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			90
Results of Operations			92
Southern Company			92
Alabama Power			98
Georgia Power			103
Mississippi Power			107
Southern Power			110
Southern Company Gas			113
Future Earnings Potential			118
Accounting Policies			122
Financial Condition and Liquidity			122

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. See Note (K) to the Condensed Financial Statements herein for additional information on segment reporting. Alabama Power, Georgia Power, and Mississippi Power each operate with one reportable business segment, since substantially all of their business is providing electric service to customers. Southern Power also operates its business with one reportable business segment, the sale of electricity in the competitive wholesale market. For additional information on the Registrants' primary business activities, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K.

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

During the first three months of 2023, Alabama Power continued construction of Plant Barry Unit 8, which is expected to be placed in service in November 2023. At March 31, 2023, project expenditures associated with Plant Barry Unit 8 totaled approximately $541 million.

On March 24, 2023, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover costs associated with the acquisition of the Central Alabama Generating Station. The filing reflected an annual increase in retail revenues of $78 million effective with June 2023 billings. Through May 2023, Alabama Power expects to recover substantially all costs associated with the Central Alabama Generating Station through Rate RSE, offset by revenues from a power sales agreement.

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

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 second quarter 2023 and the first quarter 2024, respectively, is $10.6 billion.

On March 6, 2023, Unit 3 achieved self-sustaining nuclear fission, commonly referred to as initial criticality, and, on April 1, 2023, the generator successfully synchronized to the power grid and generated electricity for the first time. Operators continue to perform tests at various power levels to help ensure the reactor performs as designed, and Southern Nuclear continues to remediate various equipment and component issues as they are identified. Based on the expected duration of start-up testing, Unit 3 is projected to be placed in service during May or June 2023. The projected schedule for Unit 3 primarily depends on the progression of pre-operational testing and start-up,

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

which may be impacted by further equipment, component, and/or other operational challenges. Hot functional testing for Unit 4 commenced on March 20, 2023, with fuel load projected to occur in the third quarter 2023. Unit 4 is projected to be placed in service during late fourth quarter 2023 or the first quarter 2024. The projected schedule for Unit 4 primarily depends on potential impacts arising from Unit 4 testing activities overlapping with Unit 3 start-up and commissioning; maintaining overall construction productivity and production levels, particularly in subcontractor scopes of work; and maintaining appropriate levels of craft laborers. Any further delays could result in later in-service dates and cost increases.

During the first quarter 2023, established construction contingency totaling $20 million was assigned to the base capital cost forecast for costs primarily associated with additional craft and support resources.

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 notified Georgia Power that they believe the project capital cost forecast approved by the Vogtle Owners in February 2022 triggered the tender provisions.

In June 2022 and July 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. Georgia Power did not accept these purported tender exercises. In June 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 had been triggered. In July 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC 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. In September 2022, Dalton filed complaints in each of these lawsuits.

Also in September 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 reimburse 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 $92 million based on the current project capital cost forecast; and (iii) Georgia Power will reimburse 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. In October 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 Dalton dismissed its related complaint.

Georgia Power recorded pre-tax charges to income through the fourth quarter 2022 of $407 million ($304 million after tax) associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power. This total is included in the total project capital cost forecast and will not be recovered from retail customers. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint, described above. Georgia Power may be required to record further pre-tax charges to income of up to approximately $345 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.

Georgia Power's ownership interest in Plant Vogtle Units 3 and 4 continues to be 45.7%. Georgia Power believes the increases in the total project capital cost forecast through December 31, 2022 triggered the tender provisions, but Georgia Power disagrees with OPC and Dalton on the tender provisions trigger date. Valid notices of tender from OPC and Dalton would require Georgia Power to pay 100% of their respective remaining shares of the costs necessary to complete Plant Vogtle Units 3 and 4. Georgia Power's incremental ownership interest will be calculated and conveyed to Georgia Power after Plant Vogtle Units 3 and 4 are placed in service.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The ultimate impact of these matters on the construction schedule and project capital cost forecast and related cost recovery 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.

Fuel Cost Recovery

On February 28, 2023, Georgia Power filed a request with the Georgia PSC to increase fuel rates. On April 24, 2023, Georgia Power filed an updated request reflecting a 54% increase in fuel rates effective June 1, 2023, which is expected to increase annual billings by approximately $1.1 billion. Changes in fuel rates have no significant effect on Georgia Power's net income but do impact the related operating cash flows. Georgia Power expects the Georgia PSC to make a final decision on this matter on May 16, 2023. The ultimate outcome of this matter cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Fuel Cost Recovery" herein for additional information.

RESULTS OF OPERATIONS

Southern Company

Net Income


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(170)	(16.5)

Consolidated net income attributable to Southern Company was $0.9 billion ($0.79 per share) in the first quarter 2023 compared to $1.0 billion ($0.97 per share) for the corresponding period in 2022. The decrease was primarily due to higher depreciation and amortization, a decrease in retail electric revenues associated with milder weather in the first quarter 2023 compared to the corresponding period in 2022, and higher interest expense, partially offset by an increase in retail electric revenues associated with rates and pricing and an increase in other revenues.

Retail Electric Revenues

In the first quarter 2023, retail electric revenues were $3.60 billion compared to $3.61 billion for the corresponding period in 2022. Details of the changes in retail electric revenues were as follows:


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Rates and pricing		$	97	2.7	%
Sales growth		7		0.2
Weather		(152)		(4.2)
Fuel and other cost recovery		34		0.9
Retail electric revenues		$	(14)	(0.4)	%

Revenues associated with changes in rates and pricing increased in the first quarter 2023 when compared to the corresponding period in 2022. The increase was primarily due to an increase in Rate CNP Compliance revenues at Alabama Power and base tariff increases in accordance with Georgia Power's 2022 ARP. In addition, revenues associated with Rate CNP Depreciation increased $73 million and were fully offset by customer bill credits of $73 million related to the flowback of excess accumulated deferred income taxes at Alabama Power. See Note 2 to the financial statements under "Alabama Power" and "Georgia Power – Rate Plans" 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 attributable to changes in sales increased in the first quarter 2023 when compared to the corresponding period in 2022. Weather-adjusted residential and commercial KWH sales increased 1.2% and 1.8%, respectively, in the first quarter 2023 when compared to the corresponding period in 2022 primarily due to residential customer growth and increased commercial usage. Commercial customer usage increased as customers continued their return to regular business trends. Industrial KWH sales decreased 1.6% in the first quarter 2023 when compared to the corresponding period in 2022 primarily due to a decrease in the chemicals sector, partially offset by increases in the pipeline and primary metals sectors.

Fuel and other cost recovery revenues increased $34 million in the first quarter 2023 compared to the corresponding period in 2022 primarily due to higher recoverable fuel costs. Electric rates for the traditional electric operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs. 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


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(65)	(9.8)

In the first quarter 2023, wholesale electric revenues were $599 million compared to $664 million for the corresponding period in 2022. The decrease was primarily due to a $97 million decrease in energy revenues in the first quarter 2023 as a result of fuel and purchased power price decreases when compared to the corresponding period in 2022 and a net decrease in the volume of KWHs sold primarily associated with natural gas PPAs at Southern Power. The decrease in energy revenues was partially offset by an increase in capacity revenues of $32 million in the first quarter 2023 primarily resulting from a new power sales agreement that began in July 2022 at Alabama Power and a net increase in capacity sales from natural gas PPAs at Southern Power.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Electric Revenues


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$13	7.3

In the first quarter 2023, other electric revenues were $190 million compared to $177 million for the corresponding period in 2022. The increase was primarily due to an increase of $7 million in transmission revenues at the traditional electric operating companies and Southern Power, an increase of $6 million in outdoor lighting sales at Georgia Power, and a $4 million gain on the resale of gas at Alabama Power, partially offset by a $5 million decrease in cogeneration steam revenue primarily associated with lower natural gas prices at Alabama Power.

