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			96
Results of Operations			99
Southern Company			99
Alabama Power			108
Georgia Power			114
Mississippi Power			120
Southern Power			124
Southern Company Gas			128
Future Earnings Potential			134
Accounting Policies			138
Financial Condition and Liquidity			139

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 six months of 2023, Alabama Power continued construction of Plant Barry Unit 8, which is expected to be placed in service in November 2023. At June 30, 2023, project expenditures associated with Plant Barry Unit 8 totaled approximately $568 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 recovered substantially all costs associated with the Central Alabama Generating Station through Rate RSE, offset by revenues from a power sales agreement. On May 24, 2023, the Central Alabama Generating Station was placed into retail service.

On June 14, 2023, the Alabama PSC issued an order approving modifications to Alabama Power's Renewable Generation Certificate. The modifications authorized Alabama Power to procure an additional 2,400 MWs of renewable capacity and energy by June 14, 2029 and to market the related energy and environmental attributes to customers and other third parties. The modifications also increased the size of allowable renewable projects from 80 MWs to 200 MWs and increased the annual approval limit from 160 MWs to 400 MWs.

On July 11, 2023, the Alabama PSC issued an order authorizing Alabama Power to expand the existing authority of its reliability reserve to include certain production-related expenses that are intended to maintain reliability in periods between scheduled generating unit outages.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Georgia Power

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

Construction continues on Plant Vogtle Units 3 and 4 (with electric generating capacity of approximately 1,100 MWs each), in which Georgia Power currently holds a 45.7% ownership interest. Georgia Power's share of the total project capital cost forecast to complete Plant Vogtle Units 3 and 4, including contingency, through July 2023 and March 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. Georgia Power placed Unit 3 in service on July 31, 2023.

Hot functional testing for Unit 4 was completed on May 1, 2023. On July 20, 2023, Southern Nuclear announced that all Unit 4 ITAACs had been submitted to the NRC, and, on July 28, 2023, the NRC published its 103(g) finding that the accepted criteria in the combined license for Unit 4 had been met, which allows nuclear fuel to be loaded and start-up testing to begin. Fuel load for Unit 4 is projected to be completed by the end of October 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 significantly depends on maintaining overall construction productivity and production levels, particularly in completing remaining subcontractor scopes of work while reducing the level of craft laborers based on work remaining. Any further delays could result in a later in-service date and cost increases.

During the first half of 2023, established construction contingency totaling $43 million was assigned to the base capital cost forecast for costs primarily associated with the Unit 3 schedule extension, including continued need of support resources for Unit 3 testing, as well as additional craft and support resources and subcontract work for Unit 4.

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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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.

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.

Plant Vogtle Unit 3 and Common Facilities Rate Proceeding

In compliance with a Georgia PSC order approved in November 2021, Georgia Power increased annual retail base rates by $318 million effective August 1, 2023 based on the actual in-service date of July 31, 2023 for Plant Vogtle Unit 3.

See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4.

Fuel Cost Recovery

On May 16, 2023, the Georgia PSC approved a stipulation agreement between Georgia Power and the staff of the Georgia PSC to increase annual fuel billings by 54%, or approximately $1.1 billion, effective June 1, 2023. The increase reflects a three-year recovery period for $2.2 billion of Georgia Power's under recovered fuel balance at May 31, 2023. Changes in fuel rates have no significant effect on Georgia Power's net income but do impact the related operating cash flows. See Note (B) to the Condensed Financial Statements under "Georgia Power – Fuel Cost Recovery" herein for additional information.

Mississippi Power

On July 31, 2023, Mississippi Power and Cooperative Energy filed a settlement agreement with the FERC related to Mississippi Power's July 2022 request for a $23 million increase in annual wholesale base revenues under the MRA tariff. Interim rates based on the initial request became effective September 14, 2022, subject to refund. The settlement agreement provides for a $16 million increase in annual wholesale base revenues and a refund to customers of approximately $6 million. The settlement agreement is subject to approval by the FERC. The ultimate outcome of this matter cannot be determined at this time.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Company Gas

On July 14, 2023, Atlanta Gas Light filed its annual GRAM update with the Georgia PSC. The filing requests an annual base rate increase of $53 million based on the projected 12-month period beginning January 1, 2024. Resolution of the GRAM filing is expected by December 31, 2023, with new rates effective January 1, 2024.

On June 7, 2023, Virginia Natural Gas, the Virginia Commission staff, and the Virginia Attorney General's Division of Consumer Counsel entered into a stipulation agreement related to Virginia Natural Gas' August 2022 general base rate case filing. The stipulation provides for a $48 million increase in annual base rate revenues, including the recovery of investments under the SAVE program, an ROE of 9.70%, and an equity ratio of 49.06%. The Virginia Commission is expected to rule on this matter by the end of 2023.

On June 15, 2023, the Illinois Commission concluded its review of the Qualifying Infrastructure Plant (QIP) capital investments by Nicor Gas for calendar year 2019 under the QIP Rider, or Investing in Illinois, program. The Illinois Commission disallowed $32 million of the $415 million of capital investments commissioned in 2019, together with the related return on investment. Nicor Gas recorded a pre-tax charge to income in the second quarter 2023 of $38 million ($28 million after tax) associated with the disallowance of capital investments. The disallowance is reflected on the income statement as an $8 million reduction to revenues and a $30 million increase in operating expenses. On July 14, 2023, Nicor Gas requested rehearing by the Illinois Commission, which is expected to render a decision by August 3, 2023. Nicor Gas defends these investments in infrastructure as prudently incurred and, if necessary, intends to appeal to the Illinois Appellate Court.

The ultimate outcome of these matters cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

RESULTS OF OPERATIONS

Southern Company

Net Income


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(269)	(24.3)	$(439)	(20.5)

Consolidated net income attributable to Southern Company was $0.8 billion ($0.77 per share) in the second quarter 2023 compared to $1.1 billion ($1.04 per share) for the corresponding period in 2022. For year-to-date 2023, consolidated net income attributable to Southern Company was $1.7 billion ($1.56 per share) compared to $2.1 billion ($2.01 per share) for the corresponding period in 2022. The decreases were primarily due to higher depreciation and amortization, a decrease in retail electric revenues associated with milder weather and rates and pricing, and higher interest expense, partially offset by a decrease in income tax expense and lower non-fuel operations and maintenance costs. The year-to-date 2023 decrease was partially offset by an increase in other revenues and an increase in natural gas revenues from rate increases and continued infrastructure replacement.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Retail Electric Revenues

In the second quarter 2023, retail electric revenues were $3.9 billion compared to $4.8 billion for the corresponding period in 2022. For year-to-date 2023, retail electric revenues were $7.5 billion compared to $8.4 billion for the corresponding period in 2022. Details of the changes in retail electric revenues were as follows:


	Second Quarter 2023 vs. Second Quarter 2022				Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)		(change in millions)		(% change)
Rates and pricing	$	(113)	(2.4)	%	$	(17)	(0.2)	%
Sales decline	(24)		(0.5)		(16)		(0.2)
Weather	(174)		(3.6)		(326)		(3.8)
Fuel and other cost recovery	(619)		(12.9)		(585)		(7.0)
Retail electric revenues	$	(930)	(19.4)	%	$	(944)	(11.2)	%

Revenues associated with changes in rates and pricing decreased in the second quarter and year-to-date 2023 when compared to the corresponding periods in 2022. The decreases were primarily due to lower contributions from commercial and industrial customers with variable demand-driven pricing at Georgia Power, partially offset by an increase in Rate CNP Compliance revenues at Alabama Power and base tariff increases in accordance with Georgia Power's 2022 ARP. In addition, in the second quarter and year-to-date 2023, revenues associated with Rate CNP Depreciation increased $68 million and $141 million, respectively, and were fully offset by customer bill credits 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.

Revenues attributable to changes in sales decreased in the second quarter and year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales decreased 0.4% in the second quarter 2023 when compared to the corresponding period in 2022 primarily due to decreased customer usage, partially offset by customer growth. Weather-adjusted residential KWH sales increased 0.5% for year-to-date 2023 when compared to the corresponding period in 2022 primarily due to customer growth. Weather-adjusted commercial KWH sales increased 0.9% and 1.3% in the second quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 due to both increased customer usage and customer growth. Industrial KWH sales decreased 2.4% and 2.0% in the second quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to a decrease in the chemicals and textiles sectors, partially offset by an increase in the pipeline sector.

Fuel and other cost recovery revenues decreased $619 million and $585 million in the second quarter and year-to-date 2023, respectively, compared to the corresponding periods in 2022 primarily due to lower 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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Wholesale Electric Revenues


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(332)	(35.4)	$(398)	(24.9)

In the second quarter 2023, wholesale electric revenues were $605 million compared to $937 million for the corresponding period in 2022. For year-to-date 2023, wholesale electric revenues were $1.2 billion compared to $1.6 billion for the corresponding period in 2022. The decreases were primarily due to decreases of $342 million and $440 million in energy revenues in the second quarter and year-to-date 2023, respectively, as a result of fuel and purchased power price decreases when compared to the corresponding periods in 2022 and a net decrease in the volume of KWHs sold primarily associated with natural gas PPAs at Southern Power. The decreases in energy revenues were partially offset by increases in capacity revenues of $10 million and $42 million in the second quarter and year-to-date 2023, respectively, primarily resulting from a power sales agreement that began in July 2022 and ended in May 2023 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.

Other Electric Revenues


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$17	8.9	$29	7.8

In the second quarter 2023, other electric revenues were $209 million compared to $192 million for the corresponding period in 2022. For year-to-date 2023, other electric revenues were $399 million compared to $370 million for the corresponding period in 2022. The increases in the second quarter and year-to-date 2023 were primarily due to increases of $14 million and $21 million, respectively, in transmission revenues primarily associated with open access transmission tariff sales, $8 million and $11 million, respectively, in realized gains associated with price stability products for retail customers on variable demand-driven pricing tariffs at Georgia Power, and $6 million and $12 million, respectively, in outdoor lighting sales at Georgia Power, partially offset by decreases of $7 million and $12 million, respectively, in cogeneration steam revenue primarily associated with lower natural gas prices at Alabama Power.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Natural Gas Revenues

In the second quarter 2023, natural gas revenues were $0.9 billion compared to $1.1 billion for the corresponding period in 2022. For year-to-date 2023, natural gas revenues were $2.7 billion compared to $3.1 billion for the corresponding period in 2022. Details of the changes in natural gas revenues were as follows:


	Second Quarter 2023 vs. Second Quarter 2022				Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)		(change in millions)		(% change)
Infrastructure replacement programs and rate changes	$	38	3.5	%	$	88	2.8	%
Gas costs and other cost recovery	(265)		(24.4)		(464)		(14.8)
Gas marketing services	(1)		(0.1)		(22)		(0.7)
Other	(3)		(0.3)		(14)		(0.4)
Natural gas revenues	$	(231)	(21.3)	%	$	(412)	(13.1)	%

Revenues from infrastructure replacement programs and rate changes at the natural gas distribution utilities increased in the second quarter and year-to-date 2023 compared to the corresponding periods in 2022 primarily due to rate increases at the natural gas distribution utilities and continued investment in infrastructure replacement, partially offset by a regulatory disallowance at Nicor Gas. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information.

