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			101
Results of Operations			105
Southern Company			105
Alabama Power			114
Georgia Power			119
Mississippi Power			125
Southern Power			129
Southern Company Gas			133
Future Earnings Potential			141
Accounting Policies			145
Financial Condition and Liquidity			146

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

Alabama Power

On July 12, 2022, the Alabama PSC approved the following items:

Alabama Power's petition for a certificate of convenience and necessity authorizing Alabama Power to complete the acquisition of the Calhoun Generating Station. The transaction closed on September 30, 2022 and, on October 3, 2022, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover the related costs. The filing reflected an increase in annual revenues of $34 million, or 0.6%, effective with the billing month of November 2022.
An increase to Rate ECR effective with August 2022 billings, which is expected to result in an increase of approximately $310 million annually. The approved increase in the Rate ECR factor has no significant effect on Alabama Power's net income, but does increase operating cash flows related to fuel cost recovery.
Modifications to Rate NDR.
An accounting order authorizing Alabama Power to create a reliability reserve separate from the NDR and transition the previous Rate NDR authority related to reliability expenditures to the reliability reserve. Alabama Power may make accruals to the reliability reserve if the NDR balance exceeds $35 million.

See Note (B) to the Condensed Financial Statements under "Alabama Power" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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.

On July 29, 2022, Southern Nuclear announced that all Unit 3 ITAACs had been submitted to the NRC. On August 3, 2022, the NRC published its 103(g) finding that the acceptance criteria in the combined license for Unit 3 had been met, which allowed nuclear fuel to be loaded and allows start-up testing to begin. Fuel load for Unit 3 was completed on October 17, 2022, and the unit is projected to be placed in service by the end of the first quarter 2023. The projected schedule for Unit 3 primarily depends on the pace of system and area transitions to operations, including the completion of closure documentation necessary to support start-up testing, and the progression of start-up, final component, and pre-operational testing, which may be impacted by equipment or other operational failures. Unit 4 is projected to be placed in service by the end of the fourth quarter 2023. The projected schedule for Unit 4 primarily depends on Unit 3 progress through start-up and testing; overall construction productivity and production levels improving, particularly in electrical installation, including terminations; and appropriate levels of craft laborers, particularly electricians, being added and maintained. Any further delays could result in later in-service dates and cost increases.

During the first nine months of 2022, established construction contingency totaling $170 million was assigned to the base capital cost forecast for costs primarily associated with construction productivity, the pace of system turnovers, additional craft and support resources, and procurement for Units 3 and 4. Georgia Power also increased its total project capital cost forecast by adding $36 million and $32 million to replenish construction contingency in the second quarter 2022 and the third quarter 2022, respectively. After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded pre-tax charges to income in the second quarter 2022 and the third quarter 2022 of $36 million ($27 million after tax) and $32 million ($24 million after tax), respectively, for the increases in the total project capital cost forecast. Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery during the prudence review following the Unit 4 fuel load pursuant to the twenty-fourth VCM stipulation described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Regulatory Matters" herein.

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 capital cost expenditures have already exceeded the cost-sharing thresholds and the current project capital cost forecast triggers the tender provisions under the Global Amendments.

On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. On June 18, 2022, OPC and MEAG Power each filed a separate lawsuit against Georgia Power in the Superior Court of Fulton County, Georgia seeking a declaratory judgment that the starting dollar amount is $17.1 billion and that the cost-sharing and tender provisions have been triggered. On July 25, 2022 and July 28, 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC, respectively, and included counterclaims seeking a declaratory judgment that the starting dollar amount is $18.38 billion and that costs related to force majeure events are excluded prior to calculating the cost-sharing and tender provisions and when calculating Georgia Power's related financial obligations. On September 26, 2022, Dalton filed complaints in each of these lawsuits.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs. On October 4, 2022, MEAG Power and Georgia Power filed a notice of settlement and voluntary dismissal of the pending litigation described above, including Georgia Power's counterclaim, and, on October 6, 2022, Dalton dismissed its related complaint. Georgia Power recorded pre-tax charges (credits) to income in the fourth quarter 2021, the second quarter 2022, and the third quarter 2022 of approximately $440 million ($328 million after tax), $16 million ($12 million after tax), and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with the cost-sharing and tender provisions of the Global Amendments for OPC and Dalton based on the current project capital cost forecast.

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.

2022 Base Rate Case

On June 24, 2022, Georgia Power filed a base rate case (Georgia Power 2022 Base Rate Case) with the Georgia PSC. The filing, as modified on August 22, 2022, proposes a three-year alternate rate plan with requested rate increases totaling $889 million, $107 million, and $45 million effective January 1, 2023, January 1, 2024, and January 1, 2025, respectively. Georgia Power expects the Georgia PSC to render a final decision in this matter on December 20, 2022. The ultimate outcome of this matter cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plans – 2022 Base Rate Case" herein for additional information.

Integrated Resource Plan

On July 21, 2022, the Georgia PSC approved Georgia Power's triennial IRP (2022 IRP), as modified by a stipulated agreement among Georgia Power, the staff of the Georgia PSC, and certain intervenors and as further modified by the Georgia PSC. In the 2022 IRP decision, the Georgia PSC approved several requests, including the following:

Decertification and retirement of Plant Wansley Units 1 and 2 (926 MWs based on 53.5% ownership), which occurred on August 31, 2022, and Plant Scherer Unit 3 (614 MWs based on 75% ownership) by December 31, 2028, as well as the reclassification to regulatory asset accounts of the remaining net book values of these units and any remaining unusable materials and supplies inventories upon retirement.
Decertification and retirement of Plant Gaston Units 1 through 4 (500 MWs based on 50% ownership through SEGCO) by December 31, 2028. See Note 7 to the financial statements under "SEGCO" in Item 8 of the Form 10-K for additional information.
Georgia Power's environmental compliance strategy, including approval of Georgia Power's plans to address CCR at its ash ponds and landfills.

The Georgia PSC deferred a decision on the requested decertification and retirement of Plant Bowen Units 1 and 2 (1,400 MWs) to the 2025 IRP.

See Note (B) to the Condensed Financial Statements under "Georgia Power – Integrated Resource Plans" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Mississippi Power

On June 7, 2022, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2022, resulting in an annual increase in revenues of approximately $18 million, or 1.9%. The rate increase became effective with the first billing cycle of April 2022 in accordance with the PEP rate schedule.

On August 26, 2022, the FERC accepted an amended shared service agreement (SSA) between Mississippi Power and Cooperative Energy, effective July 1, 2022, under which Cooperative Energy will continue to decrease its use of Mississippi Power's generation services under the MRA tariff up to 2.5% annually through 2035. At September 30, 2022, Mississippi Power is serving approximately 400 MWs of Cooperative Energy's annual demand. Beginning in 2036, Cooperative Energy will provide 100% of its electricity requirements at the MRA delivery points under the tariff. Neither party has the option to cancel the amended SSA. Mississippi Power expects to remarket this capacity, including the potential development of future arrangements with Cooperative Energy.

On July 15, 2022, Mississippi Power filed a request with the FERC for a $23 million increase in annual wholesale base revenues under the MRA tariff and requested an effective date of July 15, 2022. Cooperative Energy has filed a complaint with FERC challenging the new rates. On September 13, 2022, the FERC issued an order accepting Mississippi Power's request effective September 14, 2022, subject to refund, and establishing hearing and settlement judge procedures. The ultimate outcome of this matter cannot be determined at this time.

See Note (B) to the Condensed Financial Statements under "Mississippi Power" herein for additional information.

Southern Power

During the nine months ended September 30, 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 September 30, 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 July 1, 2022, Atlanta Gas Light filed its annual GRAM update with the Georgia PSC. The filing requests an annual base rate increase of $53 million based on the projected 12-month period beginning January 1, 2023. Resolution of the GRAM filing is expected by December 28, 2022, with the new rates effective January 1, 2023.

On August 1, 2022, Virginia Natural Gas filed a general base rate case with the Virginia Commission seeking an increase in annual base rate revenues of $69 million, including $15 million related to the recovery of investments under the SAVE program, primarily to recover investments and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a projected 12-month period beginning January 1, 2023, a ROE of 10.35%, and an equity ratio of 53.2%. Rate adjustments are expected to be effective January 1, 2023, subject to refund. The Virginia Commission is expected to rule on the requested increase in the third quarter 2023.

On September 7, 2022, certain affiliates of Southern Company Gas entered into agreements to sell two natural gas storage facilities located in California and Texas for an aggregate purchase price of $186 million, plus working capital and certain other adjustments. On October 20, 2022, the release of a Southern Company Gas parent guarantee was executed, which resolved a material closing condition. As a result, Southern Company Gas expects to record pre-tax impairment charges totaling approximately $125 million ($95 million after tax) in the fourth quarter

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

The ultimate outcome of these matters cannot be determined at this time.

RESULTS OF OPERATIONS

Southern Company

Net Income


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$371	33.7	$1,003	38.5

Consolidated net income attributable to Southern Company was $1.5 billion ($1.36 per share) in the third quarter 2022 compared to $1.1 billion ($1.04 per share) for the corresponding period in 2021. Consolidated net income attributable to Southern Company was $3.6 billion ($3.38 per share) for year-to-date 2022 compared to $2.6 billion ($2.46 per share) for the corresponding period in 2021. The increases were primarily due to decreases of $249 million and $589 million in the third quarter and year-to-date 2022, respectively, in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, increases in retail electric revenues associated with rates and pricing, warmer weather, and sales growth, and increases in natural gas revenues from base rate increases and continued infrastructure replacement, partially offset by higher non-fuel operations and maintenance costs. The increase for year-to-date 2022 also reflects after-tax charges totaling $67 million in 2021 related to the PennEast Pipeline project at Southern Company Gas.

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 and Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information on the PennEast Pipeline project.

Retail Electric Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$1,410	31.0	$2,871	25.0

In the third quarter 2022, retail electric revenues were $6.0 billion compared to $4.6 billion for the corresponding period in 2021. For year-to-date 2022, retail electric revenues were $14.4 billion compared to $11.5 billion for the corresponding period in 2021.

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


	Third Quarter 2022				Year-To-Date 2022
	(in millions)		(% change)		(in millions)		(% change)
Retail electric – prior year	$	4,551			$	11,492
Estimated change resulting from –
Rates and pricing	165		3.6	%	458		4.0	%
Sales growth	73		1.6		158		1.4
Weather	26		0.6		188		1.6
Fuel and other cost recovery	1,146		25.2		2,067		18.0
Retail electric – current year	$	5,961	31.0	%	$	14,363	25.0	%

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 third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. The increases were primarily due to higher contributions from commercial and industrial customers with variable demand-driven pricing, base tariff increases in accordance with Georgia Power's 2019 ARP, and pricing effects associated with customer usage. 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 third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. Weather-adjusted residential KWH sales increased 1.3% and 0.4% in the third quarter and year-to-date 2022, respectively, and weather-adjusted commercial KWH sales increased 2.0% in both the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to customer growth. In addition, commercial customer usage increased in the third quarter and year-to-date 2022 and residential customer usage decreased for year-to-date 2022 when compared to the corresponding periods in 2021 as customers return to pre-pandemic levels of activity outside the home. Industrial KWH sales increased 2.2% and 2.6% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the pipeline and paper sectors, partially offset by a decrease in the chemicals sector.

Fuel and other cost recovery revenues increased $1.1 billion and $2.1 billion in the third quarter and year-to-date 2022, respectively, compared to the corresponding periods in 2021 primarily due to higher fuel and purchased power costs and an increase in the volume of KWHs generated. 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. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.