Natural Gas Revenues

In the first quarter 2023, natural gas revenues were $1.9 billion compared to $2.1 billion for the corresponding period in 2022. Details of the changes in natural gas revenues were as follows:


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Infrastructure replacement programs and rate changes		$	50	2.4	%
Gas costs and other cost recovery		(199)		(9.7)
Gas marketing services		(21)		(1.0)
Other		(13)		(0.6)
Natural gas revenues		$	(183)	(8.9)	%

Revenues from infrastructure replacement programs and rate changes at the natural gas distribution utilities increased in the first quarter 2023 compared to the corresponding period in 2022 primarily due to rate increases at the natural gas distribution utilities 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 from gas costs and other cost recovery decreased in the first quarter 2023 compared to the corresponding period in 2022 primarily due to lower natural gas cost recovery associated with the timing of natural gas purchases and the recovery of those costs from 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.

Revenues from gas marketing services decreased in the first quarter 2023 compared to the corresponding period in 2022 primarily due to lower natural gas prices and the timing of unrealized hedge losses, partially offset by higher variable price spreads in Georgia and Illinois and higher customer count in Georgia.

Other Revenues


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$81	59.6

In the first quarter 2023, other revenues were $217 million compared to $136 million for the corresponding period in 2022. The increase was primarily due to increases of $36 million related to distributed infrastructure projects at PowerSecure, $24 million in unregulated sales associated with power delivery construction and maintenance projects primarily at Georgia Power, and $15 million in unregulated sales of products and services at Alabama Power.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Fuel		$	(61)	(5.5)
Purchased power		10		4.3
Total fuel and purchased power expenses		$	(51)

In the first quarter 2023, total fuel and purchased power expenses were $1.29 billion compared to $1.34 billion for the corresponding period in 2022. The decrease was due to a $42 million decrease in the average cost of fuel and purchased power and a $9 million net decrease 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.

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


	First Quarter 2023	First Quarter 2022
Total generation (in billions of KWHs)(a)	44	46
Total purchased power (in billions of KWHs)	5	4
Sources of generation (percent)(a) —
Gas	54	46
Coal	15	23
Nuclear	17	17
Hydro	5	6
Wind, Solar, and Other	9	8
Cost of fuel, generated (in cents per net KWH)—
Gas(a)	3.13	3.53
Coal	4.02	3.11
Nuclear	0.71	0.72
Average cost of fuel, generated (in cents per net KWH)(a)	2.80	2.86
Average cost of purchased power (in cents per net KWH)(b)	5.50	5.58

(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 first quarter 2023, fuel expense was $1.05 billion compared to $1.11 billion for the corresponding period in 2022. The decrease was primarily due to a 39.1% decrease in the volume of KWHs generated by coal and an 11.3% decrease in the average cost of natural gas per KWH generated, partially offset by a 29.3% increase in the average cost of coal per KWH generated, a 16.3% increase in the volume of KWHs generated by natural gas, and a 13.9% decrease in the volume of KWHs generated by hydro.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Purchased Power

In the first quarter 2023, purchased power expense was $242 million compared to $232 million for the corresponding period in 2022. The increase was primarily due to a 1.7% increase in the volume of KWHs purchased, partially offset by a 1.4% decrease in the average cost per KWH purchased primarily due to a decrease in natural gas prices.

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

Cost of Natural Gas


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(197)	(18.0)

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 85% of the total cost of natural gas in the first quarter 2023.

In the first quarter 2023, cost of natural gas was $0.9 billion compared to $1.1 billion for the corresponding period in 2022. The decrease reflects lower gas cost recovery as a result of a 31% decrease in natural gas prices in the first quarter 2023 compared to the corresponding period in 2022.

Cost of Other Sales


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$58	84.1

In the first quarter 2023, cost of other sales was $127 million compared to $69 million for the corresponding period in 2022. The increase was primarily due to a $29 million increase related to distributed infrastructure projects at PowerSecure and a $24 million increase from unregulated power delivery construction and maintenance projects primarily at Georgia Power.

Other Operations and Maintenance Expenses


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(34)	(2.2)

In the first quarter 2023, other operations and maintenance expenses were $1.48 billion compared to $1.52 billion for the corresponding period in 2022. The decrease was primarily due to decreases of $45 million in storm damage recovery as authorized in Georgia Power's 2022 ARP, $44 million in generation expenses primarily associated with non-outage and scheduled outage maintenance costs, and $31 million in transmission and distribution expenses primarily related to line maintenance, partially offset by a $39 million increase in technology infrastructure and application production costs, a $25 million decrease in nuclear property insurance refunds at Georgia Power and Alabama Power, a $12 million increase in compensation and benefit expenses, and a $9 million increase related to the injuries and damages reserves at Alabama Power and Georgia Power.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Depreciation and Amortization


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$219	24.6

In the first quarter 2023, depreciation and amortization was $1.1 billion compared to $0.9 billion for the corresponding period in 2022. The increase was primarily due to an increase of $179 million resulting from higher depreciation rates at Alabama Power and Georgia Power and an increase of $26 million from additional plant in service. 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.

Taxes Other Than Income Taxes


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$22	5.9

In the first quarter 2023, taxes other than income taxes were $394 million compared to $372 million for the corresponding period in 2022. The increase primarily reflects a $13 million increase in property taxes at the traditional electric operating companies and a $9 million increase in utility license taxes at Alabama Power.

Gain on Dispositions, Net


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$19	82.6

In the first quarter 2023, gain on dispositions, net was $42 million compared to $23 million for the corresponding period in 2022. The increase was primarily due to a gain on the sale of spare parts at Southern Power in 2023.

Allowance for Equity Funds Used During Construction


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$14	27.5

In the first quarter 2023, allowance for equity funds used during construction was $65 million compared to $51 million for the corresponding period in 2022. The increase was primarily associated with an increase in capital expenditures subject to AFUDC at Georgia Power and an increase in capital expenditures related to Plant Barry Unit 8 construction at Alabama Power. 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 "Alabama Power – Certificates of Convenience and Necessity" for additional information.

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


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$120	26.0

In the first quarter 2023, interest expense, net of amounts capitalized was $582 million compared to $462 million for the corresponding period in 2022. The increase primarily reflects approximately $62 million related to higher interest rates and $39 million related to higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Income Taxes


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(76)	(43.9)

In the first quarter 2023, income taxes were $97 million compared to $173 million for the corresponding period in 2022. The decrease was primarily due to lower pre-tax earnings and an increase in the flowback of certain excess deferred income taxes at Alabama Power, partially offset by a decrease in the flowback of certain excess deferred income taxes at Georgia Power that ended in 2022. See Note (G) to the Condensed Financial Statements herein for additional information.

Net Loss Attributable to Noncontrolling Interests


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(18)	(40.0)

Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the first quarter 2023, net loss attributable to noncontrolling interests was $63 million compared to $45 million for the corresponding period in 2022. The increased loss was primarily due to $16 million in higher HLBV loss allocations to Southern Power's wind tax equity partners due to higher wind PTCs in 2023.