Revenues from gas costs and other cost recovery decreased in the second quarter and year-to-date 2023 compared to the corresponding periods 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 second quarter and year-to-date 2023 compared to the corresponding periods 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$18	8.8	$99	29.0

In the second quarter 2023, other revenues were $223 million compared to $205 million for the corresponding period in 2022. The increase was primarily due to increases of $20 million at Southern Linc primarily related to sales associated with commercial customers and $11 million in power delivery construction and maintenance projects at Georgia Power, partially offset by an $8 million decrease related to distributed infrastructure projects at PowerSecure.

For year-to-date 2023, other revenues were $440 million compared to $341 million for the corresponding period in 2022. The increase was primarily due to increases of $32 million in power delivery construction and maintenance projects at Georgia Power, $28 million related to distributed infrastructure projects at PowerSecure, $17 million at Southern Linc primarily related to sales associated with commercial customers, and $16 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


	Second Quarter 2023 vs. Second Quarter 2022			Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	(756)	(44.1)	$	(817)	(28.9)
Purchased power	(177)		(43.4)	(167)		(26.1)
Total fuel and purchased power expenses	$	(933)		$	(984)

In the second quarter 2023, total fuel and purchased power expenses were $1.2 billion compared to $2.1 billion for the corresponding period in 2022. The decrease was due to a $792 million decrease in the average cost of fuel and purchased power and a $141 million decrease in the volume of KWHs generated and purchased.

For year-to-date 2023, total fuel and purchased power expenses were $2.5 billion compared to $3.5 billion for the corresponding period in 2022. The decrease was due to an $868 million decrease in the average cost of fuel and purchased power and a $116 million 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:


	Second Quarter 2023	Second Quarter 2022	Year-To-Date 2023	Year-To-Date 2022
Total generation (in billions of KWHs)(a)(b)	44	46	88	92
Total purchased power (in billions of KWHs)	5	6	9	11
Sources of generation (percent)(a) —
Gas	54	49	54	47
Nuclear(b)	18	16	17	16
Coal	16	22	16	23
Hydro	3	3	4	5
Wind, Solar, and Other	9	10	9	9
Cost of fuel, generated (in cents per net KWH)—
Gas(a)	2.42	5.59	2.78	4.60
Nuclear(b)	0.71	0.72	0.71	0.72
Coal	4.55	3.50	4.30	3.30
Average cost of fuel, generated (in cents per net KWH)(a)(b)	2.47	4.13	2.63	3.50
Average cost of purchased power (in cents per net KWH)(c)	4.97	7.83	5.23	6.90

(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)Excludes KWHs generated from test period energy at Plant Vogtle Unit 3 prior to its in-service date. The related fuel costs are charged to CWIP in accordance with FERC guidance. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel

In the second quarter 2023, fuel expense was $1.0 billion compared to $1.7 billion for the corresponding period in 2022. For year-to-date 2023, fuel expense was $2.0 billion compared to $2.8 billion for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of 56.7% and 39.6%, respectively, in the average cost of natural gas per KWH generated and 28.8% and 34.0%, respectively, in the volume of KWHs generated by coal, partially offset by increases of 30.0% and 30.3%, respectively, in the average cost of coal per KWH generated, decreases of 8.3% and 12.0%, respectively, in the volume of KWHs generated by hydro, and increases of 6.0% and 10.9%, respectively, in the volume of KWHs generated by natural gas.

Purchased Power

In the second quarter 2023, purchased power expense was $231 million compared to $408 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense was $473 million compared to $640 million for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of 36.5% and 24.2%, respectively, in the average cost per KWH purchased primarily due to a decrease in natural gas prices and decreases of 22.8% and 12.7%, respectively, in the volume of KWHs purchased.

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

Cost of Natural Gas


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(253)	(56.0)	$(449)	(29.0)

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 84% and 85% of the total cost of natural gas in the second quarter and year-to-date 2023, respectively.

In the second quarter 2023, cost of natural gas was $199 million compared to $452 million for the corresponding period in 2022. For year-to-date 2023, cost of natural gas was $1.1 billion compared to $1.5 billion for the corresponding period in 2022. The decreases reflect lower gas cost recovery as a result of decreases of 71% and 54% in natural gas prices in the second quarter and year-to-date 2023, respectively, compared to the corresponding periods in 2022.

Cost of Other Sales


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$14	12.3	$72	39.3

In the second quarter 2023, cost of other sales was $128 million compared to $114 million for the corresponding period in 2022. The increase was primarily due to increases of $16 million at Southern Linc primarily related to sales associated with commercial customers and $11 million related to energy service contracts at Southern Company Gas, partially offset by a $13 million decrease related to distributed infrastructure projects at PowerSecure.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

For year-to-date 2023, cost of other sales was $255 million compared to $183 million for the corresponding period in 2022. The increase was primarily due to increases of $24 million from unregulated power delivery construction and maintenance projects at Georgia Power, $16 million related to energy service contracts at Southern Company Gas, $16 million at Southern Linc primarily related to sales associated with commercial customers, $16 million related to distributed infrastructure projects at PowerSecure, and $7 million in expenses related to unregulated products and services at Alabama Power.

Other Operations and Maintenance Expenses


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(59)	(3.8)	$(113)	(3.7)

In the second quarter 2023, other operations and maintenance expenses were $1.49 billion compared to $1.55 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, $29 million in transmission and distribution expenses primarily related to line maintenance, $20 million in expenses passed through to customers primarily related to bad debt and energy efficiency programs at Southern Company Gas, and $14 million in generation expenses primarily associated with non-outage and scheduled outage maintenance costs, partially offset by a $32 million increase in technology infrastructure and application production costs and $30 million related to a regulatory disallowance at Nicor Gas.

For year-to-date 2023, other operations and maintenance expenses were $2.9 billion compared to $3.0 billion for the corresponding period in 2022. The decrease was primarily due to decreases of $91 million in storm damage recovery as authorized in Georgia Power's 2022 ARP, $59 million in transmission and distribution expenses primarily related to line maintenance, $57 million in generation expenses primarily associated with non-outage and scheduled outage maintenance costs, and $36 million in expenses passed through to customers primarily related to bad debt and energy efficiency programs at Southern Company Gas, as well as a $16 million gain on the sale of spare parts in 2023 at Southern Power, partially offset by a $69 million increase in technology infrastructure and application production costs, $30 million related to a regulatory disallowance at Nicor Gas, a $25 million decrease in nuclear property insurance refunds at Georgia Power and Alabama Power, and a $14 million increase in employee compensation and benefit expenses.

See Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information on the regulatory disallowance at Nicor Gas.

Depreciation and Amortization


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$199	21.8	$417	23.1

In the second quarter 2023, depreciation and amortization was $1.1 billion compared to $0.9 billion for the corresponding period in 2022. For year-to-date 2023, depreciation and amortization was $2.2 billion compared to $1.8 billion for the corresponding period in 2022. The increases in the second quarter and year-to-date 2023 were primarily due to increases of $182 million and $363 million, respectively, resulting from higher depreciation rates at Alabama Power and Georgia Power and increases of $20 million and $46 million, respectively, 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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Taxes Other Than Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(9)	(2.6)	$13	1.8

In the second quarter 2023, taxes other than income taxes were $340 million compared to $349 million for the corresponding period in 2022. The decrease was primarily due to decreases of $17 million in municipal franchise fees resulting from lower retail revenues at Georgia Power and $7 million in revenue tax expenses at Southern Company Gas, partially offset by increases of $10 million in property taxes primarily at Georgia Power resulting from an increase in the assessed value of property and $7 million in utility license taxes at Alabama Power.

For year-to-date 2023, taxes other than income taxes were $734 million compared to $721 million for the corresponding period in 2022. The increase was primarily due to increases of $22 million in property taxes primarily at Georgia Power resulting from an increase in the assessed value of property and $16 million in utility license taxes at Alabama Power, partially offset by decreases of $17 million in municipal franchise fees resulting from lower retail revenues at Georgia Power and $12 million in revenue tax expenses at Southern Company Gas.

Estimated Loss on Plant Vogtle Units 3 and 4


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(52)	(100.0)	$(52)	(100.0)

In the second quarter 2022, Georgia Power recorded an estimated probable loss on Plant Vogtle Units 3 and 4 of $52 million. The loss reflected revisions to the total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

Allowance for Equity Funds Used During Construction


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$17	32.1	$31	29.8

In the second quarter 2023, allowance for equity funds used during construction was $70 million compared to $53 million for the corresponding period in 2022. For year-to-date 2023, allowance for equity funds used during construction was $135 million compared to $104 million for the corresponding period in 2022. The increases were 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$122	25.0	$242	25.5

In the second quarter 2023, interest expense, net of amounts capitalized was $610 million compared to $488 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $1.2 billion compared to $1.0 billion for the corresponding period in 2022. The increases in the second quarter and year-to-date 2023 primarily reflect approximately $76 million and $170 million, respectively, related to higher interest rates and $48 million and $87 million, respectively, related to higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Other Income (Expense), Net


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$3	2.2	$3	1.1

In the second quarter 2023, other income (expense), net was $142 million compared to $139 million for the corresponding period in 2022. For year-to-date 2023, other income (expense), net was $286 million compared to $283 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were primarily due to increases of $21 million and $26 million, respectively, in interest income, largely offset by decreases of $12 million and $19 million, respectively, in non-service cost-related retirement benefits income and $7 million and $13 million, respectively, in customer charges related to contributions in aid of construction at Georgia Power. The year-to-date 2023 increase also reflects an $8 million gain on investments at Southern Holdings. See Note (H) to the Condensed Financial Statements herein for additional information.

Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(206)	(67.8)	$(283)	(59.3)

In the second quarter 2023, income taxes were $98 million compared to $304 million for the corresponding period in 2022. For year-to-date 2023, income taxes were $194 million compared to $477 million for the corresponding period in 2022. The decreases were primarily due to lower pre-tax earnings, an increase in the flowback of certain excess deferred income taxes at Alabama Power, an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward at Georgia Power, and a decrease in a valuation allowance on certain state tax credit carryforwards at Georgia Power in 2023, 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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Net Loss Attributable to Noncontrolling Interests


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$7	31.8	$(11)	(16.4)

Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the second quarter 2023, net loss attributable to noncontrolling interests was $15 million compared to $22 million for the corresponding period in 2022. The decreased loss was primarily due to $7 million in lower HLBV loss allocations to Southern Power's wind tax equity partners and $6 million in lower loss allocations to Southern Power's battery energy storage partners, partially offset by $5 million in lower income allocations to Southern Power's equity partners.