Wholesale Electric Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$466	63.7	$976	53.6

In the third quarter 2022, wholesale electric revenues were $1.2 billion compared to $731 million for the corresponding period in 2021. For year-to-date 2022, wholesale electric revenues were $2.8 billion compared to $1.8 billion for the corresponding period in 2021. The increases were primarily due to increases of $437 million and $930 million in the third quarter and year-to-date 2022, respectively, in energy revenues as a result of fuel and purchased power price increases when compared to the corresponding periods in 2021, an increase in the volume of KWHs sold primarily associated with natural gas PPAs at Southern Power, and increased opportunity sales at Alabama Power due to warmer weather.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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.

Other Electric Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$6	3.4	$29	5.5

In the third quarter 2022, other electric revenues were $185 million compared to $179 million for the corresponding period in 2021. The increase was primarily due to increases of $14 million in transmission revenues primarily associated with open access transmission tariff sales and $7 million in cogeneration steam revenues associated with higher natural gas prices at Alabama Power, partially offset by a $14 million increase in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs at Georgia Power.

For year-to-date 2022, other electric revenues were $554 million compared to $525 million for the corresponding period in 2021. The increase was primarily due to increases of $41 million in transmission revenues primarily associated with open access transmission tariff sales, $15 million in cogeneration steam revenues associated with higher natural gas prices at Alabama Power, and $13 million in outdoor lighting sales at Georgia Power, partially offset by a decrease of $26 million resulting from the termination of a transmission service contract and an increase of $21 million in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs, both at Georgia Power.

Natural Gas Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$234	37.6	$1,004	33.5

In the third quarter 2022, natural gas revenues were $857 million compared to $623 million for the corresponding period in 2021. For year-to-date 2022, natural gas revenues were $4.0 billion compared to $3.0 billion for the corresponding period in 2021.

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


	Third Quarter 2022				Year-To-Date 2022
	(in millions)		(% change)		(in millions)		(% change)
Natural gas revenues – prior year	$	623			$	2,994
Estimated change resulting from –
Infrastructure replacement programs and base rate changes	54		8.7	%	186		6.2	%
Gas costs and other cost recovery	172		27.6		955		31.9
Gas marketing services	1		0.2		14		0.5
Wholesale gas services	—		—		(187)		(6.2)
Other	7		1.1		36		1.1
Natural gas revenues – current year	$	857	37.6	%	$	3,998	33.5	%

Revenues from infrastructure replacement programs and base rate changes at the natural gas distribution utilities increased in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to rate increases at Nicor Gas, 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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Revenues associated with gas costs and other cost recovery increased in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to 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 for year-to-date 2022 compared to the corresponding period in 2021 due to higher commodity prices and higher sales to commercial customers.

The changes in year-to-date 2022 revenues related to Southern Company Gas' wholesale gas services were 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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$24	15.6	$6	1.2

In the third quarter 2022, other revenues were $178 million compared to $154 million for the corresponding period in 2021. The increase was primarily due to a $15 million increase in unregulated sales at the traditional electric operating companies primarily associated with power delivery construction and maintenance projects, energy conservation projects, and lighting. Also contributing to the increase was a $9 million increase primarily related to distributed infrastructure projects at PowerSecure.

For year-to-date 2022, other revenues were $519 million compared to $513 million for the corresponding period in 2021. The increase was primarily due to increases of $10 million in unregulated sales associated with power delivery construction and maintenance projects at Mississippi Power, $9 million in unregulated energy conservation projects at Georgia Power, $8 million in unregulated lighting sales at Alabama Power, and $5 million primarily related to distribution infrastructure projects at PowerSecure, partially offset by a $28 million decrease associated with the timing of revenue recognition for a large, ongoing power delivery construction and maintenance contract at Georgia Power.

Fuel and Purchased Power Expenses


	Third Quarter 2022 vs. Third Quarter 2021			Year-To-Date 2022 vs. Year-To-Date 2021
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	1,189	96.4	$	2,319	79.1
Purchased power	357		124.0	573		80.5
Total fuel and purchased power expenses	$	1,546		$	2,892

In the third quarter 2022, total fuel and purchased power expenses were $3.1 billion compared to $1.5 billion for the corresponding period in 2021. The increase was primarily the result of a $1.2 billion increase in the average cost of fuel and purchased power and a $310 million increase in the volume of KWHs generated and purchased.

For year-to-date 2022, total fuel and purchased power expenses were $6.5 billion compared to $3.6 billion for the corresponding period in 2021. The increase was primarily the result of a $2.4 billion increase in the average cost of fuel and purchased power and a $523 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:


	Third Quarter 2022	Third Quarter 2021	Year-To-Date 2022	Year-To-Date 2021
Total generation (in billions of KWHs)(a)	50	50	141	136
Total purchased power (in billions of KWHs)	9	5	20	13
Sources of generation (percent)(a) —
Gas	54	48	50	47
Coal	21	26	22	24
Nuclear	16	16	16	17
Hydro	2	3	4	4
Wind, Solar, and Other	7	7	8	8
Cost of fuel, generated (in cents per net KWH)—
Gas(a)	6.75	3.38	5.42	2.87
Coal	4.12	2.82	3.58	2.84
Nuclear	0.71	0.78	0.72	0.76
Average cost of fuel, generated (in cents per net KWH)(a)	5.05	2.75	4.07	2.45
Average cost of purchased power (in cents per net KWH)(b)	8.94	6.45	7.84	5.77

(a)Excludes Central Alabama Generating Station KWHs and associated cost of fuel through July 12, 2022 as its fuel was previously 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 third quarter 2022, fuel expense was $2.4 billion compared to $1.2 billion for the corresponding period in 2021. The increase was primarily due to a 99.7% increase in the average cost of natural gas per KWH generated, a 52.7% decrease in the volume of KWHs generated by hydro, a 46.1% increase in the average cost of coal per KWH generated, and a 13.0% increase in the volume of KWHs generated by natural gas, partially offset by a 19.0% decrease in the volume of KWHs generated by coal.

For year-to-date 2022, fuel expense was $5.2 billion compared to $2.9 billion for the corresponding period in 2021. The increase was primarily due to an 88.9% increase in the average cost of natural gas per KWH generated, a 26.1% increase in the average cost of coal per KWH generated, a 9.6% increase in the volume of KWHs generated by natural gas, and an 8.7% decrease in the volume of KWHs generated by hydro, partially offset by a 4.1% decrease in the volume of KWHs generated by coal.

Purchased Power

In the third quarter 2022, purchased power expense was $645 million compared to $288 million for the corresponding period in 2021. The increase was primarily due to a 38.6% increase in the average cost per KWH purchased primarily due to higher natural gas and coal prices and an 87.2% increase in the volume of KWHs purchased.

For year-to-date 2022, purchased power expense was $1.3 billion compared to $712 million for the corresponding period in 2021. The increase was primarily due to a 35.9% increase in the average cost per KWH purchased primarily due to higher natural gas and coal prices and a 50.9% increase in the volume of KWHs purchased.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$165	N/M	$897	95.1

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 the natural gas distribution utilities. Cost of natural gas at the natural gas distribution utilities represented 78% and 87% of the total cost of natural gas in the third quarter and year-to-date 2022, respectively.

In the third quarter 2022, cost of natural gas was $294 million compared to $129 million for the corresponding period in 2021. For year-to-date 2022, cost of natural gas was $1.8 billion compared to $943 million for the corresponding period in 2021. The increases reflect higher gas cost recovery as a result of increases of 104% and 113% in natural gas prices in the third quarter and year-to-date 2022, respectively, compared to the corresponding periods in 2021.

Cost of Other Sales


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$21	29.6	$20	7.8

In the third quarter 2022, cost of other sales was $92 million compared to $71 million for the corresponding period in 2021. The increase was primarily related to distributed infrastructure projects at PowerSecure.

For year-to-date 2022, cost of other sales was $275 million compared to $255 million for the corresponding period in 2021. The increase was primarily due to increases of $32 million related to distributed infrastructure projects at PowerSecure, $9 million related to unregulated power delivery construction and maintenance projects at Mississippi Power, and $9 million primarily associated with unregulated merchandising and energy services expenses at Alabama Power, partially offset by a decrease of $32 million associated with unregulated power delivery construction and maintenance projects at Georgia Power.

Other Operations and Maintenance Expenses


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$101	7.0	$364	8.6

In the third quarter 2022, other operations and maintenance expenses were $1.5 billion compared to $1.4 billion for the corresponding period in 2021. The increase was primarily due to increases of $49 million in transmission and distribution expenses primarily related to line maintenance, $18 million in customer accounts, customer service, and sales expenses primarily related to bad debt expenses, payment convenience fees, and labor, $12 million in compensation and benefit expenses, and $10 million in generation expenses primarily related to scheduled outage and maintenance costs.

For year-to-date 2022, other operations and maintenance expenses were $4.6 billion compared to $4.3 billion for the corresponding period in 2021. Excluding $53 million of expenses related to Sequent in 2021, other operations and

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

maintenance expenses increased $417 million. The increase was primarily due to increases of $135 million in transmission and distribution expenses primarily related to line maintenance, $90 million in generation expenses primarily related to scheduled outage and maintenance costs, $38 million in compensation and benefit expenses, $30 million in expenses at Southern Company Gas passed through directly to customers primarily related to bad debt, and $21 million in customer accounts, customer service, and sales expenses primarily related to bad debt expenses, payment convenience fees, and labor.

Depreciation and Amortization


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$26	2.9	$70	2.6

In the third quarter 2022, depreciation and amortization was $922 million compared to $896 million for the corresponding period in 2021. For year-to-date 2022, depreciation and amortization was $2.73 billion compared to $2.66 billion for the corresponding period in 2021. The increases were primarily due to additional plant in service, including continued infrastructure investments at the natural gas distribution utilities.

Taxes Other Than Income Taxes


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$40	12.8	$104	10.7

In the third quarter 2022, taxes other than income taxes were $352 million compared to $312 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $1.1 billion compared to $969 million for the corresponding period in 2021. The increases primarily reflect an increase in municipal franchise fees at Georgia Power and an increase in revenue tax expenses at Southern Company Gas.

Estimated Loss on Plant Vogtle Units 3 and 4


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(334)	N/M	$(790)	N/M

Georgia Power recorded pre-tax charges (credits) to income for the estimated probable loss on Plant Vogtle Units 3 and 4 totaling $(70) million and $264 million in the third quarter 2022 and 2021, respectively, and $(18) million and $772 million for year-to-date 2022 and 2021, respectively. The charges (credits) reflect 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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(105)	(84.0)	$(126)	(70.4)

In the third quarter 2022, gain on dispositions, net was $20 million compared to $125 million for the corresponding period in 2021. For year-to-date 2022, gain on dispositions, net was $53 million compared to $179 million for the corresponding period in 2021. The decreases primarily reflect a $121 million gain at Southern Company Gas related to the sale of Sequent in the third quarter 2021, partially offset by a $14 million gain recorded in the third quarter

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

2022 as a result of the early termination of the transition services agreement related to the 2019 sale of Gulf Power. The year-to-date 2022 decrease also reflects a $39 million gain at Southern Power primarily from contributions of wind turbine equipment to various equity method investments in 2021, partially offset by a $17 million gain from sales of integrated transmission system assets at Georgia Power in 2022. See Note 15 to the financial statements under "Southern Power – Development Projects" and "Southern Company Gas – Sale of Sequent" in Item 8 of the Form 10-K for additional information.

Allowance for Equity Funds Used During Construction


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$10	20.4	$23	16.4

In the third quarter 2022, allowance for equity funds used during construction was $59 million compared to $49 million for the corresponding period in 2021. For year-to-date 2022, allowance for equity funds used during construction was $163 million compared to $140 million for the corresponding period in 2021. The increases were primarily associated with an increase in capital expenditures related to Plant Barry Unit 8 construction at Alabama Power and transmission and distribution projects related to grid modernization at Georgia Power.