Alabama Power

Net Income


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(92)	(26.5)

Alabama Power's net income after dividends on preferred stock in the first quarter 2023 was $255 million compared to $347 million for the corresponding period in 2022. The decrease was primarily due to an increase in depreciation rates effective January 2023, a decrease in weather-related revenues due to milder weather in Alabama Power's service territory in the first quarter 2023 compared to the corresponding period in 2022, and a decrease in customer usage. These decreases to income were partially offset by a decrease in income tax expense and an increase in Rate CNP Compliance revenues. See Note 2 to the financial statements in Item 8 of the Form 10-K under "Alabama Power" for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Retail Revenues

In both the first quarter 2023 and 2022, retail revenues were $1.38 billion. Details of the changes in retail revenues were as follows:


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Rates and pricing		$	58	4.2	%
Sales decline		(17)		(1.3)
Weather		(61)		(4.4)
Fuel and other cost recovery		22		1.6
Retail revenues		$	2	0.1	%

Revenues associated with changes in rates and pricing increased in the first quarter 2023 when compared to the corresponding period in 2022 primarily due to an increase in Rate CNP Compliance revenues. In addition, revenues associated with Rate CNP Depreciation increased $73 million and were fully offset by customer bill credits of $73 million related to the flowback of excess accumulated deferred income taxes. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales decreased in the first quarter 2023 when compared to the corresponding period in 2022. Weather-adjusted residential KWH sales increased 0.1% and weather-adjusted commercial KWH sales decreased 0.3% in the first quarter 2023 when compared to the corresponding period in 2022. The residential and commercial changes were primarily due to residential customer growth and a decrease in commercial usage, respectively. Industrial KWH sales decreased 2.4% primarily due to decreases in the chemicals sector, partially offset by an increase in the primary metals sector.

Fuel and other cost recovery revenues increased in the first quarter 2023 when compared to the corresponding period in 2022 primarily as a result of higher recoverable fuel costs.

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

Wholesale Revenues – Non-Affiliates


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$27	23.7

In the first quarter 2023, wholesale revenues from sales to non-affiliates were $141 million compared to $114 million for the corresponding period in 2022. The increase was primarily due to an 18.1% increase in the volume of KWH sales and a 4.8% increase in the price of energy both due to a new power sales agreement that began in July 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 Alabama Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not affect net income. Short-term opportunity energy sales are also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Wholesale Revenues – Affiliates


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(46)	(70.8)

In the first quarter 2023, wholesale revenues from sales to affiliates were $19 million compared to $65 million for the corresponding period in 2022. The decrease was primarily due to a 63.5% decrease in the volume of KWH sales due to higher demand for Southern Company system lower cost generation and an 18.2% decrease in the price of energy due to lower natural gas prices.

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. Energy revenues related to 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.

Other Revenues


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$15	16.5

In the first quarter 2023, other revenues were $106 million compared to $91 million for the corresponding period in 2022. The increase was primarily due to an increase of $15 million in unregulated sales of products and services and a $4 million gain on the resale of gas, partially offset by a $5 million decrease in cogeneration steam revenue primarily associated with lower natural gas prices.

Fuel and Purchased Power Expenses


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Fuel		$	(25)	(7.5)
Purchased power – non-affiliates		34		50.7
Purchased power – affiliates		33		126.9
Total fuel and purchased power expenses		$	42

In the first quarter 2023, total fuel and purchased power expenses were $468 million compared to $426 million for the corresponding period in 2022. The increase was due to a $39 million net increase related to the volume of KWHs generated and purchased and a $3 million net increase in the cost of fuel and purchased power.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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


	First Quarter 2023	First Quarter 2022
Total generation (in billions of KWHs)(a)	14	15
Total purchased power (in billions of KWHs)	3	2
Sources of generation (percent)(a) —
Coal	30	42
Nuclear	28	25
Gas	29	19
Hydro	13	14
Cost of fuel, generated (in cents per net KWH) —
Coal	3.33	2.90
Nuclear	0.67	0.67
Gas(a)	3.37	3.45
Average cost of fuel, generated (in cents per net KWH)(a)	2.49	2.36
Average cost of purchased power (in cents per net KWH)(b)	6.35	6.82

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

Fuel

In the first quarter 2023, fuel expense was $308 million compared to $333 million for the corresponding period in 2022. The decrease was primarily due to a 35.0% decrease in the volume of KWHs generated by coal and a 2.3% decrease in the average cost of natural gas per KWH generated, which excludes tolling agreements, partially offset by a 36.6% increase in the volume of KWHs generated by natural gas, a 14.8% increase in the average cost of coal per KWH generated, and a 12.8% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall in the first quarter 2023 compared to the corresponding period in 2022.

Purchased Power – Non-Affiliates

In the first quarter 2023, purchased power expense from non-affiliates was $101 million compared to $67 million for the corresponding period in 2022. The increase was primarily due to a 57.6% increase in the volume of KWHs purchased due to the availability of lower cost generation from market resources, partially offset by an 18.7% decrease in the average cost per KWH purchased due to a decrease in natural gas prices.

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

Purchased Power – Affiliates

In the first quarter 2023, purchased power expense from affiliates was $59 million compared to $26 million for the corresponding period in 2022. The increase was primarily due to an 82.5% increase in the volume of KWHs purchased due to the availability of lower cost gas generation in the Southern Company system and a 22.3% increase in the average cost per KWH purchased due to the purchase of additional capacity for reliability.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$15	3.7

In the first quarter 2023, other operations and maintenance expenses were $424 million compared to $409 million for the corresponding period in 2022. The increase was primarily due to a $14 million decrease in nuclear property insurance refunds and increases of $8 million in expenses related to unregulated products and services, $7 million in technology infrastructure and application production costs, $5 million related to the injuries and damages reserve, $4 million in employee compensation and benefits, and $3 million in bad debt expense. The increases were partially offset by a $30 million decrease in generation expenses primarily associated with planned outages and maintenance.

Depreciation and Amortization


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$130	60.5

In the first quarter 2023, depreciation and amortization was $345 million compared to $215 million for the corresponding period in 2022. The increase was primarily due to an increase in depreciation rates effective in 2023. 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.

Taxes Other Than Income Taxes


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$11	10.6

In the first quarter 2023, taxes other than income taxes were $115 million compared to $104 million for the corresponding period in 2022. The increase was primarily due to an increase in utility license taxes.

Interest Expense, Net of Amounts Capitalized


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$14	15.7

In the first quarter 2023, interest expense, net of amounts capitalized was $103 million compared to $89 million for the corresponding period in 2022. The increase was primarily associated with increases of approximately $11 million related to higher average outstanding borrowings and $5 million related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" 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)

Income Taxes (Benefit)


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(109)	N/M

In the first quarter 2023, income tax benefit was $2 million compared to income tax expense of $107 million for the corresponding period in 2022. The change was primarily due to an increase in the flowback of certain excess deferred income taxes and lower pre-tax earnings in the first quarter 2023. See Note 2 to the financial statements under "Alabama Power – Excess Accumulated Deferred Income Tax Accounting Order" in Item 8 of the Form 10-K and Note (G) to the Condensed Financial Statements herein for additional information.

Georgia Power

Net Income


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(89)	(23.1)

Georgia Power's net income in the first quarter 2023 was $296 million compared to $385 million for the corresponding period in 2022. The decrease was primarily due to a decrease in retail revenues associated with milder weather in the first quarter 2023 compared to the corresponding period in 2022. Partially offsetting this net income reduction were the impacts of the 2022 ARP effective January 1, 2023, including increased retail rates, partially offset by higher depreciation and amortization. See Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information.