For year-to-date 2023, net loss attributable to noncontrolling interests was $78 million compared to $67 million for the corresponding period in 2022. The increased loss was primarily due to $15 million in lower income allocations to Southern Power's equity partners and $9 million in higher HLBV loss allocations to Southern Power's wind tax equity partners, partially offset by $14 million in lower loss allocations to Southern Power's battery energy storage partners.

Alabama Power

Net Income


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(71)	(18.5)	$(162)	(22.2)

Alabama Power's net income after dividends on preferred stock in the second quarter 2023 was $312 million compared to $383 million for the corresponding period in 2022. Alabama Power's net income after dividends on preferred stock for year-to-date 2023 was $568 million compared to $730 million for the corresponding period in 2022. These decreases were primarily due to an increase in depreciation rates effective January 2023 and a decrease in weather-related revenues due to milder weather in Alabama Power's service territory in 2023 compared to the corresponding periods in 2022. In addition, the year-to-date 2023 decrease was also due to increased capacity-related expenses. 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.

Retail Revenues

In the second quarter 2023, retail revenues were $1.47 billion compared to $1.63 billion for the corresponding period in 2022. For year-to-date 2023, retail revenues were $2.85 billion compared to $3.01 billion for the corresponding period in 2022. Details of the changes in retail revenues were as follows:


	Second Quarter 2023 vs. Second Quarter 2022				Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)		(change in millions)		(% change)
Rates and pricing	$	56	3.4	%	$	114	3.8	%
Sales decline	(16)		(1.0)		(33)		(1.1)
Weather	(58)		(3.6)		(119)		(4.0)
Fuel and other cost recovery	(144)		(8.8)		(122)		(4.1)
Retail revenues	$	(162)	(10.0)	%	$	(160)	(5.4)	%

Revenues associated with changes in rates and pricing increased in the second quarter and year-to-date 2023 when compared to the corresponding periods in 2022 primarily due to an increase in Rate CNP Compliance revenues. In

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

addition, in the second quarter and year-to-date 2023, revenues associated with Rate CNP Depreciation increased $68 million and $141 million, respectively, and were fully offset by customer bill credits 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 second quarter and year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales increased 1.1% and 0.6% in the second quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to customer growth. Weather-adjusted commercial KWH sales increased 1.5% and 0.6% in the second quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to increases in customer demand and customer growth. Industrial KWH sales decreased 4.3% and 3.4% in the second quarter and year-to-date 2023, respectively, primarily due to decreases in the chemicals and forest products sectors. Also contributing to the industrial KWH sales decrease in the second quarter 2023 was a decrease in the primary metals sector.

Fuel and other cost recovery revenues decreased in the second quarter and year-to-date 2023 when compared to the corresponding periods in 2022 primarily as a result of lower 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(47)	(29.6)	$(20)	(7.4)

In the second quarter 2023, wholesale revenues from sales to non-affiliates were $112 million compared to $159 million for the corresponding period in 2022. The decrease was primarily due to a 28.3% decrease in the price of energy primarily as a result of lower natural gas prices in the second quarter 2023 compared to the corresponding period in 2022.

For year-to-date 2023, wholesale revenues from sales to non-affiliates were $252 million compared to $272 million for the corresponding period in 2022. The decrease was primarily due to a 14.5% decrease in the price of energy due to lower natural gas prices, partially offset by an 8.3% increase in the volume of KWHs sold as a result of a power sales agreement that began in July 2022 and ended in May 2023.

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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Wholesale Revenues – Affiliates


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(24)	(70.6)	$(71)	(71.0)

In the second quarter 2023, wholesale revenues from sales to affiliates were $10 million compared to $34 million for the corresponding period in 2022. For year-to-date 2023, wholesale revenues from sales to affiliates were $29 million compared to $100 million for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of 62.0% and 35.4%, respectively, in the price of energy due to lower natural gas prices and 23.9% and 54.3%, respectively, in the volume of KWH sales due to lower customer demand as a result of milder weather in 2023 compared to the corresponding period in 2022.

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.

Fuel and Purchased Power Expenses


	Second Quarter 2023 vs. Second Quarter 2022			Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	(98)	(24.4)	$	(122)	(16.6)
Purchased power – non-affiliates	(41)		(43.2)	(7)		(4.3)
Purchased power – affiliates	(67)		(55.4)	(34)		(23.1)
Total fuel and purchased power expenses	$	(206)		$	(163)

In the second quarter 2023, total fuel and purchased power expenses were $411 million compared to $617 million for the corresponding period in 2022. For year-to-date 2023, total fuel and purchased power expenses were $879 million compared to $1.04 billion for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were due to decreases of $214 million and $222 million, respectively, in the average cost of fuel and purchased power, partially offset by an increase of $8 million and a net increase of $59 million, respectively, related to the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions do not have a significant impact on earnings, since 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:


	Second Quarter 2023	Second Quarter 2022	Year-To-Date 2023	Year-To-Date 2022
Total generation (in billions of KWHs)(a)	13	13	27	29
Total purchased power (in billions of KWHs)	3	3	5	4
Sources of generation (percent)(a) —
Coal	35	45	33	44
Nuclear	29	25	28	25
Gas	29	22	29	20
Hydro	7	8	10	11
Cost of fuel, generated (in cents per net KWH) —
Coal	3.50	3.35	3.42	3.11
Nuclear	0.69	0.67	0.68	0.67
Gas(a)	2.69	4.88	3.03	4.17
Average cost of fuel, generated (in cents per net KWH)(a)	2.39	2.98	2.44	2.66
Average cost of purchased power (in cents per net KWH)(b)	4.08	8.88	5.17	8.12

(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 second quarter 2023, fuel expense was $303 million compared to $401 million for the corresponding period in 2022. The decrease was primarily due to a 44.9% decrease in the average cost of natural gas per KWH generated, which excludes tolling agreements, and a 23.0% decrease in the volume of KWHs generated by coal, partially offset by a 33.3% increase in the volume of KWHs generated by natural gas, a 9.2% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall in the second quarter 2023 compared to the corresponding period in 2022, and a 4.5% increase in the average cost of coal per KWH generated.

For year-to-date 2023, fuel expense was $611 million compared to $733 million for the corresponding period in 2022. The decrease was primarily due to a 29.1% decrease in the volume of KWHs generated by coal and a 27.3% decrease in the average cost of natural gas per KWH generated, which excludes tolling agreements, partially offset by a 34.9% increase in the volume of KWHs generated by natural gas, an 11.6% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall for year-to-date 2023 compared to the corresponding period in 2022, and a 10.0% increase in the average cost of coal per KWH generated.

Purchased Power – Non-Affiliates

In the second quarter 2023, purchased power expense from non-affiliates was $54 million compared to $95 million for the corresponding period in 2022. The decrease was primarily due to a 50.8% decrease in the average cost per KWH purchased due to lower natural gas prices.

For year-to-date 2023, purchased power expense from non-affiliates was $155 million compared to $162 million for the corresponding period in 2022. The decrease was primarily due to a 35.7% decrease in the average cost per KWH purchased as a result of lower natural gas prices, partially offset by a 25.5% increase in the volume of KWHs purchased due to a new power purchase contract that began in July 2022 and ended in May 2023.

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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Purchased Power – Affiliates

In the second quarter 2023, purchased power expense from affiliates was $54 million compared to $121 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense from affiliates was $113 million compared to $147 million for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of 57.8% and 36.6%, respectively, in the average cost per KWH purchased due to lower purchase prices as a result of lower natural gas prices, partially offset by increases of 6.3% and 21.0%, respectively, in the volume of KWHs purchased due to the availability of lower cost gas generation in the Southern Company system.

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

Other Operations and Maintenance Expenses


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(1)	(0.2)	$10	1.2

In the second quarter 2023, other operations and maintenance expenses were $440 million compared to $441 million for the corresponding period in 2022. The decrease was primarily due to a $15 million decrease in generation expenses primarily associated with planned outages and maintenance and a $4 million decrease related to the injuries and damages reserve. The decreases were largely offset by increases of $10 million in technology infrastructure and application production costs, $5 million in customer accounts primarily associated with bad debt expense, and $5 million in expenses related to unregulated products and services.

For year-to-date 2023, other operations and maintenance expenses were $862 million compared to $852 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 $18 million in technology infrastructure and application production costs, $13 million in expenses related to unregulated products and services, and $9 million in customer accounts primarily associated with bad debt expense. The increases were partially offset by a $47 million decrease in generation expenses primarily associated with planned outages and maintenance.

Depreciation and Amortization


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$131	60.1	$262	60.6

In the second quarter 2023, depreciation and amortization was $349 million compared to $218 million for the corresponding period in 2022. For year-to-date 2023, depreciation and amortization was $694 million compared to $432 million for the corresponding period in 2022. The increases were 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.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Taxes Other Than Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$7	7.0	$19	9.3

In the second quarter 2023, taxes other than income taxes were $107 million compared to $100 million for the corresponding period in 2022. For year-to-date 2023, taxes other than income taxes were $223 million compared to $204 million for the corresponding period in 2022. The increases were primarily due to an increase in utility license taxes.

Interest Expense, Net of Amounts Capitalized


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$14	15.4	$28	15.6

In the second quarter 2023, interest expense, net of amounts capitalized was $105 million compared to $91 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $208 million compared to $180 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were primarily associated with increases of approximately $9 million and $20 million, respectively, related to higher average outstanding borrowings and $6 million and $11 million, respectively, related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" herein for additional information on borrowings.

Other Income (Expense), Net


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$12	44.4	$18	29.5

In the second quarter 2023, other income (expense), net was $39 million compared to $27 million for the corresponding period in 2022. For year-to-date 2023, other income (expense), net was $79 million compared to $61 million for the corresponding period in 2022. The increases were primarily due to an increase in interest income and a decrease in non-operating expenses.

Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(96)	(79.3)	$(204)	(89.9)

In the second quarter 2023, income taxes were $25 million compared to $121 million for the corresponding period in 2022. For year-to-date 2023, income taxes were $23 million compared to $227 million for the corresponding period in 2022. The decreases were primarily due to an increase in the flowback of certain excess deferred income taxes and lower pre-tax earnings. 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Georgia Power

Net Income


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(137)	(22.5)	$(226)	(22.8)

Georgia Power's net income in the second quarter 2023 was $471 million compared to $608 million for the corresponding period in 2022. For year-to-date 2023, net income was $767 million compared to $993 million for the corresponding period in 2022. The decreases were primarily due to decreases in retail revenues associated with lower contributions from variable demand-driven pricing and milder weather in the second quarter and year-to-date 2023 compared to the corresponding periods in 2022 and higher interest expense, partially offset by lower non-fuel operations and maintenance costs and a decrease of $39 million in after-tax charges related to the construction of Plant Vogtle Units 3 and 4. Also partially offsetting the net income reductions were the impacts of the 2022 ARP effective January 1, 2023, including increased retail rates, largely 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 second quarter 2023, retail revenues were $2.17 billion compared to $2.91 billion for the corresponding period in 2022. For year-to-date 2023, retail revenues were $4.15 billion compared to $4.93 billion for the corresponding period in 2022. Details of the changes in retail revenues were as follows:


	Second Quarter 2023 vs. Second Quarter 2022				Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)		(change in millions)		(% change)
Rates and pricing	$	(166)	(5.7)	%	$	(132)	(2.7)	%
Sales growth (decline)	(9)		(0.3)		14		0.3
Weather	(111)		(3.8)		(197)		(4.0)
Fuel cost recovery	(457)		(15.7)		(465)		(9.4)
Retail revenues	$	(743)	(25.5)	%	$	(780)	(15.8)	%

Revenues attributable to changes in sales decreased in the second quarter 2023 and increased for year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales decreased 1.3% in the second quarter 2023 when compared to the corresponding period in 2022 primarily due to decreased customer usage, partially offset by customer growth. Weather-adjusted residential KWH sales increased 0.5% for year-to-date 2023 when compared to the corresponding period in 2022 primarily due to customer growth, partially offset by decreased customer usage. Weather-adjusted commercial KWH sales increased 0.5% in the second quarter 2023 when compared to the corresponding period in 2022 primarily due to customer growth, partially offset by decreased customer usage. Weather-adjusted commercial KWH sales increased 1.5% for year-to-date 2023 when compared to the corresponding period in 2022 primarily due to customer growth and increased customer usage as customers continued their return to regular business trends. Weather-adjusted industrial KWH sales increased 0.4% in the second quarter 2023 when compared to the corresponding period in 2022 primarily due to increases in the paper and electronics sectors, partially offset by decreases in the textile and mining sectors. Weather-adjusted industrial KWH

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

sales decreased 0.8% for year-to-date 2023 when compared to the corresponding period in 2022 primarily due to decreases in the textile and rubber sectors, partially offset by increases in the electronics and pipeline sectors.

Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreased in the second quarter and year-to-date 2023 when compared to the corresponding periods 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(17)	(26.6)	$(52)	(40.0)

In the second quarter 2023, wholesale revenues were $47 million compared to $64 million for the corresponding period in 2022. The decrease was primarily due to a $22 million decrease related to the average cost per KWH sold due to lower Southern Company system fuel and purchased power costs.

For year-to-date 2023, wholesale revenues were $78 million compared to $130 million for the corresponding period in 2022. The decrease was primarily due to a $26 million decrease related to the volume of KWH sales associated with lower market demand and a $23 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$30	20.1	$71	26.1

In the second quarter 2023, other revenues were $179 million compared to $149 million for the corresponding period in 2022. For year-to-date 2023, other revenues were $343 million compared to $272 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were primarily due to increases of $15 million and $46 million, respectively, in unregulated sales associated with power delivery construction and maintenance and outdoor lighting, net increases of $8 million and $11 million, respectively, in

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

realized gains associated with price stability products for retail customers on variable demand-driven pricing tariffs, and increases of $4 million and $7 million, respectively, in open access transmission tariff sales.

Fuel and Purchased Power Expenses


	Second Quarter 2023 vs. Second Quarter 2022			Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	(214)	(34.1)	$	(230)	(22.0)
Purchased power – non-affiliates	(104)		(42.3)	(130)		(32.8)
Purchased power – affiliates	(171)		(52.9)	(171)		(32.3)
Total fuel and purchased power expenses	$	(489)		$	(531)

In the second quarter 2023, total fuel and purchased power expenses were $0.7 billion compared to $1.2 billion for the corresponding period in 2022. For year-to-date 2023, total fuel and purchased power expenses were $1.4 billion compared to $2.0 billion for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were due to decreases of $330 million and $344 million, respectively, related to the average cost of fuel and purchased power and $159 million and $187 million, respectively, related to the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions do not have a significant impact on earnings since these fuel expenses are generally offset by fuel revenues through Georgia Power's fuel cost recovery mechanism. See Note (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:


	Second Quarter 2023	Second Quarter 2022	Year-To-Date 2023	Year-To-Date 2022
Total generation (in billions of KWHs)(a)	15	15	28	30
Total purchased power (in billions of KWHs)	6	8	14	16
Sources of generation (percent) —
Gas	51	45	53	45

Nuclear(a)	28	27	27	25
Coal	17	24	16	25
Hydro and other	4	4	4	5
Cost of fuel, generated (in cents per net KWH) —
Gas	2.67	5.10	3.11	4.34

Nuclear(a)	0.72	0.76	0.73	0.76
Coal	6.45	3.68	5.92	3.54
Average cost of fuel, generated (in cents per net KWH)(a)	2.76	3.52	2.89	3.18
Average cost of purchased power (in cents per net KWH)(b)	4.91	8.22	4.70	6.58

(a)Excludes KWHs generated from test period energy at Plant Vogtle Unit 3 prior to its in-service date. The related fuel costs are charged to CWIP in accordance with FERC guidance. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel

In the second quarter 2023, fuel expense was $414 million compared to $628 million for the corresponding period in 2022. For year-to-date 2023, fuel expense was $0.82 billion compared to $1.05 billion for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of 47.6% and 28.3%, respectively, in the average cost per KWH generated by natural gas and 31.3% and 40.0%, respectively, in the volume of KWHs generated by coal, partially offset by increases of 75.3% and 67.2%, respectively, in the average cost per KWH generated by coal and 12.3% and 9.4%, respectively, in the volume of KWHs generated by natural gas.

Purchased Power – Non-Affiliates

In the second quarter 2023, purchased power expense from non-affiliates was $142 million compared to $246 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense from non-affiliates was $266 million compared to $396 million for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of 40.5% and 37.6%, respectively, in the volume of KWHs purchased as Georgia Power and other Southern Company system units generally dispatched at a lower cost than available market resources and 18.3% and 4.2%, respectively, in the average cost per KWH purchased primarily due to lower natural gas prices.

Purchased Power – Affiliates

In the second quarter 2023, purchased power expense from affiliates was $152 million compared to $323 million for the corresponding period in 2022. The decrease reflects decreases of 52.6% in the average cost per KWH purchased primarily due to lower natural gas prices and 8.0% in the volume of KWHs purchased.

For year-to-date 2023, purchased power expense from affiliates was $358 million compared to $529 million for the corresponding period in 2022. The decrease reflects a 38.6% decrease in the average cost per KWH purchased primarily due to lower natural gas prices, partially offset by a 4.0% increase in the volume of KWHs purchased.

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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(77)	(13.4)	$(100)	(9.2)

In the second quarter 2023, other operations and maintenance expenses were $496 million compared to $573 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, $32 million in transmission and distribution expenses primarily associated with line maintenance, $23 million in generation non-outage maintenance expense, and $13 million in certain employee compensation and benefit expenses. These decreases were partially offset by increases of $24 million in technology infrastructure and application production costs, $17 million in generation environmental projects, and $9 million from unregulated power delivery construction and maintenance and energy conservation projects.

For year-to-date 2023, other operations and maintenance expenses were $0.99 billion compared to $1.09 billion for the corresponding period in 2022. The decrease was primarily due to decreases of $91 million in storm damage

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

recovery as authorized in the 2022 ARP, $57 million in transmission and distribution expenses primarily associated with line maintenance, $49 million in generation non-outage maintenance expense, and $18 million in certain employee compensation and benefit expenses. These decreases were partially offset by increases of $48 million in technology infrastructure and application production costs, $29 million from unregulated power delivery construction and maintenance and energy conservation projects, and $26 million in generation environmental projects and planned outages, 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$55	15.4	$113	16.0

In the second quarter 2023, depreciation and amortization was $411 million compared to $356 million for the corresponding period in 2022. For year-to-date 2023, depreciation and amortization was $819 million compared to $706 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were primarily due to increases of $47 million and $94 million, respectively, resulting from higher depreciation rates as authorized in the 2022 ARP and $15 million and $30 million, respectively, associated with additional plant in service. Partially offsetting these increases for the second quarter and year-to-date 2023 were decreases of $5 million and $7 million, respectively, in amortization of regulatory assets related to CCR AROs under the terms of the 2022 ARP and $4 million and $7 million, respectively, in amortization of regulatory assets related to the retirement of certain generating units that ended in 2022.

See Note 5 to the financial statements under "Depreciation and Amortization" in Item 8 of the Form 10-K for additional information.

Taxes Other Than Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(9)	(6.4)	$(2)	(0.8)

In the second quarter 2023, taxes other than income taxes were $132 million compared to $141 million for the corresponding period in 2022. For year-to-date 2023, taxes other than income taxes were $263 million compared to $265 million for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were due to decreases of $17 million in municipal franchise fees resulting from lower retail revenues and $3 million and $4 million, respectively, in payroll taxes, largely offset by increases of $11 million and $19 million, respectively, in property taxes primarily resulting from an increase in the assessed value of property.

Estimated Loss on Plant Vogtle Units 3 and 4


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(52)	(100.0)	$(52)	(100.0)

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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$10	30.3	$18	27.7

In the second quarter 2023, allowance for equity funds used during construction was $43 million compared to $33 million for the corresponding period in 2022. For year-to-date 2023, allowance for equity funds used during construction was $83 million compared to $65 million for the corresponding period in 2022. The increases were primarily due to an increase in capital expenditures subject to AFUDC.

Interest Expense, Net of Amounts Capitalized


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$43	36.8	$82	36.6

In the second quarter 2023, interest expense, net of amounts capitalized was $160 million compared to $117 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $306 million compared to $224 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were primarily associated with increases of approximately $23 million and $44 million, respectively, related to higher average outstanding borrowings and $20 million and $39 million, respectively, related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Other Income (Expense), Net


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(18)	(33.3)	$(23)	(22.3)

In the second quarter 2023, other income (expense), net was $36 million compared to $54 million for the corresponding period in 2022. For year-to-date 2023, other income (expense), net was $80 million compared to $103 million for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of $7 million and $13 million, respectively, in customer charges related to contributions in aid of construction and a $7 million charge in the second quarter 2023 under a stipulation agreement approved by the Georgia PSC related to Georgia Power's fuel cost recovery case.