Earnings from Equity Method Investments


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(2)	(6.7)	$74	N/M

For year-to-date 2022, earnings from equity method investments were $109 million compared to $35 million for the corresponding period in 2021. The increase was primarily due to pre-tax impairment charges in 2021 totaling $84 million related to the PennEast Pipeline project at Southern Company Gas, partially offset by a $16 million decrease at Southern Holdings primarily due to a decrease in investment income. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information.

Interest Expense, Net of Amounts Capitalized


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$60	13.3	$109	8.1

In the third quarter 2022, interest expense, net of amounts capitalized was $511 million compared to $451 million for the corresponding period in 2021. The increase was primarily due to increases of approximately $28 million due to higher average outstanding borrowings and $28 million due to higher interest rates.

For year-to-date 2022, interest expense, net of amounts capitalized was $1.5 billion compared to $1.4 billion for the corresponding period in 2021. The increase was primarily due to higher average outstanding borrowings.

See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Income (Expense), Net


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$1	0.8	$124	42.8

For year-to-date 2022, other income (expense), net was $414 million compared to $290 million for the corresponding period in 2021. The increase was primarily due to charitable contributions of $101 million at Southern Company Gas during the first and second quarters of 2021 and a $44 million increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.

Income Taxes


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$42	11.3	$341	62.0

In the third quarter 2022, income taxes were $414 million compared to $372 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $891 million compared to $550 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings, partially offset by $113 million of additional tax expense in 2021 resulting from Southern Company Gas' sale of Sequent in the third quarter 2021. The year-to-date 2022 increase was also due to an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward at Georgia Power. See Note (G) to the Condensed Financial Statements herein for additional information.

Net Income (Loss) Attributable to Noncontrolling Interests


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$7	N/M	$(28)	N/M

Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the third quarter 2022, net income attributable to noncontrolling interests was $12 million compared to $5 million for the corresponding period in 2021. The increase was primarily due to lower HLBV loss allocations to Southern Power's tax equity partners, including loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021, and higher income allocations to Southern Power's equity partners.

For year-to-date 2022, net loss attributable to noncontrolling interests was $55 million compared to $27 million for the corresponding period in 2021. The increased loss was primarily due to higher HLBV loss allocations to Southern Power's tax equity partners, partially offset by loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021 and higher income allocations to Southern Power's equity partners.

See Notes 9 and 15 to the financial statements under "Lessor" and "Southern Power," respectively, 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)

Alabama Power

Net Income


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$26	5.2	$67	5.6

Alabama Power's net income after dividends on preferred stock in the third quarter 2022 was $525 million compared to $499 million for the corresponding period in 2021. Alabama Power's net income after dividends on preferred stock for year-to-date 2022 was $1.26 billion compared to $1.19 billion for the corresponding period in 2021. These increases were primarily due to an increase in retail revenues associated with warmer weather in Alabama Power's service territory in 2022 compared to the corresponding periods in 2021 and sales growth, partially offset by higher non-fuel operations and maintenance costs.

Retail Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$357	21.6	$658	15.1

In the third quarter 2022, retail revenues were $2.01 billion compared to $1.65 billion for the corresponding period in 2021. For year-to-date 2022, retail revenues were $5.02 billion compared to $4.36 billion for the corresponding period in 2021.

Details of the changes in retail revenues were as follows:


	Third Quarter 2022				Year-To-Date 2022
	(in millions)		(% change)		(in millions)		(% change)
Retail – prior year	$	1,651			$	4,357
Estimated change resulting from –
Rates and pricing	3		0.2	%	7		0.2	%
Sales growth	20		1.2		53		1.2
Weather	25		1.5		88		2.0
Fuel and other cost recovery	309		18.7		510		11.7
Retail – current year	$	2,008	21.6	%	$	5,015	15.1	%

Revenues attributable to changes in sales increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. Weather-adjusted residential KWH sales decreased 0.4% and 0.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales decreased 0.7% in the third quarter 2022 when compared to the corresponding period in 2021 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales were flat for year-to-date 2022 when compared to the corresponding period in 2021. Industrial KWH sales increased 2.9% and 2.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the forest product and pipeline sectors, partially offset by decreases in the chemicals sector.

Fuel and other cost recovery revenues increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to increases in the volume of KWHs generated and the average cost of fuel.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$143	N/M	$237	83.2

In the third quarter 2022, wholesale revenues from sales to non-affiliates were $250 million compared to $107 million for the corresponding period in 2021. For year-to-date 2022, wholesale revenues from sales to non-affiliates were $522 million compared to $285 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 75.9% and 41.8%, respectively, in the price of energy due to higher natural gas prices, as well as increases of 32.3% and 29.3%, respectively, in KWH sales as a result of increased opportunity sales due to warmer weather in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021.

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.

Wholesale Revenues – Affiliates


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$17	32.1	$61	56.0

In the third quarter 2022, wholesale revenues from sales to affiliates were $70 million compared to $53 million for the corresponding period in 2021. The increase was primarily due to a 142.2% increase in the price of energy due to higher natural gas prices, partially offset by a 45.7% decrease in KWH sales due to the availability of lower cost Southern Company system resources compared to Alabama Power's generation.

For year-to-date 2022, wholesale revenues from sales to affiliates were $170 million compared to $109 million for the corresponding period in 2021. The increase was primarily due to an 84.7% increase in the price of energy due to higher natural gas prices, partially offset by a 15.3% decrease in KWH sales due to the availability of lower cost Southern Company system resources compared to Alabama Power's generation.

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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$23	24.7	$48	17.9

In the third quarter 2022, other revenues were $116 million compared to $93 million for the corresponding period in 2021. For year-to-date 2022, other revenues were $316 million compared to $268 million for the corresponding period in 2021. The third quarter and year-to-date 2022 increases were primarily due to increases of $7 million and $15 million, respectively, in cogeneration steam revenue associated with higher natural gas prices, $6 million and $13 million, respectively, in transmission revenues primarily due to open access transmission tariff sales, and $3 million and $8 million, respectively, in unregulated lighting sales. The year-to-date 2022 increase also included a $5 million increase in energy services revenue.

Fuel and Purchased Power Expenses


	Third Quarter 2022 vs. Third Quarter 2021			Year-To-Date 2022 vs. Year-To-Date 2021
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	293	78.6	$	472	50.9
Purchased power – non-affiliates	109		143.4	174		100.6
Purchased power – affiliates	68		151.1	146		128.1
Total fuel and purchased power expenses	$	470		$	792

In the third quarter 2022, total fuel and purchased power expenses were $964 million compared to $494 million for the corresponding period in 2021. The increase was primarily due to a $257 million increase in the cost of fuel and purchased power and a $213 million increase related to the volume of KWHs generated and purchased.

For year-to-date 2022, total fuel and purchased power expenses were $2.01 billion compared to $1.21 billion for the corresponding period in 2021. The increase was primarily due to a $518 million increase in the cost of fuel and purchased power and a $274 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:


	Third Quarter 2022	Third Quarter 2021	Year-To-Date 2022	Year-To-Date 2021
Total generation (in billions of KWHs)(a)	16	16	45	45
Total purchased power (in billions of KWHs)	4	2	9	5
Sources of generation (percent)(a) —
Coal	47	50	45	47
Nuclear	22	24	24	25
Gas	28	18	23	19
Hydro	3	8	8	9
Cost of fuel, generated (in cents per net KWH) —
Coal	3.89	2.85	3.40	2.78
Nuclear	0.67	0.73	0.67	0.71
Gas(a)	6.55	3.03	5.20	2.68
Average cost of fuel, generated (in cents per net KWH)(a)	3.91	2.33	3.13	2.20
Average cost of purchased power (in cents per net KWH)(b)	8.55	7.96	8.33	6.70

(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 third quarter 2022, fuel expense was $666 million compared to $373 million for the corresponding period in 2021. The increase was primarily due to a 116.2% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, a 36.5% increase in the average cost of coal per KWH generated, a 56.8% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall in the third quarter 2022 compared to the corresponding period in 2021, and a 46.9% increase in the volume of KWHs generated by natural gas.

For year-to-date 2022, fuel expense was $1.4 billion compared to $0.9 billion for the corresponding period in 2021. The increase was primarily due to a 94.0% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, a 22.3% increase in the average cost of coal per KWH generated, an 18.3% increase in the volume of KWHs generated by natural gas, and an 8.5% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall for year-to-date 2022 compared to the corresponding period in 2021.

Purchased Power – Non-Affiliates

In the third quarter 2022, purchased power expense from non-affiliates was $185 million compared to $76 million for the corresponding period in 2021. The increase was primarily due to a 193.7% increase in the volume of KWHs purchased as a result of warmer weather in the third quarter 2022 compared to the corresponding period in 2021, partially offset by an 11.2% decrease in the average cost per KWH purchased due to fixed capacity costs allocated across a higher level of generation.

For year-to-date 2022, purchased power expense from non-affiliates was $347 million compared to $173 million for the corresponding period in 2021. The increase was primarily due to a 100.5% increase in the volume of KWHs purchased as a result of warmer weather for year-to-date 2022 compared to the corresponding period in 2021, as well as an 8.2% increase in the average cost per KWH purchased due to higher natural gas and coal prices.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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

In the third quarter 2022, purchased power expense from affiliates was $113 million compared to $45 million for the corresponding period in 2021. The increase was primarily due to an 84.5% increase in the average cost per KWH purchased due to higher natural gas and coal prices and a 36.4% increase in the volume of KWHs purchased as a result of warmer weather in the third quarter 2022 compared to the corresponding period in 2021.

For year-to-date 2022, purchased power expense from affiliates was $260 million compared to $114 million for the corresponding period in 2021. The increase was primarily due to a 71.0% increase in the average cost per KWH purchased due to higher natural gas and coal prices and a 33.6% increase in the volume of KWHs purchased as a result of warmer weather for year-to-date 2022 compared to the corresponding period in 2021.

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.

Other Operations and Maintenance Expenses


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$17	4.2	$95	8.1

In the third quarter 2022, other operations and maintenance expenses were $418 million compared to $401 million for the corresponding period in 2021. For year-to-date 2022, other operations and maintenance expenses were $1.27 billion compared to $1.18 billion for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $18 million and $41 million, respectively, in transmission and distribution expenses primarily associated with line maintenance and $6 million and $12 million, respectively, in customer accounts, customer service, and sales expenses primarily associated with labor and bad debt expense. The increase for the third quarter 2022 was partially offset by a $15 million decrease in generation expenses primarily associated with scheduled outages and maintenance. The year-to-date 2022 increase also included a $24 million increase in generation expenses primarily associated with scheduled outages and maintenance and Rate CNP Compliance-related expenses. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.

Allowance for Equity Funds Used During Construction


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$4	28.6	$13	34.2

For year-to-date 2022, allowance for equity funds used during construction was $51 million compared to $38 million for the corresponding period in 2021. The increase for year-to-date 2022 was primarily due to an increase in capital expenditures related to Plant Barry Unit 8 construction.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Interest Expense, Net of Amounts Capitalized


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$14	16.7	$26	10.3

In the third quarter 2022, interest expense, net of amounts capitalized was $98 million compared to $84 million for the corresponding period in 2021. For year-to-date 2022, interest expense, net of amounts capitalized was $278 million compared to $252 million for the corresponding period in 2021. The increases were primarily due to higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Income Taxes


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$14	9.2	$28	7.7

In the third quarter 2022, income taxes were $166 million compared to $152 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $394 million compared to $366 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings.