Retail Revenues

In the first quarter 2023, retail revenues were $1.98 billion compared to $2.02 billion for the corresponding period in 2022. Details of the changes in retail revenues were as follows:


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Rates and pricing		$	34	1.7	%
Sales growth		23		1.1
Weather		(85)		(4.2)
Fuel cost recovery		(8)		(0.4)
Retail revenues		$	(36)	(1.8)	%

Revenues associated with changes in rates and pricing increased in the first quarter 2023 when compared to the corresponding period in 2022. The increase was primarily due to base tariff increases in accordance with the 2022 ARP. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the first quarter 2023 when compared to the corresponding period in 2022. Weather-adjusted residential and commercial KWH sales increased 2.2% and 2.5%, respectively, primarily due to increased customer usage and customer growth. Commercial customer usage increased as customers continued their return to regular business trends. Weather-adjusted industrial KWH sales decreased 2.1% primarily due to decreases in the textile, chemical, and rubber sectors, partially offset by increases in the electronic, transportation, and pipeline sectors.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreased in the first quarter 2023 when compared to the corresponding period in 2022 due to lower 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 (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 – Fuel Cost Recovery" for additional information.

Wholesale Revenues


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(35)	(53.0)

In the first quarter 2023, wholesale revenues were $31 million compared to $66 million for the corresponding period in 2022. The decrease was primarily due to a $23 million decrease in KWH sales associated with lower market demand and a $5 million decrease related to the average cost per KWH sold due to lower Southern Company system fuel and purchased power costs.

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


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$39	31.2

In the first quarter 2023, other revenues were $164 million compared to $125 million for the corresponding period in 2022. The increase was primarily due to increases of $34 million in unregulated sales associated with power delivery construction and maintenance, outdoor lighting, and energy conservation projects.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Fuel		$	(17)	(4.1)
Purchased power – non-affiliates		(27)		(18.0)
Purchased power – affiliates		—		—
Total fuel and purchased power expenses		$	(44)

In the first quarter 2023, total fuel and purchased power expenses were $731 million compared to $775 million for the corresponding period in 2022. The decrease was due to a decrease of $55 million related to the volume of KWHs generated and purchased, partially offset by a net increase of $11 million related to the average cost of fuel and purchased power.

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 (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 – Fuel Cost Recovery" for additional information.

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


	First Quarter 2023	First Quarter 2022
Total generation (in billions of KWHs)	13	15
Total purchased power (in billions of KWHs)	8	8
Sources of generation (percent) —
Gas	55	46

Nuclear	26	24
Coal	14	25
Hydro and other	5	5
Cost of fuel, generated (in cents per net KWH) —
Gas	3.57	3.58

Nuclear	0.75	0.77
Coal	5.24	3.41
Average cost of fuel, generated (in cents per net KWH)	3.05	2.83
Average cost of purchased power (in cents per net KWH)(*)	4.52	4.81

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

Fuel

In the first quarter 2023, fuel expense was $402 million compared to $419 million for the corresponding period in 2022. The decrease was primarily due to a 48.4% decrease in the volume of KWHs generated by coal, partially offset by increases of 53.7% in the average cost per KWH generated by coal and 6.4% in the volume of KWHs generated by natural gas.

Purchased Power – Non-Affiliates

In the first quarter 2023, purchased power expense from non-affiliates was $123 million compared to $150 million for the corresponding period in 2022. The decrease was primarily due to a 33.3% decrease in the volume of KWHs

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

purchased as Georgia Power and other Southern Company system units generally dispatched at a lower cost than available market resources, partially offset by a 23.6% increase in the average cost per KWH purchased primarily due to higher coal prices.

Purchased Power – Affiliates

Purchased power expense from affiliates was $206 million in both the first quarter 2023 and 2022 and reflects a 14.3% increase in the volume of KWHs purchased, offset by a 14.1% decrease in the average cost per KWH purchased primarily due to higher 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


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(21)	(4.1)

In the first quarter 2023, other operations and maintenance expenses were $496 million compared to $517 million for the corresponding period in 2022. The decrease was primarily due to decreases of $45 million in storm damage recovery as authorized in the 2022 ARP, $25 million in distribution and transmission expenses primarily associated with line maintenance, and $14 million in generation expenses primarily due to non-outage maintenance partially offset by scheduled generation outages. These decreases were partially offset by increases of $24 million in technology infrastructure and application production costs and $20 million from unregulated power delivery construction and maintenance and energy conservation projects, as well as a $12 million decrease in nuclear property insurance refunds. See Note 2 to the financial statements under "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information.

Depreciation and Amortization


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$57	16.2

In the first quarter 2023, depreciation and amortization was $408 million compared to $351 million for the corresponding period in 2022. The increase was primarily due to increases of $47 million resulting from higher depreciation rates as authorized in the 2022 ARP and $14 million associated with additional plant in service. See Note 5 to the financial statements under "Depreciation and Amortization" 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)

Allowance for Equity Funds Used During Construction


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$8	25.0

In the first quarter 2023, allowance for equity funds used during construction was $40 million compared to $32 million for the corresponding period in 2022. The increase was primarily due to an increase in capital expenditures subject to AFUDC.

Interest Expense, Net of Amounts Capitalized


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$39	36.4

In the first quarter 2023, interest expense, net of amounts capitalized was $146 million compared to $107 million for the corresponding period in 2022. The increase was primarily associated with increases of approximately $21 million related to higher average outstanding borrowings and $19 million related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Income Taxes


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$23	76.7

In the first quarter 2023, income taxes were $53 million compared to $30 million for the corresponding period in 2022. The increase was primarily due to the flowback of certain excess deferred income taxes that ended in 2022, partially offset by lower pre-tax earnings. See Note (G) to the Condensed Financial Statements herein for additional information.

Mississippi Power

Net Income


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$16	38.1

Mississippi Power's net income in the first quarter 2023 was $58 million compared to $42 million for the corresponding period in 2022. The increase was primarily due to an increase in affiliate wholesale capacity revenues, partially offset by an increase in non-fuel operations and maintenance expenses.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Retail Revenues

In the first quarter 2023, retail revenues were $236 million compared to $217 million for the corresponding period in 2022. Details of the changes in retail revenues were as follows:


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Rates and pricing		$	4	1.8	%
Sales growth		2		1.0
Weather		(6)		(2.8)
Fuel and other cost recovery		19		8.8
Retail revenues		$	19	8.8	%

Revenues associated with changes in rates and pricing increased in the first quarter 2023 when compared to the corresponding period in 2022 primarily due to new PEP rates that became effective for the first billing cycle of April 2022 and ECO Plan rates that became effective for the first billing cycle of May 2022. See Note 2 to the financial statements under "Mississippi Power – Performance Evaluation Plan" and " – Environmental Compliance Overview Plan" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the first quarter 2023 when compared to the corresponding period in 2022. Weather-adjusted residential KWH sales decreased 2.1% in the first quarter 2023 when compared to the corresponding period in 2022 due to a decrease in customer usage. Weather-adjusted commercial KWH sales increased 3.2% in the first quarter 2023 when compared to the corresponding period in 2022 due to an increase in customer usage. Industrial KWH sales increased 5.5% in the first quarter 2023 when compared to the corresponding period in 2022 primarily due to increases in the non-manufacturing, petroleum, and pipeline sectors, partially offset by decreases in the chemicals sector.

Fuel and other cost recovery revenues increased in the first quarter 2023 when compared to the corresponding period in 2022 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 for additional information.