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

Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(72)	(43.9)	$(50)	(25.8)

In the second quarter 2023, income taxes were $92 million compared to $164 million for the corresponding period in 2022. For year-to-date 2023, income taxes were $144 million compared to $194 million for the corresponding period in 2022. The decreases were primarily due to lower pre-tax earnings, an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward, and a decrease in a valuation allowance on certain state tax credit carryforwards in 2023, partially offset by the flowback of certain excess deferred income taxes that ended in 2022.

See Note (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)

Mississippi Power

Net Income


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(5)	(11.1)	$11	12.6

Mississippi Power's net income for the second quarter 2023 was $40 million compared to $45 million for the corresponding period in 2022. The decrease was primarily due to a decrease in revenues due to milder weather in the second quarter 2023 compared to the corresponding period in 2022 and changes in power supply agreements.

Mississippi Power's net income for year-to-date 2023 was $98 million compared to $87 million for the corresponding period in 2022. The increase was primarily due to an increase in affiliate wholesale capacity revenues, partially offset by a decrease in revenues due to milder weather in 2023 compared to the corresponding period in 2022 and an increase in interest expense.

Retail Revenues

In the second quarter 2023, retail revenues were $227 million compared to $252 million for the corresponding period in 2022. For year-to-date 2023, retail revenues were $464 million compared to $469 million for the corresponding period in 2022. Details of the changes in retail revenues were as follows:


	Second Quarter 2023 vs. Second Quarter 2022				Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)		(change in millions)		(% change)
Rates and pricing	$	(3)	(1.2)	%	$	2	0.4	%
Sales growth	—		—		2		0.4
Weather	(4)		(1.6)		(10)		(2.1)
Fuel and other cost recovery	(18)		(7.1)		1		0.2
Retail revenues	$	(25)	(9.9)	%	$	(5)	(1.1)	%

Revenues associated with changes in rates and pricing decreased in the second quarter 2023 and increased year-to-date 2023 when compared to the corresponding periods in 2022. The second quarter 2023 decrease was primarily due to the expiration of a PEP surcharge at the end of 2022 that became effective for the first billing cycle of April 2022. The year-to-date 2023 increase was primarily due to ECO Plan rates that became effective in 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 were relatively flat in the second quarter and year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales increased 0.1% in the second quarter 2023 when compared to the corresponding period in 2022 due to an increase in customer usage. Weather-adjusted residential KWH sales decreased 1.0% year-to-date 2023 when compared to the corresponding period in 2022 due to a decrease in customer usage. Weather-adjusted commercial KWH sales increased 2.7% and 2.9% in the second quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 due to an increase in customer usage. Industrial KWH sales decreased 2.1% in the second quarter 2023 when compared to the corresponding period in 2022 primarily due to decreases in the chemicals, petroleum, and lumber sectors, partially offset by increases in the non-manufacturing sector. Industrial KWH sales increased 1.4% year-to-date 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 decreased in the second quarter 2023 when compared to the corresponding period in 2022 primarily as a result of lower recoverable fuel costs. Recoverable fuel costs include fuel and

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

purchased power expenses reduced by the fuel and emissions 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 – Non-Affiliates


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(7)	(11.1)	$(7)	(5.3)

In the second quarter 2023, wholesale revenues from sales to non-affiliates were $56 million compared to $63 million for the corresponding period in 2022. For year-to-date 2023, wholesale revenues from sales to non-affiliates were $124 million compared to $131 million for the corresponding period in 2022. The decreases were primarily due to a decrease in revenue from MRA customers primarily due to the lower cost of natural gas and changes in power supply agreements, partially offset by higher opportunity sales.

Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Mississippi Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. In addition, Mississippi Power provides service under long-term contracts with rural electric cooperative associations and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. See Note 2 to the financial statements under "Mississippi Power" in Item 8 of the Form 10-K for additional information. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Municipal and Rural Associations Tariff" herein for additional information.

Wholesale Revenues – Affiliates


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(89)	(83.2)	$(56)	(37.6)

In the second quarter 2023, wholesale revenues from sales to affiliates were $18 million compared to $107 million for the corresponding period in 2022. The decrease was primarily due to a $44 million decrease associated with lower natural gas prices and a $44 million decrease associated with lower KWH sales.

For year-to-date 2023, wholesale revenues from sales to affiliates were $93 million compared to $149 million for the corresponding period in 2022. The decrease was due to an $81 million decrease associated with lower natural gas prices and a $4 million decrease associated with lower KWH sales, partially offset by a $29 million increase in capacity revenues resulting from an increase in pricing and volume of generation reserves.

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


	Second Quarter 2023 vs. Second Quarter 2022			Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	(107)	(54.6)	$	(87)	(27.0)
Purchased power	(4)		(36.4)	(6)		(35.3)
Total fuel and purchased power expenses	$	(111)		$	(93)

In the second quarter 2023, total fuel and purchased power expenses were $96 million compared to $207 million for the corresponding period in 2022. The decrease was primarily due to an $86 million decrease related to the average cost of fuel and purchased power and a $25 million decrease related to the volume of KWHs generated.

For year-to-date 2023, total fuel and purchased power expenses were $246 million compared to $339 million for the corresponding period in 2022. The decrease was primarily due to an $85 million decrease related to the average cost of fuel and purchased power and an $8 million decrease related to the volume of KWHs generated.

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

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


	Second Quarter 2023	Second Quarter 2022	Year-To-Date 2023	Year-To-Date 2022
Total generation (in millions of KWHs)	3,897	4,483	8,340	8,557
Total purchased power (in millions of KWHs)	174	166	274	286
Sources of generation (percent) –
Gas	97	88	95	90
Coal	3	12	5	10
Cost of fuel, generated (in cents per net KWH) –
Gas	2.31	4.73	2.85	4.04
Coal	6.31	3.95	5.94	3.86
Average cost of fuel, generated (in cents per net KWH)	2.44	4.63	3.01	4.02
Average cost of purchased power (in cents per net KWH)	4.07	6.57	4.08	5.72

Fuel

In the second quarter 2023, fuel expense was $89 million compared to $196 million for the corresponding period in 2022. The decrease was due to a 78.3% decrease in the volume of KWHs generated by coal, a 51.2% decrease in the average cost of natural gas per KWH generated, and a 5.0% decrease in the volume of KWHs generated by natural gas, partially offset by a 59.7% increase in the average cost of coal per KWH generated.

For year-to-date 2023, fuel expense was $235 million compared to $322 million for the corresponding period in 2022. The decrease was due to a 55.0% decrease in the volume of KWHs generated by coal and a 29.5% decrease in the average cost of natural gas per KWH generated, partially offset by a 53.9% increase in the average cost of coal per KWH generated and a 4.0% increase in the volume of KWHs generated by natural gas.

Purchased Power

In the second quarter 2023, purchased power expense was $7 million compared to $11 million for the corresponding period in 2022. The decrease was due to a 38.1% decrease in the average cost per KWH purchased primarily due to lower natural gas prices, partially offset by a 5.1% increase in the volume of KWHs purchased.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

For year-to-date 2023, purchased power expense was $11 million compared to $17 million for the corresponding period in 2022. The decrease was due to a 28.7% decrease in the average cost per KWH purchased primarily due to lower natural gas prices and a 4.1% decrease in the volume of KWHs purchased.

Other Operations and Maintenance Expenses


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$—	—	$8	4.8

For year-to-date 2023, other operations and maintenance expenses were $175 million compared to $167 million for the corresponding period in 2022. The increase was primarily due to increases of $4 million in generation expenses, $3 million in storm reserve accruals, and $2 million associated with the Kemper County energy facility (primarily related to lower salvage proceeds in 2023), partially offset by a decrease of $3 million in distribution lines and substation expenses. See Notes 2 and 3 to the financial statements under "Mississippi Power – System Restoration Rider" and "Other Matters – Mississippi Power," respectively, in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Mississippi Power – System Restoration Rider" herein for additional information.

Taxes Other Than Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(4)	(12.5)	$(1)	(1.6)

In the second quarter 2023, taxes other than income taxes were $28 million compared to $32 million for the corresponding period in 2022. For year-to-date 2023, taxes other than income taxes were $60 million compared to $61 million for the corresponding period in 2022. The decreases primarily reflect a decrease in ad valorem taxes due to lower assessed values.

Interest Expense, Net of Amounts Capitalized


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$4	28.6	$7	25.9

In the second quarter 2023, interest expense, net of amounts capitalized was $18 million compared to $14 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $34 million compared to $27 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were associated with increases of approximately $3 million and $5 million, respectively, related to higher interest rates and $1 million and $2 million, respectively, 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(8)	(66.7)	$(3)	(15.0)

In the second quarter 2023, income taxes were $4 million compared to $12 million for the corresponding period in 2022. The decrease was primarily due to lower pre-tax earnings and the flowback of certain excess deferred income taxes.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

For year-to-date 2023, income taxes were $17 million compared to $20 million for the corresponding period in 2022. The decrease was primarily due the flowback of certain excess deferred income taxes, partially offset by higher pre-tax earnings.

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

Southern Power

Net Income Attributable to Southern Power


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(13)	(13.3)	$17	10.0

Net income attributable to Southern Power in the second quarter 2023 was $85 million compared to $98 million for the corresponding period in 2022. The decrease was primarily due to lower revenues driven by lower market prices of energy, as well as lower HLBV income associated with tax equity partnerships. These decreases were partially offset by a tax benefit related to changes in state apportionment methodology due to tax legislation enacted by the State of Tennessee and insurance proceeds received for damaged generation equipment.

Net income attributable to Southern Power for year-to-date 2023 was $187 million compared to $170 million for the corresponding period in 2022. The increase was primarily due to a gain on the sale of spare parts and higher HLBV income associated with tax equity partnerships, as well as changes in state apportionment methodology related to tax legislation enacted by the State of Tennessee and receipts of liquidated damages associated with generation facility production guarantees. These increases were partially offset by lower revenues driven by lower market prices of energy.