Georgia Power

Net Income


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$322	60.1	$821	79.7

Georgia Power's net income in the third quarter 2022 was $858 million compared to $536 million for the corresponding period in 2021. For year-to-date 2022 net income was $1.85 billion compared to $1.03 billion for the corresponding period in 2021. The increases were primarily due to decreases of $249 million and $589 million in the third quarter and year-to-date 2022, respectively, in after-tax charges related to the construction of Plant Vogtle Units 3 and 4 and increases in retail revenues associated with rates and pricing and sales growth, partially offset by higher non-fuel operations and maintenance costs. The increase for year-to-date 2022 was also due to warmer weather in Georgia Power's service territory compared to the corresponding period in 2021.

Retail Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$1,051	39.6	$2,164	33.5

In the third quarter 2022, retail revenues were $3.70 billion compared to $2.65 billion for the corresponding period in 2021. For year-to-date 2022, retail revenues were $8.63 billion compared to $6.47 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:


	Third Quarter 2022				Year-To-Date 2022
	(in millions)		(% change)		(in millions)		(% change)
Retail – prior year	$	2,652			$	6,465
Estimated change resulting from –
Rates and pricing	157		5.9	%	442		6.8	%
Sales growth	54		2.0		101		1.6
Weather	(1)		—		89		1.4
Fuel cost recovery	841		31.7		1,532		23.7
Retail – current year	$	3,703	39.6	%	$	8,629	33.5	%

Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. The increases were primarily due to higher contributions from commercial and industrial customers with variable demand-driven pricing, base tariff increases in accordance with the 2019 ARP, and pricing effects associated with customer usage. 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 third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. Weather-adjusted residential KWH sales increased 2.7% and 1.0% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to customer growth. The increase for the third quarter 2022 also reflects increased customer usage. Weather-adjusted commercial KWH sales increased 3.2% and 2.9% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to impacts on customer usage from increased activity outside the home as customers return to pre-pandemic levels of activity, as well as customer growth. Weather-adjusted industrial KWH sales increased 1.8% and 2.8% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the pipeline, electronic, and paper sectors, partially offset by decreases in the chemicals and textiles sectors.

Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues increased in the third quarter and year-to-date 2022 when compared to the corresponding periods 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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(7)	(11.1)	$43	30.1

In the third quarter 2022, wholesale revenues were $56 million compared to $63 million for the corresponding period in 2021. The decrease was primarily due to a $22 million decrease in KWH sales associated with lower market demand and a $3 million decrease in capacity revenues due to the expiration of a non-affiliate PPA in 2021, largely offset by an increase of $20 million related to the average cost of fuel primarily due to higher natural gas and coal prices.

For year-to-date 2022, wholesale revenues were $186 million compared to $143 million for the corresponding period in 2021. The increase was primarily due to an increase of $60 million related to the average cost of fuel primarily due to higher natural gas and coal prices, partially offset by a $10 million decrease in KWH sales

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

associated with lower market demand and an $8 million decrease in capacity revenues due to the expiration of a non-affiliate PPA in 2021.

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.

Other Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(11)	(7.8)	$(39)	(8.8)

In the third quarter 2022, other revenues were $130 million compared to $141 million for the corresponding period in 2021. For year-to-date 2022, other revenues were $403 million compared to $442 million for the corresponding period in 2021. The decreases for the third quarter and year-to-date 2022 were primarily due to increases of $14 million and $21 million, respectively, in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs, decreases of $9 million and $12 million, respectively, from retail solar programs as a result of higher avoided cost credits to customers, and $6 million and $26 million, respectively, resulting from the termination of a transmission service contract. These reductions were partially offset by increases of $8 million and $22 million, respectively, associated with unregulated outdoor lighting sales and energy conservation projects and $6 million and $16 million, respectively, in open access transmission tariff sales. Also contributing to the decrease for year-to-date 2022 was a decrease of $28 million associated with the timing of revenue recognition for a large, ongoing power delivery construction and maintenance contract.

Fuel and Purchased Power Expenses


	Third Quarter 2022 vs. Third Quarter 2021			Year-to-Date 2022 vs. Year-to-Date 2021
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	409	94.7	$	799	73.4
Purchased power – non-affiliates	131		75.7	239		51.8
Purchased power – affiliates	283		98.3	527		92.0
Total fuel and purchased power expenses	$	823		$	1,565

In the third quarter 2022, total fuel and purchased power expenses were $1.7 billion compared to $0.9 billion for the corresponding period in 2021. For year-to-date 2022, total fuel and purchased power expenses were $3.7 billion compared to $2.1 billion for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $0.8 billion and $1.4 billion, respectively, related to the average cost of fuel

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

and purchased power and net increases of $30 million and $158 million, respectively, 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:


	Third Quarter 2022	Third Quarter 2021	Year-To-Date 2022	Year-To-Date 2021
Total generation (in billions of KWHs)	15	16	45	46
Total purchased power (in billions of KWHs)	11	10	27	23
Sources of generation (percent) —
Gas	53	45	48	46

Nuclear	28	24	26	26
Coal	16	28	22	24
Hydro and other	3	3	4	4
Cost of fuel, generated (in cents per net KWH) —
Gas	6.10	3.28	4.99	2.84
Coal	4.73	2.73	3.84	2.89
Nuclear	0.75	0.83	0.76	0.80

Average cost of fuel, generated (in cents per net KWH)	4.32	2.51	3.56	2.30
Average cost of purchased power (in cents per net KWH)(*)	10.14	5.24	8.00	4.80

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

Fuel

In the third quarter 2022, fuel expense was $841 million compared to $432 million for the corresponding period in 2021. The increase was primarily due to increases of 86.0% and 73.3% in the average cost per KWH generated by natural gas and coal, respectively, and an 11.1% increase in the volume of KWHs generated by natural gas, partially offset by a 44.2% decrease in the volume of KWHs generated by coal.

For year-to-date 2022, fuel expense was $1.89 billion compared to $1.09 billion for the corresponding period in 2021. The increase was primarily due to increases of 75.7% and 32.9% in the average cost per KWH generated by natural gas and coal, respectively, partially offset by a 9.1% decrease in the volume of KWHs generated by coal.

Purchased Power – Non-Affiliates

In the third quarter 2022, purchased power expense from non-affiliates was $304 million compared to $173 million for the corresponding period in 2021. For year-to-date 2022, purchased power expense from non-affiliates was $700 million compared to $461 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 50.5% and 39.4%, respectively, in the volume of KWHs purchased primarily due to less available Georgia Power-owned coal generation and increases of 53.1% and 31.6%, respectively, in the average cost per KWH purchased primarily due to higher natural gas and coal prices.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Purchased Power – Affiliates

In the third quarter 2022, purchased power expense from affiliates was $571 million compared to $288 million for the corresponding period in 2021. For year-to-date 2022, purchased power expense from affiliates was $1.1 billion compared to $573 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 120.3% and 93.3%, respectively, in the average cost per KWH purchased primarily due to higher natural gas and coal prices.

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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$51	9.4	$128	8.2

In the third quarter 2022, other operations and maintenance expenses were $595 million compared to $544 million for the corresponding period in 2021. The increase was primarily due to increases of $35 million in distribution expenses primarily associated with line maintenance, $10 million in generation expenses primarily related to non-outage maintenance costs, and $9 million in certain compensation and benefit expenses, partially offset by a decrease of $6 million related to unregulated power delivery construction and maintenance projects.

For year-to-date 2022, other operations and maintenance expenses were $1.69 billion compared to $1.56 billion for the corresponding period in 2021. The increase was primarily due to increases of $80 million in distribution expenses primarily associated with line maintenance, $37 million in generation expenses primarily related to non-outage maintenance costs, $20 million in certain compensation and benefit expenses, $11 million in legal and regulatory expenses, and $8 million in amortization of cloud software, partially offset by a net decrease of $19 million related to unregulated products and services and $17 million in gains from sales of integrated transmission system assets.

Depreciation and Amortization


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$14	4.1	$41	4.0

In the third quarter 2022, depreciation and amortization was $359 million compared to $345 million for the corresponding period in 2021. For year-to-date 2022, depreciation and amortization was $1.07 billion compared to $1.03 billion for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to additional plant in service and increases of $3 million and $9 million, respectively, in amortization of regulatory assets related to CCR AROs under the terms of the 2019 ARP. See Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Rate Plans – 2019 ARP" for additional information on recovery of CCR AROs.

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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$25	19.2	$55	15.1

In the third quarter 2022, taxes other than income taxes were $155 million compared to $130 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $420 million compared to $365 million for the corresponding period in 2021. The increases were primarily due to increases in municipal franchise fees resulting from higher retail revenues.

Estimated Loss on Plant Vogtle Units 3 and 4


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(334)	N/M	$(790)	N/M

Interest Expense, Net of Amounts Capitalized


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$17	16.0	$32	10.2

In the third quarter 2022, interest expense, net of amounts capitalized was $123 million compared to $106 million for the corresponding period in 2021. For year-to-date 2022, interest expense, net of amounts capitalized was $347 million compared to $315 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily associated with increases of approximately $11 million and $23 million, respectively, related to higher average outstanding borrowings and $10 million and $12 million, respectively, related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Other Income (Expense), Net


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(6)	(14.3)	$16	12.9

For year-to-date 2022, other income (expense), net was $140 million compared to $124 million for the corresponding period in 2021. The increase was primarily due to an increase of $11 million in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information on retirement benefits.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Income Taxes


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$113	100.0	$340	N/M

In the third quarter 2022, income taxes were $226 million compared to $113 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $421 million compared to $81 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings largely resulting from lower charges associated with the construction of Plant Vogtle Units 3 and 4. The year-to-date increase also reflects an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward. 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" and Note (G) to the Condensed Financial Statements herein for additional information.

Mississippi Power

Net Income


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$12	24.0	$17	12.8

Mississippi Power's net income in the third quarter 2022 was $62 million compared to $50 million for the corresponding period in 2021. For year-to-date 2022, net income was $150 million compared to $133 million for the corresponding period in 2021. The increases were primarily due to an increase in revenues, partially offset by an increase in income taxes. The year-to-date 2022 increase was also partially offset by higher non-fuel operations and maintenance costs.

Retail Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$2	0.8	$48	7.2

In the third quarter 2022, retail revenues were $250 million compared to $248 million for the corresponding period in 2021. For year-to-date 2022, retail revenues were $718 million compared to $670 million for the corresponding period in 2021.

Details of the changes in retail revenues were as follows:


	Third Quarter 2022				Year-To-Date 2022
	(in millions)		(% change)		(in millions)		(% change)
Retail – prior year	$	248			$	670
Estimated change resulting from –
Rates and pricing	4		1.6	%	9		1.3	%
Sales growth (decline)	—		—		3		0.5
Weather	3		1.2		10		1.5
Fuel and other cost recovery	(5)		(2.0)		26		3.9
Retail – current year	$	250	0.8	%	$	718	7.2	%

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 third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to new PEP rates that became effective for the first billing cycle of April 2022, partially offset by a decrease in revenues associated with a tolling arrangement. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Performance Evaluation Plan" herein for additional information.

Revenues attributable to changes in sales decreased in the third quarter 2022 when compared to the corresponding period in 2021. Revenues attributable to changes in sales increased for year-to-date 2022 when compared to the corresponding period in 2021. Weather-adjusted residential KWH sales decreased 3.3% and 1.2% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 due to a decrease in customer usage resulting from increased activity outside the home as customers return to pre-pandemic levels of activity. Weather-adjusted commercial KWH sales increased 0.3% and 1.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 due to customer growth. Industrial KWH sales increased 1.9% and 1.8% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the petroleum, pipeline, and transportation sectors.

Fuel and other cost recovery revenues decreased in the third quarter 2022 when compared to the corresponding period in 2021 primarily as a result of lower recoverable fuel costs. Fuel and other cost recovery revenues increased for year-to-date 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. 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 "Mississippi Power" for additional information.