Wholesale Revenues – Affiliates


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$33	78.6

In the first quarter 2023, wholesale revenues from sales to affiliates were $75 million compared to $42 million for the corresponding period in 2022. The increase was due to a $29 million increase in capacity revenues resulting from an increase in pricing and volume of generation reserves and a $17 million increase associated with higher KWH sales, partially offset by a $13 million decrease associated with lower natural gas prices.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Revenues


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$3	37.5

In the first quarter 2023, other revenues were $11 million compared to $8 million for the corresponding period in 2022. The increase was due to an increase in unregulated sales associated with power delivery construction and maintenance projects.

Fuel and Purchased Power Expenses


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Fuel		$	21	16.7
Purchased power		(2)		(31.0)
Total fuel and purchased power expenses		$	19

In the first quarter 2023, total fuel and purchased power expenses were $151 million compared to $132 million for the corresponding period in 2022. The increase was due to a $12 million increase related to the volume of KWHs generated and a $7 million increase related to the average cost of fuel and purchased power.

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

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


	First Quarter 2023	First Quarter 2022
Total generation (in millions of KWHs)	4,443	4,074
Total purchased power (in millions of KWHs)	100	120
Sources of generation (percent) –
Gas	94	92
Coal	6	8
Cost of fuel, generated (in cents per net KWH) –
Gas	3.34	3.30
Coal	5.78	3.74
Average cost of fuel, generated (in cents per net KWH)	3.51	3.34
Average cost of purchased power (in cents per net KWH)	4.10	4.54

Fuel

In the first quarter 2023, fuel expense was $147 million compared to $126 million for the corresponding period in 2022. The increase was due to a 13.6% increase in the volume of KWHs generated by natural gas, a 1.2% increase in the average cost of natural gas per KWH generated, and a 54.5% increase in the average cost of coal per KWH generated, partially offset by a 17.3% decrease in the volume of KWHs generated by coal.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$6	7.9

In the first quarter 2023, other operations and maintenance expenses were $82 million compared to $76 million for the corresponding period in 2022. The increase was primarily due to increases of $2 million in technology infrastructure and application production costs and $2 million in unregulated power delivery construction and maintenance projects.

Income Taxes


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$5	62.5

In the first quarter 2023, income taxes were $13 million compared to $8 million for the corresponding period in 2022. The increase was primarily due to higher pre-tax earnings.

Southern Power

Net Income Attributable to Southern Power


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$30	41.7

Net income attributable to Southern Power in the first quarter 2023 was $102 million compared to $72 million for the corresponding period in 2022. The increase was primarily due to a gain on the sale of spare parts and higher income associated with tax equity partnerships.

Operating Revenues


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(31)	(5.8)

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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:


	First Quarter 2023		First Quarter 2022
	(in millions)
PPA capacity revenues	$	112	$	102
PPA energy revenues	277		345
Total PPA revenues	389		447
Non-PPA revenues	108		84
Other revenues	11		8
Total operating revenues	$	508	$	539

In the first quarter 2023, total operating revenues were $508 million, reflecting a $31 million, or 5.8%, decrease from the corresponding period in 2022. The decrease in operating revenues was primarily due to the following:

PPA capacity revenues increased $10 million, or 9.8%, primarily due to a net increase in MW capacity under contract from natural gas PPAs and an increase associated with a change in rates from natural gas PPAs.
PPA energy revenues decreased $68 million, or 19.7%, primarily due to a $38 million decrease in sales under existing natural gas PPAs resulting from a $43 million decrease in the price of fuel and purchased power, partially offset by a $5 million increase in the volume of KWHs sold. Also contributing to the decrease was a $21 million decrease in sales associated with expired natural gas PPAs, net of new natural gas PPAs.
Non-PPA revenues increased $24 million, or 28.6%, due to a $58 million increase in the volume of KWHs sold through short-term sales, largely offset by a $34 million decrease in the market price of energy.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses

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


	First Quarter 2023	First Quarter 2022
	(in billions of KWHs)
Generation	12.3	11.0
Purchased power	0.7	0.5
Total generation and purchased power	13.0	11.5

Total generation and purchased power (excluding solar, wind, fuel cells, and tolling agreements)	8.4	6.9

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

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

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


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)
Fuel		$	(41)	(17.7)
Purchased power		5		23.8
Total fuel and purchased power expenses		$	(36)

In the first quarter 2023, total fuel and purchased power expenses decreased $36 million, or 14.2%, compared to the corresponding period in 2022. Fuel expense decreased $41 million due to an $84 million decrease associated with the average cost of fuel, partially offset by a $43 million increase associated with the volume of KWHs generated. Purchased power expense increased $5 million due to an $11 million increase associated with the volume of KWHs purchased, largely offset by a $7 million decrease associated with the average cost of purchased power.

Depreciation and Amortization


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$8	6.7

In the first quarter 2023, depreciation and amortization was $128 million compared to $120 million for the corresponding period in 2022. The increase was primarily due to capital improvements at natural gas generating facilities.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Gain on Dispositions, Net


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$18	N/M

In the first quarter 2023, gain on dispositions, net was $20 million compared to $2 million for the corresponding period in 2022. The increase was primarily due to a $16 million gain on the sale of spare parts in 2023.

Interest Expense, Net of Amounts Capitalized


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(4)	(10.8)

In the first quarter 2023, interest expense, net of amounts capitalized was $33 million compared to $37 million for the corresponding period in 2022. The decrease was primarily due to lower average outstanding borrowings.

Income Taxes (Benefit)


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$5	41.7

In the first quarter 2023, income tax benefit was $7 million compared to $12 million for the corresponding period in 2022. The change was primarily due to higher pre-tax earnings in 2023. See Note (G) to the Condensed Financial Statements herein for additional information.

Net Loss Attributable to Noncontrolling Interests


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(18)	(40.0)

In the first quarter 2023, net loss attributable to noncontrolling interests was $63 million compared to $45 million for the corresponding period in 2022. The increased loss was primarily due to $16 million in higher HLBV loss allocations to wind tax equity partners due to higher wind PTCs in 2023.

Southern Company Gas

Operating Metrics

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

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

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(10)	(3.1)

In the first quarter 2023, net income was $309 million compared to $319 million for the corresponding period in 2022. The decrease was primarily due to a $16 million decrease at gas marketing services primarily related to hedge losses, partially offset by a $7 million increase at gas distribution operations primarily due to rate increases and continued investment in infrastructure replacement.

Natural Gas Revenues

In the first quarter 2023, natural gas revenues were $1.9 billion compared to $2.1 billion for the corresponding period in 2022. Details of the changes in natural gas revenues were as follows:


	First Quarter 2023 vs. First Quarter 2022
		(change in millions)		(% change)


Infrastructure replacement programs and rate changes		$	50	2.4	%
Gas costs and other cost recovery		(199)		(9.7)
Gas marketing services		(21)		(1.0)

Other		(13)		(0.6)
Natural gas revenues		$	(183)	(8.9)	%

Revenues from infrastructure replacement programs and rate changes increased in the first quarter 2023 compared to the corresponding period in 2022 primarily due to rate increases at the natural gas distribution utilities 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 from gas costs and other cost recovery decreased in the first quarter 2023 compared to the corresponding period in 2022 primarily due to lower natural gas cost recovery associated with the timing of natural gas purchases and the recovery of those costs from customers. See "Cost of Natural Gas" herein for additional information. Revenue impacts from weather and customer growth are described further below.