Operating Revenues


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(374)	(41.6)	$(405)	(28.2)

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

Natural Gas Capacity and Energy Revenue

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

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

Solar and Wind Energy Revenue

Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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:


	Second Quarter 2023		Second Quarter 2022		Year-To-Date 2023		Year-To-Date 2022
	(in millions)
PPA capacity revenues	$	114	$	109	$	227	$	214
PPA energy revenues	307		579		583		921
Total PPA revenues	421		688		810		1,135
Non-PPA revenues	88		202		196		286
Other revenues	16		9		27		17
Total operating revenues	$	525	$	899	$	1,033	$	1,438

In the second quarter 2023, total operating revenues were $525 million, reflecting a $374 million, or 41.6%, decrease from the corresponding period in 2022. The change in operating revenues was primarily due to the following:

PPA capacity revenues increased $5 million, or 4.6%, 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 $272 million, or 47.0%, primarily due to a $267 million decrease in sales under natural gas PPAs resulting from a $209 million decrease in the price of fuel and purchased power and a $58 million decrease in the volume of KWHs sold.
Non-PPA revenues decreased $114 million, or 56.4%, primarily due to a $183 million decrease in the market price of energy, partially offset by a $68 million increase in the volume of KWHs sold through short-term sales.
Other revenues increased $7 million, or 77.8%, primarily due to receipts of liquidated damages associated with generation facility production guarantees and business interruption insurance proceeds received for damaged generation equipment.

For year-to-date 2023, total operating revenues were $1.0 billion, reflecting a $405 million, or 28.2%, decrease from the corresponding period in 2022. The change in operating revenues was primarily due to the following:

PPA capacity revenues increased $13 million, or 6.1%, 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 $338 million, or 36.7%, primarily due to a $328 million decrease in sales under natural gas PPAs resulting from a $269 million decrease in the price of fuel and purchased power and a $59 million decrease in the volume of KWHs sold.
Non-PPA revenues decreased $90 million, or 31.5%, primarily due to a $244 million decrease in the market price of energy, largely offset by a $152 million increase in the volume of KWHs sold through short-term sales.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other revenues increased $10 million, or 58.8%, primarily due to receipts of liquidated damages associated with generation facility production guarantees and business interruption insurance proceeds for damaged generation equipment.

Fuel and Purchased Power Expenses

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


	Second Quarter 2023	Second Quarter 2022	Year-To-Date 2023	Year-To-Date 2022
	(in billions of KWHs)
Generation	11.7	12.8	24.0	23.9
Purchased power	0.9	0.7	1.6	1.1
Total generation and purchased power	12.6	13.5	25.6	25.0

Total generation and purchased power (excluding solar, wind, fuel cells, and tolling agreements)	7.8	7.5	16.2	14.4

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:


	Second Quarter 2023 vs. Second Quarter 2022			Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)	(change in millions)		(% change)
Fuel	$	(298)	(68.2)	$	(339)	(50.7)
Purchased power	(40)		(58.8)	(35)		(39.3)
Total fuel and purchased power expenses	$	(338)		$	(374)

In the second quarter 2023, total fuel and purchased power expenses decreased $338 million, or 66.9%, compared to the corresponding period in 2022. Fuel expense decreased $298 million due to a $303 million decrease associated with the average cost of fuel, partially offset by a $4 million increase associated with the volume of KWHs generated. Purchased power expense decreased $40 million due to a $62 million decrease associated with the average cost of purchased power, partially offset by a $23 million increase associated with the volume of KWHs purchased.

For year-to-date 2023, total fuel and purchased power expenses decreased $374 million, or 49.3%, compared to the corresponding period in 2022. Fuel expense decreased $339 million due to a $403 million decrease associated with the average cost of fuel, partially offset by a $64 million increase associated with the volume of KWHs generated. Purchased power expense decreased $35 million due to a $72 million decrease associated with the average cost of purchased power, partially offset by a $37 million increase associated with the volume of KWHs purchased.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Depreciation and Amortization


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(9)	(6.9)	$(1)	(0.4)

In the second quarter 2023, depreciation and amortization was $122 million compared to $131 million for the corresponding period in 2022. The decrease was primarily due to a decrease in units-of-production depreciation related to lower production from natural gas generating facilities and insurance proceeds received for damaged generation equipment, partially offset by an increase in depreciation related to capital improvements at natural gas generating facilities.

Gain on Dispositions, Net


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$—	—	$18	N/M

For year-to-date 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(3)	(8.3)	$(7)	(9.6)

In the second quarter 2023, interest expense, net of amounts capitalized was $33 million compared to $36 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $66 million compared to $73 million for the corresponding period in 2022. The decreases were primarily due to lower average outstanding borrowings.

Income Taxes (Benefit)


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(19)	(76.0)	$(14)	(107.7)

In the second quarter 2023, income tax expense was $6 million compared to $25 million for the corresponding period in 2022. For year-to-date 2023, income tax benefit was $1 million compared to income tax expense of $13 million for the corresponding period in 2022. These changes were primarily due to lower pre-tax earnings and a change in state apportionment methodology resulting from tax legislation enacted by the state of Tennessee in the second quarter 2023. See Note (G) to the Condensed Financial Statements herein for additional information.

Net Loss Attributable to Noncontrolling Interests


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$7	31.8	$(11)	(16.4)

In the second quarter 2023, net loss attributable to noncontrolling interests was $15 million compared to $22 million for the corresponding period in 2022. The decreased loss was primarily due to $7 million in lower HLBV loss allocations to wind tax equity partners and $6 million in lower loss allocations to battery energy storage partners, partially offset by $5 million in lower income allocations to equity partners.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

For year-to-date 2023, net loss attributable to noncontrolling interests was $78 million compared to $67 million for the corresponding period in 2022. The increased loss was primarily due to $15 million in lower income allocations to equity partners and $9 million in higher HLBV loss allocations to wind tax equity partners, partially offset by $14 million in lower loss allocations to battery energy storage partners.

Southern Company Gas

Operating Metrics

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

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

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

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

Seasonality of Results

During the Heating Season, natural gas usage and operating revenues are generally higher as more customers are connected to the gas distribution systems and natural gas usage is higher in periods of colder weather. 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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(30)	(26.1)	$(40)	(9.2)

In the second quarter 2023, net income was $85 million compared to $115 million for the corresponding period in 2022. For year-to-date 2023, net income was $393 million compared to $433 million for the corresponding period in 2022. The decreases were primarily due to lower net income at gas distribution operations primarily as a result of a $28 million loss related to a regulatory disallowance at Nicor Gas. The year-to-date 2023 decrease also included an $11 million decrease in net income at gas marketing services primarily related to hedge losses. See Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Natural Gas Revenues


	Second Quarter 2023 vs. Second Quarter 2022				Year-To-Date 2023 vs. Year-To-Date 2022
	(change in millions)		(% change)		(change in millions)		(% change)


Infrastructure replacement programs and rate changes	$	38	3.5	%	$	88	2.8	%
Gas costs and other cost recovery	(265)		(24.4)		(464)		(14.8)
Gas marketing services	(1)		(0.1)		(22)		(0.7)

Other	(3)		(0.3)		(14)		(0.4)
Natural gas revenues	$	(231)	(21.3)	%	$	(412)	(13.1)	%

Revenues from infrastructure replacement programs and rate changes increased in the second quarter and year-to-date 2023 compared to the corresponding periods in 2022 primarily due to rate increases at the natural gas distribution utilities and continued investment in infrastructure replacement, partially offset by a regulatory disallowance at Nicor Gas. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information.

Revenues from gas costs and other cost recovery decreased in the second quarter and year-to-date 2023 compared to the corresponding periods 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 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.


	Second Quarter							Year-to-Date
				2023 vs. normal		2023 vs. 2022					2023 vs. normal		2023 vs. 2022
	Normal*()**	2023	2022	warmer		colder (warmer)		Normal*()**	2023	2022	warmer		warmer
	(in thousands)							(in thousands)
Illinois	651	538	620	(17.4)	%	(13.2)	%	3,715	3,198	3,627	(13.9)	%	(11.8)	%
Georgia	129	121	110	(6.2)	%	10.0	%	1,458	1,029	1,361	(29.4)	%	(24.4)	%

(*)Normal represents the 10-year average from January 1, 2013 through June 30, 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The following table provides the number of customers served by Southern Company Gas at June 30, 2023 and 2022:


	June 30,
	2023		2022		2023 vs. 2022
	(in thousands, except market share %)				(% change)
Gas distribution operations	4,337		4,314		0.5	%
Gas marketing services
Energy customers(*)	665		610		9.0	%
Market share of energy customers in Georgia	30.0	%	28.6	%

(*)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


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(253)	(56.0)	$(449)	(29.0)

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 84% and 85% of the total cost of natural gas in the second quarter and year-to-date 2023, respectively. See MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – "Southern Company Gas – Cost of Natural Gas" in Item 7 of the Form 10-K and "Natural Gas Revenues" herein for additional information.

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


	Second Quarter				Year-to-Date
	2023	2022	2023 vs. 2022		2023	2022	2023 vs. 2022
Gas distribution operations (mmBtu in millions)
Firm	101	111	(9.0)	%	359	415	(13.5)	%
Interruptible	23	22	4.5		47	47	—
Total	124	133	(6.8)	%	406	462	(12.1)	%


Gas marketing services (mmBtu in millions)
Firm:
Georgia	5	5	—	%	18	21	(14.3)	%
Illinois	1	1	—		4	4	—

Other	3	3	—		7	7	—
Interruptible large commercial and industrial	4	3	33.3		7	7	—
Total	13	12	8.3	%	36	39	(7.7)	%

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$43	16.2	$45	7.9

In the second quarter 2023, other operations and maintenance expenses were $309 million compared to $266 million for the corresponding period in 2022. For year-to-date 2023, other operations and maintenance expenses were $615 million compared to $570 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were primarily due to increases of $30 million and $43 million, respectively, in compensation and benefits, $30 million for both periods related to a regulatory disallowance at Nicor Gas, and increases of $11 million and $16 million, respectively, related to energy service contracts, partially offset by decreases of $20 million and $36 million, respectively, in expenses passed through to customers primarily related to bad debt and energy efficiency programs at gas distribution operations. See Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information on the regulatory disallowance.

Depreciation and Amortization


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$5	3.6	$9	3.3

In the second quarter 2023, depreciation and amortization was $143 million compared to $138 million for the corresponding period in 2022. For year-to-date 2023, depreciation and amortization was $284 million compared to $275 million for the corresponding period in 2022. The increases were primarily due to continued infrastructure investments at the natural gas distribution utilities.

Taxes Other Than Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(3)	(4.8)	$(2)	(1.2)

In the second quarter 2023, taxes other than income taxes was $59 million compared to $62 million for the corresponding period in 2022. For year-to-date 2023, taxes other than income taxes was $161 million compared to $163 million for the corresponding period in 2022. The decreases for the second quarter and year-to-date 2023 were primarily due to decreases of $7 million and $12 million, respectively, in revenue taxes, largely offset by increases of $5 million and $11 million, respectively, in payroll, property, and invested capital taxes.