Wholesale Revenues – Non-Affiliates


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$—	—	$13	7.3

For year-to-date 2022, wholesale revenues from sales to non-affiliates were $191 million compared to $178 million for the corresponding period in 2021. The increase was primarily due to higher fuel costs and an increase in base revenue from MRA customers primarily due to increased demand as a result of weather impacts in 2022.

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 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. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Municipal and Rural Associations Tariff" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Wholesale Revenues – Affiliates


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$125	N/M	$216	N/M

In the third quarter 2022, wholesale revenues from sales to affiliates were $187 million compared to $62 million for the corresponding period in 2021. For year-to-date 2022, wholesale revenues from sales to affiliates were $336 million compared to $120 million for the corresponding period in 2021. The increases were primarily due to increases of $111 million and $197 million, respectively, associated with higher fuel prices, primarily for natural gas, and $14 million and $19 million, respectively, associated with higher KWH sales due to lower cost available Mississippi Power resources as compared to the available affiliate company generation.

Other Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$5	62.5	$14	70.0

In the third quarter 2022, other revenues were $13 million compared to $8 million for the corresponding period in 2021. For year-to-date 2022, other revenues were $34 million compared to $20 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $5 million and $10 million, respectively, in unregulated sales associated with power delivery construction and maintenance projects.

Fuel and Purchased Power Expenses


	Third Quarter 2022 vs. Third Quarter 2021			Year-to-Date 2022 vs. Year-to-Date 2021
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	103	74.2	$	235	71.1
Purchased power	14		250.0	15		70.6
Total fuel and purchased power expenses	$	117		$	250

In the third quarter 2022, total fuel and purchased power expenses were $262 million compared to $145 million for the corresponding period in 2021. The increase was due to a $106 million increase related to the average cost of fuel and purchased power and an $11 million increase related to the volume of KWHs generated and purchased.

For year-to-date 2022, total fuel and purchased power expenses were $601 million compared to $351 million for the corresponding period in 2021. The increase was primarily due to a $233 million increase related to the average cost of fuel and purchased power and a $17 million increase related to the volume of KWHs generated.

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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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


	Third Quarter 2022	Third Quarter 2021	Year-To-Date 2022	Year-To-Date 2021
Total generation (in millions of KWHs)	5,093	4,878	13,650	13,016
Total purchased power (in millions of KWHs)	241	124	527	562
Sources of generation (percent) –
Gas	89	93	89	91
Coal	11	7	11	9
Cost of fuel, generated (in cents per net KWH) –
Gas	5.10	2.99	4.43	2.66
Coal	4.50	3.16	4.12	3.13
Average cost of fuel, generated (in cents per net KWH)	5.02	3.00	4.40	2.70
Average cost of purchased power (in cents per net KWH)	8.15	4.51	6.83	3.78

Fuel

In the third quarter 2022, fuel expense was $242 million compared to $139 million for the corresponding period in 2021. The increase was due to a 70.6% increase in the average cost of natural gas per KWH generated, a 42.4% increase in the average cost of coal per KWHs generated, and a 61.3% increase in the volume of KWHs generated by coal.

For year-to-date 2022, fuel expense was $565 million compared to $330 million for the corresponding period in 2021. The increase was due to a 66.5% increase in the average cost of natural gas per KWH generated, a 31.6% increase in the average cost of coal per KWHs generated, a 30.2% increase in the volume of KWHs generated by coal, and a 2.4% increase in the volume of KWHs generated by natural gas.

Purchased Power

In the third quarter 2022, purchased power expense was $20 million compared to $6 million for the corresponding period in 2021. The increase was due to a 93.6% increase in the volume of KWHs purchased and an 80.7% increase in the average cost per KWH purchased.

For year-to-date 2022, purchased power expense was $36 million compared to $21 million for the corresponding period in 2021. The increase was primarily due to an 80.6% increase in the average cost per KWH purchased, partially offset by a 6.3% decrease in the volume of KWHs purchased.

Energy purchases 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. 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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$1	1.2	$22	9.6

For year-to-date 2022, other operations and maintenance expenses were $252 million compared to $230 million for the corresponding period in 2021. The increase was primarily due to increases of $9 million related to unregulated power delivery construction and maintenance projects, $6 million associated with storm reserve accruals, $4 million in transmission and distribution line maintenance, and $4 million in sales and use taxes associated with the Kemper County energy facility. See Note 2 to the financial statements under "Mississippi Power – System Restoration Rider" in Item 8 of the Form 10-K and Note (C) to the Condensed Financial Statements under "Other Matters – Mississippi Power" herein for additional information.

Income Taxes


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$7	70.0	$16	72.7

In the third quarter 2022, income taxes were $17 million compared to $10 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $38 million compared to $22 million for the corresponding period in 2021. The third quarter and year-to-date 2022 increases primarily relate to a reduction of $3 million and $8 million, respectively, in the flowback of excess deferred income taxes associated with new PEP rates that became effective in April 2022, as well as increases of $4 million and $8 million, respectively, due to higher pre-tax earnings. See Note (G) to the Condensed Financial Statements herein for additional information.

Southern Power

Net Income Attributable to Southern Power


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$17	21.8	$54	25.6

Net income attributable to Southern Power in the third quarter 2022 was $95 million compared to $78 million for the corresponding period in 2021. Net income attributable to Southern Power for year-to-date 2022 was $265 million compared to $211 million for the corresponding period in 2021. The increases were primarily due to higher revenues driven by higher market prices of energy, partially offset by higher other operations and maintenance expenses. Also contributing to the year-to-date 2022 increase were higher revenues from new natural gas PPAs and higher income associated with tax equity partnerships. The year-to-date 2022 increase was partially offset by gains from contributions of wind turbine equipment to various equity method investments in the first quarter 2021 and a tax benefit due to a change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama 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 for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Operating Revenues


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$501	73.8	$1,008	62.6

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.

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:


	Third Quarter 2022		Third Quarter 2021		Year-To-Date 2022		Year-To-Date 2021
	(in millions)
PPA capacity revenues	$	131	$	118	$	344	$	311
PPA energy revenues	736		413		1,657		954
Total PPA revenues	867		531		2,001		1,265
Non-PPA revenues	304		139		590		327
Other revenues	9		9		27		18
Total operating revenues	$	1,180	$	679	$	2,618	$	1,610

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

In the third quarter 2022, total operating revenues were $1.2 billion, reflecting a $501 million, or 74%, increase from the corresponding period in 2021. The increase in operating revenues was primarily due to the following:

PPA capacity revenues increased $13 million, or 11%, primarily due to increased capacity sales under existing natural gas PPAs.
PPA energy revenues increased $323 million, or 78%, primarily due to a $333 million increase in sales under existing natural gas PPAs resulting from a $287 million increase in the price of fuel and purchased power and a $45 million increase in the volume of KWHs sold.
Non-PPA revenues increased $165 million, or 119%, due to a $172 million increase in the market price of energy, partially offset by a $7 million decrease in the volume of KWHs sold through short-term sales.

For year-to-date 2022, total operating revenues were $2.6 billion, reflecting a $1.0 billion, or 63%, increase from the corresponding period in 2021. The increase in operating revenues was primarily due to the following:

PPA capacity revenues increased $33 million, or 11%, 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 $703 million, or 74%, primarily due to a $540 million increase in sales under existing natural gas PPAs resulting from a $442 million increase in the price of fuel and purchased power and a $98 million increase in the volume of KWHs sold. Also contributing to the increase was a $186 million increase in sales associated with new natural gas PPAs, partially offset by a $17 million decrease due to the contractual expiration of natural gas PPAs.
Non-PPA revenues increased $263 million, or 80%, due to a $299 million increase in the market price of energy, partially offset by a $35 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:


	Third Quarter 2022	Third Quarter 2021	Year-To-Date 2022	Year-To-Date 2021
	(in billions of KWHs)
Generation	12.8	12.1	36.7	31.8
Purchased power	1.2	0.8	2.3	2.0
Total generation and purchased power	14.0	12.9	39.0	33.8

Total generation and purchased power (excluding solar, wind, fuel cells, and tolling agreements)	8.8	7.7	23.2	20.2

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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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


	Third Quarter 2022 vs. Third Quarter 2021			Year-to-Date 2022 vs. Year-to-Date 2021
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	346	133.6	$	734	135.9
Purchased power	103		251.2	147		170.9
Total fuel and purchased power expenses	$	449		$	881

In the third quarter 2022, total fuel and purchased power expenses increased $449 million, or 150%, compared to the corresponding period in 2021. Fuel expense increased $346 million due to a $323 million increase associated with the average cost of fuel and a $23 million increase associated with the volume of KWHs generated. Purchased power expense increased $103 million due to a $79 million increase associated with the average cost of purchased power and a $24 million increase associated with the volume of KWHs purchased.

For year-to-date 2022, total fuel and purchased power expenses increased $881 million, or 141%, compared to the corresponding period in 2021. Fuel expense increased $734 million due to a $651 million increase associated with the average cost of fuel and an $83 million increase associated with the volume of KWHs generated. Purchased power expense increased $147 million due to a $134 million increase associated with the average cost of purchased power and a $13 million increase associated with the volume of KWHs purchased.

Other Operations and Maintenance Expenses


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$19	20.1	$23	7.4

In the third quarter 2022, other operations and maintenance expenses were $113 million compared to $94 million for the corresponding period in 2021. For year-to-date 2022, other operations and maintenance expenses were $331 million compared to $308 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $11 million and $13 million, respectively, related to the timing of non-outage generation maintenance expenses. Also contributing to the year-to-date 2022 increase was an increase of $11 million in transmission expenses to serve new natural gas PPAs, partially offset by $6 million related to the allocation in 2021 of uncollected settlements by the Energy Reliability Council of Texas market as a result of Winter Storm Uri.

Loss on Sales-Type Lease


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(15)	(100.0)	$(14)	(93.4)

In the third quarter 2021, a $15 million loss on sales-type lease was recorded upon commencement of the Garland battery energy storage facility PPA, $10 million of which was allocated through noncontrolling interests to Southern Power's partners in the project. See Notes 9 and 15 to the financial statements under "Lessor" and "Southern Power," respectively, in Item 8 of the Form 10-K for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Gain on Dispositions, Net


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$—	N/M	$(37)	(94.9)

For year-to-date 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.

Income Taxes (Benefit)


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$27	N/M	$52	N/M

In the third quarter 2022, income tax expense was $36 million compared to $9 million for the corresponding period in 2021. The change was primarily due to higher pre-tax earnings, partially offset by higher wind PTCs.

For year-to-date 2022, income tax expense was $49 million compared to a benefit of $3 million for the corresponding period in 2021. The change was primarily due to higher pre-tax earnings for year-to-date 2022 and a change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in the first quarter 2021, partially offset by higher wind PTCs for year-to-date 2022.

Net Income (Loss) Attributable to Noncontrolling Interests


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$7	N/M	$(28)	N/M

In the third quarter 2022, net income attributable to noncontrolling interests was $12 million compared to $5 million for the corresponding period in 2021. The increase was primarily due to lower HLBV loss allocations to tax equity partners, including loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021, and higher income allocations to equity partners.

For year-to-date 2022, net loss attributable to noncontrolling interests was $55 million compared to $27 million for the corresponding period in 2021. The increased loss was primarily due to higher HLBV loss allocations to tax equity partners, partially offset by loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021 and higher income allocations to equity partners.

See Notes 9 and 15 to the financial statements under "Lessor" and "Southern Power," respectively, in Item 8 of the Form 10-K for additional information.