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services; therefore, weather typically does not have a significant net income impact. The following table presents Heating Degree Days information for Illinois and Georgia, the primary locations where Southern Company Gas' operations are impacted by weather.


	First Quarter			2023 vs. normal	2023 vs. 2022
		Normal*()**	2023	2022		warmer		warmer
	(in thousands)
Illinois		3,064	2,661	3,007		(13.2)	%	(11.5)	%
Georgia		1,329	908	1,251		(31.7)	%	(27.4)	%

(*)Normal represents the 10-year average from January 1, 2013 through March 31, 2022 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.

The following table provides the number of customers served by Southern Company Gas at March 31, 2023 and 2022:


	March 31,
	2023		2022		2023 vs. 2022
	(in thousands, except market share %)				(% change)
Gas distribution operations	4,375		4,358		0.4	%
Gas marketing services
Energy customers(*)	635		598		6.2	%
Market share of energy customers in Georgia	29.8	%	28.7	%

(*)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


First Quarter 2023 vs. First Quarter 2022
	(change in millions)	(% change)
	$(197)	(18.0)

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 85% of the total cost of natural gas in the first quarter 2023. 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" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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


	First Quarter		2023 vs. 2022
	2023	2022
Gas distribution operations (mmBtu in millions)
Firm		258	304	(15.1)	%
Interruptible		25	25	—
Total		283	329	(14.0)	%


Gas marketing services (mmBtu in millions)
Firm:
Georgia		13	16	(18.8)	%
Illinois		3	3	—

Other		5	4	25.0
Interruptible large commercial and industrial		4	4	—
Total		25	27	(7.4)	%

Other Operations and Maintenance Expenses

Other operations and maintenance expenses were $305 million for both the first quarter 2023 and 2022 and reflect a $17 million increase in compensation and benefits, partially offset by a $12 million decrease in expenses passed through to customers primarily related to bad debt at gas distribution operations.

Interest Expense, Net of Amounts Capitalized


First Quarter 2023 vs. First Quarter 2022
(change in millions)						(% change)
$15						24.6

In the first quarter 2023, interest expense, net of amounts capitalized was $76 million compared to $61 million for the corresponding period in 2022. The increase primarily reflects higher interest rates and higher average outstanding debt. 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)

Segment Information

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


	2023						2022
	Operating Revenues		Operating Expenses		Net Income		Operating Revenues		Operating Expenses		Net Income
	(in millions)						(in millions)









First Quarter
Gas distribution operations	$	1,618	$	1,264	$	221	$	1,803	$	1,475	$	214
Gas pipeline investments	8		3		31		8		3		29
Gas marketing services	246		175		50		243		150		66
All other	12		9		7		16		21		10
Intercompany eliminations	(9)		(5)		—		(12)		(12)		—
Consolidated	$	1,875	$	1,446	$	309	$	2,058	$	1,637	$	319

Gas Distribution Operations

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

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

In the first quarter 2023, net income increased $7 million, or 3.3%, when compared to the corresponding period in 2022, as described further below:

Operating revenues decreased $185 million primarily due to lower gas cost over recovery, partially offset by 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 decreased $211 million primarily due to a $218 million decrease in cost of natural gas as a result of lower gas prices and lower volumes sold compared to 2022, partially offset by higher depreciation resulting from additional assets placed in service and higher compensation and benefits. The decrease in operating expenses also includes lower costs passed through directly to customers, primarily related to bad debt expenses and revenue taxes.
Interest expense, net of amounts capitalized increased $13 million primarily due to higher interest rates and higher average outstanding debt.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Gas Pipeline Investments

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

In the first quarter 2023, net income increased $2 million primarily due to higher earnings at SNG resulting from higher revenues primarily due to increased demand, partially offset by higher interest expense, net of amounts capitalized.

Gas Marketing Services

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

In the first quarter 2023, net income decreased $16 million, or 24.2%, when compared to the corresponding period in 2022 primarily due to a $25 million increase in operating expenses primarily resulting from a $22 million increase in cost of natural gas due to the timing of unrealized hedge losses, partially offset by lower gas prices and lower volumes sold. Net income also reflects a decrease of $6 million in income taxes as a result of lower 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. All other included a natural gas storage facility in Texas through its sale in November 2022. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information, including the sale of a natural gas storage facility in California expected to be completed later in 2023.

In the first quarter 2023, net income decreased $3 million when compared to the corresponding period in 2022. The change was primarily related to an increase in income taxes, largely offset by a decrease in operating expenses primarily related to lower depreciation in 2023.

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, other major factors are completing construction and start-up of Plant Vogtle Units 3 and 4, meeting the related cost and schedule projections, and completing the related cost recovery proceedings.

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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Global and U.S. economic conditions continue to be significantly affected by a series of demand and supply shocks that caused a global and national economic recession in 2020 and have been further impacted by the invasion of Ukraine and significant declines in labor force participation rates. The confluence of these disruptions has resulted in the highest levels of inflation globally in 40 years and driven a significant policy response by central banks across the global economy. The U.S. Federal Reserve has increased policy interest rates faster than any rate increase cycle in the last 40 years and to levels high enough to slow economic activity. These actions and impacts, including increased costs for goods and services and borrowing costs, have led to a slowing of some economic activity and a significantly increased risk of recession. Recent challenges facing small and midsize banks may tighten lending standards, cause uncertainty in the banking sector, and further reduce economic growth. Additionally, inflation remains elevated in part due to continued supply chain and labor market constraints. Electricity sales across all classes have recovered to pre-COVID-19 pandemic levels and customer growth at both the traditional electric operating companies and natural gas distribution utilities has remained strong. However, weakening economic activity increases the risk of slowing to declining energy sales. Additionally, the current economic environment has increased the uncertainty of future energy demand and operating costs. See RESULTS OF OPERATIONS herein for information on energy sales in the Southern Company system's service territory during the first three months of 2023.

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; continued 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 MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters" in Item 7 of the Form 10-K for information regarding the Inflation Reduction Act's expansion of 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 or policies designed to promote electrification. 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 may result 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; customer energy conservation practices; the use of alternative energy sources by customers; government incentives to reduce overall energy usage; fuel, labor, and material prices in an environment of heightened inflation and material and labor supply chain disruptions; and the price elasticity of

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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 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 February 13, 2023, the EPA published a final rule disapproving 19 state implementation plans (SIPs), including the States of Alabama and Mississippi, under the interstate transport (good neighbor) provisions of the Clean Air Act for the 2015 Ozone National Ambient Air Quality Standards (NAAQS). On March 14, 2023 and March 15, 2023, the State of Mississippi and Mississippi Power, respectively, challenged the EPA's disapproval of the Mississippi SIP in the U.S. Court of Appeals for the Fifth Circuit. On April 13, 2023 and April 14, 2023, the State of Alabama and Alabama Power, respectively, challenged the EPA's disapproval of the Alabama SIP in the U.S. Court of Appeals for the Eleventh Circuit. The ultimate impact of these cases cannot be determined at this time. As a result of the SIP disapprovals, on March 15, 2023, the EPA released the prepublication version of the 2015 Ozone NAAQS Good Neighbor federal implementation plan with initial compliance expected to begin in May 2023. The ultimate impact of the rule cannot be determined at this time; however, it will likely result in increased compliance costs for the traditional electric operating companies.

Water Quality

On March 29, 2023, the EPA published a proposed ELG Supplemental Rule revising certain effluent limits of the 2020 and 2015 ELG rules. The proposal imposes more stringent requirements for flue gas desulfurization wastewater, bottom ash transport water, and combustion residual leachate to be met no later than December 31, 2029. The EPA is also proposing that a limited number of facilities already achieving compliance with the 2020 ELG Reconsideration Rule be allowed to elect retirement or repowering by December 31, 2032 as opposed to meeting the new more stringent requirements. The proposal maintains the 2020 ELG Reconsideration Rule's permanent cessation of coal combustion subcategory allowing units to continue to operate until the end of 2028 without having to install additional technologies. A final rule is anticipated in 2024. The ultimate impact of this proposal cannot be determined at this time; however, it may result in significant compliance costs.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Regulatory Matters

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

Construction Programs

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

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

Southern Company Gas is engaged in various infrastructure improvement programs designed to update or expand the natural gas distribution systems of the natural gas distribution utilities to improve reliability and resiliency, 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.

Southern Power's Power Sales Agreements

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Southern Power's Power Sales Agreements" in Item 7 of the Form 10-K for additional information.

At March 31, 2023, 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 96% through 2027 and 90% through 2032, with an average remaining contract duration of approximately 12 years.

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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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.

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

FINANCIAL CONDITION AND LIQUIDITY

Overview

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Overview" in Item 7 of the Form 10-K for additional information. The financial condition of each Registrant remained stable at March 31, 2023. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. See "Cash Requirements," "Sources of Capital," and "Financing Activities" herein for additional information.

At the end of the first quarter 2023, the market price of Southern Company's common stock was $69.58 per share (based on the closing price as reported on the NYSE) and the book value was $28.00 per share, representing a market-to-book ratio of 249%, compared to $71.41, $27.93, and 256%, respectively, at the end of 2022. Southern Company's common stock dividend for the first quarter 2023 was $0.68 per share compared to $0.66 per share in the first quarter 2022.

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. See Note (B) to the Condensed Financial Statements herein under "Georgia Power – Fuel Cost Recovery" for additional information.

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 under "Southern Power" in Item 8 of the Form 10-K for additional information regarding Southern Power's plant acquisitions and construction projects.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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, 2022.

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, hybrid, and/or equity issuances. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings.

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 substantial portion of the Registrants' cash needs. In addition, Southern Power plans to utilize tax equity partnership contributions (as discussed further herein). Georgia Power intends to continue utilizing short-term floating rate bank loans and commercial paper issuances to fund operating cash flows related to fuel cost under recovery.

The amount, type, and timing of any financings in 2023, 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 three months ended March 31, 2023, Southern Power obtained tax equity funding for existing tax equity partnerships totaling $21 million. See Note 1 to the financial statements under "General" in Item 8 of the Form 10-K for additional information.

By regulation, Nicor Gas is restricted, to the extent of its retained earnings balance, in the amount it can dividend or loan to affiliates and is not permitted to make money pool loans to affiliates. At March 31, 2023, the amount of subsidiary retained earnings restricted to dividend totaled $1.6 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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at March 31, 2023 for the applicable Registrants:


At March 31, 2023	Southern Company		Georgia Power		Mississippi Power		Southern Company Gas
	(in millions)
Current liabilities in excess of current assets	$	4,338	$	2,820	$	91	$	355

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.

Bank Credit Arrangements

At March 31, 2023, the Registrants' unused committed credit arrangements with banks were as follows:


At March 31, 2023	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	$	225	$	587	$	1,748	$	30	$	7,564

(a)At March 31, 2023, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $25 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 March 31, 2023 was approximately $1.7 billion (comprised of approximately $789 million at Alabama Power, $819 million at Georgia Power, and $69 million at Mississippi Power). In addition, at March 31, 2023, Alabama Power and Georgia Power had approximately $120 million and $285 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Short-term Borrowings

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


	Short-term Debt at March 31, 2023				Short-term Debt During the Period*()**
	Amount Outstanding		Weighted Average Interest Rate		Average Amount Outstanding		Weighted Average Interest Rate		Maximum Amount Outstanding
	(in millions)				(in millions)				(in millions)
Southern Company	$	2,554	5.5	%	$	2,753	5.2	%	$	3,270
Alabama Power	170		5.1		83		4.8		230
Georgia Power	1,965		5.5		1,671		5.3		2,025
Mississippi Power	126		5.6		49		5.1		136
Southern Power	165		5.6		179		5.1		267
Southern Company Gas:
Southern Company Gas Capital	$	120	5.6	%	$	215	4.9	%	$	297
Nicor Gas	—		—		239		4.8		483
Southern Company Gas Total	$	120	5.6	%	$	454	4.9	%

(*)Average and maximum amounts are based upon daily balances during the three-month period ended March 31, 2023.

Analysis of Cash Flows

Net cash flows provided from (used for) operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 are presented in the following table:


Net cash provided from (used for):	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Three Months Ended March 31, 2023
Operating activities	$	844	$	30	$	(53)	$	(3)	$	135	$	978
Investing activities	(2,118)		(509)		(1,117)		(117)		4		(379)
Financing activities	454		219		850		79		(146)		(593)

Three Months Ended March 31, 2022
Operating activities	$	1,592	$	154	$	361	$	(16)	$	117	$	1,024
Investing activities	(1,555)		(365)		(809)		(68)		(37)		(271)
Financing activities	(193)		504		441		32		(76)		(768)

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 $0.7 billion for the three months ended March 31, 2023 as compared to the corresponding period in 2022 primarily due to the timing of vendor payments and the timing of fossil fuel stock purchases, partially offset by increased fuel cost recovery and the timing of customer receivable collections.

The net cash used for investing activities for the three months ended March 31, 2023 was primarily related to the Subsidiary Registrants' construction programs.

The net cash provided from financing activities for the three months ended March 31, 2023 was primarily related to net issuances of long-term debt, partially offset by common stock dividend payments.

Alabama Power

Net cash provided from operating activities decreased $124 million for the three months ended March 31, 2023 as compared to the corresponding period in 2022 primarily due to the timing of vendor payments and fuel stock purchases, partially offset by increased fuel cost recovery.

The net cash used for investing activities for the three months ended March 31, 2023 was primarily related to gross property additions, including approximately $23 million related to the construction of Plant Barry Unit 8. See Note (B) to the Condensed Financial Statements under "Alabama Power" herein for additional information.

The net cash provided from financing activities for the three months ended March 31, 2023 was primarily related to capital contributions from Southern Company and an increase in short-term borrowings, partially offset by common stock dividend payments.

Georgia Power

Net cash used for operating activities increased $414 million for the three months ended March 31, 2023 as compared to the corresponding period in 2022 primarily due to the timing of vendor payments, higher payments for property taxes and municipal franchise fees, and the timing of fossil fuel stock purchases, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the three months ended March 31, 2023 was primarily related to gross property additions, including a total of approximately $225 million related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.

The net cash provided from financing activities for the three months ended March 31, 2023 was primarily related to capital contributions from Southern Company, a net increase in short-term borrowings, and reofferings of pollution control revenue bonds, partially offset by common stock dividend payments.

Mississippi Power

Net cash used for operating activities decreased $13 million for the three months ended March 31, 2023 as compared to the corresponding period in 2022 primarily due to the timing of customer receivable collections, partially offset by the timing of vendor payments.

The net cash used for investing activities for the three months ended March 31, 2023 was primarily related to gross property additions.

The net cash provided from financing activities for the three months ended March 31, 2023 was primarily related to an increase in short-term borrowings, partially offset by common stock dividend payments.

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 $18 million for the three months ended March 31, 2023 as compared to the corresponding period in 2022 primarily due to the timing of customer receivable collections, partially offset by the timing of vendor payments.

The net cash provided from investing activities for the three months ended March 31, 2023 was primarily related to the sale of equity method investments in wind and battery energy storage projects, partially offset by ongoing construction activities.

The net cash used for financing activities for the three months ended March 31, 2023 was primarily related to common stock dividend payments, net repayments of short-term debt, and net distributions to noncontrolling interests.

Southern Company Gas

Net cash provided from operating activities decreased $46 million for the three months ended March 31, 2023 as compared to the corresponding period in 2022 primarily due to lower gas cost recovery, timing of vendor payments, and a change in natural gas for sale, net of temporary LIFO liquidation due to use of stored natural gas, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the three months ended March 31, 2023 was primarily related to construction of transportation and distribution assets recovered through base rates and infrastructure investment recovered through replacement programs at gas distribution operations.

The net cash used for financing activities for the three months ended March 31, 2023 was primarily related to repayment of short-term debt and common stock dividend payments, partially offset by capital contributions from Southern Company.

Significant Balance Sheet Changes

Southern Company

Significant balance sheet changes for the three months ended March 31, 2023 included:

an increase of $1.5 billion in long-term debt (including securities due within one year) related to new issuances;
a decrease of $1.2 billion in accounts payable primarily related to the timing of vendor payments;
an increase of $1.1 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs;
a decrease of $0.9 billion in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Southern Company" herein;
a decrease of $0.5 billion in accrued compensation due to the timing of payments;
an increase of $0.5 billion in accumulated deferred income taxes primarily related to the expected utilization of ITCs in 2023, as well as an increase in property-related timing differences; and
a decrease of $0.4 billion in unbilled revenues primarily related to seasonality.

See "Financing Activities" herein and Notes (B), (F), and (G) 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)

Alabama Power

Significant balance sheet changes for the three months ended March 31, 2023 included:

an increase of $300 million in common stockholder's equity primarily due to capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
a decrease of $261 million in other accounts payable primarily due to the timing of vendor payments;
a decrease of $260 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Alabama Power" herein;
a decrease of $201 million in affiliated accounts payable due to the timing of payments to affiliates; and
an increase of $170 million in notes payable primarily due to an increase in commercial paper borrowings.

Georgia Power

Significant balance sheet changes for the three months ended March 31, 2023 included:

an increase of $861 million in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $270 million for Plant Vogtle Units 3 and 4;
an increase of $585 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;
an increase of $365 million in notes payable primarily due to an increase in commercial paper;
a decrease of $364 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Georgia Power" herein;
a decrease of $322 million in affiliated accounts payable due to the timing of payments to affiliates;
a decrease of $286 million in accrued taxes primarily related to payments for municipal franchise fees and property taxes; and
an increase of $210 million in long-term debt (including securities due within one year) primarily due to reofferings of pollution control revenue bonds.

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

Mississippi Power

Significant balance sheet changes for the three months ended March 31, 2023 included:

an increase of $126 million in notes payable due to an increase in short-term borrowings;
a decrease of $62 million in accrued taxes primarily due to the payment of ad valorem taxes;
decreases of $56 million in affiliated receivables and $52 million in affiliated accounts payable primarily due to fluctuations in affiliate sales/purchases and the timing of payments;
an increase of $48 million in total property, plant, and equipment primarily related to the construction of transmission and distribution facilities; and
a decrease of $41 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Mississippi Power" herein.

See "Financing Activities – Mississippi 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)

Southern Power

Significant balance sheet changes for the three months ended March 31, 2023 included:

increases of $302 million in accumulated deferred income tax liabilities and $286 million in prepaid income taxes primarily related to the expected utilization of ITCs in 2023 and
a decrease of $120 million in total property, plant, and equipment primarily due to continued depreciation of assets.

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

Southern Company Gas

Significant balance sheet changes for the three months ended March 31, 2023 included:

a decrease of $648 million in notes payable due to repayments of short-term debt and commercial paper borrowings;
an increase of $356 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
a decrease of $340 million in other accounts payable due to seasonality and the timing of vendor payments;
a decrease of $268 million in total accounts receivable primarily related to a decrease of $235 million in unbilled revenues as a result of seasonality;
a decrease of $222 million in natural gas for sale primarily due to the use of stored natural gas; and
an increase of $208 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets and additional infrastructure investment.

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

Financing Activities

The following table outlines the Registrants' long-term debt financing activities for the first three months of 2023:


	Issuances/Reofferings						Maturities and Redemptions
Company	Senior Notes		Revenue Bonds		Other Long-Term Debt		Other Long- Term Debt*()**
	(in millions)
Southern Company parent	$	1,725	$	—	$	—	$	550
Alabama Power	—		—		16		—
Georgia Power	—		229		—		22


Southern Company Gas	—		—		8		—
Other	—		—		—		3

Southern Company	$	1,725	$	229	$	24	$	575

(*)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments totaling $21 million for FFB borrowings. See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for additional information.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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 three months of 2022, Southern Company issued approximately 1.6 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $15 million.

In January 2023, Southern Company redeemed all $550 million aggregate principal amount of its Series 2016B Junior Subordinated Notes due March 15, 2057.

In February 2023, Southern Company issued $1.5 billion aggregate principal amount of its Series 2023A 3.875% Convertible Senior Notes due December 15, 2025 (Series 2023A Convertible Senior Notes) in a private offering. In March 2023, Southern Company issued an additional $225 million aggregate principal amount of the Series 2023A Convertible Senior Notes upon the exercise by the initial purchasers of their over-allotment option. See Note (F) to the Condensed Financial Statements under "Convertible Senior Notes" herein for additional information.

Alabama Power

During the first quarter 2023, a subsidiary of Alabama Power borrowed $16 million under a $39 million long-term floating rate bank loan entered into in December 2022 with a maturity date of December 12, 2029.

Georgia Power

In March 2023, Georgia Power reoffered to the public the following pollution control revenue bonds that previously had been purchased and were held by Georgia Power at December 31, 2022:

approximately $28 million aggregate principal amount of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Scherer Project), Second Series 2006;
approximately $89 million aggregate principal amount of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Scherer Project), Second Series 2009;
approximately $49 million aggregate principal amount of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Scherer Project), First Series 2012;
approximately $18 million aggregate principal amount of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Scherer Project), First Series 2013; and
$46 million aggregate principal amount of Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Vogtle Project), First Series 1996.

Also in March 2023, Georgia 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. Subsequent to March 31, 2023, Georgia Power borrowed an additional $150 million under the arrangement.

Also in March 2023, Georgia Power repaid at maturity a $200 million short-term floating rate bank loan entered into in March 2022.

Subsequent to March 31, 2023, Georgia Power repaid at maturity $100 million aggregate principal amount of its Series N 5.750% Senior Notes.

Also subsequent to March 31, 2023, Georgia Power repaid at maturity a $200 million short-term floating rate bank loan entered into in April 2022.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Mississippi Power

In March 2023, Mississippi Power borrowed $50 million of short-term debt pursuant to its $125 million revolving credit arrangement bearing interest based on term SOFR.

Southern Power

In January 2023, 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

In February 2023, Nicor Gas repaid its $150 million and $50 million short-term floating rate bank loans entered into in February 2022 and March 2022, respectively.

Credit Rating Risk

At March 31, 2023, 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 March 31, 2023 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	407		2		60		1		345		—
At BB+ and/or Ba1 or below	2,086		422		937		320		1,233		69

(*)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 March 31, 2023.

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.

Table of Contents Index to Financial Statements

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