Interest Expense, Net of Amounts Capitalized


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$12	19.7	$28	23.0

In the second quarter 2023, interest expense, net of amounts capitalized was $73 million compared to $61 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $150 million compared to $122 million for the corresponding period in 2022. The increases for the second quarter and year-to-date 2023 were primarily associated with increases of approximately $13 million and $31 million, respectively, related to higher interest rates. 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)

Income Taxes


Second Quarter 2023 vs. Second Quarter 2022		Year-To-Date 2023 vs. Year-To-Date 2022
(change in millions)	(% change)	(change in millions)	(% change)
$(7)	(19.4)	$(2)	(1.5)

In the second quarter 2023, income taxes were $29 million compared to $36 million for the corresponding period in 2022. For year-to-date 2023, income taxes were $132 million compared to $134 million for the corresponding period in 2022. The decreases were primarily the result of the regulatory disallowance at Nicor Gas, partially offset by higher pre-tax earnings. See Note (B) under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" and Note (G) under "Southern Company Gas" to the Condensed Financial Statements herein for additional information.

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 (Loss)		Operating Revenues		Operating Expenses		Net Income (Loss)
	(in millions)						(in millions)
Second Quarter
Gas distribution operations	$	764	$	636	$	60	$	980	$	819	$	92
Gas pipeline investments	8		2		19		8		2		23

Gas marketing services	75		64		7		92		90		1
All other	9		9		(1)		10		14		(1)
Intercompany eliminations	(4)		(1)		—		(7)		(7)		—
Consolidated	$	852	$	710	$	85	$	1,083	$	918	$	115

Year-to-Date
Gas distribution operations	$	2,383	$	1,901	$	281	$	2,782	$	2,293	$	306
Gas pipeline investments	16		5		50		16		5		52
Gas marketing services	320		239		56		335		240		67
All other	22		18		6		26		35		8
Intercompany eliminations	(13)		(6)		—		(19)		(19)		—
Consolidated	$	2,728	$	2,157	$	393	$	3,140	$	2,554	$	433

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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 second quarter 2023, net income decreased $32 million, or 34.8%, when compared to the corresponding period in 2022, as described further below:

Operating revenues decreased $216 million primarily due to lower gas cost recovery and the regulatory disallowance at Nicor Gas, 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 $183 million primarily due to a $230 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, $30 million related to the regulatory disallowance at Nicor Gas, and an $11 million increase related to energy service contracts. The decrease in operating expenses also includes costs passed through directly to customers, primarily related to bad debt expenses and revenue taxes.
Interest expense, net of amounts capitalized increased $12 million primarily due to higher interest rates and higher average outstanding debt.
Income taxes decreased $12 million primarily as a result of the tax benefit resulting from the regulatory disallowance at Nicor Gas.

For year-to-date 2023, net income decreased $25 million, or 8.2%, when compared to the corresponding period in 2022, as described further below:

Operating revenues decreased $399 million primarily due to lower gas cost 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 $392 million primarily due to a $447 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, higher compensation and benefits, $30 million related to the regulatory disallowance at Nicor Gas, and a $16 million increase related to energy service contracts. The decrease in operating expenses also includes costs passed through directly to customers, primarily related to bad debt expenses and revenue taxes.
Interest expense, net of amounts capitalized increased $26 million primarily due to higher interest rates and higher average outstanding debt.
Income taxes decreased $9 million primarily as a result of the tax benefit resulting from the regulatory disallowance at Nicor Gas.

See Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information.

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.

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,

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

such as weather derivative instruments and other risk management tools, to partially mitigate potential weather impacts.

In the second quarter 2023, net income increased $6 million, when compared to the corresponding period in 2022 primarily due to a $27 million decrease in cost of gas, partially offset by a $17 million decrease in operating revenue primarily due to the timing of unrealized hedge losses and a $3 million increase in income taxes.

For year-to-date 2023, net income decreased $11 million, or 16.4%, when compared to the corresponding period in 2022 primarily due to a $15 million decrease in operating revenue primarily due to the timing of unrealized hedge losses, partially offset by lower gas prices and lower volumes sold.

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.

For year-to-date 2023, net income decreased $2 million when compared to the corresponding period in 2022. The decrease 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 Unit 4, meeting the related cost and schedule projections, and completing the related cost recovery proceedings for Plant Vogtle Units 3 and 4.

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

Global and U.S. economic conditions 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 and reduce inflation, although target inflation levels have not yet been achieved. These actions and impacts, including increased costs for goods and services and borrowing costs, have led to a slowing of some economic activity and an 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.

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AND RESULTS OF OPERATIONS (Continued)

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 half 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 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.

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AND RESULTS OF OPERATIONS (Continued)

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 May 11, 2023, the State of Mississippi and Mississippi Power filed a joint motion for stay of the EPA's disapproval of the Mississippi SIP, which was granted on June 8, 2023. 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. On June 13, 2023, the State of Alabama, Alabama Power, and PowerSouth Energy Cooperative filed a joint motion for stay of the EPA's disapproval of the Alabama SIP.

On June 5, 2023, the EPA published the 2015 Ozone NAAQS Good Neighbor federal implementation plan (FIP), which will become effective August 4, 2023. On June 16, 2023 and June 27, 2023, the State of Mississippi and Mississippi Power, respectively, challenged the FIP in the U.S. Court of Appeals for the Fifth Circuit. On June 30, 2023, the State of Mississippi and Mississippi Power filed in the U.S. Court of Appeals for the Fifth Circuit a joint motion for stay of the FIP as to the State of Mississippi, which was denied on July 20, 2023.

On July 31, 2023, the EPA published an interim final rule that stays the implementation of the FIP for states with judicially stayed SIP disapprovals, including Mississippi. The interim final rule revises the existing regulations to maintain currently applicable trading programs for those states.

The ultimate impact of the rule and associated legal matters cannot be determined at this time; however, implementation of the FIP 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.

Coal Combustion Residuals

On May 18, 2023, the EPA published a proposal to establish two new categories of federally regulated CCR, legacy surface impoundments and CCR management units (CCRMUs). The EPA is proposing to define a legacy surface impoundment as a CCR surface impoundment that no longer receives CCR but contained both CCR and liquids on

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AND RESULTS OF OPERATIONS (Continued)

or after October 19, 2015 and that is located at an inactive electric generating facility. The EPA is proposing that owners and operators of legacy surface impoundments comply with all of the existing CCR Rule requirements with the exception of location restrictions and liner demonstrations. The proposal establishes accelerated compliance deadlines for legacy surface impoundments to meet regulatory requirements, including a requirement to initiate closure within 12 months after the effective date of the final rule. The EPA is also proposing to define CCRMUs as any area of land on which any non-containerized accumulation of CCR is received, placed, or otherwise managed at any time, that is not a CCR unit, including inactive CCR landfills and CCR units that closed prior to October 17, 2015. The EPA's proposal would require evaluations to be completed at both active facilities and inactive facilities with one or more legacy surface impoundment. CCRMUs must comply with the CCR Rule's provisions for groundwater monitoring, corrective action, closure, and post-closure activities. 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.

Greenhouse Gases

On May 23, 2023, the EPA published the proposed GHG standards and state plan guidelines for fossil fuel-fired power plants. The proposal includes GHG limits for both new and existing units based on technologies such as carbon capture and sequestration, low-GHG hydrogen co-firing, and natural gas co-firing. The proposed standards for new combustion turbines include subcategories for different operational uses including peaking, intermediate, and base load. Compliance with new source standards, once finalized, begins when the unit comes online. The EPA proposes a phased approach for intermediate and base load units that increases in stringency over time. The proposed state plan guidelines for existing units include subcategories based on unit type, retirement date, size, and capacity factor. The EPA is proposing a 24-month state plan submission deadline for the existing unit implementation and proposes to potentially allow some limited form of trading and averaging for the state plans. Existing source compliance is proposed to begin as early as January 1, 2030, depending on the unit type and subcategory. The EPA also proposes to simultaneously repeal the Affordable Clean Energy rule. 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.

Regulatory Matters

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

Alabama Power

On July 14, 2023, Alabama Power issued a request for proposals of between 100 MWs and 1,200 MWs of capacity beginning no later than December 1, 2028, with consideration for commencement as early as 2025. Any purchases will depend upon the cost competitiveness of the respective offers, as well as other options available to Alabama Power, and would ultimately require approval by the Alabama PSC. The ultimate outcome of this matter cannot be determined at this time.

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 Unit 4. See Note (B) to the Condensed Financial Statements under "Georgia Power

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– 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 June 30, 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 97% 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.

Traditional Electric Operating Companies

See BUSINESS – "The Southern Company System – Traditional Electric Operating Companies" in Item 1 of the Form 10-K for information regarding the Southeast Energy Exchange Market (SEEM). On July 14, 2023, the U.S. Court of Appeals for the District of Columbia Circuit vacated the FERC's orders related to SEEM and remanded the proceeding to the FERC. The ultimate outcome of this matter cannot be determined at this time.

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.

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AND RESULTS OF OPERATIONS (Continued)

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 June 30, 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 second quarter 2023, the market price of Southern Company's common stock was $70.25 per share (based on the closing price as reported on the NYSE) and the book value was $28.12 per share, representing a market-to-book ratio of 250%, compared to $71.41, $27.93, and 256%, respectively, at the end of 2022. Southern Company's common stock dividend for the second quarter 2023 was $0.70 per share compared to $0.68 per share in the second 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. 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.

The construction program of Georgia Power includes Plant Vogtle Unit 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.

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AND RESULTS OF OPERATIONS (Continued)

Sources of Capital

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt, 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. Georgia Power intends to utilize a mix of senior note issuances, short-term floating rate bank loans, and commercial paper issuances to continue funding 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 six months ended June 30, 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 June 30, 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.

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 June 30, 2023 for the applicable Registrants:


At June 30, 2023	Southern Company		Georgia Power		Mississippi Power		Southern Company Gas
	(in millions)
Current liabilities in excess of current assets	$	2,261	$	1,689	$	232	$	626

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

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AND RESULTS OF OPERATIONS (Continued)

Bank Credit Arrangements

At June 30, 2023, the Registrants' unused committed credit arrangements with banks were as follows:


At June 30, 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	$	275	$	589	$	1,598	$	30	$	7,466

(a)At June 30, 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 $800 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 June 30, 2023 was approximately $1.4 billion (comprised of approximately $492 million at Alabama Power, $819 million at Georgia Power, and $69 million at Mississippi Power). In addition, at June 30, 2023, Alabama Power and Georgia Power had approximately $120 million and $225 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.

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 June 30, 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	$	1,647	5.9	%	$	2,115	5.7	%	$	2,595
Alabama Power	—		—		84		5.1		195
Georgia Power	1,295		6.0		1,553		5.7		2,110
Mississippi Power	53		5.3		130		5.7		169
Southern Power	100		5.7		117		5.7		197
Southern Company Gas:
Southern Company Gas Capital	$	196	5.3	%	$	104	5.4	%	$	206

(*)Average and maximum amounts are based upon daily balances during the three-month period ended June 30, 2023.

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AND RESULTS OF OPERATIONS (Continued)

Analysis of Cash Flows

Net cash flows provided from (used for) operating, investing, and financing activities for the six months ended June 30, 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)
Six Months Ended June 30, 2023
Operating activities	$	2,900	$	656	$	576	$	82	$	357	$	1,530
Investing activities	(4,288)		(1,011)		(2,260)		(193)		(18)		(761)
Financing activities	1,595		(11)		1,364		71		(300)		(608)

Six Months Ended June 30, 2022
Operating activities	$	3,579	$	510	$	926	$	112	$	552	$	1,478
Investing activities	(3,460)		(889)		(1,668)		(133)		(73)		(658)
Financing activities	(213)		227		939		(18)		(403)		(650)

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

Southern Company

Net cash provided from operating activities decreased $0.7 billion for the six months ended June 30, 2023 as compared to the corresponding period in 2022 primarily due to the timing of vendor payments and fossil fuel stock purchases, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the six months ended June 30, 2023 was primarily related to the Subsidiary Registrants' construction programs.

The net cash provided from financing activities for the six months ended June 30, 2023 was primarily related to net issuances of long-term debt, partially offset by common stock dividend payments, net repayments of short-term bank loans, and a reduction in commercial paper borrowings.

Alabama Power

Net cash provided from operating activities increased $146 million for the six months ended June 30, 2023 as compared to the corresponding period in 2022 primarily due to an increase in fuel cost recovery and the timing of customer receivable collections, partially offset by the timing of vendor payments and fuel stock purchases.

The net cash used for investing activities for the six months ended June 30, 2023 was primarily related to gross property additions, including approximately $50 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 used for financing activities for the six months ended June 30, 2023 was primarily related to common stock dividend payments, largely offset by capital contributions from Southern Company and the issuance of senior notes.

Georgia Power

Net cash provided from operating activities decreased $350 million for the six months ended June 30, 2023 as compared to the corresponding period in 2022 primarily due to the timing of vendor payments and fossil fuel stock purchases, partially offset by the timing of customer receivable collections.

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AND RESULTS OF OPERATIONS (Continued)

The net cash used for investing activities for the six months ended June 30, 2023 was primarily related to gross property additions, including a total of approximately $425 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 Plant Vogtle Units 3 and 4.

The net cash provided from financing activities for the six months ended June 30, 2023 was primarily related to issuances of senior notes, capital contributions from Southern Company, and reofferings of pollution control revenue bonds which were previously held by Georgia Power, partially offset by common stock dividend payments and a net decrease in short-term borrowings.

Mississippi Power

Net cash provided from operating activities decreased $30 million for the six months ended June 30, 2023 as compared to the corresponding period in 2022 primarily due to the timing of vendor payments, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the six months ended June 30, 2023 was primarily related to gross property additions.

The net cash provided from financing activities for the six months ended June 30, 2023 was primarily related to the issuance of senior notes and an increase in short-term borrowings, partially offset by common stock dividend payments.

Southern Power

Net cash provided from operating activities decreased $195 million for the six months ended June 30, 2023 as compared to the corresponding period in 2022 primarily due to the timing of vendor payments and a decrease in the utilization of tax credits, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the six months ended June 30, 2023 was primarily related to ongoing construction activities, partially offset by proceeds from the sale of equity investments.

The net cash used for financing activities for the six months ended June 30, 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 increased $52 million for the six months ended June 30, 2023 as compared to the corresponding period in 2022 primarily due to the timing of customer receivable collections and higher gas cost recovery, partially offset by the timing of vendor payments and a change in natural gas for sale, net of temporary LIFO liquidation due to use of stored natural gas.

The net cash used for investing activities for the six months ended June 30, 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 six months ended June 30, 2023 was primarily related to repayment of short-term borrowings and common stock dividend payments, partially offset by capital contributions from Southern Company and proceeds from other long-term debt.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Significant Balance Sheet Changes

Southern Company

Significant balance sheet changes for the six months ended June 30, 2023 included:

an increase of $4.3 billion in long-term debt (including securities due within one year) related to new issuances;
an increase of $2.2 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs;
a decrease of $1.0 billion in accounts payable primarily related to the timing of vendor payments;
a decrease of $1.0 billion in notes payable due to a reduction in commercial paper borrowings and the repayment of short-term bank loans;
an increase of $0.6 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 accrued compensation due to the timing of payments.

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

Alabama Power

Significant balance sheet changes for the six months ended June 30, 2023 included:

an increase of $355 million in common stockholder's equity primarily due to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
a decrease of $366 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Alabama Power" herein;
an increase of $269 million in total property, plant, and equipment primarily related to the construction of Plant Barry Unit 8 and transmission and distribution facilities;
a decrease of $269 million in other accounts payable primarily due to the timing of vendor payments; and
an increase of $214 million in long-term debt (including securities due within one year) primarily due to the issuance of senior notes.

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

Georgia Power

Significant balance sheet changes for the six months ended June 30, 2023 included:

an increase of $1.8 billion in long-term debt (including securities due within one year) primarily due to issuances of senior notes;
an increase of $1.5 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $514 million for Plant Vogtle Units 3 and 4;
an increase of $626 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;
a decrease of $320 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Georgia Power" herein; and
a decrease of $305 million in notes payable primarily due to repayments of short-term bank debt.

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

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Mississippi Power

Significant balance sheet changes for the six months ended June 30, 2023 included:

an increase of $100 million in long-term debt (including securities due within one year) primarily due to issuances of senior notes;
an increase of $92 million in total property, plant, and equipment primarily related to the construction of transmission and distribution facilities;
decreases of $62 million in affiliated receivables and $47 million in affiliated accounts payable primarily due to fluctuations in affiliate sales/purchases and the timing of payments;
a decrease of $61 million in accrued taxes primarily due to the payment of ad valorem taxes;
an increase of $53 million in notes payable due to commercial paper borrowings; and
a decrease of $40 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.

Southern Power

Significant balance sheet changes for the six months ended June 30, 2023 included:

increases of $319 million in accumulated deferred income tax liabilities and $223 million in prepaid income taxes primarily related to the expected utilization of ITCs in 2023;
a decrease of $220 million in total property, plant, and equipment primarily due to continued depreciation of assets; and
a decrease of $125 million in notes payable primarily due to net repayments of commercial paper.

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

Southern Company Gas

Significant balance sheet changes for the six months ended June 30, 2023 included:

a decrease of $663 million in total accounts receivable primarily related to decreases of $367 million in unbilled revenues and $297 million in customer accounts receivable as a result of seasonality;
a decrease of $572 million in notes payable due to a reduction in commercial paper borrowings and the repayment of short-term bank loans;
an increase of $525 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets and additional infrastructure investment;
an increase of $341 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 $278 million in other accounts payable due to seasonality and the timing of vendor payments; and
a decrease of $204 million in natural gas for sale primarily due to the use of stored natural gas.

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

Financing Activities

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


	Issuances and Reofferings						Maturities and Redemptions
Company	Senior Notes		Revenue Bonds		Other Long- Term Debt		Senior Notes		Other Long- Term Debt*()**
	(in millions)
Southern Company parent	$	3,225	$	—	$	—	$	600	$	550
Alabama Power	200		—		17		—		1
Georgia Power	1,750		229		—		100		44
Mississippi Power	100		—		—		—		—

Southern Company Gas	—		—		19		—		—
Other	—		—		—		—		5

Southern Company	$	5,275	$	229	$	36	$	700	$	600

(*)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments totaling $43 million for FFB borrowings. See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for additional information.

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

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

Southern Company

During the first six months of 2023, Southern Company issued approximately 1.8 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $22 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.

In May 2023, Southern Company repaid at maturity $600 million aggregate principal amount of its 2021C Floating Rate Senior Notes.

Also in May 2023, Southern Company issued $750 million aggregate principal amount of Series 2023B 4.85% Senior Notes due June 15, 2028 and $750 million aggregate principal amount of Series 2023C 5.20% Senior Notes due June 15, 2033.

Subsequent to June 30, 2023, Southern Company repaid at maturity $1.25 billion aggregate principal amount of its 2.95% Senior Notes.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Alabama Power

During the first half of 2023, a subsidiary of Alabama Power borrowed $17 million under a $39 million long-term floating rate bank loan entered into in December 2022 with a maturity date of December 12, 2029.

In May 2023, Alabama Power issued $200 million aggregate principal amount of Series 2023A Floating Rate Senior Notes due May 15, 2073.

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. In April 2023, Georgia Power borrowed an additional $150 million under the arrangement. In May 2023, Georgia Power repaid the aggregate $250 million outstanding.

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

In April 2023, Georgia Power repaid at maturity $100 million aggregate principal amount of its Series N 5.750% Senior Notes.

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

In May 2023, Georgia Power issued $750 million aggregate principal amount of Series 2023A 4.65% Senior Notes due May 16, 2028 and $1.0 billion aggregate principal amount of Series 2023B 4.95% Senior Notes due May 17, 2033.

Subsequent to June 30, 2023, Georgia Power repaid at maturity $700 million aggregate principal amount of its Series 2020A 2.10% Senior Notes.

Mississippi Power

In March 2023, Mississippi Power borrowed $50 million of short-term debt pursuant to its $125 million revolving credit arrangement, which it repaid in June 2023.

In June 2023, Mississippi Power issued in a private placement $65 million aggregate principal amount of Series 2023A 5.64% Senior Notes due July 15, 2026 and $35 million aggregate principal amount of Series 2023B 5.63% Senior Notes due July 15, 2033.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

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. During the second quarter 2023, Southern Power made net repayments of $50 million of the $100 million borrowed.

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.

During the first half of 2023, Southern Company Gas received cash advances totaling $19 million under a long-term financing agreement related to a construction contract.

Subsequent to June 30, 2023, Nicor Gas issued in a private placement $50 million aggregate principal amount of 5.28% Series First Mortgage Bonds due July 31, 2030 and $75 million aggregate principal amount of 5.43% Series First Mortgage Bonds due July 31, 2035. Pursuant to the same agreement, Nicor Gas agreed to issue in a private placement in October 2023 $75 million aggregate principal amount of 5.67% Series First Mortgage Bonds due October 31, 2053 and $75 million aggregate principal amount of 5.77% Series First Mortgage Bonds due October 31, 2063.

Credit Rating Risk

At June 30, 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 June 30, 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	432		2		60		—		370		—
At BB+ and/or Ba1 or below	2,113		424		952		328		1,297		30

(*)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 June 30, 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.

On August 2, 2023, S&P revised its credit rating outlook for Southern Company and its subsidiaries to positive from stable.

Table of Contents Index to Financial Statements

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