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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. 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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$27	48.2	$127	32.6

In the third quarter 2022, net income was $83 million compared to $56 million for the corresponding period in 2021. Net income increased $14 million at gas distribution operations primarily due to base rate increases and continued investment in infrastructure replacement and $14 million at gas pipeline investments primarily as a result of higher earnings at SNG and lower income taxes related to the PennEast Pipeline project. The third quarter 2021 results also included a $93 million after-tax gain and $85 million of additional tax expense as a result of the July 1, 2021 sale of Sequent.

For year-to-date 2022, net income was $516 million compared to $389 million for the corresponding period in 2021. Net income increased $73 million at gas pipeline investments primarily as a result of a 2021 impairment charge related to the PennEast Pipeline project and $57 million at gas distribution operations primarily due to base rate increases and continued investment in infrastructure replacement. The year-to-date 2021 results also included $108 million of net income from Sequent, including the $93 million after-tax gain, and $85 million of additional tax expense as a result of the July 1, 2021 sale of Sequent.

See Notes 2, 7, 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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$234	37.6	$1,004	33.5

In the third quarter 2022, natural gas revenues, including alternative revenue programs, were $857 million compared to $623 million for the corresponding period in 2021. For year-to-date 2022, natural gas revenues, including alternative revenue programs, were $4.0 billion compared to $3.0 billion for the corresponding period in 2021.

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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:


	Third Quarter 2022				Year-To-Date 2022
	(in millions)		(% change)		(in millions)		(% change)
Natural gas revenues – prior year	$	623			$	2,994
Estimated change resulting from –
Infrastructure replacement programs and base rate changes	54		8.7	%	186		6.2	%
Gas costs and other cost recovery	172		27.6		955		31.9
Gas marketing services	1		0.2		14		0.5
Wholesale gas services	—		—		(187)		(6.2)

Other	7		1.1		36		1.1
Natural gas revenues – current year	$	857	37.6	%	$	3,998	33.5	%

Revenues from infrastructure replacement programs and base rate changes increased in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to rate increases at Nicor Gas, 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 third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to 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.

Revenues from gas marketing services increased for year-to-date 2022 compared to the corresponding period in 2021 due to higher commodity prices and higher sales to commercial customers.

The changes in year-to-date 2022 revenues related to wholesale gas services were 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 the majority of 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.


	Third Quarter			2022 vs. normal		2022 vs. 2021		Year-to-Date			2022 vs. normal		2022 vs. 2021
	Normal*()**	2022	2021	colder (warmer)		colder (warmer)		Normal*()**	2022	2021	colder (warmer)		colder (warmer)
	(in thousands)							(in thousands)
Illinois	42	56	14	33.3	%	300.0	%	3,686	3,683	3,594	(0.1)	%	2.5	%
Georgia	3	—	3	—	%	—	%	1,431	1,361	1,396	(4.9)	%	(2.5)	%

(*)Normal represents the 10-year average from January 1, 2012 through September 30, 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.

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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 September 30, 2022 and 2021:


	September 30,
	2022		2021		2022 vs. 2021
	(in thousands, except market share %)				(% change)
Gas distribution operations	4,300		4,283		0.4	%
Gas marketing services
Energy customers(*)	598		603		(0.8)	%
Market share of energy customers in Georgia	28.3	%	28.9	%

(*)Gas marketing services' customers are primarily located in Georgia and Illinois.

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


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$165	N/M	$897	95.1

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 78% and 87% of the total cost of natural gas in the third quarter and year-to-date 2022, respectively. 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.

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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.


	Third Quarter		2022 vs. 2021			Year-to-Date		2022 vs. 2021
	2022	2021			2022	2021
Gas distribution operations (mmBtu in millions)
Firm	70	74	(5.4)	%		485	465	4.3	%
Interruptible	22	23	(4.3)			69	73	(5.5)
Total	92	97	(5.2)	%		554	538	3.0	%


Gas marketing services (mmBtu in millions)
Firm:
Georgia	3	3	—	%		24	26	(7.7)	%
Illinois	—	—	—			4	5	(20.0)

Other	2	2	—			8	10	(20.0)
Interruptible large commercial and industrial	3	3	—			11	10	10.0
Total	8	8	—	%		47	51	(7.8)	%

Other Operations and Maintenance Expenses


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$14	5.9	$53	6.8

In the third quarter 2022, other operations and maintenance expenses were $252 million compared to $238 million for the corresponding period in 2021. The increase was primarily due to higher compensation and benefit expenses and higher expenses passed through directly to customers primarily related to bad debt at gas distribution operations.

For year-to-date 2022, other operations and maintenance expenses were $829 million compared to $776 million for the corresponding period in 2021. Excluding $53 million of expenses related to Sequent for year-to-date 2021, other operations and maintenance expenses increased approximately $106 million. The increase was primarily due to increases of $47 million in compensation and benefit expenses, $30 million in expenses passed through directly to customers primarily related to bad debt at gas distribution operations, $18 million in customer accounts expenses, and $15 million in technology-related costs.

Depreciation and Amortization


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$7	5.3	$18	4.5

In the third quarter 2022, depreciation and amortization was $140 million compared to $133 million for the corresponding period in 2021. For year-to-date 2022, depreciation and amortization was $414 million compared to $396 million for the corresponding period in 2021. The increases were primarily due to continued infrastructure investments at the natural gas distribution utilities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Taxes Other Than Income Taxes


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$9	25.0	$42	25.3

In the third quarter 2022, taxes other than income taxes were $45 million compared to $36 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $208 million compared to $166 million for the corresponding period in 2021. The increases primarily reflect an increase in revenue tax expenses as a result of higher natural gas revenues and an increase in invested capital tax expense at Nicor Gas. Revenue tax expenses are passed through directly to customers and have no impact on net income.

Gain on Dispositions, Net


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(121)	(100.0)	$(122)	(96.1)

The sale of Sequent in the third quarter 2021 resulted in a gain on dispositions, net of $121 million. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Earnings from Equity Method Investments


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$9	36.0	$91	N/M

In the third quarter 2022, earnings from equity method investments were $34 million compared to $25 million for the corresponding period in 2021. The increase was primarily due to higher earnings at SNG resulting from higher revenues primarily due to increased demand.

For year-to-date 2022, earnings from equity method investments were $105 million compared to $14 million for the corresponding period in 2021. The increase was primarily due to pre-tax impairment charges totaling $84 million in 2021 related to the PennEast Pipeline project and higher earnings at SNG resulting from higher revenues primarily due to increased demand.

See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information.

Other Income (Expense), Net


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$2	15.4	$113	N/M

For year-to-date 2022, other income (expense), net was $47 million of income compared to $66 million of expense for the corresponding period in 2021. The change was largely due to charitable contributions totaling $101 million during the first and second quarters of 2021 and an increase of $12 million at gas distribution operations primarily related to an increase in non-service cost-related retirement benefits income. See Note (H) 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)

Income Taxes


Third Quarter 2022 vs. Third Quarter 2021		Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)	(% change)	(change in millions)	(% change)
$(106)	(79.7)	$(63)	(28.1)

In the third quarter 2022, income taxes were $27 million compared to $133 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $161 million compared to $224 million for the corresponding period in 2021. The decreases were primarily the result of $113 million in additional tax expense in the third quarter 2021 as a result of the sale of Sequent. Partially offsetting the third quarter 2022 decrease was an increase of $9 million in income tax expense at gas distribution operations primarily as a result of higher pre-tax earnings. The year-to-date 2022 decrease was partially offset by increases in income tax expense of $25 million at gas distribution operations primarily as a result of higher pre-tax earnings and $20 million at gas pipeline investments primarily from $18 million of tax benefits resulting from the impairment charge in the second quarter 2021 related to the PennEast Pipeline project. See Notes 7 and 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

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.


	2022						2021
	Operating Revenues		Operating Expenses		Net Income (Loss)		Operating Revenues		Operating Expenses		Net Income (Loss)
	(in millions)						(in millions)
Third Quarter
Gas distribution operations	$	751	$	629	$	59	$	556	$	459	$	45
Gas pipeline investments	8		3		24		8		3		10
Wholesale gas services(*)	—		—		—		—		(120)		94
Gas marketing services	85		87		(2)		52		52		(2)
All other	16		12		2		11		25		(91)
Intercompany eliminations	(3)		—		—		(4)		(4)		—
Consolidated	$	857	$	731	$	83	$	623	$	415	$	56

Year-to-Date
Gas distribution operations	$	3,533	$	2,922	$	365	$	2,466	$	1,936	$	308
Gas pipeline investments	24		8		76		24		9		3
Wholesale gas services(*)	—		—		—		188		(53)		108
Gas marketing services	420		327		65		311		226		60
All other	43		48		10		29		60		(90)
Intercompany eliminations	(22)		(19)		—		(24)		(24)		—
Consolidated	$	3,998	$	3,286	$	516	$	2,994	$	2,154	$	389

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

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

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AND RESULTS OF OPERATIONS (Continued)

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 third quarter and year-to-date 2022, net income increased $14 million, or 31.1%, and $57 million, or 18.5%, respectively, when compared to the corresponding periods in 2021, as described further below:

Operating revenues increased $195 million and $1.07 billion, respectively, when compared to the corresponding periods in 2021 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 $170 million and $986 million, respectively, when compared to the corresponding periods in 2021 primarily due to increases of $129 million and $802 million, respectively, in the cost of gas as a result of higher natural gas prices compared to 2021, higher compensation and benefit expenses, and higher 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.
Other income and (expense) increased $3 million and $12 million, respectively, when compared to the corresponding periods in 2021, primarily due to an increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Interest expense, net of amounts capitalized increased $5 million and $11 million, respectively, when compared to the corresponding periods in 2021 primarily due to additional debt issued to finance continued investments. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.
Income taxes increased $9 million and $25 million, respectively, when compared to the corresponding periods in 2021 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.

In the third quarter 2022, net income increased $14 million when compared to the corresponding period in 2021 primarily due to higher earnings at SNG resulting from higher revenues primarily due to increased demand and lower income taxes related to the PennEast Pipeline project.

For year-to-date 2022, net income increased $73 million when compared to the corresponding period in 2021 primarily due to pre-tax impairment charges totaling $84 million ($67 million after tax) in 2021 related to the equity method investment in the PennEast Pipeline project and higher earnings at SNG resulting from higher revenues primarily due to increased demand. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

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AND RESULTS OF OPERATIONS (Continued)

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 third quarter 2022, net income was flat when compared to the corresponding period in 2021 primarily due to an increase of $35 million in operating expenses primarily due to higher cost of gas, largely offset by a related increase of $33 million in operating revenues.

For year-to-date 2022, net income increased $5 million, or 8.3%, when compared to the corresponding period in 2021 primarily due to a $109 million increase in operating revenues as a result of higher commodity prices and higher sales to commercial customers, partially offset by a $101 million increase in operating expenses primarily due to $95 million in higher cost of natural gas and an increase of $4 million in income taxes as a result of higher pre-tax earnings.

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. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding agreements by certain affiliates of Southern Company Gas to sell two natural gas storage facilities.

In the third quarter 2022, net income increased $93 million when compared to the corresponding period in 2021. The change primarily relates to additional tax expense as a result of the sale of Sequent in 2021 and a decrease of $13 million in operating expenses related to lower depreciation in 2022 and transaction costs in 2021 related to the sale of Sequent.

For year-to-date 2022, net income increased $100 million when compared to the corresponding period in 2021. The change primarily relates to additional tax expense as a result of the sale of Sequent in 2021 and an increase in operating revenues of $14 million primarily related to higher demand fees and favorable hedge gains at the natural gas storage businesses, higher sales from the renewable natural gas business, and lower depreciation in 2022.

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 trends of higher inflation and 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.

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AND RESULTS OF OPERATIONS (Continued)

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. The drivers, speed, and depth of the 2020 economic contraction were unprecedented and continue to reduce energy demand across the Southern Company system's service territory, primarily in the commercial class. Retail electric revenues attributable to changes in sales increased in the first nine months of 2022 when compared to the corresponding period in 2021 primarily due to the normalization of economic activity; however, total retail electric sales for the Southern Company system continued to be negatively impacted by the COVID-19 pandemic when compared to pre-pandemic trends. 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, which has impacted, and may continue to impact, the Registrants' borrowing costs. Based on these factors, the probability of the U.S. economy falling into a recession has heightened. The impacts of new COVID-19 variants, responses to the COVID-19 pandemic by both customers and governments, ongoing geopolitical threats, such as the escalation of the Russia-Ukraine war, and the potential of future COVID-19-related lockdowns in Asia or elsewhere could further disrupt global supply chains and increase the severity of a possible economic downturn in the Southern Company system's service territory. 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 nine months of 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 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. See "Income Tax Matters" herein for additional information on recent tax legislation expanding the availability of federal ITCs and PTCs.

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; and 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. 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. 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

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gas; costs and availability of labor and materials in a time of rising costs, impacted by heightened inflation caused by unprecedented shocks to the broader economy, 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 "General Litigation Matters" and "Environmental Remediation" herein, for additional information.

Environmental Laws and Regulations

Air Quality

On August 30, 2022, the EPA found that 15 states, including Alabama and Mississippi, failed to submit regional haze state implementation plans for the second 10-year planning period (2018 through 2028) by July 31, 2021. The finding of failure to submit establishes a two-year deadline for the EPA to promulgate a Federal Implementation Plan (FIP) to address these requirements for each applicable state unless, before the EPA promulgates a FIP, the state submits, and the EPA approves, a state implementation plan that meets the requirements. The ultimate outcome of this matter, including any potential impacts to Alabama Power, Mississippi Power, and Southern Power, cannot be determined at this time.

Global Climate Issues

On June 30, 2022, the U.S. Supreme Court issued an opinion limiting the EPA's authority to regulate greenhouse gas emissions under the Clean Air Act. The Court's review in the case focused on whether the EPA's authority under the Clean Air Act allows the EPA to regulate the electric industry in a manner as broad as the Clean Power Plan (CPP), which was repealed and replaced by the Affordable Clean Energy rule (ACE Rule). The Court held that the generation shifting to lower carbon emitting sources approach in the CPP is not authorized by the Clean Air Act. However, the Court did not decide whether the EPA may adopt measures only applied at the individual electric generating source, which is the basis for the ACE Rule. The EPA has announced its intent to propose a rule for existing power plants pursuant to the Clean Air Act by March 2023. The ultimate impact of the Court's decision cannot be determined at this time.

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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.

Alabama Power

On September 23, 2022, the FERC authorized Alabama Power to use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, and the new depreciation rates will be reflected in Alabama Power's future rate filings. The updated depreciation rates are expected to result in an approximately $500 million increase in annual depreciation expense. See Notes 2 and 5 to the financial statements under "Alabama Power" and "Depreciation and Amortization," respectively, in Item 8 of the Form 10-K for additional information.

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, reduce emissions, 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.

Income Tax Matters

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters" in Item 7 of the Form 10-K for additional information.

On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA extends, expands, and increases ITCs and PTCs for clean energy projects, allows PTCs for solar projects, adds ITCs for stand-alone energy storage projects with an option to elect out of the tax normalization requirement, and allows for the transferability of the tax credits. The IRA extends and increases the tax credits for carbon capture and sequestration projects and adds tax credits for clean hydrogen and nuclear projects. Additional ITC and PTC amounts are available if the projects meet domestic content requirements or are located in low-income or energy communities.

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AND RESULTS OF OPERATIONS (Continued)

The IRA also enacted a 15% corporate minimum tax on book income, with some adjustments including adjustments for pension and tax depreciation. The 15% corporate minimum tax on book income can be reduced by energy tax credits.

For solar projects placed in service in 2022 through 2032, the IRA provides for a 30% ITC and an option to claim a PTC instead of an ITC. Starting in 2023 and through 2032, the IRA provides for a 30% ITC for stand-alone energy storage projects. For wind projects placed in service in 2022 through 2032, the IRA provides for a 100% PTC. The PTC rate for 2022 is 2.6 cents per KWH and will be adjusted for inflation annually. The same PTC rate applies for solar projects for which the PTC option has been elected. To realize the full value of ITCs and PTCs, the IRA requires satisfaction of prevailing wage and apprenticeship requirements.

Implementation of the IRA provisions is subject to the issuance of additional guidance by the U.S. Treasury Department, and the ultimate impacts cannot be determined at this time; however, the IRA is not expected to have a material impact on the Registrants' financial statements for the year ending December 31, 2022.

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.

Application of Critical Accounting Policies and Estimates

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.

Estimated Cost, Schedule, and Rate Recovery for the Construction of Plant Vogtle Units 3 and 4

(Southern Company and Georgia Power)

As of September 30, 2022, Georgia Power revised its total project capital cost forecast to $10.4 billion (net of $1.7 billion received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). This forecast includes construction contingency of $49 million and is based on projected in-service dates at the end of the first quarter 2023 and the fourth quarter 2023 for Units 3 and 4, respectively.

The projected schedule for Unit 3 primarily depends on the pace of system and area transitions to operations, including the completion of closure documentation necessary to support start-up testing, and the progression of start-up, final component, and pre-operational testing, which may be impacted by equipment or other operational failures. The projected schedule for Unit 4 primarily depends on Unit 3 progress through start-up and testing; overall construction productivity and production levels improving, particularly in electrical installation, including terminations; and appropriate levels of craft laborers, particularly electricians, being added and maintained. Any further delays could result in later in-service dates and cost increases.

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AND RESULTS OF OPERATIONS (Continued)

Georgia Power and the other Vogtle Owners do not agree on either 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) or the extent to which COVID-19-related costs impact those provisions. In October 2021, Georgia Power and the other Vogtle Owners entered into an agreement, which was modified on June 3, 2022, to clarify the process for the tender provisions of the Global Amendments to provide for a decision between 120 and 194 days after the tender option is triggered, which the other Vogtle Owners assert occurred on February 14, 2022. On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs.

Georgia Power recorded additional pre-tax charges (credits) to income in the second quarter 2022 and the third quarter 2022 of approximately $16 million ($12 million after tax) and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint, regarding the cost-sharing and tender provisions of the Global Amendments described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with these provisions for OPC and Dalton based on the current project capital cost forecast.

The ultimate outcome of these matters cannot be determined at this time. However, any extension of the in-service date beyond the first quarter 2023 for Unit 3 or the fourth quarter 2023 for Unit 4, including the current level of cost sharing described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein, is estimated to result in additional base capital costs for Georgia Power of up to $15 million per month for Unit 3 and $35 million per month for Unit 4, as well as the related AFUDC and any additional related construction, support resources, or testing costs. 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 additional information.

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 September 30, 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.

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At the end of the third quarter 2022, the market price of Southern Company's common stock was $68.00 per share (based on the closing price as reported on the NYSE) and the book value was $28.69 per share, representing a market-to-book ratio of 237%, compared to $68.58, $26.30, and 261%, respectively, at the end of 2021. Southern Company's common stock dividend for the third quarter 2022 was $0.68 per share compared to $0.66 per share in the third 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 and, for the traditional electric operating companies, operating cash flows related to fuel cost under recovery. The fuel cost under recovery balances are primarily the result of higher than forecasted prices for natural gas and purchased power.

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.

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. 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.

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. Operating cash flows provide a

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AND RESULTS OF OPERATIONS (Continued)

substantial portion of the Registrants' cash needs. During the nine months ended September 30, 2022, Southern Power utilized tax credits, which provided $218 million in operating cash flows. In addition, Southern Power plans to utilize tax equity partnership contributions (as discussed further herein). Georgia Power intends to utilize short-term floating rate bank loans and commercial paper issuances to fund operating cash flows related to fuel cost under recovery. Subsequent to September 30, 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement and intends to borrow up to an additional $1.2 billion pursuant to a short-term floating rate bank loan in November 2022.

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 nine months ended September 30, 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 September 30, 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 September 30, 2022 for the applicable Registrants:


At September 30, 2022	Southern Company		Georgia Power		Mississippi Power		Southern Power
	(in millions)
Current liabilities in excess of current assets	$	2,438	$	2,442	$	18	$	325

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.

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AND RESULTS OF OPERATIONS (Continued)

Bank Credit Arrangements

At September 30, 2022, the Registrants' unused committed credit arrangements with banks were as follows:


At September 30, 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	$	275	$	569	$	1,748	$	30	$	7,596

(a)At September 30, 2022, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $16 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(b)Includes $798 million and $950 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 September 30, 2022 was approximately $1.4 billion (comprised of approximately $789 million at Alabama Power, $619 million at Georgia Power, and $34 million at Mississippi Power). In addition, at September 30, 2022, Georgia Power had approximately $288 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.

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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 September 30, 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	$	1,398	3.5	%	$	1,859	2.5	%	$	2,809
Alabama Power	—		—		—		—		—
Georgia Power	814		3.4		443		2.7		815
Mississippi Power	—		—		3		2.1		23
Southern Power	208		3.6		199		2.5		306
Southern Company Gas:
Southern Company Gas Capital	$	35	3.4	%	$	347	2.5	%	$	547
Nicor Gas	325		3.5		218		2.7		330
Southern Company Gas Total	$	360	3.5	%	$	565	2.6	%

(*)Average and maximum amounts are based upon daily balances during the three-month period ended September 30, 2022.

Analysis of Cash Flows

Net cash flows provided from (used for) operating, investing, and financing activities for the nine months ended September 30, 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)
Nine Months Ended September 30, 2022
Operating activities	$	5,017	$	1,072	$	1,482	$	279	$	827	$	1,532
Investing activities	(5,952)		(1,641)		(2,653)		(219)		(128)		(1,239)
Financing activities	1,119		967		1,171		(72)		(603)		(313)

Nine Months Ended September 30, 2021
Operating activities	$	5,081	$	1,419	$	2,350	$	159	$	750	$	757
Investing activities	(5,850)		(1,335)		(2,572)		(182)		(753)		(966)
Financing activities	1,802		56		505		130		33		222

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 decreased $64 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to decreased fuel cost recovery at the traditional electric operating companies and the timing of customer receivable collections, largely offset by the timing of vendor payments and increased natural gas cost recovery at the natural gas distribution utilities.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to the Subsidiary Registrants' construction programs.

The net cash provided from financing activities for the nine months ended September 30, 2022 was primarily related to net issuances of long-term debt and the issuance of common stock to settle the purchase contracts entered into as part of the 2019 Series A Equity Units (Equity Units) (as discussed in Note (F) to the Condensed Financial Statements under "Equity Units" herein), partially offset by common stock dividend payments.

Alabama Power

Net cash provided from operating activities decreased $347 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to decreased fuel cost recovery, the timing of customer receivable collections, and fossil fuel stock purchases, partially offset by the timing of vendor payments.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to gross property additions, including approximately $182 million related to the construction of Plant Barry Unit 8 and $171 million related to the acquisition of the Calhoun Generating Station. See Notes (B) and (K) to the Condensed Financial Statements under "Alabama Power" herein for additional information.

The net cash provided from financing activities for the nine months ended September 30, 2022 was primarily related to the net issuance of long-term debt and capital contributions from Southern Company, partially offset by common stock dividend payments.

Georgia Power

Net cash provided from operating activities decreased $868 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to decreased fuel cost recovery and the timing of customer receivable collections and fossil fuel stock purchases, partially offset by the timing of vendor payments.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to gross property additions, including a total of approximately $820 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 nine months ended September 30, 2022 was primarily related to net issuances of senior notes, a net increase in short-term borrowings, and capital contributions from Southern Company, partially offset by common stock dividend payments.

Mississippi Power

Net cash provided from operating activities increased $120 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to the timing of vendor payments, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to gross property additions.

The net cash used for financing activities for the nine months ended September 30, 2022 was primarily related to common stock dividend payments, partially offset by capital contributions from Southern Company.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Power

Net cash provided from operating activities increased $77 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to an increase in wholesale revenues driven by higher market prices of energy and the timing of vendor payments, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the nine months ended September 30, 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 nine months ended September 30, 2022 was primarily related to the repayment of senior notes at maturity, common stock dividend payments, net capital distributions to noncontrolling interests, and a decrease in commercial paper borrowings, partially offset by a capital contribution from Southern Company.

Southern Company Gas

Net cash provided from operating activities increased $775 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to increased natural gas cost recovery and the timing of vendor payments, partially offset by an increase in natural gas for sale as a result of higher prices for natural gas purchases.

The net cash used for investing activities for the nine months ended September 30, 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 nine months ended September 30, 2022 was primarily related to common stock dividend payments and net repayments of short-term debt, partially offset by net issuances of long-term debt and capital contributions from Southern Company.

Significant Balance Sheet Changes

Southern Company

Significant balance sheet changes for the nine months ended September 30, 2022 included:

an increase of $3.2 billion in total stockholders' equity primarily related to net income and the issuance of common stock to settle the purchase contracts entered into as part of the Equity Units (as discussed in Note (F) to the Condensed Financial Statements under "Equity Units" herein), partially offset by common stock dividend payments;
an increase of $2.4 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs, net of the reclassification of $0.6 billion to other regulatory assets and $0.4 billion to regulatory assets associated with AROs upon Georgia Power's retirement of Plant Wansley Units 1 and 2;
an increase of $1.4 billion in long-term debt (including securities due within one year) related to new issuances;
an increase of $1.3 billion in deferred under recovered fuel clause revenues due to higher fuel and purchased power costs at Georgia Power;
an increase of $1.1 billion in accumulated deferred income taxes primarily related to the expected utilization of ITCs in 2022 and the increase in under recovered fuel clause revenues;
an increase of $0.9 billion in accounts payable primarily related to the timing of vendor payments;
an increase of $0.7 billion in regulatory assets associated with AROs, net of the reclassification from property, plant, and equipment discussed above, primarily due to a decrease of $0.5 billion in the fair value of the investments held in Alabama Power's and Georgia Power's nuclear decommissioning trusts; and

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

an increase of $0.6 billion in other deferred credits and liabilities primarily due to changes in the fair value of interest rate and foreign currency derivatives.

See "Financing Activities" herein and Notes (B), (F), (G), (I), and (J) to the Condensed Financial Statements herein for additional information.

Alabama Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

an increase of $1.2 billion in common stockholder's equity primarily due to capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
an increase of $1.1 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;
an increase of $0.8 billion in total property, plant, and equipment primarily related to the construction of Plant Barry Unit 8, the acquisition of the Calhoun Generating Station, and construction of distribution and transmission facilities;
an increase of $0.4 billion in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Alabama Power" herein; and
an increase of $0.4 billion in regulatory assets associated with AROs primarily due to a decrease of $0.3 billion in the fair value of the investments held in Alabama Power's nuclear decommissioning trust.

See "Financing Activities – Alabama Power" herein and Notes (I) and (K) to the Condensed Financial Statements herein for additional information.

Georgia Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

an increase of $1.4 billion in common stockholder's equity primarily due to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
an increase of $1.3 billion in deferred under recovered fuel clause revenues due to higher fuel and purchased power costs;
an increase of $1.1 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $956 million for Plant Vogtle Units 3 and 4, net of $0.6 billion reclassified to other regulatory assets and $0.4 billion reclassified to regulatory assets associated with AROs due to the retirement of Plant Wansley Units 1 and 2 as approved in Georgia Power's 2022 IRP;
an increase of $0.9 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;
an increase of $0.8 billion in notes payable due to an increase in commercial paper and short-term bank debt;
an increase of $0.6 billion in accumulated deferred income taxes primarily due to the increase in under recovered fuel clause revenues and the expected reduction in federal and state credit carryforward balances in 2022;
an increase of $0.3 billion in regulatory assets associated with AROs, net of the reclassification from property, plant, and equipment discussed above, primarily due to a decrease in the fair value of the investments held in Georgia Power's nuclear decommissioning trust;
an increase of $0.3 billion in other accounts payable due to the timing of vendor payments; and
an increase of $0.3 billion in customer accounts receivable primarily due to higher customer usage and the timing of collections.

See "Financing Activities – Georgia Power" herein and Note (B) under "Georgia Power – Nuclear Construction" and " – Integrated Resource Plans" and Note (I) 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)

Mississippi Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

an increase of $79 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company and
an increase of $66 million in total property, plant, and equipment primarily related to the construction of transmission and distribution facilities.

Southern Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

a decrease of $756 million in long-term debt (including securities due within one year) primarily due to the redemption of senior notes;
a decrease of $289 million in total property, plant, and equipment primarily due to continued depreciation of assets;
an increase of $282 million in common stockholder's equity primarily due to capital contributions from Southern Company and net income, partially offset by dividends paid to Southern Company and distributions to noncontrolling interests; and
increases of $194 million in accrued taxes and $100 million in accumulated deferred income tax liabilities primarily related to the expected utilization of ITCs in 2022.

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

Southern Company Gas

Significant balance sheet changes for the nine months ended September 30, 2022 included:

a decrease of $849 million in notes payable due to repayments of short-term debt and commercial paper borrowings;
an increase of $760 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets and additional infrastructure investment;
an increase of $522 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
an increase of $459 million in long-term debt (including securities due with one year) due to issuances of senior notes and first mortgage bonds, partially offset by the repayment of medium-term notes and adjustments related to fair value hedges;
a decrease of $313 million in total accounts receivable primarily relating to decreases of $166 million in customer accounts receivable and $156 million in unbilled revenues as a result of seasonality;
an increase of $231 million in other accounts payable due to seasonality and the timing of vendor payments; and
a decrease of $221 million in other regulatory assets, deferred primarily due to a $207 million reduction in natural gas cost under recovery.

See "Financing Activities – Southern Company Gas" herein and Note (B) 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)

Financing Activities

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


	Issuances				Maturities and Redemptions
Company	Senior Notes		Other Long-Term Debt			Senior Notes		Revenue Bonds		Other Long-Term Debt(a)
	(in millions)

Alabama Power	$	1,700	$	—		$	550	$	—	$	1
Georgia Power	1,500		—			400		53		201

Southern Power	—		—			677		—		—
Southern Company Gas	500		100			—		—		46
Other	—		—			—		—		8
Elimination(b)	—		—			—		—		(4)
Southern Company	$	3,700	$	100		$	1,627	$	53	$	252

(a)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments totaling $66 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.

(b)Represents reductions in affiliate finance lease obligations at Georgia Power, which are eliminated in Southern Company's consolidated financial statements.

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 nine months of 2022, Southern Company issued approximately 3.5 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $78 million.

In May 2022, Southern Company remarketed its Series 2019A and Series 2019B Remarketable Junior Subordinated Notes pursuant to the terms of its 2019 Series A Equity Units (Equity Units). Southern Company did not receive any proceeds from the remarketing, which were used to purchase a portfolio of treasury securities maturing on July 28, 2022. On August 1, 2022, the proceeds from this portfolio were used to settle the purchase contracts entered into as part of the Equity Units and Southern Company issued approximately 25.2 million shares of common stock and received proceeds of $1.725 billion. See Note (F) to the Condensed Financial Statements herein under "Equity Units" for additional information.

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

In May 2022, Southern Company borrowed $100 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate, which it repaid in August 2022.

Subsequent to September 30, 2022, Southern Company issued $500 million aggregate principal amount of Series 2022A 5.15% Senior Notes due October 6, 2025 and $500 million aggregate principal amount of Series 2022B 5.70% Senior Notes due October 15, 2032.

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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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

In June 2022, Alabama Power redeemed the following series of preferred stock: 4.20% Preferred Stock, Par Value $100 Per Share, 4.60% Preferred Stock, Par Value $100 Per Share, 4.92% Preferred Stock, Par Value $100 Per Share, 4.52% Preferred Stock, Par Value $100 Per Share, 4.64% Preferred Stock, Par Value $100 Per Share, and 4.72% Preferred Stock, Par Value $100 Per Share. The redemption price per share for each series of preferred stock equaled the redemption price per share provided in Note 8 to the financial statements under "Outstanding Classes of Capital Stock – Alabama Power" in Item 8 of the Form 10-K, plus accrued and unpaid dividends to the redemption date.

In August 2022, Alabama Power issued $550 million aggregate principal amount of Series 2022B 3.75% Senior Notes due September 1, 2027 and $450 million aggregate principal amount of Series 2022C 3.94% Senior Notes due September 1, 2032. An amount equal to the net proceeds of the Series 2022C Senior Notes will be allocated to finance or refinance, in whole or in part, one or more renewable energy projects and/or expenditures and programs related to enabling opportunities for diverse and small businesses/suppliers.

Subsequent to September 30, 2022, Alabama Power redeemed all of its 5.00% Class A Preferred Stock, Par Value $1 Per Share (Stated Capital $25 Per Share) at a redemption price of $25.00 per share plus accrued and unpaid dividends to the redemption date.

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, which it repaid in May 2022.

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

In May 2022, Georgia Power issued $700 million aggregate principal amount of Series 2022A 4.70% Senior Notes due May 15, 2032 and $800 million aggregate principal amount of Series 2022B 5.125% Senior Notes due May 15, 2052. An amount equal to the net proceeds of the Series 2022B Senior Notes will be allocated to finance or refinance, in whole or in part, one or more renewable energy projects and/or expenditures and programs related to enabling opportunities for diverse and small businesses/suppliers.

In May 2022, Georgia Power repaid its $125 million long-term bank loan that was scheduled to mature in June 2022.

In July 2022, Georgia Power repaid at maturity $53 million aggregate principal amount of Development Authority of Floyd County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Hammond Project), First Series 2010.

Subsequent to September 30, 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate and payable on demand.

Mississippi Power

In June 2022, Mississippi Power repaid $20 million, which was borrowed in March 2022 under its $125 million revolving credit arrangement.

Southern Power

In June 2022, Southern Power repaid at maturity €600 million (approximately $677 million) aggregate principal amount of Series 2016A 1.00% Senior Notes.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Subsequent to September 30, 2022, Southern Power borrowed $100 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate and payable on demand.

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 also 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.

During the second quarter 2022, Atlanta Gas Light repaid at maturity $46 million aggregate principal amount of medium-term notes with a weighted average interest rate of 8.63%.

In August 2022, Nicor Gas issued in a private placement $100 million aggregate principal amount of 2.21% Series First Mortgage Bonds due August 31, 2032.

In September 2022, Southern Company Gas Capital issued $500 million aggregate principal amount of Series 2022A 5.15% Senior Notes due September 15, 2032, guaranteed by Southern Company Gas.

Credit Rating Risk

At September 30, 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.

The maximum potential collateral requirements under these contracts at September 30, 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	$	33	$	1	$	—	$	—	$	32	$	—
At BBB- and/or Baa3	395		2		61		1		333		—
At BB+ and/or Ba1 or below	2,042		409		907		306		1,205		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 $106 million of cash collateral posted related to PPA requirements at September 30, 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

Previous: Item 1. Financial Statements (Unaudited). · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk.