þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 |
Commission | Registrant, State of Incorporation, | I.R.S. Employer | ||||||
File Number | Address and Telephone Number | Identification No. | ||||||
1-3526 | The Southern Company | 58-0690070 | ||||||
(A Delaware Corporation) | ||||||||
30 Ivan Allen Jr. Boulevard, N.W. | ||||||||
Atlanta, Georgia 30308 | ||||||||
(404) 506-5000 | ||||||||
1-3164 | Alabama Power Company | 63-0004250 | ||||||
(An Alabama Corporation) | ||||||||
600 North 18th Street | ||||||||
Birmingham, Alabama 35291 | ||||||||
(205) 257-1000 | ||||||||
1-6468 | Georgia Power Company | 58-0257110 | ||||||
(A Georgia Corporation) | ||||||||
241 Ralph McGill Boulevard, N.E. | ||||||||
Atlanta, Georgia 30308 | ||||||||
(404) 506-6526 | ||||||||
0-2429 | Gulf Power Company | 59-0276810 | ||||||
(A Florida Corporation) | ||||||||
One Energy Place | ||||||||
Pensacola, Florida 32520 | ||||||||
(850) 444-6111 | ||||||||
001-11229 | Mississippi Power Company | 64-0205820 | ||||||
(A Mississippi Corporation) | ||||||||
2992 West Beach | ||||||||
Gulfport, Mississippi 39501 | ||||||||
(228) 864-1211 | ||||||||
333-98553 | Southern Power Company | 58-2598670 | ||||||
(A Delaware Corporation) | ||||||||
30 Ivan Allen Jr. Boulevard, N.W. | ||||||||
Atlanta, Georgia 30308 | ||||||||
(404) 506-5000 |
Title of each class | Registrant | |||
Common Stock, $5 par value | The Southern Company | |||
Class A preferred, cumulative, $25 stated capital | Alabama Power Company | ||||
5.20% Series | 5.83% Series | ||||
5.30% Series |
Senior Notes | ||||
5 5/8% Series AA | 5.875% Series II | |||
5 7/8% Series GG | 6.375% Series JJ | |||
5.875% Series 2007B | ||||
Class A Preferred Stock, non-cumulative, | Georgia Power Company | ||||
Par value $25 per share | |||||
6 1/8% Series | |||||
Senior Notes | |||||
5.90% Series O | 6% Series R | 5.70% Series X | |||
5.75% Series T | 6% Series W | 5.75% Series G2 | |||
6.375% Series 2007D | 8.20% Series 2008C | ||||
Long-term debt payable to affiliated trusts, $25 liquidation amount | |||||
5 7/8% Trust Preferred Securities3 |
Senior Notes | Gulf Power Company | ||||
5.25% Series H | 5.75% Series I | ||||
5.875% Series J | |||||
1 | As of December 31, | |
2 | Assumed by Georgia Power Company in connection with its merger with Savannah Electric and Power Company, effective July 1, 2006. | |
3 | Issued by Georgia Power Capital Trust VII and guaranteed by Georgia Power Company. |
Senior Notes | Mississippi Power Company | |||||||
5 5/8% Series E | ||||||||
Depositary preferred shares, each representing one-fourth of a share of preferred stock, cumulative, $100 par value | ||||||||
5.25% Series |
Title of each class | Registrant | |||||
Preferred stock, cumulative, $100 par value | Alabama Power Company | |||||
4.20% Series | 4.60% Series | 4.72% Series | ||||
4.52% Series | 4.64% Series | 4.92% Series | ||||
Preferred stock, cumulative, $100 par value | Mississippi Power Company | |||||
4.40% Series | 4.60% Series | |||||
4.72% Series |
4 | As of December 31, |
Registrant | Yes | No | ||
The Southern Company | ü | |||
Alabama Power Company | ü | |||
Georgia Power Company | ü | |||
Gulf Power Company | ü | |||
Mississippi Power Company | ü | |||
Southern Power Company | ü |
Large | Smaller | |||||||
Accelerated | Accelerated | Non-accelerated | Reporting | |||||
Registrant | Filer | Filer | Filer | Company | ||||
The Southern Company | ü | |||||||
Alabama Power Company | ü | |||||||
Georgia Power Company | ü | |||||||
Gulf Power Company | ü | |||||||
Mississippi Power Company | ü | |||||||
Southern Power Company | ü |
Description of | Shares Outstanding | |||||
Registrant | Common Stock | at January 31, | ||||
The Southern Company | Par Value $5 Per Share | |||||
Alabama Power Company | Par Value $40 Per Share | |||||
Georgia Power Company | Without Par Value | 9,261,500 | ||||
Gulf Power Company | Without Par Value | |||||
Mississippi Power Company | Without Par Value | 1,121,000 | ||||
Southern Power Company | Par Value $0.01 Per Share | 1,000 |
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Term | Meaning | |
AFUDC | Allowance for Funds Used During Construction | |
Alabama Power | Alabama Power Company | |
AMEA | Alabama Municipal Electric Authority | |
Clean Air Act | Clean Air Act Amendments of 1990 | |
Dalton | Dalton Utilities | |
DOE | United States Department of Energy | |
Duke Energy | Duke Energy Corporation | |
Energy Act of 1992 | Energy Policy Act of 1992 | |
Energy Act of 2005 | Energy Policy Act of 2005 | |
EPA | United States Environmental Protection Agency | |
FERC | Federal Energy Regulatory Commission | |
FMPA | Florida Municipal Power Agency | |
FP&L | Florida Power & Light Company | |
Georgia Power | Georgia Power Company | |
Gulf Power | Gulf Power Company | |
Hampton | City of Hampton, Georgia | |
IBEW | International Brotherhood of Electrical Workers | |
IIC | Intercompany Interchange Contract | |
IPP | Independent Power Producer | |
IRP | Integrated Resource Plan | |
IRS | Internal Revenue Service | |
KUA | Kissimmee Utility Authority | |
MEAG Power | Municipal Electric Authority of Georgia | |
Mirant | Mirant Corporation | |
Mississippi Power | Mississippi Power Company | |
Moody’s | Moody’s Investors Service | |
NRC | Nuclear Regulatory Commission | |
OPC | Oglethorpe Power Corporation | |
OUC | Orlando Utilities Commission | |
power pool | The operating arrangement whereby the integrated generating resources of the traditional operating companies and Southern Power are subject to joint commitment and dispatch in order to serve their combined load obligations | |
PowerSouth | PowerSouth Energy Cooperative (formerly, Alabama Electric Cooperative, Inc.) | |
PPA | Power Purchase Agreement | |
Progress Energy Carolinas | Carolina Power & Light Company, d/b/a Progress Energy Carolinas, Inc. | |
Progress Energy Florida | Florida Power Corporation, d/b/a Progress Energy Florida, Inc. | |
PSC | Public Service Commission | |
registrants | The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Southern Power Company |
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Term | Meaning | |
RFP | Request for Proposal | |
RUS | Rural | |
S&P | Standard and Poor’s, a division of The McGraw-Hill Companies | |
SCS | Southern Company Services, Inc. (the system service company) | |
SEC | Securities and Exchange Commission | |
SEGCO | Southern Electric Generating Company | |
SEPA | Southeastern Power Administration | |
SERC | Southeastern Electric Reliability Council | |
SMEPA | South Mississippi Electric Power Association | |
Southern Company | The Southern Company | |
Southern Company system | Southern Company, the traditional operating companies, Southern Power, SEGCO, Southern Nuclear, SCS, SouthernLINC Wireless, and other subsidiaries | |
Southern Holdings | Southern Company Holdings, Inc. | |
SouthernLINC Wireless | Southern Communications Services, Inc. | |
Southern Nuclear | Southern Nuclear Operating Company, Inc. | |
Southern Power | Southern Power Company | |
Southern Renewable Energy | Southern Renewable Energy, Inc. | |
Stone & Webster | Stone & Webster, Inc. | |
traditional operating companies | Alabama Power Company, Georgia Power Company, Gulf Power Company, and Mississippi Power Company | |
TVA | Tennessee Valley Authority | |
Westinghouse | Westinghouse Electric Company LLC |
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• | available sources and costs of fuels; | |
• | effects of inflation; | |
• | ability to control | |
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Southern | Southern | |||||||||||||||||||||||||||||||||||||||||||||||
Company | Alabama | Georgia | Gulf | Mississippi | Southern | Company | Alabama | Georgia | Gulf | Mississippi | Southern | |||||||||||||||||||||||||||||||||||||
System* | Power | Power | Power | Power | Power | System* | Power | Power | Power | Power | Power | |||||||||||||||||||||||||||||||||||||
New generation | $ | 1,953 | $ | — | $ | 1,209 | $ | 6 | $ | 48 | $ | 690 | $ | 2,188 | $ | — | $ | 1,254 | $ | 3 | $ | 341 | $ | 590 | ||||||||||||||||||||||||
Environmental | 1,448 | 584 | 472 | 335 | 28 | — | 545 | 136 | 259 | 113 | 11 | — | ||||||||||||||||||||||||||||||||||||
Other generating facilities, including associated plant substations | 543 | 232 | 178 | 42 | 11 | 59 | 528 | 228 | 154 | 54 | 39 | 37 | ||||||||||||||||||||||||||||||||||||
New business | 411 | 196 | 170 | 29 | 16 | — | 435 | 169 | 218 | 25 | 23 | — | ||||||||||||||||||||||||||||||||||||
Transmission | 434 | 76 | 313 | 25 | 20 | — | 461 | 119 | 265 | 45 | 32 | — | ||||||||||||||||||||||||||||||||||||
Distribution | 404 | 157 | 189 | 29 | 30 | — | 290 | 137 | 110 | 25 | 18 | — | ||||||||||||||||||||||||||||||||||||
Nuclear fuel | 238 | 90 | 148 | — | — | — | 258 | 111 | 147 | — | — | — | ||||||||||||||||||||||||||||||||||||
General plant | 222 | 79 | 75 | 12 | 10 | — | 231 | 85 | 89 | 6 | 8 | — | ||||||||||||||||||||||||||||||||||||
$ | 5,653 | $ | 1,414 | $ | 2,754 | $ | 478 | $ | 163 | $ | 749 | $ | 4,936 | $ | 985 | $ | 2,496 | $ | 271 | $ | 472 | $ | 627 | |||||||||||||||||||||||||
* | These amounts include the traditional operating companies and Southern Power (as detailed in the table above) as well as the amounts for the other subsidiaries. See “Other Businesses” herein for additional information. |
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Employees at December 31, | ||||
Alabama Power | ||||
Georgia | ||||
Gulf Power | ||||
Mississippi Power | ||||
SCS | ||||
Southern Holdings* | — | |||
Southern Nuclear | ||||
Southern Power* | — | |||
Other | ||||
Total | ||||
Southern Holdings has agreements with SCS whereby all employee services are rendered at cost. | ||
** | Southern Power has no employees. Southern Power has agreements with SCS and the traditional operating companies whereby employee services are rendered at amounts in compliance with FERC regulations. |
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• | operator error or failure of equipment or processes; | ||
• | operating limitations that may be imposed by environmental or other regulatory requirements; | ||
• | labor disputes; | ||
• | terrorist attacks; | ||
• | fuel or material supply interruptions; | ||
• | compliance with mandatory reliability standards, including mandatory cyber security standards; | ||
• | information technology system failure; | ||
• | cyber intrusion; and | ||
• | catastrophic events such as fires, earthquakes, explosions, floods, droughts, hurricanes, pandemic health events such as |
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• | shortages and inconsistent quality of equipment, materials, and labor; | ||
• | work stoppages; | ||
• | contractor or supplier non-performance under construction or other agreements; | ||
• | delays in or failure to receive necessary permits, approvals, and other regulatory authorizations; | ||
• | impacts of new and existing laws and regulations, including environmental laws and regulations; | ||
• | continued public and policymaker support for such projects; | ||
• | adverse weather conditions; | ||
• | unforeseen engineering problems; | ||
• | changes in project design or scope; | ||
• | environmental and geological conditions; |
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• | delays or increased costs to interconnect facilities to transmission grids; | ||
• | unanticipated cost increases, including materials and labor; and | ||
• | attention to other projects. |
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• | prevailing market prices for coal, natural gas, uranium, fuel oil, and other fuels used in the generation facilities of the traditional operating companies and Southern Power including associated transportation costs, and supplies of such commodities; | ||
• | demand for energy and the extent of additional supplies of energy available from current or new competitors; | ||
• | liquidity in the general wholesale electricity market; | ||
• | weather conditions impacting demand for electricity; | ||
• | seasonality; | ||
• | transmission or transportation constraints or inefficiencies; | ||
• | availability of competitively priced alternative energy sources; | ||
• | forced or unscheduled plant outages for the Southern Company system, its competitors, or third party providers; | ||
• | the financial condition of market participants; | ||
• | the economy in the service territory, the nation, and worldwide, including the impact of economic conditions on industrial and commercial demand for electricity and the worldwide demand for fuels; | ||
• | natural disasters, wars, embargos, acts of terrorism, and other catastrophic events; and | ||
• | federal, state, and foreign energy and environmental regulation and legislation. |
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• | an economic downturn or uncertainty; | ||
• | the bankruptcy of an unrelated energy company or financial institution; | ||
• | capital markets volatility and interruption; | ||
• | financial institution distress; | ||
• | market prices for electricity and gas; | ||
• | terrorist attacks or threatened attacks on Southern Company’s facilities or unrelated energy companies’ facilities; | ||
• | war or threat of war; or | ||
• | the overall health of the utility and financial institution industries. |
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Nameplate | Nameplate | |||||||||||
Generating Station | Location | Capacity (1) | Location | Capacity (1) | ||||||||
(Kilowatts) | (Kilowatts) | |||||||||||
FOSSIL STEAM | ||||||||||||
Gadsden | Gadsden, AL | 120,000 | Gadsden, AL | 120,000 | ||||||||
Gorgas | Jasper, AL | 1,221,250 | Jasper, AL | 1,221,250 | ||||||||
Barry | Mobile, AL | 1,525,000 | Mobile, AL | 1,525,000 | ||||||||
Greene County | Demopolis, AL | 300,000 | (2) | Demopolis, AL | 300,000 | (2) | ||||||
Gaston Unit 5 | Wilsonville, AL | 880,000 | Wilsonville, AL | 880,000 | ||||||||
Miller | Birmingham, AL | 2,532,288 | (3) | Birmingham, AL | 2,532,288 | (3) | ||||||
Alabama Power Total | 6,578,538 | 6,578,538 | ||||||||||
Bowen | Cartersville, GA | 3,160,000 | Cartersville, GA | 3,160,000 | ||||||||
Branch | Milledgeville, GA | 1,539,700 | Milledgeville, GA | 1,539,700 | ||||||||
Hammond | Rome, GA | 800,000 | Rome, GA | 800,000 | ||||||||
Kraft | Port Wentworth, GA | 281,136 | Port Wentworth, GA | 281,136 | ||||||||
McDonough | Atlanta, GA | 490,000 | ||||||||||
McDonough (4) | Atlanta, GA | 490,000 | ||||||||||
McIntosh | Effingham County, GA | 163,117 | Effingham County, GA | 163,117 | ||||||||
McManus | Brunswick, GA | 115,000 | Brunswick, GA | 115,000 | ||||||||
Mitchell | Albany, GA | 125,000 | Albany, GA | 125,000 | ||||||||
Scherer | Macon, GA | 750,924 | (4) | Macon, GA | 750,924 | (5) | ||||||
Wansley | Carrollton, GA | 925,550 | (5) | Carrollton, GA | 925,550 | (6) | ||||||
Yates | Newnan, GA | 1,250,000 | Newnan, GA | 1,250,000 | ||||||||
Georgia Power Total | 9,600,427 | 9,600,427 | ||||||||||
Crist | Pensacola, FL | 970,000 | Pensacola, FL | 970,000 | ||||||||
Daniel | Pascagoula, MS | 500,000 | (6) | Pascagoula, MS | 500,000 | (7) | ||||||
Lansing Smith | Panama City, FL | 305,000 | Panama City, FL | 305,000 | ||||||||
Scholz | Chattahoochee, FL | 80,000 | Chattahoochee, FL | 80,000 | ||||||||
Scherer Unit 3 | Macon, GA | 204,500 | (4) | Macon, GA | 204,500 | (5) | ||||||
Gulf Power Total | 2,059,500 | 2,059,500 | ||||||||||
Daniel | Pascagoula, MS | 500,000 | (6) | Pascagoula, MS | 500,000 | (7) | ||||||
Eaton | Hattiesburg, MS | 67,500 | Hattiesburg, MS | 67,500 | ||||||||
Greene County | Demopolis, AL | 200,000 | (2) | Demopolis, AL | 200,000 | (2) | ||||||
Sweatt | Meridian, MS | 80,000 | Meridian, MS | 80,000 | ||||||||
Watson | Gulfport, MS | 1,012,000 | Gulfport, MS | 1,012,000 | ||||||||
Mississippi Power Total | 1,859,500 | 1,859,500 | ||||||||||
Gaston Units 1-4 | Wilsonville, AL | Wilsonville, AL | ||||||||||
SEGCO Total | 1,000,000 | (7) | 1,000,000 | (8) | ||||||||
Total Fossil Steam | 21,097,965 | 21,097,965 | ||||||||||
NUCLEAR STEAM | ||||||||||||
Farley | Dothan, AL | Dothan, AL | ||||||||||
Alabama Power Total | 1,720,000 | 1,720,000 | ||||||||||
Hatch | Baxley, GA | 899,612 | (8) | Baxley, GA | 899,612 | (9) | ||||||
Vogtle | Augusta, GA | 1,060,240 | (9) | Augusta, GA | 1,060,240 | (10) | ||||||
Georgia Power Total | 1,959,852 | 1,959,852 | ||||||||||
Total Nuclear Steam | 3,679,852 | 3,679,852 | ||||||||||
COMBUSTION TURBINES | ||||||||||||
Greene County | Demopolis, AL | Demopolis, AL | ||||||||||
Alabama Power Total | 720,000 | 720,000 | ||||||||||
Boulevard | Savannah, GA | 59,100 | Savannah, GA | 59,100 | ||||||||
Bowen | Cartersville, GA | 39,400 | Cartersville, GA | 39,400 | ||||||||
Intercession City | Intercession City, FL | 47,667 | (10) | Intercession City, FL | 47,667 | (11) | ||||||
Kraft | Port Wentworth, GA | 22,000 | Port Wentworth, GA | 22,000 | ||||||||
McDonough | Atlanta, GA | 78,800 | Atlanta, GA | 78,800 | ||||||||
McIntosh Units 1 through 8 | Effingham County, GA | 640,000 | Effingham County, GA | 640,000 | ||||||||
McManus | Brunswick, GA | 481,700 | Brunswick, GA | 481,700 | ||||||||
Mitchell | Albany, GA | 118,200 | Albany, GA | 118,200 | ||||||||
Robins | Warner Robins, GA | 158,400 | Warner Robins, GA | 158,400 | ||||||||
Wansley | Carrollton, GA | 26,322 | Carrollton, GA | 26,322 | ||||||||
Wilson | Augusta, GA | 354,100 | Augusta, GA | 354,100 | ||||||||
Georgia Power Total | 2,025,689 | 2,025,689 | ||||||||||
Lansing Smith Unit A | Panama City, FL | 39,400 | Panama City, FL | 39,400 | ||||||||
Pea Ridge Units 1-3 | Pea Ridge, FL | 15,000 | Pea Ridge, FL | 15,000 | ||||||||
Gulf Power Total | 54,400 | 54,400 | ||||||||||
Chevron Cogenerating Station | Pascagoula, MS | 147,292 | (11) | Pascagoula, MS | 147,292 | (12) | ||||||
Sweatt | Meridian, MS | 39,400 | Meridian, MS | 39,400 |
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Nameplate | Nameplate | |||||||||||
Generating Station | Location | Capacity (1) | Location | Capacity (1) | ||||||||
(Kilowatts) | (Kilowatts) | |||||||||||
Watson | Gulfport, MS | 39,360 | Gulfport, MS | 39,360 | ||||||||
Mississippi Power Total | 226,052 | 226,052 | ||||||||||
Dahlberg | Jackson County, GA | 756,000 | Jackson County, GA | 756,000 | ||||||||
DeSoto | Arcadia, FL | 343,760 | ||||||||||
Oleander | Cocoa, FL | 791,301 | Cocoa, FL | 791,301 | ||||||||
Rowan | Salisbury, NC | 455,250 | Salisbury, NC | 455,250 | ||||||||
West Georgia | Thomaston, GA | 668,800 | ||||||||||
Southern Power Total | 2,346,311 | 2,671,351 | ||||||||||
Gaston(SEGCO) | Wilsonville, AL | 19,680 | (7) | Wilsonville, AL | 19,680 | (8) | ||||||
Total Combustion Turbines | 5,392,132 | 5,717,172 | ||||||||||
COGENERATION | ||||||||||||
Washington County | Washington County, AL | 123,428 | Washington County, AL | 123,428 | ||||||||
GE Plastics Project | Burkeville, AL | 104,800 | Burkeville, AL | 104,800 | ||||||||
Theodore | Theodore, AL | 236,418 | Theodore, AL | 236,418 | ||||||||
Total Cogeneration | 464,646 | 464,646 | ||||||||||
COMBINED CYCLE | ||||||||||||
Barry | Mobile, AL | Mobile, AL | ||||||||||
Alabama Power Total | 1,070,424 | 1,070,424 | ||||||||||
McIntosh Units 10&11 | Effingham County, GA | Effingham County, GA | ||||||||||
Georgia Power Total | 1,318,920 | 1,318,920 | ||||||||||
Smith | Lynn Haven, FL | Lynn Haven, FL | ||||||||||
Gulf Power Total | 545,500 | 545,500 | ||||||||||
Daniel (Leased) | Pascagoula, MS | Pascagoula, MS | ||||||||||
Mississippi Power Total | 1,070,424 | 1,070,424 | ||||||||||
Franklin | Smiths, AL | 1,857,820 | Smiths, AL | 1,857,820 | ||||||||
Harris | Autaugaville, AL | 1,318,920 | Autaugaville, AL | 1,318,920 | ||||||||
Rowan | Salisbury, NC | 530,550 | Salisbury, NC | 530,550 | ||||||||
Stanton Unit A | Orlando, FL | 428,649 | (12) | Orlando, FL | 428,649 | (13) | ||||||
Wansley | Carrollton, GA | 1,073,000 | Carrollton, GA | 1,073,000 | ||||||||
Southern Power Total | 5,208,939 | 5,208,939 | ||||||||||
Total Combined Cycle | 9,214,207 | 9,214,207 | ||||||||||
HYDROELECTRIC FACILITIES | ||||||||||||
Bankhead | Holt, AL | 53,985 | Holt, AL | 53,985 | ||||||||
Bouldin | Wetumpka, AL | 225,000 | Wetumpka, AL | 225,000 | ||||||||
Harris | Wedowee, AL | 132,000 | Wedowee, AL | 132,000 | ||||||||
Henry | Ohatchee, AL | 72,900 | Ohatchee, AL | 72,900 | ||||||||
Holt | Holt, AL | 46,944 | Holt, AL | 46,944 | ||||||||
Jordan | Wetumpka, AL | 100,000 | Wetumpka, AL | 100,000 | ||||||||
Lay | Clanton, AL | 177,000 | Clanton, AL | 177,000 | ||||||||
Lewis Smith | Jasper, AL | 157,500 | Jasper, AL | 157,500 | ||||||||
Logan Martin | Vincent, AL | 135,000 | Vincent, AL | 135,000 | ||||||||
Martin | Dadeville, AL | 182,000 | Dadeville, AL | 182,000 | ||||||||
Mitchell | Verbena, AL | 170,000 | Verbena, AL | 170,000 | ||||||||
Thurlow | Tallassee, AL | 81,000 | Tallassee, AL | 81,000 | ||||||||
Weiss | Leesburg, AL | 87,750 | Leesburg, AL | 87,750 | ||||||||
Yates | Tallassee, AL | 47,000 | Tallassee, AL | 47,000 | ||||||||
Alabama Power Total | 1,668,079 | 1,668,079 | ||||||||||
Barnett Shoals (Leased) | Athens, GA | 2,800 | Athens, GA | 2,800 | ||||||||
Bartletts Ferry | Columbus, GA | 173,000 | Columbus, GA | 173,000 | ||||||||
Goat Rock | Columbus, GA | 38,600 | Columbus, GA | 38,600 | ||||||||
Lloyd Shoals | Jackson, GA | 14,400 | Jackson, GA | 14,400 | ||||||||
Morgan Falls | Atlanta, GA | 16,800 | Atlanta, GA | 16,800 | ||||||||
North Highlands | Columbus, GA | 29,600 | Columbus, GA | 29,600 | ||||||||
Oliver Dam | Columbus, GA | 60,000 | Columbus, GA | 60,000 | ||||||||
Rocky Mountain | Rome, GA | 215,256 | (13) | Rome, GA | 215,256 | (14) | ||||||
Sinclair Dam | Milledgeville, GA | 45,000 | Milledgeville, GA | 45,000 | ||||||||
Tallulah Falls | Clayton, GA | 72,000 | Clayton, GA | 72,000 | ||||||||
Terrora | Clayton, GA | 16,000 | Clayton, GA | 16,000 | ||||||||
Tugalo | Clayton, GA | 45,000 | Clayton, GA | 45,000 | ||||||||
Wallace Dam | Eatonton, GA | 321,300 | Eatonton, GA | 321,300 | ||||||||
Yonah | Toccoa, GA | 22,500 | Toccoa, GA | 22,500 | ||||||||
6 Other Plants | 18,080 | 18,080 | ||||||||||
Georgia Power Total | 1,090,336 | 1,090,336 | ||||||||||
Total Hydroelectric Facilities | 2,758,415 | 2,758,415 | ||||||||||
Total Generating Capacity | 42,607,217 | 42,932,257 | ||||||||||
Notes: | ||
(1) | See “Jointly-Owned Facilities” herein for additional information. | |
(2) | Owned by Alabama Power and Mississippi Power as tenants in common in the proportions of 60% and 40%, respectively. | |
(3) | Capacity shown is Alabama Power’s portion (91.84%) of total plant capacity. | |
(4) | McDonough Units 1 and 2 are scheduled to be retired in October 2011 and October 2010, respectively. | |
(5) | Capacity shown for Georgia Power is 8.4% of Units 1 and 2 and 75% of Unit 3. Capacity shown for Gulf Power is 25% of Unit 3. |
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Capacity shown is Georgia Power’s portion (53.5%) of total plant capacity. | ||
Represents 50% of the plant which is owned as tenants in common by Gulf Power and Mississippi Power. | ||
SEGCO is jointly-owned by Alabama Power and Georgia Power. See BUSINESS in Item 1 herein for additional information. | ||
Capacity shown is Georgia Power’s portion (50.1%) of total plant capacity. | ||
Capacity shown is Georgia Power’s portion (45.7%) of total plant capacity. | ||
Capacity shown represents 33 1/3% of total plant capacity. Georgia Power owns a 1/3 interest in the unit with 100% use of the unit from June through September. Progress Energy Florida operates the unit. | ||
Generation is dedicated to a single industrial customer. | ||
Capacity shown is Southern Power’s portion (65%) of total plant capacity. | ||
Capacity shown is Georgia Power’s portion (25.4%) of total plant capacity. OPC operates the plant. |
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Percentage Ownership | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Percentage Ownership | Progress | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Progress | Total | Alabama | Power | Georgia | MEAG | Energy | Southern | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Alabama | Power | Georgia | Energy | Southern | Capacity | Power | South | Power | OPC | Power | Dalton | Florida | Power | OUC | FMPA | KUA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capacity | Power | South | Power | OPC | MEAG | Dalton | Florida | Power | OUC | FMPA | KUA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Megawatts) | (Megawatts) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plant Miller Units 1 and 2 | 1,320 | 91.8 | % | 8.2 | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | 1,320 | 91.8 | % | 8.2 | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
Plant Hatch | 1,796 | — | — | 50.1 | 30.0 | 17.7 | 2.2 | — | — | — | — | — | 1,796 | — | — | 50.1 | 30.0 | 17.7 | 2.2 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plant Vogtle | 2,320 | — | — | 45.7 | 30.0 | 22.7 | 1.6 | — | — | — | — | — | 2,320 | — | — | 45.7 | 30.0 | 22.7 | 1.6 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plant Scherer Units 1 and 2 | 1,636 | — | — | 8.4 | 60.0 | 30.2 | 1.4 | — | — | — | — | — | 1,636 | — | — | 8.4 | 60.0 | 30.2 | 1.4 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plant Wansley | 1,779 | — | — | 53.5 | 30.0 | 15.1 | 1.4 | — | — | — | — | — | 1,779 | — | — | 53.5 | 30.0 | 15.1 | 1.4 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rocky Mountain | 848 | — | — | 25.4 | 74.6 | — | — | — | — | — | — | — | 848 | — | — | 25.4 | 74.6 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intercession City, FL | 143 | — | — | 33.3 | — | — | — | 66.7 | — | — | — | — | 143 | — | — | 33.3 | — | — | — | 66.7 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plant Stanton A | 660 | — | — | — | — | — | — | — | 65 | % | 28 | % | 3.5 | % | 3.5 | % | 660 | — | — | — | — | — | — | — | 65 | % | 28 | % | 3.5 | % | 3.5 | % |
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Item 5. | MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
High | Low | |||||||||||||||
2009 | ||||||||||||||||
First Quarter | $ | 37.62 | $ | 26.48 | ||||||||||||
Second Quarter | 32.05 | 27.19 | ||||||||||||||
Third Quarter | 32.67 | 30.27 | ||||||||||||||
Fourth Quarter | 34.47 | 30.89 | ||||||||||||||
High | Low | |||||||||||||||
2008 | ||||||||||||||||
First Quarter | $ | 40.60 | $ | 33.71 | $ | 40.60 | $ | 33.71 | ||||||||
Second Quarter | 37.81 | 34.28 | 37.81 | 34.28 | ||||||||||||
Third Quarter | 40.00 | 34.46 | 40.00 | 34.46 | ||||||||||||
Fourth Quarter | 38.18 | 29.82 | 38.18 | 29.82 | ||||||||||||
2007 | ||||||||||||||||
First Quarter | $ | 37.25 | $ | 34.85 | ||||||||||||
Second Quarter | 38.90 | 33.50 | ||||||||||||||
Third Quarter | 37.70 | 33.16 | ||||||||||||||
Fourth Quarter | 39.35 | 35.15 | ||||||||||||||
Registrant | Quarter | 2008 | 2007 | Quarter | 2009 | 2008 | ||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||
Southern Company | First | $ | 307,960 | $ | 290,292 | First | $ | 326,780 | $ | 307,960 | ||||||||||||
Second | 343,446 | 322,634 | ||||||||||||||||||||
Second | 322,634 | 303,699 | Third | 348,702 | 323,844 | |||||||||||||||||
Third | 323,844 | 304,775 | Fourth | 350,538 | 325,681 | |||||||||||||||||
Fourth | 325,681 | 306,039 | ||||||||||||||||||||
Alabama Power | First | 122,825 | 116,250 | First | 130,700 | 122,825 | ||||||||||||||||
Second | 122,825 | 116,250 | Second | 130,700 | 122,825 | |||||||||||||||||
Third | 122,825 | 116,250 | Third | 130,700 | 122,825 | |||||||||||||||||
Fourth | 122,825 | 116,250 | Fourth | 130,700 | 122,825 | |||||||||||||||||
Georgia Power | First | 180,300 | 172,475 | First | 184,725 | 180,300 | ||||||||||||||||
Second | 184,725 | 180,300 | ||||||||||||||||||||
Second | 180,300 | 172,475 | Third | 184,725 | 180,300 | |||||||||||||||||
Third | 180,300 | 172,475 | Fourth | 184,725 | 180,300 | |||||||||||||||||
Fourth | 180,300 | 172,475 | ||||||||||||||||||||
Gulf Power | First | 20,425 | 18,525 | First | 22,350 | 20,425 | ||||||||||||||||
Second | 20,425 | 18,525 | Second | 22,300 | 20,425 | |||||||||||||||||
Third | 20,425 | 18,525 | Third | 22,325 | 20,425 | |||||||||||||||||
Fourth | 20,425 | 18,525 | Fourth | 22,325 | 20,425 | |||||||||||||||||
Mississippi Power | First | 17,100 | 16,825 | First | 17,125 | 17,100 | ||||||||||||||||
Second | 17,100 | 16,825 | Second | 17,125 | 17,100 | |||||||||||||||||
Third | 17,100 | 16,825 | Third | 17,125 | 17,100 | |||||||||||||||||
Fourth | 17,100 | 16,825 | Fourth | 17,125 | 17,100 | |||||||||||||||||
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Registrant | Quarter | 2008 | 2007 | Quarter | 2009 | 2008 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Southern Power | First | $ | 23.63 | $ | 22.45 | First | $ | 26.525 | $ | 23.63 | ||||||||||||
Second | 23.63 | 22.45 | Second | 26.525 | 23.63 | |||||||||||||||||
Third | 23.63 | 22.45 | Third | 26.525 | 23.63 | |||||||||||||||||
Fourth | 23.63 | 22.45 | Fourth | 26.525 | 23.63 | |||||||||||||||||
Item 6. | SELECTED FINANCIAL DATA |
Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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Item 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
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Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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Item 9A. | CONTROLS AND PROCEDURES |
Item 9A(T). | CONTROLS AND PROCEDURES |
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(b) | Changes in internal controls. |
Item 9B. | OTHER INFORMATION |
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2008 Target | 2008 Actual | 2009 Target | 2009 Actual | |||||||||||
Key Performance Indicator | Performance | Performance | Performance | Performance | ||||||||||
Top quartile in | Top quartile in | |||||||||||||
Customer Satisfaction | customer surveys | Top quartile | customer surveys | Top quartile | ||||||||||
Peak Season EFOR — fossil/hydro | 2.75% or less | 1.68 | % | 2.75% or less | 1.44 | % | ||||||||
Peak Season EFOR — nuclear | 2.00% or less | 1.98 | % | 2.75% or less | 2.61 | % | ||||||||
Basic EPS | $ | 2.28 — $2.36 | $ | 2.26 | $2.30 — $2.45 | $ | 2.07 | |||||||
EPS, excluding leveraged lease charges | — | $ | 2.37 | |||||||||||
EPS, excluding the MC Asset Recovery litigation settlement | — | $ | 2.32 |
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Increase (Decrease) | ||||||||||||||||||||||||||||||||
Amount | from Prior Year | |||||||||||||||||||||||||||||||
Increase (Decrease) | ||||||||||||||||||||||||||||||||
Amount | from Prior Year | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Electric operating revenues | $ | 17,000 | $ | 1,860 | $ | 1,052 | $ | 810 | $ | 15,642 | $ | (1,358 | ) | $ | 1,860 | $ | 1,052 | |||||||||||||||
Fuel | 6,817 | 973 | 701 | 655 | 5,952 | (865 | ) | 973 | 701 | |||||||||||||||||||||||
Purchased power | 815 | 300 | (28 | ) | (188 | ) | 474 | (341 | ) | 300 | (28 | ) | ||||||||||||||||||||
Other operations and maintenance | 3,584 | 111 | 183 | 70 | 3,401 | (183 | ) | 111 | 183 | |||||||||||||||||||||||
Depreciation and amortization | 1,414 | 199 | 51 | 27 | 1,476 | 62 | 199 | 51 | ||||||||||||||||||||||||
Taxes other than income taxes | 794 | 56 | 23 | 39 | 816 | 22 | 56 | 23 | ||||||||||||||||||||||||
Total electric operating expenses | 13,424 | 1,639 | 930 | 603 | 12,119 | (1,305 | ) | 1,639 | 930 | |||||||||||||||||||||||
Operating income | 3,576 | 221 | 122 | 207 | 3,523 | (53 | ) | 221 | 122 | |||||||||||||||||||||||
Other income (expense), net | 145 | 24 | 68 | (9 | ) | 199 | 53 | 26 | 66 | |||||||||||||||||||||||
Interest expense and dividends | 837 | 25 | 61 | 75 | ||||||||||||||||||||||||||||
Interest expense, net of amounts capitalized | 834 | 61 | 10 | 46 | ||||||||||||||||||||||||||||
Income taxes | 1,037 | 87 | 1 | 50 | 988 | (49 | ) | 87 | 1 | |||||||||||||||||||||||
Net income | $ | 1,847 | $ | 133 | $ | 128 | $ | 73 | 1,900 | (12 | ) | 150 | 141 | |||||||||||||||||||
Dividends on preferred and preference stock of subsidiaries | 65 | — | 17 | 13 | ||||||||||||||||||||||||||||
Net income after dividends on preferred and preference stock of subsidiaries | $ | 1,835 | $ | (12 | ) | $ | 133 | $ | 128 | |||||||||||||||||||||||
Amount | ||||||||||||||||||||||||
Amount | 2009 | 2008 | 2007 | |||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Retail — prior year | $ | 12,639 | $ | 11,801 | $ | 11,165 | $ | 14,055 | $ | 12,639 | $ | 11,801 | ||||||||||||
Estimated change in — | ||||||||||||||||||||||||
Rates and pricing | 668 | 161 | 9 | 144 | 668 | 161 | ||||||||||||||||||
Sales growth | — | 60 | 115 | |||||||||||||||||||||
Sales growth (decline) | (208 | ) | — | 60 | ||||||||||||||||||||
Weather | (106 | ) | 54 | 35 | (21 | ) | (106 | ) | 54 | |||||||||||||||
Fuel and other cost recovery | 854 | 563 | 477 | (663 | ) | 854 | 563 | |||||||||||||||||
Retail — current year | 14,055 | 12,639 | 11,801 | 13,307 | 14,055 | 12,639 | ||||||||||||||||||
Wholesale revenues | 2,400 | 1,988 | 1,822 | 1,802 | 2,400 | 1,988 | ||||||||||||||||||
Other electric operating revenues | 545 | 513 | 465 | 533 | 545 | 513 | ||||||||||||||||||
Electric operating revenues | $ | 17,000 | $ | 15,140 | $ | 14,088 | $ | 15,642 | $ | 17,000 | $ | 15,140 | ||||||||||||
Percent change | 12.3 | % | 7.5 | % | 6.1 | % | (8.0 | %) | 12.3 | % | 7.5 | % |
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2009 | 2008 | 2007 | ||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Other power sales — | ||||||||||||||||||||||||
Capacity and other | $ | 538 | $ | 533 | $ | 499 | $ | 575 | $ | 538 | $ | 533 | ||||||||||||
Energy | 1,319 | 989 | 841 | 735 | 1,319 | 989 | ||||||||||||||||||
Total | $ | 1,857 | $ | 1,522 | $ | 1,340 | $ | 1,310 | $ | 1,857 | $ | 1,522 |
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2009 | 2008 | 2007 | ||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Unit power sales — | ||||||||||||||||||||||||
Capacity | $ | 223 | $ | 202 | $ | 208 | $ | 225 | $ | 223 | $ | 202 | ||||||||||||
Energy | 320 | 264 | 274 | 267 | 320 | 264 | ||||||||||||||||||
Total | $ | 543 | $ | 466 | $ | 482 | $ | 492 | $ | 543 | $ | 466 |
KWHs | Percent Change | |||||||||||||||
2008 | 2008 | 2007 | 2006 | |||||||||||||
(in billions) | ||||||||||||||||
Residential | 52.3 | (2.0 | )% | 1.8 | % | 2.5 | % | |||||||||
Commercial | 54.4 | (0.4 | ) | 3.2 | 2.2 | |||||||||||
Industrial | 52.7 | (3.7 | ) | (0.7 | ) | (0.2 | ) | |||||||||
Other | 0.9 | (2.9 | ) | 4.4 | (7.6 | ) | ||||||||||
Total retail | 160.3 | (2.1 | ) | 1.4 | 1.4 | |||||||||||
Wholesale | 39.3 | (3.4 | ) | 5.9 | 3.7 | |||||||||||
Total energy sales | 199.6 | (2.3 | ) | 2.3 | 1.9 | |||||||||||
KWHs | Percent Change | |||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||
Quarter Ended | Retail | Wholesale | Energy Sales | Retail | Wholesale | Energy Sales | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
March 2008 | 38,576 | 9,590 | 48,166 | 1.4 | % | (1.9 | )% | 0.7 | % | |||||||||||||||
June 2008 | 39,882 | 10,049 | 49,931 | (1.2 | ) | 1.0 | (0.7 | ) | ||||||||||||||||
September 2008 | 45,800 | 10,969 | 56,769 | (4.6 | ) | (2.2 | ) | (4.1 | ) | |||||||||||||||
December 2008 | 36,001 | 8,760 | 44,761 | (3.3 | ) | (10.6 | ) | (4.8 | ) |
KWHs | Percent Change | |||||||||||||||
2009 | 2009 | 2008 | 2007 | |||||||||||||
(in billions) | ||||||||||||||||
Residential | 51.7 | (1.1 | )% | (2.0 | )% | 1.8 | % | |||||||||
Commercial | 53.5 | (1.7 | ) | (0.4 | ) | 3.2 | ||||||||||
Industrial | 46.4 | (11.8 | ) | (3.7 | ) | (0.7 | ) | |||||||||
Other | 1.0 | 2.0 | (2.9 | ) | 4.4 | |||||||||||
Total retail | 152.6 | (4.8 | ) | (2.1 | ) | 1.4 | ||||||||||
Wholesale | 33.5 | (14.9 | ) | (3.4 | ) | 5.9 | ||||||||||
Total energy sales | 186.1 | (6.8 | ) | (2.3 | ) | 2.3 | ||||||||||
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2009 | 2008 | 2007 | ||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Total generation(billions of KWHs) | 198 | 206 | 201 | 187 | 198 | 206 | ||||||||||||||||||
Total purchased power(billions of KWHs) | 11 | 8 | 8 | 8 | 11 | 8 | ||||||||||||||||||
Sources of generation(percent) — | ||||||||||||||||||||||||
Coal | 68 | 70 | 70 | 57 | 68 | 70 | ||||||||||||||||||
Nuclear | 15 | 14 | 15 | 16 | 15 | 14 | ||||||||||||||||||
Gas | 16 | 15 | 13 | 23 | 16 | 15 | ||||||||||||||||||
Hydro | 1 | 1 | 2 | 4 | 1 | 1 | ||||||||||||||||||
Cost of fuel, generated(cents per net KWH) — | ||||||||||||||||||||||||
Coal | 3.27 | 2.60 | 2.40 | 3.70 | 3.27 | 2.61 | ||||||||||||||||||
Nuclear | 0.50 | 0.50 | 0.47 | 0.55 | 0.50 | 0.50 | ||||||||||||||||||
Gas | 7.58 | 6.64 | 6.63 | 4.58 | 7.58 | 6.64 | ||||||||||||||||||
Average cost of fuel, generated(cents per net KWH) | 3.52 | 2.89 | 2.63 | |||||||||||||||||||||
Average cost of fuel, generated(cents per net KWH)* | 3.38 | 3.52 | 2.89 | |||||||||||||||||||||
Average cost of purchased power(cents per net KWH) | 7.85 | 7.20 | 6.82 | 6.37 | 7.85 | 7.20 |
* | Fuel includes fuel purchased by the Company for tolling agreements where power is generated by the provider and is included in purchased power when determining the average cost of purchased power. |
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Increase (Decrease) | ||||||||||||||||||||||||||||||||
Amount | from Prior Year | |||||||||||||||||||||||||||||||
Increase (Decrease) | ||||||||||||||||||||||||||||||||
Amount | from Prior Year | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Operating revenues | $ | 127 | $ | (86 | ) | $ | (55 | ) | $ | (8 | ) | $ | 101 | $ | (26 | ) | $ | (86 | ) | $ | (55 | ) | ||||||||||
Other operations and maintenance | 165 | (44 | ) | (29 | ) | (59 | ) | 125 | (40 | ) | (44 | ) | (29 | ) | ||||||||||||||||||
MC Asset Recovery litigation settlement | 202 | 202 | — | — | ||||||||||||||||||||||||||||
Depreciation and amortization | 29 | (1 | ) | (6 | ) | (3 | ) | 27 | (2 | ) | (1 | ) | (6 | ) | ||||||||||||||||||
Taxes other than income taxes | 3 | — | — | (1 | ) | 2 | (1 | ) | — | — | ||||||||||||||||||||||
Total operating expenses | 197 | (45 | ) | (35 | ) | (63 | ) | 356 | 159 | (45 | ) | (35 | ) | |||||||||||||||||||
Operating income (loss) | (70 | ) | (41 | ) | (20 | ) | 55 | (255 | ) | (185 | ) | (41 | ) | (20 | ) | |||||||||||||||||
Equity in income (losses) of unconsolidated subsidiaries | 10 | 35 | 35 | 62 | (1 | ) | (11 | ) | 35 | 35 | ||||||||||||||||||||||
Leveraged lease income (losses) | (85 | ) | (125 | ) | (29 | ) | (5 | ) | 40 | 125 | (125 | ) | (29 | ) | ||||||||||||||||||
Other income (expense), net | 12 | (29 | ) | 73 | (19 | ) | 3 | (8 | ) | (31 | ) | 74 | ||||||||||||||||||||
Interest expense | 94 | (28 | ) | (27 | ) | 48 | 71 | (22 | ) | (30 | ) | (26 | ) | |||||||||||||||||||
Income taxes | (122 | ) | (7 | ) | 53 | 136 | (92 | ) | 30 | (7 | ) | 53 | ||||||||||||||||||||
Net income (loss) | $ | (105 | ) | $ | (125 | ) | $ | 33 | $ | (91 | ) | $ | (192 | ) | $ | (87 | ) | $ | (125 | ) | $ | 33 |
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Increase/(Decrease) in | ||||||
Increase/(Decrease) in | Projected Obligation for | |||||
Increase/(Decrease) in | Projected Obligation for | Other Postretirement | ||||
Total Benefit Expense | Pension Plan | Benefit Plans | ||||
Change in Assumption | for 2010 | at December 31, 2009 | at December 31, 2009 | |||
(in millions) | ||||||
25 basis point change in discount rate | $11/$(8) | $226/$(214) | $53/$(51) | |||
25 basis point change in salary assumption | $9/$(8) | $58/$(55) | N/M | |||
25 basis point change in long-term return on plan assets | $19/$(19) | N/M | N/M | |||
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2009 | 2008 | |||||||||||||||
Changes | Changes | |||||||||||||||
2008 | 2007 | |||||||||||||||
Changes | Changes | Fair Value | ||||||||||||||
Fair Value | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Contracts outstanding at the beginning of the period, assets (liabilities), net | $ | 4 | $ | (82 | ) | $ | (285 | ) | $ | 4 | ||||||
Contracts realized or settled | (150 | ) | 80 | 367 | (150 | ) | ||||||||||
Current period changes(a) | (139 | ) | 6 | (260 | ) | (139 | ) | |||||||||
Contracts outstanding at the end of the period, assets (liabilities), net | $ | (285 | ) | $ | 4 | $ | (178 | ) | $ | (285 | ) |
(a) | Current period changes also include the changes in fair value of new contracts entered into during the period, if any. |
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Asset (Liability) Derivatives | 2009 | 2008 | ||||||||||||||
2008 | 2007 | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Regulatory hedges | $ | (288 | ) | $ | — | $ | (175 | ) | $ | (288 | ) | |||||
Cash flow hedges | (1 | ) | 1 | (2 | ) | (1 | ) | |||||||||
Non-accounting hedges | 4 | 3 | ||||||||||||||
Not designated | (1 | ) | 4 | |||||||||||||
Total fair value | $ | (285 | ) | $ | 4 | $ | (178 | ) | $ | (285 | ) | |||||
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December 31, 2009 | ||||||||||||||||||||||||||||||||
December 31, 2008 | Fair Value Measurements | |||||||||||||||||||||||||||||||
Fair Value Measurements | Total | Maturity | ||||||||||||||||||||||||||||||
Total | Maturity | Fair Value | Year 1 | Years 2&3 | Years 4&5 | |||||||||||||||||||||||||||
Fair Value | Year 1 | Years 2&3 | Years 4&5 | |||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Level 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Level 2 | (285 | ) | (203 | ) | (77 | ) | (5 | ) | (178 | ) | (113 | ) | (65 | ) | — | |||||||||||||||||
Level 3 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Fair value of contracts outstanding at end of period | $ | (285 | ) | $ | (203 | ) | $ | (77 | ) | $ | (5 | ) | $ | (178 | ) | $ | (113 | ) | $ | (65 | ) | $ | — |
II-36
II-46
II-47II-37
2011- | 2013- | After | Uncertain | |||||||||||||||||||||||||||||||||||||||||||||
2010- | 2012- | After | Uncertain | 2010 | 2012 | 2014 | 2014 | Timing(d) | Total | |||||||||||||||||||||||||||||||||||||||
2009 | 2011 | 2013 | 2013 | Timing(d) | Total | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt(a) — | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | $ | 617 | $ | 1,972 | $ | 2,745 | $ | 12,119 | $ | — | $ | 17,453 | $ | 1,092 | $ | 2,880 | $ | 1,361 | $ | 13,836 | $ | — | $ | 19,169 | ||||||||||||||||||||||||
Interest | 858 | 1,616 | 1,424 | 11,102 | — | 15,000 | 894 | 1,732 | 1,455 | 11,905 | — | 15,986 | ||||||||||||||||||||||||||||||||||||
Preferred and preference stock dividends(b) | 65 | 130 | 130 | — | — | 325 | 65 | 130 | 130 | — | — | 325 | ||||||||||||||||||||||||||||||||||||
Other derivative obligations(c) — | ||||||||||||||||||||||||||||||||||||||||||||||||
Energy-related | 224 | 78 | 5 | — | — | 307 | 119 | 66 | — | — | — | 185 | ||||||||||||||||||||||||||||||||||||
Interest | 21 | — | — | — | — | 21 | ||||||||||||||||||||||||||||||||||||||||||
Operating leases | 143 | 212 | 81 | 146 | — | 582 | 144 | 192 | 99 | 124 | — | 559 | ||||||||||||||||||||||||||||||||||||
Capital leases | 21 | 26 | 11 | 40 | — | 98 | ||||||||||||||||||||||||||||||||||||||||||
Unrecognized tax benefits and interest(d) | Unrecognized tax benefits and interest(d) | 145 | — | — | — | 16 | 161 | 184 | — | — | — | 36 | 220 | |||||||||||||||||||||||||||||||||||
Purchase commitments(e) — | ||||||||||||||||||||||||||||||||||||||||||||||||
Capital(f) | 5,467 | 10,644 | — | — | — | 16,111 | 4,665 | 11,160 | — | — | — | 15,825 | ||||||||||||||||||||||||||||||||||||
Limestone(g) | 13 | 70 | 72 | 144 | — | 299 | 37 | 72 | 76 | 110 | — | 295 | ||||||||||||||||||||||||||||||||||||
Coal | 4,608 | 5,999 | 2,602 | 3,421 | — | 16,630 | 4,490 | 4,707 | 1,913 | 2,508 | — | 13,618 | ||||||||||||||||||||||||||||||||||||
Nuclear fuel | 187 | 301 | 275 | 43 | — | 806 | 271 | 323 | 231 | 297 | — | 1,122 | ||||||||||||||||||||||||||||||||||||
Natural gas(h) | 1,507 | 1,609 | 1,242 | 3,798 | — | 8,156 | 1,349 | 2,192 | 1,504 | 4,153 | — | 9,198 | ||||||||||||||||||||||||||||||||||||
Biomass fuel(i) | — | 17 | 35 | 128 | — | 180 | ||||||||||||||||||||||||||||||||||||||||||
Purchased power | 217 | 455 | 413 | 1,938 | — | 3,023 | 253 | 524 | 502 | 2,742 | — | 4,021 | ||||||||||||||||||||||||||||||||||||
Long-term service agreements(i) | 85 | 203 | 255 | 1,731 | — | 2,274 | ||||||||||||||||||||||||||||||||||||||||||
Long-term service agreements(j) | 103 | 251 | 263 | 1,738 | — | 2,355 | ||||||||||||||||||||||||||||||||||||||||||
Trusts — | ||||||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning | 3 | 7 | 7 | 53 | — | 70 | ||||||||||||||||||||||||||||||||||||||||||
Postretirement benefits(j) | 56 | 116 | — | — | — | 172 | ||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning(k) | 3 | 7 | 7 | 53 | — | 70 | ||||||||||||||||||||||||||||||||||||||||||
Postretirement benefits(l) | 43 | 76 | — | — | — | 119 | ||||||||||||||||||||||||||||||||||||||||||
Total | $ | 14,216 | $ | 23,412 | $ | 9,251 | $ | 34,495 | $ | 16 | $ | 81,390 | $ | 13,733 | $ | 24,355 | $ | 7,587 | $ | 37,634 | $ | 36 | $ | 83,345 |
(a) | All amounts are reflected based on final maturity dates. Southern Company and its subsidiaries plan to continue to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of January 1, | |
(b) | Preferred and preference stock do not mature; therefore, amounts are provided for the next five years only. | |
(c) | For additional information, see Notes 1 and | |
(d) | The timing related to the | |
(e) | Southern Company generally does not enter into non-cancelable commitments for other operations and maintenance expenditures. Total other operations and maintenance expenses for 2009, 2008, and 2007 | |
(f) | Southern Company forecasts capital expenditures over a three-year period. Amounts represent current estimates of total expenditures excluding those amounts related to contractual purchase commitments for nuclear fuel. At December 31, | |
(g) | As part of Southern Company’s program to reduce sulfur dioxide emissions from its coal plants, the traditional operating companies have | |
(h) | Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected have been estimated based on the New York Mercantile Exchange future prices at December 31, | |
(i) | Biomass fuel commitments are based on minimum committed tonnage of wood waste purchases. | |
(j) | Long-term service agreements include price escalation based on inflation indices. | |
Projections of nuclear decommissioning trust contributions are based on the 2007 Retail Rate Plan and are subject to change in Georgia Power’s 2010 retail rate case. | ||
(l) | Southern Company forecasts postretirement trust contributions over a three-year period. Southern Company expects that the earliest that cash may have to be contributed to the pension trust fund is |
II-48II-38
• | the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water quality and emissions of sulfur, nitrogen, mercury, carbon, soot, | |
• | current and future litigation, regulatory investigations, proceedings, or inquiries, including the pending EPA civil actions against certain Southern Company subsidiaries, FERC matters, IRS audits, and Mirant matters; | |
• | the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company’s subsidiaries operate; | |
• | variations in demand for electricity, including those relating to weather, the general economy and recovery from the recent recession, population and business growth (and declines), and the effects of energy conservation measures; | |
• | available sources and costs of fuels; | |
• | effects of inflation; | |
• | ability to control | |
• | investment performance of Southern Company’s employee benefit | |
• | advances in technology; | |
• | state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and | |
• | regulatory approvals and actions related to the potential Plant Vogtle expansion, including Georgia PSC and NRC | |
• | the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities; | |
• | internal restructuring or other restructuring options that may be pursued; | |
• | potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries; | |
• | the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required; | |
• | the ability to obtain new short- and long-term contracts with | |
• | the direct or indirect effect on Southern Company’s business resulting from terrorist incidents and the threat of terrorist incidents; | |
• | interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern Company’s and its subsidiaries’ credit ratings; | |
• | the ability of Southern Company and its subsidiaries to obtain additional generating capacity at competitive prices; | |
• | catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as | |
• | the direct or indirect effects on Southern Company’s business resulting from incidents | |
• | the effect of accounting pronouncements issued periodically by standard setting bodies; and | |
• | other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Company from time to time with the SEC. |
II-49II-39
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||
Retail revenues | $ | 14,055 | $ | 12,639 | $ | 11,801 | $ | 13,307 | $ | 14,055 | $ | 12,639 | ||||||||||||
Wholesale revenues | 2,400 | 1,988 | 1,822 | 1,802 | 2,400 | 1,988 | ||||||||||||||||||
Other electric revenues | 545 | 513 | 465 | 533 | 545 | 513 | ||||||||||||||||||
Other revenues | 127 | 213 | 268 | 101 | 127 | 213 | ||||||||||||||||||
Total operating revenues | 17,127 | 15,353 | 14,356 | 15,743 | 17,127 | 15,353 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Fuel | 6,818 | 5,856 | 5,152 | 5,952 | 6,818 | 5,856 | ||||||||||||||||||
Purchased power | 815 | 515 | 543 | 474 | 815 | 515 | ||||||||||||||||||
Other operations and maintenance | 3,748 | 3,670 | 3,519 | 3,526 | 3,748 | 3,670 | ||||||||||||||||||
MC Asset Recovery litigation settlement | 202 | — | — | |||||||||||||||||||||
Depreciation and amortization | 1,443 | 1,245 | 1,200 | 1,503 | 1,443 | 1,245 | ||||||||||||||||||
Taxes other than income taxes | 797 | 741 | 718 | 818 | 797 | 741 | ||||||||||||||||||
Total operating expenses | 13,621 | 12,027 | 11,132 | 12,475 | 13,621 | 12,027 | ||||||||||||||||||
Operating Income | 3,506 | 3,326 | 3,224 | 3,268 | 3,506 | 3,326 | ||||||||||||||||||
Other Income and (Expense): | ||||||||||||||||||||||||
Allowance for equity funds used during construction | 152 | 106 | 50 | 200 | 152 | 106 | ||||||||||||||||||
Interest income | 33 | 45 | 41 | 23 | 33 | 45 | ||||||||||||||||||
Equity in income (losses) of unconsolidated subsidiaries | 11 | (24 | ) | (57 | ) | |||||||||||||||||||
Leveraged lease (losses) income | (85 | ) | 40 | 69 | ||||||||||||||||||||
Impairment loss on equity method investments | — | — | (16 | ) | ||||||||||||||||||||
Equity in (losses) income of unconsolidated subsidiaries | (1 | ) | 11 | (24 | ) | |||||||||||||||||||
Leveraged lease income (losses) | 31 | (85 | ) | 40 | ||||||||||||||||||||
Gain on disposition of lease termination | 26 | — | — | |||||||||||||||||||||
Loss on extinguishment of debt | (17 | ) | — | — | ||||||||||||||||||||
Interest expense, net of amounts capitalized | (866 | ) | (886 | ) | (866 | ) | (905 | ) | (866 | ) | (886 | ) | ||||||||||||
Preferred and preference dividends of subsidiaries | (65 | ) | (48 | ) | (34 | ) | ||||||||||||||||||
Other income (expense), net | (29 | ) | 10 | (58 | ) | (21 | ) | (29 | ) | 10 | ||||||||||||||
Total other income and (expense) | (849 | ) | (757 | ) | (871 | ) | (664 | ) | (784 | ) | (709 | ) | ||||||||||||
Earnings Before Income Taxes | 2,657 | 2,569 | 2,353 | 2,604 | 2,722 | 2,617 | ||||||||||||||||||
Income taxes | 915 | 835 | 780 | 896 | 915 | 835 | ||||||||||||||||||
Consolidated Net Income | $ | 1,742 | $ | 1,734 | $ | 1,573 | 1,708 | 1,807 | 1,782 | |||||||||||||||
Dividends on Preferred and Preference Stock of Subsidiaries | 65 | 65 | 48 | |||||||||||||||||||||
Consolidated Net Income After Dividends on Preferred and Preference Stock of Subsidiaries | $ | 1,643 | $ | 1,742 | $ | 1,734 | ||||||||||||||||||
Common Stock Data: | ||||||||||||||||||||||||
Earnings per share— | ||||||||||||||||||||||||
Basic | $ | 2.26 | $ | 2.29 | $ | 2.12 | ||||||||||||||||||
Diluted | 2.25 | 2.28 | 2.10 | |||||||||||||||||||||
Earnings per share (EPS)— | ||||||||||||||||||||||||
Basic EPS | $ | 2.07 | $ | 2.26 | $ | 2.29 | ||||||||||||||||||
Diluted EPS | 2.06 | 2.25 | 2.28 | |||||||||||||||||||||
Average number of shares of common stock outstanding — (in millions) | ||||||||||||||||||||||||
Basic | 771 | 756 | 743 | 795 | 771 | 756 | ||||||||||||||||||
Diluted | 775 | 761 | 748 | 796 | 775 | 761 | ||||||||||||||||||
Cash dividends paid per share of common stock | $ | 1.6625 | $ | 1.595 | $ | 1.535 | $ | 1.7325 | $ | 1.6625 | $ | 1.595 |
II-50II-40
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Operating Activities: | ||||||||||||||||||||||||
Consolidated net income | $ | 1,742 | $ | 1,734 | $ | 1,573 | $ | 1,708 | $ | 1,807 | $ | 1,782 | ||||||||||||
Adjustments to reconcile consolidated net income to net cash provided from operating activities — | ||||||||||||||||||||||||
Depreciation and amortization | 1,704 | 1,486 | 1,421 | |||||||||||||||||||||
Deferred income taxes and investment tax credits | 215 | 7 | 202 | |||||||||||||||||||||
Depreciation and amortization, total | 1,788 | 1,704 | 1,486 | |||||||||||||||||||||
Deferred income taxes | 25 | 215 | 7 | |||||||||||||||||||||
Deferred revenues | 120 | (2 | ) | (1 | ) | (54 | ) | 120 | (2 | ) | ||||||||||||||
Allowance for equity funds used during construction | (152 | ) | (106 | ) | (50 | ) | (200 | ) | (152 | ) | (106 | ) | ||||||||||||
Equity in (income) losses of unconsolidated subsidiaries | (11 | ) | 24 | 57 | 1 | (11 | ) | 24 | ||||||||||||||||
Leveraged lease losses (income) | 85 | (40 | ) | (69 | ) | |||||||||||||||||||
Leveraged lease (income) losses | (31 | ) | 85 | (40 | ) | |||||||||||||||||||
Gain on disposition of lease termination | (26 | ) | — | — | ||||||||||||||||||||
Loss on extinguishment of debt | 17 | — | — | |||||||||||||||||||||
Pension, postretirement, and other employee benefits | 21 | 39 | 46 | (3 | ) | 21 | 39 | |||||||||||||||||
Stock based compensation expense | 20 | 28 | 28 | 23 | 20 | 28 | ||||||||||||||||||
Derivative fair value adjustments | (1 | ) | (30 | ) | 32 | |||||||||||||||||||
Hedge settlements | 15 | 10 | 13 | (19 | ) | 15 | 10 | |||||||||||||||||
Hurricane Katrina grant proceeds-property reserve | — | 60 | — | |||||||||||||||||||||
Other, net | (97 | ) | 60 | 51 | 79 | (97 | ) | 80 | ||||||||||||||||
Changes in certain current assets and liabilities — | ||||||||||||||||||||||||
Receivables | (176 | ) | 165 | (69 | ) | |||||||||||||||||||
Fossil fuel stock | (303 | ) | (39 | ) | (246 | ) | ||||||||||||||||||
Materials and supplies | (23 | ) | (71 | ) | 7 | |||||||||||||||||||
Other current assets | (36 | ) | — | 73 | ||||||||||||||||||||
Accounts payable | (74 | ) | 105 | (173 | ) | |||||||||||||||||||
Hurricane Katrina grant proceeds | — | 14 | 120 | |||||||||||||||||||||
Accrued taxes | 293 | (19 | ) | (103 | ) | |||||||||||||||||||
Accrued compensation | 36 | (40 | ) | (24 | ) | |||||||||||||||||||
Other current liabilities | 20 | 10 | (68 | ) | ||||||||||||||||||||
-Receivables | 585 | (176 | ) | 165 | ||||||||||||||||||||
-Fossil fuel stock | (432 | ) | (303 | ) | (39 | ) | ||||||||||||||||||
-Materials and supplies | (39 | ) | (23 | ) | (71 | ) | ||||||||||||||||||
-Other current assets | (47 | ) | (36 | ) | — | |||||||||||||||||||
-Accounts payable | (125 | ) | (74 | ) | 105 | |||||||||||||||||||
-Accrued taxes | (95 | ) | 293 | (19 | ) | |||||||||||||||||||
-Accrued compensation | (226 | ) | 36 | (40 | ) | |||||||||||||||||||
-Other current liabilities | 334 | 20 | 25 | |||||||||||||||||||||
Net cash provided from operating activities | 3,398 | 3,395 | 2,820 | 3,263 | 3,464 | 3,434 | ||||||||||||||||||
Investing Activities: | ||||||||||||||||||||||||
Property additions | (3,961 | ) | (3,545 | ) | (2,994 | ) | (4,670 | ) | (3,961 | ) | (3,546 | ) | ||||||||||||
Investment in restricted cash from pollution control bonds | (96 | ) | (157 | ) | — | |||||||||||||||||||
Distribution of restricted cash from pollution control bonds | 69 | 78 | — | |||||||||||||||||||||
Investment in restricted cash from pollution control revenue bonds | (55 | ) | (96 | ) | (157 | ) | ||||||||||||||||||
Distribution of restricted cash from pollution control revenue bonds | 119 | 69 | 78 | |||||||||||||||||||||
Nuclear decommissioning trust fund purchases | (720 | ) | (783 | ) | (751 | ) | (1,234 | ) | (720 | ) | (783 | ) | ||||||||||||
Nuclear decommissioning trust fund sales | 712 | 775 | 743 | 1,228 | 712 | 775 | ||||||||||||||||||
Proceeds from property sales | 34 | 33 | 150 | 340 | 34 | 33 | ||||||||||||||||||
Hurricane Katrina capital grant proceeds | 7 | 35 | 153 | |||||||||||||||||||||
Investment in unconsolidated subsidiaries | (1 | ) | (37 | ) | (64 | ) | ||||||||||||||||||
Cost of removal net of salvage | (123 | ) | (108 | ) | (90 | ) | ||||||||||||||||||
Other | (47 | ) | — | 19 | ||||||||||||||||||||
Cost of removal, net of salvage | (119 | ) | (123 | ) | (108 | ) | ||||||||||||||||||
Change in construction payables | 215 | 83 | 38 | |||||||||||||||||||||
Other investing activities | (143 | ) | (124 | ) | (39 | ) | ||||||||||||||||||
Net cash used for investing activities | (4,126 | ) | (3,709 | ) | (2,834 | ) | (4,319 | ) | (4,126 | ) | (3,709 | ) | ||||||||||||
Financing Activities: | ||||||||||||||||||||||||
Increase (decrease) in notes payable, net | (314 | ) | (669 | ) | 683 | |||||||||||||||||||
Decrease in notes payable, net | (306 | ) | (314 | ) | (669 | ) | ||||||||||||||||||
Proceeds — | ||||||||||||||||||||||||
Long-term debt | 3,686 | 3,826 | 1,564 | |||||||||||||||||||||
Long-term debt issuances | 3,042 | 3,687 | 3,826 | |||||||||||||||||||||
Preferred and preference stock | — | 470 | 150 | — | — | 470 | ||||||||||||||||||
Common stock | 474 | 538 | 137 | |||||||||||||||||||||
Common stock issuances | 1,286 | 474 | 538 | |||||||||||||||||||||
Redemptions — | ||||||||||||||||||||||||
Long-term debt | (1,469 | ) | (2,566 | ) | (1,366 | ) | (1,234 | ) | (1,469 | ) | (2,565 | ) | ||||||||||||
Preferred and preference stock | (125 | ) | — | (15 | ) | |||||||||||||||||||
Redeemable preferred stock | — | (125 | ) | — | ||||||||||||||||||||
Payment of common stock dividends | (1,280 | ) | (1,205 | ) | (1,140 | ) | (1,369 | ) | (1,280 | ) | (1,205 | ) | ||||||||||||
Other | (28 | ) | (46 | ) | (34 | ) | ||||||||||||||||||
Payment of dividends on preferred and preference stock of subsidiaries | (65 | ) | (66 | ) | (40 | ) | ||||||||||||||||||
Other financing activities | (25 | ) | (29 | ) | (46 | ) | ||||||||||||||||||
Net cash provided from (used for) financing activities | 944 | 348 | (21 | ) | ||||||||||||||||||||
Net cash provided from financing activities | 1,329 | 878 | 309 | |||||||||||||||||||||
Net Change in Cash and Cash Equivalents | 216 | 34 | (35 | ) | 273 | 216 | 34 | |||||||||||||||||
Cash and Cash Equivalents at Beginning of Year | 201 | 167 | 202 | 417 | 201 | 167 | ||||||||||||||||||
Cash and Cash Equivalents at End of Year | $ | 417 | $ | 201 | $ | 167 | $ | 690 | $ | 417 | $ | 201 | ||||||||||||
II-51II-41
Assets | 2008 | 2007 | 2009 | 2008 | ||||||||||||
(in millions) | (in millions) | |||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 417 | $ | 201 | $ | 690 | $ | 417 | ||||||||
Restricted cash | 103 | 68 | ||||||||||||||
Restricted cash and cash equivalents | 43 | 103 | ||||||||||||||
Receivables — | ||||||||||||||||
Customer accounts receivable | 1,054 | 1,000 | 953 | 1,054 | ||||||||||||
Unbilled revenues | 320 | 294 | 394 | 320 | ||||||||||||
Under recovered regulatory clause revenues | 646 | 716 | 333 | 646 | ||||||||||||
Other accounts and notes receivable | 301 | 348 | 375 | 301 | ||||||||||||
Accumulated provision for uncollectible accounts | (26 | ) | (22 | ) | (25 | ) | (26 | ) | ||||||||
Fossil fuel stock, at average cost | 1,018 | 710 | 1,447 | 1,018 | ||||||||||||
Materials and supplies, at average cost | 757 | 725 | 794 | 757 | ||||||||||||
Vacation pay | 140 | 135 | 145 | 140 | ||||||||||||
Prepaid expenses | 302 | 146 | 508 | 302 | ||||||||||||
Other | 326 | 411 | ||||||||||||||
Other regulatory assets, current | 167 | 275 | ||||||||||||||
Other current assets | 49 | 51 | ||||||||||||||
Total current assets | 5,358 | 4,732 | 5,873 | 5,358 | ||||||||||||
Property, Plant, and Equipment: | ||||||||||||||||
In service | 50,618 | 47,176 | 53,588 | 50,618 | ||||||||||||
Less accumulated depreciation | 18,286 | 17,413 | 19,121 | 18,286 | ||||||||||||
32,332 | 29,763 | |||||||||||||||
Plant in service, net of depreciation | 34,467 | 32,332 | ||||||||||||||
Nuclear fuel, at amortized cost | 510 | 336 | 593 | 510 | ||||||||||||
Construction work in progress | 3,036 | 3,228 | 4,170 | 3,036 | ||||||||||||
Total property, plant, and equipment | 35,878 | 33,327 | 39,230 | 35,878 | ||||||||||||
Other Property and Investments: | ||||||||||||||||
Nuclear decommissioning trusts, at fair value | 864 | 1,132 | 1,070 | 864 | ||||||||||||
Leveraged leases | 897 | 984 | 610 | 897 | ||||||||||||
Other | 227 | 238 | ||||||||||||||
Miscellaneous property and investments | 283 | 227 | ||||||||||||||
Total other property and investments | 1,988 | 2,354 | 1,963 | 1,988 | ||||||||||||
Deferred Charges and Other Assets: | ||||||||||||||||
Deferred charges related to income taxes | 973 | 910 | 1,047 | 973 | ||||||||||||
Prepaid pension costs | — | 2,369 | ||||||||||||||
Unamortized debt issuance expense | 208 | 191 | 208 | 208 | ||||||||||||
Unamortized loss on reacquired debt | 271 | 289 | 255 | 271 | ||||||||||||
Deferred under recovered regulatory clause revenues | 606 | 389 | 373 | 606 | ||||||||||||
Other regulatory assets | 2,637 | 768 | ||||||||||||||
Other | 428 | 460 | ||||||||||||||
Other regulatory assets, deferred | 2,702 | 2,636 | ||||||||||||||
Other deferred charges and assets | 395 | 429 | ||||||||||||||
Total deferred charges and other assets | 5,123 | 5,376 | 4,980 | 5,123 | ||||||||||||
Total Assets | $ | 48,347 | $ | 45,789 | $ | 52,046 | $ | 48,347 |
II-52II-42
Liabilities and Stockholders’ Equity | 2008 | 2007 | 2009 | 2008 | ||||||||||||
(in millions) | (in millions) | |||||||||||||||
Current Liabilities: | ||||||||||||||||
Securities due within one year | $ | 617 | $ | 1,178 | $ | 1,113 | $ | 617 | ||||||||
Notes payable | 953 | 1,272 | 639 | 953 | ||||||||||||
Accounts payable | 1,250 | 1,214 | 1,329 | 1,250 | ||||||||||||
Customer deposits | 302 | 274 | 331 | 302 | ||||||||||||
Accrued taxes — | ||||||||||||||||
Income taxes | 197 | 52 | ||||||||||||||
Accrued income taxes | 13 | 197 | ||||||||||||||
Unrecognized tax benefits | 131 | 165 | 166 | 131 | ||||||||||||
Other | 396 | 330 | ||||||||||||||
Other accrued taxes | 398 | 396 | ||||||||||||||
Accrued interest | 196 | 218 | 218 | 196 | ||||||||||||
Accrued vacation pay | 179 | 171 | 184 | 179 | ||||||||||||
Accrued compensation | 447 | 408 | 248 | 447 | ||||||||||||
Liabilities from risk management activities | 261 | 63 | 125 | 261 | ||||||||||||
Other | 297 | 286 | ||||||||||||||
Other regulatory liabilities, current | 528 | 78 | ||||||||||||||
Other current liabilities | 292 | 219 | ||||||||||||||
Total current liabilities | 5,226 | 5,631 | 5,584 | 5,226 | ||||||||||||
Long-term Debt(See accompanying statements) | 16,816 | 14,143 | ||||||||||||||
Long-Term Debt(See accompanying statements) | 18,131 | 16,816 | ||||||||||||||
Deferred Credits and Other Liabilities: | ||||||||||||||||
Accumulated deferred income taxes | 6,080 | 5,839 | 6,455 | 6,080 | ||||||||||||
Deferred credits related to income taxes | 259 | 272 | 248 | 259 | ||||||||||||
Accumulated deferred investment tax credits | 455 | 479 | 448 | 455 | ||||||||||||
Employee benefit obligations | 2,057 | 1,492 | 2,304 | 2,057 | ||||||||||||
Asset retirement obligations | 1,183 | 1,200 | 1,201 | 1,183 | ||||||||||||
Other cost of removal obligations | 1,321 | 1,308 | 1,091 | 1,321 | ||||||||||||
Other regulatory liabilities | 262 | 1,613 | ||||||||||||||
Other | 330 | 347 | ||||||||||||||
Other regulatory liabilities, deferred | 278 | 262 | ||||||||||||||
Other deferred credits and liabilities | 346 | 330 | ||||||||||||||
Total deferred credits and other liabilities | 11,947 | 12,550 | 12,371 | 11,947 | ||||||||||||
Total Liabilities | 33,989 | 32,324 | 36,086 | 33,989 | ||||||||||||
Preferred and Preference Stock of Subsidiaries(See accompanying statements) | 1,082 | 1,080 | ||||||||||||||
Redeemable Preferred Stock of Subsidiaries(See accompanying statements) | 375 | 375 | ||||||||||||||
Common Stockholders’ Equity(See accompanying statements) | 13,276 | 12,385 | ||||||||||||||
Total Stockholders’ Equity(See accompanying statements) | 15,585 | 13,983 | ||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 48,347 | $ | 45,789 | $ | 52,046 | $ | 48,347 | ||||||||
Commitments and Contingent Matters(See notes) |
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2008 | 2007 | 2008 | 2007 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||||||
(in millions) | (percent of total) | (in millions) | (percent of total) | |||||||||||||||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||||||||||
Long-term debt payable to affiliated trusts — | ||||||||||||||||||||||||||||||||||||
Maturity | Interest Rates | Interest Rates | ||||||||||||||||||||||||||||||||||
2042 through 2044 | 5.50% to 5.88% | $ | 412 | $ | 412 | |||||||||||||||||||||||||||||||
2044 | 5.88% | $ | 206 | $ | 206 | |||||||||||||||||||||||||||||||
Variable rate (3.35% at 1/1/10) due 2042 | 206 | 206 | ||||||||||||||||||||||||||||||||||
Total long-term debt payable to affiliated trusts | 412 | 412 | ||||||||||||||||||||||||||||||||||
Long-term senior notes and debt — | ||||||||||||||||||||||||||||||||||||
Maturity | Interest Rates | Interest Rates | ||||||||||||||||||||||||||||||||||
2008 | 2.54% to 7.00% | — | 459 | |||||||||||||||||||||||||||||||||
2009 | 4.10% to 7.00% | 128 | 127 | 4.10% to 7.00% | — | 128 | ||||||||||||||||||||||||||||||
2010 | 4.70% | 102 | 102 | 4.70% | 102 | 102 | ||||||||||||||||||||||||||||||
2011 | 4.00% to 5.57% | 303 | 302 | 4.00% to 5.57% | 304 | 303 | ||||||||||||||||||||||||||||||
2012 | 4.85% to 6.25% | 1,778 | 1,478 | 4.85% to 6.25% | 1,778 | 1,778 | ||||||||||||||||||||||||||||||
2013 | 4.35% to 6.00% | 936 | 236 | 4.35% to 6.00% | 936 | 936 | ||||||||||||||||||||||||||||||
2014 through 2048 | 4.88% to 8.20% | 8,437 | 7,824 | |||||||||||||||||||||||||||||||||
Adjustable rates (at 1/1/09): | ||||||||||||||||||||||||||||||||||||
2008 | 4.94% to 5.00% | — | 550 | |||||||||||||||||||||||||||||||||
2014 | 4.15% to 4.90% | 425 | 75 | |||||||||||||||||||||||||||||||||
2015 through 2048 | 4.25% to 8.20% | 9,847 | 8,362 | |||||||||||||||||||||||||||||||||
Adjustable rates (at 1/1/10): | ||||||||||||||||||||||||||||||||||||
2009 | 2.3288% to 2.36% | 440 | 440 | 2.3288% to 2.36% | — | 440 | ||||||||||||||||||||||||||||||
2010 | 2.42% to 6.10% | 1,034 | 202 | 0.35% to 0.97% | 990 | 1,034 | ||||||||||||||||||||||||||||||
2011 | 1.645% to 2.35% | 490 | — | 0.68% to 2.95% | 790 | 490 | ||||||||||||||||||||||||||||||
Total long-term senior notes and debt | Total long-term senior notes and debt | 13,648 | 11,720 | 15,172 | 13,648 | |||||||||||||||||||||||||||||||
Other long-term debt — | ||||||||||||||||||||||||||||||||||||
Pollution control revenue bonds — | ||||||||||||||||||||||||||||||||||||
Maturity | Interest Rates | Interest Rates | ||||||||||||||||||||||||||||||||||
2016 through 2048 | 1.95% to 6.00% | 2,030 | 812 | 1.40% to 6.00% | 1,973 | 2,030 | ||||||||||||||||||||||||||||||
Variable rates (at 1/1/09): | ||||||||||||||||||||||||||||||||||||
2011 through 2041 | 0.80% to 3.00% | 1,257 | 2,170 | |||||||||||||||||||||||||||||||||
Variable rates (at 1/1/10): | ||||||||||||||||||||||||||||||||||||
2011 through 2049 | 0.18% to 0.44% | 1,612 | 1,257 | |||||||||||||||||||||||||||||||||
Total other long-term debt | 3,287 | 2,982 | 3,585 | 3,287 | ||||||||||||||||||||||||||||||||
Capitalized lease obligations | 106 | 101 | 98 | 106 | ||||||||||||||||||||||||||||||||
Unamortized debt premium (discount), net | (20 | ) | (19 | ) | ||||||||||||||||||||||||||||||||
Unamortized debt (discount), net | (23 | ) | (20 | ) | ||||||||||||||||||||||||||||||||
Total long-term debt (annual interest requirement — $858 million) | 17,433 | 15,196 | ||||||||||||||||||||||||||||||||||
Total long-term debt (annual interest requirement — $894 million) | 19,244 | 17,433 | ||||||||||||||||||||||||||||||||||
Less amount due within one year | 617 | 1,053 | 1,113 | 617 | ||||||||||||||||||||||||||||||||
Long-term debt excluding amount due within one year | Long-term debt excluding amount due within one year | 16,816 | 14,143 | 53.9 | % | 51.2 | % | 18,131 | 16,816 | 53.2 | % | 53.9 | % |
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2008 | 2007 | 2008 | 2007 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(in millions) | (percent of total) | (in millions) | (percent of total) | |||||||||||||||||||||||||||||
Preferred and Preference Stock of Subsidiaries: | ||||||||||||||||||||||||||||||||
Redeemable Preferred Stock of Subsidiaries: | ||||||||||||||||||||||||||||||||
Cumulative preferred stock | ||||||||||||||||||||||||||||||||
$100 par or stated value — 4.20% to 5.44% | ||||||||||||||||||||||||||||||||
Authorized — 20 million shares | ||||||||||||||||||||||||||||||||
Outstanding — 1 million shares | 81 | 81 | 81 | 81 | ||||||||||||||||||||||||||||
$1 par value — 4.95% to 5.83% | ||||||||||||||||||||||||||||||||
Authorized — 28 million shares | ||||||||||||||||||||||||||||||||
Outstanding — 12 million shares: $25 stated value | 294 | 294 | 294 | 294 | ||||||||||||||||||||||||||||
Outstanding — 2008: 0 shares | — | 123 | ||||||||||||||||||||||||||||||
Outstanding — 2007: 1,250 shares: $100,000 stated capital | ||||||||||||||||||||||||||||||||
Total redeemable preferred stock of subsidiaries (annual dividend requirement — $20 million) | 375 | 375 | 1.1 | 1.2 | ||||||||||||||||||||||||||||
Common Stockholders’ Equity: | ||||||||||||||||||||||||||||||||
Common stock, par value $5 per share — | 4,101 | 3,888 | ||||||||||||||||||||||||||||||
Authorized — 1 billion shares | ||||||||||||||||||||||||||||||||
Issued — 2009: 820 million shares | ||||||||||||||||||||||||||||||||
— 2008: 778 million shares | ||||||||||||||||||||||||||||||||
Treasury — 2009: 0.5 million shares | ||||||||||||||||||||||||||||||||
— 2008: 0.4 million shares | ||||||||||||||||||||||||||||||||
Paid-in capital | 2,995 | 1,893 | ||||||||||||||||||||||||||||||
Treasury, at cost | (15 | ) | (12 | ) | ||||||||||||||||||||||||||||
Retained earnings | 7,885 | 7,612 | ||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) | (88 | ) | (105 | ) | ||||||||||||||||||||||||||||
Total common stockholders’ equity | 14,878 | 13,276 | 43.6 | 42.6 | ||||||||||||||||||||||||||||
Preferred and Preference Stock of Subsidiaries: | ||||||||||||||||||||||||||||||||
Non-cumulative preferred stock | ||||||||||||||||||||||||||||||||
$25 par value — 6.00% to 6.13% | ||||||||||||||||||||||||||||||||
Authorized — 60 million shares | ||||||||||||||||||||||||||||||||
Outstanding — 2 million shares | 45 | 45 | 45 | 45 | ||||||||||||||||||||||||||||
Preference stock | ||||||||||||||||||||||||||||||||
Authorized — 65 million shares | ||||||||||||||||||||||||||||||||
Outstanding — $1 par value — 5.63% to 6.50% | 343 | 343 | 343 | 343 | ||||||||||||||||||||||||||||
— 14 million shares (non-cumulative) | ||||||||||||||||||||||||||||||||
— $100 par or stated value — 6.00% to 6.50% | 319 | 319 | 319 | 319 | ||||||||||||||||||||||||||||
— 3 million shares (non-cumulative) | ||||||||||||||||||||||||||||||||
Total preferred and preference stock of subsidiaries | ||||||||||||||||||||||||||||||||
(annual dividend requirement — $65 million) | 1,082 | 1,205 | ||||||||||||||||||||||||||||||
Less amount due within one year | — | 125 | ||||||||||||||||||||||||||||||
Total preferred and preference stock of subsidiaries (annual dividend requirement — $45 million) | 707 | 707 | 2.1 | 2.3 | ||||||||||||||||||||||||||||
Preferred and preference stock of subsidiaries excluding amount due within one year | 1,082 | 1,080 | 3.5 | 3.9 | ||||||||||||||||||||||||||||
Common Stockholders’ Equity: | ||||||||||||||||||||||||||||||||
Common stock, par value $5 per share — | 3,888 | 3,817 | ||||||||||||||||||||||||||||||
Authorized — 1 billion shares | ||||||||||||||||||||||||||||||||
Issued — 2008: 778 million shares | ||||||||||||||||||||||||||||||||
— 2007: 764 million shares | ||||||||||||||||||||||||||||||||
Treasury — 2008: 0.4 million shares | ||||||||||||||||||||||||||||||||
— 2007: 0.4 million shares | ||||||||||||||||||||||||||||||||
Paid-in capital | 1,893 | 1,454 | ||||||||||||||||||||||||||||||
Treasury, at cost | (12 | ) | (11 | ) | ||||||||||||||||||||||||||||
Retained earnings | 7,612 | 7,155 | ||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) | (105 | ) | (30 | ) | ||||||||||||||||||||||||||||
Total common stockholders’ equity | 13,276 | 12,385 | 42.6 | 44.9 | ||||||||||||||||||||||||||||
Total stockholders’ equity | 15,585 | 13,983 | ||||||||||||||||||||||||||||||
Total Capitalization | $ | 31,174 | $ | 27,608 | 100.0 | % | 100.0 | % | $ | 34,091 | $ | 31,174 | 100.0 | % | 100.0 | % |
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Common Stock | Accumulated | Accumulated | Preferred | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Par | Paid-In | Retained | Other Comprehensive | Other | and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value | Capital | Treasury | Earnings | Income (Loss) | Total | Number of | Common Stock | Comprehensive | Preference | |||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Common Shares | Par | Paid-In | Retained | Income | Stock of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2005 | $ | 3,759 | $ | 1,085 | $ | (359 | ) | $ | 6,332 | $ | (128 | ) | $ | 10,689 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 1,573 | — | 1,573 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued | Treasury | Value | Capital | Treasury | Earnings | (Loss) | Subsidiaries | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | 751,864 | (5,594 | ) | $ | 3,759 | $ | 1,096 | $ | (192 | ) | $ | 6,765 | $ | (57 | ) | $ | 246 | $ | 11,617 | |||||||||||||||||||||||||||||||||||||||||
Net income after dividends on preferred and preference stock of subsidiaries | — | — | — | — | — | 1,734 | — | — | 1,734 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | 19 | 19 | — | — | — | — | — | — | 27 | — | 27 | |||||||||||||||||||||||||||||||||||||||||||||
Adjustment to initially apply FASB Statement No. 158, net of tax | — | — | — | — | 52 | 52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of new accounting standards (a) | — | — | — | — | — | (140 | ) | — | — | (140 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued | — | 11 | 168 | — | — | 179 | 11,639 | 5,255 | 58 | 356 | 183 | — | — | 461 | 1,058 | |||||||||||||||||||||||||||||||||||||||||||||
Cash dividends | — | — | — | (1,140 | ) | — | (1,140 | ) | — | — | — | — | — | (1,204 | ) | — | — | (1,204 | ) | |||||||||||||||||||||||||||||||||||||||||
Other | — | — | (1 | ) | — | — | (1 | ) | — | (60 | ) | — | 2 | (2 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | 3,759 | 1,096 | (192 | ) | 6,765 | (57 | ) | 11,371 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 1,734 | — | 1,734 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 763,503 | (399 | ) | 3,817 | 1,454 | (11 | ) | 7,155 | (30 | ) | 707 | 13,092 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income after dividends on preferred and preference stock of subsidiaries | — | — | — | — | — | 1,742 | — | — | 1,742 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | 27 | 27 | — | — | — | — | — | — | (75 | ) | — | (75 | ) | |||||||||||||||||||||||||||||||||||||||||||
Stock issued | 58 | 356 | 183 | — | — | 597 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment to initially apply FIN 48, net of tax | — | — | — | (15 | ) | — | (15 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment to initially apply FSP 13-2, net of tax | — | — | — | (125 | ) | — | (125 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends | — | — | — | (1,204 | ) | — | (1,204 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | 2 | (2 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 3,817 | 1,454 | (11 | ) | 7,155 | (30 | ) | 12,385 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 1,742 | — | 1,742 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (75 | ) | (75 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued | 71 | 438 | — | — | — | 509 | 14,113 | — | 71 | 438 | — | — | — | — | 509 | |||||||||||||||||||||||||||||||||||||||||||||
Cash dividends | — | — | — | (1,279 | ) | — | (1,279 | ) | — | — | — | — | — | (1,279 | ) | — | — | (1,279 | ) | |||||||||||||||||||||||||||||||||||||||||
Other | — | 1 | (1 | ) | (6 | ) | — | (6 | ) | — | (25 | ) | — | 1 | (1 | ) | (6 | ) | — | — | (6 | ) | ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | $ | 3,888 | $ | 1,893 | $ | (12 | ) | $ | 7,612 | $ | (105 | ) | $ | 13,276 | 777,616 | (424 | ) | 3,888 | 1,893 | (12 | ) | 7,612 | (105 | ) | 707 | 13,983 | ||||||||||||||||||||||||||||||||||
Net income after dividends on preferred and preference stock of subsidiaries | — | — | — | — | — | 1,643 | — | — | 1,643 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 17 | — | 17 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued | 42,536 | — | 213 | 1,100 | — | — | — | — | 1,313 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends | — | — | — | — | — | (1,369 | ) | — | — | (1,369 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | (81 | ) | — | 2 | (3 | ) | (1 | ) | — | — | (2 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2009 | 820,152 | (505 | ) | $ | 4,101 | $ | 2,995 | $ | (15 | ) | $ | 7,885 | $ | (88 | ) | $ | 707 | $ | 15,585 | |||||||||||||||||||||||||||||||||||||||||
II-46
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Consolidated Net Income | $ | 1,742 | $ | 1,734 | $ | 1,573 | ||||||
Other comprehensive income (loss): | ||||||||||||
Qualifying hedges: | ||||||||||||
Changes in fair value, net of tax of $(19), $(3), and $(5), respectively | (30 | ) | (5 | ) | (8 | ) | ||||||
Reclassification adjustment for amounts included in net income, net of tax of $7, $6, and $-, respectively | 11 | 9 | 1 | |||||||||
Marketable securities: | ||||||||||||
Changes in fair value, net of tax of $(4), $3, and $4, respectively | (7 | ) | 4 | 8 | ||||||||
Reclassification adjustment for amounts included in net income, net of tax of $-, $-, and $-, respectively | — | (1 | ) | — | ||||||||
Pension and other postretirement benefit plans: | ||||||||||||
Benefit plan net gain (loss), net of tax of $(32), $13, and $-, respectively | (51 | ) | 20 | — | ||||||||
Additional prior service costs from amendment to non-qualified pension plans, net of tax of $-, $(2), and $-, respectively | — | (2 | ) | — | ||||||||
Change in additional minimum pension liability, net of tax of $-, $-, and $10, respectively | — | — | 18 | |||||||||
Reclassification adjustment for amounts included in net income, net of tax of $1, $1, and $-, respectively | 2 | 2 | — | |||||||||
Total other comprehensive income (loss) | (75 | ) | 27 | 19 | ||||||||
Consolidated Comprehensive Income | $ | 1,667 | $ | 1,761 | $ | 1,592 | ||||||
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Consolidated Net Income | $ | 1,708 | $ | 1,807 | $ | 1,782 | ||||||
Other comprehensive income: | ||||||||||||
Qualifying hedges: | ||||||||||||
Changes in fair value, net of tax of $(3), $(19), and $(3), respectively | (4 | ) | (30 | ) | (5 | ) | ||||||
Reclassification adjustment for amounts included in net income, net of tax of $18, $7, and $6, respectively | 28 | 11 | 9 | |||||||||
Marketable securities: | ||||||||||||
Change in fair value, net of tax of $1, $(4), and $3, respectively | 4 | (7 | ) | 4 | ||||||||
Reclassification adjustment for amounts included in net income, net of tax of$-, $-, and $-, respectively | — | — | (1 | ) | ||||||||
Pension and other postretirement benefit plans: | ||||||||||||
Benefit plan net gain (loss),net of tax of $(8), $(32), and $13, respectively | (12 | ) | (51 | ) | 20 | |||||||
Additional prior service costs from amendment to non-qualified plans, net of tax of$-, $-, and $(2), respectively | — | — | (2 | ) | ||||||||
Reclassification adjustment for amounts included in net income, net of tax of $1, $1, and $1, respectively | 1 | 2 | 2 | |||||||||
Total other comprehensive income (loss) | 17 | (75 | ) | 27 | ||||||||
Dividends on preferred and preference stock of subsidiaries | (65 | ) | (65 | ) | (48 | ) | ||||||
Consolidated Comprehensive Income | $ | 1,660 | $ | 1,667 | $ | 1,761 | ||||||
II-56II-47
II-57
II-48
2008 | 2007 | Note | 2009 | 2008 | Note | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Deferred income tax charges | $ | 972 | $ | 911 | (a | ) | $ | 1,048 | $ | 972 | (a | ) | ||||||||||||
Asset retirement obligations-asset | 236 | 50 | (a | ) | 125 | 236 | (a,i | ) | ||||||||||||||||
Asset retirement obligations-liability | (5 | ) | (154 | ) | (a | ) | (47 | ) | (5 | ) | (a,i | ) | ||||||||||||
Other cost of removal obligations | (1,321 | ) | (1,308 | ) | (a | ) | (1,307 | ) | (1,321 | ) | (a | ) | ||||||||||||
Deferred income tax credits | (260 | ) | (275 | ) | (a | ) | (249 | ) | (260 | ) | (a | ) | ||||||||||||
Loss on reacquired debt | 271 | 289 | (b | ) | 255 | 271 | (b | ) | ||||||||||||||||
Vacation pay | 140 | 135 | (c | ) | 145 | 140 | (c,i | ) | ||||||||||||||||
Under recovered regulatory clause revenues | 432 | 371 | (d | ) | 40 | 432 | (d | ) | ||||||||||||||||
Building lease | 48 | 49 | (d | ) | ||||||||||||||||||||
Over recovered regulatory clause revenues | (218 | ) | (3 | ) | (d | ) | ||||||||||||||||||
Building leases | 47 | 49 | (f | ) | ||||||||||||||||||||
Generating plant outage costs | 45 | 46 | (d | ) | 39 | 45 | (d | ) | ||||||||||||||||
Under recovered storm damage costs | 27 | 43 | (d | ) | 22 | 27 | (d | ) | ||||||||||||||||
Property damage reserves | (97 | ) | (90 | ) | (d | ) | (157 | ) | (97 | ) | (h | ) | ||||||||||||
Fuel hedging (realized and unrealized) losses | 314 | 25 | (d | ) | ||||||||||||||||||||
Fuel hedging (realized and unrealized) gains | (10 | ) | (20 | ) | (d | ) | ||||||||||||||||||
Fuel hedging-asset | 187 | 314 | (d | ) | ||||||||||||||||||||
Fuel hedging-liability | (2 | ) | (10 | ) | (d | ) | ||||||||||||||||||
Other assets | 164 | 88 | (d | ) | 156 | 163 | (d | ) | ||||||||||||||||
Environmental remediation-asset | 67 | 67 | (d | ) | 68 | 67 | (h,i | ) | ||||||||||||||||
Environmental remediation-liability | (19 | ) | (22 | ) | (d | ) | (13 | ) | (19 | ) | (h | ) | ||||||||||||
Deferred purchased power | (156 | ) | (20 | ) | (d | ) | ||||||||||||||||||
Environmental compliance cost recovery | (96 | ) | (135 | ) | (g | ) | ||||||||||||||||||
Other liabilities | (25 | ) | (21 | ) | (d | ) | (51 | ) | (43 | ) | (j | ) | ||||||||||||
Overfunded retiree benefit plans | — | (1,288 | ) | (e | ) | |||||||||||||||||||
Underfunded retiree benefit plans | 2,068 | 547 | (e | ) | 2,268 | 2,068 | (e,i | ) | ||||||||||||||||
Total assets (liabilities), net | $ | 2,891 | $ | (577 | ) | $ | 2,260 | $ | 2,891 | |||||||||||||||
Note: The recovery and amortization periods for these regulatory assets and (liabilities) are as follows: | ||
(a) | Asset retirement and removal assets and liabilities are recorded, deferred income tax assets are recovered, other cost of removal, and deferred tax liabilities are amortized over the related property lives, which may range up to 65 years. Asset retirement and removal assets and liabilities will be settled and trued up following completion of the related activities. Other cost of removal obligations include $216 million at Georgia Power that may be amortized during 2010 in accordance with the August 27, 2009 Georgia PSC order. See Note 3 under “Retail Regulatory Matters — Georgia Power — Cost of Removal” for additional information. | |
(b) | Recovered over either the remaining life of the original issue or, if refinanced, over the life of the new issue, which may range up to 50 years. | |
(c) | Recorded as earned by employees and recovered as paid, generally within one year. | |
(d) | Recorded and recovered or amortized as approved by the appropriate state | |
(e) | Recovered and amortized over the average remaining service period which may range up to | |
(f) | Recovered over the remaining lives of the buildings through 2026. | |
(g) | This balance represents deferred revenue associated with Georgia Power’s environmental compliance cost recovery (ECCR) tariff established in its retail rate plan for the years 2008 through 2010 (2007 Retail Rate Plan). The recovery of the forecasted environmental compliance costs was levelized to collect equal annual amounts between January 1, 2008 and December 31, 2010 under the tariff. | |
(h) | Recovered as storm restoration or environmental remediation expenses are incurred. | |
(i) | Not earning a return as offset in rate base by a corresponding asset or liability. | |
(j) | Recorded and recovered or amortized as approved by the appropriate state PSC over periods up to the life of the plant or the remaining life of the original issue or, if refinanced, over the life of the new issue which may range up to 50 years. |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Generation | $ | 26,154 | $ | 23,879 | $ | 28,204 | $ | 26,154 | ||||||||
Transmission | 7,085 | 6,761 | 7,380 | 7,085 | ||||||||||||
Distribution | 13,856 | 13,134 | 14,335 | 13,856 | ||||||||||||
General | 2,750 | 2,619 | 2,917 | 2,750 | ||||||||||||
Plant acquisition adjustment | 43 | 43 | 43 | 43 | ||||||||||||
Utility plant in service | 49,888 | 46,436 | 52,879 | 49,888 | ||||||||||||
IT equipment and software | 240 | 230 | 182 | 240 | ||||||||||||
Communications equipment | 450 | 452 | 423 | 450 | ||||||||||||
Other | 40 | 58 | 104 | 40 | ||||||||||||
Other plant in service | 730 | 740 | 709 | 730 | ||||||||||||
Total plant in service | $ | 50,618 | $ | 47,176 | $ | 53,588 | $ | 50,618 |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Balance beginning of year | $ | 1,203 | $ | 1,137 | $ | 1,185 | $ | 1,203 | ||||||||
Liabilities incurred | 4 | 1 | 2 | 4 | ||||||||||||
Liabilities settled | (4 | ) | (8 | ) | (10 | ) | (4 | ) | ||||||||
Accretion | 75 | 74 | 77 | 75 | ||||||||||||
Cash flow revisions | (93 | ) | (1 | ) | (48 | ) | (93 | ) | ||||||||
Balance end of year | $ | 1,185 | $ | 1,203 | $ | 1,206 | $ | 1,185 | ||||||||
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Plant Farley | Plant Hatch | Plant Vogtle | Plant Farley | Plant Hatch | Plant Vogtle | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
External trust funds | $ | 404 | $ | 280 | $ | 168 | $ | 490 | $ | 360 | $ | 206 | ||||||||||||
Internal reserves | 26 | — | — | 25 | — | — | ||||||||||||||||||
Total | $ | 430 | $ | 280 | $ | 168 | $ | 515 | $ | 360 | $ | 206 | ||||||||||||
Plant Farley | Plant Hatch | Plant Vogtle | ||||||||||||||||||||||
Plant Farley | Plant Hatch | Plant Vogtle | ||||||||||||||||||||||
Decommissioning periods: | ||||||||||||||||||||||||
Beginning year | 2037 | 2034 | 2027 | 2037 | 2034 | 2047 | ||||||||||||||||||
Completion year | 2065 | 2061 | 2051 | 2065 | 2063 | 2067 | ||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Site study costs: | ||||||||||||||||||||||||
Radiated structures | $ | 1,060 | $ | 544 | $ | 507 | $ | 1,060 | $ | 583 | $ | 500 | ||||||||||||
Non-radiated structures | 72 | 46 | 67 | 72 | 46 | 71 | ||||||||||||||||||
Total | $ | 1,132 | $ | 590 | $ | 574 | $ | 1,132 | $ | 629 | $ | 571 | ||||||||||||
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Net rentals receivable | $ | 492 | $ | 494 | $ | 487 | $ | 492 | ||||||||
Unearned income | (230 | ) | (244 | ) | (218 | ) | (230 | ) | ||||||||
Investment in leveraged leases | 262 | 250 | 269 | 262 | ||||||||||||
Deferred taxes from leveraged leases | (189 | ) | (163 | ) | (211 | ) | (189 | ) | ||||||||
Net investment in leveraged leases | $ | 73 | $ | 87 | $ | 58 | $ | 73 | ||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Pretax leveraged lease income | $ | 14 | $ | 16 | $ | 20 | $ | 12 | $ | 14 | $ | 16 | ||||||||||||
Income tax expense | (6 | ) | (7 | ) | (9 | ) | (5 | ) | (6 | ) | (7 | ) | ||||||||||||
Net leveraged lease income | $ | 8 | $ | 9 | $ | 11 | $ | 7 | $ | 8 | $ | 9 | ||||||||||||
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Net rentals receivable | $ | 1,298 | $ | 1,298 | $ | 734 | $ | 1,298 | ||||||||
Unearned income | (663 | ) | (563 | ) | (393 | ) | (663 | ) | ||||||||
Investment in leveraged leases | 635 | 735 | 341 | 635 | ||||||||||||
Current taxes payable | (120 | ) | — | — | (120 | ) | ||||||||||
Deferred taxes from leveraged leases | (117 | ) | (316 | ) | (40 | ) | (117 | ) | ||||||||
Net investment in leveraged leases | $ | 398 | $ | 419 | $ | 301 | $ | 398 |
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Pretax leveraged lease income (loss) | $ | (99 | ) | $ | 24 | $ | 49 | $ | 19 | $ | (99 | ) | $ | 24 | ||||||||||
Income tax benefit (expense) | 35 | (8 | ) | (17 | ) | (7 | ) | 35 | (8 | ) | ||||||||||||||
Net leveraged lease income (loss) | $ | (64 | ) | $ | 16 | $ | 32 | $ | 12 | $ | (64 | ) | $ | 16 |
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Carrying Amount | Fair Value | |||||||
(in millions) | ||||||||
Long-term debt: | ||||||||
2008 | $ | 17,327 | $ | 17,114 | ||||
2007 | $ | 15,095 | $ | 14,931 |
Pension and Other | Accumulated Other | Pension and Other | Accumulated Other | |||||||||||||||||||||||||||||
Qualifying | Marketable | Postretirement | Comprehensive | Qualifying | Marketable | Postretirement | Comprehensive | |||||||||||||||||||||||||
Hedges | Securities | Benefit Plans | Income (Loss) | Hedges | Securities | Benefit Plans | Income (Loss) | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Balance at December 31, 2007 | $ | (54 | ) | $ | 13 | $ | 11 | $ | (30 | ) | ||||||||||||||||||||||
Balance at December 31, 2008 | $ | (73 | ) | $ | 6 | $ | (38 | ) | $ | (105 | ) | |||||||||||||||||||||
Current period change | (19 | ) | (7 | ) | (49 | ) | (75 | ) | 24 | 4 | (11 | ) | 17 | |||||||||||||||||||
Balance at December 31, 2008 | $ | (73 | ) | $ | 6 | $ | (38 | ) | $ | (105 | ) | |||||||||||||||||||||
Balance at December 31, 2009 | $ | (49 | ) | $ | 10 | $ | (49 | ) | $ | (88 | ) |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 5,660 | $ | 5,491 | $ | 5,879 | $ | 5,660 | ||||||||
Service cost | 182 | 147 | 146 | 182 | ||||||||||||
Interest cost | 435 | 324 | 387 | 435 | ||||||||||||
Benefits paid | (324 | ) | (241 | ) | (282 | ) | (324 | ) | ||||||||
Plan amendments | — | 50 | ||||||||||||||
Actuarial gain | (74 | ) | (111 | ) | ||||||||||||
Actuarial loss (gain) | 628 | (74 | ) | |||||||||||||
Balance at end of year | 5,879 | 5,660 | 6,758 | 5,879 | ||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 7,624 | 6,693 | 5,093 | 7,624 | ||||||||||||
Actual return (loss) on plan assets | (2,234 | ) | 1,153 | 792 | (2,234 | ) | ||||||||||
Employer contributions | 27 | 19 | 24 | 27 | ||||||||||||
Benefits paid | (324 | ) | (241 | ) | (282 | ) | (324 | ) | ||||||||
Fair value of plan assets at end of year | 5,093 | 7,624 | 5,627 | 5,093 | ||||||||||||
Funded status at end of year | (786 | ) | 1,964 | |||||||||||||
Fourth quarter contributions | — | 5 | ||||||||||||||
Accrued liability | $ | (1,131 | ) | $ | (786 | ) | ||||||||||
(Accrued liability) prepaid pension asset | $ | (786 | ) | $ | 1,969 | |||||||||||
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Target | 2008 | 2007 | ||||||||||||||||||||||
Target | 2009 | 2008 | ||||||||||||||||||||||
Domestic equity | 36 | % | 34 | % | 38 | % | 29 | % | 33 | % | 34 | % | ||||||||||||
International equity | 24 | 23 | 24 | 28 | 29 | 23 | ||||||||||||||||||
Fixed income | 15 | 14 | 15 | 15 | 15 | 14 | ||||||||||||||||||
Real estate | 15 | 19 | 16 | |||||||||||||||||||||
Special situations | 3 | — | — | |||||||||||||||||||||
Real estate investments | 15 | 13 | 19 | |||||||||||||||||||||
Private equity | 10 | 10 | 7 | 10 | 10 | 10 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
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• | Domestic equity.This portion of the portfolio comprises a mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes managed both actively and through passive index approaches. | |
• | International equity.This portion of the portfolio is actively managed with a blend of growth stocks and value stocks with both developed and emerging market exposure. | |
• | Fixed income.This portion of the portfolio is actively managed through an allocation to long-dated, investment grade corporate and government bonds. | |
• | Special situations.Though currently unfunded, this portion of the portfolio was established both to execute opportunistic investment strategies with the objectives of diversifying and enhancing returns and exploiting short-term inefficiencies, as well as to invest in promising new strategies of a longer-term nature. | |
• | Real estate investments.Assets in this portion of the portfolio are invested in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities. | |
• | Private equity.This portion of the portfolio generally consists of investments in private partnerships that invest in private or public securities typically through privately negotiated and/or structured transactions. Leveraged buyouts, venture capital, and distressed debt are examples of investment strategies within this category. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active Markets for | Significant Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 1,117 | $ | 462 | $ | — | $ | 1,579 | ||||||||
International equity* | 1,444 | 144 | — | 1,588 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 416 | — | 416 | ||||||||||||
Mortgage- and asset-backed securities | — | 113 | — | 113 | ||||||||||||
Corporate bonds | — | 279 | — | 279 | ||||||||||||
Pooled funds | — | 10 | — | 10 | ||||||||||||
Cash equivalents and other | 3 | 341 | — | 344 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 174 | — | 547 | 721 | ||||||||||||
Private equity | — | — | 555 | 555 | ||||||||||||
Total | $ | 2,738 | $ | 1,765 | $ | 1,102 | $ | 5,605 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives | (5 | ) | (1 | ) | — | (6 | ) | |||||||||
Total | $ | 2,733 | $ | 1,764 | $ | 1,102 | $ | 5,599 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
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Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active Markets for | Significant Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2008: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 1,049 | $ | 427 | $ | — | $ | 1,476 | ||||||||
International equity* | 944 | 87 | — | 1,031 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 441 | — | 441 | ||||||||||||
Mortgage- and asset-backed securities | — | 209 | — | 209 | ||||||||||||
Corporate bonds | — | 286 | — | 286 | ||||||||||||
Pooled funds | — | 3 | — | 3 | ||||||||||||
Cash equivalents and other | 22 | 202 | — | 224 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 144 | — | 839 | 983 | ||||||||||||
Private equity | — | — | 490 | 490 | ||||||||||||
Total | $ | 2,159 | $ | 1,655 | $ | 1,329 | $ | 5,143 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives | (8 | ) | — | — | (8 | ) | ||||||||||
Total | $ | 2,151 | $ | 1,655 | $ | 1,329 | $ | 5,135 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
2009 | 2008 | |||||||||||||||
Real Estate | Real Estate | |||||||||||||||
Investments | Private Equity | Investments | Private Equity | |||||||||||||
(in millions) | ||||||||||||||||
Beginning balance | $ | 839 | $ | 490 | $ | 1,045 | $ | 520 | ||||||||
Actual return on investments: | ||||||||||||||||
Related to investments held at year end | (240 | ) | 37 | (170 | ) | (141 | ) | |||||||||
Related to investments sold during the year | (65 | ) | 10 | 4 | 25 | |||||||||||
Total return on investments | (305 | ) | 47 | (166 | ) | (116 | ) | |||||||||
Purchases, sales, and settlements | 13 | 18 | (40 | ) | 86 | |||||||||||
Transfers into/out of Level 3 | — | — | — | — | ||||||||||||
Ending balance | $ | 547 | $ | 555 | $ | 839 | $ | 490 | ||||||||
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2008 | 2007 | |||||||
(in millions) | ||||||||
Prepaid pension costs | $ | — | $ | 2,369 | ||||
Other regulatory assets | 1,579 | 188 | ||||||
Current liabilities, other | (23 | ) | (21 | ) | ||||
Other regulatory liabilities | — | (1,288 | ) | |||||
Employee benefit obligations | (763 | ) | (379 | ) | ||||
Accumulated other comprehensive income | 54 | (26 | ) | |||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Other regulatory assets, deferred | $ | 1,894 | $ | 1,579 | ||||
Other current liabilities | (25 | ) | (23 | ) | ||||
Employee benefit obligations | (1,106 | ) | (763 | ) | ||||
Accumulated other comprehensive income | 74 | 54 | ||||||
Prior Service Cost | Net (Gain)Loss | |||||||||||||||
(in millions) | ||||||||||||||||
Balance at December 31, 2009: | ||||||||||||||||
Accumulated other comprehensive income | $ | 10 | $ | 64 | ||||||||||||
Regulatory assets | 188 | 1,706 | ||||||||||||||
Total | $ | 198 | $ | 1,770 | ||||||||||||
Prior Service Cost | Net(Gain)Loss | |||||||||||||||
(in millions) | ||||||||||||||||
Balance at December 31, 2008: | ||||||||||||||||
Accumulated other comprehensive income | $ | 12 | $ | 42 | $ | 12 | $ | 42 | ||||||||
Regulatory assets | 220 | 1,359 | 220 | 1,359 | ||||||||||||
Regulatory liabilities | — | — | ||||||||||||||
Total | $ | 232 | $ | 1,401 | $ | 232 | $ | 1,401 | ||||||||
Balance at December 31, 2007: | ||||||||||||||||
Estimated amortization in net periodic pension cost in 2010: | ||||||||||||||||
Accumulated other comprehensive income | $ | 14 | $ | (40 | ) | $ | 1 | $ | 1 | |||||||
Regulatory assets | 66 | 122 | 31 | 9 | ||||||||||||
Regulatory liabilities | 198 | (1,486 | ) | |||||||||||||
Total | $ | 278 | $ | (1,404 | ) | $ | 32 | $ | 10 | |||||||
Estimated amortization in net periodic pension cost in 2009: | ||||||||||||||||
Accumulated other comprehensive income | $ | 2 | $ | — | ||||||||||||
Regulatory assets | 33 | 7 | ||||||||||||||
Regulatory liabilities | — | — | ||||||||||||||
Total | $ | 35 | $ | 7 | ||||||||||||
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Accumulated Other | Accumulated Other | Regulatory | Regulatory | |||||||||||||||||||||
Comprehensive Income | Regulatory Assets | Regulatory Liabilities | Comprehensive Income | Assets | Liabilities | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance at December 31, 2006 | $ | — | $ | 158 | $ | (507 | ) | |||||||||||||||||
Net gain | (28 | ) | — | (753 | ) | |||||||||||||||||||
Change in prior service costs | 4 | 46 | — | |||||||||||||||||||||
Reclassification adjustments: | ||||||||||||||||||||||||
Amortization of prior service costs | (2 | ) | (7 | ) | (28 | ) | ||||||||||||||||||
Amortization of net gain | — | (9 | ) | — | ||||||||||||||||||||
Total reclassification adjustments | (2 | ) | (16 | ) | (28 | ) | ||||||||||||||||||
Total change | (26 | ) | 30 | (781 | ) | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance at December 31, 2007 | (26 | ) | 188 | (1,288 | ) | $ | (26 | ) | $ | 188 | $ | (1,288 | ) | |||||||||||
Net loss | 83 | 1,412 | 1,322 | 83 | 1,412 | 1,322 | ||||||||||||||||||
Change in prior service costs | — | — | — | — | — | — | ||||||||||||||||||
Reclassification adjustments: | ||||||||||||||||||||||||
Amortization of prior service costs | (2 | ) | (10 | ) | (34 | ) | (2 | ) | (10 | ) | (34 | ) | ||||||||||||
Amortization of net gain | (1 | ) | (11 | ) | — | (1 | ) | (11 | ) | — | ||||||||||||||
Total reclassification adjustments | (3 | ) | (21 | ) | (34 | ) | (3 | ) | (21 | ) | (34 | ) | ||||||||||||
Total change | 80 | 1,391 | 1,288 | 80 | 1,391 | 1,288 | ||||||||||||||||||
Balance at December 31, 2008 | $ | 54 | $ | 1,579 | $ | — | 54 | 1,579 | — | |||||||||||||||
Net loss | 21 | 355 | — | |||||||||||||||||||||
Change in prior service costs | — | 1 | — | |||||||||||||||||||||
Reclassification adjustments: | ||||||||||||||||||||||||
Amortization of prior service costs | (1 | ) | (34 | ) | — | |||||||||||||||||||
Amortization of net gain | — | (7 | ) | — | ||||||||||||||||||||
Total reclassification adjustments | (1 | ) | (41 | ) | — | |||||||||||||||||||
Total change | 20 | 315 | — | |||||||||||||||||||||
Balance at December 31, 2009 | $ | 74 | $ | 1,894 | $ | — | ||||||||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Service cost | $ | 146 | $ | 147 | $ | 153 | $ | 146 | $ | 146 | $ | 147 | ||||||||||||
Interest cost | 348 | 324 | 300 | 387 | 348 | 324 | ||||||||||||||||||
Expected return on plan assets | (525 | ) | (481 | ) | (456 | ) | (541 | ) | (525 | ) | (481 | ) | ||||||||||||
Recognized net loss | 9 | 10 | 16 | 7 | 9 | 10 | ||||||||||||||||||
Net amortization | 37 | 35 | 26 | 35 | 37 | 35 | ||||||||||||||||||
Net periodic pension cost | $ | 15 | $ | 35 | $ | 39 | $ | 34 | $ | 15 | $ | 35 |
Benefit Payments | Benefit Payments | |||||||
(in millions) | (in millions) | |||||||
2009 | $ | 289 | ||||||
2010 | 304 | $ | 323 | |||||
2011 | 322 | 341 | ||||||
2012 | 341 | 360 | ||||||
2013 | 362 | 383 | ||||||
2014 to 2018 | 2,187 | |||||||
2014 | 417 | |||||||
2015 to 2019 | 2,456 |
II-69II-61
2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 1,797 | $ | 1,830 | $ | 1,733 | $ | 1,797 | ||||||||
Service cost | 36 | 27 | 26 | 36 | ||||||||||||
Interest cost | 138 | 107 | 113 | 138 | ||||||||||||
Benefits paid | (108 | ) | (83 | ) | (93 | ) | (108 | ) | ||||||||
Actuarial gain | (139 | ) | (90 | ) | ||||||||||||
Actuarial loss (gain) | 34 | (139 | ) | |||||||||||||
Plan amendments | (59 | ) | — | |||||||||||||
Retiree drug subsidy | 9 | 6 | 5 | 9 | ||||||||||||
Balance at end of year | 1,733 | 1,797 | 1,759 | 1,733 | ||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 820 | 731 | 631 | 820 | ||||||||||||
Actual return (loss) on plan assets | (232 | ) | 105 | 127 | (232 | ) | ||||||||||
Employer contributions | 142 | 61 | 72 | 142 | ||||||||||||
Benefits paid | (99 | ) | (77 | ) | (87 | ) | (99 | ) | ||||||||
Fair value of plan assets at end of year | 631 | 820 | 743 | 631 | ||||||||||||
Funded status at end of year | (1,102 | ) | (977 | ) | ||||||||||||
Fourth quarter contributions | — | 65 | ||||||||||||||
Accrued liability | $ | (1,102 | ) | $ | (912 | ) | $ | (1,016 | ) | $ | (1,102 | ) |
Target | 2008 | 2007 | ||||||||||||||||||||||
Target | 2009 | 2008 | ||||||||||||||||||||||
Domestic equity | 44 | % | 34 | % | 45 | % | 42 | % | 37 | % | 34 | % | ||||||||||||
International equity | 17 | 18 | 20 | 19 | 24 | 18 | ||||||||||||||||||
Fixed income | 30 | 38 | 26 | 30 | 32 | 38 | ||||||||||||||||||
Real estate | 5 | 7 | 6 | |||||||||||||||||||||
Special situations | 1 | — | — | |||||||||||||||||||||
Real estate investments | 5 | 4 | 7 | |||||||||||||||||||||
Private equity | 4 | 3 | 3 | 3 | 3 | 3 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
• | Domestic equity.This portion of the portfolio comprises a mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes managed both actively and through passive index approaches. | |
• | International equity.This portion of the portfolio is actively managed with a blend of growth stocks and value stocks with both developed and emerging market exposure. | |
• | Fixed income.This portion of the portfolio is actively managed through an allocation to long-dated, investment grade corporate and government bonds. | |
• | Special situations.Though currently unfunded, this portion of the portfolio was established both to execute opportunistic investment strategies with the objectives of diversifying and enhancing returns and exploiting short-term inefficiencies, as well as to invest in promising new strategies of a longer-term nature. | |
• | Trust-owned life insurance.Some of the Company’s taxable trusts invest in these investments in order to minimize the impact of taxes on the portfolio. | |
• | Real estate investments.Assets in this portion of the portfolio are invested in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities. |
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• | Private equity.This portion of the portfolio generally consists of investments in private partnerships that invest in private or public securities typically through privately negotiated and/or structured transactions. Leveraged buyouts, venture capital, and distressed debt are examples of investment strategies within this category. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 149 | $ | 42 | $ | — | $ | 191 | ||||||||
International equity* | 62 | 36 | — | 98 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 22 | — | 22 | ||||||||||||
Mortgage- and asset-backed securities | — | 5 | — | 5 | ||||||||||||
Corporate bonds | — | 12 | — | 12 | ||||||||||||
Pooled funds | — | 18 | — | 18 | ||||||||||||
Cash equivalents and other | — | 54 | — | 54 | ||||||||||||
Trust-owned life insurance | — | 270 | — | 270 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 7 | — | 24 | 31 | ||||||||||||
Private equity | — | — | 24 | 24 | ||||||||||||
Total | $ | 218 | $ | 459 | $ | 48 | $ | 725 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2008: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 114 | $ | 47 | $ | — | $ | 161 | ||||||||
International equity* | 41 | 24 | — | 65 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 23 | — | 23 | ||||||||||||
Mortgage- and asset-backed securities | — | 9 | — | 9 | ||||||||||||
Corporate bonds | — | 12 | — | 12 | ||||||||||||
Pooled funds | — | 9 | — | 9 | ||||||||||||
Cash equivalents and other | 1 | 73 | — | 74 | ||||||||||||
Trust-owned life insurance | — | 215 | — | 215 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 6 | — | 36 | 42 | ||||||||||||
Private equity | — | — | 21 | 21 | ||||||||||||
Total | $ | 162 | $ | 412 | $ | 57 | $ | 631 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
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2009 | 2008 | |||||||||||||||
Real Estate | Real Estate | |||||||||||||||
Investments | Private Equity | Investments | Private Equity | |||||||||||||
(in millions) | ||||||||||||||||
Beginning balance | $ | 36 | $ | 21 | $ | 44 | $ | 22 | ||||||||
Actual return on investments: | ||||||||||||||||
Related to investments held at year end | (10 | ) | 2 | (6 | ) | (6 | ) | |||||||||
Related to investments sold during the year | (3 | ) | — | — | 1 | |||||||||||
Total return on investments | (13 | ) | 2 | (6 | ) | (5 | ) | |||||||||
Purchases, sales, and settlements | 1 | 1 | (2 | ) | 4 | |||||||||||
Transfers into/out of Level 3 | — | — | — | — | ||||||||||||
Ending balance | $ | 24 | $ | 24 | $ | 36 | $ | 21 | ||||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Other regulatory assets | $ | 489 | $ | 360 | ||||||||||||
Current liabilities, other | (3 | ) | (3 | ) | ||||||||||||
Other regulatory assets, deferred | $ | 374 | $ | 489 | ||||||||||||
Other current liabilities | — | (3 | ) | |||||||||||||
Employee benefit obligations | (1,099 | ) | (909 | ) | (1,016 | ) | (1,099 | ) | ||||||||
Accumulated other comprehensive income | 8 | 8 | 5 | 8 |
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Prior Service | Net(Gain) | Transition | Prior Service | Net (Gain) | Transition | |||||||||||||||||||
Cost | Loss | Obligation | Cost | Loss | Obligation | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance at December 31, 2009: | ||||||||||||||||||||||||
Accumulated other comprehensive income | $ | — | $ | 5 | $ | — | ||||||||||||||||||
Regulatory assets | 41 | 298 | 35 | |||||||||||||||||||||
Total | $ | 41 | $ | 303 | $ | 35 | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance at December 31, 2008: | ||||||||||||||||||||||||
Accumulated other comprehensive income | $ | 3 | $ | 5 | $ | — | $ | 3 | $ | 5 | $ | — | ||||||||||||
Regulatory assets | 88 | 335 | 66 | 88 | 335 | 66 | ||||||||||||||||||
Total | $ | 91 | $ | 340 | $ | 66 | $ | 91 | $ | 340 | $ | 66 | ||||||||||||
Balance at December 31, 2007: | ||||||||||||||||||||||||
Estimated amortization as net periodic postretirement benefit cost in 2010: | ||||||||||||||||||||||||
Accumulated other comprehensive income | $ | 4 | $ | 4 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Regulatory assets | 99 | 177 | 84 | 5 | 5 | 10 | ||||||||||||||||||
Total | $ | 103 | $ | 181 | $ | 84 | $ | 5 | $ | 5 | $ | 10 | ||||||||||||
Estimated amortization as net periodic postretirement benefit cost in 2009: | ||||||||||||||||||||||||
Accumulated other comprehensive income | $ | — | $ | — | $ | — | ||||||||||||||||||
Regulatory assets | 9 | 5 | 15 | |||||||||||||||||||||
Total | $ | 9 | $ | 5 | $ | 15 | ||||||||||||||||||
Accumulated Other | Accumulated Other | Regulatory | ||||||||||||||
Comprehensive Income | Regulatory Assets | Comprehensive Income | Assets | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Balance at December 31, 2006 | $ | 14 | $ | 539 | ||||||||||||
Net gain | (6 | ) | (141 | ) | ||||||||||||
Change in prior service costs | — | — | ||||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of transition obligation | — | (15 | ) | |||||||||||||
Amortization of prior service costs | — | (9 | ) | |||||||||||||
Amortization of net gain | — | (14 | ) | |||||||||||||
Total reclassification adjustments | — | (38 | ) | |||||||||||||
Total change | (6 | ) | (179 | ) | ||||||||||||
Balance at December 31, 2007 | 8 | 360 | $ | 8 | $ | 360 | ||||||||||
Net loss | 1 | 166 | 1 | 166 | ||||||||||||
Change in prior service costs | — | — | ||||||||||||||
Change in prior service costs/transition obligation | — | — | ||||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of transition obligation | — | (18 | ) | — | (18 | ) | ||||||||||
Amortization of prior service costs | (1 | ) | (11 | ) | (1 | ) | (11 | ) | ||||||||
Amortization of net gain | — | (8 | ) | — | (8 | ) | ||||||||||
Total reclassification adjustments | (1 | ) | (37 | ) | (1 | ) | (37 | ) | ||||||||
Total change | — | 129 | — | 129 | ||||||||||||
Balance at December 31, 2008 | $ | 8 | $ | 489 | 8 | 489 | ||||||||||
Net loss (gain) | — | (33 | ) | |||||||||||||
Change in prior service costs/transition obligation | (3 | ) | (56 | ) | ||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of transition obligation | — | (13 | ) | |||||||||||||
Amortization of prior service costs | — | (8 | ) | |||||||||||||
Amortization of net gain | — | (5 | ) | |||||||||||||
Total reclassification adjustments | — | (26 | ) | |||||||||||||
Total change | (3 | ) | (115 | ) | ||||||||||||
Balance at December 31, 2009 | $ | 5 | $ | 374 | ||||||||||||
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Service cost | $ | 28 | $ | 27 | $ | 30 | $ | 26 | $ | 28 | $ | 27 | ||||||||||||
Interest cost | 111 | 107 | 98 | 113 | 111 | 107 | ||||||||||||||||||
Expected return on plan assets | (59 | ) | (52 | ) | (49 | ) | (61 | ) | (59 | ) | (52 | ) | ||||||||||||
Net amortization | 31 | 38 | 43 | 25 | 31 | 38 | ||||||||||||||||||
Net postretirement cost | $ | 111 | $ | 120 | $ | 122 | $ | 103 | $ | 111 | $ | 120 |
Benefit Payments | Subsidy Receipts | Total | Benefit Payments | Subsidy Receipts | Total | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 100 | $ | (8 | ) | $ | 92 | |||||||||||||||||
2010 | 110 | (10 | ) | 100 | $ | 107 | $ | (8 | ) | $ | 99 | |||||||||||||
2011 | 120 | (11 | ) | 109 | 117 | (9 | ) | 108 | ||||||||||||||||
2012 | 127 | (13 | ) | 114 | 123 | (11 | ) | 112 | ||||||||||||||||
2013 | 134 | (14 | ) | 120 | 129 | (12 | ) | 117 | ||||||||||||||||
2014 to 2018 | 746 | (100 | ) | 646 | ||||||||||||||||||||
2014 | 134 | (14 | ) | 120 | ||||||||||||||||||||
2015 to 2019 | 722 | (93 | ) | 629 |
2008 | 2007 | 2006 | ||||||||||
Discount | 6.75 | % | 6.30 | % | 6.00 | % | ||||||
Annual salary increase | 3.75 | 3.75 | 3.50 | |||||||||
Long-term return on plan assets | 8.50 | 8.50 | 8.50 | |||||||||
2009 | 2008 | 2007 | ||||||||||
Discount rate: | ||||||||||||
Pension plans | 5.93 | % | 6.75 | % | 6.30 | % | ||||||
Other postretirement benefit plans | 5.83 | 6.75 | 6.30 | |||||||||
Annual salary increase | 4.18 | 3.75 | 3.75 | |||||||||
Long-term return on plan assets: | ||||||||||||
Pension plans | 8.50 | 8.50 | 8.50 | |||||||||
Other postretirement benefit plans | 7.51 | 7.59 | 7.58 | |||||||||
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1 Percent | 1 Percent | |||||||
Increase | Decrease | |||||||
(in millions) | ||||||||
Benefit obligation | $ | 122 | $ | 126 | ||||
Service and interest costs | 9 | 7 | ||||||
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1 Percent | 1 Percent | |||||||
Increase | Decrease | |||||||
(in millions) | ||||||||
Benefit obligation | $ | 115 | $ | 102 | ||||
Service and interest costs | 9 | 9 | ||||||
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Percent | Amount of | Accumulated | Percent | Amount of | Accumulated | |||||||||||||||||||
Ownership | Investment | Depreciation | Ownership | Investment | Depreciation | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Plant Vogtle (nuclear) | 45.7 | % | $ | 3,303 | $ | 1,918 | ||||||||||||||||||
Plant Vogtle (nuclear) Units 1 and 2 | 45.7 | % | $ | 3,285 | $ | 1,916 | ||||||||||||||||||
Plant Hatch (nuclear) | 50.1 | 953 | 521 | 50.1 | 937 | 522 | ||||||||||||||||||
Plant Miller (coal) Units 1 and 2 | 91.8 | 986 | 425 | 91.8 | 1,063 | 449 | ||||||||||||||||||
Plant Scherer (coal) Units 1 and 2 | 8.4 | 117 | 68 | 8.4 | 133 | 70 | ||||||||||||||||||
Plant Wansley (coal) | 53.5 | 552 | 189 | 53.5 | 696 | 195 | ||||||||||||||||||
Rocky Mountain (pumped storage) | 25.4 | 175 | 102 | 25.4 | 175 | 106 | ||||||||||||||||||
Intercession City (combustion turbine) | 33.3 | 12 | 3 | 33.3 | 12 | 3 | ||||||||||||||||||
Plant Stanton (combined cycle) Unit A | 65.0 | 151 | 14 | 65.0 | 151 | 20 |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Federal — | ||||||||||||||||||||||||
Current | $ | 628 | $ | 715 | $ | 465 | $ | 771 | $ | 628 | $ | 715 | ||||||||||||
Deferred | 177 | 11 | 207 | 40 | 177 | 11 | ||||||||||||||||||
805 | 726 | 672 | 811 | 805 | 726 | |||||||||||||||||||
State — | ||||||||||||||||||||||||
Current | 72 | 114 | 110 | 100 | 72 | 114 | ||||||||||||||||||
Deferred | 38 | (5 | ) | (2 | ) | (15 | ) | 38 | (5 | ) | ||||||||||||||
110 | 109 | 108 | 85 | 110 | 109 | |||||||||||||||||||
Total | $ | 915 | $ | 835 | $ | 780 | $ | 896 | $ | 915 | $ | 835 |
2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Deferred tax liabilities — | ||||||||||||||||
Accelerated depreciation | $ | 5,356 | $ | 4,878 | $ | 5,938 | $ | 5,356 | ||||||||
Property basis differences | 968 | 950 | 986 | 968 | ||||||||||||
Leveraged lease basis differences | 306 | 479 | 251 | 306 | ||||||||||||
Employee benefit obligations | 364 | 856 | 384 | 364 | ||||||||||||
Under recovered fuel clause | 516 | 443 | 271 | 516 | ||||||||||||
Premium on reacquired debt | 107 | 114 | 100 | 107 | ||||||||||||
Regulatory assets associated with employee benefit obligations | 869 | 303 | 939 | 869 | ||||||||||||
Regulatory assets associated with asset retirement obligations | 480 | 483 | 486 | 480 | ||||||||||||
Other | 132 | 140 | 216 | 132 | ||||||||||||
Total | 9,098 | 8,646 | 9,571 | 9,098 | ||||||||||||
Deferred tax assets — | ||||||||||||||||
Federal effect of state deferred taxes | 354 | 305 | 302 | 354 | ||||||||||||
State effect of federal deferred taxes | 105 | 97 | 108 | 105 | ||||||||||||
Employee benefit obligations | 1,325 | 656 | 1,435 | 1,325 | ||||||||||||
Over recovered fuel clause | 119 | — | ||||||||||||||
Other property basis differences | 144 | 147 | 132 | 144 | ||||||||||||
Deferred costs | 99 | 131 | 65 | 99 | ||||||||||||
Cost of removal | 109 | — | ||||||||||||||
Unbilled revenue | 100 | 90 | 96 | 100 | ||||||||||||
Other comprehensive losses | 82 | 48 | 81 | 82 | ||||||||||||
Regulatory liabilities associated with employee benefit obligations | — | 514 | ||||||||||||||
Asset retirement obligations | 480 | 483 | 486 | 480 | ||||||||||||
Other | 279 | 259 | 458 | 279 | ||||||||||||
Total | 2,968 | 2,730 | 3,391 | 2,968 | ||||||||||||
Total deferred tax liabilities, net | 6,130 | 5,916 | 6,180 | 6,130 | ||||||||||||
Portion included in prepaid expenses (accrued income taxes), net | (90 | ) | (106 | ) | 229 | (90 | ) | |||||||||
Deferred state tax assets | 103 | 88 | 105 | 103 | ||||||||||||
Valuation allowance | (63 | ) | (59 | ) | (59 | ) | (63 | ) | ||||||||
Accumulated deferred income taxes | $ | 6,080 | $ | 5,839 | $ | 6,455 | $ | 6,080 |
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2008 | 2007 | 2006 | ||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||||
State income tax, net of federal deduction | 2.6 | 2.7 | 2.9 | 2.1 | 2.6 | 2.7 | ||||||||||||||||||
Synthetic fuel tax credits | — | (1.4 | ) | (2.7 | ) | — | — | (1.4 | ) | |||||||||||||||
Employee stock plans dividend deduction | (1.3 | ) | (1.3 | ) | (1.4 | ) | (1.4 | ) | (1.3 | ) | (1.3 | ) | ||||||||||||
Non-deductible book depreciation | 0.8 | 0.9 | 1.0 | 0.9 | 0.8 | 0.9 | ||||||||||||||||||
Difference in prior years’ deferred and current tax rate | (0.2 | ) | (0.2 | ) | (0.3 | ) | (0.1 | ) | (0.2 | ) | (0.2 | ) | ||||||||||||
AFUDC-Equity | (1.9 | ) | (1.4 | ) | (0.7 | ) | (2.7 | ) | (1.9 | ) | (1.4 | ) | ||||||||||||
Production activities deduction | (0.4 | ) | (0.8 | ) | (0.2 | ) | (0.7 | ) | (0.4 | ) | (0.8 | ) | ||||||||||||
Leveraged lease termination | (0.9 | ) | — | — | ||||||||||||||||||||
MC Asset Recovery | 2.7 | — | — | |||||||||||||||||||||
Donations | — | (0.8 | ) | — | (0.4 | ) | — | (0.8 | ) | |||||||||||||||
Other | (1.0 | ) | (0.8 | ) | (0.9 | ) | (0.1 | ) | (1.0 | ) | (0.8 | ) | ||||||||||||
Effective income tax rate | 33.6 | % | 31.9 | % | 32.7 | % | 34.4 | % | 33.6 | % | 31.9 | % |
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2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Unrecognized tax benefits at beginning of year | $ | 264 | $ | 211 | $ | 146 | $ | 264 | $ | 211 | ||||||||||
Tax positions from current periods | 49 | 46 | 53 | 49 | 46 | |||||||||||||||
Tax positions from prior periods | 130 | 7 | 2 | 130 | 7 | |||||||||||||||
Reductions due to settlements | (297 | ) | — | — | (297 | ) | — | |||||||||||||
Reductions due to expired statute of limitations | (2 | ) | — | — | ||||||||||||||||
Balance at end of year | $ | 146 | $ | 264 | $ | 199 | $ | 146 | $ | 264 |
2008 | 2007 | Change | ||||||||||
(in millions) | ||||||||||||
Tax positions impacting the effective tax rate | $ | 143 | $ | 96 | $ | 47 | ||||||
Tax positions not impacting the effective tax rate | 3 | 168 | (165 | ) | ||||||||
Balance of unrecognized tax benefits | $ | 146 | $ | 264 | $ | (118 | ) | |||||
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2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Tax positions impacting the effective tax rate | $ | 199 | $ | 143 | $ | 96 | ||||||
Tax positions not impacting the effective tax rate | — | 3 | 168 | |||||||||
Balance of unrecognized tax benefits | $ | 199 | $ | 146 | $ | 264 | ||||||
2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Interest accrued at beginning of year | $ | 31 | $ | 27 | $ | 15 | $ | 31 | $ | 27 | ||||||||||
Interest reclassified due to settlements | (49 | ) | — | — | (49 | ) | — | |||||||||||||
Interest accrued during the year | 33 | 4 | 6 | 33 | 4 | |||||||||||||||
Balance at end of year | $ | 15 | $ | 31 | $ | 21 | $ | 15 | $ | 31 |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Capitalized leases | $ | 20 | $ | 15 | $ | 21 | $ | 20 | ||||||||
Senior notes | 565 | 1,005 | 1,090 | 565 | ||||||||||||
Other long-term debt | 32 | 33 | 2 | 32 | ||||||||||||
Preferred stock | — | 125 | ||||||||||||||
Total | $ | 617 | $ | 1,178 | $ | 1,113 | $ | 617 |
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Expires | ||||||||||||||||||||
Company | Total | Unused | 2009 | 2011 | 2012 | |||||||||||||||
(in millions) | ||||||||||||||||||||
Alabama Power | $ | 1,256 | $ | 1,256 | $ | 466 | $ | 25 | $ | 765 | ||||||||||
Georgia Power | 1,345 | 1,333 | 225 | — | 1,120 | |||||||||||||||
Gulf Power | 120 | 120 | 120 | — | — | |||||||||||||||
Mississippi Power | 99 | 99 | 99 | — | — | |||||||||||||||
Southern Company | 950 | 950 | — | — | 950 | |||||||||||||||
Southern Power | 400 | 400 | — | — | 400 | |||||||||||||||
Other | 60 | 60 | 60 | — | — | |||||||||||||||
Total | $ | 4,230 | $ | 4,218 | $ | 970 | $ | 25 | $ | 3,235 | ||||||||||
Executable | ||||||||||||||||||||||||||||
Term-Loans | Expires | |||||||||||||||||||||||||||
One | Two | |||||||||||||||||||||||||||
Company | Total | Unused | Year | Years | 2010 | 2011 | 2012 | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Southern Company | $ | 950 | $ | 950 | $ | — | $ | — | $ | — | $ | — | $ | 950 | ||||||||||||||
Alabama Power | 1,271 | 1,271 | 372 | — | 481 | 25 | 765 | |||||||||||||||||||||
Georgia Power | 1,715 | 1,703 | — | 40 | 595 | — | 1,120 | |||||||||||||||||||||
Gulf Power | 220 | 220 | 70 | — | 220 | — | — | |||||||||||||||||||||
Mississippi Power | 156 | 156 | 15 | 41 | 156 | — | — | |||||||||||||||||||||
Southern Power | 400 | 400 | — | — | — | — | 400 | |||||||||||||||||||||
Other | 60 | 60 | 60 | — | 60 | — | — | |||||||||||||||||||||
Total | $ | 4,772 | $ | 4,760 | $ | 517 | $ | 81 | $ | 1,512 | $ | 25 | $ | 3,235 | ||||||||||||||
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2008 | 2007 | |||||||
(in millions) | ||||||||
Regulatory hedges | $ | (288 | ) | $ | — | |||
Cash flow hedges | ( 1 | ) | 1 | |||||
Non-accounting hedges | 4 | 3 | ||||||
Total fair value | $ | (285 | ) | $ | 4 | |||
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Weighted | Fair Value | |||||||||||||||||||
Notional | Variable Rate | Average | Hedge Maturity | Gain (Loss) | ||||||||||||||||
Amount | Received | Fixed Rate Paid | Date | December 31, 2008 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Cash Flow Hedges on Existing Debt | ||||||||||||||||||||
Alabama Power* | $ | 576 | SIFMA Index | 2.69 | % | February 2010 | $ | (11 | ) | |||||||||||
Georgia Power* | 301 | SIFMA Index | 2.22 | % | December 2009 | (3 | ) | |||||||||||||
Georgia Power | 150 | 3-month LIBOR | 2.63 | % | February 2009 | (- | ) | |||||||||||||
Georgia Power | 300 | 1-month LIBOR | 2.43 | % | April 2010 | (5 | ) | |||||||||||||
Cash Flow Hedges on Forecasted Debt | ||||||||||||||||||||
Georgia Power | 100 | 3-month LIBOR | 4.98 | % | February 2019 | (21 | ) |
II-95
Redeemable Preferred Stock | ||||
of Subsidiaries | ||||
(in millions) | ||||
Balance at December 31, 2006 | $ | 498 | ||
Issued | — | |||
Redeemed | — | |||
Balance at December 31, 2007 | $ | 498 | ||
Issued | — | |||
Redeemed | (125 | ) | ||
Other | 2 | |||
Balance at December 31, 2008 | $ | 375 | ||
Issued | — | |||
Redeemed | — | |||
Balance at December 31, 2009 | $ | 375 | ||
II-81
II-96
Commitments | Commitments | |||||||||||||||||||||||||||||||||||
Natural Gas | Coal | Nuclear Fuel | Purchased Power | Natural Gas | Coal | Nuclear Fuel | Biomass Fuel | Purchased Power* | ||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||||||
2009 | $ | 1,507 | $ | 4,608 | $ | 187 | $ | 217 | ||||||||||||||||||||||||||||
2010 | 969 | 3,333 | 151 | 239 | $ | 1,349 | $ | 4,490 | $ | 271 | $ | — | $ | 253 | ||||||||||||||||||||||
2011 | 640 | 2,666 | 150 | 216 | 1,266 | 3,135 | 157 | — | 258 | |||||||||||||||||||||||||||
2012 | 611 | 1,370 | 152 | 222 | 926 | 1,572 | 166 | 17 | 266 | |||||||||||||||||||||||||||
2013 | 631 | 1,232 | 123 | 191 | 816 | 1,063 | 148 | 17 | 235 | |||||||||||||||||||||||||||
2014 and thereafter | 3,798 | 3,421 | 43 | 1,938 | ||||||||||||||||||||||||||||||||
2014 | 688 | 850 | 83 | 18 | 267 | |||||||||||||||||||||||||||||||
2015 and thereafter | 4,153 | 2,508 | 297 | 128 | 2,742 | |||||||||||||||||||||||||||||||
Total | $ | 8,156 | $ | 16,630 | $ | 806 | $ | 3,023 | $ | 9,198 | $ | 13,618 | $ | 1,122 | $ | 180 | $ | 4,021 |
* | Certain PPAs reflected in the table are accounted for as operating leases. |
II-82
II-97
Minimum Lease Payments | Minimum Lease Payments | |||||||||||||||||||||||||||||||
Plant Daniel | Barges & Rail Cars | Other | Total | Plant Daniel | Barges & Rail Cars | Other | Total | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
2009 | $ | 29 | $ | 66 | $ | 48 | $ | 143 | ||||||||||||||||||||||||
2010 | 28 | 46 | 42 | 116 | $ | 28 | $ | 70 | $ | 46 | $ | 144 | ||||||||||||||||||||
2011 | 28 | 34 | 34 | 96 | 28 | 57 | 38 | 123 | ||||||||||||||||||||||||
2012 | — | 21 | 25 | 46 | — | 40 | 29 | 69 | ||||||||||||||||||||||||
2013 | — | 18 | 17 | 35 | — | 32 | 22 | 54 | ||||||||||||||||||||||||
2014 and thereafter | — | 40 | 106 | 146 | ||||||||||||||||||||||||||||
2014 | — | 27 | 18 | 45 | ||||||||||||||||||||||||||||
2015 and thereafter | — | 28 | 96 | 124 | ||||||||||||||||||||||||||||
Total | $ | 85 | $ | 225 | $ | 272 | $ | 582 | $ | 56 | $ | 254 | $ | 249 | $ | 559 |
II-83
II-98
Year Ended December 31 | 2008 | 2007 | 2006 | 2009 | 2008 | 2007 | ||||||||||||||||||
Expected volatility | 13.1 | % | 14.8 | % | 16.9 | % | 15.6 | % | 13.1 | % | 14.8 | % | ||||||||||||
Expected term(in years) | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | ||||||||||||||||||
Interest rate | 2.8 | % | 4.6 | % | 4.6 | % | 1.9 | % | 2.8 | % | 4.6 | % | ||||||||||||
Dividend yield | 4.5 | % | 4.3 | % | 4.4 | % | 5.4 | % | 4.5 | % | 4.3 | % | ||||||||||||
Weighted average grant-date fair value | $ | 2.37 | $ | 4.12 | $ | 4.15 | $1.80 | $ | 2.37 | $ | 4.12 |
Shares Subject | Weighted Average | Shares Subject | Weighted Average | |||||||||||||
To Option | Exercise Price | To Option | Exercise Price | |||||||||||||
Outstanding at December 31, 2007 | 34,074,622 | $ | 30.77 | |||||||||||||
Outstanding at December 31, 2008 | 36,941,273 | $ | 32.09 | |||||||||||||
Granted | 7,084,902 | 35.78 | 12,292,239 | 31.38 | ||||||||||||
Exercised | (4,112,651 | ) | 27.42 | (879,555 | ) | 21.97 | ||||||||||
Cancelled | (105,600 | ) | 34.70 | (106,638 | ) | 32.48 | ||||||||||
Outstanding at December 31, 2008 | 36,941,273 | $ | 32.09 | |||||||||||||
Outstanding at December 31, 2009 | 48,247,319 | $ | 32.10 | |||||||||||||
Exercisable at December 31, 2008 | 24,194,943 | $ | 30.20 | |||||||||||||
Exercisable at December 31, 2009 | 30,209,272 | $ | 31.57 |
II-84
II-99
Average Common Stock Shares | Average Common Stock Shares | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
As reported shares | 771,039 | 756,350 | 743,146 | 794,795 | 771,039 | 756,350 | ||||||||||||||||||
Effect of options | 3,809 | 4,666 | 4,739 | 1,620 | 3,809 | 4,666 | ||||||||||||||||||
Diluted shares | 774,848 | 761,016 | 747,885 | 796,415 | 774,848 | 761,016 |
II-85
II-100
• | Level 1 consists of observable market data in an active market for identical assets or liabilities. | |
• | Level 2 consists of observable market data, other than that included in Level 1, that is either directly or indirectly observable. | |
• | Level 3 consists of unobservable market data. The input may reflect the assumptions of the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’s own assumptions are the best available information. |
II-101II-86
At December 31, 2008: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||||||||||||||
in Active | Significant | |||||||||||||||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Energy-related derivatives | $ | — | $ | 22 | $ | — | $ | 22 | $ | — | $ | 7 | $ | — | $ | 7 | ||||||||||||||||
Nuclear decommissioning trusts(a) | 498 | 364 | — | 862 | ||||||||||||||||||||||||||||
Interest rate derivatives | — | 3 | — | 3 | ||||||||||||||||||||||||||||
Nuclear decommissioning trusts:(a) | ||||||||||||||||||||||||||||||||
Domestic equity | 724 | 50 | — | 774 | ||||||||||||||||||||||||||||
U.S. Treasury and government agency securities | 11 | 36 | — | 47 | ||||||||||||||||||||||||||||
Municipal bonds | — | 23 | — | 23 | ||||||||||||||||||||||||||||
Corporate bonds | — | 137 | — | 137 | ||||||||||||||||||||||||||||
Mortgage and asset backed securities | — | 65 | — | 65 | ||||||||||||||||||||||||||||
Other | — | 22 | — | 22 | ||||||||||||||||||||||||||||
Cash equivalents and restricted cash | 469 | — | — | 469 | 623 | — | — | 623 | ||||||||||||||||||||||||
Other | 2 | 46 | 35 | 83 | 3 | 48 | 35 | 86 | ||||||||||||||||||||||||
Total fair value | $ | 969 | $ | 432 | $ | 35 | $ | 1,436 | ||||||||||||||||||||||||
Total | $ | 1,361 | $ | 391 | $ | 35 | $ | 1,787 | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Energy-related derivatives | $ | — | $ | 307 | $ | — | $ | 307 | $ | — | $ | 185 | $ | — | $ | 185 | ||||||||||||||||
Interest rate derivatives | — | 40 | — | 40 | — | 6 | — | 6 | ||||||||||||||||||||||||
Total fair value | $ | — | $ | 347 | $ | — | $ | 347 | ||||||||||||||||||||||||
Total | $ | — | $ | 191 | $ | — | $ | 191 |
(a) | Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases. |
Level 3 | ||||
Other | ||||
(in millions) | ||||
Beginning balance at December 31, 2007 | $ | 50 | ||
Total gains (losses) — realized/unrealized: | ||||
Included in other comprehensive income | (12 | ) | ||
Purchases, issuances and settlements | 1 | |||
Transfers in and/or out of Level 3 | (4 | ) | ||
Ending balance at December 31, 2008 | $ | 35 | ||
Fair | Unfunded | Redemption | Redemption | |||||||||||||||
As of December 31, 2009: | Value | Commitments | Frequency | Notice Period | ||||||||||||||
(in millions) | ||||||||||||||||||
Nuclear decommissioning trusts: | ||||||||||||||||||
Corporate bonds – commingled funds | $ | 14 | None | Daily | 1 to 3 days | |||||||||||||
Other – commingled funds | 13 | None | Daily | Not applicable | ||||||||||||||
Trust owned life insurance | 78 | None | Daily | 15 days | ||||||||||||||
Cash equivalents and restricted cash: | ||||||||||||||||||
Money market funds | 623 | None | Daily | Not applicable | ||||||||||||||
Other: | ||||||||||||||||||
Deferred compensation — money market funds | 3 | None | Daily | Not applicable |
II-102II-87
Level 3 | ||||
Other | ||||
(in millions) | ||||
Beginning balance at December 31, 2008 | $ | 35 | ||
Total gains (losses) — realized/unrealized: | ||||
Included in earnings | (3 | ) | ||
Included in other comprehensive income | 3 | |||
Ending balance at December 31, 2009 | $ | 35 | ||
Carrying Amount | Fair Value | |||||||
(in millions) | ||||||||
Long-term debt: | ||||||||
2009 | $ | 19,145 | $ | 19,567 | ||||
2008 | $ | 17,327 | $ | 17,114 |
II-88
• | Regulatory Hedges– Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the traditional operating companies’ fuel hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the respective fuel cost recovery clauses. | |
• | Cash Flow Hedges– Gains and losses on energy-related derivatives designated as cash flow hedges are used to hedge anticipated purchases and sales and are initially deferred in other comprehensive income (OCI) before being recognized in income in the same period as the hedged transactions are reflected in earnings. | |
• | Not Designated– Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred. |
II-89
Power | Gas | |||||||||||||||||||
Longest | Longest | Net | Longest | Longest | ||||||||||||||||
Net Sold | Hedge | Non-Hedge | Purchased | Hedge | Non-Hedge | |||||||||||||||
Megawatt-hours | Date | Date | mmBtu | Date | Date | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
2.6 | 2010 | 2010 | 154 | * | 2014 | 2014 |
* | Includes location basis of 2 million British thermal units (mmBtu). |
Weighted | Fair Value | |||||||||||||||||||
Average | Gain (Loss) | |||||||||||||||||||
Notional | Variable Rate | Fixed Rate | Hedge Maturity | December 31, | ||||||||||||||||
Amount | Received | Paid | Date | 2009 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Cash flow hedges of existing debt | ||||||||||||||||||||
$ | 576 | SIFMA* Index | 2.69 | % | February 2010 | $ | (4 | ) | ||||||||||||
300 | 1-month LIBOR | 2.43 | % | April 2010 | (2 | ) | ||||||||||||||
Cash flow hedges on forecasted debt | ||||||||||||||||||||
100 | 3-month LIBOR | 3.79 | % | April 2020 | 3 | |||||||||||||||
Total | $ | 976 | $ | (3 | ) | |||||||||||||||
* | Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA) |
II-90
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
Balance Sheet | Balance Sheet | |||||||||||||||||||||||
Derivative Category | Location | 2009 | 2008 | Location | 2009 | 2008 | ||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Derivatives designated as hedging instruments for regulatory purposes | ||||||||||||||||||||||||
Energy-related derivatives: | Other current assets | $ | 1 | $ | 10 | Liabilities from risk management activities | $ | 111 | $ | 215 | ||||||||||||||
Other deferred charges and assets | 1 | — | Other deferred credits and liabilities | 66 | 83 | |||||||||||||||||||
Total derivatives designated as hedging instruments for regulatory purposes | $ | 2 | $ | 10 | $ | 177 | $ | 298 | ||||||||||||||||
Derivatives designated as hedging instruments in cash flow hedges | ||||||||||||||||||||||||
Energy-related derivatives: | Other current assets | $ | 3 | $ | — | Liabilities from risk management activities | $ | 5 | $ | 1 | ||||||||||||||
Interest rate derivatives: | Other current assets | 3 | — | Liabilities from risk management activities | 6 | 37 | ||||||||||||||||||
Other deferred charges and assets | — | — | Other deferred credits and liabilities | — | 3 | |||||||||||||||||||
Total derivatives designated as hedging instruments in cash flow hedges | $ | 6 | $ | — | $ | 11 | $ | 41 | ||||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||||||
Energy-related derivatives: | Other current assets | $ | 2 | $ | 12 | Liabilities from risk management activities | $ | 3 | $ | 8 | ||||||||||||||
Total | $ | 10 | $ | 22 | $ | 191 | $ | 347 | ||||||||||||||||
All derivative instruments are measured at fair value. See Note 10 for additional information. At December 31, 2009 and 2008, the pre-tax effect of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred on the balance sheets were as follows: | ||||||||||||||||||||||||
Unrealized Losses | Unrealized Gains | |||||||||||||||||||||||
Balance Sheet | Balance Sheet | |||||||||||||||||||||||
Derivative Category | Location | 2009 | 2008 | Location | 2009 | 2008 | ||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Energy-related derivatives: | Other regulatory assets, current | $ | (111 | ) | $ | (215 | ) | Other regulatory liabilities, current | $ | 1 | $ | 10 | ||||||||||||
Other regulatory assets, deferred | (66 | ) | (83 | ) | Other regulatory liabilities, deferred | 1 | — | |||||||||||||||||
Total energy-related derivative gains (losses) | $ | (177 | ) | $ | (298 | ) | $ | 2 | $ | 10 | ||||||||||||||
II-91
Gain (Loss) Recognized in | Gain (Loss) Reclassified from Accumulated OCI into Income | |||||||||||||||||||||||
Derivatives in Cash Flow | OCI on Derivative | (Effective Portion) | ||||||||||||||||||||||
Hedging Relationships | (Effective Portion) | Amount | ||||||||||||||||||||||
Derivative Category | 2009 | 2008 | 2007 | Statements of Income Location | 2009 | 2008 | 2007 | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Energy-related derivatives | $(2) | $ | (1 | ) | $ | (2 | ) | Fuel | $— | $ | — | $ | — | |||||||||||
Interest rate derivatives | (5) | (47 | ) | (7 | ) | Interest expense | (46) | (19 | ) | (15 | ) | |||||||||||||
Total | $(7) | $ | (48 | ) | $ | (9 | ) | $(46) | $ | (19 | ) | $ | (15 | ) | ||||||||||
Derivatives not Designated | Unrealized Gain (Loss) Recognized in Income | |||||||||||||
as Hedging Instruments | Amount | |||||||||||||
Derivative Category | Statements of Income Location | 2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||||
Energy-related derivatives: | Wholesale revenues | $ | 5 | $ | (2 | ) | $ | — | ||||||
Fuel | (6 | ) | 5 | — | ||||||||||
Purchased power | (4 | ) | (2 | ) | — | |||||||||
Other income (expense), net | — | — | 30 | * | ||||||||||
Total | $ | (5 | ) | $ | 1 | $ | 30 | |||||||
* | Includes a $27 million unrealized gain related to derivatives in place to reduce exposure to a phase-out of certain income tax credits related to synthetic fuel production in 2007. |
II-92
Electric Utilities | ||||||||||||||||||||||||||||
Traditional | ||||||||||||||||||||||||||||
Operating | Southern | All | ||||||||||||||||||||||||||
Companies | Power | Eliminations | Total | Other | Eliminations | Consolidated | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
Operating revenues | $ | 15,304 | $ | 947 | $ | (609 | ) | $ | 15,642 | $ | 165 | $ | (64 | ) | $ | 15,743 | ||||||||||||
Depreciation and amortization | 1,378 | 98 | — | 1,476 | 27 | — | 1,503 | |||||||||||||||||||||
Interest income | 21 | — | — | 21 | 3 | (1 | ) | 23 | ||||||||||||||||||||
Interest expense | 749 | 85 | — | 834 | 71 | — | 905 | |||||||||||||||||||||
Income taxes | 902 | 86 | — | 988 | (92 | ) | — | 896 | ||||||||||||||||||||
Segment net income (loss)* | 1,679 | 156 | — | 1,835 | (193 | ) | 1 | 1,643 | ||||||||||||||||||||
Total assets | 48,403 | 3,043 | (143 | ) | 51,303 | 1,223 | (480 | ) | 52,046 | |||||||||||||||||||
Gross property additions | 4,568 | 331 | — | 4,899 | 14 | — | 4,913 | |||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||
Operating revenues | $ | 16,521 | $ | 1,314 | $ | (835 | ) | $ | 17,000 | $ | 182 | $ | (55 | ) | $ | 17,127 | ||||||||||||
Depreciation and amortization | 1,325 | 89 | — | 1,414 | 29 | — | 1,443 | |||||||||||||||||||||
Interest income | 32 | 1 | — | 33 | — | — | 33 | |||||||||||||||||||||
Interest expense | 689 | 83 | — | 772 | 94 | — | 866 | |||||||||||||||||||||
Income taxes | 944 | 93 | — | 1,037 | (122 | ) | — | 915 | ||||||||||||||||||||
Segment net income (loss)* | 1,703 | 144 | — | 1,847 | (104 | ) | (1 | ) | 1,742 | |||||||||||||||||||
Total assets | 44,794 | 2,813 | (139 | ) | 47,468 | 1,407 | (528 | ) | 48,347 | |||||||||||||||||||
Gross property additions | 4,058 | 50 | — | 4,108 | 14 | — | 4,122 | |||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||
Operating revenues | $ | 14,851 | $ | 972 | $ | (683 | ) | $ | 15,140 | $ | 380 | $ | (167 | ) | $ | 15,353 | ||||||||||||
Depreciation and amortization | 1,141 | 74 | — | 1,215 | 30 | — | 1,245 | |||||||||||||||||||||
Interest income | 31 | 1 | — | 32 | 14 | (1 | ) | 45 | ||||||||||||||||||||
Interest expense | 685 | 79 | — | 764 | 122 | — | 886 | |||||||||||||||||||||
Income taxes | 866 | 84 | — | 950 | (115 | ) | — | 835 | ||||||||||||||||||||
Segment net income (loss)* | 1,582 | 132 | — | 1,714 | 22 | (2 | ) | 1,734 | ||||||||||||||||||||
Total assets | 41,812 | 2,769 | (122 | ) | 44,459 | 1,767 | (437 | ) | 45,789 | |||||||||||||||||||
Gross property additions | 3,465 | 184 | (4 | ) | 3,645 | 13 | — | 3,658 | ||||||||||||||||||||
* | After dividends on preferred and preference stock of subsidiaries |
Electric Utilities’ Revenues | ||||||||||||||||
Year | Retail | Wholesale | Other | Total | ||||||||||||
(in millions) | ||||||||||||||||
2009 | $ | 13,307 | $ | 1,802 | $ | 533 | $ | 15,642 | ||||||||
2008 | 14,055 | 2,400 | 545 | 17,000 | ||||||||||||
2007 | 12,639 | 1,988 | 513 | 15,140 | ||||||||||||
II-103II-93
Electric Utilities | ||||||||||||||||||||||||||||
Traditional | ||||||||||||||||||||||||||||
Operating | Southern | All | ||||||||||||||||||||||||||
Companies | Power | Eliminations | Total | Other | Eliminations | Consolidated | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||
Operating revenues | $ | 16,521 | $ | 1,314 | $ | (835 | ) | $ | 17,000 | $ | 182 | $ | (55 | ) | $ | 17,127 | ||||||||||||
Depreciation and amortization | 1,325 | 89 | — | 1,414 | 29 | — | 1,443 | |||||||||||||||||||||
Interest income | 32 | 1 | — | 33 | — | — | 33 | |||||||||||||||||||||
Interest expense | 689 | 83 | — | 772 | 94 | — | 866 | |||||||||||||||||||||
Income taxes | 944 | 93 | — | 1,037 | (122 | ) | — | 915 | ||||||||||||||||||||
Segment net income (loss) | 1,703 | 144 | — | 1,847 | (104 | ) | (1 | ) | 1,742 | |||||||||||||||||||
Total assets | 44,794 | 2,813 | (139 | ) | 47,468 | 1,407 | (528 | ) | 48,347 | |||||||||||||||||||
Gross property additions | 4,058 | 50 | — | 4,108 | 14 | — | 4,122 | |||||||||||||||||||||
Electric Utilities | ||||||||||||||||||||||||||||
Traditional | ||||||||||||||||||||||||||||
Operating | Southern | All | ||||||||||||||||||||||||||
Companies | Power | Eliminations | Total | Other | Eliminations | Consolidated | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||
Operating revenues | $ | 14,851 | $ | 972 | $ | (683 | ) | $ | 15,140 | $ | 380 | $ | (167 | ) | $ | 15,353 | ||||||||||||
Depreciation and amortization | 1,141 | 74 | — | 1,215 | 30 | — | 1,245 | |||||||||||||||||||||
Interest income | 31 | 1 | — | 32 | 14 | (1 | ) | 45 | ||||||||||||||||||||
Interest expense | 685 | 79 | — | 764 | 122 | — | 886 | |||||||||||||||||||||
Income taxes | 866 | 84 | — | 950 | (115 | ) | — | 835 | ||||||||||||||||||||
Segment net income (loss) | 1,582 | 132 | — | 1,714 | 22 | (2 | ) | 1,734 | ||||||||||||||||||||
Total assets | 41,812 | 2,769 | (122 | ) | 44,459 | 1,767 | (437 | ) | 45,789 | |||||||||||||||||||
Gross property additions | 3,465 | 184 | (4 | ) | 3,645 | 13 | — | 3,658 | ||||||||||||||||||||
Electric Utilities | ||||||||||||||||||||||||||||
Traditional | ||||||||||||||||||||||||||||
Operating | Southern | All | ||||||||||||||||||||||||||
Companies | Power | Eliminations | Total | Other | Eliminations | Consolidated | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||
Operating revenues | $ | 13,920 | $ | 777 | $ | (609 | ) | $ | 14,088 | $ | 413 | $ | (145 | ) | $ | 14,356 | ||||||||||||
Depreciation and amortization | 1,098 | 66 | — | 1,164 | 37 | (1 | ) | 1,200 | ||||||||||||||||||||
Interest income | 33 | 2 | — | 35 | 7 | (1 | ) | 41 | ||||||||||||||||||||
Interest expense | 637 | 80 | — | 717 | 149 | — | 866 | |||||||||||||||||||||
Income taxes | 867 | 82 | — | 949 | (169 | ) | — | 780 | ||||||||||||||||||||
Segment net income (loss) | 1,462 | 124 | — | 1,586 | (11 | ) | (2 | ) | 1,573 | |||||||||||||||||||
Total assets | 38,825 | 2,691 | (110 | ) | 41,406 | 1,933 | (481 | ) | 42,858 | |||||||||||||||||||
Gross property additions | 2,561 | 501 | (16 | ) | 3,046 | 26 | — | 3,072 | ||||||||||||||||||||
Electric Utilities’ Revenues | ||||||||||||||||
Year | Retail | Wholesale | Other | Total | ||||||||||||
(in millions) | ||||||||||||||||
2008 | $ | 14,055 | $ | 2,400 | $ | 545 | $ | 17,000 | ||||||||
2007 | 12,639 | 1,988 | 513 | 15,140 | ||||||||||||
2006 | 11,801 | 1,822 | 465 | 14,088 | ||||||||||||
II-104
Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income After | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per Common Share | Dividends on | Per Common Share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading | Preferred and | Trading | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating | Operating | Consolidated | Basic | Price Range | Operating | Operating | Preference Stock | Basic | Price Range | ||||||||||||||||||||||||||||||||||||||||||||||||
Quarter Ended | Revenues | Income | Net Income | Earnings | Dividends | High | Low | Revenues | Income | of Subsidiaries | Earnings | Dividends | High | Low | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 2009 | $ | 3,666 | $ | 490 | $ | 126 | * | $ | 0.16 | * | $ | 0.4200 | $ | 37.62 | $ | 26.48 | |||||||||||||||||||||||||||||||||||||||||
June 2009 | 3,885 | 886 | 478 | 0.61 | 0.4375 | 32.05 | 27.19 | ||||||||||||||||||||||||||||||||||||||||||||||||||
September 2009 | 4,682 | 1,415 | 790 | 0.99 | 0.4375 | 32.67 | 30.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||
December 2009 | 3,510 | 477 | 249 | 0.31 | 0.4375 | 34.47 | 30.89 | ||||||||||||||||||||||||||||||||||||||||||||||||||
March 2008 | $ | 3,683 | $ | 708 | $ | 359 | $ | 0.47 | $ | 0.4025 | $ | 40.60 | $ | 33.71 | $ | 3,683 | $ | 708 | $ | 359 | $ | 0.47 | $ | 0.4025 | $ | 40.60 | $ | 33.71 | |||||||||||||||||||||||||||||
June 2008 | 4,215 | 924 | 417 | 0.54 | 0.4200 | 37.81 | 34.28 | 4,215 | 924 | 417 | 0.54 | 0.4200 | 37.81 | 34.28 | |||||||||||||||||||||||||||||||||||||||||||
September 2008 | 5,427 | 1,405 | 780 | 1.01 | 0.4200 | 40.00 | 34.46 | 5,427 | 1,405 | 780 | 1.01 | 0.4200 | 40.00 | 34.46 | |||||||||||||||||||||||||||||||||||||||||||
December 2008 | 3,802 | 469 | 186 | 0.24 | 0.4200 | 38.18 | 29.82 | 3,802 | 469 | 186 | 0.24 | 0.4200 | 38.18 | 29.82 | |||||||||||||||||||||||||||||||||||||||||||
March 2007 | $ | 3,409 | $ | 691 | $ | 339 | $ | 0.45 | $ | 0.3875 | $ | 37.25 | $ | 34.85 | |||||||||||||||||||||||||||||||||||||||||||
June 2007 | 3,772 | 844 | 429 | 0.57 | 0.4025 | 38.90 | 33.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||
September 2007 | 4,832 | 1,382 | 762 | 1.00 | 0.4025 | 37.70 | 33.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||
December 2007 | 3,340 | 409 | 204 | 0.27 | 0.4025 | 39.35 | 35.15 |
* | Southern Company’s MC Asset Recovery litigation settlement reduced earnings by $202 million, or 25 cents per share, during the first quarter of 2009. |
II-105II-94
2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Operating Revenues (in millions) | $ | 17,127 | $ | 15,353 | $ | 14,356 | $ | 13,554 | $ | 11,729 | $ | 15,743 | $ | 17,127 | $ | 15,353 | $ | 14,356 | $ | 13,554 | ||||||||||||||||||||
Total Assets (in millions) | $ | 48,347 | $ | 45,789 | $ | 42,858 | $ | 39,877 | $ | 36,955 | $ | 52,046 | $ | 48,347 | $ | 45,789 | $ | 42,858 | $ | 39,877 | ||||||||||||||||||||
Gross Property Additions (in millions) | $ | 4,122 | $ | 3,658 | $ | 3,072 | $ | 2,476 | $ | 2,099 | $ | 4,913 | $ | 4,122 | $ | 3,658 | $ | 3,072 | $ | 2,476 | ||||||||||||||||||||
Return on Average Common Equity (percent) | 13.57 | 14.60 | 14.26 | 15.17 | 15.38 | 11.67 | 13.57 | 14.60 | 14.26 | 15.17 | ||||||||||||||||||||||||||||||
Cash Dividends Paid Per Share of Common Stock | $ | 1.6625 | $ | 1.595 | $ | 1.535 | $ | 1.475 | $ | 1.415 | $ | 1.7325 | $ | 1.6625 | $ | 1.595 | $ | 1.535 | $ | 1.475 | ||||||||||||||||||||
Consolidated Net Income (in millions): | $ | 1,742 | $ | 1,734 | $ | 1,573 | $ | 1,591 | $ | 1,532 | ||||||||||||||||||||||||||||||
Consolidated Net Income After Dividends on Preferred and Preference Stock of Subsidiaries (in millions) | $ | 1,643 | $ | 1,742 | $ | 1,734 | $ | 1,573 | $ | 1,591 | ||||||||||||||||||||||||||||||
Earnings Per Share — | ||||||||||||||||||||||||||||||||||||||||
Basic | $ | 2.26 | $ | 2.29 | $ | 2.12 | $ | 2.14 | $ | 2.07 | $ | 2.07 | $ | 2.26 | $ | 2.29 | $ | 2.12 | $ | 2.14 | ||||||||||||||||||||
Diluted | 2.25 | 2.28 | 2.10 | 2.13 | 2.06 | 2.06 | 2.25 | 2.28 | 2.10 | 2.13 | ||||||||||||||||||||||||||||||
Capitalization (in millions): | ||||||||||||||||||||||||||||||||||||||||
Common stock equity | $ | 13,276 | $ | 12,385 | $ | 11,371 | $ | 10,689 | $ | 10,278 | $ | 14,878 | $ | 13,276 | $ | 12,385 | $ | 11,371 | $ | 10,689 | ||||||||||||||||||||
Preferred and preference stock | 1,082 | 1,080 | 744 | 596 | 561 | |||||||||||||||||||||||||||||||||||
Preferred and preference stock of subsidiaries | 707 | 707 | 707 | 246 | 98 | |||||||||||||||||||||||||||||||||||
Redeemable preferred stock of subsidiaries | 375 | 375 | 373 | 498 | 498 | |||||||||||||||||||||||||||||||||||
Long-term debt | 16,816 | 14,143 | 12,503 | 12,846 | 12,449 | 18,131 | 16,816 | 14,143 | 12,503 | 12,846 | ||||||||||||||||||||||||||||||
Total (excluding amounts due within one year) | $ | 31,174 | $ | 27,608 | $ | 24,618 | $ | 24,131 | $ | 23,288 | $ | 34,091 | $ | 31,174 | $ | 27,608 | $ | 24,618 | $ | 24,131 | ||||||||||||||||||||
Capitalization Ratios (percent): | ||||||||||||||||||||||||||||||||||||||||
Common stock equity | 42.6 | 44.9 | 46.2 | 44.3 | 44.1 | 43.6 | 42.6 | 44.9 | 46.2 | 44.3 | ||||||||||||||||||||||||||||||
Preferred and preference stock | 3.5 | 3.9 | 3.0 | 2.5 | 2.4 | |||||||||||||||||||||||||||||||||||
Preferred and preference stock of subsidiaries | 2.1 | 2.3 | 2.6 | 1.0 | 0.4 | |||||||||||||||||||||||||||||||||||
Redeemable preferred stock of subsidiaries | 1.1 | 1.2 | 1.3 | 2.0 | 2.1 | |||||||||||||||||||||||||||||||||||
Long-term debt | 53.9 | 51.2 | 50.8 | 53.2 | 53.5 | 53.2 | 53.9 | 51.2 | 50.8 | 53.2 | ||||||||||||||||||||||||||||||
Total (excluding amounts due within one year) | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||||||||||||||||||||
Other Common Stock Data: | ||||||||||||||||||||||||||||||||||||||||
Book value per share | $ | 17.08 | $ | 16.23 | $ | 15.24 | $ | 14.42 | $ | 13.86 | $ | 18.15 | $ | 17.08 | $ | 16.23 | $ | 15.24 | $ | 14.42 | ||||||||||||||||||||
Market price per share: | ||||||||||||||||||||||||||||||||||||||||
High | $ | 40.60 | $ | 39.35 | $ | 37.40 | $ | 36.47 | $ | 33.96 | $ | 37.62 | $ | 40.60 | $ | 39.35 | $ | 37.40 | $ | 36.47 | ||||||||||||||||||||
Low | 29.82 | 33.16 | 30.48 | 31.14 | 27.44 | 26.48 | 29.82 | 33.16 | 30.48 | 31.14 | ||||||||||||||||||||||||||||||
Close (year-end) | 37.00 | 38.75 | 36.86 | 34.53 | 33.52 | 33.32 | 37.00 | 38.75 | 36.86 | 34.53 | ||||||||||||||||||||||||||||||
Market-to-book ratio (year-end) (percent) | 216.6 | 238.8 | 241.9 | 239.5 | 241.8 | 183.6 | 216.6 | 238.8 | 241.9 | 239.5 | ||||||||||||||||||||||||||||||
Price-earnings ratio (year-end) (times) | 16.4 | 16.9 | 17.4 | 16.1 | 16.2 | 16.1 | 16.4 | 16.9 | 17.4 | 16.1 | ||||||||||||||||||||||||||||||
Dividends paid (in millions) | $ | 1,279 | $ | 1,204 | $ | 1,140 | $ | 1,098 | $ | 1,044 | $ | 1,369 | $ | 1,279 | $ | 1,204 | $ | 1,140 | $ | 1,098 | ||||||||||||||||||||
Dividend yield (year-end) (percent) | 4.5 | 4.1 | 4.2 | 4.3 | 4.2 | 5.2 | 4.5 | 4.1 | 4.2 | 4.3 | ||||||||||||||||||||||||||||||
Dividend payout ratio (percent) | 73.5 | 69.5 | 72.4 | 69.0 | 68.3 | 83.3 | 73.5 | 69.5 | 72.4 | 69.0 | ||||||||||||||||||||||||||||||
Shares outstanding (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Average | 771,039 | 756,350 | 743,146 | 743,927 | 738,879 | 794,795 | 771,039 | 756,350 | 743,146 | 743,927 | ||||||||||||||||||||||||||||||
Year-end | 777,192 | 763,104 | 746,270 | 741,448 | 741,495 | 819,647 | 777,192 | 763,104 | 746,270 | 741,448 | ||||||||||||||||||||||||||||||
Stockholders of record (year-end) | 97,324 | 102,903 | 110,259 | 118,285 | 125,975 | 92,799 | 97,324 | 102,903 | 110,259 | 118,285 | ||||||||||||||||||||||||||||||
Traditional Operating Company Customers (year-end) (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Residential | 3,785 | 3,756 | 3,706 | 3,642 | 3,600 | 3,798 | 3,785 | 3,756 | 3,706 | 3,642 | ||||||||||||||||||||||||||||||
Commercial | 594 | 600 | 596 | 586 | 578 | 580 | 594 | 600 | 596 | 586 | ||||||||||||||||||||||||||||||
Industrial | 15 | 15 | 15 | 15 | 14 | 15 | 15 | 15 | 15 | 15 | ||||||||||||||||||||||||||||||
Other | 8 | 6 | 5 | 5 | 5 | 9 | 8 | 6 | 5 | 5 | ||||||||||||||||||||||||||||||
Total | 4,402 | 4,377 | 4,322 | 4,248 | 4,197 | 4,402 | 4,402 | 4,377 | 4,322 | 4,248 | ||||||||||||||||||||||||||||||
Employees (year-end) | 27,276 | 26,742 | 26,091 | 25,554 | 25,642 | 26,112 | 27,276 | 26,472 | 26,091 | 25,554 |
II-106II-95
2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Operating Revenues (in millions): | ||||||||||||||||||||||||||||||||||||||||
Residential | $ | 5,476 | $ | 5,045 | $ | 4,716 | $ | 4,376 | $ | 3,848 | $ | 5,481 | $ | 5,476 | $ | 5,045 | $ | 4,716 | $ | 4,376 | ||||||||||||||||||||
Commercial | 5,018 | 4,467 | 4,117 | 3,904 | 3,346 | 4,901 | 5,018 | 4,467 | 4,117 | 3,904 | ||||||||||||||||||||||||||||||
Industrial | 3,445 | 3,020 | 2,866 | 2,785 | 2,446 | 2,806 | 3,445 | 3,020 | 2,866 | 2,785 | ||||||||||||||||||||||||||||||
Other | 116 | 107 | 102 | 100 | 92 | 119 | 116 | 107 | 102 | 100 | ||||||||||||||||||||||||||||||
Total retail | 14,055 | 12,639 | 11,801 | 11,165 | 9,732 | 13,307 | 14,055 | 12,639 | 11,801 | 11,165 | ||||||||||||||||||||||||||||||
Wholesale | 2,400 | 1,988 | 1,822 | 1,667 | 1,341 | 1,802 | 2,400 | 1,988 | 1,822 | 1,667 | ||||||||||||||||||||||||||||||
Total revenues from sales of electricity | 16,455 | 14,627 | 13,623 | 12,832 | 11,073 | 15,109 | 16,455 | 14,627 | 13,623 | 12,832 | ||||||||||||||||||||||||||||||
Other revenues | 672 | 726 | 733 | 722 | 656 | 634 | 672 | 726 | 733 | 722 | ||||||||||||||||||||||||||||||
Total | $ | 17,127 | $ | 15,353 | $ | 14,356 | $ | 13,554 | $ | 11,729 | $ | 15,743 | $ | 17,127 | $ | 15,353 | $ | 14,356 | $ | 13,554 | ||||||||||||||||||||
Kilowatt-Hour Sales (in millions): | ||||||||||||||||||||||||||||||||||||||||
Residential | 52,262 | 53,326 | 52,383 | 51,082 | 49,702 | 51,690 | 52,262 | 53,326 | 52,383 | 51,082 | ||||||||||||||||||||||||||||||
Commercial | 54,427 | 54,665 | 52,987 | 51,857 | 50,037 | 53,526 | 54,427 | 54,665 | 52,987 | 51,857 | ||||||||||||||||||||||||||||||
Industrial | 52,636 | 54,662 | 55,044 | 55,141 | 56,399 | 46,422 | 52,636 | 54,662 | 55,044 | 55,141 | ||||||||||||||||||||||||||||||
Other | 934 | 962 | 920 | 996 | 1,005 | 953 | 934 | 962 | 920 | 996 | ||||||||||||||||||||||||||||||
Total retail | 160,259 | 163,615 | 161,334 | 159,076 | 157,143 | 152,591 | 160,259 | 163,615 | 161,334 | 159,076 | ||||||||||||||||||||||||||||||
Sales for resale | 39,368 | 40,745 | 38,460 | 37,072 | 34,568 | |||||||||||||||||||||||||||||||||||
Wholesale sales | 33,503 | 39,368 | 40,745 | 38,460 | 37,072 | |||||||||||||||||||||||||||||||||||
Total | 199,627 | 204,360 | 199,794 | 196,148 | 191,711 | 186,094 | 199,627 | 204,360 | 199,794 | 196,148 | ||||||||||||||||||||||||||||||
Average Revenue Per Kilowatt-Hour (cents): | ||||||||||||||||||||||||||||||||||||||||
Residential | 10.48 | 9.46 | 9.00 | 8.57 | 7.74 | 10.60 | 10.48 | 9.46 | 9.00 | 8.57 | ||||||||||||||||||||||||||||||
Commercial | 9.22 | 8.17 | 7.77 | 7.53 | 6.69 | 9.16 | 9.22 | 8.17 | 7.77 | 7.53 | ||||||||||||||||||||||||||||||
Industrial | 6.54 | 5.52 | 5.21 | 5.05 | 4.34 | 6.04 | 6.54 | 5.52 | 5.21 | 5.05 | ||||||||||||||||||||||||||||||
Total retail | 8.77 | 7.72 | 7.31 | 7.02 | 6.19 | 8.72 | 8.77 | 7.72 | 7.31 | 7.02 | ||||||||||||||||||||||||||||||
Wholesale | 6.10 | 4.88 | 4.74 | 4.50 | 3.88 | 5.38 | 6.10 | 4.88 | 4.74 | 4.50 | ||||||||||||||||||||||||||||||
Total sales | 8.24 | 7.16 | 6.82 | 6.54 | 5.78 | 8.12 | 8.24 | 7.16 | 6.82 | 6.54 | ||||||||||||||||||||||||||||||
Average Annual Kilowatt-Hour | ||||||||||||||||||||||||||||||||||||||||
Use Per Residential Customer | 13,844 | 14,263 | 14,235 | 14,084 | 13,879 | 13,607 | 13,844 | 14,263 | 14,235 | 14,084 | ||||||||||||||||||||||||||||||
Average Annual Revenue | ||||||||||||||||||||||||||||||||||||||||
Per Residential Customer | $ | 1,451 | $ | 1,349 | $ | 1,282 | $ | 1,207 | $ | 1,074 | $ | 1,443 | $ | 1,451 | $ | 1,349 | $ | 1,282 | $ | 1,207 | ||||||||||||||||||||
Plant Nameplate Capacity | ||||||||||||||||||||||||||||||||||||||||
Ratings (year-end) (megawatts) | 42,607 | 41,948 | 41,785 | 40,509 | 38,622 | 42,932 | 42,607 | 41,948 | 41,785 | 40,509 | ||||||||||||||||||||||||||||||
Maximum Peak-Hour Demand (megawatts): | ||||||||||||||||||||||||||||||||||||||||
Winter | 32,604 | 31,189 | 30,958 | 30,384 | 28,467 | 33,519 | 32,604 | 31,189 | 30,958 | 30,384 | ||||||||||||||||||||||||||||||
Summer | 37,166 | 38,777 | 35,890 | 35,050 | 34,414 | 34,471 | 37,166 | 38,777 | 35,890 | 35,050 | ||||||||||||||||||||||||||||||
System Reserve Margin (at peak) (percent) | 15.3 | 11.2 | 17.1 | 14.4 | 20.2 | 26.4 | 15.3 | 11.2 | 17.1 | 14.4 | ||||||||||||||||||||||||||||||
Annual Load Factor (percent) | 58.7 | 57.6 | 60.8 | 60.2 | 61.4 | 60.6 | 58.7 | 57.6 | 60.8 | 60.2 | ||||||||||||||||||||||||||||||
Plant Availability (percent): | ||||||||||||||||||||||||||||||||||||||||
Fossil-steam | 90.5 | 90.5 | 89.3 | 89.0 | 88.5 | 91.3 | 90.5 | 90.5 | 89.3 | 89.0 | ||||||||||||||||||||||||||||||
Nuclear | 91.3 | 90.8 | 91.5 | 90.5 | 92.8 | 90.1 | 91.3 | 90.8 | 91.5 | 90.5 | ||||||||||||||||||||||||||||||
Source of Energy Supply (percent): | ||||||||||||||||||||||||||||||||||||||||
Coal | 64.0 | 67.1 | 67.2 | 67.4 | 65.0 | 54.7 | 64.0 | 67.1 | 67.2 | 67.4 | ||||||||||||||||||||||||||||||
Nuclear | 14.0 | 13.4 | 14.0 | 14.0 | 14.5 | 14.9 | 14.0 | 13.4 | 14.0 | 14.0 | ||||||||||||||||||||||||||||||
Hydro | 1.4 | 0.9 | 1.9 | 3.1 | 2.9 | 3.9 | 1.4 | 0.9 | 1.9 | 3.1 | ||||||||||||||||||||||||||||||
Oil and gas | 15.4 | 15.0 | 12.9 | 10.9 | 10.9 | 22.5 | 15.4 | 15.0 | 12.9 | 10.9 | ||||||||||||||||||||||||||||||
Purchased power | 5.2 | 3.6 | 4.0 | 4.6 | 6.7 | 4.0 | 5.2 | 3.6 | 4.0 | 4.6 | ||||||||||||||||||||||||||||||
Total | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 |
II-107II-96
II-109II-98
II-110II-99
2008 | 2008 | 2009 | 2009 | |||||
Target | Actual | Target | Actual | |||||
Key Performance Indicator | Performance | Performance | Performance | Performance | ||||
Top quartile in | Top quartile in | |||||||
Customer Satisfaction | customer surveys | Top quartile | customer surveys | Top quartile | ||||
Peak Season EFOR — fossil/hydro | 2.75% or less | 1.51% | 2.75% or less | 1.50% | ||||
Peak Season EFOR — nuclear | 2.00% or less | 2.78% | 2.75% or less | 0.14% | ||||
Net Income | $617 million | $616 million | $666 million | $670 million |
II-100
II-111
Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||||||||||||||
Amount | from Prior Year | Amount | from Prior Year | |||||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Operating revenues | $ | 6,077 | $ | 717 | $ | 345 | $ | 367 | $ | 5,529 | $ | (548 | ) | $ | 717 | $ | 345 | |||||||||||||||
Fuel | 2,184 | 422 | 90 | 216 | 1,824 | (360 | ) | 422 | 90 | |||||||||||||||||||||||
Purchased power | 538 | 99 | 12 | (31 | ) | 307 | (232 | ) | 99 | 12 | ||||||||||||||||||||||
Other operations and maintenance | 1,259 | 73 | 89 | 53 | 1,211 | (48 | ) | 73 | 89 | |||||||||||||||||||||||
Depreciation and amortization | 520 | 49 | 21 | 24 | 545 | 25 | 49 | 21 | ||||||||||||||||||||||||
Taxes other than income taxes | 307 | 20 | 28 | 9 | 322 | 16 | 20 | 28 | ||||||||||||||||||||||||
Total operating expenses | 4,808 | 663 | 240 | 271 | 4,209 | (599 | ) | 663 | 240 | |||||||||||||||||||||||
Operating income | 1,269 | 54 | 105 | 96 | 1,320 | 51 | 54 | 105 | ||||||||||||||||||||||||
Total other income and (expense) | (246 | ) | 2 | (11 | ) | (40 | ) | (227 | ) | 19 | 2 | (11 | ) | |||||||||||||||||||
Income taxes | 368 | 16 | 21 | 46 | 384 | 16 | 16 | 21 | ||||||||||||||||||||||||
Net income | 655 | 40 | 73 | 10 | 709 | 54 | 40 | 73 | ||||||||||||||||||||||||
Dividends on preferred and preference stock | 39 | 4 | 11 | — | 39 | — | 4 | 11 | ||||||||||||||||||||||||
Net income after dividends on preferred and preference stock | $ | 616 | $ | 36 | $ | 62 | $ | 10 | $ | 670 | $ | 54 | $ | 36 | $ | 62 |
Amount | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Retail — prior year | $ | 4,407.0 | $ | 3,995.7 | $ | 3,621.4 | ||||||
Estimated change in — | ||||||||||||
Rates and pricing | 246.1 | 216.3 | 48.4 | |||||||||
Sales growth | 26.8 | (4.9 | ) | 35.8 | ||||||||
Weather | (70.4 | ) | 37.6 | 19.9 | ||||||||
Fuel and other cost recovery | 252.8 | 162.3 | 270.2 | |||||||||
Retail — current year | 4,862.3 | 4,407.0 | 3,995.7 | |||||||||
Wholesale revenues — | ||||||||||||
Non-affiliates | 711.9 | 627.0 | 634.6 | |||||||||
Affiliates | 308.5 | 144.1 | 216.0 | |||||||||
Total wholesale revenues | 1,020.4 | 771.1 | 850.6 | |||||||||
Other operating revenues | 194.2 | 181.9 | 168.4 | |||||||||
Total operating revenues | $ | 6,076.9 | $ | 5,360.0 | $ | 5,014.7 | ||||||
Percent change | 13.4 | % | 6.9 | % | 7.9 | % | ||||||
Amount | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Retail — prior year | $ | 4,862 | $ | 4,407 | $ | 3,996 | ||||||
Estimated change in — | ||||||||||||
Rates and pricing | 174 | 246 | 216 | |||||||||
Sales growth (decline) | (109 | ) | 26 | (5 | ) | |||||||
Weather | (12 | ) | (70 | ) | 38 | |||||||
Fuel and other cost recovery | (418 | ) | 253 | 162 | ||||||||
Retail — current year | 4,497 | 4,862 | 4,407 | |||||||||
Wholesale revenues — | ||||||||||||
Non-affiliates | 620 | 712 | 627 | |||||||||
Affiliates | 237 | 309 | 144 | |||||||||
Total wholesale revenues | 857 | 1,021 | 771 | |||||||||
Other operating revenues | 175 | 194 | 182 | |||||||||
Total operating revenues | $ | 5,529 | $ | 6,077 | $ | 5,360 | ||||||
Percent change | (9 | )% | 13 | % | 7 | % | ||||||
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Unit power sales — | ||||||||||||||||||||||||
Capacity | $ | 160 | $ | 151 | $ | 154 | $ | 158 | $ | 160 | $ | 151 | ||||||||||||
Energy | 238 | 192 | 198 | 207 | 238 | 192 | ||||||||||||||||||
Total | 398 | 343 | 352 | 365 | 398 | 343 | ||||||||||||||||||
Other power sales — | ||||||||||||||||||||||||
Capacity and other | 134 | 128 | 137 | 133 | 134 | 128 | ||||||||||||||||||
Energy | 180 | 156 | 146 | 122 | 180 | 156 | ||||||||||||||||||
Total | 314 | 284 | 283 | 255 | 314 | 284 | ||||||||||||||||||
Total non-affiliated | $ | 712 | $ | 627 | $ | 635 | $ | 620 | $ | 712 | $ | 627 |
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KWHs | Percent Change | KWHs | Percent Change | |||||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||
(in billions) | (in billions) | |||||||||||||||||||||||||||||||
Residential | 18.4 | (2.6 | )% | 1.3 | % | 3.1 | % | 18.1 | (1.7 | )% | (2.6 | )% | 1.3 | % | ||||||||||||||||||
Commercial | 14.5 | (1.4 | ) | 2.8 | 2.1 | 14.2 | (2.5 | ) | (1.4 | ) | 2.8 | |||||||||||||||||||||
Industrial | 22.1 | (3.2 | ) | (1.6 | ) | (0.7 | ) | 18.5 | (15.9 | ) | (3.2 | ) | (1.6 | ) | ||||||||||||||||||
Other | 0.2 | 0.2 | 0.7 | 0.4 | 0.2 | 8.1 | 0.2 | 0.7 | ||||||||||||||||||||||||
Total retail | 55.2 | (2.5 | ) | 0.5 | 1.2 | 51.0 | (7.6 | ) | (2.5 | ) | 0.5 | |||||||||||||||||||||
Wholesale — | ||||||||||||||||||||||||||||||||
Non-affiliates | 15.2 | (3.6 | ) | (1.3 | ) | 3.5 | 14.3 | (5.8 | ) | (3.6 | ) | (1.3 | ) | |||||||||||||||||||
Affiliates | 5.3 | 62.2 | (37.0 | ) | (10.3 | ) | 6.5 | 23.2 | 62.2 | (37.0 | ) | |||||||||||||||||||||
Total wholesale | 20.5 | 7.6 | (10.0 | ) | (0.3 | ) | 20.8 | 1.6 | 7.6 | (10.0 | ) | |||||||||||||||||||||
Total energy sales | 75.7 | 0.0 | (2.4 | ) | 0.8 | 71.8 | (5.1 | ) | 0.0 | (2.4 | ) |
2008 | 2007 | 2006 | ||||||||||
Total generation(billions of KWHs) | 70.0 | 69.8 | 72.0 | |||||||||
Total purchased power(billions of KWHs) | 9.2 | 9.6 | 8.9 | |||||||||
Sources of generation(percent)— | ||||||||||||
Coal | 66 | 69 | 68 | |||||||||
Nuclear | 20 | 19 | 19 | |||||||||
Gas | 11 | 10 | 9 | |||||||||
Hydro | 3 | 2 | 4 | |||||||||
Cost of fuel, generated(cents per net KWH)— | ||||||||||||
Coal | 2.94 | 2.14 | 2.09 | |||||||||
Nuclear | 0.50 | 0.50 | 0.47 | |||||||||
Gas | 8.30 | 7.43 | 7.87 | |||||||||
Average cost of fuel, generated(cents per net KWH) | 3.00 | 2.36 | 2.27 | |||||||||
Average cost of purchased power(cents per net KWH) | 7.44 | 6.07 | 5.98 | |||||||||
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2009 | 2008 | 2007 | ||||||||||
Total generation(billions of KWHs) | 68.8 | 70.0 | 69.8 | |||||||||
Total purchased power(billions of KWHs) | 6.3 | 9.2 | 9.6 | |||||||||
Sources of generation(percent) — | ||||||||||||
Coal | 58 | 66 | 69 | |||||||||
Nuclear | 20 | 20 | 19 | |||||||||
Gas | 13 | 11 | 10 | |||||||||
Hydro | 9 | 3 | 2 | |||||||||
Cost of fuel, generated(cents per net KWH) — | ||||||||||||
Coal | 3.02 | 2.94 | 2.14 | |||||||||
Nuclear | 0.56 | 0.50 | 0.50 | |||||||||
Gas | 5.24 | 8.30 | 7.43 | |||||||||
Average cost of fuel, generated(cents per net KWH)* | 2.79 | 3.00 | 2.36 | |||||||||
Average cost of purchased power(cents per net KWH) | 6.05 | 7.44 | 6.07 | |||||||||
* | Fuel includes fuel purchased by the Company for tolling agreements where power is generated by the provider and is included in purchased power when determining the average cost of purchased power. |
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• | Changes in existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, coal combustion byproducts, including coal ash, control of toxic substances, hazardous and solid wastes, and other environmental matters. | ||
• | Changes in existing income tax regulations or changes in | ||
• | Identification of sites that require environmental remediation or the filing of other complaints in which the Company may be asserted to be a potentially responsible party. | ||
• | Identification and evaluation of other potential lawsuits or complaints in which the Company may be named as a defendant. | ||
• | Resolution or progression of new or existing matters through the legislative process, the court systems, the IRS, the Alabama Department of Revenue, the FERC, or the EPA. |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
Changes | Changes | Changes | Changes | |||||||||||||
Fair Value | Fair Value | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Contracts outstanding at the beginning of the period, assets (liabilities), net | $ | (0.4 | ) | $ | (32.6 | ) | $ | (92 | ) | $ | — | |||||
Contracts realized or settled | (44.0 | ) | 31.5 | 123 | (44 | ) | ||||||||||
Current period changes(a) | (47.5 | ) | 0.7 | (75 | ) | (48 | ) | |||||||||
Contracts outstanding at the end of the period, assets (liabilities), net | $ | (91.9 | ) | $ | (0.4 | ) | $ | (44 | ) | $ | (92 | ) |
(a) | Current period changes also include the changes in fair value of new contracts entered into during the period, if any. |
2008 | 2007 | |||||||||||||||
Asset (Liability) Derivatives | 2009 | 2008 | ||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Regulatory hedges | $ | (91.9 | ) | $ | (0.7 | ) | $ | (44 | ) | $ | (92 | ) | ||||
Cash flow hedges | — | 0.5 | — | — | ||||||||||||
Non-accounting hedges | — | (0.2 | ) | |||||||||||||
Not designated | — | — | ||||||||||||||
Total fair value | $ | (91.9 | ) | $ | (0.4 | ) | $ | (44 | ) | $ | (92 | ) |
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December 31, 2008 | December 31, 2009 | |||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements | |||||||||||||||||||||||||||||||
Total | Maturity | Total | Maturity | |||||||||||||||||||||||||||||
Fair Value | Year 1 | Years 2&3 | Years 4&5 | Fair Value | Year 1 | Years 2&3 | Years 4&5 | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Level 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Level 2 | (91.9 | ) | (71.4 | ) | (20.5 | ) | — | (44 | ) | (34 | ) | (10 | ) | — | ||||||||||||||||||
Level 3 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Fair value of contracts outstanding at end of period | $ | (91.9 | ) | $ | (71.4 | ) | $ | (20.5 | ) | $ | — | $ | (44 | ) | $ | (34 | ) | $ | (10 | ) | $ | — |
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2010- | 2012- | After | 2011- | 2013- | After | Uncertain | ||||||||||||||||||||||||||||||||||||||
2009 | 2011 | 2013 | 2013 | Total | 2010 | 2012 | 2014 | 2014 | Timing(d) | Total | ||||||||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||||||||||||||
Long-term debt(a) — | ||||||||||||||||||||||||||||||||||||||||||||
Principal | $ | 250 | $ | 300 | $ | 750 | $ | 4,558 | $ | 5,858 | $ | 100 | $ | 700 | $ | 250 | $ | 5,136 | $ | — | $ | 6,186 | ||||||||||||||||||||||
Interest | 291 | 549 | 499 | 4,351 | 5,690 | 311 | 603 | 530 | 4,846 | — | 6,290 | |||||||||||||||||||||||||||||||||
Preferred and preference stock dividends(b) | 39 | 79 | 79 | — | 197 | 39 | 79 | 79 | — | — | 197 | |||||||||||||||||||||||||||||||||
Energy-related derivative obligations(c) | 75 | 20 | — | — | 95 | 34 | 11 | — | — | — | 45 | |||||||||||||||||||||||||||||||||
Operating leases | 23 | 28 | 12 | 11 | 74 | 22 | 21 | 8 | 10 | — | 61 | |||||||||||||||||||||||||||||||||
Purchase commitments(d) — | ||||||||||||||||||||||||||||||||||||||||||||
Capital(e) | 1,365 | 1,865 | — | — | 3,230 | |||||||||||||||||||||||||||||||||||||||
Limestone(f) | 3 | 24 | 29 | 68 | 124 | |||||||||||||||||||||||||||||||||||||||
Unrecognized tax benefits and interest(d) | — | — | — | — | 6 | 6 | ||||||||||||||||||||||||||||||||||||||
Purchase commitments(e) — | ||||||||||||||||||||||||||||||||||||||||||||
Capital(f) | 912 | 1,919 | — | — | — | 2,831 | ||||||||||||||||||||||||||||||||||||||
Limestone(g) | 11 | 30 | 32 | 54 | — | 127 | ||||||||||||||||||||||||||||||||||||||
Coal | 1,461 | 1,804 | 1,110 | 1,414 | 5,789 | 1,420 | 1,589 | 923 | 975 | — | 4,907 | |||||||||||||||||||||||||||||||||
Nuclear fuel | 48 | 82 | 76 | 10 | 216 | 73 | 99 | 60 | 90 | — | 322 | |||||||||||||||||||||||||||||||||
Natural gas(g) | 505 | 386 | 311 | 210 | 1,412 | |||||||||||||||||||||||||||||||||||||||
Natural gas(h) | 413 | 451 | 254 | 148 | — | 1,266 | ||||||||||||||||||||||||||||||||||||||
Purchased power | 105 | 44 | — | — | 149 | 39 | 60 | 67 | 337 | — | 503 | |||||||||||||||||||||||||||||||||
Long-term service agreements(h) | 18 | 35 | 29 | 37 | 119 | |||||||||||||||||||||||||||||||||||||||
Postretirement benefits trust(i) | 17 | 35 | — | — | 52 | |||||||||||||||||||||||||||||||||||||||
Long-term service agreements(i) | 23 | 48 | 50 | 135 | — | 256 | ||||||||||||||||||||||||||||||||||||||
Postretirement benefits trust(j) | 11 | 22 | — | — | — | 33 | ||||||||||||||||||||||||||||||||||||||
Total | $ | 4,200 | $ | 5,251 | $ | 2,895 | $ | 10,659 | $ | 23,005 | $ | 3,408 | $ | 5,632 | $ | 2,253 | $ | 11,731 | $ | 6 | $ | 23,030 |
(a) | All amounts are reflected based on final maturity dates. The Company plans to continue to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of January 1, | |
(b) | Preferred and preference stock do not mature; therefore, amounts are provided for the next five years only. | |
(c) | For additional information, see Notes 1 and | |
(d) | The timing related to the realization of $6 million in unrecognized tax benefits and interest payments in individual years beyond 12 months cannot be reasonably and reliably estimated due to uncertainties in the timing of the effective settlement of tax positions. See Note 5 to the financial statements for additional information. | |
(e) | The Company generally does not enter into non-cancelable commitments for other operations and maintenance expenditures. Total other operations and maintenance expenses for 2009, 2008, and 2007 | |
The Company forecasts capital expenditures over a three-year period. Amounts represent current estimates of total expenditures excluding those amounts related to contractual purchase commitments for nuclear fuel. At December 31, | ||
As part of the Company’s program to reduce sulfur dioxide emissions from certain of its coal plants, the Company has | ||
Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected have been estimated based on the New York Mercantile Exchange future prices at December 31, | ||
Long-term service agreements include price escalation based on inflation indices. | ||
The Company forecasts postretirement trust contributions over a three-year period. The Company expects that the earliest that cash may have to be contributed to the pension trust fund is |
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• | the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water quality and emissions of sulfur, nitrogen, mercury, carbon, soot, | ||
• | current and future litigation, regulatory investigations, proceedings, or inquiries, including FERC matters and the pending EPA civil action against the Company; | ||
• | the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates; | ||
• | variations in demand for electricity, including those relating to weather, the general economy and recovery from the recent recession, population and business growth (and declines), and the effects of energy conservation measures; | ||
• | available sources and costs of fuels; | ||
• | effects of inflation; | ||
• | ability to control | ||
• | investment performance of the Company’s employee benefit | ||
• | advances in technology; | ||
• | state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and | ||
• | internal restructuring or other restructuring options that may be pursued; | ||
• | potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company; | ||
• | the ability of counterparties of the Company to make payments as and when due and to perform as required; | ||
• | the ability to obtain new short- and long-term contracts with | ||
• | the direct or indirect effect on the Company’s business resulting from terrorist incidents and the threat of terrorist incidents; | ||
• | interest rate fluctuations and financial market conditions and the results of financing efforts, including the Company’s credit ratings; | ||
• | the ability of the Company to obtain additional generating capacity at competitive prices; | ||
• | catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as | ||
• | the direct or indirect effects on the Company’s business resulting from incidents | ||
• | the effect of accounting pronouncements issued periodically by | ||
• | other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Company from time to time with the SEC. |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||
Retail revenues | $ | 4,862,281 | $ | 4,406,956 | $ | 3,995,731 | $ | 4,497,081 | $ | 4,862,281 | $ | 4,406,956 | ||||||||||||
Wholesale revenues — | ||||||||||||||||||||||||
Non-affiliates | 711,903 | 627,047 | 634,552 | |||||||||||||||||||||
Affiliates | 308,482 | 144,089 | 216,028 | |||||||||||||||||||||
Wholesale revenues, non-affiliates | 619,859 | 711,903 | 627,047 | |||||||||||||||||||||
Wholesale revenues, affiliates | 236,995 | 308,482 | 144,089 | |||||||||||||||||||||
Other revenues | 194,265 | 181,901 | 168,417 | 174,639 | 194,265 | 181,901 | ||||||||||||||||||
Total operating revenues | 6,076,931 | 5,359,993 | 5,014,728 | 5,528,574 | 6,076,931 | 5,359,993 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Fuel | 2,184,310 | 1,762,418 | 1,672,831 | 1,823,784 | 2,184,310 | 1,762,418 | ||||||||||||||||||
Purchased power — | ||||||||||||||||||||||||
Non-affiliates | 178,807 | 96,928 | 124,022 | |||||||||||||||||||||
Affiliates | 359,202 | 341,461 | 302,045 | |||||||||||||||||||||
Purchased power, non-affiliates | 87,737 | 178,807 | 96,928 | |||||||||||||||||||||
Purchased power, affiliates | 218,654 | 359,202 | 341,461 | |||||||||||||||||||||
Other operations and maintenance | 1,258,888 | 1,186,235 | 1,096,978 | 1,211,245 | 1,258,888 | 1,186,235 | ||||||||||||||||||
Depreciation and amortization | 520,449 | 471,536 | 451,018 | 544,923 | 520,449 | 471,536 | ||||||||||||||||||
Taxes other than income taxes | 306,522 | 286,579 | 258,135 | 322,274 | 306,522 | 286,579 | ||||||||||||||||||
Total operating expenses | 4,808,178 | 4,145,157 | 3,905,029 | 4,208,617 | 4,808,178 | 4,145,157 | ||||||||||||||||||
Operating Income | 1,268,753 | 1,214,836 | 1,109,699 | 1,319,957 | 1,268,753 | 1,214,836 | ||||||||||||||||||
Other Income and (Expense): | ||||||||||||||||||||||||
Allowance for equity funds used during construction | 45,519 | 35,425 | 18,253 | 79,175 | 45,519 | 35,425 | ||||||||||||||||||
Interest income | 19,394 | 19,545 | 20,897 | 16,906 | 19,394 | 19,545 | ||||||||||||||||||
Interest expense, net of amounts capitalized | (278,917 | ) | (273,737 | ) | (252,282 | ) | (298,495 | ) | (278,917 | ) | (273,737 | ) | ||||||||||||
Other income (expense), net | (31,514 | ) | (29,144 | ) | (23,758 | ) | (24,564 | ) | (31,514 | ) | (29,144 | ) | ||||||||||||
Total other income and (expense) | (245,518 | ) | (247,911 | ) | (236,890 | ) | (226,978 | ) | (245,518 | ) | (247,911 | ) | ||||||||||||
Earnings Before Income Taxes | 1,023,235 | 966,925 | 872,809 | 1,092,979 | 1,023,235 | 966,925 | ||||||||||||||||||
Income taxes | 367,813 | 351,198 | 330,345 | 383,980 | 367,813 | 351,198 | ||||||||||||||||||
Net Income | 655,422 | 615,727 | 542,464 | 708,999 | 655,422 | 615,727 | ||||||||||||||||||
Dividends on Preferred and Preference Stock | 39,463 | 36,145 | 24,734 | 39,463 | 39,463 | 36,145 | ||||||||||||||||||
Net Income After Dividends on Preferred and Preference Stock | $ | 615,959 | $ | 579,582 | $ | 517,730 | $ | 669,536 | $ | 615,959 | $ | 579,582 |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Operating Activities: | ||||||||||||||||||||||||
Net income | $ | 655,422 | $ | 615,727 | $ | 542,464 | $ | 708,999 | $ | 655,422 | $ | 615,727 | ||||||||||||
Adjustments to reconcile net income to net cash provided from operating activities — | ||||||||||||||||||||||||
Depreciation and amortization | 599,767 | 548,959 | 524,313 | |||||||||||||||||||||
Deferred income taxes and investment tax credits, net | 126,538 | 21,269 | (27,562 | ) | ||||||||||||||||||||
Depreciation and amortization, total | 636,788 | 599,767 | 548,959 | |||||||||||||||||||||
Deferred income taxes | (65,907 | ) | 126,538 | 21,269 | ||||||||||||||||||||
Allowance for equity funds used during construction | (45,519 | ) | (35,425 | ) | (18,253 | ) | (79,175 | ) | (45,519 | ) | (35,425 | ) | ||||||||||||
Pension, postretirement, and other employee benefits | (26,530 | ) | (18,781 | ) | (15,196 | ) | (25,802 | ) | (26,530 | ) | (18,781 | ) | ||||||||||||
Stock based compensation expense | 3,105 | 4,900 | 4,848 | 3,767 | 3,105 | 4,900 | ||||||||||||||||||
Tax benefit of stock options | 685 | 1,118 | 610 | 166 | 685 | 1,118 | ||||||||||||||||||
Other, net | 27,689 | (13,650 | ) | 29,564 | 62,318 | 27,687 | (13,648 | ) | ||||||||||||||||
Changes in certain current assets and liabilities — | ||||||||||||||||||||||||
Receivables | (31,693 | ) | (5,797 | ) | (33,260 | ) | ||||||||||||||||||
Fossil fuel stock | (134,212 | ) | (33,840 | ) | (28,179 | ) | ||||||||||||||||||
Materials and supplies | (17,723 | ) | (32,543 | ) | (25,711 | ) | ||||||||||||||||||
Other current assets | (1,494 | ) | 22,354 | 38,645 | ||||||||||||||||||||
Accounts payable | (8,751 | ) | 78,508 | (49,725 | ) | |||||||||||||||||||
Accrued taxes | 36,957 | (17,248 | ) | 1,124 | ||||||||||||||||||||
Accrued compensation | (4,722 | ) | 4,194 | (6,157 | ) | |||||||||||||||||||
Other current liabilities | (198 | ) | 10,098 | 18,486 | ||||||||||||||||||||
-Receivables | 310,203 | (31,692 | ) | (5,798 | ) | |||||||||||||||||||
-Fossil fuel stock | (76,602 | ) | (134,212 | ) | (33,840 | ) | ||||||||||||||||||
-Materials and supplies | (21,989 | ) | (17,723 | ) | (32,543 | ) | ||||||||||||||||||
-Other current assets | (16,253 | ) | (1,493 | ) | 22,353 | |||||||||||||||||||
-Accounts payable | (18,767 | ) | (8,751 | ) | 78,508 | |||||||||||||||||||
-Accrued taxes | 24,415 | 36,957 | (17,248 | ) | ||||||||||||||||||||
-Accrued compensation | (31,684 | ) | (4,722 | ) | 4,194 | |||||||||||||||||||
-Other current liabilities | 192,835 | (198 | ) | 10,098 | ||||||||||||||||||||
Net cash provided from operating activities | 1,179,321 | 1,149,843 | 956,011 | 1,603,312 | 1,179,321 | 1,149,843 | ||||||||||||||||||
Investing Activities: | ||||||||||||||||||||||||
Property additions | (1,477,643 | ) | (1,157,186 | ) | (933,306 | ) | (1,233,580 | ) | (1,477,644 | ) | (1,157,186 | ) | ||||||||||||
Investment in restricted cash from pollution control bonds | (96,326 | ) | (97,775 | ) | — | (5,673 | ) | (96,326 | ) | (97,775 | ) | |||||||||||||
Distribution of restricted cash from pollution control bonds | 35,979 | 78,043 | — | 49,041 | 35,979 | 78,043 | ||||||||||||||||||
Nuclear decommissioning trust fund purchases | (300,503 | ) | (334,275 | ) | (286,551 | ) | (244,662 | ) | (300,503 | ) | (334,275 | ) | ||||||||||||
Nuclear decommissioning trust fund sales | 299,636 | 333,409 | 285,685 | 243,796 | 299,636 | 333,409 | ||||||||||||||||||
Cost of removal net of salvage | (41,744 | ) | (48,932 | ) | (40,834 | ) | (37,883 | ) | (41,744 | ) | (48,932 | ) | ||||||||||||
Other | (19,143 | ) | (26,621 | ) | (1,777 | ) | ||||||||||||||||||
Other investing activities | 165 | (19,142 | ) | (26,621 | ) | |||||||||||||||||||
Net cash used for investing activities | (1,599,744 | ) | (1,253,337 | ) | (976,783 | ) | (1,228,796 | ) | (1,599,744 | ) | (1,253,337 | ) | ||||||||||||
Financing Activities: | ||||||||||||||||||||||||
Increase (decrease) in notes payable, net | 24,995 | (119,670 | ) | (195,609 | ) | (24,995 | ) | 24,995 | (119,670 | ) | ||||||||||||||
Proceeds — | ||||||||||||||||||||||||
Senior notes | 850,000 | 850,000 | 950,000 | |||||||||||||||||||||
Preferred and preference stock | — | 200,000 | 150,000 | |||||||||||||||||||||
Common stock issued to parent | 300,000 | 229,000 | 120,000 | 202,500 | 300,000 | 229,000 | ||||||||||||||||||
Capital contributions | 21,272 | 27,867 | 27,160 | |||||||||||||||||||||
Capital contributions from parent company | 23,949 | 21,272 | 27,867 | |||||||||||||||||||||
Gross excess tax benefit of stock options | 1,289 | 2,556 | 1,291 | 485 | 1,289 | 2,556 | ||||||||||||||||||
Preference stock | — | — | 200,000 | |||||||||||||||||||||
Pollution control revenue bonds | 265,100 | 265,500 | — | 78,500 | 265,100 | 265,500 | ||||||||||||||||||
Senior notes issuances | 500,000 | 850,000 | 850,000 | |||||||||||||||||||||
Redemptions — | ||||||||||||||||||||||||
Senior notes | (410,000 | ) | (668,500 | ) | (546,500 | ) | ||||||||||||||||||
Preferred stock | (125,000 | ) | — | — | — | (125,000 | ) | — | ||||||||||||||||
Pollution control revenue bonds | (11,100 | ) | — | (2,950 | ) | — | (11,100 | ) | — | |||||||||||||||
Senior notes | (250,000 | ) | (410,000 | ) | (668,500 | ) | ||||||||||||||||||
Other long-term debt | — | (103,093 | ) | — | — | — | (103,093 | ) | ||||||||||||||||
Payment of preferred and preference stock dividends | (40,899 | ) | (31,380 | ) | (24,318 | ) | (39,470 | ) | (40,899 | ) | (31,380 | ) | ||||||||||||
Payment of common stock dividends | (491,300 | ) | (465,000 | ) | (440,600 | ) | (522,800 | ) | (491,300 | ) | (465,000 | ) | ||||||||||||
Other | (9,369 | ) | (25,709 | ) | (24,635 | ) | ||||||||||||||||||
Other financing activities | (2,850 | ) | (9,369 | ) | (25,709 | ) | ||||||||||||||||||
Net cash provided from financing activities | 374,988 | 161,571 | 13,839 | |||||||||||||||||||||
Net cash provided from (used for) financing activities | (34,681 | ) | 374,988 | 161,571 | ||||||||||||||||||||
Net Change in Cash and Cash Equivalents | (45,435 | ) | 58,077 | (6,933 | ) | 339,835 | (45,435 | ) | 58,077 | |||||||||||||||
Cash and Cash Equivalents at Beginning of Year | 73,616 | 15,539 | 22,472 | 28,181 | 73,616 | 15,539 | ||||||||||||||||||
Cash and Cash Equivalents at End of Year | $ | 28,181 | $ | 73,616 | $ | 15,539 | $ | 368,016 | $ | 28,181 | $ | 73,616 | ||||||||||||
Supplemental Cash Flow Information: | ||||||||||||||||||||||||
Cash paid during the period for — | ||||||||||||||||||||||||
Interest (net of $20,215, $17,961, and $7,930 capitalized, respectively) | $ | 258,918 | $ | 248,289 | $ | 245,387 | ||||||||||||||||||
Interest (net of $33,112, $20,215 and $17,961 capitalized, respectively) | 254,989 | �� | 258,918 | 248,289 | ||||||||||||||||||||
Income taxes (net of refunds) | 214,368 | 340,951 | 345,803 | 426,390 | 214,368 | 340,951 |
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Assets | 2008 | 2007 | 2009 | 2008 | |||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||
Current Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 28,181 | $ | 73,616 | $ | 368,016 | $ | 28,181 | |||||||||
Restricted cash | 80,079 | 19,732 | 36,711 | 80,079 | |||||||||||||
Receivables — | |||||||||||||||||
Customer accounts receivable | 350,409 | 357,355 | 322,292 | 350,410 | |||||||||||||
Unbilled revenues | 98,921 | 95,278 | 134,875 | 98,921 | |||||||||||||
Under recovered regulatory clause revenues | 153,899 | 232,226 | 37,338 | 153,899 | |||||||||||||
Other accounts and notes receivable | 44,645 | 42,745 | 33,522 | 44,645 | |||||||||||||
Affiliated companies | 70,612 | 61,250 | 61,508 | 70,612 | |||||||||||||
Accumulated provision for uncollectible accounts | (8,882 | ) | (7,988 | ) | (9,551 | ) | (8,882 | ) | |||||||||
Fossil fuel stock, at average cost | 322,089 | 182,963 | 394,511 | 322,089 | |||||||||||||
Materials and supplies, at average cost | 305,880 | 287,994 | 326,074 | 305,880 | |||||||||||||
Vacation pay | 52,577 | 50,266 | 53,607 | 52,577 | |||||||||||||
Prepaid expenses | 88,220 | 72,952 | 111,320 | 88,219 | |||||||||||||
Other | 87,740 | 19,610 | |||||||||||||||
Other regulatory assets, current | 34,347 | 74,825 | |||||||||||||||
Other current assets | 6,203 | 12,915 | |||||||||||||||
Total current assets | 1,674,370 | 1,487,999 | 1,910,773 | 1,674,370 | |||||||||||||
Property, Plant, and Equipment: | |||||||||||||||||
In service | 17,635,129 | 16,669,142 | 18,574,229 | 17,635,129 | |||||||||||||
Less accumulated provision for depreciation | 6,259,720 | 5,950,373 | 6,558,864 | 6,259,720 | |||||||||||||
11,375,409 | 10,718,769 | ||||||||||||||||
Plant in service, net of depreciation | 12,015,365 | 11,375,409 | |||||||||||||||
Nuclear fuel, at amortized cost | 231,862 | 137,146 | 253,308 | 231,862 | |||||||||||||
Construction work in progress | 1,092,516 | 928,182 | 1,256,311 | 1,092,516 | |||||||||||||
Total property, plant, and equipment | 12,699,787 | 11,784,097 | 13,524,984 | 12,699,787 | |||||||||||||
Other Property and Investments: | |||||||||||||||||
Equity investments in unconsolidated subsidiaries | 50,912 | 48,664 | 59,628 | 50,912 | |||||||||||||
Nuclear decommissioning trusts, at fair value | 403,966 | 542,846 | 489,795 | 403,966 | |||||||||||||
Other | 62,782 | 31,146 | |||||||||||||||
Miscellaneous property and investments | 69,749 | 62,782 | |||||||||||||||
Total other property and investments | 517,660 | 622,656 | 619,172 | 517,660 | |||||||||||||
Deferred Charges and Other Assets: | |||||||||||||||||
Deferred charges related to income taxes | 362,596 | 347,193 | 387,447 | 362,596 | |||||||||||||
Prepaid pension costs | 166,334 | 989,085 | 132,643 | 166,334 | |||||||||||||
Deferred under recovered regulatory clause revenues | 180,874 | 81,650 | — | 180,874 | |||||||||||||
Other regulatory assets | 732,367 | 224,792 | |||||||||||||||
Other | 202,018 | 209,153 | |||||||||||||||
Other regulatory assets, deferred | 750,492 | 732,367 | |||||||||||||||
Other deferred charges and assets | 198,582 | 202,018 | |||||||||||||||
Total deferred charges and other assets | 1,644,189 | 1,851,873 | 1,469,164 | 1,644,189 | |||||||||||||
Total Assets | $ | 16,536,006 | $ | 15,746,625 | $ | 17,524,093 | $ | 16,536,006 |
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Liabilities and Stockholder’s Equity | 2008 | 2007 | 2009 | 2008 | ||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Current Liabilities: | ||||||||||||||||
Securities due within one year | $ | 250,079 | $ | 535,152 | $ | 100,000 | $ | 250,079 | ||||||||
Notes payable | 24,995 | — | — | 24,995 | ||||||||||||
Accounts payable — | ||||||||||||||||
Affiliated | 178,708 | 193,518 | 194,675 | 178,708 | ||||||||||||
Other | 358,176 | 308,177 | 328,400 | 358,176 | ||||||||||||
Customer deposits | 77,205 | 67,722 | 86,975 | 77,205 | ||||||||||||
Accrued taxes — | ||||||||||||||||
Income taxes | 18,299 | 45,958 | ||||||||||||||
Other | 30,372 | 29,198 | ||||||||||||||
Accrued income taxes | 14,789 | 18,299 | ||||||||||||||
Other accrued taxes | 31,918 | 30,372 | ||||||||||||||
Accrued interest | 56,375 | 55,263 | 65,455 | 56,375 | ||||||||||||
Accrued vacation pay | 44,217 | 42,138 | 44,751 | 44,217 | ||||||||||||
Accrued compensation | 91,856 | 92,385 | 71,286 | 91,856 | ||||||||||||
Liabilities from risk management activities | 83,873 | 6,404 | 37,844 | 83,873 | ||||||||||||
Other | 53,777 | 48,927 | ||||||||||||||
Over recovered regulatory clause revenues | 181,565 | — | ||||||||||||||
Other current liabilities | 40,020 | 53,777 | ||||||||||||||
Total current liabilities | 1,267,932 | 1,424,842 | 1,197,678 | 1,267,932 | ||||||||||||
Long-term Debt(See accompanying statements) | 5,604,791 | 4,750,196 | ||||||||||||||
Long-Term Debt(See accompanying statements) | 6,082,489 | 5,604,791 | ||||||||||||||
Deferred Credits and Other Liabilities: | ||||||||||||||||
Accumulated deferred income taxes | 2,243,117 | 2,065,264 | 2,293,468 | 2,243,117 | ||||||||||||
Deferred credits related to income taxes | 90,083 | 93,709 | 88,705 | 90,083 | ||||||||||||
Accumulated deferred investment tax credits | 172,638 | 180,578 | 164,713 | 172,638 | ||||||||||||
Employee benefit obligations | 396,923 | 349,974 | 387,936 | 396,923 | ||||||||||||
Asset retirement obligations | 461,284 | 505,794 | 491,007 | 461,284 | ||||||||||||
Other cost of removal obligations | 634,792 | 613,616 | 668,151 | 634,792 | ||||||||||||
Other regulatory liabilities | 79,150 | 637,040 | ||||||||||||||
Other | 45,859 | 31,417 | ||||||||||||||
Other regulatory liabilities, deferred | 169,224 | 79,151 | ||||||||||||||
Deferred over recovered regulatory clause revenues | 22,060 | — | ||||||||||||||
Other deferred credits and liabilities | 37,113 | 45,858 | ||||||||||||||
Total deferred credits and other liabilities | 4,123,846 | 4,477,392 | 4,322,377 | 4,123,846 | ||||||||||||
Total Liabilities | 10,996,569 | 10,652,430 | 11,602,544 | 10,996,569 | ||||||||||||
Preferred and Preference Stock(See accompanying statements) | 685,127 | 683,512 | ||||||||||||||
Redeemable Preferred Stock(See accompanying statements) | 341,715 | 341,715 | ||||||||||||||
Preference Stock(See accompanying statements) | 343,373 | 343,412 | ||||||||||||||
Common Stockholder’s Equity(See accompanying statements) | 4,854,310 | 4,410,683 | 5,236,461 | 4,854,310 | ||||||||||||
Total Liabilities and Stockholder’s Equity | $ | 16,536,006 | $ | 15,746,625 | 17,524,093 | $ | 16,536,006 | |||||||||
Commitments and Contingent Matters(See notes) |
II-136II-126
2008 | 2007 | 2008 | 2007 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(in thousands) | (percent of total) | (in thousands) | (percent of total) | |||||||||||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||||||
Long-term debt payable to affiliated trusts — | ||||||||||||||||||||||||||||||||
5.5% due 2042 | $ | 206,186 | $ | 206,186 | ||||||||||||||||||||||||||||
Variable rate (3.35% at 1/1/10) due 2042 | $ | 206,186 | $ | 206,186 | ||||||||||||||||||||||||||||
Long-term notes payable — | ||||||||||||||||||||||||||||||||
3.125% to 5.375% due 2008 | — | 410,000 | ||||||||||||||||||||||||||||||
Floating rate (2.34% at 1/1/09) due 2009 | 250,000 | 250,000 | — | 250,000 | ||||||||||||||||||||||||||||
4.70% due 2010 | 100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||||||||||||||||||
5.10% due 2011 | 200,000 | 200,000 | 200,000 | 200,000 | ||||||||||||||||||||||||||||
4.85% due 2012 | 500,000 | 200,000 | 500,000 | 500,000 | ||||||||||||||||||||||||||||
5.80% due 2013 | 250,000 | — | 250,000 | 250,000 | ||||||||||||||||||||||||||||
5.125% to 6.375% due 2016-2047 | 3,275,000 | 2,975,000 | 3,775,000 | 3,275,000 | ||||||||||||||||||||||||||||
Total long-term notes payable | 4,575,000 | 4,135,000 | 4,825,000 | $ | 4,575,000 | |||||||||||||||||||||||||||
Other long-term debt — | ||||||||||||||||||||||||||||||||
Pollution control revenue bonds: | ||||||||||||||||||||||||||||||||
2.00% to 5.00% due 2030-2038 | 500,500 | — | ||||||||||||||||||||||||||||||
Variable rates (0.92% to 1.83% at 1/1/09) due 2015-2036 | 576,190 | 822,690 | ||||||||||||||||||||||||||||||
Pollution control revenue bonds — | ||||||||||||||||||||||||||||||||
1.40% to 5.00% due 2030-2038 | 553,500 | 500,500 | ||||||||||||||||||||||||||||||
Variable rates (0.18% to 0.44% at 1/1/10) due 2015-2036 | 601,690 | 576,190 | ||||||||||||||||||||||||||||||
Total other long-term debt | 1,076,690 | 822,690 | 1,155,190 | 1,076,690 | ||||||||||||||||||||||||||||
Capitalized lease obligations | 79 | 231 | — | 79 | ||||||||||||||||||||||||||||
Unamortized debt premium (discount), net | (3,085 | ) | (3,759 | ) | (3,887 | ) | (3,085 | ) | ||||||||||||||||||||||||
Total long-term debt (annual interest requirement — $290.8 million) | 5,854,870 | 5,160,348 | ||||||||||||||||||||||||||||||
Total long-term debt (annual interest requirement — $311.4 million) | 6,182,489 | 5,854,870 | ||||||||||||||||||||||||||||||
Less amount due within one year | 250,079 | 410,152 | 100,000 | 250,079 | ||||||||||||||||||||||||||||
Long-term debt excluding amount due within one year | 5,604,791 | 4,750,196 | 50.3 | % | 48.3 | % | 6,082,489 | 5,604,791 | 50.7 | % | 50.3 | % |
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2008 | 2007 | 2008 | 2007 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(in thousands) | (percent of total) | (in thousands) | (percent of total) | |||||||||||||||||||||||||||||
Preferred and Preference Stock: | ||||||||||||||||||||||||||||||||
Cumulative preferred stock | ||||||||||||||||||||||||||||||||
Cumulative redeemable preferred stock | ||||||||||||||||||||||||||||||||
$100 par or stated value — 4.20% to 4.92% | ||||||||||||||||||||||||||||||||
Authorized — 3,850,000 shares | ||||||||||||||||||||||||||||||||
Outstanding — 475,115 shares | 47,610 | 47,610 | 47,610 | 47,610 | ||||||||||||||||||||||||||||
$1 par value — 5.20% to 5.83% | ||||||||||||||||||||||||||||||||
Authorized — 27,500,000 shares | ||||||||||||||||||||||||||||||||
Outstanding — 12,000,000 shares: $25 stated value | 294,105 | 294,105 | 294,105 | 294,105 | ||||||||||||||||||||||||||||
Outstanding — 2008: 0 shares 2007: 1,250 shares: $100,000 stated capital | — | 123,331 | ||||||||||||||||||||||||||||||
Preference stock | ||||||||||||||||||||||||||||||||
Authorized — 40,000,000 shares | ||||||||||||||||||||||||||||||||
Outstanding — $1 par value — 5.63% to 6.50% — 14,000,000 shares (non-cumulative) $25 stated value | 343,412 | 343,466 | 343,373 | 343,412 | ||||||||||||||||||||||||||||
Total preferred and preference stock (annual dividend requirement — $39.5 million) | 685,127 | 808,512 | 685,088 | 685,127 | 5.7 | 6.1 | ||||||||||||||||||||||||||
Less amount due within one year | — | 125,000 | ||||||||||||||||||||||||||||||
Preferred and preference stock excluding amount due within one year | 685,127 | 683,512 | 6.1 | 6.9 | ||||||||||||||||||||||||||||
Common Stockholder’s Equity: | ||||||||||||||||||||||||||||||||
Common stock, par value $40 per share — Authorized — 2008: 40,000,000 shares — 2007: 25,000,000 shares Outstanding — 2008: 25,475,000 shares — 2007: 17,975,000 shares | 1,019,000 | 719,000 | ||||||||||||||||||||||||||||||
Common stock, par value $40 per share — Authorized — 2009: 40,000,000 shares — 2008: 40,000,000 shares Outstanding — 2009: 30,537,500 shares — 2008: 25,475,000 shares | 1,221,500 | 1,019,000 | ||||||||||||||||||||||||||||||
Paid-in capital | 2,091,462 | 2,065,298 | 2,119,818 | 2,091,462 | ||||||||||||||||||||||||||||
Retained earnings | 1,753,797 | 1,630,832 | 1,900,526 | 1,753,797 | ||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) | (9,949 | ) | (4,447 | ) | (5,383 | ) | (9,949 | ) | ||||||||||||||||||||||||
Total common stockholder’s equity | 4,854,310 | 4,410,683 | 43.6 | 44.8 | 5,236,461 | 4,854,310 | 43.6 | 43.6 | ||||||||||||||||||||||||
Total Capitalization | $ | 11,144,228 | $ | 9,844,391 | 100.0 | % | 100.0 | % | $ | 12,004,038 | $ | 11,144,228 | 100.0 | % | 100.0 | % |
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Accumulated | ||||||||||||||||||||
Common | Paid-In | Retained | Other Comprehensive | |||||||||||||||||
Stock | Capital | Earnings | Income (Loss) | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at December 31, 2005 | $ | 370,000 | $ | 1,995,056 | $ | 1,439,144 | $ | (11,474 | ) | $ | 3,792,726 | |||||||||
Net income after dividends on preferred stock | — | — | 517,730 | — | 517,730 | |||||||||||||||
Issuance of common stock | 120,000 | — | — | — | 120,000 | |||||||||||||||
Capital contributions from parent company | — | 33,907 | — | — | 33,907 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | (4,057 | ) | (4,057 | ) | |||||||||||||
Adjustment to initially apply FASB Statement No. 158, net of tax | — | — | — | 12,610 | 12,610 | |||||||||||||||
Cash dividends on common stock | — | — | (440,600 | ) | — | (440,600 | ) | |||||||||||||
Other | — | — | (29 | ) | — | (29 | ) | |||||||||||||
Balance at December 31, 2006 | 490,000 | 2,028,963 | 1,516,245 | (2,921 | ) | 4,032,287 | ||||||||||||||
Net income after dividends on preferred and preference stock | — | — | 579,582 | — | 579,582 | |||||||||||||||
Issuance of common stock | 229,000 | — | — | — | 229,000 | |||||||||||||||
Capital contributions from parent company | — | 36,441 | — | — | 36,441 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | (1,526 | ) | (1,526 | ) | |||||||||||||
Cash dividends on common stock | — | — | (465,000 | ) | — | (465,000 | ) | |||||||||||||
Other | — | (106 | ) | 5 | — | (101 | ) | |||||||||||||
Balance at December 31, 2007 | 719,000 | 2,065,298 | 1,630,832 | (4,447 | ) | 4,410,683 | ||||||||||||||
Net income after dividends on preferred and preference stock | — | — | 615,959 | — | 615,959 | |||||||||||||||
Issuance of common stock | 300,000 | — | — | — | 300,000 | |||||||||||||||
Capital contributions from parent company | — | 26,164 | — | — | 26,164 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | (5,502 | ) | (5,502 | ) | |||||||||||||
Cash dividends on common stock | — | — | (491,300 | ) | — | (491,300 | ) | |||||||||||||
Other | — | — | (1,694 | ) | — | (1,694 | ) | |||||||||||||
Balance at December 31, 2008 | $ | 1,019,000 | $ | 2,091,462 | $ | 1,753,797 | $ | ( 9,949 | ) | $ | 4,854,310 | |||||||||
2008 | 2007 | 2006 | ||||||||||
(in thousands) | ||||||||||||
Net income after dividends on preferred and preference stock | $ | 615,959 | $ | 579,582 | $ | 517,730 | ||||||
Other comprehensive income (loss): | ||||||||||||
Qualifying hedges: | ||||||||||||
Changes in fair value, net of tax of $(4,297), $(1,226), and $155, respectively | (7,068 | ) | (2,017 | ) | 255 | |||||||
Reclassification adjustment for amounts included in net income, net of tax of $952, $298, and $(3,696), respectively | 1,566 | 491 | (6,080 | ) | ||||||||
Pension and other postretirement benefit plans: | ||||||||||||
Change in additional minimum pension liability, net of tax of $-, $-, and $1,109, respectively | — | — | 1,768 | |||||||||
Total other comprehensive income (loss) | (5,502 | ) | (1,526 | ) | (4,057 | ) | ||||||
Comprehensive Income | $ | 610,457 | $ | 578,056 | $ | 513,673 | ||||||
Number of | Accumulated | |||||||||||||||||||||||
Common | Other | |||||||||||||||||||||||
Shares | Common | Paid-In | Retained | Comprehensive | ||||||||||||||||||||
Issued | Stock | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Balance at December 31, 2006 | 12,250 | $ | 490,000 | $ | 2,028,963 | $ | 1,516,245 | $ | (2,921 | ) | $ | 4,032,287 | ||||||||||||
Net income after dividends on preferred and preference stock | — | — | — | 579,582 | — | 579,582 | ||||||||||||||||||
Issuance of common stock | 5,725 | 229,000 | — | — | — | 229,000 | ||||||||||||||||||
Capital contributions from parent company | — | — | 36,441 | — | — | 36,441 | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (1,526 | ) | (1,526 | ) | ||||||||||||||||
Cash dividends on common stock | — | — | — | (465,000 | ) | — | (465,000 | ) | ||||||||||||||||
Other | — | — | (106 | ) | 5 | — | (101 | ) | ||||||||||||||||
Balance at December 31, 2007 | 17,975 | 719,000 | 2,065,298 | 1,630,832 | (4,447 | ) | 4,410,683 | |||||||||||||||||
Net income after dividends on preferred and preference stock | — | — | — | 615,959 | — | 615,959 | ||||||||||||||||||
Issuance of common stock | 7,500 | 300,000 | — | — | — | 300,000 | ||||||||||||||||||
Capital contributions from parent company | — | — | 26,164 | — | — | 26,164 | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (5,502 | ) | (5,502 | ) | ||||||||||||||||
Cash dividends on common stock | — | — | — | (491,300 | ) | — | (491,300 | ) | ||||||||||||||||
Other | — | — | — | (1,694 | ) | — | (1,694 | ) | ||||||||||||||||
Balance at December 31, 2008 | 25,475 | 1,019,000 | 2,091,462 | 1,753,797 | (9,949 | ) | 4,854,310 | |||||||||||||||||
Net income after dividends on preferred and preference stock | — | — | — | 669,536 | — | 669,536 | ||||||||||||||||||
Issuance of common stock | 5,063 | 202,500 | — | — | — | 202,500 | ||||||||||||||||||
Capital contributions from parent company | — | — | 28,356 | — | — | 28,356 | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | 4,566 | 4,566 | ||||||||||||||||||
Cash dividends on common stock | — | — | — | (522,800 | ) | — | (522,800 | ) | ||||||||||||||||
Other | — | — | — | (7 | ) | — | (7 | ) | ||||||||||||||||
Balance at December 31, 2009 | 30,538 | $ | 1,221,500 | $ | 2,119,818 | $ | 1,900,526 | $ | (5,383 | ) | $ | 5,236,461 | ||||||||||||
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2009 | 2008 | 2007 | ||||||||||
(in thousands) | ||||||||||||
Net income after dividends on preferred and preference stock | $ | 669,536 | $ | 615,959 | $ | 579,582 | ||||||
Other comprehensive income (loss): | ||||||||||||
Qualifying hedges: | ||||||||||||
Changes in fair value, net of tax of $(1,943), $(4,297), and $(1,226), respectively | (3,195 | ) | (7,068 | ) | (2,017 | ) | ||||||
Reclassification adjustment for amounts included in net income, net of tax of $4,718, $952, and $298, respectively | 7,761 | 1,566 | 491 | |||||||||
Total other comprehensive income (loss) | 4,566 | (5,502 | ) | (1,526 | ) | |||||||
Comprehensive Income | $ | 674,102 | $ | 610,457 | $ | 578,056 | ||||||
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2009 | 2008 | Note | ||||||||||||||||||||||
2008 | 2007 | Note | ||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Deferred income tax charges | $ | 363 | $ | 347 | (a | ) | $ | 387 | $ | 363 | (a | ) | ||||||||||||
Loss on reacquired debt | 80 | 87 | (b | ) | 74 | 80 | (b | ) | ||||||||||||||||
Vacation pay | 53 | 50 | (c | ) | 54 | 53 | (c, k) | |||||||||||||||||
Under recovered regulatory clause revenues | 335 | 314 | (d | ) | ||||||||||||||||||||
Under/(over) recovered regulatory clause revenues | (166 | ) | 335 | (d | ) | |||||||||||||||||||
Fuel-hedging (realized and unrealized) losses | 95 | 6 | (e | ) | 45 | 95 | (e | ) | ||||||||||||||||
Other assets | 7 | 6 | (d | ) | 8 | 7 | (f, g | ) | ||||||||||||||||
Asset retirement obligations | 18 | (150 | ) | (a | ) | (43 | ) | 18 | (a | ) | ||||||||||||||
Other cost of removal obligations | (635 | ) | (614 | ) | (a | ) | (668 | ) | (635 | ) | (a | ) | ||||||||||||
Deferred income tax credits | (90 | ) | (94 | ) | (a | ) | (89 | ) | (90 | ) | (a | ) | ||||||||||||
Fuel-hedging (realized and unrealized) gains | (4 | ) | (5 | ) | (e | ) | (1 | ) | (4 | ) | (e | ) | ||||||||||||
Mine reclamation and remediation | (14 | ) | (14 | ) | (d | ) | (12 | ) | (14 | ) | (h | ) | ||||||||||||
Nuclear outage | (8 | ) | 2 | (d | ) | (27 | ) | (8 | ) | (d | ) | |||||||||||||
Deferred purchased power | (20 | ) | (20 | ) | (d | ) | (8 | ) | (20 | ) | (g | ) | ||||||||||||
Natural disaster reserve (future storms) | (33 | ) | (26 | ) | (d | ) | ||||||||||||||||||
Natural disaster reserve | (75 | ) | (33 | ) | (i | ) | ||||||||||||||||||
Other liabilities | (4 | ) | (3 | ) | (d | ) | (3 | ) | (4 | ) | (d | ) | ||||||||||||
Overfunded retiree benefit plans | — | (423 | ) | (f | ) | |||||||||||||||||||
Underfunded retiree benefit plans | 614 | 138 | (f | ) | 657 | 614 | (j, k | ) | ||||||||||||||||
Total assets (liabilities), net | $ | 757 | $ | (399 | ) | $ | 133 | $ | 757 |
Note: | The recovery and amortization periods for these regulatory assets and (liabilities) are as follows: | |
(a) | Asset retirement and removal assets and liabilities are recorded, deferred income tax assets are recovered, and deferred tax liabilities are amortized over the related property lives, which may range up to 50 years. Asset retirement and removal assets and liabilities will be settled and trued up following completion of the related activities. | |
(b) | Recovered over the remaining life of the original issue, which may range up to 50 years. | |
(c) | Recorded as earned by employees and recovered as paid, generally within one year. This includes both vacation and banked holiday pay. |
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(d) | Recorded and recovered or amortized as approved or accepted by the Alabama | |
(e) | Fuel-hedging assets and liabilities are recorded over the life of the underlying hedged purchase contracts, which generally does not exceed | |
(f) | Recorded as accepted by the Alabama PSC. Capitalized upon initialization of related construction projects. | |
(g) | Recovered over the life of the PPA for periods up to 13 years. | |
(h) | Recorded as accepted by the Alabama PSC. Mine reclamation and remediation liabilities will be settled following completion of the related activities. | |
(i) | Recovered as storm restoration expenses are incurred, as approved by the Alabama PSC. | |
(j) | Recovered and amortized over the average remaining service period which may range up to 14 years. See Note 2 for additional information. | |
(k) | Not earning a return as offset in rate base by a corresponding asset or liability. |
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2009 | 2008 | |||||||||||||||
2008 | 2007 | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Generation | $ | 9,096 | $ | 8,541 | $ | 9,627 | $ | 9,096 | ||||||||
Transmission | 2,559 | 2,435 | 2,702 | 2,559 | ||||||||||||
Distribution | 4,827 | 4,586 | 5,046 | 4,827 | ||||||||||||
General | 1,141 | 1,095 | 1,187 | 1,141 | ||||||||||||
Plant acquisition adjustment | 12 | 12 | 12 | 12 | ||||||||||||
Total plant in service | $ | 17,635 | $ | 16,669 | $ | 18,574 | $ | 17,635 |
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2009 | 2008 | |||||||||||||||
2008 | 2007 | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Balance beginning of year | $ | 506 | $ | 476 | $ | 461 | $ | 506 | ||||||||
Liabilities incurred | — | — | — | — | ||||||||||||
Liabilities settled | (2 | ) | (3 | ) | (1 | ) | (2 | ) | ||||||||
Accretion | 31 | 33 | 31 | 31 | ||||||||||||
Cash flow revisions(a) | (74 | ) | — | — | (74 | ) | ||||||||||
Balance end of year | $ | 461 | $ | 506 | $ | 491 | $ | 461 |
(a) | Updated based on results from 2008 Nuclear Decommissioning Study |
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(in millions) | ||||||||
(in millions) | ||||||||
External trust funds | $ | 404 | $ | 490 | ||||
Internal reserves | 26 | 25 | ||||||
Total | $ | 430 | $ | 515 |
Decommissioning periods: | ||||
Beginning year | 2037 | |||
Completion year | 2065 | |||
(in millions) | ||||
Site study costs: | ||||
Radiated structures | $ | 1,060 | ||
Non-radiated structures | 72 | |||
Total | $ | 1,132 | ||
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Carrying Amount | Fair Value | |||||||
(in millions) | ||||||||
Long-term debt: | ||||||||
2008 | $ | 5,855 | $ | 5,784 | ||||
2007 | 5,160 | 5,079 |
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2009 | 2008 | |||||||||||||||
2008 | 2007 | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 1,420 | $ | 1,394 | $ | 1,460 | $ | 1,420 | ||||||||
Service cost | 43 | 35 | 34 | 43 | ||||||||||||
Interest cost | 109 | 82 | 96 | 109 | ||||||||||||
Benefits paid | (94 | ) | (70 | ) | (77 | ) | (94 | ) | ||||||||
Plan amendments | — | 10 | ||||||||||||||
Actuarial (gain) loss | (18 | ) | (31 | ) | ||||||||||||
Actuarial loss (gain) | 162 | (18 | ) | |||||||||||||
Balance at end of year | 1,460 | 1,420 | 1,675 | 1,460 | ||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 2,318 | 2,038 | 1,539 | 2,318 | ||||||||||||
Actual return (loss) on plan assets | (692 | ) | 346 | 245 | (692 | ) | ||||||||||
Employer contributions | 7 | 4 | 5 | 7 | ||||||||||||
Benefits paid | (94 | ) | (70 | ) | (77 | ) | (94 | ) | ||||||||
Fair value of plan assets at end of year | 1,539 | 2,318 | 1,712 | 1,539 | ||||||||||||
Funded status at end of year | 79 | 898 | ||||||||||||||
Fourth quarter contributions | — | 2 | ||||||||||||||
Prepaid pension asset, net | $ | 79 | $ | 900 | $ | 37 | $ | 79 |
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Target | 2008 | 2007 | Target | 2009 | 2008 | |||||||||||||||||||
Domestic equity | 36 | % | 34 | % | 38 | % | 29 | % | 33 | % | 34 | % | ||||||||||||
International equity | 24 | 23 | 24 | 28 | 29 | 23 | ||||||||||||||||||
Fixed income | 15 | 14 | 15 | 15 | 15 | 14 | ||||||||||||||||||
Real estate | 15 | 19 | 16 | |||||||||||||||||||||
Special situations | 3 | — | — | |||||||||||||||||||||
Real estate investments | 15 | 13 | 19 | |||||||||||||||||||||
Private equity | 10 | 10 | 7 | 10 | 10 | 10 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
• | Domestic equity.This portion of the portfolio comprises a mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes managed both actively and through passive index approaches. |
• | International equity.This portion of the portfolio is actively managed with a blend of growth stocks and value stocks with both developed and emerging market exposure. |
• | Fixed income.This portion of the portfolio is actively managed through an allocation to long-dated, investment grade corporate and government bonds. |
• | Special situations.Though currently unfunded, this portion of the portfolio was established both to execute opportunistic investment strategies with the objectives of diversifying and enhancing returns and exploiting short-term inefficiencies, as well as to invest in promising new strategies of a longer-term nature. |
• | Real estate investments.Assets in this portion of the portfolio are invested in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities. |
• | Private equity.This portion of the portfolio generally consists of investments in private partnerships that invest in private or public securities typically through privately negotiated and/or structured transactions. Leveraged buyouts, venture capital, and distressed debt are examples of investment strategies within this category. |
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Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 339 | $ | 141 | $ | — | $ | 480 | ||||||||
International equity* | 439 | 44 | — | 483 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 127 | — | 127 | ||||||||||||
Mortgage- and asset-backed securities | — | 34 | — | 34 | ||||||||||||
Corporate bonds | — | 85 | — | 85 | ||||||||||||
Pooled funds | — | 3 | — | 3 | ||||||||||||
Cash equivalents and other | 1 | 104 | — | 105 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 53 | — | 166 | 219 | ||||||||||||
Private equity | — | — | 169 | 169 | ||||||||||||
Total | $ | 832 | $ | 538 | $ | 335 | $ | 1,705 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives | (1 | ) | — | — | (1 | ) | ||||||||||
Total | $ | 831 | $ | 538 | $ | 335 | $ | 1,704 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well diversified with no significant concentrations of risk. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2008: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 318 | $ | 129 | $ | — | $ | 447 | ||||||||
International equity* | 285 | 26 | — | 311 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 133 | — | 133 | ||||||||||||
Mortgage- and asset-backed securities | — | 63 | — | 63 | ||||||||||||
Corporate bonds | — | 86 | — | 86 | ||||||||||||
Pooled funds | — | 1 | — | 1 | ||||||||||||
Cash equivalents and other | 7 | 61 | — | 68 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 43 | — | 254 | 297 | ||||||||||||
Private equity | — | — | 148 | 148 | ||||||||||||
Total | $ | 653 | $ | 499 | $ | 402 | $ | 1,554 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives | (2 | ) | — | — | (2 | ) | ||||||||||
Total | $ | 651 | $ | 499 | $ | 402 | $ | 1,552 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well diversified with no significant concentrations of risk. |
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2009 | 2008 | |||||||||||||||
Real Estate | Real Estate | |||||||||||||||
Investments | Private Equity | Investments | Private Equity | |||||||||||||
(in millions) | ||||||||||||||||
Beginning balance | $ | 254 | $ | 148 | $ | 316 | $ | 157 | ||||||||
Actual return on investments: | ||||||||||||||||
Related to investments held at year end | (72 | ) | 13 | (51 | ) | (43 | ) | |||||||||
Related to investments sold during the year | (20 | ) | 3 | 1 | 8 | |||||||||||
Total return on investments | (92 | ) | 16 | (50 | ) | (35 | ) | |||||||||
Purchases, sales, and settlements | 4 | 5 | (12 | ) | 26 | |||||||||||
Transfers into/out of Level 3 | — | — | — | — | ||||||||||||
Ending balance | $ | 166 | $ | 169 | $ | 254 | $ | 148 | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Prepaid pension asset | $ | 166 | $ | 989 | ||||
Other regulatory assets | 479 | 43 | ||||||
Current liabilities, other | (6 | ) | (5 | ) | ||||
Other regulatory liabilities | — | (423 | ) | |||||
Employee benefit obligations | (81 | ) | (84 | ) |
2009 | 2008 | |||||||
(in millions) | ||||||||
Prepaid pension costs | $ | 133 | $ | 166 | ||||
Other regulatory assets, deferred | 549 | 479 | ||||||
Other current liabilities | (6 | ) | (6 | ) | ||||
Employee benefit obligations | (90 | ) | (81 | ) | ||||
Prior Service Cost | Net(Gain)Loss | |||||||
(in millions) | ||||||||
Balance at December 31, 2008: | ||||||||
Regulatory assets | $ | 58 | $ | 421 | ||||
Regulatory liabilities | — | — | ||||||
Total | $ | 58 | $ | 421 | ||||
Balance at December 31, 2007: | ||||||||
Regulatory assets | $ | 14 | $ | 29 | ||||
Regulatory liabilities | 56 | (479 | ) | |||||
Total | $ | 70 | $ | (450 | ) | |||
Estimated amortization in net periodic pension cost in 2009: | ||||||||
Regulatory assets | $ | 9 | $ | 1 | ||||
Regulatory liabilities | — | — | ||||||
Total | $ | 9 | $ | 1 | ||||
Prior ServiceCost | Net(Gain)Loss | |||||||
(in millions) | ||||||||
Balance at December 31, 2009: | ||||||||
Regulatory assets | $ | 50 | $ | 499 | ||||
Balance at December 31, 2008: | ||||||||
Regulatory assets | $ | 58 | $ | 421 | ||||
Estimated amortization in net periodic pension cost in 2010: | ||||||||
Regulatory assets | $ | 9 | $ | 2 | ||||
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Regulatory | Regulatory | Regulatory | Regulatory | |||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(in millions) | ||||||||||||||||
Balance at December 31, 2006 | $ | 36 | $ | (183 | ) | |||||||||||
Net (gain) loss | 1 | (232 | ) | |||||||||||||
Change in prior service costs | 10 | — | ||||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of prior service costs | (2 | ) | (8 | ) | ||||||||||||
Amortization of net gain | (2 | ) | — | |||||||||||||
Total reclassification adjustments | (4 | ) | (8 | ) | ||||||||||||
Total change | 7 | (240 | ) | |||||||||||||
(in millions) | ||||||||||||||||
Balance at December 31, 2007 | 43 | (423 | ) | $ | 43 | $ | (423 | ) | ||||||||
Net (gain) loss | 441 | 433 | ||||||||||||||
Net loss | 441 | 433 | ||||||||||||||
Change in prior service costs | — | — | — | — | ||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of prior service costs | (2 | ) | (10 | ) | (2 | ) | (10 | ) | ||||||||
Amortization of net gain | (3 | ) | — | (3 | ) | — | ||||||||||
Total reclassification adjustments | (5 | ) | (10 | ) | (5 | ) | (10 | ) | ||||||||
Total change | 436 | 423 | 436 | 423 | ||||||||||||
Balance at December 31, 2008 | $ | 479 | $ | — | 479 | — | ||||||||||
Net loss | 79 | — | ||||||||||||||
Change in prior service costs | 1 | — | ||||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of prior service costs | (9 | ) | — | |||||||||||||
Amortization of net gain | (1 | ) | — | |||||||||||||
Total reclassification adjustments | (10 | ) | — | |||||||||||||
Total change | 70 | — | ||||||||||||||
Balance at December 31, 2009 | $ | 549 | $ | — | ||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Service cost | $ | 35 | $ | 35 | $ | 37 | $ | 34 | $ | 35 | $ | 35 | ||||||||||||
Interest cost | 87 | 82 | 77 | 96 | 87 | 82 | ||||||||||||||||||
Expected return on plan assets | (160 | ) | (146 | ) | (139 | ) | (164 | ) | (160 | ) | (146 | ) | ||||||||||||
Recognized net (gain) loss | 2 | 2 | 3 | 1 | 2 | 2 | ||||||||||||||||||
Net amortization | 10 | 10 | 9 | 9 | 10 | 10 | ||||||||||||||||||
Net periodic pension (income) | $ | (26 | ) | $ | (17 | ) | $ | (13 | ) | $ | (24 | ) | $ | (26 | ) | $ | (17 | ) |
Benefit Payments | Benefit Payments | |||||||
(in millions) | ||||||||
2009 | $ | 81 | ||||||
(in millions) | ||||||||
2010 | 84 | $ | 87 | |||||
2011 | 88 | 91 | ||||||
2012 | 92 | 95 | ||||||
2013 | 96 | 101 | ||||||
2014 to 2018 | 556 | |||||||
2014 | 108 | |||||||
2015 to 2019 | 610 |
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2009 | 2008 | |||||||||||||||
2008 | 2007 | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 480 | $ | 490 | $ | 446 | $ | 480 | ||||||||
Service cost | 9 | 7 | 6 | 9 | ||||||||||||
Interest cost | 37 | 28 | 29 | 37 | ||||||||||||
Benefits paid | (30 | ) | (23 | ) | (26 | ) | (30 | ) | ||||||||
Actuarial (gain) loss | (53 | ) | (24 | ) | ||||||||||||
Actuarial loss (gain) | 19 | (53 | ) | |||||||||||||
Plan amendments | (15 | ) | — | |||||||||||||
Retiree drug subsidy | 3 | 2 | 2 | 3 | ||||||||||||
Balance at end of year | 446 | 480 | 461 | 446 | ||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 297 | 259 | 252 | 297 | ||||||||||||
Actual return (loss) on plan assets | (75 | ) | 36 | 47 | (75 | ) | ||||||||||
Employer contributions | 57 | 23 | 20 | 57 | ||||||||||||
Benefits paid | (27 | ) | (21 | ) | (24 | ) | (27 | ) | ||||||||
Fair value of plan assets at end of year | 252 | 297 | 295 | 252 | ||||||||||||
Funded status at end of year | (194 | ) | (183 | ) | ||||||||||||
Fourth quarter contributions | — | 28 | ||||||||||||||
Accrued liability (recognized in the balance sheet) | $ | (166 | ) | $ | (194 | ) | ||||||||||
Accrued liability | $ | (194 | ) | $ | (155 | ) | ||||||||||
Target | 2009 | 2008 | ||||||||||||||||||||||
Target | 2008 | 2007 | ||||||||||||||||||||||
Domestic equity | 49 | % | 31 | % | 46 | % | 47 | % | 42 | % | 31 | % | ||||||||||||
International equity | 12 | 13 | 15 | 12 | 16 | 13 | ||||||||||||||||||
Fixed income | 31 | 46 | 29 | |||||||||||||||||||||
Real estate | 5 | 7 | 7 | |||||||||||||||||||||
Domestic fixed income | 32 | 35 | 46 | |||||||||||||||||||||
Special situations | 1 | — | — | |||||||||||||||||||||
Real estate investments | 5 | 4 | 7 | |||||||||||||||||||||
Private equity | 3 | 3 | 3 | 3 | 3 | 3 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
• | Domestic equity.This portion of the portfolio comprises a mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes managed both actively and through passive index approaches. |
• | International equity.This portion of the portfolio is actively managed with a blend of growth stocks and value stocks with both developed and emerging market exposure. |
• | Fixed income.This portion of the portfolio is comprised of domestic bonds. |
• | Special situations.Though currently unfunded, this portion of the portfolio was established both to execute opportunistic investment strategies with the objectives of diversifying and enhancing returns and exploiting short-term inefficiencies, as well as to invest in promising new strategies of a longer-term nature. |
• | Trust-owned life insurance.Some of the Company’s taxable trusts invest in these investments in order to minimize the impact of taxes on the portfolio. |
• | Real estate investments.Assets in this portion of the portfolio are invested in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities. |
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• | Private equity.This portion of the portfolio generally consists of investments in private partnerships that invest in private or public securities typically through privately negotiated and/or structured transactions. Leveraged buyouts, venture capital, and distressed debt are examples of investment strategies within this category. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 54 | $ | 8 | $ | — | $ | 62 | ||||||||
International equity* | 24 | 2 | — | 26 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 7 | — | 7 | ||||||||||||
Mortgage- and asset-backed securities | — | 2 | — | 2 | ||||||||||||
Corporate bonds | — | 5 | — | 5 | ||||||||||||
Pooled funds | — | — | — | — | ||||||||||||
Cash equivalents and other | — | 23 | — | 23 | ||||||||||||
Trust-owned life insurance | — | 144 | — | 144 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 3 | — | 9 | 12 | ||||||||||||
Private equity | — | — | 10 | 10 | ||||||||||||
Total | $ | 81 | $ | 191 | $ | 19 | $ | 291 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well diversified with no significant concentrations of risk. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2008: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 33 | $ | 7 | $ | — | $ | 40 | ||||||||
International equity* | 16 | 1 | — | 17 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 7 | — | 7 | ||||||||||||
Mortgage- and asset-backed securities | — | 4 | — | 4 | ||||||||||||
Corporate bonds | — | 5 | — | 5 | ||||||||||||
Pooled funds | — | — | — | — | ||||||||||||
Cash equivalents and other | — | 48 | — | 48 | ||||||||||||
Trust-owned life insurance | — | 105 | — | 105 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 2 | — | 15 | 17 | ||||||||||||
Private equity | — | — | 8 | 8 | ||||||||||||
Total | $ | 51 | $ | 177 | $ | 23 | $ | 251 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well diversified with no significant concentrations of risk. |
II-144
2009 | 2008 | |||||||||||||||
Real Estate | Real Estate | |||||||||||||||
Investments | Private Equity | Investments | Private Equity | |||||||||||||
(in millions) | ||||||||||||||||
Beginning balance | $ | 15 | $ | 8 | $ | 17 | $ | 9 | ||||||||
Actual return on investments: | ||||||||||||||||
Related to investments held at year end | (5 | ) | 2 | (2 | ) | (2 | ) | |||||||||
Related to investments sold during the year | (1 | ) | — | — | — | |||||||||||
Total return on investments | (6 | ) | 2 | (2 | ) | (2 | ) | |||||||||
Purchases, sales, and settlements | — | — | — | 1 | ||||||||||||
Transfers into/out of Level 3 | — | — | — | — | ||||||||||||
Ending balance | $ | 9 | $ | 10 | $ | 15 | $ | 8 | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Regulatory assets | $ | 135 | $ | 95 | ||||
Employee benefit obligations | (194 | ) | (155 | ) | ||||
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2009 | 2008 | |||||||
(in millions) | ||||||||
Regulatory assets | $ | 108 | $ | 135 | ||||
Employee benefit obligations | (166 | ) | (194 | ) | ||||
Prior Service | Net | Transition | Prior Service | Net | Transition | |||||||||||||||||||
Cost | (Gain)Loss | Obligation | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance at December 31, 2009: | ||||||||||||||||||||||||
Regulatory asset | $ | 33 | $ | 67 | $ | 8 | ||||||||||||||||||
Cost | (Gain) Loss | Obligation | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance at December 31, 2008: | ||||||||||||||||||||||||
Regulatory asset | $ | 49 | $ | 71 | $ | 15 | $ | 49 | $ | 71 | $ | 15 | ||||||||||||
Balance at December 31, 2007: | ||||||||||||||||||||||||
Estimated amortization as net periodic postretirement cost in 2010: | ||||||||||||||||||||||||
Regulatory asset | $ | 55 | $ | 20 | $ | 20 | $ | 4 | $ | — | $ | 3 | ||||||||||||
Estimated amortization as net periodic postretirement cost in 2009: | ||||||||||||||||||||||||
Regulatory asset | $ | 4 | $ | — | $ | 4 | ||||||||||||||||||
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Regulatory Assets | Regulatory Assets | |||||||
(in millions) | ||||||||
Balance at December 31, 2006 | $ | 147 | ||||||
Net gain | (41 | ) | ||||||
Change in prior service costs | — | |||||||
Reclassification adjustments: | ||||||||
Amortization of transition obligation | (4 | ) | ||||||
Amortization of prior service costs | (5 | ) | ||||||
Amortization of net gain | (2 | ) | ||||||
Total reclassification adjustments | (11 | ) | ||||||
Total change | (52 | ) | ||||||
(in millions) | ||||||||
Balance at December 31, 2007 | 95 | $ | 95 | |||||
Net loss | 50 | 50 | ||||||
Change in prior service costs | — | |||||||
Change in prior service costs/transition obligation | — | |||||||
Reclassification adjustments: | ||||||||
Amortization of transition obligation | (5 | ) | (5 | ) | ||||
Amortization of prior service costs | (5 | ) | (5 | ) | ||||
Amortization of net gain | — | — | ||||||
Total reclassification adjustments | (10 | ) | (10 | ) | ||||
Total change | 40 | 40 | ||||||
Balance at December 31, 2008 | $ | 135 | 135 | |||||
Net gain | (4 | ) | ||||||
Change in prior service costs/transition obligation | (15 | ) | ||||||
Reclassification adjustments: | ||||||||
Amortization of transition obligation | (4 | ) | ||||||
Amortization of prior service costs | (4 | ) | ||||||
Amortization of net gain | — | |||||||
Total reclassification adjustments | (8 | ) | ||||||
Total change | (27 | ) | ||||||
Balance at December 31, 2009 | $ | 108 | ||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Service cost | $ | 7 | $ | 7 | $ | 7 | $ | 6 | $ | 7 | $ | 7 | ||||||||||||
Interest cost | 29 | 28 | 26 | 29 | 29 | 28 | ||||||||||||||||||
Expected return on plan assets | (22 | ) | (19 | ) | (17 | ) | (24 | ) | (22 | ) | (19 | ) | ||||||||||||
Net amortization | 9 | 11 | 12 | 8 | 9 | 11 | ||||||||||||||||||
Net postretirement cost | $ | 23 | $ | 27 | $ | 28 | $ | 19 | $ | 23 | $ | 27 |
II-152
Benefit Payments | Subsidy Receipts | Total | Benefit Payments | Subsidy Receipts | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
2009 | $ | 28 | $ | (3 | ) | $ | 25 | |||||||||||||||||
(in millions) | ||||||||||||||||||||||||
2010 | 31 | (3 | ) | 28 | $ | 29 | $ | (3 | ) | $ | 26 | |||||||||||||
2011 | 33 | (4 | ) | 29 | 32 | (3 | ) | 29 | ||||||||||||||||
2012 | 35 | (4 | ) | 31 | 34 | (3 | ) | 31 | ||||||||||||||||
2013 | 36 | (5 | ) | 31 | 36 | (4 | ) | 32 | ||||||||||||||||
2014 to 2018 | 196 | (30 | ) | 166 | ||||||||||||||||||||
2014 | 37 | (4 | ) | 33 | ||||||||||||||||||||
2015 to 2019 | 194 | (28 | ) | 166 |
II-146
2008 | 2007 | 2006 | ||||||||||
Discount | 6.75 | % | 6.30 | % | 6.00 | % | ||||||
Annual salary increase | 3.75 | 3.75 | 3.50 | |||||||||
Long-term return on plan assets | 8.50 | 8.50 | 8.50 | |||||||||
2009 | 2008 | 2007 | ||||||||||
Discount rate: | ||||||||||||
Pension plans | 5.93 | % | 6.75 | % | 6.30 | % | ||||||
Other postretirement benefit plans | 5.84 | 6.75 | 6.30 | |||||||||
Annual salary increase | 4.18 | 3.75 | 3.75 | |||||||||
Long-term return on plan assets: | ||||||||||||
Pension plans | 8.50 | 8.50 | 8.50 | |||||||||
Other postretirement benefit plans | 7.52 | 7.66 | 7.68 | |||||||||
1 Percent | 1 Percent | 1 Percent | 1 Percent | |||||||||||||
Increase | Decrease | Increase | Decrease | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Benefit obligation | $ | 31 | $ | 33 | $ | 29 | $ | 27 | ||||||||
Service and interest costs | 2 | 2 | 2 | 2 |
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Total Megawatt | Company | Company | Accumulated | Total Megawatt | Company | Company | Accumulated | |||||||||||||||||||||||||
Facility | Capacity | Ownership | Investment | Depreciation | Capacity | Ownership | Investment | Depreciation | ||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Greene County | 500 | 60.00% | (1) | $ | 130 | $ | 68 | 500 | 60.00 | %(1) | $ | 137 | $ | 71 | ||||||||||||||||||
Plant Miller | ||||||||||||||||||||||||||||||||
Units 1 and 2 | 1,320 | 91.84% | (2) | 986 | 425 | 1,320 | 91.84 | %(2) | 1,063 | 449 |
(1) | Jointly owned with an affiliate, Mississippi Power. | |
(2) | Jointly owned with PowerSouth. |
II-152
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Federal — | ||||||||||||
Current | $ | 198 | $ | 287 | $ | 302 | ||||||
Deferred | 121 | 17 | (25 | ) | ||||||||
319 | 304 | 277 | ||||||||||
State — | ||||||||||||
Current | 43 | 43 | 56 | |||||||||
Deferred | 6 | 4 | (3 | ) | ||||||||
49 | 47 | 53 | ||||||||||
Total | $ | 368 | $ | 351 | $ | 330 | ||||||
II-159
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Federal — | ||||||||||||
Current | $ | 374 | $ | 198 | $ | 287 | ||||||
Deferred | (41 | ) | 121 | 17 | ||||||||
$ | 333 | $ | 319 | $ | 304 | |||||||
State — | ||||||||||||
Current | $ | 76 | $ | 43 | $ | 43 | ||||||
Deferred | (25 | ) | 6 | 4 | ||||||||
51 | 49 | 47 | ||||||||||
Total | $ | 384 | $ | 368 | $ | 351 | ||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Deferred tax liabilities: | ||||||||||||||||
Accelerated depreciation | $ | 1,908 | $ | 1,766 | $ | 2,010 | $ | 1,908 | ||||||||
Property basis differences | 343 | 341 | 376 | 343 | ||||||||||||
Premium on reacquired debt | 33 | 36 | 30 | 33 | ||||||||||||
Pension and other benefits | 175 | 340 | 184 | 175 | ||||||||||||
Fuel clause under recovered | 140 | 128 | — | 140 | ||||||||||||
Regulatory assets associated with employee benefit obligations | 286 | 90 | 295 | 286 | ||||||||||||
Asset retirement obligations | — | 27 | ||||||||||||||
Regulatory assets associated with asset retirement obligations | 199 | 187 | 208 | 199 | ||||||||||||
Other | 67 | 60 | 82 | 67 | ||||||||||||
Total | 3,151 | 2,975 | 3,185 | 3,151 | ||||||||||||
Deferred tax assets: | ||||||||||||||||
Federal effect of state deferred taxes | 126 | 121 | 88 | 126 | ||||||||||||
State effect of federal deferred taxes | 104 | 96 | 107 | 104 | ||||||||||||
Unbilled revenue | 34 | 31 | 29 | 34 | ||||||||||||
Storm reserve | 4 | 3 | 23 | 4 | ||||||||||||
Pension and other benefits | 330 | 126 | 334 | 330 | ||||||||||||
Other comprehensive losses | 13 | 10 | 9 | 13 | ||||||||||||
Regulatory liabilities associated with employee benefit obligations | — | 178 | ||||||||||||||
Fuel clause over recovered | 75 | |||||||||||||||
Asset retirement obligations | 199 | 214 | 208 | 199 | ||||||||||||
Other | 82 | 88 | 93 | 82 | ||||||||||||
Total | 892 | 867 | 966 | 892 | ||||||||||||
Total deferred tax liabilities, net | 2,259 | 2,108 | 2,219 | 2,259 | ||||||||||||
Portion included in current (liabilities) assets, net | (16 | ) | (43 | ) | ||||||||||||
Portion included in current assets (liabilities), net | 74 | (16 | ) | |||||||||||||
Accumulated deferred income taxes in the balance sheets | $ | 2,243 | $ | 2,065 | $ | 2,293 | $ | 2,243 |
II-153
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
Federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||||
State income tax, net of federal deduction | 3.1 | 3.2 | 4.0 | 3.0 | 3.1 | 3.2 | ||||||||||||||||||
Non-deductible book depreciation | 0.9 | 0.9 | 1.0 | 0.8 | 0.9 | 0.9 | ||||||||||||||||||
Differences in prior years’ deferred and current tax rates | (0.1 | ) | (0.2 | ) | (0.3 | ) | (0.2 | ) | (0.1 | ) | (0.2 | ) | ||||||||||||
AFUDC-equity | (1.6 | ) | (1.3 | ) | (0.7 | ) | (2.5 | ) | (1.6 | ) | (1.3 | ) | ||||||||||||
Production activities deduction | (0.5 | ) | (0.6 | ) | (0.2 | ) | (0.8 | ) | (0.5 | ) | (0.6 | ) | ||||||||||||
Other | (0.8 | ) | (0.7 | ) | (0.9 | ) | (0.2 | ) | (0.8 | ) | (0.7 | ) | ||||||||||||
Effective income tax rate | 36.0 | % | 36.3 | % | 37.9 | % | 35.1 | % | 36.0 | % | 36.3 | % |
II-160
2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Unrecognized tax benefits at beginning of year | $ | 4.8 | $ | 1.2 | $ | 3 | $ | 5 | $ | 1 | ||||||||||
Tax positions from current periods | 0.8 | 1.5 | 2 | 1 | 2 | |||||||||||||||
Tax positions from prior periods | (1.4 | ) | 2.1 | 1 | (2 | ) | 2 | |||||||||||||
Reductions due to settlements | (1.2 | ) | — | — | (1 | ) | — | |||||||||||||
Reductions due to expired statute of limitations | — | — | — | — | — | |||||||||||||||
Balance at end of year | $ | 3.0 | $ | 4.8 | $ | 6 | $ | 3 | $ | 5 |
II-154
2008 | 2007 | Change | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Tax positions impacting the effective tax rate | $ | 3.0 | $ | 4.8 | $ | (1.8 | ) | $ | 6 | $ | 3 | $ | 5 | |||||||||||
Tax positions not impacting the effective tax rate | — | — | — | — | — | — | ||||||||||||||||||
Balance of unrecognized tax benefits | $ | 3.0 | $ | 4.8 | $ | (1.8 | ) | $ | 6 | $ | 3 | $ | 5 |
2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Interest accrued at beginning of year | $ | 0.4 | $ | — | $ | 0.3 | $ | 0.4 | $ | — | ||||||||||
Interest reclassified due to settlements | (0.3 | ) | — | — | (0.3 | ) | — | |||||||||||||
Interest accrued during the year | 0.2 | 0.4 | — | 0.2 | 0.4 | |||||||||||||||
Balance at end of year | $ | 0.3 | $ | 0.4 | $ | 0.3 | $ | 0.3 | $ | 0.4 |
II-161
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2008 | 2007 | |||||||
(in millions) | ||||||||
Regulatory hedges | $ | (91.9 | ) | $ | (0.7 | ) | ||
Cash flow hedges | — | 0.5 | ||||||
Non-accounting hedges | — | (0.2 | ) | |||||
Total fair value | $ | (91.9 | ) | $ | (0.4 | ) | ||
Weighted | Fair Value | |||||||||
Notional | Variable Rate | Average | Hedge Maturity | Gain (Loss) | ||||||
Amount | Received | Fixed Rate Paid | Date | December 31, 2008 | ||||||
(in millions) | ||||||||||
$576 million | SIFMA Index | 2.69%* | February 2010 | $ | (11 | ) | ||||
II-164
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Commitments | Commitments | |||||||||||||||||||||||
Natural Gas | Coal | Nuclear Fuel | Natural Gas | Coal | Nuclear Fuel | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 505 | $ | 1,461 | $ | 48 | ||||||||||||||||||
2010 | 266 | 996 | 37 | $ | 413 | $ | 1,420 | $ | 73 | |||||||||||||||
2011 | 120 | 808 | 45 | 275 | 894 | 48 | ||||||||||||||||||
2012 | 154 | 636 | 44 | 176 | 695 | 51 | ||||||||||||||||||
2013 | 157 | 474 | 32 | 141 | 516 | 37 | ||||||||||||||||||
2014 and thereafter | 210 | 1,414 | 10 | |||||||||||||||||||||
2014 | 113 | 407 | 23 | |||||||||||||||||||||
2015 and thereafter | 148 | 975 | 90 | |||||||||||||||||||||
Total commitments | $ | 1,412 | $ | 5,789 | $ | 216 | $ | 1,266 | $ | 4,907 | $ | 322 |
II-165
Commitments | Commitments | |||||||||||||||||||||||
Affiliated | Non-Affiliated | Total | Affiliated | Non-Affiliated | Total | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 61 | $ | 44 | $ | 105 | ||||||||||||||||||
2010 | 17 | 24 | 41 | $ | 13 | $ | 26 | $ | 39 | |||||||||||||||
2011 | — | 3 | 3 | — | 30 | 30 | ||||||||||||||||||
2012 | — | — | — | — | 30 | 30 | ||||||||||||||||||
2013 | — | — | — | — | 31 | 31 | ||||||||||||||||||
2014 and thereafter | — | — | — | |||||||||||||||||||||
2014 | — | 36 | 36 | |||||||||||||||||||||
2015 and thereafter | — | 337 | 337 | |||||||||||||||||||||
Total commitments | $ | 78 | $ | 71 | $ | 149 | $ | 13 | $ | 490 | $ | 503 |
II-158
Minimum Lease Payments | Minimum Lease Payments | |||||||||||||||||||||||
Rail Cars | Vehicles & Other | Total | Rail Cars | Vehicles & Other | Total | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 17 | $ | 6 | $ | 23 | ||||||||||||||||||
2010 | 13 | 6 | 19 | $ | 16 | $ | 6 | $ | 22 | |||||||||||||||
2011 | 5 | 4 | 9 | 7 | 4 | 11 | ||||||||||||||||||
2012 | 5 | 2 | 7 | 7 | 3 | 10 | ||||||||||||||||||
2013 | 4 | 1 | 5 | 4 | 1 | 5 | ||||||||||||||||||
2014 and thereafter | 11 | — | 11 | |||||||||||||||||||||
2014 | 3 | — | 3 | |||||||||||||||||||||
2015 and thereafter | 10 | — | 10 | |||||||||||||||||||||
Total | $ | 55 | $ | 19 | $ | 74 | ||||||||||||||||||
Total * | $ | 47 | $ | 14 | $ | 61 |
* | Total does not include payments related to a non-affiliated PPA that is accounted for as an operating lease. Obligations related to this agreement are included in the above purchased power commitments table. |
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Year Ended December 31 | 2008 | 2007 | 2006 | 2009 | 2008 | 2007 | ||||||||||||||||||
Expected volatility | 13.1 | % | 14.8 | % | 16.9 | % | 15.6 | % | 13.1 | % | 14.8 | % | ||||||||||||
Expected term(in years) | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | ||||||||||||||||||
Interest rate | 2.8 | % | 4.6 | % | 4.6 | % | 1.9 | % | 2.8 | % | 4.6 | % | ||||||||||||
Dividend yield | 4.5 | % | 4.3 | % | 4.4 | % | 5.4 | % | 4.5 | % | 4.3 | % | ||||||||||||
Weighted average grant-date fair value | $ | 2.37 | $ | 4.12 | $ | 4.15 | $ | 1.80 | $ | 2.37 | $ | 4.12 |
Shares Subject | Weighted Average | Shares Subject | Weighted Average | |||||||||||||
to Option | Exercise Price | to Option | Exercise Price | |||||||||||||
Outstanding at December 31, 2007 | 6,186,430 | $ | 30.50 | |||||||||||||
Outstanding at December 31, 2008 | 6,809,196 | $ | 31.61 | |||||||||||||
Granted | 1,148,493 | 35.78 | 2,084,772 | 31.39 | ||||||||||||
Exercised | (522,381 | ) | 27.68 | (137,082 | ) | 19.79 | ||||||||||
Cancelled | (3,346 | ) | 32.31 | (7,412 | ) | 29.40 | ||||||||||
Outstanding at December 31, 2008 | 6,809,196 | $ | 31.61 | |||||||||||||
Outstanding at December 31, 2009 | 8,749,474 | $ | 31.74 | |||||||||||||
Exercisable at December 31, 2008 | 4,610,589 | $ | 29.65 | |||||||||||||
Exercisable at December 31, 2009 | 5,791,523 | $ | 31.10 |
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• | Level 1 consists of observable market data in an active market for identical assets or liabilities. | ||
• | Level 2 consists of observable market data, other than that included in Level 1, that is either directly or indirectly observable. | ||
• | Level 3 consists of unobservable market data. The input may reflect the assumptions of the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’s own assumptions are the best available information. |
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At December 31, 2008: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||||||||||||||
in Active | Significant | |||||||||||||||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Energy-related derivatives | $ | — | $ | 3.6 | $ | — | $ | 3.6 | $ | — | $ | 1 | $ | — | $ | 1 | ||||||||||||||||
Nuclear decommissioning trusts(a) | 237.4 | 165.5 | — | 402.9 | ||||||||||||||||||||||||||||
Nuclear decommissioning trusts:(a) | ||||||||||||||||||||||||||||||||
Domestic equity | 296 | 49 | — | 345 | ||||||||||||||||||||||||||||
U.S. Treasury and government agency securities | 11 | 5 | — | 16 | ||||||||||||||||||||||||||||
Corporate bonds | — | 76 | — | 76 | ||||||||||||||||||||||||||||
Mortgage and asset backed securities | — | 42 | — | 42 | ||||||||||||||||||||||||||||
Other | — | 9 | — | 9 | ||||||||||||||||||||||||||||
Cash equivalents and restricted cash | 80.1 | — | — | 80.1 | 346 | — | — | 346 | ||||||||||||||||||||||||
Total fair value | $ | 317.5 | $ | 169.1 | $ | — | $ | 486.6 | ||||||||||||||||||||||||
Total | $ | 653 | $ | 182 | $ | — | $ | 835 | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Energy-related derivatives | $ | — | $ | 95.5 | $ | — | $ | 95.5 | $ | — | $ | 45 | $ | — | $ | 45 | ||||||||||||||||
Interest rate derivatives | — | 10.9 | — | 10.9 | — | 4 | — | 4 | ||||||||||||||||||||||||
Total fair value | $ | — | $ | 106.4 | $ | — | $ | 106.4 | ||||||||||||||||||||||||
Total | $ | — | $ | 49 | $ | — | $ | 49 |
(a) | Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases. |
Unfunded | Redemption | Redemption | ||||||||||||||
As of December 31, 2009: | Fair Value | Commitments | Frequency | Notice Period | ||||||||||||
(in millions) | ||||||||||||||||
Nuclear decommissioning trusts: | ||||||||||||||||
Trust owned life insurance | $ | 78 | None | Daily | 15 days | |||||||||||
Cash equivalents and restricted cash: | ||||||||||||||||
Money market funds | 346 | None | Daily | Not applicable |
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Carrying Amount | Fair Value | |||||||
(in millions) | ||||||||
Long-term debt: | ||||||||
2009 | $ | 6,182 | $ | 6,357 | ||||
2008 | 5,855 | 5,784 |
• | Regulatory Hedges– Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company’s fuel hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the fuel cost recovery clause. |
• | Cash Flow Hedges– Gains and losses on energy-related derivatives designated as cash flow hedges are used to hedge anticipated purchases and sales and are initially deferred in other comprehensive income (OCI) before being recognized in income in the same period as the hedged transactions are reflected in earnings. |
• | Not Designated– Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred. |
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Net | ||||
Purchased | ||||
mmBtu* | Longest Hedge | Longest Non-Hedge | ||
(in millions) | Date | Date | ||
37 | 2014 | — |
* | mmBtu – million British thermal units |
Weighted | Fair Value | |||||||
Notional | Variable Rate | Average | Hedge Maturity | Gain (Loss) | ||||
Amount | Received | Fixed Rate Paid | Date | December 31, 2009 | ||||
(in millions) | (in millions) | |||||||
$576 | SIFMA Index* | 2.69% | February 2010 | $(4) | ||||
* | Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA) |
II-164
Asset Derivatives | Liability Derivatives | |||||||||||||||||||
Balance Sheet | Balance Sheet | |||||||||||||||||||
Derivative Category | Location | 2009 | 2008 | Location | 2009 | 2008 | ||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Derivatives designated as hedging instruments for regulatory purposes | ||||||||||||||||||||
Energy-related derivatives: | Other current assets | $ | 1 | $ | 4 | Liabilities from risk management activities | $ | 34 | $ | 75 | ||||||||||
Other deferred charges and assets | — | — | Other deferred credits and liabilities | 11 | 21 | |||||||||||||||
Total derivatives designated as hedging instruments for regulatory purposes | $ | 1 | $ | 4 | $ | 45 | $ | 96 | ||||||||||||
Derivatives designated as hedging instruments in cash flow hedges | ||||||||||||||||||||
Interest rate derivatives: | Other current assets | — | — | Liabilities from risk management activities | 4 | 9 | ||||||||||||||
Other deferred charges and assets | — | — | Other deferred credits and liabilities | — | 2 | |||||||||||||||
Total derivatives designated as hedging instruments in cash flow hedges | $ | — | $ | — | $ | 4 | $ | 11 | ||||||||||||
Total | $ | 1 | $ | 4 | $ | 49 | $ | 107 | ||||||||||||
Unrealized Losses | Unrealized Gains | |||||||||||||||||||
Balance Sheet | Balance Sheet | |||||||||||||||||||
Derivative Category | Location | 2009 | 2008 | Location | 2009 | 2008 | ||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Energy-related derivatives: | Other regulatory assets, current | $ | (34 | ) | $ | (75 | ) | Other regulatory liabilities, current | $ | 1 | $ | 4 | ||||||||
Other regulatory assets, deferred | (11 | ) | (21 | ) | Other regulatory liabilities, deferred | — | — | |||||||||||||
Total energy-related derivative gains (losses) | $ | (45 | ) | $ | (96 | ) | $ | 1 | $ | 4 | ||||||||||
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Gain (Loss) Recognized in | Gain (Loss) Reclassified from Accumulated OCI into Income | |||||||||||||||||||||||||||
Derivatives in Cash Flow | OCI on Derivative | (Effective Portion) | ||||||||||||||||||||||||||
Hedging Relationships | (Effective Portion) | Amount | ||||||||||||||||||||||||||
Statements of Income | ||||||||||||||||||||||||||||
Derivative Category | 2009 | 2008 | 2007 | Location | 2009 | 2008 | 2007 | |||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||
Interest rate derivatives | $ | (5 | ) | $ | (11 | ) | $ | (3 | ) | Interest expense | $ | (12 | ) | $ | (3 | ) | $ | (1 | ) | |||||||||
Net Income After | Net Income After | |||||||||||||||||||||||
Operating | Operating | Dividends on Preferred | Operating | Operating | Dividends on Preferred | |||||||||||||||||||
Quarter Ended | Revenues | Income | and Preference Stock | Revenues | Income | and Preference Stock | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
March 2009 | $ | 1,340 | $ | 299 | $ | 146 | ||||||||||||||||||
June 2009 | 1,366 | 349 | 177 | |||||||||||||||||||||
September 2009 | 1,592 | 483 | 261 | |||||||||||||||||||||
December 2009 | 1,231 | 189 | 86 | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
March 2008 | $ | 1,337 | $ | 274 | $ | 130 | $ | 1,337 | $ | 274 | $ | 130 | ||||||||||||
June 2008 | 1,470 | 319 | 153 | 1,470 | 319 | 153 | ||||||||||||||||||
September 2008 | 1,865 | 478 | 252 | 1,865 | 478 | 252 | ||||||||||||||||||
December 2008 | 1,405 | 198 | 81 | 1,405 | 198 | 81 | ||||||||||||||||||
March 2007 | $ | 1,197 | $ | 255 | $ | 115 | ||||||||||||||||||
June 2007 | 1,336 | 311 | 147 | |||||||||||||||||||||
September 2007 | 1,635 | 476 | 246 | |||||||||||||||||||||
December 2007 | 1,192 | 173 | 72 | |||||||||||||||||||||
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2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Operating Revenues (in thousands) | $ | 6,076,931 | $ | 5,359,993 | $ | 5,014,728 | $ | 4,647,824 | $ | 4,235,991 | $ | 5,528,574 | $ | 6,076,931 | $ | 5,359,993 | $ | 5,014,728 | $ | 4,647,824 | ||||||||||||||||||||
Net Income after Dividends on Preferred and Preference Stock (in thousands) | $ | 615,959 | $ | 579,582 | $ | 517,730 | $ | 507,895 | $ | 481,171 | $ | 669,536 | $ | 615,959 | $ | 579,582 | $ | 517,730 | $ | 507,895 | ||||||||||||||||||||
Cash Dividends on Common Stock (in thousands) | $ | 491,300 | $ | 465,000 | $ | 440,600 | $ | 409,900 | $ | 437,300 | $ | 522,800 | $ | 491,300 | $ | 465,000 | $ | 440,600 | $ | 409,900 | ||||||||||||||||||||
Return on Average Common Equity (percent) | 13.30 | 13.73 | 13.23 | 13.72 | 13.53 | 13.27 | 13.30 | 13.73 | 13.23 | 13.72 | ||||||||||||||||||||||||||||||
Total Assets (in thousands) | $ | 16,536,006 | $ | 15,746,625 | $ | 14,655,290 | $ | 13,689,907 | $ | 12,781,525 | $ | 17,524,093 | $ | 16,536,006 | $ | 15,746,625 | $ | 14,655,290 | $ | 13,689,907 | ||||||||||||||||||||
Gross Property Additions (in thousands) | $ | 1,532,673 | $ | 1,203,300 | $ | 960,759 | $ | 890,062 | $ | 786,298 | $ | 1,322,596 | $ | 1,532,673 | $ | 1,203,300 | $ | 960,759 | $ | 890,062 | ||||||||||||||||||||
Capitalization (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Common stock equity | $ | 4,854,310 | $ | 4,410,683 | $ | 4,032,287 | $ | 3,792,726 | $ | 3,610,204 | $ | 5,236,461 | $ | 4,854,310 | $ | 4,410,683 | $ | 4,032,287 | $ | 3,792,726 | ||||||||||||||||||||
Preferred and preference stock | 685,127 | 683,512 | 612,407 | 465,046 | 465,047 | |||||||||||||||||||||||||||||||||||
Preference stock | 343,373 | 343,412 | 343,466 | 147,361 | — | |||||||||||||||||||||||||||||||||||
Redeemable preferred stock | 341,715 | 341,715 | 340,046 | 465,046 | 465,046 | |||||||||||||||||||||||||||||||||||
Long-term debt | 5,604,791 | 4,750,196 | 4,148,185 | 3,869,465 | 4,164,536 | 6,082,489 | 5,604,791 | 4,750,196 | 4,148,185 | 3,869,465 | ||||||||||||||||||||||||||||||
Total (excluding amounts due within one year) | $ | 11,144,228 | $ | 9,844,391 | $ | 8,792,879 | $ | 8,127,237 | $ | 8,239,787 | $ | 12,004,038 | $ | 11,144,228 | $ | 9,844,391 | $ | 8,792,879 | $ | 8,127,237 | ||||||||||||||||||||
Capitalization Ratios (percent): | ||||||||||||||||||||||||||||||||||||||||
Common stock equity | 43.6 | 44.8 | 45.9 | 46.7 | 43.8 | 43.6 | 43.6 | 44.8 | 45.9 | 46.7 | ||||||||||||||||||||||||||||||
Preferred and preference stock | 6.1 | 6.9 | 7.0 | 5.7 | 5.6 | |||||||||||||||||||||||||||||||||||
Preference stock | 2.9 | 3.1 | 3.5 | 1.7 | — | |||||||||||||||||||||||||||||||||||
Redeemable preferred stock | 2.8 | 3.0 | 3.4 | 5.3 | 5.7 | |||||||||||||||||||||||||||||||||||
Long-term debt | 50.3 | 48.3 | 47.1 | 47.6 | 50.6 | 50.7 | 50.3 | 48.3 | 47.1 | 47.6 | ||||||||||||||||||||||||||||||
Total (excluding amounts due within one year) | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||||||||||||||||||||
Security Ratings: | ||||||||||||||||||||||||||||||||||||||||
First Mortgage Bonds — | ||||||||||||||||||||||||||||||||||||||||
Moody’s | — | — | — | A1 | A1 | — | — | — | — | A1 | ||||||||||||||||||||||||||||||
Standard and Poor’s | — | — | — | A+ | A | — | — | — | — | A+ | ||||||||||||||||||||||||||||||
Fitch | — | — | — | AA- | AA- | — | — | — | — | AA- | ||||||||||||||||||||||||||||||
Preferred Stock/ Preference Stock — | ||||||||||||||||||||||||||||||||||||||||
Moody’s | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | ||||||||||||||||||||||||||||||
Standard and Poor’s | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | ||||||||||||||||||||||||||||||
Fitch | A | A | A | A | A | A | A | A | A | A | ||||||||||||||||||||||||||||||
Unsecured Long-Term Debt — | ||||||||||||||||||||||||||||||||||||||||
Moody’s | A2 | A2 | A2 | A2 | A2 | A2 | A2 | A2 | A2 | A2 | ||||||||||||||||||||||||||||||
Standard and Poor’s | A | A | A | A | A | A | A | A | A | A | ||||||||||||||||||||||||||||||
Fitch | A+ | A+ | A+ | A+ | A+ | A+ | A+ | A+ | A+ | A+ | ||||||||||||||||||||||||||||||
Customers (year-end): | ||||||||||||||||||||||||||||||||||||||||
Residential | 1,220,046 | 1,207,883 | 1,194,696 | 1,184,406 | 1,170,814 | 1,229,134 | 1,220,046 | 1,207,883 | 1,194,696 | 1,184,406 | ||||||||||||||||||||||||||||||
Commercial | 211,119 | 216,830 | 214,723 | 212,546 | 208,547 | 198,642 | 211,119 | 216,830 | 214,723 | 212,546 | ||||||||||||||||||||||||||||||
Industrial | 5,906 | 5,849 | 5,750 | 5,492 | 5,260 | 5,912 | 5,906 | 5,849 | 5,750 | 5,492 | ||||||||||||||||||||||||||||||
Other | 775 | 772 | 766 | 759 | 753 | 780 | 775 | 772 | 766 | 759 | ||||||||||||||||||||||||||||||
Total | 1,437,846 | 1,431,334 | 1,415,935 | 1,403,203 | 1,385,374 | 1,434,468 | 1,437,846 | 1,431,334 | 1,415,935 | 1,403,203 | ||||||||||||||||||||||||||||||
Employees (year-end) | 6,997 | 6,980 | 6,796 | 6,621 | 6,745 | 6,842 | 6,997 | 6,980 | 6,796 | 6,621 |
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2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Operating Revenues (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Residential | $ | 1,997,603 | $ | 1,833,563 | $ | 1,664,304 | $ | 1,476,211 | $ | 1,346,669 | $ | 1,961,678 | $ | 1,997,603 | $ | 1,833,563 | $ | 1,664,304 | $ | 1,476,211 | ||||||||||||||||||||
Commercial | 1,459,466 | 1,313,642 | 1,172,436 | 1,062,341 | 980,771 | 1,429,601 | 1,459,466 | 1,313,642 | 1,172,436 | 1,062,341 | ||||||||||||||||||||||||||||||
Industrial | 1,381,100 | 1,238,368 | 1,140,225 | 1,065,124 | 948,528 | 1,080,208 | 1,381,100 | 1,238,368 | 1,140,225 | 1,065,124 | ||||||||||||||||||||||||||||||
Other | 24,112 | 21,383 | 18,766 | 17,745 | 16,860 | 25,594 | 24,112 | 21,383 | 18,766 | 17,745 | ||||||||||||||||||||||||||||||
Total retail | 4,862,281 | 4,406,956 | 3,995,731 | 3,621,421 | 3,292,828 | 4,497,081 | 4,862,281 | 4,406,956 | 3,995,731 | 3,621,421 | ||||||||||||||||||||||||||||||
Wholesale — non-affiliates | 711,903 | 627,047 | 634,552 | 551,408 | 483,839 | 619,859 | 711,903 | 627,047 | 634,552 | 551,408 | ||||||||||||||||||||||||||||||
Wholesale — affiliates | 308,482 | 144,089 | 216,028 | 288,956 | 308,312 | 236,995 | 308,482 | 144,089 | 216,028 | 288,956 | ||||||||||||||||||||||||||||||
Total revenues from sales of electricity | 5,882,666 | 5,178,092 | 4,846,311 | 4,461,785 | 4,084,979 | 5,353,935 | 5,882,666 | 5,178,092 | 4,846,311 | 4,461,785 | ||||||||||||||||||||||||||||||
Other revenues | 194,265 | 181,901 | 168,417 | 186,039 | 151,012 | 174,639 | 194,265 | 181,901 | 168,417 | 186,039 | ||||||||||||||||||||||||||||||
Total | $ | 6,076,931 | $ | 5,359,993 | $ | 5,014,728 | $ | 4,647,824 | $ | 4,235,991 | 5,528,574 | $ | 6,076,931 | $ | 5,359,993 | $ | 5,014,728 | $ | 4,647,824 | |||||||||||||||||||||
Kilowatt-Hour Sales (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Residential | 18,379,801 | 18,874,039 | 18,632,935 | 18,073,783 | 17,368,321 | 18,071,471 | 18,379,801 | 18,874,039 | 18,632,935 | 18,073,783 | ||||||||||||||||||||||||||||||
Commercial | 14,551,495 | 14,761,243 | 14,355,091 | 14,061,650 | 13,822,926 | 14,185,622 | 14,551,495 | 14,761,243 | 14,355,091 | 14,061,650 | ||||||||||||||||||||||||||||||
Industrial | 22,074,616 | 22,805,676 | 23,187,328 | 23,349,769 | 22,854,399 | 18,555,377 | 22,074,616 | 22,805,676 | 23,187,328 | 23,349,769 | ||||||||||||||||||||||||||||||
Other | 201,283 | 200,874 | 199,445 | 198,715 | 198,253 | 217,594 | 201,283 | 200,874 | 199,445 | 198,715 | ||||||||||||||||||||||||||||||
Total retail | 55,207,195 | 56,641,832 | 56,374,799 | 55,683,917 | 54,243,899 | 51,030,064 | 55,207,195 | 56,641,832 | 56,374,799 | 55,683,917 | ||||||||||||||||||||||||||||||
Sales for resale — non-affiliates | �� | 15,203,960 | 15,769,485 | 15,978,465 | 15,442,728 | 15,483,420 | ||||||||||||||||||||||||||||||||||
Sales for resale — affiliates | 5,256,130 | 3,241,168 | 5,145,107 | 5,735,429 | 7,233,880 | |||||||||||||||||||||||||||||||||||
Wholesale — non-affiliates | 14,316,742 | 15,203,960 | 15,769,485 | 15,978,465 | 15,442,728 | |||||||||||||||||||||||||||||||||||
Wholesale — affiliates | 6,473,084 | 5,256,130 | 3,241,168 | 5,145,107 | 5,735,429 | |||||||||||||||||||||||||||||||||||
Total | 75,667,285 | 75,652,485 | 77,498,371 | 76,862,074 | 76,961,199 | 71,819,890 | 75,667,285 | 75,652,485 | 77,498,371 | 76,862,074 | ||||||||||||||||||||||||||||||
Average Revenue Per Kilowatt-Hour (cents): | ||||||||||||||||||||||||||||||||||||||||
Residential | 10.87 | 9.71 | 8.93 | 8.17 | 7.75 | 10.86 | 10.87 | 9.71 | 8.93 | 8.17 | ||||||||||||||||||||||||||||||
Commercial | 10.03 | 8.90 | 8.17 | 7.55 | 7.10 | 10.08 | 10.03 | 8.90 | 8.17 | 7.55 | ||||||||||||||||||||||||||||||
Industrial | 6.26 | 5.43 | 4.92 | 4.56 | 4.15 | 5.82 | 6.26 | 5.43 | 4.92 | 4.56 | ||||||||||||||||||||||||||||||
Total retail | 8.81 | 7.78 | 7.09 | 6.50 | 6.07 | 8.81 | 8.81 | 7.78 | 7.09 | 6.50 | ||||||||||||||||||||||||||||||
Wholesale | 4.99 | 4.06 | 4.03 | 3.97 | 3.49 | 4.12 | 4.99 | 4.06 | 4.03 | 3.97 | ||||||||||||||||||||||||||||||
Total sales | 7.77 | 6.84 | 6.25 | 5.80 | 5.31 | 7.45 | 7.77 | 6.84 | 6.25 | 5.80 | ||||||||||||||||||||||||||||||
Residential Average Annual Kilowatt-Hour Use Per Customer | 15,162 | 15,696 | 15,663 | 15,347 | 14,894 | 14,716 | 15,162 | 15,696 | 15,663 | 15,347 | ||||||||||||||||||||||||||||||
Residential Average Annual Revenue Per Customer | $ | 1,648 | $ | 1,525 | $ | 1,399 | $ | 1,253 | $ | 1,155 | $ | 1,597 | $ | 1,648 | $ | 1,525 | $ | 1,399 | $ | 1,253 | ||||||||||||||||||||
Plant Nameplate Capacity Ratings (year-end) (megawatts) | 12,222 | 12,222 | 12,222 | 12,216 | 12,216 | 12,222 | 12,222 | 12,222 | 12,222 | 12,216 | ||||||||||||||||||||||||||||||
Maximum Peak-Hour Demand (megawatts): | ||||||||||||||||||||||||||||||||||||||||
Winter | 10,747 | 10,144 | 10,309 | 9,812 | 9,556 | 10,701 | 10,747 | 10,144 | 10,309 | 9,812 | ||||||||||||||||||||||||||||||
Summer | 11,518 | 12,211 | 11,744 | 11,162 | 10,938 | 10,870 | 11,518 | 12,211 | 11,744 | 11,162 | ||||||||||||||||||||||||||||||
Annual Load Factor (percent) | 60.9 | 59.4 | 61.8 | 63.2 | 63.2 | 59.8 | 60.9 | 59.4 | 61.8 | 63.2 | ||||||||||||||||||||||||||||||
Plant Availability (percent): | ||||||||||||||||||||||||||||||||||||||||
Fossil-steam | 90.08 | 88.2 | 89.6 | 90.5 | 87.8 | 88.5 | 90.1 | 88.2 | 89.6 | 90.5 | ||||||||||||||||||||||||||||||
Nuclear | 94.13 | 87.5 | 93.3 | 92.9 | 88.7 | 93.3 | 94.1 | 87.5 | 93.3 | 92.9 | ||||||||||||||||||||||||||||||
Source of Energy Supply (percent): | ||||||||||||||||||||||||||||||||||||||||
Coal | 58.5 | 60.9 | 60.2 | 59.5 | 56.5 | 53.4 | 58.5 | 60.9 | 60.2 | 59.5 | ||||||||||||||||||||||||||||||
Nuclear | 17.8 | 16.5 | 17.4 | 17.2 | 16.4 | 18.6 | 17.8 | 16.5 | 17.4 | 17.2 | ||||||||||||||||||||||||||||||
Hydro | 2.9 | 1.8 | 3.8 | 5.6 | 5.6 | 7.9 | 2.9 | 1.8 | 3.8 | 5.6 | ||||||||||||||||||||||||||||||
Gas | 9.2 | 8.7 | 7.6 | 6.8 | 8.9 | 11.8 | 9.2 | 8.7 | 7.6 | 6.8 | ||||||||||||||||||||||||||||||
Purchased power — | ||||||||||||||||||||||||||||||||||||||||
From non-affiliates | 2.9 | 1.8 | 2.1 | 3.8 | 5.4 | 2.0 | 2.9 | 1.8 | 2.1 | 3.8 | ||||||||||||||||||||||||||||||
From affiliates | 8.7 | 10.3 | 8.9 | 7.1 | 7.2 | 6.3 | 8.7 | 10.3 | 8.9 | 7.1 | ||||||||||||||||||||||||||||||
Total | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 |
II-171II-168
II-173II-170
II-174II-171
2008 | 2008 | 2009 | 2009 | |||||||||
Target | Actual | Target | Actual | |||||||||
Key Performance Indicator | Performance | Performance | Performance | Performance | ||||||||
Customer Satisfaction | Top quartile in customer surveys | Top quartile in customer surveys | Top quartile in customer surveys | Top quartile in customer surveys | ||||||||
Peak Season EFOR — fossil/hydro | 2.75% or less | 0.84 | % | 2.75% or less | 1.43 | % | ||||||
Peak Season EFOR — nuclear | 2.00% or less | 1.64 | % | 2.75% or less | 3.70 | % | ||||||
Net Income | $900 million | $903 million | $856 million | $814 million |
II-175II-172
Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||||||||||||||
Amount | from Prior Year | Amount | from Prior Year | |||||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Operating revenues | $ | 8,412 | $ | 840 | $ | 326 | $ | 170 | $ | 7,692 | $ | (720 | ) | $ | 840 | $ | 326 | |||||||||||||||
Fuel | 2,813 | 172 | 408 | 296 | 2,717 | (95 | ) | 172 | 408 | |||||||||||||||||||||||
Purchased power | 1,405 | 355 | (95 | ) | (171 | ) | 979 | (426 | ) | 355 | (95 | ) | ||||||||||||||||||||
Other operations and maintenance | 1,581 | 19 | 1 | (11 | ) | 1,494 | (87 | ) | 19 | 1 | ||||||||||||||||||||||
Depreciation and amortization | 637 | 126 | 13 | (28 | ) | 655 | 18 | 126 | 13 | |||||||||||||||||||||||
Taxes other than income taxes | 316 | 25 | (8 | ) | 23 | 317 | — | 25 | (8 | ) | ||||||||||||||||||||||
Total operating expenses | 6,752 | 697 | 319 | 109 | 6,162 | (590 | ) | 697 | 319 | |||||||||||||||||||||||
Operating income | 1,660 | 143 | 7 | 61 | 1,530 | (130 | ) | 143 | 7 | |||||||||||||||||||||||
Total other income and (expense) | (252 | ) | 5 | 18 | (22 | ) | (289 | ) | (37 | ) | 5 | 18 | ||||||||||||||||||||
Income taxes | 488 | 70 | (25 | ) | (5 | ) | 410 | (78 | ) | 70 | (25 | ) | ||||||||||||||||||||
Net income | 920 | 78 | 50 | 44 | 831 | (89 | ) | 78 | 50 | |||||||||||||||||||||||
Dividends on preferred and preference stock | 17 | 11 | 1 | 1 | 17 | — | 11 | 1 | ||||||||||||||||||||||||
Net income after dividends on preferred and preference stock | $ | 903 | $ | 67 | $ | 49 | $ | 43 | $ | 814 | $ | (89 | ) | $ | 67 | $ | 49 |
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Amount | Amount | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Retail — prior year | $ | 6,498.0 | $ | 6,205.6 | $ | 6,064.4 | $ | 7,287 | $ | 6,498 | $ | 6,206 | ||||||||||||
Estimated change in — | ||||||||||||||||||||||||
Rates and pricing | 396.9 | (66.2 | ) | (76.8 | ) | (64 | ) | 397 | (66 | ) | ||||||||||||||
Sales growth | (20.9 | ) | 46.5 | 76.6 | ||||||||||||||||||||
Sales growth (decline) | (93 | ) | (21 | ) | 46 | |||||||||||||||||||
Weather | (37.7 | ) | 17.7 | 7.5 | (6 | ) | (37 | ) | 18 | |||||||||||||||
Fuel cost recovery | 450.1 | 294.4 | 133.9 | (212 | ) | 450 | 294 | |||||||||||||||||
Retail — current year | 7,286.4 | 6,498.0 | 6,205.6 | 6,912 | 7,287 | 6,498 | ||||||||||||||||||
Wholesale revenues — | ||||||||||||||||||||||||
Non-affiliates | 568.8 | 537.9 | 551.7 | 395 | 569 | 538 | ||||||||||||||||||
Affiliates | 286.2 | 277.9 | 252.6 | 112 | 286 | 278 | ||||||||||||||||||
Total wholesale revenues | 855.0 | 815.8 | 804.3 | 507 | 855 | 816 | ||||||||||||||||||
Other operating revenues | 270.2 | 257.9 | 235.7 | 273 | 270 | 258 | ||||||||||||||||||
Total operating revenues | $ | 8,411.6 | $ | 7,571.7 | $ | 7,245.6 | $ | 7,692 | $ | 8,412 | $ | 7,572 | ||||||||||||
Percent change | 11.1 | % | 4.5 | % | 2.4 | % | (8.6 | )% | 11.1 | % | 4.5 | % |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | ||||||||||||||||||||||
(in millions) | (in millions) | ||||||||||||||||||||||||||
Unit power sales — | |||||||||||||||||||||||||||
Capacity | $ | 40 | $ | 33 | $ | 33 | $ | 43 | $ | 40 | $ | 33 | |||||||||||||||
Energy | 44 | 33 | 38 | 26 | 44 | 33 | |||||||||||||||||||||
Total | 84 | 66 | 71 | 69 | 84 | 66 | |||||||||||||||||||||
Other power sales — | |||||||||||||||||||||||||||
Capacity and other | 129 | 158 | 165 | 140 | 129 | 158 | |||||||||||||||||||||
Energy | 356 | 314 | 316 | 186 | 356 | 314 | |||||||||||||||||||||
Total | 485 | 472 | 481 | 326 | 485 | 472 | |||||||||||||||||||||
Total non-affiliated | $ | 569 | $ | 538 | $ | 552 | $ | 395 | $ | 569 | $ | 538 |
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KWH | Percent Change | KWH | Percent Change | |||||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||
(in billions) | (in billions) | |||||||||||||||||||||||||||||||
Residential | 26.4 | (1.6 | )% | 2.4 | % | 2.7 | % | 26.3 | (0.5 | )% | (1.6 | )% | 2.4 | % | ||||||||||||||||||
Commercial | 33.0 | 0.0 | 2.9 | 2.5 | 32.6 | (1.4 | ) | 0.0 | 2.9 | |||||||||||||||||||||||
Industrial | 24.2 | (5.2 | ) | (0.3 | ) | (1.0 | ) | 21.8 | (9.7 | ) | (5.2 | ) | (0.3 | ) | ||||||||||||||||||
Other | 0.7 | (3.8 | ) | 5.6 | (10.5 | ) | 0.7 | 0.1 | (3.8 | ) | 5.6 | |||||||||||||||||||||
Total retail | 84.3 | (2.1 | ) | 1.8 | 1.4 | 81.4 | (3.5 | ) | (2.1 | ) | 1.8 | |||||||||||||||||||||
Wholesale | ||||||||||||||||||||||||||||||||
Non-affiliates | 9.8 | (7.8 | ) | (1.0 | ) | 0.9 | 5.2 | (46.6 | ) | (7.8 | ) | (1.0 | ) | |||||||||||||||||||
Affiliates | 3.7 | (28.8 | ) | (5.0 | ) | 8.5 | 2.5 | (32.2 | ) | (28.8 | ) | (5.0 | ) | |||||||||||||||||||
Total wholesale | 13.5 | (14.7 | ) | (2.3 | ) | 3.4 | 7.7 | (42.7 | ) | (14.7 | ) | (2.3 | ) | |||||||||||||||||||
Total energy sales | 97.8 | (4.0 | )% | 1.1 | % | 1.7 | % | 89.1 | (8.9 | )% | (4.0 | )% | 1.1 | % |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
Total generation(billions of KWHs) | 80.8 | 87.0 | 83.7 | 72.4 | 80.8 | 87.0 | ||||||||||||||||||
Total purchased power(billions of KWHs) | 21.3 | 18.9 | 21.9 | 20.4 | 21.3 | 18.9 | ||||||||||||||||||
Sources of generation(percent) - | ||||||||||||||||||||||||
Coal | 74 | 75 | 75 | 67 | 74 | 75 | ||||||||||||||||||
Nuclear | 19 | 18 | 18 | 21 | 19 | 18 | ||||||||||||||||||
Gas | 6 | 7 | 6 | 10 | 6 | 7 | ||||||||||||||||||
Hydro | 1 | — | 1 | 2 | 1 | — | ||||||||||||||||||
Cost of fuel, generated(cents per net KWH) - | ||||||||||||||||||||||||
Coal | 3.44 | 2.87 | 2.58 | 4.12 | 3.44 | 2.87 | ||||||||||||||||||
Nuclear | 0.51 | 0.51 | 0.47 | 0.55 | 0.51 | 0.51 | ||||||||||||||||||
Gas | 6.90 | 6.28 | 5.76 | 5.30 | 6.90 | 6.28 | ||||||||||||||||||
Average cost of fuel, generated(cents per net KWH) | 3.11 | 2.68 | 2.39 | |||||||||||||||||||||
Average cost of fuel, generated(cents per net KWH)* | 3.48 | 3.11 | 2.68 | |||||||||||||||||||||
Average cost of purchased power(cents per net KWH) | 8.10 | 7.27 | 6.38 | 6.06 | 8.10 | 7.27 |
* | Fuel includes fuel purchased by the Company for tolling agreements where power is generated by the provider and is included in purchased power when determining the average cost of purchased power. |
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• | Changes in existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances, hazardous and solid wastes, coal combustion byproducts, including coal ash, and other environmental matters. | |
• | Changes in existing income tax regulations or changes in IRS or Georgia DOR interpretations of existing regulations. | |
• | Identification of additional sites that require environmental remediation or the filing of other complaints in which the Company may be asserted to be a potentially responsible party. | |
• | Identification and evaluation of other potential lawsuits or complaints in which the Company may be named as a defendant. | |
• | Resolution or progression of new or existing matters through the legislative process, the court systems, the IRS, the Georgia DOR, the FERC, or the EPA. |
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Expires | ||||||||||||||
Total | Unused | 2009 | 2012 | |||||||||||
(in millions) | ||||||||||||||
$1,345 | $ | 1,333 | $ | 225 | $ | 1,120 |
Expires | ||||||||||||||
Total | Unused | 2010 | 2012 | |||||||||||
(in millions) | ||||||||||||||
$1,715 | $ | 1,703 | $ | 595 | $ | 1,120 |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
Changes | Changes | Changes | Changes | |||||||||||||
Fair Value | Fair Value | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||
Contracts outstanding at the beginning of the period, assets (liabilities), net | $ | (0.4 | ) | $ | (38.0 | ) | $ | (113 | ) | $ | — | |||||
Contracts realized or settled | (68.5 | ) | 41.6 | 150 | (69 | ) | ||||||||||
Current period changes(a) | (44.3 | ) | (4.0 | ) | ||||||||||||
Current period changes(a) | (112 | ) | (44 | ) | ||||||||||||
Contracts outstanding at the end of the period, assets (liabilities), net | $ | (113.2 | ) | $ | (0.4 | ) | $ | (75 | ) | $ | (113 | ) |
(a) | Current period changes also include the changes in fair value of new contracts entered into during the period, if |
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December 31, 2008 | December 31, 2009 | |||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements | |||||||||||||||||||||||||||||||
Total | Maturity | Total | Maturity | |||||||||||||||||||||||||||||
Fair Value | Year 1 | Years 2 & 3 | Years 4 & 5 | Fair Value | Year 1 | Years 2 & 3 | Years 4 & 5 | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Level 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Level 2 | (113.2 | ) | (80.7 | ) | (32.4 | ) | (0.1 | ) | (75 | ) | (47 | ) | (27 | ) | (1 | ) | ||||||||||||||||
Level 3 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Fair value of contracts outstanding at end of period | $ | (113.2 | ) | $ | (80.7 | ) | $ | (32.4 | ) | $ | (0.1 | ) | $ | (75 | ) | $ | (47 | ) | $ | (27 | ) | $ | (1 | ) |
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2010- | 2012- | After | Uncertain | 2011- | 2013- | After | Uncertain | |||||||||||||||||||||||||||||||||||||||||
2009 | 2011 | 2013 | 2013 | Timing(d) | Total | 2010 | 2012 | 2014 | 2014 | Timing(d) | Total | |||||||||||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt(a) — | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | $ | 280 | $ | 667 | $ | 734 | $ | 5,612 | $ | — | $ | 7,293 | $ | 250 | $ | 611 | $ | 525 | $ | 6,597 | $ | — | $ | 7,983 | ||||||||||||||||||||||||
Interest | 354 | 677 | 636 | 5,711 | — | 7,378 | 378 | 736 | 670 | 6,067 | — | 7,851 | ||||||||||||||||||||||||||||||||||||
Preferred and preference stock dividends(b) | 17 | 35 | 35 | — | — | 87 | 17 | 35 | 35 | — | — | 87 | ||||||||||||||||||||||||||||||||||||
Energy-related derivative obligations(c) | 85 | 33 | — | — | — | 118 | 47 | 27 | 1 | — | — | 75 | ||||||||||||||||||||||||||||||||||||
Interest derivatives | 21 | — | — | — | — | 21 | ||||||||||||||||||||||||||||||||||||||||||
Operating leases | 43 | 65 | 32 | 28 | — | 168 | 37 | 54 | 28 | 17 | — | 136 | ||||||||||||||||||||||||||||||||||||
Capital leases | 4 | 9 | 10 | 40 | — | 63 | ||||||||||||||||||||||||||||||||||||||||||
Unrecognized tax benefits and interest(d) | 142 | — | — | — | 9 | 151 | 183 | — | — | — | 18 | 201 | ||||||||||||||||||||||||||||||||||||
Purchase commitments(e)— | ||||||||||||||||||||||||||||||||||||||||||||||||
Capital(f) | 2,615 | 4,942 | — | — | — | 7,557 | 2,298 | 4,984 | — | — | — | 7,282 | ||||||||||||||||||||||||||||||||||||
Limestone(g) | 10 | 34 | 31 | 37 | — | 112 | 19 | 30 | 32 | 20 | — | 101 | ||||||||||||||||||||||||||||||||||||
Coal | 2,497 | 3,713 | 1,406 | 1,999 | — | 9,615 | 2,239 | 2,609 | 959 | 1,533 | — | 7,340 | ||||||||||||||||||||||||||||||||||||
Nuclear fuel | 139 | 219 | 199 | 33 | — | 590 | 198 | 224 | 171 | 207 | — | 800 | ||||||||||||||||||||||||||||||||||||
Natural gas(h) | 657 | 631 | 744 | 2,917 | — | 4,949 | 473 | 1,028 | 772 | 3,414 | — | 5,687 | ||||||||||||||||||||||||||||||||||||
Purchased power | 370 | 656 | 506 | 2,186 | — | 3,718 | 343 | 583 | 472 | 1,939 | — | 3,337 | ||||||||||||||||||||||||||||||||||||
Long-term service agreements(i) | 14 | 32 | 103 | 581 | — | 730 | 14 | 61 | 91 | 550 | — | 716 | ||||||||||||||||||||||||||||||||||||
Trusts — | ||||||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning(j) | 3 | 7 | 7 | 53 | — | 70 | 3 | 7 | 7 | 53 | — | 70 | ||||||||||||||||||||||||||||||||||||
Postretirement benefits(k) | 39 | 81 | — | — | — | 120 | 31 | 53 | — | — | — | 84 | ||||||||||||||||||||||||||||||||||||
Total | $ | 7,286 | $ | 11,792 | $ | 4,433 | $ | 19,157 | $ | 9 | $ | 42,677 | $ | 6,534 | $ | 11,051 | $ | 3,773 | $ | 20,437 | $ | 18 | $ | 41,813 |
(a) | All amounts are reflected based on final maturity dates. The Company plans to continue to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of January 1, | |
(b) | Preferred and preference stock does not mature; therefore, amounts provided are for the next five years only. | |
(c) | For additional information see Notes 1 and | |
(d) | The timing related to the realization of | |
(e) | The Company generally does not enter into non-cancelable commitments for other operations and maintenance expenditures. Total other operations and maintenance expenses for the last three years were | |
(f) | The Company forecasts capital expenditures over a three-year period. Amounts represent current estimates of total expenditures, excluding those amounts related to contractual purchase commitments for nuclear fuel. At December 31, | |
(g) | As part of the Company’s program to reduce sulfur dioxide emissions from its coal plants, the Company has | |
(h) | Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected have been estimated based on the New York Mercantile Exchange future prices at December 31, | |
(i) | Long-term service agreements include price escalation based on inflation indices. | |
(j) | Projections of nuclear decommissioning trust contributions are based on the 2007 Retail Rate | |
(k) | The Company forecasts postretirement trust contributions over a three-year period. The Company expects that the earliest that cash may have to be contributed to the pension trust fund is |
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• | the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water quality and emissions of sulfur, nitrogen, mercury, carbon, soot, | ||
• | current and future litigation, regulatory investigations, proceedings, or inquiries, including FERC matters and the pending EPA civil action against the Company; | ||
• | the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates; | ||
• | variations in demand for electricity, including those relating to weather, the general economy and recovery from the recent recession, population, business growth (and declines), and the effects of energy conservation measures; | ||
• | available sources and costs of fuels; | ||
• | effects of inflation; | ||
• | ability to control | ||
• | investment performance of the Company’s employee benefit | ||
• | advances in technology; | ||
• | state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate cases related to fuel and other cost | ||
• | regulatory approvals and actions related to the potential Plant Vogtle expansion, including Georgia PSC and NRC | ||
• | internal restructuring or other restructuring options that may be pursued; | ||
• | potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company; | ||
• | the ability of counterparties of the Company to make payments as and when due and to perform as required; | ||
• | the ability to obtain new short- and long-term contracts with | ||
• | the direct or indirect effect on the Company’s business resulting from terrorist incidents and the threat of terrorist incidents; | ||
• | interest rate fluctuations and financial market conditions and the results of financing efforts, including the Company’s credit ratings; | ||
• | the ability of the Company to obtain additional generating capacity at competitive prices; | ||
• | catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as | ||
• | the direct or indirect effects on the Company’s business resulting from incidents | ||
• | the effect of accounting pronouncements issued periodically by | ||
• | other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Company from time to time with the SEC. |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||
Retail revenues | $ | 7,286,345 | $ | 6,498,003 | $ | 6,205,620 | $ | 6,912,403 | $ | 7,286,345 | $ | 6,498,003 | ||||||||||||
Wholesale revenues — | ||||||||||||||||||||||||
Non-affiliates | 568,797 | 537,913 | 551,731 | |||||||||||||||||||||
Affiliates | 286,219 | 277,832 | 252,556 | |||||||||||||||||||||
Wholesale revenues, non-affiliates | 394,538 | 568,797 | 537,913 | |||||||||||||||||||||
Wholesale revenues, affiliates | 111,964 | 286,219 | 277,832 | |||||||||||||||||||||
Other revenues | 270,191 | 257,904 | 235,737 | 272,835 | 270,191 | 257,904 | ||||||||||||||||||
Total operating revenues | 8,411,552 | 7,571,652 | 7,245,644 | 7,691,740 | 8,411,552 | 7,571,652 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Fuel | 2,812,417 | 2,640,526 | 2,233,029 | 2,716,928 | 2,812,417 | 2,640,526 | ||||||||||||||||||
Purchased power — | ||||||||||||||||||||||||
Non-affiliates | 442,951 | 332,064 | 332,606 | |||||||||||||||||||||
Affiliates | 962,100 | 718,327 | 812,433 | |||||||||||||||||||||
Purchased power, non-affiliates | 269,136 | 442,951 | 332,064 | |||||||||||||||||||||
Purchased power, affiliates | 709,730 | 962,100 | 718,327 | |||||||||||||||||||||
Other operations and maintenance | 1,580,922 | 1,561,736 | 1,560,469 | 1,494,192 | 1,580,922 | 1,561,736 | ||||||||||||||||||
Depreciation and amortization | 636,970 | 511,180 | 498,754 | 655,150 | 636,970 | 511,180 | ||||||||||||||||||
Taxes other than income taxes | 316,219 | 291,136 | 298,824 | 316,532 | 316,219 | 291,136 | ||||||||||||||||||
Total operating expenses | 6,751,579 | 6,054,969 | 5,736,115 | 6,161,668 | 6,751,579 | 6,054,969 | ||||||||||||||||||
Operating Income | 1,659,973 | 1,516,683 | 1,509,529 | 1,530,072 | 1,659,973 | 1,516,683 | ||||||||||||||||||
Other Income and (Expense): | ||||||||||||||||||||||||
Allowance for equity funds used during construction | 95,294 | 68,177 | 31,524 | 96,788 | 95,294 | 68,177 | ||||||||||||||||||
Interest income | 7,219 | 3,560 | 2,459 | 2,242 | 7,219 | 3,560 | ||||||||||||||||||
Interest expense, net of amounts capitalized | (345,416 | ) | (343,462 | ) | (317,947 | ) | (385,889 | ) | (345,415 | ) | (343,461 | ) | ||||||||||||
Other income (expense), net | (9,258 | ) | 14,705 | 8,833 | (1,774 | ) | (9,259 | ) | 14,705 | |||||||||||||||
Total other income and (expense) | (252,161 | ) | (257,020 | ) | (275,131 | ) | (288,633 | ) | (252,161 | ) | (257,019 | ) | ||||||||||||
Earnings Before Income Taxes | 1,407,812 | 1,259,663 | 1,234,398 | 1,241,439 | 1,407,812 | 1,259,664 | ||||||||||||||||||
Income taxes | 487,504 | 417,521 | 442,334 | 410,013 | 487,504 | 417,521 | ||||||||||||||||||
Net Income | 920,308 | 842,142 | 792,064 | 831,426 | 920,308 | 842,143 | ||||||||||||||||||
Dividends on Preferred and Preference Stock | 17,381 | 6,006 | 4,839 | 17,381 | 17,381 | 6,007 | ||||||||||||||||||
Net Income After Dividends on Preferred and Preference Stock | $ | 902,927 | $ | 836,136 | $ | 787,225 | $ | 814,045 | $ | 902,927 | $ | 836,136 |
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2009 | 2008 | 2007 | ||||||||||
(in thousands) | ||||||||||||
Operating Activities: | ||||||||||||
Net income | $ | 831,426 | $ | 920,308 | $ | 842,143 | ||||||
Adjustments to reconcile net income to net cash provided from operating activities — | ||||||||||||
Depreciation and amortization, total | 790,581 | 758,284 | 616,796 | |||||||||
Deferred income taxes | 191,382 | 170,958 | (78,010 | ) | ||||||||
Deferred revenues | (48,962 | ) | 122,965 | 4,871 | ||||||||
Deferred expenses | (4,281 | ) | 1,605 | 2,950 | ||||||||
Allowance for equity funds used during construction | (96,788 | ) | (95,294 | ) | (68,177 | ) | ||||||
Pension, postretirement, and other employee benefits | (20,032 | ) | (3,243 | ) | 8,836 | |||||||
Stock based compensation expense | 4,592 | 4,200 | 5,977 | |||||||||
Hedge settlements | (19,016 | ) | (22,949 | ) | 12,121 | |||||||
Insurance cash surrender value | 19,742 | — | — | |||||||||
Other, net | 20,212 | (696 | ) | 15,600 | ||||||||
Changes in certain current assets and liabilities — | ||||||||||||
-Receivables | 126,758 | (82,996 | ) | 134,276 | ||||||||
-Fossil fuel stock | (241,509 | ) | (91,536 | ) | (1,211 | ) | ||||||
-Materials and supplies | (6,139 | ) | (20,021 | ) | (32,998 | ) | ||||||
-Prepaid income taxes | 21,067 | (14,885 | ) | 10,002 | ||||||||
-Other current assets | (1,217 | ) | (18,460 | ) | (4,359 | ) | ||||||
-Accounts payable | (54,328 | ) | (56,126 | ) | 22,626 | |||||||
-Accrued taxes | (19,445 | ) | 117,524 | (33,320 | ) | |||||||
-Accrued compensation | (100,547 | ) | 21,525 | (30,039 | ) | |||||||
-Other current liabilities | 24,678 | 16,788 | 20,702 | |||||||||
Net cash provided from operating activities | 1,418,174 | 1,727,951 | 1,448,786 | |||||||||
Investing Activities: | ||||||||||||
Property additions | (2,514,972 | ) | (1,847,953 | ) | (1,765,345 | ) | ||||||
Investment in restricted cash from pollution control bonds | — | — | (59,525 | ) | ||||||||
Distribution of restricted cash from pollution control revenue bonds | 26,849 | 32,675 | — | |||||||||
Nuclear decommissioning trust fund purchases | (989,219 | ) | (419,086 | ) | (448,287 | ) | ||||||
Nuclear decommissioning trust fund sales | 984,340 | 412,206 | 441,407 | |||||||||
Cost of removal, net of salvage | (56,494 | ) | (62,722 | ) | (47,565 | ) | ||||||
Change in construction payables, net of joint owner portion | 106,008 | 2,639 | 24,893 | |||||||||
Other investing activities | 25,479 | (38,198 | ) | (25,478 | ) | |||||||
Net cash used for investing activities | (2,418,009 | ) | (1,920,439 | ) | (1,879,900 | ) | ||||||
Financing Activities: | ||||||||||||
Decrease in notes payable, net | (33,137 | ) | (358,497 | ) | (17,690 | ) | ||||||
Proceeds — | ||||||||||||
Capital contributions from parent company | 931,382 | 272,894 | 322,448 | |||||||||
Preferred and preference stock | — | — | 225,000 | |||||||||
Pollution control revenue bonds issuances | 416,510 | 386,485 | 190,800 | |||||||||
Senior notes issuances | 1,000,000 | 1,000,000 | 1,500,000 | |||||||||
Other long-term debt issuances | 1,100 | 301,100 | — | |||||||||
Redemptions — | ||||||||||||
Pollution control revenue bonds | (327,310 | ) | (335,605 | ) | — | |||||||
Capital leases | (1,693 | ) | (1,125 | ) | (2,185 | ) | ||||||
Senior notes | (333,000 | ) | (198,097 | ) | (300,000 | ) | ||||||
Other long-term debt | — | — | (762,887 | ) | ||||||||
Payment of preferred and preference stock dividends | (17,568 | ) | (17,016 | ) | (3,143 | ) | ||||||
Payment of common stock dividends | (738,900 | ) | (721,200 | ) | (689,900 | ) | ||||||
Other financing activities | (15,979 | ) | (19,104 | ) | (32,787 | ) | ||||||
Net cash provided from financing activities | 881,405 | 309,835 | 429,656 | |||||||||
Net Change in Cash and Cash Equivalents | (118,430 | ) | 117,347 | (1,458 | ) | |||||||
Cash and Cash Equivalents at Beginning of Year | 132,739 | 15,392 | 16,850 | |||||||||
Cash and Cash Equivalents at End of Year | $ | 14,309 | $ | 132,739 | $ | 15,392 | ||||||
Supplemental Cash Flow Information: | ||||||||||||
Cash paid during the period for — | ||||||||||||
Interest (net of $39,849, $39,807 and $28,668 capitalized, respectively) | $ | 341,003 | $ | 309,264 | $ | 317,938 | ||||||
Income taxes (net of refunds) | 227,778 | 279,904 | 456,852 | |||||||||
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Assets | 2009 | 2008 | ||||||
(in thousands) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 14,309 | $ | 132,739 | ||||
Restricted cash and cash equivalents | — | 22,381 | ||||||
Receivables — | ||||||||
Customer accounts receivable | 486,885 | 554,219 | ||||||
Unbilled revenues | 172,035 | 147,978 | ||||||
Under recovered regulatory clause revenues | 291,837 | 338,780 | ||||||
Joint owner accounts receivable | 146,932 | 38,710 | ||||||
Other accounts and notes receivable | 62,758 | 59,189 | ||||||
Affiliated companies | 11,775 | 13,091 | ||||||
Accumulated provision for uncollectible accounts | (9,856 | ) | (10,732 | ) | ||||
Fossil fuel stock, at average cost | 726,266 | 484,757 | ||||||
Materials and supplies, at average cost | 362,803 | 356,537 | ||||||
Vacation pay | 74,566 | 71,217 | ||||||
Prepaid income taxes | 132,668 | 65,987 | ||||||
Other regulatory assets, current | 76,634 | 118,961 | ||||||
Other current assets | 62,651 | 63,464 | ||||||
Total current assets | 2,612,263 | 2,457,278 | ||||||
Property, Plant, and Equipment: | ||||||||
In service | 25,120,034 | 23,975,262 | ||||||
Less accumulated provision for depreciation | 9,493,068 | 9,101,474 | ||||||
Plant in service, net of depreciation | 15,626,966 | 14,873,788 | ||||||
Nuclear fuel, at amortized cost | 339,810 | 278,412 | ||||||
Construction work in progress | 2,521,091 | 1,434,989 | ||||||
Total property, plant, and equipment | 18,487,867 | 16,587,189 | ||||||
Other Property and Investments: | ||||||||
Equity investments in unconsolidated subsidiaries | 66,106 | 57,163 | ||||||
Nuclear decommissioning trusts, at fair value | 580,322 | 460,430 | ||||||
Miscellaneous property and investments | 38,516 | 40,945 | ||||||
Total other property and investments | 684,944 | 558,538 | ||||||
Deferred Charges and Other Assets: | ||||||||
Deferred charges related to income taxes | 608,851 | 572,528 | ||||||
Deferred under recovered regulatory clause revenues | 373,245 | 425,609 | ||||||
Other regulatory assets, deferred | 1,321,904 | 1,449,352 | ||||||
Other deferred charges and assets | 205,492 | 265,174 | ||||||
Total deferred charges and other assets | 2,509,492 | 2,712,663 | ||||||
Total Assets | $ | 24,294,566 | $ | 22,315,668 | ||||
II-198
Liabilities and Stockholder’s Equity | 2009 | 2008 | ||||||
(in thousands) | ||||||||
Current Liabilities: | ||||||||
Securities due within one year | $ | 253,882 | $ | 280,443 | ||||
Notes payable | 323,958 | 357,095 | ||||||
Accounts payable — | ||||||||
Affiliated | 238,599 | 260,545 | ||||||
Other | 602,003 | 422,485 | ||||||
Customer deposits | 200,103 | 186,919 | ||||||
Accrued taxes — | ||||||||
Accrued income taxes | 548 | 70,916 | ||||||
Unrecognized tax benefits | 164,863 | 128,712 | ||||||
Other accrued taxes | 290,174 | 278,172 | ||||||
Accrued interest | 89,228 | 79,432 | ||||||
Accrued vacation pay | 57,662 | 57,643 | ||||||
Accrued compensation | 42,756 | 135,191 | ||||||
Liabilities from risk management activities | 49,788 | 113,432 | ||||||
Other cost of removal obligations, current | 216,000 | — | ||||||
Other regulatory liabilities, current | 99,807 | 60,330 | ||||||
Other current liabilities | 84,319 | 75,846 | ||||||
Total current liabilities | 2,713,690 | 2,507,161 | ||||||
Long-Term Debt(See accompanying statements) | 7,782,340 | 7,006,275 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Accumulated deferred income taxes | 3,389,907 | 3,064,580 | ||||||
Deferred credits related to income taxes | 133,683 | 140,933 | ||||||
Accumulated deferred investment tax credits | 242,496 | 256,218 | ||||||
Employee benefit obligations | 923,177 | 882,965 | ||||||
Asset retirement obligations | 676,705 | 688,019 | ||||||
Other cost of removal obligations | 124,662 | 396,947 | ||||||
Other regulatory liabilities, deferred | 1,234 | 115,865 | ||||||
Other deferred credits and liabilities | 137,790 | 111,505 | ||||||
Total deferred credits and other liabilities | 5,629,654 | 5,657,032 | ||||||
Total Liabilities | 16,125,684 | 15,170,468 | ||||||
Preferred Stock(See accompanying statements) | 44,991 | 44,991 | ||||||
Preference Stock(See accompanying statements) | 220,966 | 220,966 | ||||||
Common Stockholder’s Equity(See accompanying statements) | 7,902,925 | 6,879,243 | ||||||
Total Liabilities and Stockholder’s Equity | $ | 24,294,566 | $ | 22,315,668 | ||||
Commitments and Contingent Matters(See notes) | ||||||||
II-199
2008 | 2007 | 2006 | ||||||||||
(in thousands) | ||||||||||||
Operating Activities: | ||||||||||||
Net income | $ | 920,308 | $ | 842,142 | $ | 792,064 | ||||||
Adjustments to reconcile net income to net cash provided from operating activities — | ||||||||||||
Depreciation and amortization | 758,283 | 616,796 | 588,428 | |||||||||
Deferred income taxes and investment tax credits, net | 170,958 | (78,010 | ) | 16,159 | ||||||||
Deferred revenues | 122,964 | 4,871 | (136 | ) | ||||||||
Allowance for equity funds used during construction | (95,294 | ) | (68,177 | ) | (31,524 | ) | ||||||
Pension, postretirement, and other employee benefits | (3,243 | ) | 8,836 | 18,604 | ||||||||
Stock based compensation expense | 4,200 | 5,977 | 5,805 | |||||||||
Hedge settlements | (22,949 | ) | 12,121 | — | ||||||||
Other, net | 909 | 18,550 | 4,592 | |||||||||
Changes in certain current assets and liabilities — | ||||||||||||
Receivables | (82,995 | ) | 134,276 | 1,193 | ||||||||
Fossil fuel stock | (91,536 | ) | (1,211 | ) | (194,256 | ) | ||||||
Materials and supplies | (20,021 | ) | (32,998 | ) | 31,317 | |||||||
Prepaid income taxes | (14,885 | ) | 10,002 | 1,060 | ||||||||
Other current assets | (18,460 | ) | (4,359 | ) | 774 | |||||||
Accounts payable | (56,126 | ) | 22,626 | (85,189 | ) | |||||||
Accrued taxes | 117,524 | (33,320 | ) | 82,735 | ||||||||
Accrued compensation | 21,525 | (30,039 | ) | (10,328 | ) | |||||||
Other current liabilities | 16,789 | 20,703 | (21,054 | ) | ||||||||
Net cash provided from operating activities | 1,727,951 | 1,448,786 | 1,200,244 | |||||||||
Investing Activities: | ||||||||||||
Property additions | (1,847,952 | ) | (1,765,344 | ) | (1,219,498 | ) | ||||||
Investment in restricted cash from pollution control bonds | — | (59,525 | ) | — | ||||||||
Distribution of restricted cash from pollution control bonds | 32,675 | — | — | |||||||||
Nuclear decommissioning trust fund purchases | (419,086 | ) | (448,287 | ) | (464,274 | ) | ||||||
Nuclear decommissioning trust fund sales | 412,206 | 441,407 | 457,394 | |||||||||
Cost of removal net of salvage | (62,722 | ) | (47,565 | ) | (33,620 | ) | ||||||
Change in construction payables, net of joint owner portion | 2,639 | 24,893 | 35,075 | |||||||||
Other | (38,199 | ) | (25,479 | ) | (16,005 | ) | ||||||
Net cash used for investing activities | (1,920,439 | ) | (1,879,900 | ) | (1,240,928 | ) | ||||||
Financing Activities: | ||||||||||||
Increase (decrease) in notes payable, net | (358,497 | ) | (17,690 | ) | 406,768 | |||||||
Proceeds — | ||||||||||||
Senior notes | 1,000,000 | 1,500,000 | 150,000 | |||||||||
Preferred and preference stock | — | 225,000 | — | |||||||||
Pollution control revenue bonds | 386,485 | 190,800 | 153,910 | |||||||||
Capital contributions from parent company | 272,894 | 322,448 | 312,544 | |||||||||
Other long-term debt | 301,100 | — | — | |||||||||
Redemptions — | ||||||||||||
Pollution control revenue bonds | (335,605 | ) | — | (153,910 | ) | |||||||
Capital leases | (1,125 | ) | (2,185 | ) | (136 | ) | ||||||
Senior notes | (198,097 | ) | (300,000 | ) | (150,000 | ) | ||||||
First mortgage bonds | — | — | (20,000 | ) | ||||||||
Preferred and preference stock | — | — | (14,569 | ) | ||||||||
Other long-term debt | — | (762,887 | ) | — | ||||||||
Payment of preferred and preference stock dividends | (17,016 | ) | (3,143 | ) | (2,958 | ) | ||||||
Payment of common stock dividends | (721,200 | ) | (689,900 | ) | (630,000 | ) | ||||||
Other | (19,104 | ) | (32,787 | ) | (5,253 | ) | ||||||
Net cash provided from financing activities | 309,835 | 429,656 | 46,396 | |||||||||
Net Change in Cash and Cash Equivalents | 117,347 | (1,458 | ) | 5,712 | ||||||||
Cash and Cash Equivalents at Beginning of Year | 15,392 | 16,850 | 11,138 | |||||||||
Cash and Cash Equivalents at End of Year | $ | 132,739 | $ | 15,392 | $ | 16,850 | ||||||
Supplemental Cash Flow Information: | ||||||||||||
Cash paid during the period for — | ||||||||||||
Interest (net of $39,807, $28,668, and $12,530 capitalized, respectively) | $ | 309,264 | $ | 317,938 | $ | 317,536 | ||||||
Income taxes (net of refunds) | 279,904 | 456,852 | 398,735 | |||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in thousands) | (percent of total) | |||||||||||||||
Long-Term Debt: | ||||||||||||||||
Long-term debt payable to affiliated trusts — | ||||||||||||||||
5.88% due 2044 | $ | 206,186 | $ | 206,186 | ||||||||||||
Long-term notes payable — | ||||||||||||||||
4.10% due 2009 | — | 125,300 | ||||||||||||||
Variable rate (2.3288% at 1/1/09) due 2009 | — | 150,000 | ||||||||||||||
Variable rate (0.80% at 1/1/10) due 2010 | 250,000 | 250,000 | ||||||||||||||
Variable rate (2.95% at 1/1/10) due 2011 | 300,000 | 300,000 | ||||||||||||||
4.00% to 5.57% due 2011 | 102,500 | 101,100 | ||||||||||||||
5.125% due 2012 | 200,000 | 200,000 | ||||||||||||||
4.90% to 6.00% due 2013 | 525,000 | 525,000 | ||||||||||||||
4.25% to 8.20% due 2015-2048 | 4,363,903 | 3,421,903 | ||||||||||||||
Total long-term notes payable | 5,741,403 | 5,073,303 | ||||||||||||||
Other long-term debt — | ||||||||||||||||
Pollution control revenue bonds: | ||||||||||||||||
1.95% to 5.75% due 2016-2048 | 1,134,080 | 1,309,190 | ||||||||||||||
Variable rate (0.25% at 1/1/10) due 2011 | 8,330 | 8,330 | ||||||||||||||
Variable rate (0.18% to 0.30% at 1/1/10) due 2016-2049 | 892,315 | 628,005 | ||||||||||||||
Total other long-term debt | 2,034,725 | 1,945,525 | ||||||||||||||
Capitalized lease obligations | 62,805 | 67,948 | ||||||||||||||
Unamortized debt discount | (8,897 | ) | (6,244 | ) | ||||||||||||
Total long-term debt (annual interest requirement — $377.6 million) | 8,036,222 | 7,286,718 | ||||||||||||||
Less amount due within one year | 253,882 | 280,443 | ||||||||||||||
Long-term debt excluding amount due within one year | 7,782,340 | 7,006,275 | 48.8 | % | 49.5 | % | ||||||||||
Preferred and Preference Stock: | ||||||||||||||||
Non-cumulative preferred stock | ||||||||||||||||
$25 par value — 6.125% | ||||||||||||||||
Authorized - 50,000,000 shares | ||||||||||||||||
Outstanding - 1,800,000 shares | 44,991 | 44,991 | ||||||||||||||
Non-cumulative preference stock | ||||||||||||||||
$100 par value — 6.50% | ||||||||||||||||
Authorized - 15,000,000 shares | ||||||||||||||||
Outstanding - 2,250,000 shares | 220,966 | 220,966 | ||||||||||||||
Total preferred and preference stock (annual dividend requirement — $17.4 million) | 265,957 | 265,957 | 1.7 | 1.9 | ||||||||||||
Common Stockholder’s Equity: | ||||||||||||||||
Common stock, without par value — | ||||||||||||||||
Authorized: 20,000,000 shares | ||||||||||||||||
Outstanding: 9,261,500 shares | 398,473 | 398,473 | ||||||||||||||
Paid-in capital | 4,592,350 | 3,655,731 | ||||||||||||||
Retained earnings | 2,932,934 | 2,857,789 | ||||||||||||||
Accumulated other comprehensive income (loss) | (20,832 | ) | (32,750 | ) | ||||||||||||
Total common stockholder’s equity | 7,902,925 | 6,879,243 | 49.5 | 48.6 | ||||||||||||
Total Capitalization | $ | 15,951,222 | $ | 14,151,475 | 100.0 | % | 100.0 | % | ||||||||
II-200
Assets | 2008 | 2007 | ||||||
(in thousands) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 132,739 | $ | 15,392 | ||||
Restricted cash | 22,381 | 48,279 | ||||||
Receivables — | ||||||||
Customer accounts receivable | 554,220 | 491,389 | ||||||
Unbilled revenues | 147,978 | 137,046 | ||||||
Under recovered regulatory clause revenues | 338,780 | 384,538 | ||||||
Other accounts and notes receivable | 97,898 | 147,498 | ||||||
Affiliated companies | 13,091 | 21,699 | ||||||
Accumulated provision for uncollectible accounts | (10,732 | ) | (7,636 | ) | ||||
Fossil fuel stock, at average cost | 484,757 | 393,222 | ||||||
Materials and supplies, at average cost | 356,537 | 337,652 | ||||||
Vacation pay | 71,217 | 69,394 | ||||||
Prepaid income taxes | 65,987 | 51,101 | ||||||
Other | 182,425 | 55,169 | ||||||
Total current assets | 2,457,278 | 2,144,743 | ||||||
Property, Plant, and Equipment: | ||||||||
In service | 23,975,262 | 22,011,215 | ||||||
Less accumulated provision for depreciation | 9,101,474 | 8,696,668 | ||||||
14,873,788 | 13,314,547 | |||||||
Nuclear fuel, at amortized cost | 278,412 | 198,983 | ||||||
Construction work in progress | 1,434,989 | 1,797,642 | ||||||
Total property, plant, and equipment | 16,587,189 | 15,311,172 | ||||||
Other Property and Investments: | ||||||||
Equity investments in unconsolidated subsidiaries | 57,163 | 53,813 | ||||||
Nuclear decommissioning trusts, at fair value | 460,430 | 588,952 | ||||||
Other | 40,945 | 47,914 | ||||||
Total other property and investments | 558,538 | 690,679 | ||||||
Deferred Charges and Other Assets: | ||||||||
Deferred charges related to income taxes | 572,528 | 532,539 | ||||||
Prepaid pension costs | — | 1,026,985 | ||||||
Deferred under recovered regulatory clause revenues | 425,609 | 307,294 | ||||||
Other regulatory assets | 1,449,352 | 541,014 | ||||||
Other | 265,174 | 268,335 | ||||||
Total deferred charges and other assets | 2,712,663 | 2,676,167 | ||||||
Total Assets | $ | 22,315,668 | $ | 20,822,761 | ||||
Number of | ||||||||||||||||||||||||
Common | Accumulated | |||||||||||||||||||||||
Shares | Common | Paid-In | Retained | Other Comprehensive | ||||||||||||||||||||
Issued | Stock | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Balance at December 31, 2006 | 9,262 | $ | 398,473 | $ | 3,039,845 | $ | 2,529,826 | $ | (11,893 | ) | $ | 5,956,251 | ||||||||||||
Net income after dividends on preferred and preference stock | — | — | — | 836,136 | — | 836,136 | ||||||||||||||||||
Capital contributions from parent company | — | — | 334,931 | — | — | 334,931 | ||||||||||||||||||
Other comprehensive loss | — | — | — | — | (2,000 | ) | (2,000 | ) | ||||||||||||||||
Cash dividends on common stock | — | — | — | (689,900 | ) | — | (689,900 | ) | ||||||||||||||||
Other | — | — | 1 | 1 | — | 2 | ||||||||||||||||||
Balance at December 31, 2007 | 9,262 | 398,473 | 3,374,777 | 2,676,063 | (13,893 | ) | 6,435,420 | |||||||||||||||||
Net income after dividends on preferred and preference stock | — | — | — | 902,927 | — | 902,927 | ||||||||||||||||||
Capital contributions from parent company | — | — | 280,954 | — | — | 280,954 | ||||||||||||||||||
Other comprehensive loss | — | — | — | — | (18,857 | ) | (18,857 | ) | ||||||||||||||||
Cash dividends on common stock | — | — | — | (721,200 | ) | — | (721,200 | ) | ||||||||||||||||
Other | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
Balance at December 31, 2008 | 9,262 | 398,473 | 3,655,731 | 2,857,789 | (32,750 | ) | 6,879,243 | |||||||||||||||||
Net income after dividends on preferred and preference stock | — | — | — | 814,045 | — | 814,045 | ||||||||||||||||||
Capital contributions from parent company | — | — | 936,619 | — | — | 936,619 | ||||||||||||||||||
Other comprehensive income | — | — | — | — | 11,918 | 11,918 | ||||||||||||||||||
Cash dividends on common stock | — | — | — | (738,900 | ) | — | (738,900 | ) | ||||||||||||||||
Balance at December 31, 2009 | 9,262 | $ | 398,473 | $ | 4,592,350 | $ | 2,932,934 | $ | (20,832 | ) | $ | 7,902,925 | ||||||||||||
II-201
Liabilities and Stockholder’s Equity | 2008 | 2007 | ||||||
(in thousands) | ||||||||
Current Liabilities: | ||||||||
Securities due within one year | $ | 280,443 | $ | 198,576 | ||||
Notes payable | 357,095 | 715,591 | ||||||
Accounts payable — | ||||||||
Affiliated | 260,545 | 236,332 | ||||||
Other | 422,485 | 463,945 | ||||||
Customer deposits | 186,919 | 171,553 | ||||||
Accrued taxes — | ||||||||
Income taxes | 70,916 | 68,782 | ||||||
Unrecognized tax benefits | 128,712 | — | ||||||
Other | 278,171 | 219,585 | ||||||
Accrued interest | 79,432 | 74,674 | ||||||
Accrued vacation pay | 57,643 | 56,303 | ||||||
Accrued compensation | 135,191 | 114,974 | ||||||
Other | 249,609 | 103,225 | ||||||
Total current liabilities | 2,507,161 | 2,423,540 | ||||||
Long-term Debt(See accompanying statements) | 7,006,275 | 5,937,792 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Accumulated deferred income taxes | 3,064,580 | 2,850,655 | ||||||
Deferred credits related to income taxes | 140,933 | 146,886 | ||||||
Accumulated deferred investment tax credits | 256,218 | 269,125 | ||||||
Employee benefit obligations | 882,965 | 678,826 | ||||||
Asset retirement obligations | 688,019 | 663,503 | ||||||
Other cost of removal obligations | 396,947 | 414,745 | ||||||
Other regulatory liabilities | 115,865 | 577,642 | ||||||
Other | 111,505 | 158,670 | ||||||
Total deferred credits and other liabilities | 5,657,032 | 5,760,052 | ||||||
Total Liabilities | 15,170,468 | 14,121,384 | ||||||
Preferred and Preference Stock(See accompanying statements) | 265,957 | 265,957 | ||||||
Common Stockholder’s Equity(See accompanying statements) | 6,879,243 | 6,435,420 | ||||||
Total Liabilities and Stockholder’s Equity | $ | 22,315,668 | $ | 20,822,761 | ||||
Commitments and Contingent Matters(See notes) | ||||||||
2009 | 2008 | 2007 | ||||||||||
(in thousands) | ||||||||||||
Net income after dividends on preferred and preference stock | $ | 814,045 | $ | 902,927 | $ | 836,136 | ||||||
Other comprehensive income (loss): | ||||||||||||
Qualifying hedges: | ||||||||||||
Changes in fair value, net of tax of $(1,133), $(13,150), and $(1,831), respectively | (1,826 | ) | (20,846 | ) | (2,938 | ) | ||||||
Reclassification adjustment for amounts included in net income, net of tax of $8,651, $1,255, and $278, respectively | 13,744 | 1,989 | 441 | |||||||||
Marketable securities: | ||||||||||||
Change in fair value, net of tax of $-, $-, and $291, respectively | — | — | 497 | |||||||||
Total other comprehensive income (loss) | 11,918 | (18,857 | ) | (2,000 | ) | |||||||
Comprehensive Income | $ | 825,963 | $ | 884,070 | $ | 834,136 | ||||||
II-202
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in thousands) | (percent of total) | |||||||||||||||
Long-Term Debt: | ||||||||||||||||
Long-term debt payable to affiliated trusts — | ||||||||||||||||
5.88% due 2044 | $ | 206,186 | $ | 206,186 | ||||||||||||
Long-term notes payable — | ||||||||||||||||
6.55% due May 15, 2008 | — | 45,000 | ||||||||||||||
4.10% due 2009 | 125,300 | 125,000 | ||||||||||||||
Variable rate (5.00% at 1/1/08) due 2008 | — | 150,000 | ||||||||||||||
Variable rate (2.3288% at 1/1/09) due 2009 | 150,000 | 150,000 | ||||||||||||||
Variable rate (2.42% at 1/1/09) due 2010 | 250,000 | — | ||||||||||||||
Variable rate (2.35% at 1/1/09) due 2011 | 300,000 | — | ||||||||||||||
4.00% to 5.57% due 2011 | 101,100 | 100,000 | ||||||||||||||
5.125% due 2012 | 200,000 | 200,000 | ||||||||||||||
4.90% to 6.00% due 2013 | 525,000 | 125,000 | ||||||||||||||
5.25% to 8.20% due 2015-2048 | 3,421,903 | 3,075,000 | ||||||||||||||
Total long-term notes payable | 5,073,303 | 3,970,000 | ||||||||||||||
Other long-term debt — | ||||||||||||||||
Pollution control revenue bonds: | ||||||||||||||||
1.95% to 5.75% due 2016-2048 | 1,309,190 | 774,370 | ||||||||||||||
Variable rate (1.05% at 1/1/09) due 2011 | 8,330 | 10,450 | ||||||||||||||
Variable rate (0.80% to 3.00% at 1/1/09) due 2016-2041 | 628,005 | 1,109,825 | ||||||||||||||
Total other long-term debt | 1,945,525 | 1,894,645 | ||||||||||||||
Capitalized lease obligations | 67,948 | 70,733 | ||||||||||||||
Unamortized debt discount | (6,244 | ) | (5,196 | ) | ||||||||||||
Total long-term debt (annual interest requirement — $354.0 million) | 7,286,718 | 6,136,368 | ||||||||||||||
Less amount due within one year | 280,443 | 198,576 | ||||||||||||||
Long-term debt excluding amount due within one year | 7,006,275 | 5,937,792 | 49.5 | % | 47.0 | % | ||||||||||
Preferred and Preference Stock: | ||||||||||||||||
Non-cumulative preferred stock | ||||||||||||||||
$25 par value — 6.125% | ||||||||||||||||
Authorized — 50,000,000 shares | ||||||||||||||||
Outstanding — 1,800,000 shares | 44,991 | 44,991 | ||||||||||||||
Non-cumulative preference stock | ||||||||||||||||
$100 par value — 6.50% | ||||||||||||||||
Authorized — 15,000,000 shares | ||||||||||||||||
Outstanding — 2,250,000 shares | 220,966 | 220,966 | ||||||||||||||
Total preferred and preference stock (annual dividend requirement — $17.4 million) | 265,957 | 265,957 | 1.9 | 2.1 | ||||||||||||
Common Stockholder’s Equity: | ||||||||||||||||
Common stock, without par value — | ||||||||||||||||
Authorized: 20,000,000 shares | ||||||||||||||||
Outstanding: 9,261,500 shares | 398,473 | 398,473 | ||||||||||||||
Paid-in capital | 3,655,731 | 3,374,777 | ||||||||||||||
Retained earnings | 2,857,789 | 2,676,063 | ||||||||||||||
Accumulated other comprehensive income (loss) | (32,750 | ) | (13,893 | ) | ||||||||||||
Total common stockholder’s equity | 6,879,243 | 6,435,420 | 48.6 | 50.9 | ||||||||||||
Total Capitalization | $ | 14,151,475 | $ | 12,639,169 | 100.0 | % | 100.0 | % | ||||||||
II-203
Accumulated | ||||||||||||||||||||
Common | Paid-In | Retained | Other Comprehensive | |||||||||||||||||
Stock | Capital | Earnings | Income (Loss) | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at December 31, 2005 | $ | 398,473 | $ | 2,717,539 | $ | 2,372,637 | $ | (36,566 | ) | $ | 5,452,083 | |||||||||
Net income after dividends on preferred stock | — | — | 787,225 | — | 787,225 | |||||||||||||||
Capital contributions from parent company | — | 322,306 | — | — | 322,306 | |||||||||||||||
Other comprehensive income | — | — | — | 5,184 | 5,184 | |||||||||||||||
Adjustment to initially apply FASB Statement No. 158, net of tax | — | — | — | 19,489 | 19,489 | |||||||||||||||
Cash dividends on common stock | — | — | (630,000 | ) | — | (630,000 | ) | |||||||||||||
Other | — | — | (36 | ) | — | (36 | ) | |||||||||||||
Balance at December 31, 2006 | 398,473 | 3,039,845 | 2,529,826 | (11,893 | ) | 5,956,251 | ||||||||||||||
Net income after dividends on preferred and preference stock | — | — | 836,136 | — | 836,136 | |||||||||||||||
Capital contributions from parent company | — | 334,931 | — | — | 334,931 | |||||||||||||||
Other comprehensive loss | — | — | — | (2,000 | ) | (2,000 | ) | |||||||||||||
Cash dividends on common stock | — | — | (689,900 | ) | — | (689,900 | ) | |||||||||||||
Other | — | 1 | 1 | — | 2 | |||||||||||||||
Balance at December 31, 2007 | 398,473 | 3,374,777 | 2,676,063 | (13,893 | ) | 6,435,420 | ||||||||||||||
Net income after dividends on preferred and preference stock | — | — | 902,927 | — | 902,927 | |||||||||||||||
Capital contributions from parent company | — | 280,954 | — | — | 280,954 | |||||||||||||||
Other comprehensive loss | — | — | — | (18,857 | ) | (18,857 | ) | |||||||||||||
Cash dividends on common stock | — | — | (721,200 | ) | — | (721,200 | ) | |||||||||||||
Other | — | — | (1 | ) | — | (1 | ) | |||||||||||||
Balance at December 31, 2008 | $ | 398,473 | $ | 3,655,731 | $ | 2,857,789 | $ | (32,750 | ) | $ | 6,879,243 | |||||||||
2008 | 2007 | 2006 | |||||||||||
(in thousands) | |||||||||||||
Net income after dividends on preferred and preference stock | $ | 902,927 | $ | 836,136 | $ | 787,225 | |||||||
Other comprehensive income (loss): | |||||||||||||
Qualifying hedges: | |||||||||||||
Changes in fair value, net of tax of $(13,150), $(1,831), and $(935), respectively | (20,846 | ) | (2,938 | ) | (1,454 | ) | |||||||
Reclassification adjustment for amounts included in net income, net of tax of $1,255, $278, and $(441), respectively | 1,989 | 441 | (700 | ) | |||||||||
Marketable securities: | |||||||||||||
Changes in fair value, net of tax of $-, $291, and $(494), respectively | — | 497 | (817 | ) | |||||||||
Pension and other postretirement benefit plans: | |||||||||||||
Change in additional minimum pension liability, net of tax of $-, $-, and $5,143, respectively | — | — | 8,155 | ||||||||||
Total other comprehensive income (loss) | (18,857 | ) | (2,000 | ) | 5,184 | ||||||||
Comprehensive Income | $ | 884,070 | $ | 834,136 | $ | 792,409 | |||||||
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2008 | 2007 | Note | 2009 | 2008 | Note | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Deferred income tax charges | $ | 573 | $ | 533 | (a | ) | $ | 609 | �� | $ | 573 | (a | ) | |||||||||||
Loss on reacquired debt | 165 | 175 | (b | ) | 157 | 165 | (b | ) | ||||||||||||||||
Vacation pay | 71 | 69 | (c | ) | 75 | 71 | (c, h | ) | ||||||||||||||||
Underfunded retiree benefit plans | 903 | 235 | (e | ) | 952 | 921 | (e, h | ) | ||||||||||||||||
Fuel-hedging (realized and unrealized) losses | 130 | 14 | (f | ) | 82 | 130 | (f | ) | ||||||||||||||||
Nuclear early site permit | 49 | 28 | (h | ) | ||||||||||||||||||||
Building leases | 47 | 49 | (i | ) | ||||||||||||||||||||
Generating plant outage costs | 39 | 45 | (j | ) | ||||||||||||||||||||
Other regulatory assets | 160 | 133 | (d | ) | 49 | 98 | (d | ) | ||||||||||||||||
Asset retirement obligations | 209 | 41 | (a | ) | 116 | 209 | (a, h | ) | ||||||||||||||||
Other cost of removal obligations | (397 | ) | (415 | ) | (a | ) | (341 | ) | (397 | ) | (a | ) | ||||||||||||
Deferred income tax credits | (141 | ) | (147 | ) | (a | ) | (134 | ) | (141 | ) | (a | ) | ||||||||||||
Overfunded retiree benefit plans | — | (540 | ) | (e | ) | |||||||||||||||||||
Environmental compliance cost recovery | (135 | ) | — | (g | ) | (96 | ) | (135 | ) | (g | ) | |||||||||||||
Other regulatory liabilities | (14 | ) | (21 | ) | (d | ) | (1 | ) | (15 | ) | (b, d, f | ) | ||||||||||||
Total assets (liabilities), net | $ | 1,573 | $ | 105 | $ | 1,554 | $ | 1,573 |
Note: The recovery and amortization periods for these regulatory assets and (liabilities) are as follows: | ||
(a) | Asset retirement and | |
(b) | Recovered over either the remaining life of the original issue or, if refinanced, over the life of the new issue which may range up to 50 years. | |
(c) | Recorded as earned by employees and recovered as paid, generally within one year. | |
(d) | Recorded and recovered or amortized as approved by the Georgia | |
(e) | Recovered and amortized over the average remaining service period which may range up to | |
(f) | Fuel-hedging assets and liabilities are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed 42 months. Upon final settlement, costs are recovered through the Company’s fuel cost recovery | |
(g) | This balance represents deferred revenue associated with the | |
(h) | ||
(i) | See Note 6 under “Capital Leases.” Recovered over the remaining lives of | |
(j) | See “Property, Plant, and |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Generation | $ | 11,478 | $ | 10,180 | $ | 12,185 | $ | 11,478 | ||||||||
Transmission | 3,764 | 3,593 | 3,891 | 3,764 | ||||||||||||
Distribution | 7,409 | 6,985 | 7,603 | 7,409 | ||||||||||||
General | 1,296 | 1,225 | 1,413 | 1,296 | ||||||||||||
Plant acquisition adjustment | 28 | 28 | 28 | 28 | ||||||||||||
Total plant in service | $ | 23,975 | $ | 22,011 | $ | 25,120 | $ | 23,975 |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Balance beginning of year | $ | 664 | $ | 627 | $ | 690 | $ | 664 | ||||||||
Liabilities incurred | 4 | — | 2 | 4 | ||||||||||||
Liabilities settled | (1 | ) | (3 | ) | (7 | ) | (1 | ) | ||||||||
Accretion | 41 | 40 | 44 | 41 | ||||||||||||
Cash flow revisions | (18 | ) | — | (48 | ) | (18 | ) | |||||||||
Balance end of year | $ | 690 | $ | 664 | $ | 681 | $ | 690 |
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Plant Hatch | Plant Vogtle | |||||||
Decommissioning periods: | ||||||||
Beginning year | 2034 | 2047 | ||||||
Completion year | 2063 | 2067 | ||||||
(in millions) | ||||||||
Site study costs: | ||||||||
Radiated structures | $ | 583 | $ | 500 | ||||
Non-radiated structures | 46 | 71 | ||||||
Total site study costs | $ | 629 | $ | 571 | ||||
Accumulated provision | $ | 360 | $ | 206 | ||||
Plant Hatch | Plant Vogtle | |||||||
Decommissioning periods: | ||||||||
Beginning year | 2034 | 2027 | ||||||
Completion year | 2061 | 2051 | ||||||
(in millions) | ||||||||
Site study costs: | ||||||||
Radiated structures | $ | 544 | $ | 507 | ||||
Non-radiated structures | 46 | 67 | ||||||
Total site study costs | $ | 590 | $ | 574 | ||||
Accumulated provision | $ | 280 | $ | 168 | ||||
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Carrying Amount | Fair Value | |||||||
(in millions) | ||||||||
Long-term debt: | ||||||||
2008 | $ | 7,219 | $ | 7,096 | ||||
2007 | $ | 6,066 | $ | 5,969 |
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2008 | 2007 | |||||||
(in millions) | ||||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | $ | 2,178 | $ | 2,136 | ||||
Service cost | 62 | 51 | ||||||
Interest cost | 167 | 126 | ||||||
Benefits paid | (133 | ) | (98 | ) | ||||
Plan amendments | — | 15 | ||||||
Actuarial (gain) loss | (36 | ) | (52 | ) | ||||
Balance at end of year | 2,238 | 2,178 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 3,073 | 2,710 | ||||||
Actual return (loss) on plan assets | (910 | ) | 456 | |||||
Employer contributions | 8 | 5 | ||||||
Benefits paid | (133 | ) | (98 | ) | ||||
Fair value of plan assets at end of year | 2,038 | 3,073 | ||||||
Funded status at end of year | (200 | ) | 895 | |||||
Fourth quarter contributions | — | 2 | ||||||
(Accrued liability) prepaid pension asset | $ | (200 | ) | $ | 897 | |||
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2009 | 2008 | |||||||
(in millions) | ||||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | $ | 2,238 | $ | 2,178 | ||||
Service cost | 48 | 62 | ||||||
Interest cost | 147 | 167 | ||||||
Benefits paid | (122 | ) | (133 | ) | ||||
Actuarial loss (gain) | 206 | (36 | ) | |||||
Balance at end of year | 2,517 | 2,238 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 2,038 | 3,073 | ||||||
Actual return (loss) on plan assets | 314 | (910 | ) | |||||
Employer contributions | 7 | 8 | ||||||
Benefits paid | (122 | ) | (133 | ) | ||||
Fair value of plan assets at end of year | 2,237 | 2,038 | ||||||
Accrued liability | $ | (280 | ) | $ | (200 | ) | ||
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Target | 2008 | 2007 | Target | 2009 | 2008 | |||||||||||||||||||
Domestic equity | 36 | % | 34 | % | 38 | % | 29 | % | 33 | % | 34 | % | ||||||||||||
International equity | 24 | 23 | 24 | 28 | 29 | 23 | ||||||||||||||||||
Fixed income | 15 | 14 | 15 | 15 | 15 | 14 | ||||||||||||||||||
Real estate | 15 | 19 | 16 | |||||||||||||||||||||
Special situations | 3 | — | — | |||||||||||||||||||||
Real estate investments | 15 | 13 | 19 | |||||||||||||||||||||
Private equity | 10 | 10 | 7 | 10 | 10 | 10 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
• | Domestic equity.This portion of the portfolio comprises a mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes managed both actively and through passive index approaches. | |
• | International equity.This portion of the portfolio is actively managed with a blend of growth stocks and value stocks with both developed and emerging market exposure. | |
• | Fixed income.This portion of the portfolio is actively managed through an allocation to long-dated, investment grade corporate and government bonds. | |
• | Special situations.Though currently unfunded, this portion of the portfolio was established both to execute opportunistic investment strategies with the objectives of diversifying and enhancing returns and exploiting short-term inefficiencies, as well as to invest in promising new strategies of a longer-term nature. | |
• | Real estate investments.Assets in this portion of the portfolio are invested in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities. | |
• | Private equity.This portion of the portfolio generally consists of investments in private partnerships that invest in private or public securities typically through privately negotiated and/or structured transactions. Leveraged buyouts, venture capital, and distressed debt are examples of investment strategies within this category. |
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Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 444 | $ | 184 | $ | — | $ | 628 | ||||||||
International equity* | 574 | 57 | — | 631 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 165 | — | 165 | ||||||||||||
Mortgage- and asset-backed securities | — | 45 | — | 45 | ||||||||||||
Corporate bonds | — | 111 | — | 111 | ||||||||||||
Pooled funds | — | 4 | — | 4 | ||||||||||||
Cash equivalents and other | 1 | 136 | — | 137 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 69 | — | 217 | 286 | ||||||||||||
Private equity | — | — | 221 | 221 | ||||||||||||
Total | $ | 1,088 | $ | 702 | $ | 438 | $ | 2,228 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives | (2) | — | — | (2) | ||||||||||||
Total | $ | 1,086 | $ | 702 | $ | 438 | $ | 2,226 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2008: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 419 | $ | 171 | $ | — | $ | 590 | ||||||||
International equity* | 377 | 35 | — | 412 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 176 | — | 176 | ||||||||||||
Mortgage- and asset-backed securities | — | 84 | — | 84 | ||||||||||||
Corporate bonds | — | 114 | — | 114 | ||||||||||||
Pooled funds | — | 1 | — | 1 | ||||||||||||
Cash equivalents and other | 9 | 81 | — | 90 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 58 | — | 336 | 394 | ||||||||||||
Private equity | — | — | 196 | 196 | ||||||||||||
Total | $ | 863 | $ | 662 | $ | 532 | $ | 2,057 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives | (3 | ) | — | — | (3 | ) | ||||||||||
Total | $ | 860 | $ | 662 | $ | 532 | $ | 2,054 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
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2009 | 2008 | ||||||||||||||||||
Real Estate | Real Estate | ||||||||||||||||||
Investments | Private Equity | Investments | Private Equity | ||||||||||||||||
(in millions) | |||||||||||||||||||
Beginning balance | $ | 336 | $ | 196 | $ | 418 | $ | 208 | |||||||||||
Actual return on investments: | |||||||||||||||||||
Related to investments held at year end | (98 | ) | 14 | (68 | ) | (56 | ) | ||||||||||||
Related to investments sold during the year | (26 | ) | 4 | 2 | 10 | ||||||||||||||
Total return on investments | (124 | ) | 18 | (66 | ) | (46 | ) | ||||||||||||
Purchases, sales, and settlements | 5 | 7 | (16 | ) | 34 | ||||||||||||||
Transfers into/out of Level 3 | — | — | — | — | |||||||||||||||
Ending balance | $ | 217 | $ | 221 | $ | 336 | $ | 196 | |||||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Prepaid pension costs | $ | — | $ | 1,027 | ||||
Other regulatory assets | 642 | 64 | ||||||
Current liabilities, other | (7 | ) | (7 | ) | ||||
Other regulatory liabilities | — | (540 | ) | |||||
Employee benefit obligations | (193 | ) | (123 | ) | ||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Other regulatory assets, deferred | $ | 734 | $ | 642 | ||||
Current liabilities, other | (8 | ) | (7 | ) | ||||
Employee benefit obligations | (272 | ) | (193 | ) | ||||
Prior Service Cost | Net (Gain) Loss | |||||||
(in millions) | ||||||||
Balance at December 31, 2008: | ||||||||
Regulatory asset | $ | 87 | $ | 555 | ||||
Total | $ | 87 | $ | 555 | ||||
(in millions) | ||||||||
Balance at December 31, 2007: | ||||||||
Regulatory asset | $ | 24 | $ | 40 | ||||
Regulatory liabilities | 81 | (621 | ) | |||||
Total | $ | 105 | $ | (581 | ) | |||
(in millions) | ||||||||
Estimated amortization in net periodic pension cost in 2009: | ||||||||
Regulatory assets | $ | 14 | $ | 2 | ||||
Total | $ | 14 | $ | 2 | ||||
Prior Service Cost | Net(Gain)Loss | |||||||
(in millions) | ||||||||
Balance at December 31, 2009: | $ | 73 | $ | 661 | ||||
Balance at December 31, 2008: | $ | 87 | $ | 555 | ||||
Estimated amortization in net periodic pension cost in 2010: | $ | 13 | $ | 2 | ||||
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Regulatory Assets | Regulatory Liabilities | Regulatory Assets | Regulatory Liabilities | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Balance at December 31, 2006 | $ | 56 | $ | (218 | ) | |||||||||||
Net (gain) loss | (1 | ) | (311 | ) | ||||||||||||
Change in prior service costs | 15 | — | ||||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of prior service costs | (3 | ) | (11 | ) | ||||||||||||
Amortization of net gain | (3 | ) | — | |||||||||||||
Total reclassification adjustments | (6 | ) | (11 | ) | ||||||||||||
Total change | 8 | (322 | ) | |||||||||||||
Balance at December 31, 2007 | $ | 64 | $ | (540 | ) | $ | 64 | $ | (540 | ) | ||||||
Net (gain) loss | 585 | 554 | ||||||||||||||
Change in prior service costs | — | — | ||||||||||||||
Net loss | 585 | 554 | ||||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of prior service costs | (4 | ) | (14 | ) | (4 | ) | (14 | ) | ||||||||
Amortization of net gain | (3 | ) | — | (3 | ) | — | ||||||||||
Total reclassification adjustments | (7 | ) | (14 | ) | (7 | ) | (14 | ) | ||||||||
Total change | 578 | 540 | 578 | 540 | ||||||||||||
Balance at December 31, 2008 | $ | 642 | $ | — | $ | 642 | $ | — | ||||||||
Net loss | 108 | — | ||||||||||||||
Reclassification adjustments: | ||||||||||||||||
Amortization of prior service costs | (14 | ) | — | |||||||||||||
Amortization of net gain | (2 | ) | — | |||||||||||||
Total reclassification adjustments | (16 | ) | — | |||||||||||||
Total change | 92 | — | ||||||||||||||
Balance at December 31, 2009 | $ | 734 | $ | — | ||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Service cost | $ | 49 | $ | 51 | $ | 53 | $ | 48 | $ | 49 | $ | 51 | ||||||||||||
Interest cost | 134 | 126 | 117 | 147 | 134 | 126 | ||||||||||||||||||
Expected return on plan assets | (211 | ) | (195 | ) | (184 | ) | (216 | ) | (211 | ) | (195 | ) | ||||||||||||
Recognized net (gain) loss | 3 | 3 | 6 | |||||||||||||||||||||
Recognized net loss | 2 | 3 | 3 | |||||||||||||||||||||
Net amortization | 14 | 14 | 8 | 14 | 14 | 14 | ||||||||||||||||||
Net periodic pension cost (income) | $ | (11 | ) | $ | (1 | ) | $ | — | $ | (5 | ) | $ | (11 | ) | $ | (1 | ) |
Benefit Payments | Benefit Payments | |||||||
(in millions) | (in millions) | |||||||
2009 | $ | 118 | ||||||
2010 | 124 | $ | 135 | |||||
2011 | 130 | 140 | ||||||
2012 | 136 | 144 | ||||||
2013 | 143 | 151 | ||||||
2014 to 2018 | 841 | |||||||
2014 | 162 | |||||||
2015 to 2019 | 929 |
II-215
2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 798 | $ | 807 | $ | 772 | $ | 798 | ||||||||
Service cost | 13 | 10 | 10 | 13 | ||||||||||||
Interest cost | 61 | 47 | 50 | 61 | ||||||||||||
Benefits paid | (47 | ) | (35 | ) | (43 | ) | (47 | ) | ||||||||
Actuarial (gain) loss | (57 | ) | (33 | ) | ||||||||||||
Actuarial loss (gain) | 8 | (57 | ) | |||||||||||||
Plan amendments | (18 | ) | — | |||||||||||||
Retiree drug subsidy | 4 | 2 | 3 | 4 | ||||||||||||
Balance at end of year | 772 | 798 | 782 | 772 | ||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 427 | 388 | 312 | 427 | ||||||||||||
Actual return on plan assets | (131 | ) | 54 | |||||||||||||
Actual return (loss) on plan assets | 66 | (131 | ) | |||||||||||||
Employer contributions | 59 | 18 | 31 | 59 | ||||||||||||
Benefits paid | (43 | ) | (33 | ) | (40 | ) | (43 | ) | ||||||||
Fair value of plan assets at end of year | 312 | 427 | 369 | 312 | ||||||||||||
Funded status at end of year | (460 | ) | (371 | ) | ||||||||||||
Fourth quarter contributions | — | 31 | ||||||||||||||
Accrued liability | $ | (413 | ) | $ | (460 | ) | ||||||||||
Accrued liability (recognized in the balance sheets) | $ | (460 | ) | $ | (340 | ) | ||||||||||
Target | 2008 | 2007 | Target | 2009 | 2008 | |||||||||||||||||||
Domestic equity | 43 | % | 38 | % | 46 | % | 41 | % | 34 | % | 38 | % | ||||||||||||
International equity | 21 | 21 | 23 | 22 | 29 | 21 | ||||||||||||||||||
Fixed income | 31 | 35 | 25 | 31 | 32 | 35 | ||||||||||||||||||
Real estate | 3 | 4 | 4 | |||||||||||||||||||||
Special situations | 1 | — | — | |||||||||||||||||||||
Real estate investments | 3 | 3 | 4 | |||||||||||||||||||||
Private equity | 2 | 2 | 2 | 2 | 2 | 2 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
• | Domestic equity.This portion of the portfolio comprises a mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes managed both actively and through passive index approaches. | |
• | International equity.This portion of the portfolio is actively managed with a blend of growth stocks and value stocks with both developed and emerging market exposure. | |
• | Fixed income.This portion of the portfolio comprises both domestic and international bonds. | |
• | Special situations.Though currently unfunded, this portion of the portfolio was established both to execute opportunistic investment strategies with the objectives of diversifying and enhancing returns and exploiting short-term inefficiencies, as well as to invest in promising new strategies of a longer-term nature. | |
• | Trust-owned life insurance.Some of the Company’s taxable trusts invest in these investments in order to minimize the impact of taxes on the portfolio. | |
• | Real estate investments.Assets in this portion of the portfolio are invested in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities. |
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• | Private equity.This portion of the portfolio generally consists of investments in private partnerships that invest in private or public securities typically through privately negotiated and/or structured transactions. Leveraged buyouts, venture capital, and distressed debt are examples of investment strategies within this category. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 82 | $ | 29 | $ | — | $ | 111 | ||||||||
International equity* | 20 | 31 | — | 51 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 5 | — | 5 | ||||||||||||
Mortgage- and asset-backed securities | — | 2 | — | 2 | ||||||||||||
Corporate bonds | — | 4 | — | 4 | ||||||||||||
Pooled funds | — | 17 | — | 17 | ||||||||||||
Cash equivalents and other | — | 26 | — | 26 | ||||||||||||
Trust-owned life insurance | — | 126 | — | 126 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 2 | — | 8 | 10 | ||||||||||||
Private equity | — | — | 8 | 8 | ||||||||||||
Total | $ | 104 | $ | 240 | $ | 16 | $ | 360 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
As of December 31, 2008: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(in millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Domestic equity* | $ | 69 | $ | 34 | $ | — | $ | 103 | ||||||||
International equity* | 13 | 21 | — | 34 | ||||||||||||
Fixed income: | ||||||||||||||||
U.S. Treasury, government, and agency bonds | — | 5 | — | 5 | ||||||||||||
Mortgage- and asset-backed securities | — | 3 | — | 3 | ||||||||||||
Corporate bonds | — | 4 | — | 4 | ||||||||||||
Pooled funds | — | 9 | — | 9 | ||||||||||||
Cash equivalents and other | — | 22 | — | 22 | ||||||||||||
Trust-owned life insurance | — | 110 | — | 110 | ||||||||||||
Special situations | — | — | — | — | ||||||||||||
Real estate investments | 2 | — | 12 | 14 | ||||||||||||
Private equity | — | — | 7 | 7 | ||||||||||||
Total | $ | 84 | $ | 208 | $ | 19 | $ | 311 | ||||||||
* | Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds. Management believes that the portfolio is well-diversified with no significant concentrations of risk. |
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2009 | 2008 | |||||||||||||||
Real Estate | Real Estate | |||||||||||||||
Investments | Private Equity | Investments | Private Equity | |||||||||||||
(in millions) | ||||||||||||||||
Beginning balance | $ | 12 | $ | 7 | $ | 14 | $ | 7 | ||||||||
Actual return on investments: | ||||||||||||||||
Related to investments held at year end | (3 | ) | 1 | (1 | ) | (1 | ) | |||||||||
Related to investments sold during the year | (1 | ) | — | — | — | |||||||||||
Total return on investments | (4 | ) | 1 | (1 | ) | (1 | ) | |||||||||
Purchases, sales, and settlements | — | — | (1 | ) | 1 | |||||||||||
Transfers into/out of Level 3 | — | — | — | — | ||||||||||||
Ending balance | $ | 8 | $ | 8 | $ | 12 | $ | 7 | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Other regulatory assets | $ | 261 | $ | 171 | ||||
Employee benefit obligations | (460 | ) | (340 | ) | ||||
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2009 | 2008 | |||||||
(in millions) | ||||||||
Other regulatory assets, deferred | $ | 202 | $ | 261 | ||||
Employee benefit obligations | (413 | ) | (460 | ) | ||||
Prior Service | Net | Transition | ||||||||||
Cost | (Gain) Loss | Obligation | ||||||||||
(in millions) | ||||||||||||
Balance at December 31, 2008: | ||||||||||||
Regulatory assets | $ | 20 | $ | 198 | $ | 43 | ||||||
Balance at December 31, 2007: | ||||||||||||
Regulatory assets | $ | 22 | $ | 94 | $ | 55 | ||||||
Estimated amortization in net periodic postretirement benefit cost in 2009: | ||||||||||||
Regulatory assets | $ | 2 | $ | 4 | $ | 9 | ||||||
Prior Service | Net(Gain) | Transition | ||||||||||
Cost | Loss | Obligation | ||||||||||
(in millions) | ||||||||||||
Balance at December 31, 2009: | $ | 11 | $ | 167 | $ | 24 | ||||||
Balance at December 31, 2008: | $ | 20 | $ | 198 | $ | 43 | ||||||
Estimated amortization as net periodic postretirement benefit cost in 2010: | $ | 1 | $ | 3 | $ | 6 | ||||||
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Regulatory Assets | Regulatory Assets | |||||||
(in millions) | (in millions) | |||||||
Balance at December 31, 2006 | $ | 254 | ||||||
Net (gain) loss | (64 | ) | ||||||
Change in prior service costs | — | |||||||
Reclassification adjustments: | ||||||||
Amortization of transition obligation | (9 | ) | ||||||
Amortization of prior service costs | (2 | ) | ||||||
Amortization of net gain | (8 | ) | ||||||
Total reclassification adjustments | (19 | ) | ||||||
Total change | (83 | ) | ||||||
Balance at December 31, 2007 | $ | 171 | $ | 171 | ||||
Net (gain) loss | 110 | |||||||
Change in prior service costs | — | |||||||
Net loss | 110 | |||||||
Reclassification adjustments: | ||||||||
Amortization of transition obligation | (11 | ) | (11 | ) | ||||
Amortization of prior service costs | (3 | ) | (3 | ) | ||||
Amortization of net gain | (6 | ) | (6 | ) | ||||
Total reclassification adjustments | (20 | ) | (20 | ) | ||||
Total change | 90 | 90 | ||||||
Balance at December 31, 2008 | $ | 261 | $ | 261 | ||||
Net gain | (28 | ) | ||||||
Change in prior service costs/transition obligation | (18 | ) | ||||||
Reclassification adjustments: | ||||||||
Amortization of transition obligation | (8 | ) | ||||||
Amortization of prior service costs | (2 | ) | ||||||
Amortization of net gain | (3 | ) | ||||||
Total reclassification adjustments | (13 | ) | ||||||
Total change | (59 | ) | ||||||
Balance at December 31, 2009 | $ | 202 | ||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Service cost | $ | 10 | $ | 10 | $ | 11 | ||||||
Interest cost | 50 | 47 | 44 | |||||||||
Expected return on plan assets | (30 | ) | (26 | ) | (25 | ) | ||||||
Net amortization | 16 | 19 | 22 | |||||||||
Net postretirement cost | $ | 46 | $ | 50 | $ | 52 | ||||||
II-217
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Service cost | $ | 10 | $ | 10 | $ | 10 | ||||||
Interest cost | 50 | 50 | 47 | |||||||||
Expected return on plan assets | (30 | ) | (30 | ) | (26 | ) | ||||||
Net amortization | 13 | 16 | 19 | |||||||||
Net postretirement cost | $ | 43 | $ | 46 | $ | 50 | ||||||
Benefit Payments | Subsidy Receipts | Total | Benefit Payments | Subsidy Receipts | Total | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 45 | $ | (3 | ) | $ | 42 | |||||||||||||||||
2010 | 50 | (4 | ) | 46 | $ | 50 | $ | (4 | ) | $ | 46 | |||||||||||||
2011 | 54 | (5 | ) | 49 | 53 | (4 | ) | 49 | ||||||||||||||||
2012 | 57 | (5 | ) | 52 | 56 | (4 | ) | 52 | ||||||||||||||||
2013 | 60 | (6 | ) | 54 | 58 | (5 | ) | 53 | ||||||||||||||||
2014 to 2018 | 334 | (41 | ) | 293 | ||||||||||||||||||||
2014 | 60 | (6 | ) | 54 | ||||||||||||||||||||
2015 to 2019 | 317 | (38 | ) | 279 |
II-219
2008 | 2007 | 2006 | ||||||||||
Discount | 6.75 | % | 6.30 | % | 6.00 | % | ||||||
Annual salary increase | 3.75 | 3.75 | 3.50 | |||||||||
Long-term return on plan assets | 8.50 | 8.50 | 8.50 | |||||||||
2009 | 2008 | 2007 | ||||||||||
Discount rate: | ||||||||||||
Pension plans | 5.93 | % | 6.75 | % | 6.30 | % | ||||||
Other postretirement benefit plans | 5.83 | 6.75 | 6.30 | |||||||||
Annual salary increase | 4.18 | 3.75 | 3.75 | |||||||||
Long-term return on plan assets: | ||||||||||||
Pension plans | 8.50 | 8.50 | 8.50 | |||||||||
Other postretirement benefit plans | 7.35 | 7.38 | 7.37 | |||||||||
1 Percent | 1 Percent | 1 Percent | 1 Percent | |||||||||||||
Increase | Decrease | Increase | Decrease | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Benefit obligation | $ | 61 | $ | 61 | $ | 58 | $ | 51 | ||||||||
Service and interest costs | $ | 4 | $ | 4 | 4 | 4 |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Energy | $ | 86 | $ | 66 | $ | 58 | $ | 44 | $ | 86 | $ | 66 | ||||||||||||
Capacity | 41 | 42 | 38 | 43 | 41 | 42 | ||||||||||||||||||
Total | $ | 127 | $ | 108 | $ | 96 | $ | 87 | $ | 127 | $ | 108 |
II-226
Company | Accumulated | Company | Accumulated | |||||||||||||||||||||
Facility (Type) | Ownership | Investment | Depreciation | Ownership | Investment | Depreciation | ||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Plant Vogtle (nuclear) | 45.7 | % | $ | 3,303 | $ | 1,918 | ||||||||||||||||||
Units 1 and 2 | 45.7 | % | $ | 3,285 | $ | 1,916 | ||||||||||||||||||
Plant Hatch (nuclear) | 50.1 | 953 | 521 | 50.1 | 937 | 522 | ||||||||||||||||||
Plant Wansley (coal) | 53.5 | 552 | 189 | 53.5 | 696 | 195 | ||||||||||||||||||
Plant Scherer (coal) | ||||||||||||||||||||||||
Units 1 and 2 | 8.4 | 117 | 68 | 8.4 | 133 | 70 | ||||||||||||||||||
Unit 3 | 75.0 | 566 | 328 | 75.0 | 723 | 339 | ||||||||||||||||||
Rocky Mountain (pumped storage) | 25.4 | 175 | 102 | 25.4 | 175 | 106 | ||||||||||||||||||
Intercession City (combustion-turbine) | 33.3 | 12 | 3 | 33.3 | 12 | 3 |
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2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Federal — | ||||||||||||
Current | $ | 284 | $ | 442 | $ | 393 | ||||||
Deferred | 155 | (72 | ) | 7 | ||||||||
439 | 370 | 400 | ||||||||||
State — | ||||||||||||
Current | 32 | 54 | 33 | |||||||||
Deferred | 16 | (6 | ) | 9 | ||||||||
48 | 48 | 42 | ||||||||||
Total | $ | 487 | $ | 418 | $ | 442 | ||||||
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2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Federal — | ||||||||||||
Current | $ | 211 | $ | 284 | $ | 442 | ||||||
Deferred | 175 | 155 | (72 | ) | ||||||||
386 | 439 | 370 | ||||||||||
State — | ||||||||||||
Current | 7 | 32 | 54 | |||||||||
Deferred | 17 | 16 | (6 | ) | ||||||||
24 | 48 | 48 | ||||||||||
Total | $ | 410 | $ | 487 | $ | 418 | ||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Deferred tax liabilities — | ||||||||||||||||
Accelerated depreciation | $ | 2,554 | $ | 2,376 | $ | 2,923 | $ | 2,554 | ||||||||
Property basis differences | 594 | 568 | 585 | 594 | ||||||||||||
Employee benefit obligations | 174 | 374 | 184 | 174 | ||||||||||||
Fuel clause under recovery | 311 | 281 | 270 | 311 | ||||||||||||
Premium on reacquired debt | 67 | 71 | 64 | 67 | ||||||||||||
Emissions allowances | 22 | — | ||||||||||||||
Regulatory assets associated with employee benefit obligations | 349 | 123 | 362 | 349 | ||||||||||||
Asset retirement obligations | 267 | 257 | 263 | 267 | ||||||||||||
Other | 72 | 53 | 70 | 72 | ||||||||||||
Total | 4,388 | 4,103 | 4,743 | 4,388 | ||||||||||||
Deferred tax assets — | ||||||||||||||||
Federal effect of state deferred taxes | 189 | 160 | 177 | 189 | ||||||||||||
Employee benefit obligations | 457 | 226 | 482 | 457 | ||||||||||||
Other property basis differences | 127 | 130 | 117 | 127 | ||||||||||||
Other deferred costs | 99 | 131 | 65 | 99 | ||||||||||||
Cost of removal obligations | 109 | — | ||||||||||||||
State tax credit carry forward | 99 | — | ||||||||||||||
Other comprehensive income | 10 | 2 | 12 | 10 | ||||||||||||
Regulatory liabilities associated with employee benefit obligations | — | 209 | ||||||||||||||
Unbilled fuel revenue | 42 | 34 | 42 | 42 | ||||||||||||
Asset retirement obligations | 267 | 257 | 263 | 267 | ||||||||||||
Environmental capital cost recovery | 52 | — | 37 | 52 | ||||||||||||
Other | 21 | 35 | 38 | 21 | ||||||||||||
Total | 1,264 | 1,184 | 1,441 | 1,264 | ||||||||||||
Total deferred tax liabilities, net | 3,124 | 2,919 | 3,302 | 3,124 | ||||||||||||
Portion included in current liabilities, net | (60 | ) | (69 | ) | ||||||||||||
Portion included in current assets/(liabilities), net | 88 | (60 | ) | |||||||||||||
Accumulated deferred income taxes | $ | 3,064 | $ | 2,850 | $ | 3,390 | $ | 3,064 |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
Federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||||
State income tax, net of federal deduction | 2.2 | 2.4 | 2.2 | 1.2 | 2.2 | 2.4 | ||||||||||||||||||
Non-deductible book depreciation | 0.9 | 1.1 | 1.1 | 1.1 | 0.9 | 1.1 | ||||||||||||||||||
AFUDC equity | (2.4 | ) | (1.9 | ) | (0.9 | ) | (2.7 | ) | (2.4 | ) | (1.9 | ) | ||||||||||||
Donations | — | (1.7 | ) | — | (0.8 | ) | — | (1.7 | ) | |||||||||||||||
Other | (1.1 | ) | (1.7 | ) | (1.6 | ) | (0.8 | ) | (1.1 | ) | (1.7 | ) | ||||||||||||
Effective income tax rate | 34.6 | % | 33.2 | % | 35.8 | % | 33.0 | % | 34.6 | % | 33.2 | % |
2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Unrecognized tax benefits at beginning of year | $ | 89.2 | $ | 65.0 | $ | 137 | $ | 89 | $ | 65 | ||||||||||
Tax positions from current periods | 47.0 | 20.5 | 44 | 47 | 20 | |||||||||||||||
Tax positions from prior periods | 4.6 | 3.7 | 1 | 5 | 4 | |||||||||||||||
Reductions due to settlements | (3.7 | ) | — | — | (4 | ) | — | |||||||||||||
Reductions due to expired statute of limitations | (1 | ) | — | — | ||||||||||||||||
Balance at end of year | $ | 137.1 | $ | 89.2 | $ | 181 | $ | 137 | $ | 89 |
II-228II-229
2008 | 2007 | Change | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Tax positions impacting the effective tax rate | $ | 134.2 | $ | 86.1 | $ | 48.1 | $ | 181 | $ | 134 | $ | 86 | ||||||||||||
Tax positions not impacting the effective tax rate | 2.9 | 3.1 | (0.2 | ) | — | 3 | 3 | |||||||||||||||||
Balance of unrecognized tax benefits | $ | 137.1 | $ | 89.2 | $ | 47.9 | $ | 181 | $ | 137 | $ | 89 |
2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Interest accrued at beginning of year | $ | 7.1 | $ | 2.7 | $ | 14 | $ | 7 | $ | 3 | ||||||||||
Interest reclassified due to settlements | (0.3 | ) | — | — | — | — | ||||||||||||||
Interest accrued during the year | 6.8 | 4.4 | 6 | 7 | 4 | |||||||||||||||
Balance at end of year | $ | 13.6 | $ | 7.1 | $ | 20 | $ | 14 | $ | 7 |
II-229
2008 | 2007 | 2009 | 2008 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Capital lease | $ | 5 | $ | 4 | $ | 4 | $ | 5 | ||||||||
Senior notes | 275 | 195 | 250 | 275 | ||||||||||||
Total | $ | 280 | $ | 199 | $ | 254 | $ | 280 |
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Fair Value | ||||||||||||||
Notional | Variable Rate | Weighted Average | Hedge Maturity | Gain (Loss) | ||||||||||
Amount | Received | Fixed Rate Paid | Date | December 31, 2008 | ||||||||||
(in millions) | (in millions) | |||||||||||||
Cash Flow Hedges on Existing Debt | ||||||||||||||
$ | 301 | SIFMA Index * | 2.22 | % | December 2009 | $ | (3 | ) | ||||||
150 | 3-month LIBOR | 2.63 | % | February 2009 | — | |||||||||
300 | 1-month LIBOR | 2.43 | % | April 2010 | (5 | ) | ||||||||
Cash Flow Hedges on Forecasted Debt | ||||||||||||||
100 | 3-month LIBOR | 4.98 | % | February 2019 | (21 | ) | ||||||||
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Commitments | Commitments | |||||||||||||||||||||||
Natural Gas | Coal | Nuclear Fuel | Natural Gas | Coal | Nuclear Fuel | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 657 | $ | 2,497 | $ | 139 | ||||||||||||||||||
2010 | 349 | 2,001 | 114 | $ | 473 | $ | 2,239 | $ | 198 | |||||||||||||||
2011 | 282 | 1,712 | 105 | 575 | 1,843 | 109 | ||||||||||||||||||
2012 | 364 | 671 | 108 | 453 | 766 | 115 | ||||||||||||||||||
2013 | 380 | 735 | 91 | 422 | 525 | 111 | ||||||||||||||||||
2014 and thereafter | 2,917 | 1,999 | 33 | |||||||||||||||||||||
2014 | 350 | 434 | 60 | |||||||||||||||||||||
2015 and thereafter | 3,414 | 1,533 | 207 | |||||||||||||||||||||
Total | $ | 4,949 | $ | 9,615 | $ | 590 | $ | 5,687 | $ | 7,340 | $ | 800 |
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Vogtle | Affiliated | Non-Affiliated | Vogtle | Affiliated | Non-Affiliated | |||||||||||||||||||
Capacity Payments | PPA | PPA | Capacity Payments | PPAs | PPAs | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 55 | $ | 220 | $ | 95 | ||||||||||||||||||
2010 | 54 | 153 | 136 | $ | 55 | $ | 153 | $ | 135 | |||||||||||||||
2011 | 51 | 119 | 143 | 53 | 119 | 142 | ||||||||||||||||||
2012 | 46 | 107 | 116 | 47 | 107 | 115 | ||||||||||||||||||
2013 | 21 | 107 | 109 | 22 | 107 | 108 | ||||||||||||||||||
2014 and thereafter | 114 | 596 | 1,476 | |||||||||||||||||||||
2014 | 18 | 108 | 109 | |||||||||||||||||||||
2015 and thereafter | 86 | 488 | 1,365 | |||||||||||||||||||||
Total | $ | 341 | $ | 1,302 | $ | 2,075 | $ | 281 | $ | 1,082 | $ | 1,974 |
Minimum Lease Payments | Minimum Lease Payments | |||||||||||||||||||||||
Rail Cars | Other | Total | Rail Cars | Other | Total | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
2009 | $ | 33 | $ | 10 | $ | 43 | ||||||||||||||||||
2010 | 27 | 7 | 34 | $ | 30 | $ | 7 | $ | 37 | |||||||||||||||
2011 | 25 | 6 | 31 | 30 | 5 | 35 | ||||||||||||||||||
2012 | 14 | 3 | 17 | 16 | 3 | 19 | ||||||||||||||||||
2013 | 12 | 3 | 15 | 12 | 3 | 15 | ||||||||||||||||||
2014 and thereafter | 25 | 3 | 28 | |||||||||||||||||||||
2014 | 10 | 3 | 13 | |||||||||||||||||||||
2015 and thereafter | 15 | 2 | 17 | |||||||||||||||||||||
Total | $ | 136 | $ | 32 | $ | 168 | $ | 113 | $ | 23 | $ | 136 |
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Year Ended December 31 | 2008 | 2007 | 2006 | 2009 | 2008 | 2007 | ||||||||||||||||||
Expected volatility | 13.1 | % | 14.8 | % | 16.9 | % | 15.6 | % | 13.1 | % | 14.8 | % | ||||||||||||
Expected term(in years) | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | ||||||||||||||||||
Interest rate | 2.8 | % | 4.6 | % | 4.6 | % | 1.9 | % | 2.8 | % | 4.6 | % | ||||||||||||
Dividend yield | 4.5 | % | 4.3 | % | 4.4 | % | 5.4 | % | 4.5 | % | 4.3 | % | ||||||||||||
Weighted average grant-date fair value | $ | 2.37 | $ | 4.12 | $ | 4.15 | $ | 1.80 | $ | 2.37 | $ | 4.12 |
Shares Subject to | Weighted Average | |||||||
Option | Exercise Price | |||||||
Outstanding at December 31, 2007 | 7,538,109 | $ | 30.59 | |||||
Granted | 1,430,140 | 35.78 | ||||||
Exercised | (961,426 | ) | 27.34 | |||||
Cancelled | (14,387 | ) | 34.82 | |||||
Outstanding at December 31, 2008 | 7,992,436 | $ | 31.90 | |||||
Exercisable at December 31, 2008 | 5,308,585 | $ | 29.98 | |||||
II-235
Shares Subject to | Weighted Average | |||||||
Option | Exercise Price | |||||||
Outstanding at December 31, 2008 | 7,992,436 | $ | 31.90 | |||||
Granted | 2,489,671 | 31.38 | ||||||
Exercised | (121,447 | ) | 20.59 | |||||
Cancelled | (37,736 | ) | 32.71 | |||||
Outstanding at December 31, 2009 | 10,322,924 | $ | 31.90 | |||||
Exercisable at December 31, 2009 | 6,870,135 | $ | 31.35 | |||||
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II-236
• | Level 1 consists of observable market data in an active market for identical assets or liabilities. | ||
• | Level 2 consists of observable market data, other than that included in Level 1, that is either directly or indirectly observable. | ||
• | Level 3 consists of unobservable market data. The input may reflect the assumptions of the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’s own assumptions are the best available information. |
At December 31, 2008: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||||||||||||||
in Active | Significant | |||||||||||||||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||||||||||||||||
As of December 31, 2009: | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Energy-related derivatives | $ | — | $ | 4.7 | $ | — | $ | 4.7 | ||||||||||||||||||||||||
Nuclear decommissioning trusts(a) | 260.3 | 198.8 | — | 459.1 | ||||||||||||||||||||||||||||
Cash equivalents and restricted cash | 146.9 | — | — | 146.9 | ||||||||||||||||||||||||||||
Nuclear decommissioning trusts:(a) | ||||||||||||||||||||||||||||||||
Domestic equity | $ | 428 | $ | 1 | $ | — | $ | 429 | ||||||||||||||||||||||||
U.S. Treasury and government agency securities | — | 31 | — | 31 | ||||||||||||||||||||||||||||
Municipal bonds | — | 23 | — | 23 | ||||||||||||||||||||||||||||
Corporate bonds | — | 61 | — | 61 | ||||||||||||||||||||||||||||
Mortgage and asset backed securities | — | 23 | — | 23 | ||||||||||||||||||||||||||||
Other | — | 13 | — | 13 | ||||||||||||||||||||||||||||
Total fair value | $ | 407.2 | $ | 203.5 | $ | — | $ | 610.7 | ||||||||||||||||||||||||
Total | $ | 428 | $ | 152 | $ | — | $ | 580 | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Energy-related derivatives | $ | — | $ | 117.9 | $ | — | $ | 117.9 | $ | — | $ | 75 | $ | — | $ | 75 | ||||||||||||||||
Interest rate derivatives | — | 29.3 | — | 29.3 | — | 2 | — | 2 | ||||||||||||||||||||||||
Total fair value | $ | — | $ | 147.2 | $ | — | $ | 147.2 | ||||||||||||||||||||||||
Total | $ | — | $ | 77 | $ | — | $ | 77 |
(a) | Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases. |
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II-237
Unfunded | Redemption | Redemption | ||||||||
As of December 31, 2009: | Fair Value | Commitments | Frequency | Notice Period | ||||||
(in millions) | ||||||||||
Nuclear decommissioning trusts: | ||||||||||
Corporate bonds – commingled funds | $ | 14 | None | Daily | 1 to 3 days | |||||
Other – commingled funds | 13 | None | Daily | Not applicable |
Carrying Amount | Fair Value | |||||||
(in millions) | ||||||||
Long-term debt: | ||||||||
2009 | $ | 7,973 | $ | 8,059 | ||||
2008 | $ | 7,219 | $ | 7,096 |
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• | Regulatory Hedges– Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company’s fuel hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the fuel cost recovery clauses. | |
• | Not Designated– Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred. |
Net | Longest | |||
Purchased | Hedge | Longest Non-Hedge | ||
mmBtu* | Date | Date | ||
(in millions) | ||||
71 | 2014 | — |
* | mmBtu - million British thermal units |
Weighted | Fair Value | |||||||
Average | Gain (Loss) | |||||||
Notional | Variable Rate | Fixed Rate | Hedge Maturity | December 31, | ||||
Amount | Received | Paid | Date | 2009 | ||||
(in millions) | (in millions) | |||||||
$300 | 1-month LIBOR | 2.43% | April 2010 | $(2) |
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Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
Balance Sheet | Balance Sheet | |||||||||||||||||||||||
Derivative Category | Location | 2009 | 2008 | Location | 2009 | 2008 | ||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Derivatives designated as hedging instruments for regulatory purposes | ||||||||||||||||||||||||
Energy-related derivatives: | Other current assets | $ | — | $ | 5 | Liabilities from risk management activities | $ | 47 | $ | 85 | ||||||||||||||
Other deferred charges and assets | — | — | Other deferred credits and liabilities | 28 | 33 | |||||||||||||||||||
Total derivatives designated as hedging instruments for regulatory purposes | $ | — | $ | 5 | $ | 75 | $ | 118 | ||||||||||||||||
Derivatives designated as hedging instruments in cash flow hedges | ||||||||||||||||||||||||
Interest rate derivatives: | Other current assets | $ | — | $ | — | Liabilities from risk management activities | $ | 2 | $ | 28 | ||||||||||||||
Other deferred charges and assets | — | — | Other deferred credits and liabilities | — | 1 | |||||||||||||||||||
Total derivatives designated as hedging instruments in cash flow hedges | $ | — | $ | — | $ | 2 | $ | 29 | ||||||||||||||||
Total | $ | — | $ | 5 | $ | 77 | $ | 147 | ||||||||||||||||
All derivative instruments are measured at fair value. See Note 10 for additional information. At December 31, 2009 and 2008, the pre-tax effect of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred on the balance sheets were as follows: | ||||||||||||||||||||||||
Unrealized Losses | Unrealized Gains | |||||||||||||||||||||||
Balance Sheet | Balance Sheet | |||||||||||||||||||||||
Derivative Category | Location | 2009 | 2008 | Location | 2009 | 2008 | ||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Energy-related derivatives: | Other regulatory assets, current | $ | (47 | ) | $ | (85 | ) | Other regulatory liabilities, current | $ | — | $ | 5 | ||||||||||||
Other regulatory assets, deferred | (28 | ) | (33 | ) | Other regulatory liabilities, deferred | — | — | |||||||||||||||||
Total energy-related derivative gains (losses) | $ | (75 | ) | $ | (118 | ) | $ | — | $ | 5 | ||||||||||||||
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Gain (Loss) Recognized in | Gain (Loss) Reclassified from Accumulated OCI into Income | |||||||||||||||||||||||||||
Derivatives in Cash Flow | OCI on Derivative | (Effective Portion) | ||||||||||||||||||||||||||
Hedging Relationships | (Effective Portion) | Amount | ||||||||||||||||||||||||||
Derivative Category | 2009 | 2008 | 2007 | Statements of Income Location | 2009 | 2008 | 2007 | |||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||
Interest rate derivatives | $ | (3 | ) | $ | (34 | ) | $ | (5 | ) | Interest expense | $ | (22 | ) | $ | (3 | ) | $ | (1 | ) |
Net Income After | Net Income After | |||||||||||||||||||||||
Operating | Operating | Dividends on Preferred | Operating | Operating | Dividends on Preferred | |||||||||||||||||||
Quarter Ended | Revenues | Income | and Preference Stock | Revenues | Income | and Preference Stock | ||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
March 2009 | $ | 1,766 | $ | 272 | $ | 122 | ||||||||||||||||||
June 2009 | 1,874 | 369 | 190 | |||||||||||||||||||||
September 2009 | 2,327 | 683 | 388 | |||||||||||||||||||||
December 2009 | 1,725 | 206 | 114 | |||||||||||||||||||||
March 2008 | $ | 1,865 | $ | 325 | $ | 176 | $ | 1,865 | $ | 325 | $ | 176 | ||||||||||||
June 2008 | 2,111 | 442 | 248 | 2,111 | 442 | 248 | ||||||||||||||||||
September 2008 | 2,644 | 711 | 402 | 2,644 | 711 | 402 | ||||||||||||||||||
December 2008 | 1,792 | 182 | 77 | 1,792 | 182 | 77 | ||||||||||||||||||
March 2007 | $ | 1,657 | $ | 279 | $ | 131 | ||||||||||||||||||
June 2007 | 1,844 | 361 | 188 | |||||||||||||||||||||
September 2007 | 2,444 | 688 | 400 | |||||||||||||||||||||
December 2007 | 1,627 | 189 | 117 |
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2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Operating Revenues (in thousands) | $ | 8,411,552 | $ | 7,571,652 | $ | 7,245,644 | $ | 7,075,837 | $ | 5,727,768 | $ | 7,691,740 | $ | 8,411,552 | $ | 7,571,652 | $ | 7,245,644 | $ | 7,075,837 | ||||||||||||||||||||
Net Income after Dividends on Preferred and Preference Stock (in thousands) | $ | 902,927 | $ | 836,136 | $ | 787,225 | $ | 744,373 | $ | 682,793 | $ | 814,045 | $ | 902,927 | $ | 836,136 | $ | 787,225 | $ | 744,373 | ||||||||||||||||||||
Cash Dividends on Common Stock (in thousands) | $ | 721,200 | $ | 689,900 | $ | 630,000 | $ | 582,800 | $ | 588,700 | $ | 738,900 | $ | 721,200 | $ | 689,900 | $ | 630,000 | $ | 582,800 | ||||||||||||||||||||
Return on Average Common Equity (percent) | 13.56 | 13.50 | 13.80 | 14.08 | 13.87 | 11.01 | 13.56 | 13.50 | 13.80 | 14.08 | ||||||||||||||||||||||||||||||
Total Assets (in thousands) | $ | 22,315,668 | $ | 20,822,761 | $ | 19,308,730 | $ | 17,898,445 | $ | 16,598,778 | $ | 24,294,566 | $ | 22,315,668 | $ | 20,822,761 | $ | 19,308,730 | $ | 17,898,445 | ||||||||||||||||||||
Gross Property Additions (in thousands) | $ | 1,953,448 | $ | 1,862,449 | $ | 1,276,889 | $ | 958,563 | $ | 1,252,197 | $ | 2,646,158 | $ | 1,953,448 | $ | 1,862,449 | $ | 1,276,889 | $ | 958,563 | ||||||||||||||||||||
Capitalization (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Common stock equity | $ | 6,879,243 | $ | 6,435,420 | $ | 5,956,251 | $ | 5,452,083 | $ | 5,123,276 | $ | 7,902,925 | $ | 6,879,243 | $ | 6,435,420 | $ | 5,956,251 | $ | 5,452,083 | ||||||||||||||||||||
Preferred and preference stock | 265,957 | 265,957 | 44,991 | 43,909 | 58,547 | 265,957 | 265,957 | 265,957 | 44,991 | 43,909 | ||||||||||||||||||||||||||||||
Long-term debt | 7,006,275 | 5,937,792 | 5,211,912 | 5,365,323 | 4,916,694 | 7,782,340 | 7,006,275 | 5,937,792 | 5,211,912 | 5,365,323 | ||||||||||||||||||||||||||||||
Total (excluding amounts due within one year) | $ | 14,151,475 | $ | 12,639,169 | $ | 11,213,154 | $ | 10,861,315 | $ | 10,098,517 | $ | 15,951,222 | $ | 14,151,475 | $ | 12,639,169 | $ | 11,213,154 | $ | 10,861,315 | ||||||||||||||||||||
Capitalization Ratios (percent): | ||||||||||||||||||||||||||||||||||||||||
Common stock equity | 48.6 | 50.9 | 53.1 | 50.2 | 50.7 | 49.5 | 48.6 | 50.9 | 53.1 | 50.2 | ||||||||||||||||||||||||||||||
Preferred and preference stock | 1.9 | 2.1 | 0.4 | 0.4 | 0.6 | 1.7 | 1.9 | 2.1 | 0.4 | 0.4 | ||||||||||||||||||||||||||||||
Long-term debt | 49.5 | 47.0 | 46.5 | 49.4 | 48.7 | 48.8 | 49.5 | 47.0 | 46.5 | 49.4 | ||||||||||||||||||||||||||||||
Total (excluding amounts due within one year) | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||||||||||||||||||||
Security Ratings: | ||||||||||||||||||||||||||||||||||||||||
Preferred and Preference Stock - | ||||||||||||||||||||||||||||||||||||||||
Moody’s | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | Baa1 | ||||||||||||||||||||||||||||||
Standard and Poor’s | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | BBB+ | ||||||||||||||||||||||||||||||
Fitch | A | A | A | A | A | A | A | A | A | A | ||||||||||||||||||||||||||||||
Unsecured Long-Term Debt - | ||||||||||||||||||||||||||||||||||||||||
Moody’s | A2 | A2 | A2 | A2 | A2 | A2 | A2 | A2 | A2 | A2 | ||||||||||||||||||||||||||||||
Standard and Poor’s | A | A | A | A | A | A | A | A | A | A | ||||||||||||||||||||||||||||||
Fitch | A+ | A+ | A+ | A+ | A+ | A+ | A+ | A+ | A+ | A+ | ||||||||||||||||||||||||||||||
Customers (year-end): | ||||||||||||||||||||||||||||||||||||||||
Residential | 2,039,503 | 2,024,520 | 1,998,643 | 1,960,556 | 1,926,215 | 2,043,661 | 2,039,503 | 2,024,520 | 1,998,643 | 1,960,556 | ||||||||||||||||||||||||||||||
Commercial | 295,925 | 295,478 | 294,654 | 289,009 | 283,507 | 295,375 | 295,925 | 295,478 | 294,654 | 289,009 | ||||||||||||||||||||||||||||||
Industrial | 8,248 | 8,240 | 8,008 | 8,290 | 7,765 | 8,202 | 8,248 | 8,240 | 8,008 | 8,290 | ||||||||||||||||||||||||||||||
Other | 5,566 | 4,807 | 4,371 | 4,143 | 4,015 | 6,580 | 5,566 | 4,807 | 4,371 | 4,143 | ||||||||||||||||||||||||||||||
Total | 2,349,242 | 2,333,045 | 2,305,676 | 2,261,998 | 2,221,502 | 2,353,818 | 2,349,242 | 2,333,045 | 2,305,676 | 2,261,998 | ||||||||||||||||||||||||||||||
Employees (year-end) | 9,337 | 9,270 | 9,278 | 9,273 | 9,294 | 8,599 | 9,337 | 9,270 | 9,278 | 9,273 |
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2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Operating Revenues (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Residential | $ | 2,648,176 | $ | 2,442,501 | $ | 2,326,190 | $ | 2,227,137 | $ | 1,900,961 | $ | 2,686,155 | $ | 2,648,176 | $ | 2,442,501 | $ | 2,326,190 | $ | 2,227,137 | ||||||||||||||||||||
Commercial | 2,917,270 | 2,576,058 | 2,423,568 | 2,357,077 | 1,933,004 | 2,825,602 | 2,917,270 | 2,576,058 | 2,423,568 | 2,357,077 | ||||||||||||||||||||||||||||||
Industrial | 1,640,407 | 1,403,852 | 1,382,213 | 1,406,295 | 1,217,536 | 1,318,070 | 1,640,407 | 1,403,852 | 1,382,213 | 1,406,295 | ||||||||||||||||||||||||||||||
Other | 80,492 | 75,592 | 73,649 | 73,854 | 67,250 | 82,576 | 80,492 | 75,592 | 73,649 | 73,854 | ||||||||||||||||||||||||||||||
Total retail | 7,286,345 | 6,498,003 | 6,205,620 | 6,064,363 | 5,118,751 | 6,912,403 | 7,286,345 | 6,498,003 | 6,205,620 | 6,064,363 | ||||||||||||||||||||||||||||||
Wholesale — non-affiliates | 568,797 | 537,913 | 551,731 | 524,800 | 251,581 | 394,538 | 568,797 | 537,913 | 551,731 | 524,800 | ||||||||||||||||||||||||||||||
Wholesale — affiliates | 286,219 | 277,832 | 252,556 | 275,525 | 172,375 | 111,964 | 286,219 | 277,832 | 252,556 | 275,525 | ||||||||||||||||||||||||||||||
Total revenues from sales of electricity | 8,141,361 | 7,313,748 | 7,009,907 | 6,864,688 | 5,542,707 | 7,418,905 | 8,141,361 | 7,313,748 | 7,009,907 | 6,864,688 | ||||||||||||||||||||||||||||||
Other revenues | 270,191 | 257,904 | 235,737 | 211,149 | 185,061 | 272,835 | 270,191 | 257,904 | 235,737 | 211,149 | ||||||||||||||||||||||||||||||
Total | $ | 8,411,552 | $ | 7,571,652 | $ | 7,245,644 | $ | 7,075,837 | $ | 5,727,768 | $ | 7,691,740 | $ | 8,411,552 | $ | 7,571,652 | $ | 7,245,644 | $ | 7,075,837 | ||||||||||||||||||||
Kilowatt-Hour Sales (in thousands): | ||||||||||||||||||||||||||||||||||||||||
Residential | 26,412,131 | 26,840,275 | 26,206,170 | 25,508,472 | 24,829,833 | 26,272,226 | 26,412,131 | 26,840,275 | 26,206,170 | 25,508,472 | ||||||||||||||||||||||||||||||
Commercial | 33,058,109 | 33,056,632 | 32,112,430 | 31,334,182 | 29,553,893 | 32,592,831 | 33,058,109 | 33,056,632 | 32,112,430 | 31,334,182 | ||||||||||||||||||||||||||||||
Industrial | 24,163,566 | 25,490,035 | 25,577,006 | 25,832,265 | 27,197,843 | 21,810,062 | 24,163,566 | 25,490,035 | 25,577,006 | 25,832,265 | ||||||||||||||||||||||||||||||
Other | 670,588 | 697,363 | 660,285 | 737,343 | 744,935 | 671,390 | 670,588 | 697,363 | 660,285 | 737,343 | ||||||||||||||||||||||||||||||
Total retail | 84,304,394 | 86,084,305 | 84,555,891 | 83,412,262 | 82,326,504 | 81,346,509 | 84,304,394 | 86,084,305 | 84,555,891 | 83,412,262 | ||||||||||||||||||||||||||||||
Sales for resale — non-affiliates | 9,756,260 | 10,577,969 | 10,685,456 | 10,588,891 | 5,429,911 | |||||||||||||||||||||||||||||||||||
Sales for resale — affiliates | 3,694,640 | 5,191,903 | 5,463,463 | 5,033,165 | 4,925,744 | |||||||||||||||||||||||||||||||||||
Wholesale — non-affiliates | 5,206,949 | 9,756,260 | 10,577,969 | 10,685,456 | 10,588,891 | |||||||||||||||||||||||||||||||||||
Wholesale — affiliates | 2,504,437 | 3,694,640 | 5,191,903 | 5,463,463 | 5,033,165 | |||||||||||||||||||||||||||||||||||
Total | 97,755,294 | 101,854,177 | 100,704,810 | 99,034,318 | 92,682,159 | 89,057,895 | 97,755,294 | 101,854,177 | 100,704,810 | 99,034,318 | ||||||||||||||||||||||||||||||
Average Revenue Per Kilowatt-Hour (cents): | ||||||||||||||||||||||||||||||||||||||||
Residential | 10.03 | 9.10 | 8.88 | 8.73 | 7.66 | 10.22 | 10.03 | 9.10 | 8.88 | 8.73 | ||||||||||||||||||||||||||||||
Commercial | 8.82 | 7.79 | 7.55 | 7.52 | 6.54 | 8.67 | 8.82 | 7.79 | 7.55 | 7.52 | ||||||||||||||||||||||||||||||
Industrial | 6.79 | 5.51 | 5.40 | 5.44 | 4.48 | 6.04 | 6.79 | 5.51 | 5.40 | 5.44 | ||||||||||||||||||||||||||||||
Total retail | 8.64 | 7.55 | 7.34 | 7.27 | 6.22 | 8.50 | 8.64 | 7.55 | 7.34 | 7.27 | ||||||||||||||||||||||||||||||
Wholesale | 6.36 | 5.17 | 4.98 | 5.12 | 4.09 | 6.57 | 6.36 | 5.17 | 4.98 | 5.12 | ||||||||||||||||||||||||||||||
Total sales | 8.33 | 7.18 | 6.96 | 6.93 | 5.98 | 8.33 | 8.33 | 7.18 | 6.96 | 6.93 | ||||||||||||||||||||||||||||||
Residential Average Annual Kilowatt-Hour Use Per Customer | 12,969 | 13,315 | 13,216 | 13,119 | 13,002 | 12,848 | 12,969 | 13,315 | 13,216 | 13,119 | ||||||||||||||||||||||||||||||
Residential Average Annual Revenue Per Customer | $ | 1,300 | $ | 1,212 | $ | 1,173 | $ | 1,145 | $ | 995 | $ | 1,314 | $ | 1,300 | $ | 1,212 | $ | 1,173 | $ | 1,145 | ||||||||||||||||||||
Plant Nameplate Capacity Ratings (year-end) (megawatts) | 15,995 | 15,995 | 15,995 | 15,995 | 14,743 | 15,995 | 15,995 | 15,995 | 15,995 | 15,995 | ||||||||||||||||||||||||||||||
Maximum Peak-Hour Demand (megawatts): | ||||||||||||||||||||||||||||||||||||||||
Winter | 14,221 | 13,817 | 13,528 | 14,360 | 13,087 | 15,173 | 14,221 | 13,817 | 13,528 | 14,360 | ||||||||||||||||||||||||||||||
Summer | 17,270 | 17,974 | 17,159 | 16,925 | 16,129 | 16,080 | 17,270 | 17,974 | 17,159 | 16,925 | ||||||||||||||||||||||||||||||
Annual Load Factor (percent) | 58.4 | 57.5 | 61.8 | 59.4 | 61.0 | 60.7 | 58.4 | 57.5 | 61.8 | 59.4 | ||||||||||||||||||||||||||||||
Plant Availability (percent): | ||||||||||||||||||||||||||||||||||||||||
Fossil-steam | 90.95 | 90.8 | 91.4 | 90.0 | 87.1 | 92.5 | 91.0 | 90.8 | 91.4 | 90.0 | ||||||||||||||||||||||||||||||
Nuclear | 89.81 | 92.4 | 90.7 | 89.3 | 94.8 | 88.4 | 89.8 | 92.4 | 90.7 | 89.3 | ||||||||||||||||||||||||||||||
Source of Energy Supply (percent): | ||||||||||||||||||||||||||||||||||||||||
Coal | 58.7 | 61.5 | 59.0 | 60.7 | 57.6 | 52.3 | 58.7 | 61.5 | 59.0 | 60.7 | ||||||||||||||||||||||||||||||
Nuclear | 14.8 | 14.6 | 14.4 | 14.5 | 16.5 | 16.2 | 14.8 | 14.6 | 14.4 | 14.5 | ||||||||||||||||||||||||||||||
Hydro | 0.6 | 0.5 | 0.9 | 1.9 | 1.5 | 1.8 | 0.6 | 0.5 | 0.9 | 1.9 | ||||||||||||||||||||||||||||||
Oil and gas | 5.1 | 5.5 | 5.0 | 3.0 | 0.2 | 7.7 | 5.1 | 5.5 | 5.0 | 3.0 | ||||||||||||||||||||||||||||||
Purchased power - | ||||||||||||||||||||||||||||||||||||||||
From non-affiliates | 5.1 | 3.8 | 3.8 | 4.6 | 6.0 | 4.4 | 5.1 | 3.8 | 3.8 | 4.6 | ||||||||||||||||||||||||||||||
From affiliates | 15.7 | 14.1 | 16.9 | 15.3 | 18.2 | 17.6 | 15.7 | 14.1 | 16.9 | 15.3 | ||||||||||||||||||||||||||||||
Total | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 |
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II-242II-245
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2008 | 2008 | 2009 | 2009 | |||||
Target | Actual | Target | Actual | |||||
Key Performance Indicator | Performance | Performance | Performance | Performance | ||||
Top quartile in | ||||||||
Customer Satisfaction | customer surveys | Top quartile | Top quartile in customer surveys | Top quartile | ||||
Peak Season EFOR | 3.00% or less | 2.47% | 3.00% or less | 2.11% | ||||
Net Income | $102 million | $98 million | ||||||
Net income after dividends on preference stock | $112.5 million | $111.2 million |
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Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||||||||||||||
Amount | from Prior Year | Amount | from Prior Year | |||||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Operating revenues | $ | 1,387.2 | $ | 127.4 | $ | 55.9 | $ | 120.3 | $ | 1,302.2 | $ | (84.9 | ) | $ | 127.4 | $ | 55.9 | |||||||||||||||
Fuel | 635.6 | 62.2 | 38.5 | 119.1 | 573.4 | (62.2 | ) | 62.2 | 38.5 | |||||||||||||||||||||||
Purchased power | 109.4 | 37.9 | (2.3 | ) | (24.6 | ) | 92.0 | (17.4 | ) | 37.9 | (2.3 | ) | ||||||||||||||||||||
Other operations and maintenance | 277.5 | 7.1 | 10.9 | 9.8 | 260.3 | (17.2 | ) | 7.1 | 10.9 | |||||||||||||||||||||||
Depreciation and amortization | 84.8 | (0.8 | ) | (3.6 | ) | 4.2 | 93.4 | 8.6 | (0.8 | ) | (3.6 | ) | ||||||||||||||||||||
Taxes other than income taxes | 87.2 | 4.2 | 3.2 | 3.4 | 94.5 | 7.3 | 4.2 | 3.2 | ||||||||||||||||||||||||
Total operating expenses | 1,194.5 | 110.6 | 46.7 | 111.9 | 1,113.6 | (80.9 | ) | 110.6 | 46.7 | |||||||||||||||||||||||
Operating income | 192.7 | 16.8 | 9.2 | 8.4 | 188.6 | (4.0 | ) | 16.8 | 9.2 | |||||||||||||||||||||||
Total other income and (expense) | (34.1 | ) | 6.7 | 1.3 | (4.8 | ) | (18.2 | ) | 15.8 | 6.7 | 1.3 | |||||||||||||||||||||
Income taxes | 54.1 | 7.0 | 1.8 | 0.3 | 53.0 | (1.1 | ) | 7.0 | 1.8 | |||||||||||||||||||||||
Net Income | 104.5 | 16.5 | 8.7 | 3.3 | ||||||||||||||||||||||||||||
Dividends on Preference Stock | 6.2 | 2.3 | 0.6 | 2.5 | ||||||||||||||||||||||||||||
Net income | 117.4 | 12.9 | 16.5 | 8.7 | ||||||||||||||||||||||||||||
Dividends on preference stock | 6.2 | — | 2.3 | 0.6 | ||||||||||||||||||||||||||||
Net Income after Dividends on Preference Stock | $ | 98.3 | $ | 14.2 | $ | 8.1 | $ | 0.8 | ||||||||||||||||||||||||
Net income after dividends on preference stock | $ | 111.2 | $ | 12.9 | $ | 14.2 | $ | 8.1 |
Amount | Amount | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Retail — prior year | $ | 1,006.3 | $ | 952.0 | $ | 864.9 | $ | 1,120.8 | $ | 1,006.3 | $ | 952.0 | ||||||||||||
Estimated change in - | ||||||||||||||||||||||||
Rates and pricing | 6.3 | 2.5 | 14.2 | 33.0 | 6.3 | 2.5 | ||||||||||||||||||
Sales growth | (4.6 | ) | 5.8 | 2.5 | ||||||||||||||||||||
Sales growth (decline) | (5.7 | ) | (4.6 | ) | 5.8 | |||||||||||||||||||
Weather | 3.9 | 1.2 | 2.4 | (4.5 | ) | 3.9 | 1.2 | |||||||||||||||||
Fuel and other cost recovery | 108.9 | 44.8 | 68.0 | (37.0 | ) | 108.9 | 44.8 | |||||||||||||||||
Retail — current year | 1,120.8 | 1,006.3 | 952.0 | 1,106.6 | 1,120.8 | 1,006.3 | ||||||||||||||||||
Wholesale revenues - | ||||||||||||||||||||||||
Non-affiliates | 97.1 | 83.5 | 87.2 | 94.1 | 97.1 | 83.5 | ||||||||||||||||||
Affiliates | 107.0 | 113.2 | 118.1 | 32.1 | 107.0 | 113.2 | ||||||||||||||||||
Total wholesale revenues | 204.1 | 196.7 | 205.3 | 126.2 | 204.1 | 196.7 | ||||||||||||||||||
Other operating revenues | 62.3 | 56.8 | 46.6 | 69.4 | 62.3 | 56.8 | ||||||||||||||||||
Total operating revenues | $ | 1,387.2 | $ | 1,259.8 | $ | 1,203.9 | $ | 1,302.2 | $ | 1,387.2 | $ | 1,259.8 | ||||||||||||
Percent change | 10.1 | % | 4.6 | % | 11.1 | % | (6.1 | )% | 10.1 | % | 4.6 | % |
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(in thousands) | (in thousands) | |||||||||||||||||||||||
Unit power sales - | ||||||||||||||||||||||||
Capacity | $ | 22,028 | $ | 18,073 | $ | 21,477 | $ | 24,466 | $ | 22,028 | $ | 18,073 | ||||||||||||
Energy | 33,767 | 36,245 | 34,597 | 33,122 | 33,767 | 36,245 | ||||||||||||||||||
Total | 55,795 | 54,318 | 56,074 | 57,588 | 55,795 | 54,318 | ||||||||||||||||||
Other power sales - | ||||||||||||||||||||||||
Capacity and other | 10,890 | 2,397 | 2,436 | 11,060 | 10,890 | 2,397 | ||||||||||||||||||
Energy | 30,380 | 26,799 | 28,632 | 25,457 | 30,380 | 26,799 | ||||||||||||||||||
Total | 41,270 | 29,196 | 31,068 | 36,517 | 41,270 | 29,196 | ||||||||||||||||||
Total non-affiliated | $ | 97,065 | $ | 83,514 | $ | 87,142 | $ | 94,105 | $ | 97,065 | $ | 83,514 |
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KWHs | Percent Change | KWHs | Percent Change | |||||||||||||||||||||||||||||
2008 | 2008 | 2007 | 2006 | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Residential | 5,349 | (2.3 | )% | 0.9 | % | 2.0 | % | 5,255 | (1.8 | )% | (2.3 | )% | 0.9 | % | ||||||||||||||||||
Commercial | 3,961 | (0.3 | ) | 3.3 | 2.9 | 3,896 | (1.6 | ) | (0.3 | ) | 3.3 | |||||||||||||||||||||
Industrial | 2,210 | 7.9 | (4.1 | ) | (1.1 | ) | 1,727 | (21.9 | ) | 7.9 | (4.1 | ) | ||||||||||||||||||||
Other | 23 | (5.1 | ) | 4.2 | 5.1 | 25 | 8.1 | (5.1 | ) | 4.2 | ||||||||||||||||||||||
Total retail | 11,543 | 0.2 | 0.8 | 1.7 | 10,903 | (5.5 | ) | 0.2 | 0.8 | |||||||||||||||||||||||
Wholesale | ||||||||||||||||||||||||||||||||
Non-affiliates | 1,817 | (18.4 | ) | 7.1 | (9.4 | ) | 1,813 | (0.2 | ) | (18.4 | ) | 7.1 | ||||||||||||||||||||
Affiliates | 1,871 | (35.1 | ) | (1.8 | ) | 48.6 | 870 | (53.5 | ) | (35.1 | ) | (1.8 | ) | |||||||||||||||||||
Total wholesale | 3,688 | (27.8 | ) | 1.9 | 17.4 | 2,683 | (27.2 | ) | (27.8 | ) | 1.9 | |||||||||||||||||||||
Total energy sales | 15,231 | (8.4 | ) | 1.1 | 6.0 | 13,586 | (10.8 | ) | (8.4 | ) | 1.1 |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
Total generation(millions of KWHs) | 14,762 | 16,657 | 16,349 | 12,895 | 14,762 | 16,657 | ||||||||||||||||||
Total purchased power(millions of KWHs) | 1,187 | 798 | 876 | 1,481 | 1,187 | 798 | ||||||||||||||||||
Sources of generation(percent)- | ||||||||||||||||||||||||
Coal | 84 | % | 86 | % | 87 | % | 69 | % | 84 | % | 86 | % | ||||||||||||
Gas | 16 | 14 | 13 | 31 | 16 | 14 | ||||||||||||||||||
Cost of fuel, generated(cents per net KWH)- | ||||||||||||||||||||||||
Coal | 3.58 | 2.86 | 2.68 | 4.27 | 3.58 | 2.86 | ||||||||||||||||||
Gas | 8.02 | 6.91 | 7.24 | 4.66 | 8.02 | 6.91 | ||||||||||||||||||
Average cost of fuel, generated(cents per net KWH) | 4.31 | 3.44 | 3.27 | |||||||||||||||||||||
Average cost of fuel, generated(cents per net KWH)* | 4.39 | 4.31 | 3.44 | |||||||||||||||||||||
Average cost of purchased power(cents per net KWH) | 9.21 | 8.96 | 8.43 | 6.71 | 9.21 | 8.96 |
* | Fuel includes fuel purchased by the Company for tolling agreements where power is generated by the provider and is included in purchased power when determining the average cost of purchased power. |
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• | Changes in existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, coal combustion byproducts, including coal ash, control of toxic substances, hazardous and solid wastes, and other environmental matters. | |
• | Changes in existing income tax regulations or changes in IRS or state revenue department interpretations of existing regulations. | |
• | Identification of additional sites that require environmental remediation or the filing of other complaints in which the Company may be asserted to be a potentially responsible party. | |
• | Identification and evaluation of other potential lawsuits or complaints in which the Company may be named as a defendant. | |
• | Resolution or progression of new or existing matters through the legislative process, the court systems, the IRS, state revenue departments, the FERC, or the EPA. |
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2008 | 2007 | 2009 | 2008 | |||||||||||||
Changes | Changes | Changes | Changes | |||||||||||||
Fair Value | Fair Value | |||||||||||||||
(in millions) | (in thousands) | |||||||||||||||
Contracts outstanding at the beginning of the period, assets (liabilities), net | $ | (0.2 | ) | $ | (7.1 | ) | $ | (31,161 | ) | $ | (202 | ) | ||||
Contracts realized or settled | (8.0 | ) | 6.6 | 41,683 | (7,960 | ) | ||||||||||
Current period changes(a) | (23.0 | ) | 0.3 | (24,209 | ) | (22,999 | ) | |||||||||
Contracts outstanding at the end of the period, assets (liabilities), net | $ | (31.2 | ) | $ | (0.2 | ) | $ | (13,687 | ) | $ | (31,161 | ) |
(a) | Current period changes also include the changes in fair value of new contracts entered into during the period, if any. |
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2008 | 2007 | |||||||||||||||
Asset (Liability) Derivatives | 2009 | 2008 | ||||||||||||||
(in millions) | (in thousands) | |||||||||||||||
Regulatory hedges | $ | (31.2 | ) | $ | (0.2 | ) | $ | (13,699 | ) | $ | (31,161 | ) | ||||
Cash flow hedges | — | — | ||||||||||||||
Non-accounting hedges | — | — | ||||||||||||||
Not designated | 12 | — | ||||||||||||||
Total fair value | $ | (31.2 | ) | $ | (0.2 | ) | $ | (13,687 | ) | $ | (31,161 | ) |
December 31, 2008 | ||||||||||||||||
Fair Value Measurements | ||||||||||||||||
Total | Maturity | |||||||||||||||
Fair Value | Year 1 | Years 2&3 | Years 4&5 | |||||||||||||
(in millions) | ||||||||||||||||
Level 1 | $ | — | $ | — | $ | — | $ | — | ||||||||
Level 2 | (31.2 | ) | (25.9 | ) | (5.3 | ) | — | |||||||||
Level 3 | — | — | — | — | ||||||||||||
Fair value of contracts outstanding at end of period | $ | (31.2 | ) | $ | (25.9 | ) | $ | (5.3 | ) | $ | — | |||||
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December 31, 2009 | ||||||||||||||||
Fair Value Measurements | ||||||||||||||||
Total | Maturity | |||||||||||||||
Fair Value | Year 1 | Years 2&3 | Years 4&5 | |||||||||||||
(in thousands) | ||||||||||||||||
Level 1 | $ | — | $ | — | $ | — | $ | — | ||||||||
Level 2 | (13,687 | ) | (9,288 | ) | (4,264 | ) | (135 | ) | ||||||||
Level 3 | — | — | — | — | ||||||||||||
Fair value of contracts outstanding at end of period | $ | (13,687 | ) | $ | (9,288 | ) | $ | (4,264 | ) | $ | (135 | ) | ||||
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2010- | 2012- | After | 2011- | 2013- | After | Uncertain | ||||||||||||||||||||||||||||||||||||||
2009 | 2011 | 2013 | 2013 | Total | 2010 | 2012 | 2014 | 2014 | Timing(d) | Total | ||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||
Long-term debt(a) – | ||||||||||||||||||||||||||||||||||||||||||||
Principal | $ | — | $ | 110,000 | $ | 60,000 | $ | 686,255 | $ | 856,255 | $ | 140,000 | $ | 110,000 | $ | 135,000 | $ | 740,441 | $ | — | $ | 1,125,441 | ||||||||||||||||||||||
Interest | 40,864 | 81,728 | 78,110 | 471,610 | 672,312 | 41,237 | 80,746 | 77,388 | 464,144 | — | 663,515 | |||||||||||||||||||||||||||||||||
Energy-related derivative obligations(b) | 26,928 | 5,305 | — | — | 32,233 | 9,442 | 4,264 | 183 | — | — | 13,889 | |||||||||||||||||||||||||||||||||
Preference stock dividends(c) | 6,203 | 12,405 | 12,405 | — | 31,013 | 6,203 | 12,405 | 12,405 | — | — | 31,013 | |||||||||||||||||||||||||||||||||
Operating leases | 5,549 | 9,064 | 2,352 | 2,223 | 19,188 | 14,525 | 20,539 | 12,793 | 1,613 | — | 49,470 | |||||||||||||||||||||||||||||||||
Purchase commitments(d) – | ||||||||||||||||||||||||||||||||||||||||||||
Capital(e) | 477,618 | 737,292 | — | — | 1,214,910 | |||||||||||||||||||||||||||||||||||||||
Limestone(f) | — | 11,540 | 12,125 | 40,182 | 63,847 | |||||||||||||||||||||||||||||||||||||||
Unrecognized tax benefits and interest(d) | — | — | — | — | 1,729 | 1,729 | ||||||||||||||||||||||||||||||||||||||
Purchase commitments(e) – | ||||||||||||||||||||||||||||||||||||||||||||
Capital(f) | 271,419 | 768,706 | — | — | — | 1,040,125 | ||||||||||||||||||||||||||||||||||||||
Limestone(g) | 6,043 | 12,543 | 13,178 | 35,938 | — | 67,702 | ||||||||||||||||||||||||||||||||||||||
Coal | 282,370 | 182,486 | — | — | 464,856 | 515,241 | 75,561 | — | — | — | 590,802 | |||||||||||||||||||||||||||||||||
Natural gas(g) | 112,618 | 128,320 | 40,276 | 151,016 | 432,230 | |||||||||||||||||||||||||||||||||||||||
Purchased power | 23,007 | 53,672 | 53,997 | 3,918 | �� | 134,594 | ||||||||||||||||||||||||||||||||||||||
Long-term service agreements(h) | 7,088 | 14,903 | 14,552 | 25,954 | 62,497 | |||||||||||||||||||||||||||||||||||||||
Postretirement benefits trust(i) | 34 | 68 | — | — | 102 | |||||||||||||||||||||||||||||||||||||||
Natural gas(h) | 112,080 | 137,566 | 101,176 | 130,889 | — | 481,711 | ||||||||||||||||||||||||||||||||||||||
Purchased power(i) | 39,432 | 82,474 | 97,317 | 659,261 | — | 878,484 | ||||||||||||||||||||||||||||||||||||||
Long-term service agreements(j) | 6,315 | 13,303 | 13,977 | 25,583 | — | 59,178 | ||||||||||||||||||||||||||||||||||||||
Postretirement benefits trust(k) | 54 | 107 | — | — | — | 161 | ||||||||||||||||||||||||||||||||||||||
Total | $ | 982,279 | $ | 1,346,783 | $ | 273,817 | $ | 1,381,158 | $ | 3,984,037 | $ | 1,161,991 | $ | 1,318,214 | $ | 463,417 | $ | 2,057,869 | $ | 1,729 | $ | 5,003,220 |
(a) | All amounts are reflected based on final maturity dates. The Company plans to continue to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of January 1, | |
(b) | For additional information, see Notes 1 and | |
(c) | Preference stock does not mature; therefore, amounts are provided for the next five years only. | |
(d) | The timing related to the realization of $1.7 million in unrecognized tax benefits and interest payments in individual years beyond 12 months cannot be reasonably and reliably estimated due to uncertainties in the timing of the effective settlement of tax positions. See Note 5 to the financial statements for additional information. | |
(e) | The Company generally does not enter into non-cancelable commitments for other operations and maintenance expenditures. Total other operations and maintenance expenses for | |
The Company forecasts capital expenditures over a three-year period. Amounts represent current estimates of total expenditures. At December 31, | ||
As part of the Company’s program to reduce sulfur dioxide emissions from its coal plants, the Company has | ||
Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected have been estimated based on the New York Mercantile Exchange future prices at December 31, | ||
The capacity-related costs associated with PPAs are recovered through the purchased power capacity costs recovery clause. See Notes 3 and 7 to the financial statements for additional information. | ||
(j) | Long-term service agreements include price escalation based on inflation indices. | |
The Company forecasts postretirement trust contributions over a three-year period. The Company expects that the earliest that cash may have to be contributed to the pension trust fund is |
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2008 | 2007 | 2006 | ||||||||||
(in thousands) | ||||||||||||
Operating Revenues: | ||||||||||||
Retail revenues | $ | 1,120,766 | $ | 1,006,329 | $ | 952,038 | ||||||
Wholesale revenues — | ||||||||||||
Non-affiliates | 97,065 | 83,514 | 87,142 | |||||||||
Affiliates | 106,989 | 113,178 | 118,097 | |||||||||
Other revenues | 62,383 | 56,787 | 46,637 | |||||||||
Total operating revenues | 1,387,203 | 1,259,808 | 1,203,914 | |||||||||
Operating Expenses: | ||||||||||||
Fuel | 635,634 | 573,354 | 534,921 | |||||||||
Purchased power — | ||||||||||||
Non-affiliates | 29,590 | 11,994 | 16,288 | |||||||||
Affiliates | 79,750 | 59,499 | 57,536 | |||||||||
Other operations and maintenance | 277,478 | 270,440 | 259,519 | |||||||||
Depreciation and amortization | 84,815 | 85,613 | 89,170 | |||||||||
Taxes other than income taxes | 87,247 | 82,992 | 79,808 | |||||||||
Total operating expenses | 1,194,514 | 1,083,892 | 1,037,242 | |||||||||
Operating Income | 192,689 | 175,916 | 166,672 | |||||||||
Other Income and (Expense): | ||||||||||||
Allowance for equity funds used during construction | 9,969 | 2,374 | 363 | |||||||||
Interest income | 3,155 | 5,348 | 5,228 | |||||||||
Interest expense, net of amounts capitalized | (43,098 | ) | (44,680 | ) | (44,133 | ) | ||||||
Other income (expense), net | (4,064 | ) | (3,876 | ) | (3,548 | ) | ||||||
Total other income and (expense) | (34,038 | ) | (40,834 | ) | (42,090 | ) | ||||||
Earnings Before Income Taxes | 158,651 | 135,082 | 124,582 | |||||||||
Income taxes | 54,103 | 47,083 | 45,293 | |||||||||
Net Income | 104,548 | 87,999 | 79,289 | |||||||||
Dividends on Preference Stock | 6,203 | 3,881 | 3,300 | |||||||||
Net Income After Dividends on Preference Stock | $ | 98,345 | $ | 84,118 | $ | 75,989 | ||||||
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2008 | 2007 | 2006 | ||||||||||
(in thousands) | ||||||||||||
Operating Activities: | ||||||||||||
Net income | $ | 104,548 | $ | 87,999 | $ | 79,289 | ||||||
Adjustments to reconcile net income to net cash provided from operating activities — | ||||||||||||
Depreciation and amortization | 93,606 | 90,694 | 94,466 | |||||||||
Deferred income taxes | 23,949 | (10,818 | ) | 1,170 | ||||||||
Allowance for equity funds used during construction | (9,969 | ) | (2,374 | ) | (363 | ) | ||||||
Pension, postretirement, and other employee benefits | 1,585 | 6,062 | 3,319 | |||||||||
Stock based compensation expense | 765 | 1,141 | 1,005 | |||||||||
Tax benefit of stock options | 215 | 344 | 211 | |||||||||
Hedge settlements | (5,220 | ) | 3,030 | (5,399 | ) | |||||||
Other, net | (5,150 | ) | (7,074 | ) | 7,294 | |||||||
Changes in certain current assets and liabilities — | ||||||||||||
Receivables | (49,885 | ) | 10,302 | (36,795 | ) | |||||||
Fossil fuel stock | (36,765 | ) | 5,025 | (31,297 | ) | |||||||
Materials and supplies | 8,927 | (2,625 | ) | (2,330 | ) | |||||||
Prepaid income taxes | (416 | ) | 7,177 | (7,060 | ) | |||||||
Property damage cost recovery | 26,143 | 25,103 | 24,544 | |||||||||
Other current assets | (307 | ) | (632 | ) | (955 | ) | ||||||
Accounts payable | (4,561 | ) | (555 | ) | 13,876 | |||||||
Accrued taxes | (6,511 | ) | 4,773 | (455 | ) | |||||||
Accrued compensation | 570 | (1,322 | ) | (3,251 | ) | |||||||
Other current liabilities | 6,418 | 732 | 6,165 | |||||||||
Net cash provided from operating activities | 147,942 | 216,982 | 143,434 | |||||||||
Investing Activities: | ||||||||||||
Property additions | (377,790 | ) | (241,538 | ) | (154,377 | ) | ||||||
Cost of removal net of salvage | (8,713 | ) | (9,408 | ) | (4,564 | ) | ||||||
Construction payables | 37,244 | 10,817 | 3,309 | |||||||||
Other | 576 | 803 | (8,779 | ) | ||||||||
Net cash used for investing activities | (348,683 | ) | (239,326 | ) | (164,411 | ) | ||||||
Financing Activities: | ||||||||||||
Increase (decrease) in notes payable, net | 107,438 | (75,821 | ) | 30,981 | ||||||||
Proceeds — | ||||||||||||
Senior notes | — | 85,000 | 110,000 | |||||||||
Common stock issued to parent | — | 80,000 | — | |||||||||
Preference stock | — | 45,000 | — | |||||||||
Pollution control revenue bonds | 37,000 | — | — | |||||||||
Gross excess tax benefit of stock options | 298 | 799 | 423 | |||||||||
Capital contributions from parent company | 75,324 | 4,174 | 26,140 | |||||||||
Other long-term debt | 110,000 | — | — | |||||||||
Redemptions — | ||||||||||||
Senior notes | (1,300 | ) | — | — | ||||||||
Pollution control revenue bonds | (37,000 | ) | — | (12,075 | ) | |||||||
First mortgage bonds | — | — | (25,000 | ) | ||||||||
Other long-term debt | — | (41,238 | ) | (30,928 | ) | |||||||
Payment of preference stock dividends | (6,057 | ) | (3,300 | ) | (3,300 | ) | ||||||
Payment of common stock dividends | (81,700 | ) | (74,100 | ) | (70,300 | ) | ||||||
Other | (5,167 | ) | (348 | ) | (1,285 | ) | ||||||
Net cash provided from financing activities | 198,836 | 20,166 | 24,656 | |||||||||
Net Change in Cash and Cash Equivalents | (1,905 | ) | (2,178 | ) | 3,679 | |||||||
Cash and Cash Equivalents at Beginning of Year | 5,348 | 7,526 | 3,847 | |||||||||
Cash and Cash Equivalents at End of Year | $ | 3,443 | $ | 5,348 | $ | 7,526 | ||||||
Supplemental Cash Flow Information: | ||||||||||||
Cash paid during the period for — | ||||||||||||
Interest (net of $3,973, $1,048, and $160 capitalized, respectively) | $ | 39,956 | $ | 35,237 | $ | 37,297 | ||||||
Income taxes (net of refunds) | 40,176 | 39,228 | 54,533 | |||||||||
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Assets | 2008 | 2007 | ||||||
(in thousands) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 3,443 | $ | 5,348 | ||||
Receivables — | ||||||||
Customer accounts receivable | 69,531 | 63,227 | ||||||
Unbilled revenues | 48,742 | 39,000 | ||||||
Under recovered regulatory clause revenues | 98,645 | 58,435 | ||||||
Other accounts and notes receivable | 7,201 | 7,162 | ||||||
Affiliated companies | 8,516 | 19,377 | ||||||
Accumulated provision for uncollectible accounts | (2,188 | ) | (1,711 | ) | ||||
Fossil fuel stock, at average cost | 108,129 | 71,012 | ||||||
Materials and supplies, at average cost | 36,836 | 45,763 | ||||||
Property damage cost recovery | — | 18,585 | ||||||
Other regulatory assets | 38,907 | 10,220 | ||||||
Other | 25,655 | 14,878 | ||||||
Total current assets | 443,417 | 351,296 | ||||||
Property, Plant, and Equipment: | ||||||||
In service | 2,785,561 | 2,678,952 | ||||||
Less accumulated provision for depreciation | 971,464 | 931,968 | ||||||
1,814,097 | 1,746,984 | |||||||
Construction work in progress | 391,987 | 150,870 | ||||||
Total property, plant, and equipment | 2,206,084 | 1,897,854 | ||||||
Other Property and Investments | 15,918 | 4,563 | ||||||
Deferred Charges and Other Assets: | ||||||||
Deferred charges related to income taxes | 24,220 | 17,847 | ||||||
Prepaid pension costs | — | 107,151 | ||||||
Other regulatory assets | 170,836 | 97,492 | ||||||
Other | 18,550 | 22,784 | ||||||
Total deferred charges and other assets | 213,606 | 245,274 | ||||||
Total Assets | $ | 2,879,025 | $ | 2,498,987 | ||||
2009 | 2008 | 2007 | ||||||||||
(in thousands) | ||||||||||||
Operating Revenues: | ||||||||||||
Retail revenues | $ | 1,106,568 | $ | 1,120,766 | $ | 1,006,329 | ||||||
Wholesale revenues, non-affiliates | 94,105 | 97,065 | 83,514 | |||||||||
Wholesale revenues, affiliates | 32,095 | 106,989 | 113,178 | |||||||||
Other revenues | 69,461 | 62,383 | 56,787 | |||||||||
Total operating revenues | 1,302,229 | 1,387,203 | 1,259,808 | |||||||||
Operating Expenses: | ||||||||||||
Fuel | 573,407 | 635,634 | 573,354 | |||||||||
Purchased power, non-affiliates | 23,706 | 29,590 | 11,994 | |||||||||
Purchased power, affiliates | 68,276 | 79,750 | 59,499 | |||||||||
Other operations and maintenance | 260,274 | 277,478 | 270,440 | |||||||||
Depreciation and amortization | 93,398 | 84,815 | 85,613 | |||||||||
Taxes other than income taxes | 94,506 | 87,247 | 82,992 | |||||||||
Total operating expenses | 1,113,567 | 1,194,514 | 1,083,892 | |||||||||
Operating Income | 188,662 | 192,689 | 175,916 | |||||||||
Other Income and (Expense): | ||||||||||||
Allowance for equity funds used during construction | 23,809 | 9,969 | 2,374 | |||||||||
Interest income | 423 | 3,155 | 5,348 | |||||||||
Interest expense, net of amounts capitalized | (38,358 | ) | (43,098 | ) | (44,680 | ) | ||||||
Other income (expense), net | (4,075 | ) | (4,064 | ) | (3,876 | ) | ||||||
Total other income and (expense) | (18,201 | ) | (34,038 | ) | (40,834 | ) | ||||||
Earnings Before Income Taxes | 170,461 | 158,651 | 135,082 | |||||||||
Income taxes | 53,025 | 54,103 | 47,083 | |||||||||
Net Income | 117,436 | 104,548 | 87,999 | |||||||||
Dividends on Preference Stock | 6,203 | 6,203 | 3,881 | |||||||||
Net Income After Dividends on Preference Stock | $ | 111,233 | $ | 98,345 | $ | 84,118 | ||||||
II-268
Liabilities and Stockholder’s Equity | 2008 | 2007 | ||||||
(in thousands) | ||||||||
Current Liabilities: | ||||||||
Notes payable | $ | 148,239 | $ | 44,625 | ||||
Accounts payable — | ||||||||
Affiliated | 50,304 | 39,375 | ||||||
Other | 90,381 | 56,823 | ||||||
Customer deposits | 28,017 | 24,885 | ||||||
Accrued taxes — | ||||||||
Income taxes | 39,983 | 30,026 | ||||||
Other | 11,855 | 10,577 | ||||||
Accrued interest | 8,959 | 7,698 | ||||||
Accrued compensation | 15,667 | 15,096 | ||||||
Other regulatory liabilities | 4,602 | 6,027 | ||||||
Liabilities from risk management activities | 26,928 | 4,065 | ||||||
Other | 29,047 | 27,958 | ||||||
Total current liabilities | 453,982 | 267,155 | ||||||
Long-term Debt(See accompanying statements) | 849,265 | 740,050 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Accumulated deferred income taxes | 254,354 | 240,101 | ||||||
Accumulated deferred investment tax credits | 11,255 | 12,988 | ||||||
Employee benefit obligations | 97,389 | 74,021 | ||||||
Other cost of removal obligations | 180,325 | 172,876 | ||||||
Other regulatory liabilities | 28,596 | 82,741 | ||||||
Other | 83,769 | 79,802 | ||||||
Total deferred credits and other liabilities | 655,688 | 662,529 | ||||||
Total Liabilities | 1,958,935 | 1,669,734 | ||||||
Preference Stock(See accompanying statements) | 97,998 | 97,998 | ||||||
Common Stockholder’s Equity(See accompanying statements) | 822,092 | 731,255 | ||||||
Total Liabilities and Stockholder’s Equity | $ | 2,879,025 | $ | 2,498,987 | ||||
Commitments and Contingent Matters(See notes) | ||||||||
2009 | 2008 | 2007 | ||||||||||
(in thousands) | ||||||||||||
Operating Activities: | ||||||||||||
Net income | $ | 117,436 | $ | 104,548 | $ | 87,999 | ||||||
Adjustments to reconcile net income to net cash provided from operating activities — | ||||||||||||
Depreciation and amortization, total | 99,564 | 93,607 | 90,694 | |||||||||
Deferred income taxes | (16,545 | ) | 23,949 | (10,818 | ) | |||||||
Allowance for equity funds used during construction | (23,809 | ) | (9,969 | ) | (2,374 | ) | ||||||
Pension, postretirement, and other employee benefits | 1,769 | 1,585 | 6,062 | |||||||||
Stock based compensation expense | 933 | 765 | 1,141 | |||||||||
Tax benefit of stock options | 17 | 215 | 344 | |||||||||
Hedge settlements | — | (5,220 | ) | 3,030 | ||||||||
Other, net | (5,190 | ) | (5,149 | ) | (7,072 | ) | ||||||
Changes in certain current assets and liabilities — | ||||||||||||
-Receivables | 83,245 | (49,886 | ) | 10,301 | ||||||||
-Fossil fuel stock | (75,145 | ) | (36,765 | ) | 5,025 | |||||||
-Materials and supplies | (1,642 | ) | 8,927 | (2,625 | ) | |||||||
-Prepaid income taxes | (6,355 | ) | (416 | ) | 7,177 | |||||||
-Property damage cost recovery | 10,746 | 26,143 | 25,103 | |||||||||
-Other current assets | (204 | ) | (307 | ) | (632 | ) | ||||||
-Accounts payable | 7,890 | (4,561 | ) | (556 | ) | |||||||
-Accrued taxes | (2,404 | ) | (6,511 | ) | 4,773 | |||||||
-Accrued compensation | (6,330 | ) | 570 | (1,322 | ) | |||||||
-Other current liabilities | 10,255 | 6,417 | 732 | |||||||||
Net cash provided from operating activities | 194,231 | 147,942 | 216,982 | |||||||||
Investing Activities: | ||||||||||||
Property additions | (421,309 | ) | (377,790 | ) | (241,538 | ) | ||||||
Investment in restricted cash from pollution control revenue bonds | (49,188 | ) | — | — | ||||||||
Distribution of restricted cash from pollution control revenue bonds | 42,841 | — | — | |||||||||
Cost of removal net of salvage | (9,751 | ) | (8,713 | ) | (9,408 | ) | ||||||
Construction payables | (23,603 | ) | 37,244 | 10,817 | ||||||||
Other investing activities | (7,426 | ) | 576 | 803 | ||||||||
Net cash used for investing activities | (468,436 | ) | (348,683 | ) | (239,326 | ) | ||||||
Financing Activities: | ||||||||||||
Increase (decrease) in notes payable, net | (49,599 | ) | 107,438 | (75,820 | ) | |||||||
Proceeds — | ||||||||||||
Common stock issued to parent | 135,000 | — | 80,000 | |||||||||
Capital contributions from parent company | 22,032 | 75,324 | 4,174 | |||||||||
Gross excess tax benefit of stock options | 51 | 298 | 799 | |||||||||
Preference stock | — | — | 45,000 | |||||||||
Pollution control revenue bonds | 130,400 | 37,000 | — | |||||||||
Senior notes | 140,000 | — | 85,000 | |||||||||
Other long-term debt issuances | — | 110,000 | — | |||||||||
Redemptions — | ||||||||||||
Pollution control revenue bonds | — | (37,000 | ) | — | ||||||||
Senior notes | (1,214 | ) | (1,300 | ) | — | |||||||
Other long-term debt | — | — | (41,238 | ) | ||||||||
Payment of preference stock dividends | (6,203 | ) | (6,057 | ) | (3,300 | ) | ||||||
Payment of common stock dividends | (89,300 | ) | (81,700 | ) | (74,100 | ) | ||||||
Other financing activities | (1,728 | ) | (5,167 | ) | (349 | ) | ||||||
Net cash provided from financing activities | 279,439 | 198,836 | 20,166 | |||||||||
Net Change in Cash and Cash Equivalents | 5,234 | (1,905 | ) | (2,178 | ) | |||||||
Cash and Cash Equivalents at Beginning of Year | 3,443 | 5,348 | 7,526 | |||||||||
Cash and Cash Equivalents at End of Year | $ | 8,677 | $ | 3,443 | $ | 5,348 | ||||||
Supplemental Cash Flow Information: | ||||||||||||
Cash paid during the period for — | ||||||||||||
Interest (net of $9,489, $3,973 and $1,048 capitalized, respectively) | $ | 40,336 | $ | 39,956 | $ | 35,237 | ||||||
Income taxes (net of refunds) | 73,889 | 40,176 | 39,228 | |||||||||
Non-cash decrease in notes payable related to energy services | (8,309 | ) | — | — | ||||||||
II-269
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in thousands) | (percent of total) | |||||||||||||||
Long Term Debt: | ||||||||||||||||
Long-term notes payable — | ||||||||||||||||
4.35% due 2013 | $ | 60,000 | $ | 60,000 | ||||||||||||
4.90% to 5.90% due 2014-2044 | 528,700 | 530,000 | ||||||||||||||
Variable rates (1.645% at 1/1/09) due 2011 | 110,000 | — | ||||||||||||||
Total long-term notes payable | 698,700 | 590,000 | ||||||||||||||
Other long-term debt — | ||||||||||||||||
Pollution control revenue bonds — | ||||||||||||||||
2.35% to 6.00% due 2022-2037 | 153,625 | 13,000 | ||||||||||||||
Variable rate (1.05% at 1/1/09) due 2022-2037 | 3,930 | 144,555 | ||||||||||||||
Total other long-term debt | 157,555 | 157,555 | ||||||||||||||
Unamortized debt discount | (6,990 | ) | (7,505 | ) | ||||||||||||
Total long-term debt (annual interest requirement — $40.9 million) | 849,265 | 740,050 | 48.0 | % | 47.2 | % | ||||||||||
Preferred and Preference Stock: | ||||||||||||||||
Authorized - 20,000,000 shares—preferred stock | ||||||||||||||||
- 10,000,000 shares—preference stock | ||||||||||||||||
Outstanding - $100 par or stated value — 6% preference stock | 53,886 | 53,886 | ||||||||||||||
— 6.45% preference stock | 44,112 | 44,112 | ||||||||||||||
- 1,000,000 shares (non-cumulative) | ||||||||||||||||
Preference stock (annual dividend requirement — $6.2 million) | 97,998 | 97,998 | 5.5 | 6.2 | ||||||||||||
Common Stockholder’s Equity: | ||||||||||||||||
Common stock, without par value — | ||||||||||||||||
Authorized - 20,000,000 shares | ||||||||||||||||
Outstanding - 1,792,717 shares | 118,060 | 118,060 | ||||||||||||||
Paid-in capital | 511,547 | 435,008 | ||||||||||||||
Retained earnings | 197,417 | 181,986 | ||||||||||||||
Accumulated other comprehensive income (loss) | (4,932 | ) | (3,799 | ) | ||||||||||||
Total common stockholder’s equity | 822,092 | 731,255 | 46.5 | 46.6 | ||||||||||||
Total Capitalization | $ | 1,769,355 | $ | 1,569,303 | 100.0 | % | 100.0 | % | ||||||||
Assets | 2009 | 2008 | ||||||
(in thousands) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 8,677 | $ | 3,443 | ||||
Restricted cash and cash equivalents | 6,347 | — | ||||||
Receivables — | ||||||||
Customer accounts receivable | 64,257 | 69,531 | ||||||
Unbilled revenues | 60,414 | 48,742 | ||||||
Under recovered regulatory clause revenues | 4,285 | 98,644 | ||||||
Other accounts and notes receivable | 4,107 | 7,201 | ||||||
Affiliated companies | 7,503 | 8,516 | ||||||
Accumulated provision for uncollectible accounts | (1,913 | ) | (2,188 | ) | ||||
Fossil fuel stock, at average cost | 183,619 | 108,129 | ||||||
Materials and supplies, at average cost | 38,478 | 36,836 | ||||||
Other regulatory assets, current | 19,172 | 38,908 | ||||||
Prepaid expenses | 44,760 | 20,363 | ||||||
Other current assets | 3,634 | 5,292 | ||||||
Total current assets | 443,340 | 443,417 | ||||||
Property, Plant, and Equipment: | ||||||||
In service | 3,430,503 | 2,785,561 | ||||||
Less accumulated provision for depreciation | 1,009,807 | 971,464 | ||||||
Plant in service, net of depreciation | 2,420,696 | 1,814,097 | ||||||
Construction work in progress | 159,499 | 391,987 | ||||||
Total property, plant, and equipment | 2,580,195 | 2,206,084 | ||||||
Other Property and Investments | 15,923 | 15,918 | ||||||
Deferred Charges and Other Assets: | ||||||||
Deferred charges related to income taxes | 39,018 | 24,220 | ||||||
Other regulatory assets, deferred | 190,971 | 170,836 | ||||||
Other deferred charges and assets | 24,160 | 18,550 | ||||||
Total deferred charges and other assets | 254,149 | 213,606 | ||||||
Total Assets | $ | 3,293,607 | $ | 2,879,025 | ||||
II-270
Accumulated | ||||||||||||||||||||
Common | Paid-In | Retained | Other Comprehensive | |||||||||||||||||
Stock | Capital | Earnings | Income (Loss) | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at December 31, 2005 | $ | 38,060 | $ | 400,815 | $ | 166,279 | $ | (2,810 | ) | $ | 602,344 | |||||||||
Net income after dividends on preference stock | — | — | 75,989 | — | 75,989 | |||||||||||||||
Capital contributions from parent company | — | 27,777 | — | — | 27,777 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | (3,112 | ) | (3,112 | ) | |||||||||||||
Adjustment to initially apply FASB Statement No. 158, net of tax | — | — | — | 1,325 | 1,325 | |||||||||||||||
Cash dividends on common stock | — | — | (70,300 | ) | — | (70,300 | ) | |||||||||||||
Balance at December 31, 2006 | 38,060 | 428,592 | 171,968 | (4,597 | ) | 634,023 | ||||||||||||||
Net income after dividends on preference stock | — | — | 84,118 | — | 84,118 | |||||||||||||||
Issuance of common stock | 80,000 | — | — | — | 80,000 | |||||||||||||||
Capital contributions from parent company | — | 6,458 | — | — | 6,458 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | 798 | 798 | |||||||||||||||
Cash dividends on common stock | — | — | (74,100 | ) | — | (74,100 | ) | |||||||||||||
Other | — | (42 | ) | — | — | (42 | ) | |||||||||||||
Balance at December 31, 2007 | 118,060 | 435,008 | 181,986 | (3,799 | ) | 731,255 | ||||||||||||||
Net income after dividends on preference stock | — | — | 98,345 | — | 98,345 | |||||||||||||||
Capital contributions from parent company | — | 76,539 | — | — | 76,539 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | (1,133 | ) | (1,133 | ) | |||||||||||||
Cash dividends on common stock | — | — | (81,700 | ) | — | (81,700 | ) | |||||||||||||
Change in benefit plan measurement date | — | — | (1,214 | ) | — | (1,214 | ) | |||||||||||||
Balance at December 31, 2008 | $ | 118,060 | $ | 511,547 | $ | 197,417 | $ | (4,932 | ) | $ | 822,092 | |||||||||
2008 | 2007 | 2006 | ||||||||||
(in thousands) | ||||||||||||
Net income after dividends on preference stock | $ | 98,345 | $ | 84,118 | $ | 75,989 | ||||||
Other comprehensive income (loss): | ||||||||||||
Qualifying hedges: | ||||||||||||
Changes in fair value, net of tax of $(1,077), $232, and $(2,082), respectively | (1,716 | ) | 371 | (3,317 | ) | |||||||
Reclassification adjustment for amounts included in net income, net of tax of $366, $269, and $140, respectively | 583 | 427 | 224 | |||||||||
Pension and other postretirement benefit plans: | ||||||||||||
Change in additional minimum pension liability, net of tax of $-, $-, and $(13), respectively | — | — | (19 | ) | ||||||||
Total other comprehensive income (loss) | (1,133 | ) | 798 | (3,112 | ) | |||||||
Comprehensive Income | $ | 97,212 | $ | 84,916 | $ | 72,877 | ||||||
Liabilities and Stockholder’s Equity | 2009 | 2008 | |||||||
(in thousands) | |||||||||
Current Liabilities: | |||||||||
Securities due within one year | $ | 140,000 | $ | — | |||||
Notes payable | 90,331 | 148,239 | |||||||
Accounts payable — | |||||||||
Affiliated | 47,421 | 50,304 | |||||||
Other | 80,184 | 90,381 | |||||||
Customer deposits | 32,361 | 28,017 | |||||||
Accrued taxes — | |||||||||
Accrued income taxes | 1,955 | 39,983 | |||||||
Other accrued taxes | 7,297 | 11,855 | |||||||
Accrued interest | 10,222 | 8,959 | |||||||
Accrued compensation | 9,337 | 15,667 | |||||||
Other regulatory liabilities, current | 22,416 | 4,602 | |||||||
Liabilities from risk management activities | 9,442 | 26,928 | |||||||
Other current liabilities | 20,092 | 29,047 | |||||||
Total current liabilities | 471,058 | 453,982 | |||||||
Long-Term Debt(See accompanying statements) | 978,914 | 849,265 | |||||||
Deferred Credits and Other Liabilities: | |||||||||
Accumulated deferred income taxes | 297,405 | 254,354 | |||||||
Accumulated deferred investment tax credits | 9,652 | 11,255 | |||||||
Employee benefit obligations | 109,271 | 97,389 | |||||||
Other cost of removal obligations | 191,248 | 180,325 | |||||||
Other regulatory liabilities, deferred | 41,399 | 28,597 | |||||||
Other deferred credits and liabilities | 92,370 | 83,768 | |||||||
Total deferred credits and other liabilities | 741,345 | 655,688 | |||||||
Total Liabilities | 2,191,317 | 1,958,935 | |||||||
Preference Stock(See accompanying statements) | 97,998 | 97,998 | |||||||
Common Stockholder’s Equity(See accompanying statements) | 1,004,292 | 822,092 | |||||||
Total Liabilities and Stockholder’s Equity | $ | 3,293,607 | $ | 2,879,025 | |||||
Commitments and Contingent Matters(See notes) | |||||||||
II-271
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in thousands) | (percent of total) | |||||||||||||||
Long Term Debt: | ||||||||||||||||
Long-term notes payable — | ||||||||||||||||
4.35% due 2013 | 60,000 | 60,000 | ||||||||||||||
4.90% due 2014 | 75,000 | 75,000 | ||||||||||||||
5.25% to 5.90% due 2016-2044 | 452,486 | 453,700 | ||||||||||||||
Variable rates (0.35% at 1/1/10) due 2010 | 140,000 | — | ||||||||||||||
Variable rates (0.68% at 1/1/10) due 2011 | 110,000 | 110,000 | ||||||||||||||
Total long-term notes payable | 837,486 | 698,700 | ||||||||||||||
Other long-term debt — | ||||||||||||||||
Pollution control revenue bonds — | ||||||||||||||||
1.50% to 6.00% due 2022-2039 | 218,625 | 153,625 | ||||||||||||||
Variable rates (0.25% to 0.28% at 1/1/10) due 2022-2039 | 69,330 | 3,930 | ||||||||||||||
Total other long-term debt | 287,955 | 157,555 | ||||||||||||||
Unamortized debt discount | (6,527 | ) | (6,990 | ) | ||||||||||||
Total long-term debt (annual interest requirement — $41.2 million) | 1,118,914 | 849,265 | ||||||||||||||
Less amount due within one year | 140,000 | — | ||||||||||||||
Long-term debt excluding amount due within one year | 978,914 | 849,265 | 47.0 | % | 48.0 | % | ||||||||||
Preferred and Preference Stock: | ||||||||||||||||
Authorized - 20,000,000 shares—preferred stock | ||||||||||||||||
- 10,000,000 shares—preference stock | ||||||||||||||||
Outstanding - $100 par or stated value — 6% preference stock | 53,886 | 53,886 | ||||||||||||||
— 6.45% preference stock | 44,112 | 44,112 | ||||||||||||||
- 1,000,000 shares (non-cumulative) | ||||||||||||||||
Total preference stock (annual dividend requirement — $6.2 million) | 97,998 | 97,998 | 4.7 | 5.5 | ||||||||||||
Common Stockholder’s Equity: | ||||||||||||||||
Common stock, without par value — | ||||||||||||||||
Authorized - 20,000,000 shares | ||||||||||||||||
Outstanding - 2009: 3,142,717 shares | ||||||||||||||||
Outstanding - 2008: 1,792,717 shares | 253,060 | 118,060 | ||||||||||||||
Paid-in capital | 534,577 | 511,547 | ||||||||||||||
Retained earnings | 219,117 | 197,417 | ||||||||||||||
Accumulated other comprehensive income (loss) | (2,462 | ) | (4,932 | ) | ||||||||||||
Total common stockholder’s equity | 1,004,292 | 822,092 | 48.3 | 46.5 | ||||||||||||
Total Capitalization | $ | 2,081,204 | $ | 1,769,355 | 100.0 | % | 100.0 | % | ||||||||
II-272
Number of | Accumulated | |||||||||||||||||||||||
Common | Other | |||||||||||||||||||||||
Shares | Common | Paid-In | Retained | Comprehensive | ||||||||||||||||||||
Issued | Stock | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Balance at December 31, 2006 | 993 | $ | 38,060 | $ | 428,592 | $ | 171,968 | $ | (4,597 | ) | $ | 634,023 | ||||||||||||
Net income after dividends on preference stock | — | — | — | 84,118 | — | 84,118 | ||||||||||||||||||
Issuance of common stock | 800 | 80,000 | — | — | — | 80,000 | ||||||||||||||||||
Capital contributions from parent company | — | — | 6,457 | — | — | 6,457 | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | 798 | 798 | ||||||||||||||||||
Cash dividends on common stock | — | — | — | (74,100 | ) | — | (74,100 | ) | ||||||||||||||||
Other | — | — | (41 | ) | — | — | (41 | ) | ||||||||||||||||
Balance at December 31, 2007 | 1,793 | 118,060 | 435,008 | 181,986 | (3,799 | ) | 731,255 | |||||||||||||||||
Net income after dividends on preference stock | — | — | — | 98,345 | — | 98,345 | ||||||||||||||||||
Capital contributions from parent company | — | — | 76,539 | — | — | 76,539 | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (1,133 | ) | (1,133 | ) | ||||||||||||||||
Cash dividends on common stock | — | — | — | (81,700 | ) | — | (81,700 | ) | ||||||||||||||||
Change in benefit plan measurement date | — | — | — | (1,214 | ) | — | (1,214 | ) | ||||||||||||||||
Balance at December 31, 2008 | 1,793 | 118,060 | 511,547 | 197,417 | (4,932 | ) | 822,092 | |||||||||||||||||
Net income after dividends on preference stock | — | — | — | 111,233 | — | 111,233 | ||||||||||||||||||
Issuance of common stock | 1,350 | 135,000 | — | — | — | 135,000 | ||||||||||||||||||
Capital contributions from parent company | — | — | 23,030 | — | — | 23,030 | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | 2,470 | 2,470 | ||||||||||||||||||
Cash dividends on common stock | — | — | — | (89,300 | ) | — | (89,300 | ) | ||||||||||||||||
Other | — | — | — | (233 | ) | — | (233 | ) | ||||||||||||||||
Balance at December 31, 2009 | 3,143 | $ | 253,060 | $ | 534,577 | $ | 219,117 | $ | (2,462 | ) | $ | 1,004,292 | ||||||||||||
II-273
2009 | 2008 | 2007 | ||||||||||
(in thousands) | ||||||||||||
Net income after dividends on preference stock | $ | 111,233 | $ | 98,345 | $ | 84,118 | ||||||
Other comprehensive income (loss): | ||||||||||||
Qualifying hedges: | ||||||||||||
Changes in fair value, net of tax of $1,132, $(1,077), and $232, respectively | 1,803 | (1,716 | ) | 370 | ||||||||
Reclassification adjustment for amounts included in net income, net of tax of $419, $366, and $269, respectively | 667 | 583 | 428 | |||||||||
Total other comprehensive income (loss) | 2,470 | (1,133 | ) | 798 | ||||||||
Comprehensive Income | $ | 113,703 | $ | 97,212 | $ | 84,916 | ||||||
II-274
II-272
II-275
2008 | 2007 | Note | 2009 | 2008 | Note | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Environmental remediation | $ | 66,812 | $ | 66,923 | (a | ) | ||||||||||||||||||
Loss on reacquired debt | 16,248 | 17,378 | (b | ) | ||||||||||||||||||||
Vacation pay | 7,991 | 7,411 | (c | ) | ||||||||||||||||||||
Deferred charges related to income taxes | 24,220 | 17,847 | (d | ) | ||||||||||||||||||||
Fuel-hedging (realized and unrealized) losses | 35,333 | 1,834 | (e | ) | ||||||||||||||||||||
Underfunded retiree benefit plans | 81,912 | 14,602 | (f | ) | ||||||||||||||||||||
Other assets | 3,360 | 1,371 | (g | ) | ||||||||||||||||||||
Under recovered regulatory clause revenues | 96,731 | 56,628 | (g | ) | ||||||||||||||||||||
Property damage reserve | (9,801 | ) | 18,585 | (h | ) | |||||||||||||||||||
Deferred income tax charges | $ | 39,018 | $ | 24,220 | (a | ) | ||||||||||||||||||
Asset retirement obligations | (4,531 | ) | (4,570 | ) | (d | ) | (4,371 | ) | (4,531 | ) | (a,i | ) | ||||||||||||
Other cost of removal obligations | (180,325 | ) | (172,876 | ) | (d | ) | (191,248 | ) | (180,325 | ) | (a | ) | ||||||||||||
Deferred income tax credits | (12,983 | ) | (15,331 | ) | (d | ) | (11,412 | ) | (12,983 | ) | (a | ) | ||||||||||||
Loss on reacquired debt | 14,599 | 16,248 | (b | ) | ||||||||||||||||||||
Vacation pay | 8,120 | 7,991 | (c,i | ) | ||||||||||||||||||||
Under recovered regulatory clause revenues | 2,384 | 96,731 | (d | ) | ||||||||||||||||||||
Over recovered regulatory clause revenues | (14,510 | ) | (3,295 | ) | (d | ) | ||||||||||||||||||
Property damage reserve | (24,046 | ) | (9,801 | ) | (e | ) | ||||||||||||||||||
Fuel-hedging (realized and unrealized) losses | 15,367 | 35,333 | (f,i | ) | ||||||||||||||||||||
Fuel-hedging (realized and unrealized) gains | (1,071 | ) | (1,455 | ) | (e | ) | (190 | ) | (1,071 | ) | (f,i | ) | ||||||||||||
Over recovered regulatory clause revenues | (3,295 | ) | (5,233 | ) | (g | ) | ||||||||||||||||||
PPA charges | 8,141 | — | (i,j | ) | ||||||||||||||||||||
Generation site selection/evaluation costs | 8,373 | 2,370 | (k | ) | ||||||||||||||||||||
Other assets | 131 | 990 | (d,i | ) | ||||||||||||||||||||
Environmental remediation | 65,223 | 66,812 | (g,i | ) | ||||||||||||||||||||
PPA credits | (7,536 | ) | — | (i,j | ) | |||||||||||||||||||
Other liabilities | (1,518 | ) | (1,715 | ) | (g | ) | (715 | ) | (1,518 | ) | (d | ) | ||||||||||||
Overfunded retiree benefit plans | — | (60,464 | ) | (f | ) | |||||||||||||||||||
Underfunded retiree benefit plans | 91,055 | 81,912 | (h,i | ) | ||||||||||||||||||||
Total assets (liabilities), net | $ | 119,083 | $ | (59,065 | ) | $ | (1,617 | ) | $ | 119,083 |
Note: The recovery and amortization periods for these regulatory assets and (liabilities) are as follows:
In the event that a portion of the Company’s operations is no longer subject to II-276 NOTES (continued) Gulf Power Company 2009 Annual Report Revenues Energy and other revenues are recognized as services are provided. Unbilled revenues related to retail sales are accrued at the end of each fiscal period. Wholesale capacity revenues are generally recognized on a levelized basis over the appropriate contract period. The Company’s retail electric rates include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. The Company continuously monitors the over or under recovered fuel cost balance in light of the inherent variability in fuel costs. The Company is required to notify the Florida PSC if the projected fuel cost over or under recovery is expected to exceed 10% of the projected fuel revenue applicable for the period and indicate if an adjustment to the fuel cost recovery factor is being requested. The Company has similar retail cost recovery clauses for energy conservation costs, purchased power capacity costs, and environmental compliance costs. Revenues are adjusted for differences between these actual costs and amounts billed in current regulated rates. Under or over recovered regulatory clause revenues are recorded in the balance sheets and are recovered or returned to customers through adjustments to the billing factors. Annually, the Company petitions for recovery of projected costs including any true-up The Company has a diversified base of customers. No single customer or industry comprises 10% or more of revenues. For all periods presented, uncollectible accounts averaged less than 1% of revenues. Fuel Costs Fuel costs are expensed as the fuel is used. Income and Other Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average life of the related property. Taxes that are collected from customers on behalf of governmental agencies to be remitted to these agencies are presented net on the statements of income. In accordance with Property, Plant, and Equipment Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the interest capitalized and/or cost of funds used during construction.
The Company’s property, plant, and equipment consisted of the following at December 31:
The cost of replacements of property, exclusive of minor items of property, is capitalized. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense as incurred or performed. II-277 NOTES (continued) Gulf Power Company 2009 Annual Report Depreciation and Amortization Depreciation of the original cost of utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.1% in 2009, 3.4% in 2008, and 3.4% in Asset Retirement Obligations and Other Costs of Removal Asset retirement obligations are computed as the present value of the ultimate costs for an asset’s future retirement and are recorded in the period in which the liability is incurred. The costs are capitalized as part of the related long-lived asset and depreciated over the asset’s useful life. The Company has received an order from the Florida PSC allowing the continued accrual of other future retirement costs for long-lived assets that the Company does not have a legal obligation to retire. Accordingly, the accumulated removal costs for these obligations The liability recognized to retire long-lived assets primarily relates to the Company’s combustion turbines at its Pea Ridge facility, various landfill sites, a barge unloading dock, asbestos removal, ash ponds, and disposal of polychlorinated biphenyls in certain transformers. The Company also has identified retirement obligations related to certain transmission and distribution facilities, certain wireless communication towers, and certain structures authorized by the Details of the asset retirement obligations included in the balance sheets are as follows:
Allowance for Funds Used During Construction (AFUDC) In accordance with regulatory treatment, the Company records AFUDC, which represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new regulated facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher Impairment of Long-Lived Assets and Intangibles The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on either a specific regulatory disallowance or an estimate of undiscounted future cash flows attributable to the assets, as compared with the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined by either the amount of regulatory disallowance or by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. For II-278 NOTES (continued) Gulf Power Company 2009 Annual Report assets identified as held for sale, the carrying value is compared to the estimated fair value less the cost to sell in order to determine if an impairment loss is required. Until the assets are disposed of, their estimated fair value is re-evaluated when circumstances or events change. Property Damage Reserve The Company accrues for the cost of repairing damages from major storms and other uninsured property damages, including uninsured damages to transmission and distribution facilities, generation facilities, and other property. The When the Injuries and Damages Reserve The Company is subject to claims and Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the average cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, at weighted average cost when installed.
Fuel Inventory Fuel inventory includes the average costs of oil, coal, natural gas, and II-279 NOTES (continued) Gulf Power Company 2009 Annual Report Financial Instruments The Company uses derivative financial instruments to limit exposure to fluctuations in interest rates, the prices of certain fuel purchases, and electricity purchases and sales. All derivative financial instruments are recognized as either assets or liabilities The Company does not offset fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement. Additionally, the Company has no outstanding collateral repayment obligations or rights to reclaim collateral arising from derivative instruments recognized at December 31, The Company is exposed to losses related to financial instruments in the event of counterparties’ nonperformance. The Company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the Company’s exposure to counterparty credit risk.
Comprehensive Income The objective of comprehensive income is to report a measure of all changes in common stock equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income consists of net income,
2. RETIREMENT BENEFITS The Company has a defined benefit, trusteed, pension plan covering substantially all employees. The plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the defined benefit plan are expected for the year ending December 31, The measurement date for plan assets and obligations for 2009 and 2008 was December 31 while the measurement date for prior years was September 30. Pursuant to II-280 NOTES (continued) Gulf Power Company 2009 Annual Report Pension Plans The total accumulated benefit obligation for the pension plans was $275 million in 2009 and $243 million in
At December 31, Pension plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). In 2009, in determining the optimal asset allocation for the pension fund, the Company performed an extensive study based on projections of both assets and liabilities over a 10-year forward horizon. The primary goal of the study was to maximize plan funded status. The Company’s investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily
The actual composition of the Company’s pension plan assets as of
The investment strategy for plan assets related to the Company’s defined benefit plan is to be broadly diversified across major asset classes. The asset allocation is established after consideration of various factors that affect the assets and liabilities of the pension plan including, but not limited to, historical and expected returns, volatility, correlations of asset classes, the current level of assets and liabilities, and the assumed growth in assets and liabilities. Because a significant portion of the liability of the pension plan is long-term in nature, the assets are invested consistent with long-term investment expectations for return and risk. To manage the actual II-281 NOTES (continued) Gulf Power Company 2009 Annual Report asset class exposures relative to the target asset allocation, the Company employs a formal rebalancing program. As additional risk management, external investment managers and service providers are subject to written guidelines to ensure appropriate and prudent investment practices. Detailed below is a description of the investment strategies for each major asset category disclosed above:
The fair values of pension plan assets as of December 31, 2009 and 2008 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases.
II-282 NOTES (continued) Gulf Power Company 2009 Annual Report
Changes in the fair value measurement of the Level 3 items in the pension plan assets valued using significant unobservable inputs for the years ended December 31, 2009 and 2008 are as follows:
The fair values presented above are prepared in accordance with applicable accounting standards regarding fair value. For purposes of determining the fair value of the pension plan assets and the appropriate level designation, management relies on information provided by the plan’s trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate. Securities for which the activity is observable in an active market or traded exchange are categorized as Level 1. Fixed income securities classified as Level 2 are valued utilizing matrix pricing, a common model utilizing observable inputs. Domestic and international equity securities classified as Level 2 consist of pooled funds where the value is not quoted on an exchange but where the value is determined using observable inputs from the market. Securities that are valued using unobservable inputs are classified as Level 3 and include investments in real estate and investments in limited partnerships. The Company invests (through the pension plan trustee) directly in the limited partnerships which then invest in various types of funds or various private entities within a fund. The fair value of the limited partnerships’ investments is based on audited annual capital accounts statements which are generally prepared on a fair value basis. The Company also relies on the fact that, in most instances, the underlying assets held by the limited partnerships II-283 NOTES (continued) Gulf Power Company 2009 Annual Report are reported at fair value. External investment managers typically send valuations to both the custodian and to the Company within 90 days of quarter end. The custodian reports the most recent value available and adjusts the value for cash flows since the statement date for each respective fund. Amounts recognized in the balance sheets related to the Company’s pension plans consist
Presented below are the amounts included in regulatory assets
The changes in the balances of regulatory assets and regulatory liabilities related to the defined benefit pension plans for the
II-284 NOTES (continued) Gulf Power Company 2009 Annual Report Components of net periodic pension cost
Net periodic pension cost (income) is the sum of service cost, interest cost, and other costs netted against the expected return on plan assets. The expected return on plan assets is determined by multiplying the expected rate of return on plan assets and the market-related value of plan assets. In determining the market-related value of plan assets, the Company has elected to amortize changes in the market value of all plan assets over five years rather than recognize the changes immediately. As a result, the accounting value of plan assets that is used to calculate the expected return on plan assets differs from the current fair value of the plan assets. Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31,
Other Postretirement Benefits Changes during the plan year ended December 31, 2009 and the 15-month period ended December 31, 2008
II-285 NOTES (continued) Gulf Power Company 2009 Annual Report Other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue
Detailed below is a description of the investment strategies for each major asset category disclosed above:
II-286 NOTES (continued) Gulf Power Company 2009 Annual Report The fair values of other postretirement benefit plan assets as of December 31, 2009 and 2008 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases.
II-287 NOTES (continued) Gulf Power Company 2009 Annual Report Changes in the fair value measurement of the Level 3 items in the other postretirement benefit plan assets valued using significant unobservable inputs for the years ended December 31, 2009 and 2008 are as follows:
The fair values presented above are prepared in accordance with applicable accounting standards regarding fair value. For purposes of determining the fair value of the pension plan assets and the appropriate level designation, management relies on information provided by the plan’s trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate. Securities for which the activity is observable in an active market or traded exchange are categorized as Level 1. Fixed income securities classified as Level 2 are valued utilizing matrix pricing, a common model utilizing observable inputs. Domestic and international equity securities classified as Level 2 consist of pooled funds where the value is not quoted on an exchange but where the value is determined using observable inputs from the market. Securities that are valued using unobservable inputs are classified as Level 3 and include investments in real estate and investments in limited partnerships. The Company invests (through the pension plan trustee) directly in the limited partnerships which then invest in various types of funds or various private entities within a fund. The fair value of the limited partnerships’ investments is based on audited annual capital accounts statements which are generally prepared on a fair value basis. The Company also relies on the fact that, in most instances, the underlying assets held by the limited partnerships are reported at fair value. External investment managers typically send valuations to both the custodian and to the Company within 90 days of quarter end. The custodian reports the most recent value available and adjusts the value for cash flows since the statement date for each respective fund. Amounts recognized in the balance sheets related to the Company’s other postretirement benefit plans consist of:
Presented below are the amounts included in regulatory assets at December 31,
II-288 NOTES (continued) Gulf Power Company 2009 Annual Report The
Components of the other postretirement benefit plans’ net periodic cost were as follows:
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Act) provides a 28% prescription drug subsidy for Medicare eligible retirees. The effect of the subsidy reduced the Company’s expenses for the years ended December 31, 2009, 2008, II-289 NOTES (continued) Gulf Power Company 2009 Annual Report Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the APBO for the postretirement plans. Estimated benefit payments are reduced by drug subsidy receipts expected as a result of the Medicare Act as follows:
Actuarial Assumptions The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and other postretirement benefit plans for the following year are presented below. Net periodic benefit costs were calculated in
The Company An additional assumption used in measuring the APBO was a weighted average medical care cost trend rate of
Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85% matching contribution up to 6% of an employee’s base salary.
NOTES (continued) Gulf Power Company 3. CONTINGENCIES AND REGULATORY MATTERS General Litigation Matters The Company is subject to certain claims and legal actions arising in the ordinary course of business. In addition, the Company’s business activities are subject to extensive governmental regulation related to public health and the Environmental Matters New Source Review Actions In November 1999, the EPA brought a civil action in the U.S. District Court for the Northern District of Georgia against certain Southern Company subsidiaries, including Alabama Power and Georgia Power, alleging that these subsidiaries had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws at certain coal-fired generating facilities. In June 2006, the U.S. District Court for the Northern District of Alabama entered a consent decree between Alabama Power and the EPA, resolving a portion of the Alabama Power lawsuit relating to the alleged NSR violations at Plant Miller. The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $37,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome could require substantial capital expenditures or affect the timing of currently budgeted capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. Such expenditures could affect future results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. Carbon Dioxide Litigation New York Case In July 2004, three environmental groups and attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed complaints in the U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Under common law public and private nuisance theories, the plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining global warming and (2) requiring each of the defendants to cap its emissions of carbon dioxide and then reduce those emissions by a specified percentage each year for at least a decade. The plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. In September 2005, the U.S. District Court for the II-291 NOTES (continued) Gulf Power Company 2009 Annual Report Southern District of New York granted Southern Company’s and the other defendants’ motions to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit in October 2005 and, on September 21, 2009, the U.S. Court of Appeals for the Second Circuit reversed the district court’s ruling, vacating the dismissal of the plaintiffs’ claim, and remanding the case to the district court. On November 5, 2009, the defendants, including Southern Company, sought rehearing en banc, and the court’s ruling is subject to potential appeal. Therefore, the ultimate outcome of these matters cannot be determined at this time. Kivalina Case In February 2008, the Native Village of Kivalina and the City of Kivalina filed a suit in the U.S. District Court for the Northern District of California against several electric utilities (including Southern Company), several oil companies, and a coal company. The plaintiffs are the governing bodies of an Inupiat village in Alaska. The plaintiffs contend that the village is being destroyed by erosion allegedly caused by global warming that the plaintiffs attribute to emissions of greenhouse gases by the defendants. The plaintiffs assert claims for public and private nuisance and contend that some of the defendants have acted in concert and are therefore jointly and severally liable for the plaintiffs’ damages. The suit seeks damages for lost property values and for the cost of relocating the village, which is alleged to be $95 million to $400 million. Southern Company believes that these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. On September 30, 2009, the U.S. District Court for the Northern District of California granted the defendants’ motions to dismiss the case based on lack of jurisdiction and ruled the claims were barred by the political question doctrine and by the plaintiffs’ failure to establish the standard for determining that the defendants’ conduct caused the injury alleged. On November 5, 2009, the plaintiffs filed an appeal with the U.S. Court of Appeals for the Ninth Circuit challenging the district court’s order dismissing the case. The ultimate outcome of this matter cannot be determined at this time. Other Litigation Common law nuisance claims for injunctive relief and property damage allegedly caused by greenhouse gas emissions have become more frequent, and courts have recently determined that private parties and states have standing to bring such claims. For example, on October 16, 2009, the U.S. Court of Appeals for the Fifth Circuit reversed the U.S. District Court for the Southern District of Mississippi’s dismissal of private party claims against certain oil, coal, chemical, and utility companies alleging damages as a result of Hurricane Katrina. In reversing the dismissal, the U.S. Court of Appeals for the Fifth Circuit held that plaintiffs have standing to assert their nuisance, trespass, and negligence claims and none of these claims are barred by the political question doctrine. The Company is not currently a party to this litigation but was named as a defendant in an amended complaint which was rendered moot in August 2007 by the U.S. District Court for the Southern District of Mississippi when such court dismissed the original matter. The ultimate outcome of this matter cannot be determined at this time. Environmental Remediation The Company must comply with environmental laws and regulations that cover the handling and disposal of waste and releases of hazardous substances. Under these various laws and regulations, the Company may also incur substantial costs to clean up properties. The Company received authority from the Florida PSC to recover approved environmental compliance costs through the environmental cost recovery clause. The Florida PSC reviews costs and adjusts rates up or down annually. The Company’s environmental remediation liability includes estimated costs of environmental remediation projects of approximately $65.2 million as of December 31, 2009. These estimated costs relate to site closure criteria by the Florida Department of Environmental Protection (FDEP) for potential impacts to soil and groundwater from herbicide applications at the Company’s substations. The schedule for completion of the remediation projects will be subject to FDEP approval. The projects have been approved by the Florida PSC for recovery through the Company’s environmental cost recovery clause; therefore, there is no impact to net income as a result of these liabilities. The final outcome of these matters cannot now be determined. However, based on the currently known conditions at these sites and the nature and extent of activities relating to these sites, the Company does not believe that additional liabilities, if any, at these sites would be material to the Company’s financial statements. II-292 NOTES (continued) Gulf Power Company 2009 Annual Report FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. In December 2004, the FERC initiated a proceeding to assess Southern Company’s generation market power within its retail service territory. The ability to charge market-based rates in other markets was not an issue in the proceeding. Any new market-based rate sales by the Company in Southern Company’s retail service territory entered into during a 15-month refund period that ended in May 2006 could have been subject to refund to a cost-based rate level. On December 23, 2009, Southern Company and the FERC trial staff reached an agreement in principle that would resolve the proceeding in its entirety. The agreement does not reflect any finding or suggestion that the Company possesses or has exercised any market power. The agreement likewise does not require the Company to make any refunds related to sales during the 15-month refund period. Under the agreement, the Company will donate $0.1 million to nonprofit organizations in the State of Florida for the purpose of offsetting the electricity bills of low-income retail customers. The agreement is subject to review and approval by the FERC. Intercompany Interchange Contract The Company’s generation fleet is operated under the Intercompany Interchange Contract (IIC), as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine (1) the provisions of the IIC among the traditional operating companies (including the Company), Southern Power, and SCS, as agent, under the terms of which the power pool of Southern Company is operated, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power’s inclusion in the IIC in 2000. The FERC also previously approved Southern Company’s code of conduct. In October 2006, the FERC issued an order accepting a settlement resolving the proceeding subject to Southern Company’s agreement to accept certain modifications to the settlement’s terms. Southern Company notified the FERC that it accepted the modifications. The modifications largely involve functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. In November 2006, Southern Company filed with the FERC a compliance plan in connection with the order. In April 2007, the FERC approved, with certain modifications, the plan submitted by Southern Company. Implementation of the plan did not have a material impact on the Company’s financial statements. In November 2007, Southern Company notified the FERC that the plan had been implemented. In December 2008, the FERC division of audits issued for public comment its final audit report pertaining to compliance implementation and related matters. No comments were submitted challenging the audit report’s findings of Southern Company’s compliance. The proceeding remains open pending a decision from the FERC regarding the audit report. Retail Regulatory Matters General The Company’s rates and charges for service to retail customers are subject to the regulatory oversight of the Florida PSC. The Company’s rates are a combination of base rates and several separate cost recovery clauses for specific categories of costs. These separate cost recovery clauses address such items as fuel and purchased energy costs, purchased power capacity costs, energy conservation, and demand side management programs, and the costs of compliance with environmental laws and regulations. Costs not addressed through one of the specific cost recovery clauses are recovered through the Company’s base rates. On November 2, 2009, the Florida PSC approved the Company’s annual rate requests for its purchased power capacity, energy conservation, and environmental compliance cost recovery factors for 2010. On December 1, 2009, the Florida PSC approved the Company’s annual rate request for its 2010 fuel cost recovery factor, which includes both fuel and purchased energy costs. The net effect of the approved changes to the Company’s cost recovery factors for 2010 is a 3.9% rate increase for residential customers using 1,000 kilowatt-hours per month. The billing factors for 2010 are intended to allow the Company to recover projected 2010 costs as well as refund or collect the 2009 over or under recovered amounts in 2010. Cost recovery revenues, as recorded on the financial II-293 NOTES (continued) Gulf Power Company 2009 Annual Report statements, are adjusted for differences in actual recoverable costs and amounts billed in current regulated rates. Accordingly, changing the billing factors has no significant effect on the Company’s revenues or net income, but does impact annual cash flow. Fuel Cost Recovery The Company petitions for fuel cost recovery rates to be approved by the Florida PSC on an annual basis. The fuel cost recovery rates include the costs of fuel and purchased energy. The Company continuously monitors the over or under recovered fuel cost balance in light of the inherent variability in fuel costs. If the projected fuel cost over or under recovery exceeds 10% of the projected fuel revenue applicable for the period, the Company is required to notify the Florida PSC and indicate if an adjustment to the fuel cost recovery is being requested. As of December 31, 2009 and 2008, the Company had an under recovered fuel balance of approximately $2.4 million and $96.7 million, respectively, which is included in current assets in the balance sheets. Purchased Power Capacity Recovery The Florida PSC allows the Company to recover its costs for capacity purchased from other power producers under PPAs through a separate cost recovery component or factor in the Company’s retail energy rates. Like the other specific cost recovery factors included in the Company’s retail energy rates, the rates for purchased capacity are set annually on a calendar year basis. When the Company enters into a new PPA, it is reviewed and approved by the Florida PSC for cost recovery purposes. As of December 31, 2009 and 2008, the Company had an over recovered purchased power capacity balance of approximately $1.5 million and $0.3 million, respectively, which is included in other regulatory liabilities, current in the balance sheets. Environmental Cost Recovery The Florida Legislature adopted legislation for an environmental cost recovery clause, which allows an electric utility to petition the Florida PSC for recovery of prudent environmental compliance costs that are not being recovered through base rates or any other recovery mechanism. Such environmental costs include operation and maintenance expense, emission allowance expense, depreciation, and a return on invested capital. This legislation also allows recovery of costs incurred as a result of an agreement between the Company and the FDEP for the purpose of ensuring compliance with ozone ambient air quality standards adopted by the EPA. In August 2007, the Florida PSC voted to approve a stipulation among the Company, the Office of Public Counsel, and the Florida Industrial Power Users Group regarding the Company’s plan for complying with certain federal and state regulations addressing air quality. The Company’s environmental compliance plan as filed in March 2007 contemplates implementation of specific projects identified in the plan from 2007 through 2018. The stipulation covers all elements of the current plan that are scheduled to be implemented in the 2007 through 2011 timeframe. On April 1, 2009, the Company filed an update to the plan which was approved by the Florida PSC on November 2, 2009. The Florida PSC acknowledged that the costs associated with the Company’s Clean Air Interstate Rule and Clean Air Visibility Rule compliance plan are eligible for recovery through the environmental cost recovery clause. At December 31, 2009 and 2008, the over recovered environmental balance was approximately $11.7 million and $71 thousand, respectively, which is included in other regulatory liabilities, current in the balance sheets. 4. JOINT OWNERSHIP AGREEMENTS The Company and Mississippi Power jointly own Plant Daniel Units 1 and 2, which together represent capacity of 1,000 MWs. Plant Daniel is a generating plant located in Jackson County, Mississippi. In accordance with the operating agreement, Mississippi Power acts as the Company’s agent with respect to the construction, operation, and maintenance of these units. The Company and Georgia Power jointly own the 818 MWs capacity Plant Scherer Unit 3. Plant Scherer is a generating plant located near Forsyth, Georgia. In accordance with the operating agreement, Georgia Power acts as the Company’s agent with respect to the construction, operation, and maintenance of the unit. The Company’s pro rata share of expenses related to both plants is included in the corresponding operating expense accounts in the statements of income and the Company is responsible for providing its own financing. II-294 NOTES (continued) Gulf Power Company 2009 Annual Report At December 31, 2009, the Company’s percentage ownership and its investment in these jointly owned facilities were as follows:
5. INCOME TAXES Southern Company files a consolidated federal income tax return and combined State of Mississippi and State of Georgia income tax returns. Under a joint consolidated income tax allocation agreement, each subsidiary’s current and deferred tax expense is computed on a stand-alone basis and no subsidiary is allocated more expense than would be paid if it filed a separate income tax return. In accordance with Internal Revenue Service (IRS) regulations, each company is jointly and severally liable for the tax liability. Current and Deferred Income Taxes Details of income tax provisions are as follows:
II-295 NOTES (continued) Gulf Power Company 2009 Annual Report The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows:
At December 31, 2009, the tax-related regulatory assets to be recovered from customers was $39.0 million. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized allowance for funds used during construction. At December 31, 2009, the tax-related regulatory liabilities to be credited to customers was $11.4 million. These liabilities are attributable to deferred taxes previously recognized at rates higher than the current enacted tax law and to unamortized investment tax credits. In accordance with regulatory requirements, deferred investment tax credits are amortized over the lives of the related property with such amortization normally applied as a credit to reduce depreciation in the statements of income. Credits amortized in this manner amounted to $1.6 million in 2009, $1.7 million in 2008, and $1.7 million in 2007. At December 31, 2009, all investment tax credits available to reduce federal income taxes payable had been utilized. Effective Tax Rate A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
The decrease in the 2009 effective tax rate is primarily the result of an increase in nontaxable allowance for equity funds used during construction. II-296 NOTES (continued) Gulf Power Company 2009 Annual Report The American Jobs Creation Act of 2004 created a tax deduction for a portion of income attributable to U.S. production activities as defined in the Internal Revenue Code Section 199 (production activities deduction). The deduction is equal to a stated percentage of qualified production activities net income. The percentage is phased in over the years 2005 through 2010 with a 3% rate applicable to the years 2005 and 2006, a 6% rate applicable for the years 2007 through 2009, and a 9% rate thereafter. The IRS has not clearly defined a methodology for calculating this deduction. However, Southern Company reached an agreement with the IRS on a calculation methodology and signed a closing agreement in December 2008. Therefore, in 2008, the Company reversed the unrecognized tax benefit related to the calculation methodology and adjusted the deduction for all previous years to conform to the agreement which resulted in a decrease in the 2008 deduction when compared to the 2007 deduction. Certain aspects of the production activities deduction remain unresolved. The net impact of the reversal of the unrecognized tax benefits combined with the application of the new methodology had no material effect on the Company’s financial statements. Unrecognized Tax Benefits For 2009, the total amount of unrecognized tax benefits increased by $1.3 million, resulting in a balance of $1.6 million as of December 31, 2009. Changes during the year in unrecognized tax benefits were as follows:
The tax positions from current periods increase for 2009 relate primarily to the production activities deduction tax position and other miscellaneous uncertain tax positions. The tax positions increase from prior periods for 2009 relates primarily to the production activities deduction tax position. See “Effective Tax Rate” above for additional information. Impact on the Company’s effective tax rate, if recognized, is as follows:
Accrued interest for unrecognized tax benefits was as follows:
The Company classifies interest on tax uncertainties as interest expense. The Company did not accrue any penalties on uncertain tax positions. It is reasonably possible that the amount of the unrecognized benefit with respect to the majority of the Company’s unrecognized tax positions will significantly increase or decrease within the next 12 months. The possible conclusion or settlement of state audits could impact the balances significantly. At this time, an estimate of the range of reasonably possible outcomes cannot be determined. The IRS has audited and closed all tax returns prior to 2004. The audits for the state returns have either been concluded, or the statute of limitations has expired, for years prior to 2006. II-297 NOTES (continued) Gulf Power Company 2009 Annual Report 6. FINANCING Securities Due Within One Year At December 31, 2009, the Company had $140 million of senior notes due to mature within one year. The date of maturity for these notes is June 2010. Bank Term Loans At December 31, 2009, the Company had a $110 million bank loan outstanding, which matures in April 2011. Senior Notes At December 31, 2009 and 2008, the Company had a total of $727.5 million and $588.7 million of senior notes outstanding, respectively. These senior notes are effectively subordinate to all secured debt of the Company which totaled approximately $41 million at December 31, 2009. Pollution Control Revenue Bonds Pollution control obligations represent loans to the Company from public authorities of funds derived from sales by such authorities of revenue bonds issued to finance pollution control facilities. The Company has $288.0 million of outstanding pollution control revenue bonds and is required to make payments sufficient for the authorities to meet principal and interest requirements of such bonds. Proceeds from certain issuances are restricted until qualifying expenditures are incurred. Outstanding Classes of Capital Stock The Company currently has preferred stock, Class A preferred stock, preference stock, and common stock authorized. The Company’s preferred stock and Class A preferred stock, without preference between classes, rank senior to the Company’s preference stock and common stock with respect to payment of dividends and voluntary or involuntary dissolution. No shares of preferred stock or Class A preferred stock were outstanding at December 31, 2009. The Company’s preference stock ranks senior to the common stock with respect to the payment of dividends and voluntary or involuntary dissolution. Certain series of the preference stock are subject to redemption at the option of the Company on or after a specified date (typically five or 10 years after the date of issuance) at a redemption price equal to 100% of the liquidation amount of the preference stock. In addition, one series of the preference stock may be redeemed earlier at a redemption price equal to 100% of the liquidation amount plus a make-whole premium based on the present value of the liquidation amount and future dividends. In January 2009, the Company issued to Southern Company 1,350,000 shares of the Company’s common stock, without par value, and realized proceeds of $135 million. On January 25, 2010, the Company issued to Southern Company 500,000 shares of the Company’s common stock, without par value, and realized proceeds of $50 million. The proceeds were used to repay a portion of the Company’s short-term debt and for other general corporate purposes, including the Company’s continuous construction program. Dividend Restrictions The Company can only pay dividends to Southern Company out of retained earnings or paid-in-capital. Assets Subject to Lien The Company has granted a lien on its property at Plant Daniel in connection with the issuance of two series of pollution control revenue bonds with an outstanding principal amount of $41 million. There are no agreements or other arrangements among the affiliated companies under which the assets of one company have been pledged or otherwise made available to satisfy obligations of Southern Company or any of its subsidiaries. Bank Credit Arrangements At December 31, 2009, the Company had $220 million of lines of credit with banks, all of which remained unused. These bank credit arrangements will expire in 2010 and $70 million contain provisions allowing one-year term loans executable at expiration. Of the $220 million, $69 million provides support for variable rate pollution control bonds, and $151 million provides liquidity support for II-298 NOTES (continued) Gulf Power Company 2009 Annual Report the Company’s commercial paper program and other general corporate purposes, including the Company’s continuous construction program. Commitment fees average less than3/4 of 1% for the Company. Certain credit arrangements contain covenants that limit the level of indebtedness to capitalization to 65%, as defined in the arrangements. At December 31, 2009, the Company was in compliance with these covenants. In addition, certain credit arrangements contain cross default provisions to other indebtedness that would trigger an event of default if the Company defaulted on indebtedness over a specified threshold. The cross default provisions are restricted only to indebtedness of the Company. The Company is currently in compliance with all such covenants. The Company borrows primarily through a commercial paper program that has the liquidity support of committed bank credit arrangements. The Company may also borrow through various other arrangements with banks. At December 31, 2009, the Company had $88.9 million of commercial paper outstanding. At December 31, 2008, the Company had $89.9 million of commercial paper and $50 million of short-term bank notes outstanding. During 2009, the peak amount outstanding for short-term debt was $152.1 million and the average amount outstanding was $51.7 million. The peak amount outstanding for short-term debt in 2008 was $141.2 million and the average amount outstanding was $36.9 million. The average annual interest rate on short-term debt was 1.0% and 2.2% for 2009 and 2008, respectively. 7. COMMITMENTS Construction Program The Company is engaged in a continuous construction program, the cost of which is currently estimated to total $271.4 million in 2010, $350.2 million in 2011, and $418.5 million in 2012. 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; revised load growth estimates; storm impacts; changes in environmental statutes and regulations; changes in FERC rules and regulations; Florida PSC approvals; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. At December 31, 2009, significant purchase commitments were outstanding in connection with the ongoing construction program. Included in the amounts above are $113.4 million in 2010, $194.8 million in 2011, and $194.2 million in 2012 for environmental expenditures. The Company does not have any significant new generating capacity under construction. Construction of new transmission and distribution facilities and other capital improvements, including those needed to meet environmental standards for the Company’s existing generation, transmission, and distribution facilities, are ongoing. Long-Term Service Agreements The Company has a Long-Term Service Agreement (LTSA) with General Electric (GE) for the purpose of securing maintenance support for a combined cycle generating facility. The LTSA provides that GE will perform all planned inspections on the covered equipment, which generally includes the cost of all labor and materials. GE is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to limits and scope specified in the LTSA. In general, the LTSA is in effect through two major inspection cycles of the unit. Scheduled payments to GE, which are subject to price escalation, are made at various intervals based on actual operating hours of the unit. Total remaining payments to GE under the LTSA for facilities owned are currently estimated at $59.2 million over the remaining life of the LTSA, which is currently estimated to be up to 8 years. However, the LTSA contains various cancellation provisions at the option of the Company. Payments made under the LTSA prior to the performance of any planned inspections are recorded as prepayments. These amounts are included in Current Assets and Deferred Charges and Other Assets in the balance sheets for 2009 and 2008, respectively. Inspection costs are capitalized or charged to expense based on the nature of the work performed. II-299 NOTES (continued) Gulf Power Company 2009 Annual Report Limestone Commitments As part of the Company’s program to reduce sulfur dioxide emissions from certain of its coal plants, the Company has entered into various long-term commitments for the procurement of limestone to be used in flue gas desulfurization equipment. Limestone contracts are structured with tonnage minimums and maximums in order to account for fluctuations in coal burn and sulfur content. The Company has a minimum contractual obligation of 0.8 million tons equating to approximately $67.7 million, through 2019. Estimated expenditures (based on minimum contracted obligated dollars) over the next five years are $6.0 million in 2010, $6.2 million in 2011, $6.3 million in 2012, $6.5 million in 2013, and $6.7 million in 2014. Limestone costs are recovered through the environmental cost recovery clause. Fuel and Purchased Power Commitments To supply a portion of the fuel requirements of the generating plants, the Company has entered into various long-term commitments for the procurement of fossil fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Coal commitments include forward contract purchases for sulfur dioxide and nitrogen oxide emissions allowances. Natural gas purchase commitments contain fixed volumes with prices based on various indices at the time of delivery; amounts included in the chart below represent estimates based on New York Mercantile Exchange future prices at December 31, 2009. Also, the Company has entered into various long-term commitments for the purchase of capacity, electricity, and transmission. The energy-related costs associated with PPAs are recovered through the fuel cost recovery clause. The capacity-related costs associated with PPAs are recovered through the purchased power capacity cost recovery clause. Total estimated minimum long-term obligations at December 31, 2009 were as follows:
Additional commitments for fuel will be required to supply the Company’s future needs. SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. The creditworthiness of Southern Power is currently inferior to the creditworthiness of the traditional operating companies. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure the Company will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements. Operating Leases The Company has operating lease agreements with various terms and expiration dates. Total operating lease expenses were $10.1 million, $5.0 million, and $4.7 million for 2009, 2008, and 2007, respectively. Included in these lease expenses are rail car lease costs which are charged to fuel inventory and are allocated to fuel expense as the fuel is used. These expenses are then recovered through the Company’s fuel cost recovery clause. The Company’s share of the lease costs charged to fuel inventories was $7.9 million in 2009, $4.0 million in 2008, and $4.4 million in 2007. The Company includes any step rents, escalations, and lease concessions in its computation of minimum lease payments, which are recognized on a straight-line basis over the minimum lease term. II-300 NOTES (continued) Gulf Power Company 2009 Annual Report At December 31, 2009, estimated minimum rental commitments for noncancelable operating leases were as follows:
The Company and Mississippi Power jointly entered into operating lease agreements for aluminum rail cars for the transportation of coal to Plant Daniel. The Company has the option to purchase the rail cars at the greater of lease termination value or fair market value or to renew the leases at the end of each lease term. The Company and Mississippi Power also have separate lease agreements for other rail cars that do not include purchase options. The Company entered into operating lease agreements for barges and tow boats for the transport of coal at Plant Crist. The Company has the option to renew the leases at the end of each lease term. No barge lease costs were incurred for 2009, 2008, or 2007. In addition to rail car leases, the Company has other operating leases for fuel handling equipment at Plant Daniel. The Company’s share of these leases was charged to fuel handling expense in the amount of $0.3 million in 2009. The Company’s annual lease payments for 2010 to 2014 will average approximately $0.2 million. 8. STOCK OPTION PLAN Southern Company provides non-qualified stock options to a large segment of the Company’s employees ranging from line management to executives. As of December 31, 2009, there were 308 current and former employees of the Company participating in the stock option plan, and there were 21 million shares of Southern Company common stock remaining available for awards under this plan. The prices of options granted to date have been at the fair market value of the shares on the dates of grant. Options granted to date become exercisable pro rata over a maximum period of three years from the date of grant. The Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however, for employees who are eligible for retirement the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the stock option plan. For certain stock option awards a change in control will provide accelerated vesting. The estimated fair values of stock options granted in 2009, 2008, and 2007 were derived using the Black-Scholes stock option pricing model. Expected volatility was based on historical volatility of Southern Company’s stock over a period equal to the expected term. The Company used historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options. The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted:
II-301 NOTES (continued) Gulf Power Company 2009 Annual Report The Company’s activity in the stock option plan for 2009 is summarized below:
The number of stock options vested, and expected to vest in the future, as of December 31, 2009 was not significantly different from the number of stock options outstanding at December 31, 2009 as stated above. As of December 31, 2009, the weighted average remaining contractual term for the options outstanding and options exercisable was 6.4 years and 4.9 years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable was $3.2 million and $2.4 million, respectively. As of December 31, 2009, there was $0.2 million of total unrecognized compensation cost related to stock option awards not yet vested. That cost is expected to be recognized over a weighted-average period of approximately 10 months. For the years ended December 31, 2009, 2008, and 2007, total compensation cost for stock option awards recognized in income was $0.9 million, $0.8 million, and $1.1 million, respectively, with the related tax benefit also recognized in income of $0.4 million, $0.3 million, and $0.4 million, respectively. The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company’s employees are recognized in the Company’s financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company. The total intrinsic value of options exercised during the years ended December 31, 2009, 2008, and 2007 was $0.2 million, $1.3 million, and $3.0 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises for the years ended December 31, 2009, 2008, and 2007 totaled $0.1 million, $0.5 million, and $1.1 million, respectively. 9. FAIR VALUE MEASUREMENTS The fair value measurement is based on inputs of observable and unobservable market data that a market participant would use in pricing the asset or liability. The use of observable inputs is maximized where available and the use of unobservable inputs is minimized for fair value measurement and reflects a three-tier fair value hierarchy that prioritizes inputs to valuation techniques used for fair value measurement.
In the case of multiple inputs being used in a fair value measurement, the lowest level input that is significant to the fair value measurement represents the level in the fair value hierarchy in which the fair value measurement is reported. II-302 NOTES (continued) Gulf Power Company 2009 Annual Report The fair value measurements performed on a recurring basis and the level of the fair value hierarchy in which they fall at December 31, 2009 are as follows:
Energy-related derivatives and interest rate derivatives primarily consist of over-the-counter contracts. See Note 10 for additional information. The cash equivalents and restricted cash consist of securities with original maturities of 90 days or less. These financial instruments and investments are valued primarily using the market approach. As of December 31, 2009, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, are as follows:
The money market funds are short-term investments of excess funds in various money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by the SEC and typically receive the highest rating from credit rating agencies. Regulatory and rating agency requirements for money market funds include minimum credit ratings and maximum maturities for individual securities and a maximum weighted average portfolio maturity. Redemptions are available on a same day basis, up to the full amount of the Company investment in the money market funds. As of December 31, 2009, other financial instruments for which the carrying amount did not equal fair value were as follows:
The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2). II-303 NOTES (continued) Gulf Power Company 2009 Annual Report 10. DERIVATIVES The Company is exposed to market risks, primarily commodity price risk and interest rate risk. To manage the volatility attributable to these exposures, the Company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company’s policies in areas such as counterparty exposure and risk management practices. The Company’s policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities. Energy-Related Derivatives The Company enters into energy-related derivatives to hedge exposures to electricity, gas, and other fuel price changes. However, due to cost-based rate regulations, the Company has limited exposure to market volatility in commodity fuel prices and prices of electricity. The Company manages fuel-hedging programs, implemented per the guidelines of the Florida PSC, through the use of financial derivative contracts. To mitigate residual risks relative to movements in electricity prices, the Company enters into physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. To mitigate residual risks relative to movements in gas prices, the Company may enter into fixed-price contracts for natural gas purchases; however, a significant portion of contracts are priced at market. Energy-related derivative contracts are accounted for in one of two methods:
Some energy-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the electric industry. When an energy-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item representing the actual price of the underlying goods being delivered. At December 31, 2009, the net volume of energy-related derivative contracts for natural gas positions for the Company, together with the longest hedge date over which it is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest date for derivatives not designated as hedges, were as follows:
Interest Rate Derivatives The Company also enters into interest rate derivatives, which include forward-starting interest rate swaps, to hedge exposure to changes in interest rates. Derivatives related to existing variable rate securities or forecasted transactions are accounted for as cash flow hedges. The derivatives employed as hedging instruments are structured to minimize ineffectiveness. For cash flow hedges, the fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time the hedged transactions affect earnings. II-304 NOTES (continued) Gulf Power Company 2009 Annual Report At December 31, 2009, the Company had outstanding interest rate derivatives designated as cash flow hedges on forecasted debt as follows:
The estimated pre-tax losses that will be reclassified from OCI to interest expense for the next 12-month period ending December 31, 2010 are $0.9 million. The Company has deferred gains and losses that are expected to be amortized into earnings through 2018. Derivative Financial Statement Presentation and Amounts At December 31, 2009 and 2008, the fair value of energy-related derivatives and interest rate derivatives was reflected in the balance sheets as follows:
All derivative instruments are measured at fair value. See Note 9 for additional information. II-305 NOTES (continued) Gulf Power Company 2009 Annual Report At December 31, 2009 and 2008, the pre-tax effect of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred on the balance sheets were as follows:
For the years ended December 31, 2009, 2008, and 2007, the pre-tax effect of interest rate derivatives designated as cash flow hedging instruments on the statements of income were as follows:
There was no material ineffectiveness recorded in earnings for any period presented. For the years ended December 31, 2009, 2008, and 2007, the pre-tax effect of energy-related derivatives not designated as hedging instruments on the statements of income were immaterial. Contingent Features The Company does 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 derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain affiliated companies. At December 31, 2009, the fair value of derivative liabilities with contingent features was $3.1 million. At December 31, 2009, the Company had no collateral posted with its derivative counterparties; however, because of the joint and several liability features underlying these derivatives, the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, is $33.3 million. Currently, the Company has investment grade credit ratings from the major rating agencies with respect to debt and preference stock. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. The Company participated in certain agreements that could require collateral in the event that one or more Southern Company system power pool participants has a credit rating change to below investment grade. II-306 NOTES (continued) Gulf Power Company 2009 Annual Report 11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for 2009 and 2008 are as follows:
The Company’s business is influenced by seasonal weather conditions. II-307 SELECTED FINANCIAL AND OPERATING DATA 2005-2009 Gulf Power Company 2009 Annual Report
II-308 SELECTED FINANCIAL AND OPERATING DATA 2005-2009 (continued) Gulf Power Company 2009 Annual Report
II-309 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Mississippi Power Company 2009 Annual Report The management of Mississippi Power Company (the “Company”) is responsible for establishing and maintaining an adequate system of internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002 and as defined in Exchange Act Rule 13a-15(f). A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Under management’s supervision, an evaluation of the design and effectiveness of the Company’s internal control over financial reporting was conducted based on the framework inInternal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009. This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report. /s/ Anthony J. Topazi Anthony J. Topazi President and Chief Executive Officer /s/ Frances Turnage Frances Turnage Vice President, Treasurer, and Chief Financial Officer February 25, 2010 II-311 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Mississippi Power Company We have audited the accompanying balance sheets and statements of capitalization of Mississippi Power Company (the “Company”) (a wholly owned subsidiary of Southern Company) as of December 31, 2009 and 2008, and the related statements of income, comprehensive income, common stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements (pages II-339 to II-380) present fairly, in all material respects, the financial position of Mississippi Power Company at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Atlanta, Georgia February 25, 2010 II-312 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Mississippi Power Company 2009 Annual Report OVERVIEW Business Activities Mississippi Power Company (the Company) operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Mississippi and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of the Company’s business of selling electricity. These factors include the ability to maintain a constructive regulatory environment, to maintain energy sales given the effects of the recession, and to effectively manage and secure timely recovery of rising costs. The Company has various regulatory mechanisms that operate to address cost recovery. Appropriately balancing required costs and capital expenditures with reasonable retail rates will continue to challenge the Company for the foreseeable future. Hurricane Katrina, the worst natural disaster in the Company’s history, hit the Gulf Coast of Mississippi in August 2005, causing substantial damage to the Company’s service territory. All of the Company’s 195,000 customers were without service immediately after the storm. Through a coordinated effort with Southern Company, as well as non-affiliated companies, the Company restored power to all who could receive it within 12 days. However, due to obstacles in the rebuilding process coupled with the recessionary economy, as of December 31, 2009, the Company had over 8,800 fewer retail customers as compared to pre-storm levels. See Note 1 to the financial statements under “Government Grants” and Note 3 to the financial statements under “Retail Regulatory Matters — Storm Damage Cost Recovery” for additional information. The Company’s retail base rates are set under the Performance Evaluation Plan (PEP), a rate plan approved by the Mississippi Public Service Commission (PSC). PEP was designed with the objective to reduce the impact of rate changes on the customer and provide incentives for the Company to keep customer prices low and customer satisfaction and reliability high. Key Performance Indicators In striving to maximize shareholder value while providing cost-effective energy to customers, the Company continues to focus on several key indicators. These indicators are used to measure the Company’s performance for customers and employees. In recognition that the Company’s long-term financial success is dependent upon how well it satisfies its customers’ needs, the Company’s retail base rate mechanism, PEP, includes performance indicators that directly tie customer service indicators to the Company’s allowed return. PEP measures the Company’s performance on a 10-point scale as a weighted average of results in three areas: average customer price, as compared to prices of other regional utilities (weighted at 40%); service reliability, measured in outage minutes per customer (40%); and customer satisfaction, measured in a survey of residential customers (20%). See Note 3 to the financial statements under “Retail Regulatory Matters — Performance Evaluation Plan” for more information on PEP. In addition to the PEP performance indicators, the Company focuses on other performance measures, including broader measures of customer satisfaction, plant availability, system reliability, and net income after dividends on preferred stock. The Company’s financial success is directly tied to the satisfaction of its customers. Management uses customer satisfaction surveys to evaluate the Company’s results. Peak season equivalent forced outage rate (Peak Season EFOR) is an indicator of plant availability and efficient generation fleet operations during the months when generation needs are greatest. The rate is calculated by dividing the number of hours of forced outages by total generation hours. The actual EFOR performance for 2009 was the best in the history of the Company. Net income after dividends on preferred stock is the primary measure of the Company’s financial performance. Recognizing the critical role in the Company’s success played by the Company’s employees, employee-related measures are a significant management focus. These measures include safety and inclusion. The 2009 safety performance of the Company was the third best in the history of the Company with an Occupational Safety and Health Administration Incidence Rate of 0.62. This achievement resulted in the Company being recognized as one of the top in safety performance among all utilities in the Southeastern Electric Exchange. Inclusion initiatives resulted in performance at target levels for the year. II-313 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report The Company’s 2009 results compared with its targets for some of these key indicators are reflected in the following chart.
See RESULTS OF OPERATIONS herein for additional information on the Company’s financial performance. The performance achieved in 2009 reflects the continued emphasis that management places on all of these indicators, as well as the commitment shown by employees in achieving or exceeding management’s expectations. Earnings The Company’s net income after dividends on preferred stock was $85.0 million in 2009 compared to $86.0 million in 2008. The 1.2% decrease in 2009 was primarily the result of decreases in wholesale energy revenues and total other income and (expense) primarily resulting from an increase in interest expense and decreases in contracting work performed for customers, as well as an increase in income tax expense. These decreases in earnings were partially offset by an increase in territorial base revenues primarily due to a wholesale base rate increase effective January 2009 and higher demand as well as a decrease in other non-fuel related expenses. See Note 3 to the financial statements under “FERC Matters” for additional information. Net income after dividends on preferred stock was $86.0 million in 2008 compared to $84.0 million in 2007. The 2.4% increase in 2008 was primarily the result of an increase in territorial base revenues due to a retail base rate increase effective January 2008 and an increase in wholesale capacity revenues, partially offset by an increase in depreciation and amortization primarily due to the amortization of regulatory items, an increase in non-fuel related expenses, and an increase in charitable contributions. See Note 3 to the financial statements under “Retail Regulatory Matters” for additional information. Net income after dividends on preferred stock was $84.0 million in 2007 compared to $82.0 million in 2006. The 2.4% increase in 2007 was primarily the result of an increase in territorial base revenues due to a retail base rate increase effective April 1, 2006, territorial sales growth, and an increase in total other income and (expense) as a result of charitable contributions in 2006. These factors were partially offset by an increase in non-fuel related expenses and an increase in depreciation and amortization expenses. RESULTS OF OPERATIONS A condensed statement of income follows:
II-314 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Operating Revenues Details of the Company’s operating revenues in 2009 and the prior two years were as follows:
Total retail revenues for 2009 increased 0.7% when compared to 2008 primarily as a result of slightly higher energy sales and fuel revenues. Total retail revenues for 2008 increased 8.0% when compared to 2007 primarily as a result of a retail base rate increase effective in January 2008 and higher fuel revenues. Total retail revenues for 2007 increased 12.4% when compared to 2006 primarily as a result of an increase in territorial sales growth, a retail base rate increase effective in April 2006, and the Environmental Compliance Overview (ECO) Plan rate increase effective in May 2007. See “Energy Sales” below for a discussion of changes in the volume of energy sold, including changes related to sales growth (or decline) and weather. Electric rates for the Company 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 fuel component of purchased power, and do not affect net income. See FUTURE EARNINGS POTENTIAL — “PSC Matters — Fuel Cost Recovery” herein for additional information. The fuel and other cost recovery revenues increased in 2009 when compared to 2008 primarily as a result of higher recoverable fuel costs. Recoverable fuel costs include fuel and purchased power expenses reduced by the fuel portion of wholesale revenues from energy sold to customers outside the Company’s service territory. The fuel and other cost recovery revenues increased in 2008 when compared to 2007 primarily as a result of the increase in fuel and purchased power expenses. The fuel and other cost recovery revenues increased in 2007 when compared to 2006 as a result of higher fuel costs. Wholesale revenues from sales to non-affiliates will vary depending on the market cost of available energy compared to the cost of the Company and Southern Company system-owned generation, demand for energy within the Southern Company service territory, and availability of Southern Company system generation. Wholesale revenues from sales to non-affiliates decreased $54.5 million, or 15.4%, in 2009 as compared to 2008 as a result of a $54.1 million decrease in energy revenues, of which $27.6 million was associated with lower fuel prices and $26.4 million was associated with a decrease in kilowatt-hour (KWH) sales, and a $0.5 million decrease in capacity revenues. Wholesale revenues from sales to non-affiliates increased $30.7 million, or 9.5%, in 2008 as compared to 2007 as a result of a $30.4 million increase in energy revenues, of which $40.4 million was associated with higher fuel prices and a $0.3 million increase in capacity revenues, partially offset by a $10.0 million decrease in KWH sales. Wholesale revenues from sales to non-affiliates increased $54.3 million, or 20.2%, in 2007 as compared to 2006 as a result of a $51.5 million increase in energy revenues, of which $32.0 million was associated with increased KWH sales and $19.5 million was associated with higher fuel prices, and a $2.8 million increase in capacity revenues. II-315 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Included in wholesale revenues from sales to non-affiliates are revenues from rural electric cooperative associations and municipalities located in southeastern Mississippi. The related revenues increased 1.5%, 8.3%, and 12.6%, in 2009, 2008, and 2007, respectively. The 2009 increase was driven by higher demand which was the result of some brief periods of weather extremes and a base rate increase effective in January 2009. The customer demand experienced by these utilities is determined by factors very similar to those experienced by the Company. Short-term opportunity energy sales are also included in sales for resale to non-affiliates. These opportunity sales are made at market-based rates (MBRs) that generally provide a margin above the Company’s variable cost to produce the energy. Wholesale revenues from sales to affiliated companies within the Southern Company system will vary from year to year depending on demand, availability and cost of generating resources at each company. These affiliated sales and purchases are made in accordance with the Intercompany Interchange Contract (IIC), as approved by the Federal Energy Regulatory Commission (FERC). Wholesale revenues from sales to affiliated companies decreased 55.9% in 2009 when compared to 2008, increased 118.6% in 2008 when compared to 2007, and decreased 39.5% in 2007 when compared to 2006. These energy sales do not have a significant impact on earnings since the energy is generally sold at marginal cost. Other operating revenues in 2009 decreased $1.7 million, or 10.6%, from 2008 primarily due to a $1.0 million decrease in transmission revenues. Other operating revenues in 2008 decreased $0.9 million, or 5.0%, from 2007 primarily due to a sale of oil inventory and a customer contract buyout in 2007 totaling $0.9 million. Other operating revenues in 2007 increased $0.5 million, or 2.9%, from 2006 primarily due to a $1.0 million increase in miscellaneous revenues from a sale of oil inventory during the year, partially offset by a $0.6 million decrease in rent from electric property. Energy Sales Changes in revenues are influenced heavily by the change in the volume of energy sold from year to year. KWH sales for 2009 and percent change by year were as follows:
Changes in retail energy sales are comprised of changes in electricity usage by customers, changes in weather, and changes in the number of customers. Residential energy sales decreased 1.4% in 2009 compared to 2008 due to the recessionary economy and a declining number of customers. Residential energy sales decreased 0.6% in 2008 compared to 2007 due to decreased customer usage mainly due to the recessionary economy and unfavorable summer weather. Residential energy sales increased 0.8% in 2007 compared to 2006, primarily due to more favorable weather conditions, which offset slow customer growth. Commercial energy sales decreased 0.2% in 2009 compared to 2008 due to the recessionary economy and a net decline in commercial customers. Commercial energy sales decreased 0.7% in 2008 compared to 2007 due to unfavorable weather and slower than expected customer growth due to the economy. Commercial energy sales increased 7.5% in 2007 compared to 2006 due to customer growth mainly in the casino and hotel industries. II-316 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Industrial energy sales increased 3.4% in 2009 compared to 2008 due to increased production of some of the Company’s industrial customers and the impacts of Hurricane Gustav, which negatively impacted industrial energy sales in 2008. Industrial energy sales decreased 3.0% in 2008 compared to 2007 due to lower customer use from the recessionary economy. Industrial energy sales increased 4.2% in 2007 compared to 2006 due to continued recovery after Hurricane Katrina. Wholesale energy sales to non-affiliates decreased 7.3% and 3.3% and increased 12.1% in 2009, 2008, and 2007, respectively. Included in wholesale sales from sales to non-affiliates are sales from rural electric cooperative associations and municipalities located in southeastern Mississippi. Compared to the prior year, KWH sales to these customers remained at the same levels in 2009 despite the recessionary economy and unfavorable weather, decreased 0.9% in 2008 due to slowing growth and unfavorable weather, and increased 4.3% in 2007 due to growth in the service territory. KWH sales to non-territorial customers located outside the Company’s service territory decreased 29.0% in 2009 as compared to 2008 primarily due to fewer short-term opportunity sales related to lower gas prices. KWH sales to non-territorial customers located outside the Company’s service territory decreased 9.6% in 2008 as compared to 2007 primarily due to lower off-system sales. KWH sales to non-territorial customers increased 41.0% in 2007 as compared to 2006 primarily due to more off-system sales. Wholesale sales to non-affiliates will vary depending on the market cost of available energy compared to the cost of the Company and Southern Company system-owned generation, demand for energy within the Southern Company service territory, and availability of Southern Company system generation. Wholesale energy sales to affiliates decreased 43.6% in 2009 as compared to 2008 primarily due to a decrease in the Company’s generation and an increase in territorial sales, resulting in less capacity available to sell to affiliate companies. Wholesale energy sales to affiliates increased 44.9% in 2008 as compared to 2007 primarily due to the availability of the Company’s lower cost generation resources for sale to affiliated companies. Wholesale energy sales to affiliates decreased 38.9% in 2007 when compared to 2006 primarily due to a decrease in the Company’s generation and an increase in territorial sales, resulting in less capacity available to sell to affiliate companies. Fuel and Purchased Power Expenses Fuel costs constitute the single largest expense for the Company. The mix of fuel sources for generation of electricity is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. Additionally, the Company purchases a portion of its electricity needs from the wholesale market. Details of the Company’s electricity generated and purchased were as follows:
Fuel and purchased power expenses were $611.6 million in 2009, a decrease of $101.4 million, or 14.2%, below the prior year costs. This decrease was primarily due to a $69.9 million decrease in the cost of fuel and purchased power and a $31.5 million decrease related to total KWHs generated and purchased. Fuel and purchased power expenses were $713.1 million in 2008, an increase of $122.9 million, or 20.8%, above the prior year costs. This increase was primarily due to a $116.5 million increase in the cost of fuel and purchased power and a $6.4 million increase related to total KWHs generated and purchased. Fuel and purchased power expenses were $590.1 million in 2007, an increase of $78.3 million, or 15.3%, above the prior year costs. This increase was primarily due to a $63.8 million increase in the cost of fuel and purchased power and a $14.5 million increase related to total KWHs generated and purchased. II-317 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Fuel expense decreased $66.8 million in 2009 as compared to 2008. Approximately $8.1 million of the reduction in fuel expenses resulted primarily from lower gas prices and a $58.7 million decrease in generation from Company-owned facilities. Fuel expense increased $92.2 million in 2008 as compared to 2007. Approximately $86.1 million in additional fuel expenses resulted from higher coal, gas, and transportation prices and a $6.1 million increase in generation from Company-owned facilities. Fuel expense increased $55.6 million in 2007 as compared to 2006. Approximately $56.8 million in additional fuel expenses resulted from higher coal, gas, transportation prices, and emissions allowances, which were partially offset by a $1.2 million decrease in generation from Company-owned facilities. Purchased power expense decreased $34.6 million, or 27.4%, in 2009 when compared to 2008. The decrease was primarily due to a $61.8 million decrease in the cost of purchased power, partially offset by a $27.2 million increase in the amount of energy purchased which was due to lower cost opportunity purchases. Purchased power expense increased $30.7 million, or 32.0%, in 2008 when compared to 2007. The increase was primarily due to a $30.4 million increase in the cost of purchased power. Purchased power expense increased $22.6 million, or 30.9%, in 2007 when compared to 2006. The increase was primarily due to a $7.0 million increase in the cost of purchased power and a $15.6 million increase in the amount of energy purchased which was partially due to a decrease in generation resulting from plant outages. Energy purchases vary from year to year depending on demand and the availability and cost of the Company’s generating resources. These expenses do not have a significant impact on earnings since the energy purchases are generally offset by energy revenues through the Company’s fuel cost recovery clause. Coal prices continued to be influenced by worldwide demand from developing countries, as well as increased mining and fuel transportation costs. While coal prices reached unprecedented high levels in 2008, the recessionary economy pushed prices downward in 2009. However, the lower prices did not fully offset the higher priced coal already in inventory and under long-term contract. Demand for natural gas in the United States also was affected by the recessionary economy leading to significantly lower natural gas prices. Fuel expenses generally do not affect net income, since they are offset by fuel revenues under the Company’s fuel cost recovery clause. See FUTURE EARNINGS POTENTIAL — “PSC Matters — Fuel Cost Recovery” and Note 1 to the financial statements under “Fuel Costs” for additional information. Other Operations and Maintenance Expenses Total other operations and maintenance expenses decreased $13.3 million in 2009 as compared to 2008 primarily due to a decrease of $12.2 million in transmission, distribution, customer service, and administrative and general expenses driven by overall reductions in spending in an effort to offset the effects of the recessionary economy. Also contributing to the decrease was an $8.3 million reduction in generation outage expenses in 2009. These decreases were partially offset by a $3.9 million increase in expenses for the combined cycle long-term service agreement due to a 36% increase in operating hours as a result of lower gas prices. Also offsetting the decrease was $3.4 million resulting from the 2008 reclassification of generation construction screening expenses to a regulatory asset upon the FERC’s acceptance of the wholesale filing in October 2008. Total other operations and maintenance expenses increased $4.8 million in 2008 as compared to 2007 primarily due to a $6.9 million increase in transmission and distribution expenses, an increase in administrative expenses primarily resulting from the reclassification of System Restoration Rider (SRR) revenues of $3.8 million to expense pursuant to an order from the Mississippi PSC dated January 9, 2009, a $1.9 million increase in generation-related environmental expenses, and a $1.1 million increase in generation operations and outage-related expenses. These increases were partially offset by a $9.3 million reclassification of generation construction screening expenses to a regulatory asset upon the FERC’s acceptance of the wholesale filing in October 2008. Total other operations and maintenance expenses increased $18.6 million from 2006 to 2007. Other operations expense increased $15.1 million, or 8.8%, in 2007 compared to 2006 primarily as a result of a $4.1 million increase in generation construction screening, a $3.3 million insurance recovery for storm restoration expense recognized in 2006, a $2.1 million increase in employee benefits primarily due to an increase in medical expense, a $2.0 million increase in outside and other contract services, and a $2.0 million increase in scheduled production projects. Maintenance expense increased $3.5 million, or 5.2%, in 2007 when compared to 2006, primarily as a result of a $5.5 million increase in generation maintenance expense primarily due to outage work in 2007, partially offset by a $2.0 million decrease in transmission and distribution maintenance expenses due primarily to the deferral of these expenses pursuant to the regulatory accounting order from the Mississippi PSC. See FUTURE EARNINGS POTENTIAL — “FERC Matters,” “PSC Matters — System Restoration Rider,” and “PSC Matters — Storm Damage Cost Recovery” herein for additional information. II-318 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Depreciation and Amortization Depreciation and amortization expenses decreased $0.1 million in 2009 compared to 2008 primarily due to a $3.1 million decrease in amortization of environmental costs related to the approved ECO Plan, partially offset by a $2.8 million increase in depreciation expense resulting from an increase in plant in service. Depreciation and amortization expenses increased $10.7 million in 2008 compared to 2007 primarily due to a $5.7 million increase in amortization related to a regulatory liability recorded in 2003 that ended in December 2007 in connection with the Mississippi PSC’s accounting order on Plant Daniel capacity, a $2.9 million increase in depreciation expense primarily due to an increase in plant in service, and a $2.4 million increase for amortization of certain reliability-related maintenance costs deferred in 2007 in accordance with a Mississippi PSC order. Depreciation and amortization expenses increased $13.5 million in 2007 compared to 2006 due to a regulatory liability recorded in 2003 in connection with the Mississippi PSC’s accounting order on Plant Daniel capacity and an increase in amortization of environmental costs related to the approved ECO Plan. See Note 3 under “Retail Regulatory Matters – Performance Evaluation Plan” and “Environmental Compliance Overview Plan” for additional information. Taxes Other Than Income Taxes Taxes other than income taxes decreased $1.0 million in 2009 compared to 2008 primarily as a result of a $0.8 million decrease in payroll taxes and a $0.2 million decrease in franchise taxes. Taxes other than income taxes increased $4.8 million in 2008 compared to 2007 primarily as a result of a $2.7 million increase in ad valorem taxes and a $1.3 million increase in municipal franchise taxes. Taxes other than income taxes decreased $0.6 million in 2007 compared to 2006 primarily as a result of a $2.0 million decrease in ad valorem taxes, partially offset by a $1.5 million increase in municipal franchise taxes. Interest Expense, Net of Amounts Capitalized Interest expense, net of amounts capitalized increased $5.0 million in 2009 compared to 2008 primarily due to a $5.2 million increase in interest expense associated with the issuance of new long-term debt in November 2008 and March 2009, partially offset by the maturity of long-term debt and lower interest rates in 2009. Interest expense, net of amounts capitalized decreased $0.2 million in 2008 compared to 2007 primarily due to a $2.7 million decrease in borrowing and lower interest rates on short-term indebtedness and a $0.7 million decrease related to the redemption of outstanding trust preferred securities in 2007, partially offset by a $3.0 million increase in interest expense associated with the issuance of new long-term debt in November 2008 and November 2007. Interest expense, net of amounts capitalized decreased $0.5 million in 2007 compared to 2006 due to a $1.3 million decrease in long-term debt primarily related to the redemption of outstanding trust preferred securities, partially offset by the issuance of new long-term debt in November 2007 and a $0.7 million increase in short-term debt borrowing net of amounts related to Hurricane Katrina. Other Income (Expense), Net Other income (expense), net decreased $1.7 million in 2009 compared to 2008 primarily due to a $3.0 million decrease in customer projects and amounts collected from customers for construction of substation projects which had a tax effect of $2.6 million, partially offset by higher charitable contributions of $3.9 million in 2008. Other income (expense), net decreased $1.3 million in 2008 compared to 2007 primarily due to higher charitable contributions of $3.1 million, partially offset by a $0.4 million increase in revenues from contracting work performed for customers, a $0.6 million decrease in other deductions, and a $0.6 million increase in allowance for equity funds used during construction. Other income (expense), net increased $12.7 million in 2007 compared to 2006 primarily due to higher charitable contributions of $6.9 million in 2006 as compared to 2007, a gain on a contract termination approved by the FERC in 2007 of $3.7 million, and an increase in customer projects of $2.5 million. Income Taxes Income taxes increased $1.9 million, or 3.9%, in 2009 primarily due to increased pre-tax income, the 2008 amortization of a regulatory liability pursuant to a December 2007 regulatory accounting order from the Mississippi PSC which occurred in 2008, and actualization of permanent differences from previous year tax returns, partially offset by an increase in the federal production activities deduction and an increase in a State of Mississippi manufacturing investment tax credit. Income taxes decreased $3.4 million, or 6.7%, in 2008 primarily due to decreased pre-tax income, the amortization of a regulatory liability pursuant to a December 2007 regulatory accounting order from the Mississippi PSC, and a State of Mississippi manufacturing investment tax credit, partially offset by a decrease in the federal production activities deduction. See Note 3 to the financial statements under “Retail Regulatory Matters” for additional information. Income taxes increased $3.7 million, or 7.8%, in 2007 primarily due to increased pre-tax income and lower federal and state tax credits. See Note 5 to the financial statements under “Effective Tax Rate” for additional information. II-319 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Effects of Inflation The Company is subject to rate regulation that is generally based on the recovery of historical and projected costs. The effects of inflation can create an economic loss since the recovery of costs could be in dollars that have less purchasing power. Any adverse effect of inflation on the Company’s results of operations has not been substantial. FUTURE EARNINGS POTENTIAL General The Company operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located in southeast Mississippi and to wholesale customers in the southeast United States. Prices for electricity provided by the Company to retail customers are set by the Mississippi PSC under cost-based regulatory principles. Retail rates and earnings are reviewed and may be adjusted periodically within certain limitations. Prices for wholesale electricity sales, interconnecting transmission lines, and the exchange of electric power are regulated by the FERC. See ACCOUNTING POLICIES — “Application of Critical Accounting Policies and Estimates — Electric Utility Regulation” herein and Note 3 to the financial statements under “FERC Matters” and “Retail Regulatory Matters” for additional information about regulatory matters. The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of the Company’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Company’s primary business of selling electricity. These factors include the Company’s ability to maintain a constructive regulatory environment that continues to allow for the recovery of prudently incurred costs during a time of increasing costs. Future earnings in the near term will depend, in part, upon maintaining energy sales, which is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth or decline in the Company’s service area. Recessionary conditions have negatively impacted sales. The timing and extent of the economic recovery will impact future earnings. Environmental Matters Compliance costs related to the Clean Air Act and other environmental statutes and regulations could affect earnings if such costs cannot continue to be fully recovered in rates on a timely basis. Environmental compliance spending over the next several years may exceed amounts estimated. Some of the factors driving the potential for such an increase are higher commodity costs, market demand for labor, and scope additions and clarifications. The timing, specific requirements, and estimated costs could also change as environmental statutes and regulations are adopted or modified. See Note 3 to the financial statements under “Environmental Matters” for additional information. New Source Review Actions In November 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S. District Court for the Northern District of Georgia against certain Southern Company subsidiaries, including Alabama Power and Georgia Power, alleging that these subsidiaries had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws at certain coal-fired generating facilities. These actions were filed concurrently with the issuance of notices of violations to the Company with respect to the Company’s Plant Watson. After Alabama Power was dismissed from the original action, the EPA filed a separate action in January 2001 against Alabama Power in the U.S. District Court for the Northern District of Alabama. In these lawsuits, the EPA alleges that NSR violations occurred at eight coal-fired generating facilities operated by Alabama Power and Georgia Power, including one facility co-owned by the Company. The civil actions request penalties and injunctive relief, including an order requiring installation of the best available control technology at the affected units. In early 2000, the EPA filed a motion to amend its complaint to add the Company as a defendant based on the allegations in the notices of violation. However, in March 2001, the court denied the motion based on lack of jurisdiction, and the EPA has not re-filed. The original action, now solely against Georgia Power, has been administratively closed since the spring of 2001, and the case has not been reopened. In June 2006, the U.S. District Court for the Northern District of Alabama entered a consent decree between Alabama Power and the EPA, resolving a portion of the Alabama Power lawsuit relating to the alleged NSR violations at Plant Miller. In July 2008, the U.S. District Court for the Northern District of Alabama granted partial summary judgment in favor of Alabama Power with respect to its other affected units regarding the proper legal test for determining whether projects are routine maintenance, repair, and replacement and therefore are excluded from NSR permitting. The decision did not resolve the case, which remains ongoing. II-320 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $37,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome in
Carbon Dioxide Litigation New York Case In July 2004, three environmental groups and attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed complaints in the U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Under common law public and private nuisance theories, the plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining global warming and (2) requiring each of the defendants to cap its emissions of carbon dioxide and then reduce those emissions by a specified percentage each year for at least a decade. The plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. In September 2005, the U.S. District Court for the Southern District of New York granted Southern Company’s and the other defendants’ motions to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit in October 2005 Kivalina Case
II-321 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Environmental Statutes and Regulations General The Company’s operations are subject to extensive regulation by state and federal environmental agencies under a variety of statutes and regulations governing environmental media, including air, water, and land resources. Applicable statutes include the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; the Emergency Planning & Community Right-to-Know Act; the Endangered Species Act; and related federal and state regulations. Compliance with these environmental requirements involves significant capital and operating costs, a major portion of which is expected to be recovered through existing ratemaking provisions. Through Compliance with any new federal or state legislation or regulations related to global climate change, air quality, coal combustion byproducts, including coal ash, or other environmental and health concerns could also significantly affect the Company. Although new or revised environmental legislation or regulations could affect many areas of the Company’s operations, the full impact of any such changes cannot be determined at this time. Air Quality Compliance with the Clean Air Act and resulting regulations has been and will continue to be a significant focus for the Company. Through
On December 8, 2009, the EPA also proposed revisions to the National Ambient Air Quality Standard for SO2. The EPA is expected to Twenty-eight eastern states, including the The Clean Air Visibility Rule II-322 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report The EPA is currently developing a Maximum Achievable Control Technology (MACT) rule for coal and oil-fired electric generating units, which will likely address numerous Hazardous Air Pollutants, including mercury. In March 2005, the EPA issued the Clean Air Mercury Rule (CAMR), a cap and trade program for the reduction of mercury emissions from coal-fired power plants. In February 2008, the U.S. Court of Appeals for the District of Columbia Circuit vacated the CAMR. In a separate proceeding in the U.S. District Court for the District of Columbia, the EPA entered into a proposed consent decree that requires the EPA to issue a proposed MACT rule by March 16, 2011 and a final rule by November 16, 2011. The impacts of the eight-hour ozone standards and The Company has developed and continually updates a comprehensive environmental compliance strategy to assess compliance obligations associated with the continuing and new environmental requirements discussed above. As part of this strategy, the Company plans to install additional SO2and NOx
Water Quality In July 2004, the EPA published On December 28, 2009, the EPA announced its determination that revision of the current effluent guidelines for steam electric power plants is warranted and proposed a plan to adopt such revisions by 2013. New wastewater treatment requirements are expected and may result in the installation of additional controls on certain Company facilities. The impact of revised guidelines will depend on the studies conducted in connection with the rulemaking, as well as the specific requirements of the final rule, and, therefore, cannot be determined at this time. Environmental Remediation The Company must comply with other environmental laws and regulations that cover the handling and disposal of waste and releases of hazardous substances. Under these various laws and regulations, the Company could incur substantial costs to clean up properties. The Company conducts studies to determine the extent of any required cleanup and has recognized in its respective financial statements the costs to clean up known sites. Amounts for cleanup and ongoing monitoring costs were not material for any year presented. The Company could be liable for some or all required cleanup costs for additional sites that may require environmental remediation. See Note 3 to the financial statements under “Environmental Matters — Environmental Remediation” for additional information. II-323 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Global Climate Issues Federal legislative proposals that would impose mandatory requirements related to greenhouse gas emissions, renewable energy standards, and energy efficiency standards continue to be considered in Congress, and the reduction of greenhouse gas emissions has been identified as a high priority by the current Administration. On June 26, 2009, the American Clean Energy and Security Act of 2009 (ACES), which would impose mandatory greenhouse gas restrictions through implementation of a cap and trade program, a renewable energy standard, and other measures, was passed by the House of Representatives. ACES would require reductions of greenhouse gas emissions on a national basis to a level that is 17% below 2005 levels by 2020, 42% below 2005 levels by 2030, and 83% below 2005 levels by 2050. In addition, ACES would provide for renewable energy standards of 6% by 2012 and 20% by 2020. Similar legislation is being considered by the Senate. The financial and operational impact of such legislation, if enacted, will depend on a variety of factors. These factors include the specific greenhouse gas emissions limits or renewable energy requirements, the timing of implementation of these limits or requirements, the level of emissions allowances allocated and the level that must be purchased, the purchase price of emissions allowances, the development and commercial availability of technologies for renewable energy and for the reduction of emissions, the degree to which offsets may be used for compliance, provisions for cost containment (if any), the impact on coal and natural gas prices, and cost recovery through regulated rates. There can be no assurance that any legislation will be enacted or as to the ultimate form of any legislation. Additional or alternative legislation may be adopted as well. In April 2007, the U.S. Supreme Court ruled that the EPA has authority under the Clean Air Act to regulate greenhouse gas emissions from new motor vehicles. On December 15, 2009, the EPA published a final determination, which became effective on January 14, 2010, that certain greenhouse gas emissions from new motor vehicles endanger public health and welfare due to climate change. On September 28, 2009, the EPA published a proposed rule regulating greenhouse gas emissions from new motor vehicles under the Clean Air Act. The EPA has stated that once this rule is International climate change negotiations under the Although the outcome of federal, state, or international initiatives cannot be determined at this time, mandatory restrictions on the Company’s greenhouse gas emissions In The Company is actively evaluating and developing electric generating technologies with lower greenhouse gas emissions.
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company FERC Matters In full-requirements rates before November 1, 2010, except for changes associated with the fuel adjustment clause and the energy cost management clause (ECM), changes associated with property damages that exceed the amount in the wholesale property damage reserve, and changes associated with costs and expenses associated with environmental requirements affecting fossil fuel generating facilities.
PSC Matters Statewide Electric Generation Needs Review Mississippi In the 2008 regular session of the Mississippi legislature, a bill was passed and signed by the Governor Performance Evaluation Plan In May 2004, the Mississippi PSC approved the Company’s request to reclassify 266 megawatts (MWs) of Plant Daniel Units 3 and 4 capacity to jurisdictional cost of service effective January 1, 2004, and authorized the Company to include the related costs and revenue credits in jurisdictional rate base, cost of service, and revenue requirement calculations for purposes of retail rate recovery. In the May 2004 order establishing the Company’s forward-looking II-325 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report several changes to the PEP. On November 9, 2009, the Mississippi PSC approved the revised PEP, which resulted in a lower performance incentive under the PEP and therefore smaller and/or less frequent rate changes in the future. On November 16, 2009, the Company resumed annual evaluations and filed its annual PEP filing for 2010 under the revised PEP, which resulted in a lower allowed return on investment but no rate change. In April 2007, the Mississippi PSC issued an order allowing the Company to defer certain reliability related maintenance costs beginning January 1, 2007 and recover them evenly over a four-year period beginning January 1, 2008. These costs related to maintenance that was needed as follow-up to emergency repairs that were made subsequent to Hurricane Katrina. At December 31, 2007, the Company had incurred and deferred the retail portion of $9.5 million of such costs. At December 31,
System Restoration Rider In September 2006, the Company filed with the Mississippi PSC a request to implement a SRR to increase the Company’s cap on the property damage reserve and to authorize the calculation of an annual property damage accrual based on a formula. The purpose of the SRR is to provide for recovery of costs associated with property damage (including certain property insurance and the costs of self insurance) and to facilitate the Mississippi PSC’s review of these costs. In November 2007, the Company along with the Mississippi Public Utilities Staff agreed and stipulated to a revised SRR calculation method that would no longer require the Mississippi PSC to set a cap on the property damage reserve or to authorize the calculation of an annual property damage accrual. Under the revised SRR calculation method, the Mississippi PSC would periodically agree on SRR revenue levels that would be developed based on historical data, expected exposure, type and amount of insurance coverage excluding insurance costs, and other relevant information. On January 9, 2009, the Mississippi PSC issued an order accepting the stipulation and the revised SRR calculation method. The applicable SRR rate level will be adjusted every three years, unless a significant change in circumstances occurs such that the Company and the Mississippi Public Utilities Staff or the Mississippi PSC deems that a more frequent change would be appropriate. The Company will submit annual filings setting forth SRR-related revenues, expenses, and investment for the projected filing period, as well as the true-up for the prior period. As a result, the December 2008 retail regulatory liability of $6.8 million was reclassified to the property damage reserve. On February 2, 2009, the Company submitted its 2009 SRR rate filing with the Mississippi PSC, which proposed that the 2009 SRR rate level remain at zero and the Company be allowed to accrue approximately $4.0 million to the property damage reserve in 2009. On September 10, 2009, the Mississippi PSC issued an order requiring Mississippi Power to develop SRR factors designed to reduce SRR revenue by approximately $1.5 million from November 2009 to March 2010 under the new rate. On January 29, 2010, the Company submitted its 2010 SRR rate filing with the Mississippi PSC, which proposed that the Company be allowed to accrue approximately $3.0 million to the property damage reserve in 2010. The final outcome of this matter cannot now be determined. Environmental Compliance Overview Plan On February Fuel Cost Recovery The Company establishes, annually, a retail fuel cost recovery factor that is approved by the Mississippi PSC.
II-326 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report annual In August 2009, the Mississippi PSC engaged an independent professional audit firm to conduct an audit of the Company’s fuel-related expenditures included in the fuel adjustment clause and the ECM clause of 2008 and 2009. The audit was Storm Damage Cost Recovery In August 2005, Hurricane Katrina hit the Gulf Coast of the United States and caused significant damage within the Company’s service area. The estimated total storm restoration costs relating to Hurricane Katrina through December 31, 2007 Legislation On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA). Major tax incentives in the ARRA include an extension of bonus depreciation and multiple renewable energy On October 27, 2009, Southern Company and its subsidiaries received notice that an award of $165 million had been granted, of which $25 million related to the Company, under the ARRA grant application for transmission and The U.S. House of Representatives and The ultimate impact of these matters cannot be determined at this time. The American Jobs Creation Act of 2004 created a tax deduction for a portion of income attributable to U.S. production activities as defined in Section 199 II-327 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report 2005 and 2006, a 6% rate applicable for the years 2007 through 2009, and a 9% rate thereafter.
Integrated Coal Gasification Combined Cycle On January 16, 2009, the Company filed for a Certificate of Public Convenience and Necessity with the Mississippi PSC to allow construction of a new electric generating plant located in Kemper County, Mississippi. The plant would utilize an The Company filed an application in June 2006 with the U.S. Department of Energy (DOE) for certain tax credits available to projects using clean coal technologies under the Energy Policy Act of 2005. The DOE subsequently certified the Kemper IGCC, and in November 2006 the IRS allocated Internal Revenue Code Section 48A tax credits of $133 million to the Company. On May 11, 2009, the Company received notification from the IRS formally certifying these tax credits. The utilization of these credits is dependent upon meeting the certification requirements for the Kemper IGCC, including an in-service date no later than On April 6, 2009, the Governor of the State of Mississippi signed into law a bill that will provide an ad valorem tax exemption for a portion of the assessed value of all property utilized in certain electric generating facilities with integrated gasification process facilities. This tax exemption, which may not exceed 50% of the total value of the project, is for projects with a capital investment from private sources of $1 billion or more. The Company expects the Kemper IGCC, including the gasification portion, to be a qualifying project under the law. Beginning in December 2006, the Mississippi PSC has approved the Company’s requested accounting treatment to defer the costs associated with the Company’s generation resource planning, evaluation, and screening activities as a regulatory asset. On June 5, 2009, the Mississippi PSC issued an order initiating an evaluation of the Kemper IGCC and establishing a two-phase procedural schedule. On August 4, 2009, the Mississippi PSC ordered a two-part hearing process to evaluate the need for and the resources and cost of the new generating capacity separately. On November 9, 2009, the Mississippi PSC issued an order that found the Company has a demonstrated need for additional capacity of approximately 304 MWs to 1,276 MWs based on an analysis of expected load forecasts, costs, and anticipated retirements. Hearings related to the appropriate resource to meet that need as well as cost recovery of that resource through application of the Baseload Act were held in February 2010. A decision on the resources and cost recovery is expected to be made by May 1, 2010. II-328 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report On September 15, 2009, South Mississippi Electric Power Association (SMEPA) signed a non-binding letter of intent to explore the acquisition of an interest in the Kemper IGCC. The Company and SMEPA are evaluating a combination of a joint ownership arrangement and a power purchase agreement which would provide SMEPA with up to 20% of the capacity and associated energy output from the Kemper IGCC. The final outcome of this matter cannot now be determined. Other Matters The Company is involved in various other matters being litigated and regulatory matters that could affect future earnings. In addition, the Company is subject to certain claims and legal actions arising in the ordinary course of business. The Company’s business activities are subject to extensive governmental regulation related to public health and the
ACCOUNTING POLICIES Application of Critical Accounting Policies and Estimates The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements. In the application of these policies, certain estimates are made that may have a material impact on the Company’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. Senior management has reviewed and discussed critical accounting policies and estimates described below with the Audit Committee of Southern Company’s Board of Directors. Electric Utility Regulation The Company is subject to retail regulation by the Mississippi PSC and wholesale regulation by the FERC. These regulatory agencies set the rates the Company is permitted to charge customers based on allowable costs. As a result, the Company applies As reflected in Note 1 to the financial statements, significant regulatory assets and liabilities have been recorded. Management reviews the ultimate recoverability of these regulatory assets and liabilities based on applicable regulatory guidelines and accounting principles generally accepted in the United States. However, adverse legislative, judicial, or regulatory actions could materially impact the amounts of such regulatory assets and liabilities and could adversely impact the Company’s financial statements. II-329 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Contingent Obligations The Company is subject to a number of federal and state laws and regulations, as well as other factors and conditions that potentially subject it to environmental, litigation, income tax, and other risks. See FUTURE EARNINGS POTENTIAL herein and Note 3 to the financial statements for more information regarding certain of these contingencies. The Company periodically evaluates its exposure to such risks and, in accordance with generally accepted accounting principles (GAAP), records reserves for those matters where a non-tax-related loss is considered probable and reasonably estimable and records a tax asset or liability if it is more likely than not that a tax position will be sustained. The adequacy of reserves can be significantly affected by external events or conditions that can be unpredictable; thus, the ultimate outcome of such matters could materially affect the Company’s financial statements. These events or conditions include the following:
Unbilled Revenues Revenues related to the retail sale of electricity are recorded when electricity is delivered to customers. However, the determination of KWH sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, amounts of electricity delivered to customers, but not yet metered and billed, are estimated. Components of the unbilled revenue estimates include total KWH territorial supply, total KWH billed, estimated total electricity lost in delivery, and customer usage. These components can fluctuate as a result of a number of factors including weather, generation patterns, and power delivery volume and other operational constraints. These factors can be unpredictable and can vary from historical trends. As a result, the overall estimate of unbilled revenues could be significantly affected, which could have a material impact on the Company’s results of operations. Plant Daniel Operating Lease As discussed in Note 7 to the financial statements under “Operating Leases — Plant Daniel Combined Cycle Generating Units,” the Company leases a
II-330 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report The determination of operating lease treatment was made at the inception of the lease agreement and is not subject to change unless subsequent changes are made to the agreement. However, the Company is also required to monitor Juniper’s ongoing status as a voting interest entity. Changes in that status could require the Company to consolidate the Facility’s assets and the related debt and to record interest and depreciation expense of approximately $37 million annually, rather than annual lease expense of approximately $26 million. Pension and Other Postretirement Benefits The Company’s calculation of pension and other postretirement benefits expense is dependent on a number of assumptions. These assumptions include discount rates, health care cost trend rates, expected long-term return on plan assets, mortality rates, expected salary and wage increases, and other factors. Components of pension and other postretirement benefits expense include interest and service cost on the pension and other postretirement benefit plans, expected return on plan assets and amortization of certain unrecognized costs and obligations. Actual results that differ from the assumptions utilized are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. While the Company believes that the assumptions used are appropriate, differences in actual experience or significant changes in assumptions would affect its pension and other postretirement benefits costs and obligations. Key elements in determining the Company’s pension and other postretirement benefit expense in accordance with GAAP are the expected long-term return on plan assets and the discount rate used to measure the benefit plan obligations and the periodic benefit plan expense for future periods. The expected long-term return on postretirement benefit plan assets is based on the Company’s investment strategy, historical experience, and expectations for long-term rates of return that considers external actuarial advice. The Company determines the long-term return on plan assets by applying the long-term rate of expected returns on various asset classes to the Company’s target asset allocation. The Company discounts the future cash flows related to its postretirement benefit plans using a single-point discount rate developed from the weighted average of market-observed yields for high quality fixed income securities with maturities that correspond to expected benefit payments. A 25 basis point change in any significant assumption would result in a $0.7 million or less change in the total benefit expense and a $13 million or less change in projected obligations. New Accounting Standards Variable Interest Entities In June 2009, the Financial Accounting Standards Board issued new guidance of the consolidation of variable interest entities, which replaces the quantitative-based risks and rewards calculation for determining whether an enterprise is the primary beneficiary in a variable interest entity with an approach that is primarily qualitative, requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity, and requires additional disclosures about an enterprise’s involvement in variable interest entities. The Company adopted this new guidance effective January 1, 2010, with no material impact on its financial statements. FINANCIAL CONDITION AND LIQUIDITY Overview The Company’s financial condition remained stable at December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company The Company’s investments in pension trust funds Net cash provided from operating activities in 2009 increased from 2008 by $76.2 million. The increase in net cash provided from operating activities was primarily due to an increase in cash related to higher fuel rates effective in March 2009 and a decrease in deferred income taxes. Net cash provided from operating activities in 2008 decreased from 2007 by $112.2 million. The decrease in net cash provided from operating activities was primarily due to the receipt of grant proceeds of $74.3 million in June 2007 and a decrease in operating activities related to receivables in 2008 in the amount of $49.5 million. The decrease in receivables is primarily due to the change in under recovered regulatory clause revenues of $24.7 million and a $24.1 million change in affiliate receivables. Also impacting operating activities were decreases related to fossil fuel stock of $33.3 million primarily due to increases in coal and coal in-transit of $22.0 million and $15.6 million, respectively. These were offset by an increase in deferred income taxes and investment tax credits of $61.4 million. Net cash Net cash used for investing activities totaled $119.4 million due to a decrease in property additions. The $55.3 million increase in net cash used for investing activities in 2008 was primarily due to a $12.1 million increase in construction payables and a $27.6 million increase due to the capital portion of Hurricane Katrina grant proceeds received in 2007. The change in net cash used for investing activities in 2007 compared to 2006 of $107.0 million was primarily due to a $117.8 million reduction in the sources of funds related to Hurricane Katrina Net cash used for financing activities totaled $8.6 million in the corresponding period in 2008. Net cash provided from financing activities totaled $78.9 million in 2008 compared to $105.5 million that was used in financing activities for the corresponding period in 2007. The $184.5 million increase in net cash provided from financing activities was primarily due to the $80 million long-term bank loan issued to the Company in March 2008, the $50 million senior notes issued in November 2008, and the $36 million redemption of the long-term debt to an affiliated trust in the first nine months of 2007. Notes payable increased by $57.8 million primarily due to additional borrowings from commercial paper. Net cash used for financing activities totaled $105.5 million in 2007 compared to $211.5 million in 2006. This decrease in net cash used for financing activities is primarily due to a decrease in the use of funds related to notes payable of $109.3 million. Significant changes in the balance sheet as of December 31, The Company’s ratio of common equity to total capitalization, excluding long-term debt due within one year, decreased from II-332 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Sources of Capital The Company plans to obtain the funds required for construction and other purposes from sources such as operating cash flows, security issuances, term loans, short-term borrowings, and capital contributions from Southern Company. See “Capital Requirements and Contractual Obligations” herein and Note 3 to the financial statements under “Integrated Coal Gasification Combined Cycle” for
additional information. The amount, type, and timing of any financings, if needed, will depend upon regulatory approval, prevailing market conditions, and other factors. The issuance of securities by the Company is subject to regulatory approval by the FERC. Additionally, with respect to the public offering of securities, the Company files registration statements with the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended (1933 Act). The amounts of securities authorized by the FERC, as well as the amounts registered under the 1933 Act, are continuously monitored and appropriate filings are made to ensure flexibility in the capital markets. The Company obtains financing separately without credit support from any affiliate. The Southern Company system does not maintain a centralized cash or money pool. Therefore, funds of the Company are not commingled with funds of any other company. To meet short-term cash needs and contingencies, the Company has various sources of liquidity. At December 31, The Company may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper at the request and for the benefit of the Company and the other traditional operating companies. Proceeds from such issuances for the benefit of the Company are loaned directly to the Company and are not commingled with proceeds from such issuances for the benefit of any other operating company. The obligations of each company under these arrangements are several; there is no cross affiliate credit support. At December 31, Financing Activities During the In addition to any financings that may be necessary to meet capital requirements and contractual obligations, the Company plans to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Off-Balance Sheet Financing Arrangements In 2001, the Company began an initial 10-year term of a lease agreement for a combined cycle generating facility built at Plant Daniel. In June 2003, the Company entered into a restructured lease agreement for the Facility with Juniper, as discussed in Note 7 to the financial statements under “Operating Leases — Plant Daniel Combined Cycle Generating Units.” Juniper has also entered into leases with other parties unrelated to the Company. The assets leased by the Company comprise less than 50% of Juniper’s assets. The Company does not consolidate the leased assets and related liabilities, and the lease with Juniper is considered an operating lease. Accordingly, the lease is not reflected in the balance sheets. The initial lease term ends in 2011, and the lease includes a renewal and a purchase option based on the cost of the Facility at the inception of the lease, which was approximately $370 million. The Company is required to amortize approximately 4% of the initial acquisition cost over the initial lease term.
The lease also provides for a residual value guarantee, approximately 73% of the acquisition cost, by the Company that is due upon termination of the lease in the event that the Company does not renew the lease or purchase the Facility and that the fair market value is less than the unamortized cost of the Facility. See Note 7 to the financial statements under “Operating Leases — Plant Daniel Combined Cycle Generating Units” for additional information. II-333 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report Credit Rating Risk The Company does 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 to BBB- and/or Baa3 or below. These contracts are for physical electricity purchases, On September 2, 2009, Moody’s Investors Service (Moody’s) affirmed the credit ratings of the Company’s senior unsecured notes and commercial paper of A1/P-1, respectively, and revised the rating outlook for the Company to negative. On September 4, 2009, Fitch Ratings, Inc. affirmed the Company’s senior unsecured notes and commercial paper ratings of AA-/F1+, respectively, and maintained a stable rating outlook for the Company. On October 6, 2009, Standard and Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (S&P) affirmed the credit rating of the Company’s senior unsecured notes and its short-term rating of A/A-1, respectively, and maintained its stable ratings outlook. Market Price Risk Due to cost-based rate regulation, the Company has limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. To manage the volatility attributable to these exposures, the Company nets the exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company’s policies in areas such as counterparty exposure and hedging practices. The Company’s policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques that include, but are not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. The Company does not currently hedge interest rate risk. The weighted average interest rate on To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. At December 31, In addition, per the guidelines of the Mississippi PSC, the Company has implemented a fuel-hedging program. At December 31, The changes in fair value of energy-related derivative contracts were as follows at December 31:
II-334 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2009 Annual Report The
weighted average contract cost of approximately At December 31,
Energy-related derivative contracts which are designated as regulatory hedges Unrealized pre-tax The maturities of the energy-related derivative contracts and the level of the fair value hierarchy in which they fall at December 31,
The Company is exposed to market price risk in the event of nonperformance by counterparties to the energy-related derivative contracts. The
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company Capital Requirements and Contractual Obligations The construction program of the Company is currently estimated to be In addition, as discussed in Note 2 to the financial statements, the Company provides postretirement benefits to substantially all employees and funds trusts to the extent required by the FERC. Other funding requirements related to obligations associated with scheduled maturities of long-term debt, as well as the related interest, derivative obligations, preferred stock dividends, leases, and other purchase commitments, are as follows. See Notes 1, 6, 7, and
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company Contractual Obligations
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company Cautionary Statement Regarding Forward-Looking Statements The Company’s These factors include: the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water quality and emissions of sulfur, nitrogen, mercury, carbon, soot, current and future litigation, regulatory investigations, proceedings, or inquiries, including FERC matters and EPA civil actions; the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates; variations in demand for electricity, including those relating to weather, the general economy and recovery from the recent recession, population and business growth (and declines), and the effects of energy conservation measures; available sources and costs of fuels; effects of inflation; ability to control investment performance of the Company’s employee benefit plans; advances in technology; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and internal restructuring or other restructuring options that may be pursued; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company; the ability of counterparties of the Company to make payments as and when due and to perform as required; the ability to obtain new short- and long-term contracts with the direct or indirect effect on the Company’s business resulting from terrorist incidents and the threat of terrorist incidents; interest rate fluctuations and financial market conditions and the results of financing efforts, including the Company’s credit ratings; the ability of the Company to obtain additional generating capacity at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as the direct or indirect effects on the Company’s business resulting from incidents the effect of accounting pronouncements issued periodically by standard setting bodies; and other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Company from time to time with the SEC. The Company expressly disclaims any obligation to update any forward-looking statements.
STATEMENTS OF INCOME For the Years Ended December 31, 2009, 2008, Mississippi Power Company
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2009, 2008, Mississippi Power Company
The accompanying notes are an integral part of these financial statements.
BALANCE SHEETS At December 31, Mississippi Power Company
The accompanying notes are an integral part of these financial statements.
BALANCE SHEETS At December 31, Mississippi Power Company
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF CAPITALIZATION At December 31, Mississippi Power Company
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF COMMON STOCKHOLDER’S EQUITY For the Years Ended December 31, 2009, 2008, Mississippi Power Company
The accompanying notes are an integral part of these financial statements. II-344 STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2009, 2008, Mississippi Power Company
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS Mississippi Power Company 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Mississippi Power Company (the Company) is a wholly owned subsidiary of Southern Company, which is the parent company of four traditional operating companies, Southern Power Company (Southern Power), Southern Company Services, Inc. (SCS), Southern Communications Services, Inc. (SouthernLINC Wireless), Southern Company Holdings, Inc. (Southern Holdings), Southern Nuclear Operating Company, Inc. (Southern Nuclear), and other direct and indirect subsidiaries. The traditional operating companies, Alabama Power Company (Alabama Power), Georgia Power Company (Georgia Power), Gulf Power Company (Gulf Power), and Mississippi Power Company (Mississippi Power), are vertically integrated utilities providing electric service in four Southeastern states. The Company operates as a vertically integrated utility providing service to retail customers in southeast Mississippi and to wholesale customers in the Southeast. Southern Power constructs, acquires, owns, and manages generation assets and sells electricity at market-based rates in the wholesale market. SCS, the system service company, provides, at cost, specialized services to Southern Company and its subsidiary companies. SouthernLINC Wireless provides digital wireless communications for use by Southern Company and its subsidiary companies and also markets these services to the public and provides fiber cable services within the Southeast. Southern Holdings is an intermediate holding company subsidiary for Southern Company’s investments in leveraged The equity method is used for entities in which the Company has significant influence but does not control and for variable interest entities where the Company is not the primary beneficiary. Certain prior years’ data presented in the financial statements have been reclassified to conform to the current year presentation. The Company is subject to regulation by the Federal Energy Regulatory Commission (FERC) and the Mississippi Public Service Commission (PSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by its regulatory commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Affiliate Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at direct or allocated cost: general and design engineering, purchasing, accounting and statistical analysis, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, digital wireless communications, and other services with respect to business and operations and power pool transactions. Costs for these services amounted to $84 million, $87 million, and $71.8 million during 2009, 2008, and The Company provides incidental services to and receives such services from other Southern Company subsidiaries which are generally minor in duration and amount. The Company provided no significant service to an affiliate in 2009, 2008, The Company has an agreement with Alabama Power under which the Company owns a portion of Greene County Steam Plant. Alabama Power operates Greene County Steam Plant, and the Company reimburses Alabama Power for its proportionate share of all associated expenditures and costs. The Company reimbursed Alabama Power for the Company’s proportionate share of related expenses which totaled $10.2 million, $11.1 million, and $9.8 million in 2009, 2008, and
an agreement with Gulf Power under which Gulf Power owns a portion of Plant Daniel. The Company operates Plant Daniel, and Gulf Power reimburses the Company for its proportionate share of all associated expenditures and costs. Gulf Power reimbursed the Company for Gulf Power’s proportionate share of related expenses which totaled $20.9 million, $22.8 million, and $23.1 million in 2009, 2008, and II-346 NOTES (continued) Mississippi Power Company 2009 Annual Report The traditional operating companies, including the Company, and Southern Power may jointly enter into various types of wholesale energy, natural gas, and certain other contracts, either directly or through SCS, as agent. Each participating company may be jointly and severally liable for the obligations incurred under these agreements. See Note 7 under “Fuel Commitments” for additional information. Regulatory Assets and Liabilities The Company is subject to the provisions of the Financial Accounting Standards Board Regulatory assets and (liabilities) reflected in the balance sheets at December 31 relate to:
NOTES (continued) Mississippi Power Company In the event that a portion of the Company’s operations is no longer subject to Government Grants The Company received a grant in October 2006 from the Mississippi Development Authority (MDA) for $276.4 million, primarily for storm damage cost recovery. Revenues Energy and other revenues are recognized as services are The Company has a diversified base of customers. For years ended December 31, Fuel Costs Fuel costs are expensed as the fuel is used. Fuel expense generally includes the cost of purchased Income and Other Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average life of the related property. Taxes that are collected from customers on behalf of governmental agencies to be remitted to these agencies are presented net on the statements of income. In accordance with Property, Plant, and Equipment Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the interest capitalized and/or cost of funds used during construction for projects over $10 million.
NOTES (continued) Mississippi Power Company The Company’s property, plant, and equipment consisted of the following at December 31:
The cost of replacements of property, exclusive of minor items of property, is capitalized. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense except for the cost of maintenance of coal cars and a portion of the railway track maintenance costs, which are charged to fuel stock and recovered through the Company’s fuel clause. Depreciation and Amortization Depreciation of the original cost of plant in service is provided primarily by using composite straight-line rates, which approximated 3.3%, in 2009, 2008, and In April 2007, the Mississippi PSC issued an order allowing the Company to defer certain reliability related maintenance costs beginning January 1, 2007 and recover them evenly over a four-year period beginning January 1, 2008. These costs related to maintenance that was needed as follow-up to emergency repairs that were made subsequent to Hurricane Katrina. At December 31, 2007, the Company had incurred and deferred the retail portion of $9.5 million of such costs. At December 31, In December 2003, the Mississippi PSC issued an interim accounting order directing the Company to expense and record a regulatory liability of $60.3 million while it considered the Company’s request to include 266 megawatts (MWs) of Plant Daniel Units 3 and 4 generating capacity in jurisdictional cost of service. In May 2004, the Mississippi PSC approved the Company’s request effective January 1, 2004, and ordered the Company to amortize the regulatory liability previously established to reduce depreciation and amortization expenses over a Asset Retirement Obligations and Other Costs of Removal Asset retirement obligations are computed as the present value of the ultimate costs for an asset’s future retirement and are recorded in the period in which the liability is incurred. The costs are capitalized as part of the related long-lived asset and depreciated over the asset’s useful life. The Company has received accounting guidance from the Mississippi PSC allowing the continued accrual of other future retirement costs for long-lived assets that the Company does not have a legal obligation to retire. Accordingly, the accumulated removal costs for these obligations The Company has retirement obligations related to various landfill sites, underground storage tanks, and asbestos removal.
obligations is unknown and cannot be reasonably estimated. The Company will continue to recognize in the statements of income allowed removal costs in accordance with its regulatory treatment. Any differences between costs recognized II-349 NOTES (continued) Mississippi Power Company 2009 Annual Report Details of the asset retirement obligations included in the balance sheets are as follows:
Impairment of Long-Lived Assets and Intangibles The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on either a specific regulatory disallowance or an estimate of undiscounted future cash flows attributable to the assets, as compared with the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined by either the amount of regulatory disallowance or by estimating the fair value of the asset and recording a loss for the amount if the carrying value is greater than the fair value. For assets identified as held for sale, the carrying value is compared to the estimated fair value less the cost to sell in order to determine if an impairment loss is required. Until the assets are disposed of, their estimated fair value is re-evaluated when circumstances or events change. Provision for Property Damage The Company carries insurance for the cost of certain types of damage to generation plants and general property. However, the Company is self-insured for the cost of storm, fire, and other uninsured casualty damage to its property, including transmission and distribution facilities. As permitted by the Mississippi PSC and the FERC, the Company accrues for the cost of such damage through an annual expense accrual credited to
NOTES (continued) Mississippi Power Company Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the average cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, at weighted average cost when installed. Fuel Inventory Fuel inventory includes the average costs of oil, coal, natural gas, and Financial Instruments The Company uses derivative financial instruments to limit exposure to fluctuations in the prices of certain fuel purchases and electricity purchases and sales. All derivative financial instruments are recognized as either assets or liabilities The Company does not offset fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement. Additionally, the Company has no outstanding collateral repayment obligations or rights to reclaim collateral arising from derivative instruments recognized at December 31, The Mississippi PSC has approved the Company’s request to implement an The Company is exposed to losses related to financial instruments in the event of counterparties’ nonperformance. The Company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the Company’s exposure to counterparty credit risk.
Comprehensive Income The objective of comprehensive income is to report a measure of all changes in common stock equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income consists of net income, changes in the fair value of qualifying cash flow hedges, and II-351 Mississippi Power Company 2. RETIREMENT BENEFITS The Company has a defined benefit, trusteed, pension plan covering substantially all employees. The plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the plan are expected for the year ending December 31, The measurement date for plan assets and obligations for 2009 and 2008 was December 31 while the measurement date for prior years was September 30. Pursuant to
Pension Plans The total accumulated benefit obligation for the pension plans was $289 million in 2009 and $252 million in
At December 31, Pension plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). In 2009, in determining the optimal asset allocation for the pension fund, the Company performed an extensive study based on projections of both assets and liabilities over a 10-year forward horizon. The primary goal of the study was to maximize plan funded status. The Company’s investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily II-352 NOTES (continued) Mississippi Power Company 2009 Annual Report The actual composition of the Company’s pension plan assets as of
The investment strategy for plan assets related to the Company’s defined benefit plan is to be broadly diversified across major asset classes. The asset allocation is established after consideration of various factors that affect the assets and liabilities of the pension plan including, but not limited to, historical and expected returns, volatility, correlations of asset classes, the current level of assets and liabilities, and the assumed growth in assets and liabilities. Because a significant portion of the liability of the pension plan is long-term in nature, the assets are invested consistent with long-term investment expectations for return and risk. To manage the actual asset class exposures relative to the target asset allocation, the Company employs a formal rebalancing program. As additional risk management, external investment managers and service providers are subject to written guidelines to ensure appropriate and prudent investment practices. Detailed below is a description of the investment strategies for each major asset category disclosed above:
NOTES (continued) Mississippi Power Company The fair values of pension plan assets as of December 31, 2009 and 2008 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases.
II-354 NOTES (continued) Mississippi Power Company 2009 Annual Report Changes in the fair value measurement of the Level 3 items in the pension plan assets valued using significant unobservable inputs for the years ended December 31, 2009 and 2008 are as follows:
The fair values presented above are prepared in accordance with applicable accounting standards regarding fair value. For purposes of determining the fair value of the pension plan assets and the appropriate level designation, management relies on information provided by the plan’s trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate. Securities for which the activity is observable on an active market or traded exchange are categorized as Level 1. Fixed income securities classified as Level 2 are valued using matrix pricing, a common model using observable inputs. Domestic and international equity securities classified as Level 2 consist of pooled funds where the value is not quoted on an exchange but where the value is determined using observable inputs from the market. Securities that are valued using unobservable inputs are classified as Level 3 and include investments in real estate and investments in limited partnerships. The Company invests (through the pension plan trustee) directly in the limited partnerships which then invest in various types of funds or various private entities within a fund. The fair value of the limited partnerships’ investments is based on audited annual capital accounts statements which are generally prepared on a fair value basis. The Company also relies on the fact that, in most instances, the underlying assets held by the limited partnerships are reported at fair value. External investment managers typically send valuations to both the custodian and to the Company within 90 days of quarter end. The custodian reports the most recent value available and adjusts the value for cash flows since the statement date for each respective fund. Amounts recognized in the balance sheets related to the Company’s pension
Presented below are the amounts included in regulatory assets
II-355 NOTES (continued) Mississippi Power Company 2009 Annual Report The changes in the balances of regulatory assets and regulatory liabilities related to the defined benefit pension plans for the
Components of net periodic pension cost (income) were as follows:
Net periodic pension cost (income) is the sum of service cost, interest cost, and other costs netted against the expected return on plan assets. The expected return on plan assets is determined by multiplying the expected rate of return on plan assets and the market-related value of plan assets. In determining the market-related value of plan assets, the Company has elected to amortize changes in the market value of all plan assets over five years rather than recognize the changes immediately. As a result, the accounting value of plan assets that is used to calculate the expected return on plan assets differs from the current fair value of the plan assets. Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31,
II-356 NOTES (continued) Mississippi Power Company 2009 Annual Report Other Postretirement Benefits Changes during the plan year ended December 31, 2009 and the 15-month period ended December 31, 2008
Other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code. The Company’s investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily
Detailed below is a description of the investment strategies for each major asset category disclosed above:
II-357 NOTES (continued) Mississippi Power Company 2009 Annual Report
The fair values of other postretirement benefit plan assets as of December 31, 2009 and 2008 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases.
II-358 NOTES (continued) Mississippi Power Company 2009 Annual Report
Changes in the fair value measurement of the Level 3 items in the other postretirement benefit plan assets valued using significant unobservable inputs for the years ended December 31, 2009 and 2008 are as follows:
The fair values presented above are prepared in accordance with applicable accounting standards regarding fair value. For purposes of determining the fair value of the pension plan assets and the appropriate level designation, management relies on information provided by the plan’s trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate. Securities for which the activity is observable on an active market or traded exchange are categorized as Level 1. Fixed income securities classified as Level 2 are valued using matrix pricing, a common model using observable inputs. Domestic and international equity securities classified as Level 2 consist of pooled funds where the value is not quoted on an exchange but where the value is determined using observable inputs from the market. Securities that are valued using unobservable inputs are classified as Level 3 and include investments in real estate and investments in limited partnerships. The Company invests (through the pension plan trustee) directly in the limited partnerships which then invest in various types of funds or various private entities within a fund. The fair value II-359 NOTES (continued) Mississippi Power Company 2009 Annual Report of the limited partnerships’ investments is based on audited annual capital accounts statements which are generally prepared on a fair value basis. The Company also relies on the fact that, in most instances, the underlying assets held by the limited partnerships are reported at fair value. External investment managers typically send valuations to both the custodian and to the Company within 90 days of quarter end. The custodian reports the most recent value available and adjusts the value for cash flows since the statement date for each respective fund. Amounts recognized in the balance sheets related to the Company’s other postretirement benefit plans consist of the following:
Presented below are the amounts included in regulatory assets at December 31,
The changes in the balance of regulatory assets related to the other postretirement benefit plans for the plan year ended December 31, 2009 and the 15 months ended December 31, 2008 are presented in the following table:
NOTES (continued) Mississippi Power Company
Components of the other postretirement benefit plans’ net periodic cost were as follows:
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Act) provides a 28% prescription drug subsidy for Medicare eligible retirees. The effect of the subsidy reduced the Company’s expenses for the years ended December 31, 2009, 2008, Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the
Actuarial Assumptions The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and other postretirement benefit plans for the following year are presented below. Net periodic benefit costs were calculated in
The Company II-361 NOTES (continued) Mississippi Power Company 2009 Annual Report An additional assumption used in measuring the APBO was a weighted average medical care cost trend rate of
Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 3. CONTINGENCIES AND REGULATORY MATTERS General Litigation Matters The Company is subject to certain claims and legal actions arising in the ordinary course of business. In addition, the Company’s business activities are subject to extensive governmental regulation related to public health and the Environmental Matters New Source Review Actions In November 1999, the EPA brought a civil action in the U.S. District Court for the Northern District of Georgia against certain Southern Company subsidiaries, including Alabama Power and Georgia Power, alleging that these subsidiaries had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws at certain coal-fired generating facilities. These actions were filed concurrently with the issuance of notices of violations to the Company with respect to the Company’s Plant Watson. After Alabama Power was dismissed from the original action,
control technology at the affected units. In early 2000, the EPA filed a motion to amend its complaint to add the Company as a defendant based on the allegations in the notices of violation. However, in March 2001, the court denied the motion based on lack of jurisdiction, and the EPA has not re-filed. The original action, now solely against Georgia Power, has been administratively closed since the spring of 2001, and the case has not been reopened. In June 2006, the U.S. District Court for the Northern District of Alabama entered a consent decree between Alabama Power and the EPA, resolving a portion of the Alabama Power lawsuit relating to the alleged NSR violations at Plant Miller. The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $37,500 per day, per violation at each II-362 NOTES (continued) Mississippi Power Company 2009 Annual Report generating unit, depending on the date of the alleged violation. An adverse outcome in either of these cases could require substantial capital expenditures or affect the timing of currently budgeted capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. Such expenditures could affect future results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. Carbon Dioxide Litigation New York Case In July 2004, three environmental groups and attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed complaints in the U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Under common law public and private nuisance theories, the plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining global warming and (2) requiring each of the defendants to cap its emissions of carbon dioxide and then reduce those emissions by a specified percentage each year for at least a decade. The plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. In September 2005, the U.S. District Court for the Southern District of New York granted Southern Company’s and the other defendants’ motions to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit in October 2005 Kivalina Case
Other Litigation Common law nuisance claims for injunctive relief and property damage allegedly caused by greenhouse gas emissions have become more frequent, and courts have recently determined that private parties and states have standing to bring such claims. For example, on October 16, 2009, the U.S. Court of Appeals for the Fifth Circuit reversed the U.S. District Court for the Southern District of Mississippi’s dismissal of private party claims against certain oil, coal, chemical, and utility companies alleging damages as a result of Hurricane Katrina. In reversing the dismissal, the U.S. Court of Appeals for the Fifth Circuit held that plaintiffs have standing to assert their nuisance, trespass, and negligence claims and none of these claims are barred by the political question doctrine. The Company is not currently a party to this litigation but was named as a defendant in an amended complaint which was rendered moot in August 2007 by the U.S. District Court for the Southern District of Mississippi Environmental Remediation The Company must comply with other environmental laws and regulations that cover the handling and disposal of waste and releases of hazardous substances. Under these various laws and regulations, the Company may also incur substantial costs to clean up II-363 NOTES (continued) Mississippi Power Company 2009 Annual Report properties. The Company has authority from the Mississippi PSC to recover approved environmental compliance costs through regulatory mechanisms. In 2003, the Texas Commission on Environmental Quality (TCEQ) designated the Company as a potentially responsible party at a site in Texas. The site was owned by an electric transformer company that handled the Company’s transformers as well as those of many other entities. The site owner is now in bankruptcy and the State of Texas has entered into an agreement with the Company and several other utilities to investigate and remediate the site. Amounts expensed during The final outcome of these matters cannot now be determined. However, based on the currently known conditions at these sites and the nature and extent of activities relating to these sites, the Company does not believe that additional liabilities, if any, at these sites would be material to the financial statements. FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. In December 2004, the FERC initiated a proceeding to assess Southern Company’s generation
Intercompany Interchange Contract The Company’s generation fleet is operated under the Intercompany Interchange Contract (IIC), as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine (1) the provisions of the IIC among the traditional operating companies (including the Company), Southern Power, and Southern Company Services, Inc., as agent, under the terms of which the power pool of Southern Company is operated, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power’s inclusion in the IIC in 2000. The FERC also previously approved Southern Company’s code of conduct. In October 2006, the FERC issued an order accepting a settlement resolving the proceeding subject to Southern Company’s agreement to accept certain modifications to the settlement’s II-364 NOTES (continued) Mississippi Power Company 2009 Annual Report Wholesale Rate Filing Right of Way Litigation Southern Company and certain of its subsidiaries, including the Company,
To date, the Company has entered into agreements with plaintiffs in approximately 95% of the actions pending against the Company to clarify the Company’s easement rights in the State of Mississippi. These agreements have been approved by the Circuit Courts of Harrison County and Jasper County, Mississippi (First Judicial Circuit), and In addition, in late 2001, certain subsidiaries of Southern Company, including Retail Regulatory Matters Performance Evaluation Plan The Company’s retail base rates are set under the Performance Evaluation Plan (PEP), a rate plan approved by the Mississippi PSC. PEP was designed with the objective that PEP would reduce the impact of rate changes on the customer and provide incentives for the Company to keep customer prices low and customer satisfaction and reliability high. PEP is a mechanism for rate adjustments based on three indicators: price, customer satisfaction, and service reliability. In May 2004, the Mississippi PSC approved the Company’s request to modify certain portions of II-365 NOTES (continued) Mississippi Power Company 2009 Annual Report Mississippi PSC’s order, over a four-year period, resulting in increases to earnings in each of those years. The In addition, in May 2004, the Mississippi PSC approved the Company’s requested changes to PEP, including the use of a forward-looking test year, with appropriate oversight; annual, rather than semi-annual, filings; and certain changes to the performance indicator mechanisms. Rate changes In April 2007, the Mississippi PSC issued an order allowing the Company to defer certain In September 2007, the Mississippi Public Utilities Staff and the Company entered into a stipulation that included adjustments to expenses which resulted in a one-time credit to retail customers of approximately $1.1 million. In November 2007, the Mississippi PSC issued an order requiring the Company to refund this amount to its retail customers no later than December 2007. This amount was totally refunded as a credit to customer bills by December 31, 2007. In December 2007, the Company submitted its annual PEP filing for 2008, which resulted in a rate increase of 1.983% or $15.5 million annually, effective January 2008. In December 2006, the Company submitted its annual PEP filing for 2007, which resulted in no rate change.
In December 2007, the Company received an order from the Mississippi PSC requiring it to defer $1.4 million associated with the retail portion of certain tax credits and adjustments related to permanent differences pertaining to its 2006 income tax returns filed in September 2007. These tax differences were recorded in a regulatory liability included in the current portion of other regulatory liabilities and were amortized ratably over the On March System Restoration Rider In September 2006, the Company filed with the Mississippi PSC a request to implement a II-366 NOTES (continued) Mississippi Power Company 2009 Annual Report On January 9, 2009, the Mississippi PSC issued an order accepting the stipulation and the revised SRR calculation method. The applicable SRR rate level will be adjusted every three years, unless a significant change in circumstances occurs such that the Company and the Mississippi Public Utilities Staff or the Mississippi PSC deems that a more frequent change would be appropriate. The Company will submit annual filings setting forth SRR-related revenues, expenses, and investment for the projected filing period, as well as the true-up for the prior period. As a result, the December 2008 retail regulatory liability of $6.8 million was reclassified to the Environmental Compliance Overview Plan On February
Fuel Cost Recovery The Company establishes, annually, a retail fuel cost recovery factor that is approved by the Mississippi PSC. In August 2009, the Mississippi PSC engaged an independent professional audit firm to conduct an audit of the Company’s fuel-related expenditures included in the fuel adjustment clause and energy cost management clause of 2008 and 2009. The audit was II-367 NOTES (continued) Mississippi Power Company 2009 Annual Report Storm Damage Cost Recovery In August 2005, Hurricane Katrina hit the Gulf Coast of the United States and caused significant damage within the Company’s service area. The estimated total storm restoration costs relating to Hurricane Katrina through December 31, 2007 of $302.4 million, which was net of expected insurance proceeds of approximately $77 million, without offset for the property damage reserve of $3.0 million, was affirmed by the Mississippi PSC in June 2006, and the Company was ordered to establish a regulatory asset for the retail portion. The Mississippi PSC issued an order directing the Company to file an application with the MDA for a Integrated Coal Gasification Combined Cycle On January 16, 2009, the Company filed for a Certificate of Public Convenience and Necessity with the Mississippi PSC to allow construction of a new electric generating plant located in Kemper County, Mississippi. The plant would utilize an The Company filed an application in June 2006 with the U.S. Department of Energy (DOE) for certain tax credits available to projects using clean coal technologies under the Energy Policy Act of 2005. The DOE subsequently certified the Kemper IGCC, and in November 2006 the
Kemper IGCC and has entered into a binding contract for the steam turbine generator, completing two milestone requirements for the Section 48A credits. On April 6, 2009, the Governor of the State of Mississippi signed into law a bill that will provide an ad valorem tax exemption for a portion of the assessed value of all property utilized in certain electric generating facilities with integrated gasification process facilities. This tax exemption, which may not exceed 50% of the total value of the project, is for projects with a capital investment from private sources of $1 billion or more. The Company expects the Kemper IGCC, including the gasification portion, to be a qualifying project under the law. Beginning in December 2006, the Mississippi PSC has approved the Company’s requested accounting treatment to defer the costs associated with the Company’s generation resource planning, evaluation, and screening activities as a regulatory asset. II-368 NOTES (continued) Mississippi Power Company 2009 Annual Report generation resource planning, evaluation, and screening activities, including regulatory filing costs. Costs incurred for the year ended December 31, 2009 totaled $31.2 million On June 5, 2009, the Mississippi PSC issued an order initiating an evaluation of the Kemper IGCC and establishing a two-phase procedural schedule. On August 4, 2009, the Mississippi PSC ordered a two-part hearing process to evaluate the need for and the resources and cost of the new generating capacity separately. On November 9, 2009, the Mississippi PSC issued an order that found the Company has a demonstrated need for additional capacity of approximately 304 MWs to 1,276 MWs based on an analysis of expected load forecasts, costs, and anticipated retirements. Hearings related to the appropriate resource to meet that need as well as cost recovery of that resource through application of the State of Mississippi’s Baseload Act of 2008 were held in February 2010. A decision on the resources and cost recovery is expected to be made by May 1, 2010. On September 15, 2009, South Mississippi Electric Power Association (SMEPA) signed a non-binding letter of intent to explore the acquisition of an interest in the Kemper IGCC. The Company and SMEPA are evaluating a combination of a joint ownership arrangement and a power purchase agreement which would provide SMEPA with up to 20% of the capacity and associated energy output from the Kemper IGCC. The final outcome of this matter cannot now be determined. 4. JOINT OWNERSHIP AGREEMENTS The Company and Alabama Power own, as tenants in common, Units 1 and 2 (total capacity of 500 At December 31,
The Company’s proportionate share of plant operating expenses is included in the statements of income and the Company is responsible for its own financing. 5. INCOME TAXES Southern Company files a consolidated federal income tax return and combined income tax returns for the State of Alabama and the State of Mississippi. Under a joint consolidated income tax allocation agreement, each subsidiary’s current and deferred tax expense is computed on a stand-alone basis and no subsidiary is allocated more expense than would be paid if it filed a separate income tax return. In accordance with
NOTES (continued) Mississippi Power Company Current and Deferred Income Taxes Details of the income tax provisions were as follows:
The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows:
NOTES (continued) Mississippi Power Company At December 31, In accordance with regulatory requirements, deferred investment tax credits are amortized over the lives of the related property with such amortization normally applied as a credit to reduce depreciation in the statements of income. Credits amortized in this manner amounted to $1.2 million, Effective Tax Rate The provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. federal statutory rate to earnings before income taxes and preferred dividends as a result of the following:
The American Jobs Creation Act of 2004 created a tax deduction for a portion of income attributable to U.S. production activities as defined in the Unrecognized Tax Benefits Changes during the year in unrecognized tax benefits were as follows:
NOTES (continued) Mississippi Power Company The Impact on the Company’s effective tax rate, if recognized, is as follows:
Accrued interest for unrecognized tax
The Company classifies interest on tax uncertainties as interest expense. The Company did not accrue any penalties on uncertain tax positions. It is reasonably possible that the amount of the unrecognized benefit with respect to a majority of the Company’s unrecognized tax positions will significantly increase or decrease within the next 12 months. The possible conclusion or settlement of The IRS has audited and closed all tax returns prior to 2004. The audits for the state returns have either been concluded, or the statute of limitations has expired, for years prior to 6. FINANCING Bank Term Loans In 2008, the Company borrowed $80 million under a three-year term loan agreement. The proceeds were used for general corporate Senior Notes Securities Due Within One Year At December 31, 2009 and 2008, the Company has scheduled maturities of capital leases Maturities through 2013 applicable to total long-term debt are as follows: $1.3 million in 2010; $81.4 million in 2011; $0.6 million in 2012; and $50.0 million in 2013. There are no scheduled maturities in 2014.
NOTES (continued) Mississippi Power Company Pollution Control Revenue Bonds Pollution control obligations represent loans to the Company from public authorities of funds derived from sales by such authorities of revenue bonds issued to finance pollution control facilities. The Company is required to make payments sufficient for authorities to meet principal and interest requirements of such bonds. The amount of tax-exempt pollution control revenue bonds outstanding at December 31, 2009 and 2008 was $82.7 million. In September 2008, the Company was required to purchase a total of approximately $7.9 million of variable rate pollution control revenue bonds that were tendered by investors. In December 2008, the bonds were successfully remarketed. On the statement of cash flow for 2008, the $7.9 million is presented as proceeds and redemptions. Outstanding Classes of Capital Stock The Company currently has preferred stock (including depositary Dividend Restrictions The Company can only pay dividends to Southern Company out of retained earnings or paid-in-capital. Bank Credit Arrangements At the beginning of In connection with these credit arrangements, the Company agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. Commitment fees average less than 1/ The credit arrangements contain covenants that limit the ratio of indebtedness to capitalization (each as defined in the arrangements) to 65%. For purposes of these definitions, indebtedness excludes long-term debt payable to affiliated trusts and, in certain cases, other hybrid securities. In addition, the credit arrangements contain cross default provisions that would trigger an event of default if the Company defaulted on other indebtedness above a specified threshold. At December 31, 2009, the Company was in compliance with all such covenants. None of the arrangements contain material adverse change clauses at the time of borrowing. This During
7. COMMITMENTS Construction Program The Company is engaged in continuous construction programs, currently estimated to total II-373 NOTES (continued) Mississippi Power Company 2009 Annual Report estimates; storm impacts; changes in environmental statutes and regulations; changes in FERC rules and regulations; Mississippi PSC approvals; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. At December 31, Long-Term Service Agreements The Company has entered into a Long-Term Service Agreement (LTSA) with General Electric (GE) for the purpose of securing maintenance support for the leased combined cycle units at Plant Daniel. The LTSA provides that GE will cover all planned inspections on the covered equipment, which generally includes the cost of all labor and materials. GE is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to limits and scope specified in the In general, the LTSA is in effect through two major inspection cycles of the units. Scheduled payments to GE under the LTSA, which are subject to price escalation, are made monthly based on estimated operating hours of the units and are recognized as expense based on actual hours of operation. The Company has recognized $13.3 million, $9.4 million, and $9.7 million for 2009, 2008, and The Company also has entered into a LTSA with Alstom Power, Inc. for the purpose of securing maintenance support for its Chevron Unit 5 combustion turbine plant. In summary, the LTSA stipulates that Alstom Power, Inc. will perform all planned maintenance on the covered equipment, which includes the cost of all labor and materials. Alstom Power, Inc is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to a limit specified in the
In general, this LTSA is in effect through two major inspection cycles. Scheduled payments to Alstom Power, Inc., which are subject to price escalation, are made at various intervals based on actual operating hours of the unit. Payments to Alstom Power, Inc. under Fuel Commitments To supply a portion of the fuel requirements of the generating plants, the Company has entered into various long-term commitments for the procurement of fossil fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Coal commitments include forward contract purchases for sulfur dioxide and nitrogen oxide Total estimated minimum long-term obligations at December 31,
Additional commitments for fuel will be required to supply the Company’s future needs. II-374 NOTES (continued) Mississippi Power Company 2009 Annual Report SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and the other traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. The creditworthiness of Southern Power is currently inferior to the creditworthiness of the traditional operating companies. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure the Company will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements.
Plant Daniel Combined Cycle Generating Units In May 2001, the Company began the initial 10-year term of the lease agreement for a In 2003, the Facility was acquired by Juniper Capital L.P. (Juniper), whose partners are unaffiliated with the Company. Simultaneously, Juniper entered into a restructured lease agreement with the Company. Juniper has also entered into leases with other parties unrelated to the Company. The assets leased by the Company comprise less than 50% of Juniper’s assets. The Company is not required to consolidate the leased assets and related liabilities, and the lease with Juniper is considered an operating lease. The lease agreement is treated as an operating lease for accounting purposes as well as for both retail and wholesale rate recovery purposes. For income tax purposes, the Company retains tax ownership. The initial lease term ends in 2011 and the lease includes a purchase and renewal option based on the cost of the Facility at the inception of the lease, which was $370 million. The Company is required to amortize approximately 4% of the initial acquisition cost over the initial lease term. The lease provides for a residual value guarantee, approximately 73% of the acquisition cost, by the Company that is due upon termination of the lease in the event that the Company does not renew the lease or purchase the Facility and that the fair market value is less than the unamortized cost of the Facility. A liability of approximately $3 million, $5 million, The Company estimates that its annual amount of future minimum operating lease payments under this arrangement, exclusive of any payment related to the residual value guarantee, as of December 31,
Other Operating Leases The Company and Gulf Power have jointly entered into operating lease agreements for the use of 745 aluminum railcars. The Company has the option to purchase the railcars at the greater of lease termination value or fair market value, or to renew the leases at the end of the lease term. The Company also has multiple operating lease agreements for the use of additional railcars that do not contain a purchase option. All of these leases are for the transport of coal to Plant Daniel. II-375 NOTES (continued) Mississippi Power Company 2009 Annual Report The Company’s share (50%) of the leases, charged to fuel stock and recovered through the fuel cost recovery clause, was $4.0 million in 2009, $4.0 million in 2008, and $4.4 million in 2007. The Company’s annual railcar lease payments for 2010 through 2014 will average approximately $1.7 million and after 2014, lease payments total in aggregate approximately $1.6 million. In addition to railcar leases, the Company has other operating leases for fuel handling equipment at Plants Daniel and Watson and operating leases for barges and tow/shift boats for the transport of coal at Plant Watson. The Company’s share (50% at Plant Daniel and 100% at Plant Watson) of the leases for fuel handling was charged to fuel handling expense in the amount of $0.6 million in 2009 and $0.6 million in 2008. The Company’s annual lease payments for 2010 through 2014 will average approximately $0.3 million for fuel handling equipment. The Company charged to fuel stock and recovered through fuel cost recovery the barge transportation leases in the amount of $8.4 million in 2009 and $9.8 million in 2008 related to barges and tow/shift boats. The Company’s annual lease payments for 2010 through 2014 with respect to these barge transportation leases will average approximately $7.7 million. 8. STOCK OPTION PLAN Southern Company provides non-qualified stock options to a large segment of the Company’s employees ranging from line management to executives. As of December 31,
The estimated fair values of stock options granted in 2009, 2008,
The Company’s activity in the stock option plan for
The number of stock options vested, and expected to vest in the future, as of December 31, II-376 NOTES (continued) Mississippi Power Company 2009 Annual Report As of December 31, For the years ended December 31, 2009, 2008, The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company’s employees are recognized in the Company’s financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company. The total intrinsic value of options exercised during the years ended December 31, 2009, 2008, and 2007 9. FAIR VALUE MEASUREMENTS
observable inputs is maximized where available and the use of unobservable inputs is minimized for fair value
In the case of multiple inputs being used in a fair value measurement, the lowest level input that is significant to the fair value measurement represents the level in the fair value hierarchy in which the fair value measurement is reported. The
Energy-related derivatives primarily consist of over-the-counter contracts. See Note II-377 NOTES (continued) Mississippi Power Company 2009 Annual Report As of December 31, 2009, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, are as follows:
The money market funds are short-term investments of excess funds in various money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by the Securities and Exchange Commission, and typically receive the highest rating from credit rating agencies. Regulatory and rating agency requirements for money market funds include minimum credit ratings and maximum maturities for individual securities and a maximum weighted average portfolio maturity. Redemptions are available on a same day basis, up to the full amount of the Company’s investment in the money market funds. As of December 31, 2009, other financial instruments for which the carrying amount did not equal fair value were as follows:
The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2). 10. DERIVATIVES The Company is exposed to market risks, primarily commodity price risk and interest rate risk. To manage the volatility attributable to these exposures, the Company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company’s policies in areas such as counterparty exposure and risk management practices. The Company’s policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities. Energy-Related Derivatives The Company enters into energy-related derivatives to hedge exposures to electricity, gas, and other fuel price changes. However, due to cost-based rate regulations, the Company has limited exposure to market volatility in commodity fuel prices and prices of electricity. The Company manages fuel-hedging programs, implemented per the guidelines of the Mississippi PSC, through the use of financial derivative contracts. To mitigate residual risks relative to movements in electricity prices, the Company enters into physical fixed-price or heat rate contracts for the purchase and sale of electricity through the wholesale electricity market. To mitigate residual risks relative to movements in gas prices, the Company may enter into fixed-price contracts for natural gas purchases; however, a significant portion of contracts are priced at market. Energy-related derivative contracts are accounted for in one of three methods:
II-378 NOTES (continued) Mississippi Power Company 2009 Annual Report
Some energy-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the electric industry. When an energy-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item representing the actual price of the underlying goods being delivered. At December 31, 2009, the net volume of energy-related derivative contracts for natural gas positions for the Company, together with the longest hedge date over which it is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest date for derivatives not designated as hedges, were as follows:
For cash flow hedges, the amounts expected to be reclassified from OCI to revenue and fuel expense for the next 12-month period ending December 31, 2010 are immaterial. Derivative Financial Statement Presentation and Amounts At December 31, 2009 and 2008, the fair value of energy-related derivatives was reflected in the balance sheets as follows:
All derivative instruments are measured at fair value. See Note 9 for additional information. II-379 NOTES (continued) Mississippi Power Company 2009 Annual Report At December 31, 2009 and 2008, the pre-tax effect of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred on the balance sheets were as follows:
For the years ended December 31, 2009, 2008, and 2007, the pre-tax effect of energy-related derivatives designated as cash flow hedging instruments on the statements of income were as follows:
There was no material ineffectiveness recorded in earnings for any period presented. For the years ended December 31, 2009, 2008, and 2007, the pre-tax effect of energy-related derivatives not designated as hedging instruments on the statements of income were immaterial. Contingent Features The Company does 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 derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain affiliated companies. At December 31, 2009, the fair value of derivative liabilities with contingent features was $3.9 million. At December 31, 2009, the Company had no collateral posted with its derivative counterparties; however, because of the joint and several liability features underlying these derivatives, the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, is $33.3 million. Currently, the Company has investment grade credit ratings from the major rating agencies with respect to debt and preferred stock. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. The Company participated in certain agreements that could require collateral in the event that one or more Southern Company system power pool participants has a credit rating change to below investment grade. II-380 NOTES (continued) Mississippi Power Company 2009 Annual Report 11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for
The Company’s business is influenced by seasonal weather conditions.
SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company
SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Southern Power Company and Subsidiary Companies The management of Southern Power Company (the “Company”) is responsible for establishing and maintaining an adequate system of internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002 and as defined in Exchange Act Rule 13a-15(f). A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Under management’s supervision, an evaluation of the design and effectiveness of the Company’s internal control over financial reporting was conducted based on the framework inInternal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report. /s/ Ronnie L. Bates Ronnie L. Bates President and Chief Executive Officer /s/ Michael W. Southern Michael W. Southern Senior Vice President and Chief Financial Officer February 25,
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Southern Power Company We have audited the accompanying consolidated balance sheets of Southern Power Company and Subsidiary Companies (the “Company”) (a wholly owned subsidiary of Southern Company) as of December 31, We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements (pages /s/ Deloitte & Touche LLP Atlanta, Georgia February 25,
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Southern Power Company and Subsidiary Companies OVERVIEW Business Activities Southern Power Company and its wholly-owned subsidiaries (the Company) construct, acquire, own, and manage generation assets and sell electricity at market-based prices in the wholesale market. The Company continues to execute its strategy through a combination of acquiring and constructing new power plants and by entering into power purchase agreements (PPAs) with investor owned utilities, independent power producers, municipalities, and electric cooperatives. In In December In December 2009, the Company transferred all of the outstanding membership interests of DeSoto County Generating Company LLC (DeSoto) to Broadway as part of the acquisition of West Georgia. The Company continued construction of an electric generating plant in Cleveland County, North Carolina. This plant will consist of four combustion turbine natural gas generating units with a total expected generating capacity of 720 As of December 31, Key Performance Indicators To evaluate operating results and to ensure the Company’s ability to meet its contractual commitments to customers, the Company focuses on several key performance indicators. These indicators include Earnings The Company’s 2009 net income was $155.9 million, an $11.5 million increase over 2008. This increase was primarily due to increased margins associated with the operation of Plant Franklin Unit 3 for all of 2009, increased generation from the Company’s combined cycle units due to lower natural gas prices, and profit recognized under a construction contract with the Orlando Utilities Commission (OUC) whereby the Company provided engineering, procurement, and construction services to build a combined cycle unit for the OUC. These favorable impacts were partially offset by a loss recognized on the transfer of DeSoto to Broadway in December 2009, gains recognized in income in 2008 II-387 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Southern Power Company and Subsidiary Companies 2009 Annual Report The Company’s 2008 net income was $144.4 million, a $12.7 million increase over 2007. This increase was primarily The Company’s 2007
RESULTS OF OPERATIONS A condensed statement of income follows:
Operating Revenues Operating revenues in 2009 were $946.7 million, a $366.9 million (27.9%) decrease from 2008. This decrease was primarily due to lower natural gas prices that reduced energy revenues. This decrease was partially offset by increased capacity and energy revenues from the operation of Plant Franklin Unit 3 and a PPA relating to four units at Plant Dahlberg that began in June 2009. Operating revenues in 2008 were $1.31 billion, a $341.5 million (35.1%) increase from 2007. This increase was primarily due to increased short-term energy revenues from uncontracted generating units, increased energy revenues due to higher natural gas prices, and increased revenues from a full year of operations at Plant Oleander Unit 5. These increases were partially offset by decreased demand under existing PPAs due to less favorable weather in 2008 compared to 2007. The increase in fuel revenues was accompanied by an increase in related fuel costs and did not have a significant impact on net income. Operating revenues in 2007 were $972 million, a $195.0 million (25.1%) increase from 2006. This increase was primarily due to increased short-term energy sales, a full year of operations at Plant Rowan acquired in September 2006, new sales with EnergyUnited Electric Membership Cooperative (EnergyUnited), increased demand under existing PPAs with affiliates as a result of favorable weather within the Southern Company system service territory, and higher fuel revenues due to an increase in natural gas prices in 2007. The increase in fuel revenues was accompanied by an increase in related fuel costs and did not have a significant impact on net income. II-388 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Capacity revenues are an integral component of the Company’s PPAs with both affiliate and non-affiliate customers and represent the greatest contribution to net income. Energy under the PPAs is generally sold at variable cost or is indexed to published gas indices. Energy revenues also include fees for support services, fuel storage, and unit start charges. Details of these PPA capacity and energy revenues are as follows:
Wholesale revenues that were not covered by PPAs totaled $98.9 million in 2009, which included $64.0 million of revenues from affiliated companies. Wholesale revenues that were not covered by PPAs totaled $349.2 million in 2008, which included $95.5 million of revenues from affiliated companies. Wholesale revenues that were not covered by PPAs totaled $131.0 million in 2007, which included $40.0 million of revenues from affiliated companies. These wholesale sales were made in accordance with the Intercompany Interchange Contract (IIC), as approved by the FERC. These non-PPA wholesale revenues will vary from year to year depending on demand and the availability and cost of generating resources at each company that participates in the centralized operation and dispatch of the Southern Company system fleet of generating plants Fuel and Purchased Power Expenses Fuel costs constitute the single largest expense for the Company. Additionally, the Company purchases a portion of its electricity needs from the wholesale market. Details of the Company’s fuel and purchased power expenditures are as follows:
In 2009, total fuel and purchased power expenses decreased by $376.4 million (50.0%) compared to 2008. This decrease was driven by a 56.0% decrease in the average cost of natural gas and a 41.3% decrease in the average cost of purchased power. Additionally, purchased power volume decreased 25.2% primarily due to increased generation at the Company’s combined cycle units as a result of lower natural gas prices. These decreases were partially offset by a 31.2% increase in generation at the Company’s combined cycle units as a result of lower natural gas prices. In 2008, total fuel and purchased power expenses increased by $314.2 million (71.6%) compared to 2007. This increase was driven by a 58.9% increase in generation due to operations at Plant Franklin Unit 3, an 11.9% increase in the average cost of natural gas, and a 107.9% increase in the average cost of purchased power. In 2007, total fuel and purchased power expenses increased by $122.7 million (38.8%) compared to 2006. This increase was driven by a 43.7% increase in generation at Plants Wansley and Dahlberg, a 5.2% increase in the average cost of natural gas, increased purchases of lower cost energy resources from the power pool and non-affiliates, and contracts with Georgia Electric Membership Corporations and Dalton Utilities. In 2009, fuel expense decreased by $192.3 million (45.3%) compared to 2008. This decrease was driven by a 56.0% decrease in the average cost of natural gas. This decrease was partially offset by a 31.2% increase in generation at the Company’s combined cycle units as a result of lower natural gas prices. In 2008, fuel expense increased by $186.1 million (78.0%) compared to 2007. This increase was driven by a 58.9% increase in generation primarily due to operations at Plant Franklin Unit 3 and In 2007, fuel expense increased by $93.4 million (64.3%) compared to 2006. This increase was driven by a 43.7% increase in generation at Plants Wansley and Dahlberg and a 5.2% increase in the average cost of natural gas. II-389 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report In The Company’s PPAs generally provide that the purchasers are responsible for substantially all of the cost of fuel. Consequently, any increase or decrease in fuel costs is accompanied by an increase or decrease in related fuel revenues and does not have a significant impact on net income.
Purchased power expenses will vary depending on demand and the availability and cost of generating resources available throughout the Southern Company system and other contract resources. Load requirements are submitted to the Other Operations and Maintenance Expenses In 2009, other operations and maintenance expenses decreased $11.1 million (7.5%) compared to 2008. This decrease was due primarily to transmission tariff penalties recognized in 2008, reduced transmission expenses due to a decrease in power sales into the market, and the timing of plant outages. In 2008, other operations and maintenance expenses increased $12.7 million (9.4%) compared to 2007. This increase was due primarily to the timing of plant maintenance activities, transmission tariff penalties, and additional administrative and general expenses as a result of costs incurred to implement the FERC compliance plan. See In 2007, other operations and maintenance expenses increased $39.7 million (41.7%) compared to 2006. This increase was due primarily to a full year of operations at Plant DeSoto and Plant Rowan acquired in June 2006 and September 2006, respectively, and additional administrative and general expenses as a result of costs incurred to implement the FERC compliance plan. See Loss (Gain) on Sale of Property In In January 2008, the Company recorded a gain of $6.0 million on the sale of an undeveloped tract of land. Loss on IGCC Project In November 2007, the Company and the II-390 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Depreciation and Amortization In 2009, depreciation and amortization increased $9.6 million (10.9%) compared to 2008. This increase was primarily due to the completion of Plant Franklin Unit 3 in June 2008 and higher depreciation rates implemented during 2009. In 2008, depreciation and amortization increased $14.5 million (19.7%) In 2007, depreciation and amortization increased $8.0 million (12.2%) due to the completion of Plant Oleander Unit 5 in December 2007 and additional depreciation related to Plants DeSoto and Rowan acquired in June 2006 and September 2006, respectively, and higher depreciation rates from a study adopted in March 2006. See FUTURE EARNINGS POTENTIAL — “Other Matters” herein for additional information regarding the Company’s ongoing review of depreciation estimates. Taxes Other Than Income Taxes The 2009 decrease in taxes other than income taxes was not material. In 2008, taxes other than income taxes increased $2.0 million (12.4%) compared to 2007. This increase was primarily due to property taxes related to the completion of Plant Oleander Unit 5 and Plant Franklin Unit 3 in December 2007 and June 2008, respectively.
The 2007 increase in taxes other than income taxes was not material. Interest Expense, Net of Amounts Capitalized In 2009, interest expense, net of amounts capitalized increased $1.8 million (2.1%) compared to 2008. This increase was primarily due to a $5.5 million decrease in capitalized interest as a result of the completion of Plant Franklin Unit 3 in June 2008, partially offset by a $1.7 million decrease in short-term borrowing levels during 2009 and a decrease in amortization of interest rate derivatives of $2.1 million. In 2008, interest expense, net of amounts capitalized increased $4.0 million (5.1%) compared to 2007. This increase was primarily the result of a decrease in capitalized interest as a result of the completion of Plant Oleander Unit 5 in December 2007 and Plant Franklin Unit 3 in June 2008, partially offset by a decrease in short-term borrowing levels in 2008. In 2007, interest expense, net of amounts capitalized decreased $1.0 million (1.2%) compared to 2006. This decrease was primarily due to additional capitalized interest of $10.9 million on active construction projects and reduced interest on commercial paper of $2.0 million due to lower borrowing levels. This decrease was partially offset by an $11.9 million increase in interest on $200 million of senior notes that were issued in November 2006. Profit recognized on the construction contract with the OUC whereby the Company has provided engineering, procurement, and construction services to build a combined cycle unit for the OUC was $13.3 million in 2009. No profit or loss on this contract was recognized in 2008 or 2007. Other Income (Expense), Net Other income (expense), net was an expense of $0.4 million in 2009 versus income of $7.6 million in 2008. This change was primarily due to a $6.4 million fee received in 2008 for participating in an asset auction. The Company was not the successful bidder in the asset auction. Other income (expense), net increased Changes in other income (expense), net in 2007 were not material. II-391 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Income Taxes In 2009, income taxes decreased $7.3 million (7.8%) compared to 2008. This decrease was due to changes in the Internal Revenue Code of Income taxes increased $9.3 million (11.2%) in 2008 and $1.7 million (2.1%) in 2007 Effects of Inflation FUTURE EARNINGS POTENTIAL General The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of the Company’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Company’s competitive wholesale business. These factors include the Company’s ability to achieve sales growth while containing costs.
of customers, total generating capacity available in the Southeast, the successful remarketing of capacity as current contracts expire, and the Company’s ability to execute its acquisition The Company’s system generating capacity increased Power Sales Agreements The Company’s sales are primarily through long-term PPAs. The Company is working to maintain and expand its share of the wholesale The Company’s PPAs consist of two types of agreements. The first type, referred to as a unit or block sale, is a customer purchase from a dedicated plant unit where all or a portion of the generation from that unit is reserved for that customer. The Company typically has the ability to serve the unit or block sale customer from an alternate resource. The second type, referred to as requirements service, provides that the Company serve the customer’s capacity and energy requirements from a combination of the customer’s own generating units and from Company resources not dedicated to serve unit or block sales. The Company has rights to purchase power provided by the requirements customers’ resources when economically viable. II-392 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report The Company has entered into the following PPAs over the past
The Company has PPAs with some of Southern Company’s traditional operating companies and with other investor owned utilities, independent power producers, municipalities, and electric cooperatives. Although some of the Company’s PPAs are with the traditional operating companies, the Company’s generating facilities are not in the traditional operating companies’ regulated rate bases, and the Company is not able to seek recovery from the traditional operating companies’ ratepayers for construction, repair, environmental, or maintenance costs. The Company expects that the capacity payments in the PPAs will produce sufficient cash flow to cover costs, pay debt service, and provide an equity return. However, the Company’s overall profit will depend on numerous factors, including efficient operation of its generating As a general matter, existing PPAs provide that the purchasers are responsible for either procuring the fuel or reimbursing the Company for the cost of fuel relating to the energy delivered under such PPAs. To the extent a particular generating facility does not meet the operational requirements contemplated in the PPAs, the Company may be responsible for excess fuel costs. With respect to fuel transportation risk, most of the Company’s PPAs provide that the counterparties are responsible for transporting the fuel to the particular generating facility. Fixed and variable operation and maintenance costs will be recovered through capacity charges based on dollars-per-kilowatt year or energy charges based on dollars-per-MW hour. In general, the Company has long-term service contracts with General Electric and Siemens AG to reduce its exposure to certain operation and maintenance costs relating to such vendors’ applicable equipment. See Note 7 to the financial statements under “Long-Term Service Agreements” for additional information. II-393 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Many of the Company’s PPAs have provisions that require the posting of collateral or an acceptable substitute guarantee in the event that Standard The Company has entered into long-term power sales agreements for an average of
Environmental Matters The Company’s operations are subject to extensive regulation by state and federal environmental agencies under a variety of statutes and regulations governing environmental media, including air, water, and land resources. Applicable statutes include the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; the Emergency Planning & Community Right-to-Know Act; the Endangered Species Act; and related federal and state regulations. Compliance with possible additional federal or state legislation or regulations related to global climate change, air quality, or other environmental and health concerns New environmental legislation or regulations, such as requirements related to greenhouse gases or changes to existing statutes or regulations, could affect many areas of the Company’s operations. While the Company’s PPAs generally contain provisions that permit charging the counterparty with some of the new costs incurred as a result of changes in environmental laws and regulations, the full impact of any such regulatory or legislative changes cannot be determined at this time. Because the Company’s units are newer gas-fired generating facilities, costs associated with environmental compliance for these facilities have been less significant than for similarly situated coal-fired generating facilities or older gas-fired generating facilities. Environmental, natural resource, and land use concerns, including the applicability of air quality limitations, the availability of water withdrawal rights, uncertainties regarding aesthetic impacts such as increased light or noise, and concerns about potential adverse health impacts, can, however, increase the cost of siting and operating any type of future electric generating facility. The impact of such statutes and regulations on the Company cannot be determined at this time. Global Climate Issues Federal legislative proposals that would impose mandatory requirements related to greenhouse gas emissions II-394 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and In April 2007, the U.S. Supreme Court ruled that the Environmental Protection Agency (EPA) has authority under the Clean Air Act to regulate greenhouse gas emissions from new motor vehicles. On December 15, 2009, the EPA published a final determination, which became effective on January 14, 2010, that certain greenhouse gas emissions from new motor vehicles endanger public health and welfare due to climate change. On September 28, 2009, the EPA published a proposed rule regulating greenhouse gas emissions from new motor vehicles under the Clean Air Act. The EPA has stated that once this rule is International climate change negotiations under the United Nations Framework Convention on Climate Change also continue. Although the outcome of federal, state, or international initiatives cannot be determined at this time, mandatory restrictions on the Company’s greenhouse gas emissions or requirements relating to renewable energy or energy efficiency on the federal or state level are likely to result in significant additional compliance costs, including significant capital expenditures. Also, additional compliance costs could affect results of operations, cash flows, and financial condition if such costs are not recovered through PPAs. Further, higher costs that are recovered through regulated rates at other utilities could contribute to an overall reduction in demand for electricity, which could negatively impact the Company’s results of operations, cash flows, and financial condition. In 2008, the total carbon dioxide emissions from the fossil fuel-fired electric generating units owned by the Company were approximately 6 million metric tons. The preliminary estimate of carbon dioxide emissions from these units in 2009 is approximately 7 million metric tons. The level of carbon dioxide emissions from year to year will be dependent on the level of generation, which is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. The Company continues to evaluate its future energy and
Carbon Dioxide Litigation In February II-395 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Other Litigation Common law nuisance claims for injunctive relief and property damage allegedly caused by greenhouse gas emissions have become more frequent, and courts have recently determined that private parties and states have standing to bring such claims. For example, on October 16, 2009, the U.S. Court of Appeals for the Fifth Circuit reversed the U.S. District Court for the Southern District of Mississippi’s dismissal of private party claims against certain oil, coal, chemical, and utility companies alleging damages as a result of Hurricane Katrina. In reversing the dismissal, the U.S. Court of Appeals for the Fifth Circuit held that plaintiffs have standing to assert their nuisance, trespass, and negligence claims and none of these claims are barred by the political question doctrine. The Company is not currently a party to this litigation but was named as a defendant in an amended complaint which was rendered moot in August 2007 by the U.S. District Court for the Southern District of Mississippi when such court dismissed the original matter. The ultimate outcome of this matter cannot be determined at this time. In
Income Tax Matters Legislation On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA). Major tax incentives in the ARRA include an extension of bonus depreciation and multiple renewable energy incentives. The ultimate impact of these matters cannot be determined at this time. Internal Revenue Code Section 199 Domestic Production Deduction The American Jobs Creation Act of 2004 created a tax deduction for a portion of income attributable to U.S. production activities as defined in Section 199 of the Internal Revenue Acquisitions and Divestitures Nacogdoches Acquisition On October 8, 2009, the Company acquired all of the outstanding membership interests of Nacogdoches from American Renewables LLC, the original developer of the project, for approximately $50.1 million in cash consideration. Nacogdoches is constructing a biomass generating plant in Sacul, Texas with an estimated capacity of 100 MWs. The generating plant will be fueled from wood waste. Construction commenced in 2009 and the plant is expected to begin commercial operation in 2012. Costs incurred through December 31, 2009 were $86.6 million. The total estimated cost of the project is expected to be between $475 million and $500 million. The output of the plant is contracted under a PPA with Austin Energy that begins in 2012 and expires in 2032 or until a contractual limit of $2.3 billion in billings is reached. See Note 2 to the financial statements under “Acquisitions and Divestitures –Nacogdoches Power LLC Acquisition” for additional information. II-396 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report West Georgia Acquisition and Plant DeSoto Divestiture On December 17, 2009, the Company acquired all of the outstanding membership interests of West Georgia from Broadway, an affiliate of LS Power. The acquisition agreement provided for the transfer of all the outstanding membership interests of DeSoto from the Company to Broadway and the payment by the Company of approximately $144.0 million in cash consideration. West Georgia was merged into the Company and the Company now owns a 669-MW nameplate capacity generating facility consisting of four combustion turbine natural gas generating units with oil back-up. The output from two units is contracted under PPAs with MEAG Power and GEC. The MEAG Power agreement began in 2009 and expires in 2029. The GEC agreement begins in 2010 and expires in 2030. See Note 2 to the financial statements under “Acquisitions and Divestitures — West Georgia Generating Company, LLC Acquisition and DeSoto County Generating Company, LLC Divestiture” for additional information. Construction Projects Cleveland County Units 1-4 The Company has also entered into PPAs with NCEMC and NCMPA1 for a portion of the generating capacity from the plant that will begin in 2012 and expire in 2036 and 2031, respectively. NCEMC will purchase 180
Nacogdoches Biomass Plant The Company Other Matters The Company completed depreciation studies in From time to time, the Company is involved in various matters being litigated and regulatory matters that could affect future earnings. In addition, the Company is subject to certain claims and legal actions arising in the ordinary course of business. The Company’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property and other damage, personal injury, common law nuisance, and citizen enforcement of environmental requirements such as air and water quality standards, has increased generally throughout the United States. In particular, personal injury and other claims for damages caused by alleged exposure to hazardous materials, and common law nuisance claims for injunctive relief and property damage allegedly caused by greenhouse gas and other emissions, have become more frequent. The ultimate outcome of such pending or potential litigation against the Company cannot be predicted at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on the Company’s financial statements. See Note 3 to the financial statements for information regarding material issues. II-397 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report ACCOUNTING POLICIES Application of Critical Accounting Policies and Estimates The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements. In the application of these policies, certain
estimates are made that may have a material impact on the Company’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. Senior management has reviewed and discussed the critical accounting policies and estimates described below with the Audit Committee of Southern Company’s Board of Directors. Revenue Recognition The Company’s revenue recognition depends on appropriate classification and documentation of transactions in accordance with
Normal Sale and Non-Derivative Transactions The Company has entered into capacity contracts that provide for the sale of electricity and that involve physical delivery in quantities within the Company’s available generating capacity. These contracts either do not meet the definition of a derivative or are designated as normal sales, thus exempting them from fair value accounting Cash Flow Hedge Transactions The Company designates other derivative contracts for the sale of electricity as cash flow hedges of anticipated sale transactions. These contracts are marked to market through other comprehensive income over the life of the contract. Realized gains and losses are then recognized in revenues as incurred. Contracts for sales and purchases of electricity, which meet the definition of a derivative and that are not designated as normal sales and
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies Percentage of Completion The Company is currently engaged in a long-term contract for engineering, procurement, and construction services to build a combined cycle unit for the OUC. Construction activities commenced in 2006 and The Company’s investments in long-lived assets are primarily generation assets, whether in service or under construction. The Company’s intangible assets consist of acquired PPAs that are amortized over the term of the PPAs and goodwill resulting from acquisitions. The Company evaluates the carrying value of these assets
Acquisition Accounting The Company has been engaged in a strategy of acquiring assets. The Company has accounted for these acquisitions under the purchase method in accordance with Contingent Obligations The Company is subject to a number of federal and state laws and regulations, as well as other factors and conditions that potentially subject it to environmental, litigation, income tax, and other risks. See FUTURE EARNINGS POTENTIAL herein and Note 3 to the financial statements for more information regarding certain of these contingencies. The Company periodically evaluates its exposure to such risks and, in accordance with These events or conditions include the following:
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies Depreciation Depreciation of the original cost of assets is computed under the straight-line method and applies a composite depreciation rate based on the assets’ estimated useful lives determined by management. The primary assets in property, plant, and equipment are power plants, all of which have an estimated composite life ranging from When property subject to composite depreciation is retired or otherwise disposed of in the normal course of business, its cost is charged to accumulated depreciation. For other property dispositions, the applicable cost and accumulated depreciation is removed from the accounts and a gain or loss is recognized. Convertible Investment Tax Credits Under the ARRA, certain costs related to the Nacogdoches plant construction are eligible for ITCs or cash grants. The Company has elected to receive ITCs. The credits are recorded as a deferred credit, which will be amortized over the life of the asset, and the tax basis of the asset is reduced by 50% of the credits received, resulting in a deferred tax asset. The Company has elected to recognize the tax benefit of this basis difference as a reduction to income tax expense as costs are incurred during the construction period. This basis difference will reverse and be recorded to income tax expense over the useful life of the asset once placed in service. The credits received during the year will be shown within operating activities in the consolidated statements of cash flows. New Accounting Standards In FINANCIAL CONDITION AND LIQUIDITY Overview The Company’s financial condition remained stable at December 31, Net cash provided from operating activities totaled $318.1 million in 2009, increasing 20.4% from 2008. This increase is primarily due to a reduction in costs incurred on the OUC construction contract, receipt of convertible investment tax credits, and timing of tax payments. Net cash used for investing activities totaled $364.1 million in 2009, increasing 324.5% from 2008. This increase was primarily due to the Nacogdoches and West Georgia acquisitions in October 2009 and December 2009, respectively. Gross property additions to utility plant of $137.1 million in 2009 were primarily related to the construction of the Cleveland County and Nacogdoches facilities. Net cash provided from financing activities was $15.2 million in 2009, compared to $140.6 million used in 2008. This change was primarily due to the issuance of short-term debt in 2009. II-400 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Net cash provided from operating activities totaled $264.3 million in 2008, decreasing
Net cash provided from operating activities totaled $315.4 million in 2007, increasing 29.8% from 2006. This increase was primarily due to the increase in sales due to favorable weather and cash received under billings for the engineering, procurement, and construction services to build a combined cycle unit for the OUC. Net cash used for investing activities totaled $183.9 million in 2007, decreasing 61% from 2006. This decrease was primarily due to the acquisition of Plants DeSoto and Rowan in June 2006 and September 2006, respectively. Gross property additions to utility plant of $139.2 million in 2007 were primarily related to the on-going construction activity at Plant Franklin Unit 3 and the completion of construction at Plant Oleander Unit 5. Net cash used for financing activities was $161.5 million in 2007 compared to $233.4 million provided to the Company in 2006. This change was primarily due to the cash proceeds of $200 million from the issuance of 30-year senior notes in 2006 and borrowings and equity contributions to finance the acquisitions of Plants DeSoto and Rowan. Significant asset changes in the balance sheet during 2008 include increases in accounts receivable related to higher energy revenues due to an increase in natural gas prices, increases in prepaid long-term service agreements Significant Significant liability and stockholder’s equity changes in the balance sheet during 2008 include the payment of short-term debt obligations, increases in affiliate payables due to increases in natural gas and purchased power prices, a reduction of other current liabilities due to payment of IGCC termination costs, and a decrease in the net billings in excess of cost on the OUC construction contract due to on-going construction activities. In 2008, the Company also paid $94.5 Sources of Capital The Company may use operating cash flows, external funds, or equity capital or loans from Southern Company to finance any new projects, acquisitions, and ongoing capital requirements. The Company expects to generate external funds from the issuance of unsecured senior debt and commercial paper or utilization of credit arrangements from banks. However, the amount, type, and timing of any financings, if needed, will depend upon regulatory approval, prevailing market conditions, and other factors. The Company’s current liabilities frequently exceed current assets due to the use of short-term indebtedness as a funding source, as well as cash needs which can fluctuate significantly due to the seasonality of the business. To meet liquidity and capital resource requirements, at December 31, II-401 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report The Company’s commercial paper program is used to finance acquisition and construction costs related to electric generating facilities and for general corporate purposes. At December 31, Management believes that the need for working capital can be adequately met by utilizing cash balances, commercial paper programs, and lines of credit.
Financing Activities During The issuance of all securities by the Company is generally subject to regulatory approval by the FERC. Additionally, with respect to the public offering of securities, the Company files registration statements with the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended (1933 Act). The amounts of securities authorized by the FERC, as well as the amounts registered under the 1933 Act, are continuously monitored and appropriate filings are made to ensure flexibility in the capital markets. Credit Rating Risk The Company does 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 to BBB and Baa2, or BBB- and/or Baa3 or below. These contracts are for physical electricity purchases and sales, fuel purchases, fuel transportation and storage, and energy price risk management. At December 31, In addition, through the acquisition of Plant Rowan, the Company assumed Market Price Risk The Company is exposed to market risks, including changes in interest rates, certain energy-related commodity prices, and, occasionally, currency exchange rates. To manage the volatility attributable to these exposures, the Company takes advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company’s policies in areas such as counterparty exposure and hedging practices. Company policy is that derivatives are to be used primarily for hedging purposes. Derivative positions are monitored using techniques that include market valuation and sensitivity analysis. At December 31, Because energy from the Company’s facilities is primarily sold under long-term PPAs with tolling agreements and provisions shifting substantially all of the responsibility for fuel cost to the counterparties, the Company’s exposure to market volatility in commodity fuel prices and prices of electricity is limited. However, the Company has been and may continue to be exposed to market volatility in energy-related commodity prices as a result of sales of uncontracted generating capacity. II-402 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report The changes in fair value of energy-related derivative contracts were as follows at December 31:
The net hedge positions at December 31, 2009 and December 31, 2008 and respective period end dates that support these changes are as follows:
At December 31, the net fair value of energy-related derivative contracts by hedge designation was reflected in the financial statements as assets/(liabilities) as follows:
Total net unrealized pre-tax gains (losses) recognized in the statements of income for the years ended December 31, 2009 and II-403 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report The maturities of the energy-related derivative contracts and the level of the fair value hierarchy in which they fall at December 31,
The Company is exposed to market-price risk in the event of nonperformance by counterparties to energy-related derivative contracts. The Company’s
Capital Requirements and Contractual Obligations The capital program of the Company is currently estimated to be Other funding requirements related to obligations associated with scheduled maturities of long-term debt, as well as the related interest, leases, derivative obligations, and other purchase commitments are as follows. See Notes 1, 6, 7, and II-404 MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Contractual Obligations
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Southern Power Company and Subsidiary Companies Cautionary Statement Regarding Forward-Looking Statements The Company’s
The Company expressly disclaims any obligation to update any forward-looking statements.
CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 2009, 2008, Southern Power Company and Subsidiary Companies
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2009, 2008, Southern Power Company and Subsidiary Companies
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS At December 31, Southern Power Company and Subsidiary Companies
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS At December 31, Southern Power Company and Subsidiary Companies
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY For the Years Ended December 31,2009, 2008, Southern Power Company and Subsidiary Companies
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2009,2008, and 2007 Southern Power Company and Subsidiary Companies 2009 Annual Report
The accompanying notes are an integral part of these financial statements. II-412 NOTES TO FINANCIAL STATEMENTS Southern Power Company and Subsidiary Companies 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Southern Power Company (the Company) is a wholly-owned subsidiary of Southern Company, which is also the parent company of four traditional operating companies, Southern Company Services, Inc. (SCS), Southern Communications Services, Inc. (SouthernLINC Wireless), Southern Company Holdings, Inc. (Southern Holdings), Southern Nuclear Operating Company, Inc. (Southern Nuclear), and other direct and indirect subsidiaries. The traditional operating companies, Alabama Power Company (APC), Georgia Power Company (GPC), Gulf Power Company (Gulf Power), and Mississippi Power Company, are vertically integrated utilities providing electric service in four Southeastern states. The Company constructs, acquires, owns, and manages generation assets and sells electricity at market-based rates in the wholesale market. SCS, the system service company, provides, at cost, specialized services to Southern Company and its subsidiary companies. SouthernLINC Wireless provides digital wireless communications for use by Southern Company and its subsidiary companies and also markets these services to the public and provides fiber cable services within the Southeast. Southern Holdings is an intermediate holding company subsidiary for Southern Company’s investments in leveraged The Company is subject to regulation by the Federal Energy Regulatory Commission (FERC). The Company follows accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Certain prior years’ data presented in the financial statements have been reclassified to conform to the current year presentation. The financial statements include the accounts of the Company and its wholly-owned subsidiaries, Southern Company — Florida LLC, Oleander Power Project, LP (Oleander), Affiliate Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at amounts in compliance with FERC regulation: general and design engineering, purchasing, accounting and statistical analysis, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, digital wireless communications, labor, and other services with respect to business and operations and In 2003, the Company entered into agreements with APC and GPC under which APC and GPC operated and maintained Plants Dahlberg, Wansley, Franklin, and Harris. GPC also supplied various services for other plants. In August 2007, those agreements were terminated and replaced with service agreements under which APC and GPC provide specifically requested services to the Company. These services are billed at amounts in compliance with FERC regulation on a monthly basis and are recorded as
operations and maintenance expenses in the consolidated statements of income. For the periods ended December 31, 2009, 2008, Total billings for all purchased power agreements (PPAs) in effect with affiliates totaled $485.1 million, $539.6 million, and $505.2 million in 2009, 2008, and II-413 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report The Company and the traditional operating companies generally settle amounts related to the above transactions on a monthly basis in the month following the performance of such services or the purchase or sale of electricity. In 2009, there were no material transactions involving the sale of property to affiliated companies. In 2008, Gulf Power and APC sold turbine rotor assemblies to the Company for $9.4 million and $6.3 million, respectively. Additionally, the Company sold a turbine rotor assembly to APC for $8.2 million and sold a compressor assembly to GPC for $3.9 million. No gain or loss was recognized in the Company’s consolidated statements of income. These affiliate transactions were made in accordance with FERC and state Public Service Commission (PSC) rules and guidelines. In 2007, the Company sold plots of land in Prattville, Alabama and Chilton County, Alabama to APC. The total sales price was $4.3 million and is recorded in “Sale of property to affiliates” on the consolidated statements of cash flows. In addition, the Company sold a turbine rotor to Gulf Power for $7.9 million. No gain or loss was recognized in the Company’s consolidated statements of income. These affiliate transactions were made in accordance with FERC and state PSC rules and guidelines. The Company has been engaged in a strategy of acquiring assets. The Company has accounted for these acquisitions under the purchase method in accordance with generally accepted accounting principles (GAAP). Accordingly, the Company Revenues Capacity is sold at rates specified under contractual terms and is recognized at the lesser of the levelized amount or the amount billable under the contract over the respective contract periods. Energy is generally sold at market-based rates and the associated revenue is recognized as the energy is delivered. Transmission revenues and other fees are recognized as incurred as other operating revenue. Revenues are recorded on a gross basis for all full requirements PPAs. See “Financial Instruments” for additional information. Significant portions of the Company’s revenues have been derived from certain customers pursuant to PPAs. For the year ended December 31, 2009, GPC accounted for 43.7% of total revenues, APC accounted for 6.6% of total revenues, and Sawnee Electric Membership Corporation accounted for 6.0% of total revenues. For the year ended December 31, 2008, GPC accounted for 36.5% of total revenues, Sawnee Electric Membership Corporation accounted for 6.1% of total revenues, and Flint Electric Membership Corporation accounted for 5.3% of total revenues. For the year ended December 31, 2007, GPC accounted for 45.6% of total revenues, APC accounted for 6.9% of total revenues, and Sawnee Electric Membership Corporation accounted for 5.5% of total revenues.
Fuel Costs Fuel costs are expensed as the fuel is consumed. Fuel costs also include emissions allowances which are expensed as the emissions occur. Income and Other Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. In accordance with Convertible Investment Tax Credits Under the American Recovery and Reinvestment Act of 2009, certain costs related to the Nacogdoches plant construction are eligible for investment tax credits (ITCs) or cash grants. The Company has elected to receive ITCs. The credits are recorded as a deferred credit, which will be amortized over the life of the asset, and the tax basis II-414 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report of the asset is reduced by 50% of the credits received, resulting in a deferred tax asset. The Company has elected to recognize the tax benefit of this basis difference as a reduction to income tax expense as costs are incurred during the construction period. This basis difference will reverse and be recorded to income tax expense over the useful life of the asset once placed in service. The credits received during the year will be shown within operating activities in the consolidated statements of cash flows. Property, Plant, and Equipment The Company’s depreciable property, plant, and equipment Property, plant, and equipment is stated at original cost. Original cost includes materials, direct labor incurred by contractors and affiliated companies, minor items of property, and interest capitalized. Interest is capitalized on qualifying projects during the development and construction period. The cost to replace significant items of property defined as retirement units is capitalized. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense as incurred. Depreciation Depreciation of the original cost of assets is computed under the straight-line method and applies a composite depreciation rate based on the assets’ estimated useful lives determined by the Company. The primary assets in property, plant, and equipment are power plants, all of which have an estimated composite depreciable life ranging from A depreciation study was completed and the applicable remaining plant lives and associated depreciation rates were revised in January When property subject to composite depreciation is retired or otherwise disposed of in the normal course of business, its cost is charged to accumulated depreciation. For other property dispositions, the applicable cost and accumulated depreciation is removed from the accounts and a gain or loss is recognized. Asset Retirement Obligations and Other Costs of Removal The present value of the ultimate costs for an asset’s future retirement is recorded in the period in which the liability is incurred. The costs are capitalized as part of the related long-lived asset and depreciated over the asset’s useful life. At December 31, Impairment of Long-Lived Assets and Intangibles The Company evaluates long-lived assets and intangibles for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company’s intangible assets consist of acquired PPAs that are amortized over the term of the PPA and goodwill resulting from acquisitions. The average term of the PPAs is 20 years. The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, as compared with the carrying value of the assets. If
amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. Impairment of goodwill is assessed on an annual basis. For assets identified as held for sale, the carrying value is compared to the estimated fair value less the cost to sell in order to determine if an impairment loss is required. Until the assets are disposed of, their estimated fair value is re-evaluated when circumstances or events change. II-415 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report The amortization expense for the PPAs is as follows:
Deferred Project Development Costs The Company capitalizes project development costs once it is determined that it is probable that a specific site will be acquired and a power plant constructed. These costs include professional services, permits, and other costs directly related to the construction of a new project. These costs are generally transferred to construction work in progress upon commencement of construction. The total deferred project development costs were $9.0 million at December 31, 2009, $8.9 million at December 31, 2008, and $8.4 million at December 31, Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the average costs of generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, at weighted average cost when installed. Fuel Inventory Fuel inventory includes the cost of oil and Financial Instruments The Company uses derivative financial instruments to limit exposure to fluctuations in interest rates, the prices of certain fuel purchases, and electricity purchases and sales. All derivative financial instruments are recognized as either assets or liabilities The Company does not offset fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement. Additionally, the Company had no outstanding collateral repayment obligations or rights to reclaim collateral arising from derivative instruments recognized at December 31, II-416 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report The Company is exposed to losses related to financial instruments in the event of counterparties’ nonperformance. The Company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the Company’s exposure to counterparty credit risk. The
Other Income and (Expense) Other income and (expense) includes non-operating revenues and expenses. Revenues are recognized when earned and expenses are recognized when incurred. The Company has a long-term contract for engineering, procurement, and construction services to build a combined cycle unit for the OUC. Construction activities commenced in 2006 and were substantially completed in 2009. Billings and costs are recognized using the percentage of completion method. The Company utilizes the cost-to-cost approach as this method is less subjective than relying on assessments of physical progress. The percentage of completion represents the percentage of the total costs incurred to the estimated total cost of the contract. Billings and costs are recognized on a net basis by applying this percentage to the total revenues and estimated costs of the contract and are recorded in other income and (expense) in the consolidated statements of income. Net profit recognized under the long-term construction contract for the OUC was $13.3 million in 2009. No profit or loss was recognized in 2008 or 2007. In 2008, the Company received a fee of $6.4 million for participating in an asset auction. The Company was not the successful bidder in the asset auction. Interest related to the construction of new facilities is capitalized in accordance with GAAP. Comprehensive Income The objective of comprehensive income is to report a measure of all changes in common stock equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income consists of net income, 2. ACQUISITIONS AND DIVESTITURES The Company’s acquisition of the
II-417 NOTES (continued) Southern Power The Company’s acquisition of the interests in West Georgia was pursuant to an agreement which included the transfer of all the outstanding membership interests of DeSoto County Generating Company LLC (DeSoto) from The fair value of the
Fair value amounts allocated to materials and supplies and other assets are preliminary estimates pending final application of the Company’s Revenues and expenses recognized by the Company Pro Forma Information The following unaudited pro forma
NOTES (continued) Southern Power Company and Subsidiary Companies 3. CONTINGENCIES AND REGULATORY MATTERS General Litigation Matters The Company is subject to certain claims and legal actions arising in the ordinary course of business. In addition, the Company’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property and other damage, personal injury, common law nuisance, and citizen enforcement of environmental requirements such as opacity and air and water quality standards, has increased generally throughout the United States. In particular, personal injury and other claims for damages caused by alleged exposure to hazardous materials, and common law nuisance claims for injunctive relief and property damage allegedly caused by greenhouse gas and other emissions, have become more frequent. The ultimate outcome of such pending or potential litigation against the Company and its subsidiaries cannot be predicted at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on the Company’s financial statements. FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. In December 2004, the FERC initiated a proceeding to assess Southern Company’s generation
Intercompany Interchange Contract The majority of the Company’s generation fleet is operated under the Intercompany Interchange Contract (IIC), as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine (1) the provisions of the IIC among the traditional operating companies, the Company, and SCS, as agent, under the terms of which the power pool of Southern In October 2006, the FERC issued an order accepting a settlement resolving the proceeding subject to Southern Company’s agreement to accept certain modifications to the settlement’s II-419 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Carbon Dioxide Litigation In February, Other Litigation Common law nuisance claims for injunctive relief and property damage allegedly caused by greenhouse gas emissions have become more frequent, and courts have recently determined that private parties and states have standing to bring such claims. For example, on October 16, 2009, the U.S. Court of Appeals for the Fifth Circuit reversed the U.S. District Court for the Southern District of Mississippi’s dismissal of private party claims against certain oil, coal, chemical, and utility companies alleging damages as a result of Hurricane Katrina. In reversing the dismissal, the U.S. Court of Appeals for the Fifth Circuit held that plaintiffs have standing to assert their nuisance, trespass, and negligence claims and none of these claims are barred by the political question doctrine. The Company is not currently a party to this litigation but was named as a defendant in an amended complaint which was rendered moot in August 2007 by the U.S. District Court for the Southern District of Mississippi when such court dismissed the original matter. The ultimate outcome of this matter cannot be determined at this time. 4. JOINT OWNERSHIP AGREEMENTS The Company is a 65% owner of Plant Stanton A, a combined-cycle project with a nameplate capacity of 630
5. INCOME TAXES Southern Company files a consolidated federal income tax return and combined tax returns for the State of Georgia, the State of Alabama, and the State of Mississippi. Under a joint consolidated income tax allocation agreement, each subsidiary’s current and deferred tax expense is computed on a stand-alone basis, and no subsidiary is allocated more expense than would be paid if it filed a separate income tax return. In accordance with Internal Revenue Service (IRS) regulations, each company is jointly and severally liable for the tax liability. II-420 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Current and Deferred Income Taxes Details of income tax provisions are as follows:
The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows:
Deferred tax liabilities are the result of property related timing differences. The transfer of the Plant McIntosh construction project to GPC in 2004 resulted in a deferred gain for federal income tax purposes. GPC is reimbursing the Company for the related tax liability balance of Deferred tax assets consist primarily of timing differences related to the recognition of capacity revenues and the deferred loss on interest rate swaps reflected in other comprehensive income. The transfer of Plants Dahlberg, Wansley, and Franklin to the Company from GPC in 2001 also resulted in a deferred gain for federal income tax purposes. The Company will reimburse GPC for the related
tax asset of II-421 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Effective Tax Rate A reconciliation of the federal statutory tax rate to the effective income tax rate is as follows:
The American Jobs Creation Act of 2004 created a tax deduction for a portion of income attributable to U.S. production activities as defined in the Internal Revenue Code of 1986, as amended, Section 199 (production activities deduction). The deduction is equal to a stated percentage of qualified production activities net income. The percentage is phased in over the years 2005 through 2010 with a 3% rate applicable to the years 2005 and 2006, a 6% rate applicable for the years 2007 through 2009, and a 9% rate thereafter. Convertible ITCs received in 2009 for the construction of Plant Nacogdoches were $16.8 million; the tax benefit of the basis difference reduced income tax expense by $2.9 million. See Note 1 under “Summary of Significant Accounting Policies — Convertible Investment Tax Credits” for additional information. Unrecognized Tax Benefits Changes during the year in unrecognized tax benefits were as follows:
The Impact on the Company’s effective tax rate, if recognized, is as follows:
NOTES (continued) Southern Power Company and Subsidiary Companies Accrued interest for unrecognized tax
The Company classifies interest on tax uncertainties as interest expense. The Company did not accrue any penalties on uncertain tax positions. It is reasonably possible that the amount of the unrecognized benefit with respect to a majority of the Company’s unrecognized tax positions will increase or decrease within the next 12 months. The possible conclusion or settlement of state audits could impact the balances significantly. At this time, an estimate of the range of reasonably possible outcomes cannot be determined. The IRS has audited and closed all tax returns prior to 2004. The audits for the state returns have either been concluded, or the statute of limitations has expired, for years prior to 6. FINANCING Senior Notes In Bank Credit Arrangements The Company has a $400 million unsecured syndicated revolving credit facility (Facility) expiring in July 2012. The purpose of the Facility is to provide liquidity support to the Company’s commercial paper program and for other general corporate purposes. There were no borrowings outstanding under the Facility at December 31, 2009 and 2008. The Company is required to pay a commitment fee on the unused balance of the Facility. This fee is less than1/8 of 1%. In The Facility contains a covenant that limits the ratio of debt to capitalization (each as defined in the Facility) to a maximum of 65%. The Facility also contains a cross default provision that would be triggered if the Company defaulted on other indebtedness above a specified threshold. As of December 31, The Company has established a commercial paper program. For the year ended December 31,
Dividend Restrictions The Company can only pay dividends to Southern Company out of retained earnings or paid-in-capital. The Facility and the indenture related to certain series of the Company’s senior notes also contain certain limitations on the payment of common stock dividends. No dividends may be paid unless, as of the end of any calendar quarter, the Company’s projected cash flows from fixed priced capacity PPAs are at least 80% of total projected cash flows for the next 12 months or the Company’s debt to capitalization ratio is no greater than 60%. At December 31, II-423 Southern Power Company
7. COMMITMENTS Expansion Program The capital program of the Company is currently estimated to be
Long-Term Service Agreements The Company has entered into Long-Term Service Agreements (LTSAs) with General Electric and Siemens AG for the purpose of securing maintenance support for its combined cycle and combustion turbine generating facilities. In summary, the LTSAs provide that the vendors will perform all planned inspections and certain unplanned maintenance on the covered equipment, which includes the cost of all labor and materials. Scheduled payments to the vendors, which are subject to price escalation, are made at various intervals based on actual operating hours or number of gas turbine starts of the respective units. Total remaining payments to the vendors under these agreements are currently estimated at $1.2 billion over the remaining term of the agreements, which may range up to Payments made to the vendors prior to the performance of any planned inspections or unplanned maintenance are recorded as a prepayment in current assets or deferred charges and other assets on the balance sheets and are recorded as payments pursuant to long-term service agreements in the Fuel and Purchased Power Commitments SCS, as agent for the traditional operating companies and the Company, has entered into various fuel transportation and procurement agreements to supply a portion of the fuel (primarily natural gas) requirements for the operating facilities. In most cases, these contracts contain provisions for firm transportation costs, storage costs, minimum purchase levels, and other financial commitments. Natural gas purchase commitments contain Total estimated minimum long-term obligations at December 31,
Additional commitments for fuel will be required to supply the Company’s future needs. II-424 Notes (continued) Southern Power Company and Subsidary Companies 2009 Annual Report During 2008, the Company entered into agreements to purchase 452 In addition, the Company has entered into an agreement to purchase power of up to 200
Acting as an agent for all of Southern Company’s traditional operating companies and the Company, SCS may enter into various types of wholesale energy and natural gas contracts. Under these agreements, each of the traditional operating companies and the Company may be jointly and severally liable. The creditworthiness of the Company is currently inferior to the creditworthiness of the traditional operating companies; therefore, Southern Company has entered into keep-well agreements with each of the traditional operating companies to ensure they will not subsidize nor be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of the Company as a contracting party under these agreements. Operating Leases The Company has operating lease agreements with various terms and expiration dates. Total operating lease expenses were $0.5 million, $0.5 million, and At December 31,
8. FAIR VALUE MEASUREMENTS
In the case of multiple inputs being used in a fair value measurement, the lowest level input that is significant to the fair value measurement represents the level in the fair value hierarchy in which the fair value measurement is reported.
Southern Power Company and The fair value measurements performed on a recurring basis and the level of the fair value hierarchy in which they fall at December 31,
Energy-related derivatives primarily consist of over-the-counter contracts. See Note As of December 31, 2009, other financial instruments for which the carrying amount did not equal fair value were as follows:
9. DERIVATIVES The Company is exposed to market risks, primarily commodity price risk and interest rate risk. To manage the volatility attributable to these exposures, the Company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company’s policies in areas such as counterparty exposure and risk management practices. The Company’s policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities. Energy-Related Derivatives The Company enters into energy-related derivatives to hedge exposures to electricity, gas, and other fuel price changes. The Company has limited exposure to market volatility in commodity fuel prices and prices of electricity because its long-term sales contracts shift substantially all fuel cost responsibility to the purchaser. However, the Company has been and may continue to be exposed to market volatility in energy-related commodity prices as a result of sales of uncontracted generating capacity. To mitigate residual risks relative to movements in electricity prices, the Company enters into physical fixed-price or heat rate contracts for the purchase and sale of electricity through the wholesale electricity market. To mitigate residual risks relative to movements in gas prices, the Company may enter into fixed-price contracts for natural gas purchases; however, a significant portion of contracts are priced at market. Energy-related derivative contracts are accounted for in one of two methods:
II-426 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report Some energy-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the electric industry. When an energy-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item representing the actual price of the underlying goods being delivered. At December 31, 2009, the net volume of energy-related derivative contracts for power and natural gas positions for the Company, together with the longest hedge date over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest date for derivatives not designated as hedges, were as follows:
For cash flow hedges, the amounts expected to be reclassified from OCI to revenue and fuel expense for the next 12-month period ending December 31, 2010 are losses of $1.1 million and $1.0 million, respectively. Interest Rate Derivatives The Company also enters into interest rate derivatives from time to time, which include forward-starting interest rate swaps, to hedge exposure to changes in interest rates. Derivatives related to existing variable rate securities or forecasted transactions are accounted for as cash flow hedges, where the fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time the hedged transactions affect earnings. The derivatives employed as hedging instruments are structured to minimize ineffectiveness. At December 31, 2009, there were no interest rate derivatives outstanding. The estimated pre-tax loss that will be reclassified from OCI to interest expense for the next 12-month period ending December 31, 2010 is $10.7 million. The Company has deferred gains and losses that are expected to be amortized into earnings through 2016. Derivative Financial Statement Presentation and Amounts At December 31, 2009 and 2008, the fair value of energy-related derivatives was reflected in the balance sheets as follows:
II-427 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report All derivative instruments are measured at fair value. See Note 8 for additional information. For the years ended December 31, 2009, 2008, and 2007, the pre-tax effect of energy-related derivatives and interest rate derivatives designated as cash flow hedging instruments on the statements of income were as follows:
There was no material ineffectiveness recorded in earnings for any period presented. For the years ended December 31, 2009, 2008, and 2007, the pre-tax effect of energy-related derivatives not designated as hedging instruments on the statements of income were as follows:
Contingent Features The Company does 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 derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain affiliated companies. At December 31, 2009, the fair value of derivative liabilities with contingent features was $1.7 million. At December 31, 2009, the Company had no collateral posted with their derivative counterparties; however, because of the joint and several liability features underlying these derivatives, the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, is $33.3 million. Currently, the Company has investment grade credit ratings from the major rating agencies with respect to debt. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Included in these amounts are certain agreements that could require collateral in the event that one or more power pool participants has a credit rating change to below investment grade. II-428 NOTES (continued) Southern Power Company and Subsidiary Companies 2009 Annual Report 10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial information for
The Company’s business is influenced by seasonal weather conditions. Fourth quarter
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA Southern Power Company and Subsidiary Companies
II-430
PART III Items 10, 11, 12 (except for “Equity Compensation Plan Information” which is included herein on page Items 10, 11, 12, 13, and 14 for Alabama Power, Georgia Power, and Mississippi Power are incorporated by reference to the Definitive Information Statements of Alabama Power, Georgia Power, and Mississippi Power relating to each of their respective Items 10, 11, 12, 13, and 14 for Gulf Power are contained herein. Items 10, 11, 12 and 13 for Southern Power are omitted pursuant to General Instruction I(2)(c) of Form 10-K. Item 14 for Southern Power is contained herein. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Identification of directors of Gulf Power.
Each of the above is currently a director of Gulf Power, serving a term running from the last annual meeting of Gulf Power’s shareholders (June There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he or she was or is to be selected as a director, other than any arrangements or understandings with directors or officers of Gulf Power acting solely in their capacities as such. III-1 Identification of executive officers of Gulf Power.
Each of the above is currently an executive officer of Gulf Power, serving a term running from the last annual organizational meeting of the directors (July There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he or she was or is to be selected as an officer, other than any arrangements or understandings with directors or officers of Gulf Power acting solely in their capacities as such. Identification of certain significant employees.None. Family relationships.None. Business experience.Unless noted otherwise, each director has served in his or her present position for at least the past five years. DIRECTORS Gulf Power’s Board of Directors possesses collective knowledge and experience in accounting, finance, leadership, business operations, risk management, corporate governance, and Gulf Power’s industry. Susan N. Story- President and Chief Executive C. LeDon Anchors- Attorney and President of Anchors Smith Grimsley, Attorneys at Law, Fort Walton Beach, Florida. As an attorney, Mr. Anchors areas of practice include real estate, family law, banking, business law, commercial law, corporate law, government, and probate. He is also a director of Beach Community William C. Cramer, Jr.- President and Fred C. Donovan, Sr.- Chairman and Chief Executive Officer of Baskerville-Donovan, Inc. (an architectural and engineering firm), Pensacola, Florida. Mr. Donovan is responsible for establishing the strategic direction and providing the overall management of the firm. He also serves as Chairman of the Baptist Healthcare Board of Directors. Previously, he has served in leadership roles with Chambers of Commerce in his area. III-2 William A. Pullum- Winston E. Scott- Dean, College of Aeronautics, Florida Institute of Technology, Melbourne, Florida since August 2008. He previously served as Vice President and Deputy General Manager, Engineering and Science Contract Group at Jacobs Engineering, Houston, Texas, from 2006 to 2008 and Executive Director of the Florida Space Authority, Cape Canaveral, Florida, from 2003 to 2006. Mr. Scott’s experience also included serving as a pilot in the U.S. Navy and an astronaut with the National Aeronautic and Space Administration. EXECUTIVE OFFICERS P. Bernard Jacob- Vice President of Customer Operations since 2007. He previously served as Vice President of External Affairs and Corporate Services from 2003 to 2007. Philip C. Raymond- Vice President and Chief Financial Officer since April 2008. He previously served as Vice President and Comptroller of Alabama Power from January 2005 to April 2008 and Eastern Region Internal Auditing Director of SCS from September 2003 through January 2005.
Theodore J. McCullough Bentina C. Terry- Vice President of External Affairs and Corporate Services since 2007. She previously served as General Counsel and Vice President of External Affairs for Southern Nuclear from January 2005 to March 2007 and Area Distribution Manager of Georgia Power from February 2004 through January 2005. Involvement in certain legal proceedings.None. Promoters and Certain Control Persons.None. Section 16(a) Beneficial Ownership Reporting Compliance.None. Code of Ethics The registrants collectively have adopted a code of business conduct and ethics that applies to each director, officer, and employee of the registrants and their subsidiaries. The code of business conduct and ethics can be found on Southern Company’s website located at www.southerncompany.com. The code of business conduct and ethics is also available free of charge in print to any shareholder by requesting a copy from Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308. Any amendment to or waiver from the code of ethics that applies to executive officers and directors will be posted on the website. Corporate Governance Southern Company has adopted corporate governance guidelines and committee charters. The corporate governance guidelines and the charters of Southern Company’s Audit Committee, Compensation and Management Succession Committee, Finance Committee, Governance Committee, and Nuclear/Operations Committee can be found on Southern Company’s website located at www.southerncompany.com. The corporate governance guidelines and charters are also available free of charge in print to any shareholder by requesting a copy from Melissa K. Caen, Assistant Corporate Secretary, Southern Company, 30 Ivan Allen Jr. Boulevard NW, Atlanta, Georgia 30308. III-3 ITEM 11. EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS In this Compensation Discussion and Analysis (CD&A) and this Form 10-K, references to the “Compensation Committee” are to the Compensation and Management Succession Committee of the Board of Directors of Southern Company. GUIDING PRINCIPLES AND POLICIES Southern Company, through a single executive compensation program for all officers of its subsidiaries, drives and rewards both Southern Company financial performance and individual business unit performance. This executive compensation program is based on a philosophy that total executive compensation must be competitive with the companies in our industry, must be tied to and motivate our executives to meet our short- and long-term performance goals, The executive compensation program places significant focus on rewarding performance. The program is performance-based in several respects:
In support of the performance-based pay philosophy, we have no general employment contracts with our named executive officers or guaranteed severance, except upon a The pay-for-performance principles apply not only to the named executive officers, but to hundreds of Gulf Power employees. The OVERVIEW OF EXECUTIVE COMPENSATION COMPONENTS The executive compensation program is composed of several components, each of which plays a different role. The III-4
III-5
MARKET DATA For the named executive officers, III-6
Southern Company is one of the largest U.S. utility companies In using this market data, market is defined as the size-adjusted 50th percentile of the data, with a focus on pay opportunities at target performance (rather than actual plan payouts). We did not target a specified weight for base salary or annual or long-term
III-7 grant, both of which As discussed above, the Compensation Committee targets total target compensation opportunities for senior executives as a group at market. Therefore, some executives may be paid somewhat above and others somewhat below market. This practice allows for minor differentiation based on time in the position, scope of responsibilities, and individual performance. The differences in the total pay opportunities for each named executive officer are based almost exclusively on the differences indicated by the market data for persons holding similar positions. In 2008, the Compensation Committee received a detailed comparison of our executive benefits program to the benefits of a group of other large utilities and general industry companies. The results indicated that our overall executive benefits program was at market. Because this data does not change significantly year over year, this study is only updated every few years. DESCRIPTION OF KEY COMPENSATION COMPONENTS The named executive officers are each within a position level with a base salary range that is established under the direction of the Compensation Committee using the market data described above.
2009 Performance-Based Compensation This section describes our performance-based compensation program in 2009. The Compensation Committee approved changes to that program in 2009, to be effective in 2010. These changes are described in the Achieving Operational and Financial Goals — Our Guiding Principle for Our number one priority is to provide our customers outstanding reliability and superior service at low prices while achieving a level of financial performance that benefits Southern Company’s stockholders in the short and long term. In
III-8 In
The The Southern Company Chief Executive Officer, with the assistance of Southern Company’s Human Resources staff, recommends to the Compensation Committee program design and award amounts for senior Program Design The Performance Pay Program is Southern Company’s annual The performance measured by the program uses goals set at the beginning of each year by the Compensation Committee. An illustration of the annual
Business unit financial performance is weighted at 50% of the financial goals. Gulf Power’s financial performance goal is ROE, which is defined as Gulf Power’s net income divided by average equity for the year. For Southern Company Generation, it is calculated using a corporate-wide weighted average of all the business unit financial performance goals, including primarily the ROE of Gulf Power and affiliated companies, Alabama Power, Georgia Power, and Mississippi Power. For Mr. McCullough, the business unit financial goal was weighted 30% Gulf Power ROE and 20% Southern Company Generation financial goal. The Compensation Committee may make adjustments, both positive and negative, to goal achievement for purposes of determining payouts. Such adjustments include the impact of items considered Under the terms of the program, no payout can be made if Southern Company’s current earnings are not sufficient to fund its Common Stock dividend at the same level or higher than the prior year. Goal Details Operational Goals: Customer Reliability — Transmission and distribution system reliability performance is measured by the frequency and duration of outages. Performance targets for reliability are set internally based on historical performance, expected weather conditions, and expected capital expenditures. Availability — Peak season equivalent forced outage rate is an indicator of availability and efficient generation fleet operations during the months when generation needs are greatest. The rate is calculated by dividing the number of hours of forced outages by total generation hours. Safety — Southern Company’s Target Zero program is focused on continuous improvement in having a safe work environment. The performance is measured by the Occupational Safety and Health Administration recordable incident rate. Inclusion/Diversity — The inclusion program seeks to improve our inclusive workplace. This goal includes measures for work environment (employee satisfaction survey), representation of minorities and females in leadership roles, and supplier diversity. Southern Company capital expenditures “gate” or threshold goal — For 2009, Southern Company strived to manage total capital expenditures, excluding nuclear fuel, for the participating business units at or below
For Mr. McCullough, the operational goals were weighted 60% based on Gulf Power’s operational goals and 40% based on Southern Company Generation’s operational goals. III-10 The range of performance levels established for
EPS and Business Unit Financial Performance: The range of EPS and business unit financial goals for
Each named executive officer had a target
8 herein. EPS, as determined in accordance with III-11
Note that the Total Payout Factor may vary from the Total Weighted Financial Performance Factor multiplied by the Actual performance, The table below shows the pay opportunity set in early
Stock Options Options to purchase Common Stock are granted annually and were granted in As
associated performance dividends, was option. The calculation of the III-12
The
More information about the stock option program is contained in the Grant of Plan Based Awards Performance Dividends All option holders, including the named executive officers, can receive performance-based dividend equivalents on stock options held at the end of the year. Performance dividends can range from 0% to 100% of the Common Stock dividend paid during the year per option held at the end of the year. Actual payout will depend on Southern Company’s total shareholder return over a four-year performance measurement period compared to a group of other electric and gas utility companies. The peer group is determined at the beginning of each four-year performance-measurement period. The peer group varies from the Market Data peer group due to the timing and criteria of the peer selection process. The peer group for performance dividends is set by the Compensation Committee at the beginning of the four-year performance-measurement period. However, despite these timing differences, there is substantial overlap in the companies included. Total shareholder return is calculated by measuring the ending value of a hypothetical $100 invested in each company’s common stock at the beginning of each of 16 quarters. In the final year of the performance-measurement period, Southern Company’s ranking in the peer group is determined at the end of each quarter and the percentile ranking is multiplied by the actual Common Stock dividend paid in that quarter. To determine the total payout per stock option held at the end of the performance-measurement period, the four quarterly amounts earned are added together. No performance dividends are paid if Southern Company’s earnings are not sufficient to fund a Common Stock dividend at least equal to that paid in the prior year. The peer group used to determine the
The scale below determined the percentage of III-13
Southern Company’s total shareholder return performance The Compensation Committee selected two peer The companies in the Philadelphia Utility Index are listed below.
The
III-14 The scale below will determine the percentage of each quarter’s dividend paid in the last year of the performance-measurement period to be paid on each option held at December 31,
See the Grants of Plan-Based Awards Timing of As discussed above, Southern Company EPS and Gulf Power’s financial performance goal for the
Post-Employment Compensation As mentioned above, we provide certain post-employment compensation to employees, including the named executive officers: Retirement Benefits Generally, all full-time employees of Gulf Power, including the named executive officers, participate in our funded Pension Plan after completing one year of service. Normal retirement benefits become payable when participants both attain age 65 and complete five years of participation. We also provide unfunded benefits that count salary and annual Gulf Power also provides the Deferred Compensation Plan which is an unfunded plan that permits participants to defer income as well as certain federal, state, and local taxes until a specified date or their retirement, disability, death, or other separation from service. Up to 50% of base salary and up to 100% of Change-in-Control Protections The Compensation Committee initially approved the change-in-control protection program in 1998. The program III-15 participants, payment and vesting would occur only upon the occurrence of both an actual Change-in-control protections, including severance pay and, in some situations, vesting or payment of long-term If the conditions described above are met, the named executive officers are entitled to severance payments equal to Prior to the More information about post-employment compensation, including severance arrangements under our change-in-control program, is included in the section entitled Potential Payments upon Termination or
Executive Stock Ownership Requirements Effective January 1, 2006, the Compensation Committee adopted Common Stock ownership requirements for officers of Southern Company and its subsidiaries that are in a position of The types of ownership arrangements counted toward the requirements are shares owned outright, those held in Southern Company-sponsored plans, and Common Stock accounts in the Deferred Compensation Plan and the Supplemental Benefit Plan. One-third of vested Southern Company stock options may be counted, but if so, the ownership requirement is doubled. The requirements are expressed as a multiple of base salary as per the table below.
Current officers have until September 30, 2011 to meet the applicable ownership requirement. Newly-elected officers have five years from the date of their election to meet the applicable ownership requirement. III-16 Impact of Accounting and Tax Treatments on Compensation None of the compensation paid to Policy on Recovery of Awards Southern Company’s 2006 Omnibus Incentive Compensation Plan provides that if Southern Company or Gulf Power is required to prepare an accounting restatement due to material noncompliance as a result of misconduct, and if an executive officer knowingly or grossly negligently engaged in or failed to prevent the misconduct or is subject to automatic forfeiture under the Sarbanes-Oxley Act of 2002, the executive officer will reimburse Gulf Power the amount of any payment in settlement of awards earned or accrued during the 12-month period following the first public issuance or filing that was restated. Southern Company Policy Regarding Hedging the Economic Risk of Stock Ownership Southern Company’s policy is that insiders, including outside directors, will not trade in Southern Company options on the options market and will not engage in short sales. 2010 Executive Compensation Program Changes In 2009, the Compensation Committee made certain key changes to the performance-based compensation program that affect all employees of Gulf Power, including the named executive officers. Changes were made to both the annual and long-term performance-based compensation programs. Annual Performance Pay Program For annual performance-based compensation to be earned in 2010, the Compensation Committee changed the goal weights and lowered the maximum payout opportunity. Under the program in effect since 2000, the 2009 goals were weighted 50% EPS and 50% ROE with an adjustment of plus or minus 10% based on operational goal performance. The maximum payout opportunity was 220% of the target opportunity. (For more information, see the description of the Performance Pay Program in the 2009 Performance Based Compensation section in this CD&A.) Under the program effective in 2010, the goals are weighted one-third EPS, one-third ROE, and one-third operational goals. The maximum payout opportunity is reduced to 200% of target. Long-Term Performance-Based Compensation Program The long-term performance-based compensation program that has been in effect for many years has consisted of stock options with associated performance dividends. Effective in 2010, stock options were granted without associated performance dividends. Performance dividends accounted for approximately 64% of the total long-term performance-based compensation target value for 2009. In 2010, stock options represent 40% of the total value and a new long-term performance-based compensation component was granted: performance share units. Performance share units represent 60% of the total long-term performance-based compensation target value. A grant date fair value per unit is determined. For the grant made in 2010, the value per unit was $30.13. The total target value for performance share units is divided by the value per unit to determine the number of performance share units granted to each participant, including the named executive officers. Each performance share unit represents one share of Common Stock. At the end of a three-year performance-measurement period, the number of units will be adjusted up or down (zero to 200%) based on Southern Company’s total shareholder return relative to that of its peers in the Philadelphia Utility Index and the custom peer group. (The performance metric, performance scale, and the peer groups used for the performance share units are the same as that currently used for the Performance Dividend Program.) The number of performance share units earned will be paid in Common Stock. No dividends or dividend equivalents will be paid or earned on the performance share units. The Compensation Committee also approved a transition period for the Performance Dividend Program. There are three performance-measurement periods that are still open: 2007-2010, 2008-2011, and 2009-2012. For these open
periods, the performance at the end of each period will be determined as described above in this CD&A, and the amount earned will be paid on the number of stock options granted prior to 2010 that a participant holds at the end of each period. Therefore, there will be three additional payouts under the Performance Dividend Program, but the number of stock options upon which payment will be based will be limited to those granted prior to 2010. COMPENSATION COMMITTEE REPORT The Compensation Committee met with management to review and discuss the CD&A. Based on such review and discussion, the Compensation Committee recommended to the Southern Company Board of Directors that the CD&A be included in Gulf Power’s Annual Report on Form 10-K for the fiscal year ended December 31, Members of the Compensation Committee: J. Neal Purcell, Chair H. William Habermeyer, Jr. Donald M. James III-18 SUMMARY COMPENSATION TABLE The Summary Compensation Table shows the amount and type of compensation received by the Chief Executive Officer, any Chief Financial Officer, and the next three most highly-paid executive officers who served in
Column (e) No equity-based compensation has been awarded to the named executive officers, or any other employees of Gulf Power, other than Stock Option Awards which are reported in column (f). Column (f) This column reports the III-19
Column (g) The amounts in this column are the aggregate of the payouts under the annual
This column reports the aggregate change in the actuarial present value of each named executive officer’s accumulated benefit under the Pension Plan and the supplemental pension plans (collectively, Pension Benefits) during The For more information about the Pension Benefits and the assumptions used to calculate the actuarial present value of accumulated benefits as of December 31,
III-20
This column also reports above-market earnings on deferred compensation under the Deferred Compensation Plan (DCP). There were no above-market earnings on deferred compensation in
The table below itemizes the amounts reported in this column.
Column (i) This column reports the following items: perquisites; tax reimbursements by the employing company on certain perquisites; the employing company’s contributions in The amounts reported are itemized below.
III-21 Description of Perquisites Personal Financial Planningis provided for most officers of Gulf Power, including all of the named executive officers. Gulf Power pays for the services of the financial planner on behalf of the officers, up to a maximum amount of $8,700 per year, after the initial year that the benefit is provided. In the initial year, the allowed amount is $15,000. The employing company also provides a five-year allowance of $6,000 for estate planning and tax return preparation fees. Personal Use of Company-Provided Club Memberships.The employing company provides club memberships to certain officers, including all of the named executive officers. The memberships are provided for business use; however, personal use is permitted. The amount included reflects the pro-rata portion of the membership fees paid by the employing company that are attributable to the named executive officers’ personal use. Direct costs associated with any personal use, such as meals, are paid for or reimbursed by the employee and therefore are not included.
Relocation Benefits.These benefits are provided to cover the costs associated with geographic relocation. In Personal Use of Corporate-Owned Aircraft.Southern Company owns aircraft that are used to facilitate business travel. Home Security Systems.Gulf Power pays for the services of third-party providers for the installation, maintenance, and monitoring of Other Miscellaneous Perquisites.The amount included reflects the full cost to Gulf Power of providing the following items: personal use of company provided tickets for sporting and other entertainment events and gifts distributed to and activities provided to attendees at company-sponsored events. For Ms. Story, effective in 2009, tax reimbursements are no longer made on perquisites, except on any relocation benefits. III-22 GRANTS OF PLAN-BASED AWARDS MADE IN
Columns (c), (d), and (e) The amounts reported as PPP reflect the amounts established by the Compensation Committee in early Southern Company also has a long-term In February III-23 of the final year of the performance-measurement period. Also, nothing is earned unless Southern Company’s earnings are sufficient to fund a Common Stock dividend at least equal to that paid in the prior year. The The number of options held on December 31, The amounts reported as PDP in columns (c), (d), and (e) were calculated based on the number of options held by the named executive officers on December 31,
More information about the Columns (f) The stock options vest at the rate of one-third per year, on the anniversary date of the grant. Also, grants fully vest upon termination as a result of death, total disability, or retirement and expire five years after retirement, three years after death or total disability, or their normal expiration date if earlier. Please see Potential Payments The Compensation Committee granted these stock options to the named executive officers at its regularly-scheduled meeting on February Column The value of stock options granted in
OUTSTANDING EQUITY AWARDS AT This table provides information pertaining to all outstanding stock options held by the named executive officers as of December 31,
Stock options vest one-third per year on the anniversary of the grant date. Options granted from 2002 through
Options also fully vest upon death, total disability, or retirement and expire three years following death or total disability or five years following retirement, or on the original expiration date if earlier. Please see Potential Payments OPTION EXERCISES AND STOCK VESTED IN None of the named executive officers exercised stock options in 2009 and none were granted Stock Awards.
PENSION BENEFITS AT
The named executive officers earn employer-paid pension benefits from three III-26 The Pension Plan is a tax-qualified, funded plan. It is Southern Company’s primary retirement plan. Generally, all full-time employees participate in this plan after one year of service. Normal retirement benefits become payable when participants both attain age 65 and complete five years of participation. The plan benefit equals the greater of amounts computed using a “1.7% offset formula” and a “1.25% formula,” as described below. Benefits are limited to a statutory maximum. The 1.7% offset formula amount equals 1.7% of final average pay times years of participation less an offset related to Social Security benefits. The offset equals a service ratio times 50% of the anticipated Social Security benefits in excess of $4,200. The service ratio adjusts the offset for the portion of a full career that a participant has worked. The highest three rates of pay out of a participant’s last 10 calendar years of service are averaged to derive final average pay. The pay considered for this formula is the base rate of pay reduced for any voluntary deferrals. A statutory limit restricts the amount considered each year; the limit for The 1.25% formula amount equals 1.25% of final average pay times years of participation. For this formula, the final average pay computation is the same as above, but annual Early retirement benefits become payable once plan participants have during employment both attained age 50 and completed 10 years of participation. Participants who retire early from active service receive benefits equal to the amounts computed using the same formulas employed at normal retirement. However, a 0.3% reduction applies for each month (3.6% for each year) prior to normal retirement that participants elect to have their benefit payments commence. For example, 64% of the formula benefits are payable starting at age 55. As of December 31, The Pension Plan’s benefit formulas produce amounts payable monthly over a participant’s post-retirement lifetime. At retirement, plan participants can choose to receive their benefits in one of seven alternative forms of payment. All forms pay benefits monthly over the lifetime of the retiree or the joint lifetimes of the retiree and a spouse. A reduction applies if a retiring participant chooses a payment form other than a single life annuity. The reduction makes the value of the benefits paid in the form chosen comparable to what it would have been if benefits were paid as a single life annuity over the retiree’s life. Participants vest in the Pension Plan after completing five years of service. All the named executive officers are vested in their Pension Plan benefits. Participants who terminate employment after vesting can elect to have their pension benefits commencing at age 50 if they participated in the Pension Plan for 10 years. If such an election is made, the early retirement reductions that apply are actuarially determined factors and are larger than 0.3% per month. If a participant dies while actively employed, benefits will be paid to a surviving spouse. A survivor’s benefit equals 45% of the monthly benefit that the participant had earned before his or her death. Payments to a surviving spouse of a participant who could have retired will begin immediately. Payments to a survivor of a participant who was not If participants become totally disabled, periods that Social Security or
The Southern Company Supplemental Benefit Plan (Pension-Related) (SBP-P) The SBP-P is an unfunded retirement plan that is not tax qualified. This plan provides to high-paid employees any benefits that the Pension Plan cannot pay due to statutory pay/benefit limits and voluntary pay deferrals. The SBP-P’s vesting, early retirement, and disability provisions mirror those of the Pension Plan. The amounts paid by the SBP-P are based on the additional monthly benefit that the Pension Plan would pay if the statutory limits and pay deferrals were ignored. When an SBP-P participant separates from service, vested monthly benefits provided by the benefit formulas are converted into a single sum value. It equals the present value of what would have been paid monthly for an actuarially determined average post-retirement lifetime. The discount rate used in the calculation is based on the 30-year Treasury yields for the September preceding the calendar year of separation, but not more than six percent. Vested participants terminating prior to becoming eligible to retire will be paid their single sum value as of September 1 following the calendar year of separation. If the terminating participant is retirement eligible, the single sum value will be paid in 10 annual installments starting shortly after separation. The unpaid balance of a retiree’s single sum will be credited with interest at the prime rate published in The Wall Street If an SBP-P participant dies after becoming vested in the Pension Plan, the spouse of the deceased participant will receive the installments the participant would have been paid upon retirement. If a vested participant’s death occurs prior to age 50, the installments will be paid to a survivor as if the participant had survived to age 50. The Southern Company Supplemental Executive Retirement Plan (SERP) The SERP also is an unfunded retirement plan that is not tax qualified. This plan provides to The following assumptions were used in the present value calculations:
For all of the named executive officers, the number of years of credited service is one year less than the number of years of employment. III-28 NONQUALIFIED DEFERRED COMPENSATION AS OF
Southern Company provides the DCP which is designed to permit participants to defer income as well as certain federal, state, and local taxes until a specified date or their retirement, or other separation from service. Up to 50% of base salary and up to 100% of Participants have two options for the deemed investments of the amounts deferred — the Stock Equivalent Account and the Prime Equivalent Account. Under the terms of the DCP, participants are permitted to transfer between investments at any time. The amounts deferred in the Stock Equivalent Account are treated as if invested at an equivalent rate of return to that of an actual investment in Common Stock, including the crediting of dividend equivalents as such are paid by Southern Company from time to time. It provides participants with an equivalent opportunity for the capital appreciation (or loss) and income Alternatively, participants may elect to have their deferred compensation deemed invested in the Prime Equivalent Account which is treated as if invested at a prime interest rate compounded monthly, as published in Column (b) This column reports the actual amounts of compensation deferred under the DCP by each named executive officer in
Column (c) This column reflects contributions under the SBP. Under the Code, employer matching contributions are prohibited under the ESP on employee contributions above stated limits in the ESP, and, if applicable, above legal limits set forth in the Code. The SBP is a nonqualified deferred compensation plan under which contributions are made that are prohibited from being made in the ESP. The contributions are treated as if invested in Common Stock and are payable in cash upon termination of employment in a lump sum or in up to 20 annual installments, at the election of III-29 the participant. The amounts reported in this column also were Column (d) This column reports earnings or losses on both compensation the named executive officers elected to defer and Column (f) This column includes amounts that were deferred under the DCP and contributions under the SBP in prior years and reported in Gulf Power’s prior years’ Information Statements or Annual Reports on Form 10-K. The chart below shows the amounts reported in Gulf Power’s prior years’ Information Statements or Annual Reports on Form 10-K.
POTENTIAL PAYMENTS UPON TERMINATION OR This section describes and estimates payments that could be made to the named executive officers under different termination and change-in-control events. The estimated payments would be made under the terms of Southern Company’s compensation and benefits programs or the change-in-control severance program. All of the named executive officers are participants in Southern Company’s change-in-control severance plan for officers. Description of Termination and Change-in-Control Events The following charts list different types of termination and change-in-control events that can affect the treatment of payments under the compensation and benefit programs. These events also affect payments to the named executive officers under their change-in-control severance agreements. No payments are made under the severance
agreements unless, within two years of the Traditional Termination Events
III-30
Change-in-Control-Related Events At the Southern Company or Gulf Power level:
At the employee level: Involuntary Change-in-Control Termination or Voluntary Change-in-Control Termination for Good Reason – Employment is terminated within two years of a
The following chart describes the treatment of different pay and benefit elements in connection with the Traditional Termination Events described above.
The chart below describes the treatment of payments under pay and benefit programs under different change-in-control events, except the Pension Plan. The Pension Plan is not affected by change-in-control events.
Potential Payments This section describes and estimates payments that would become payable to the named executive officers upon a termination or Pension Benefits The amounts that would have become payable to the named executive officers if the Traditional Termination Events occurred as of December 31, III-34 present values of all the benefits amounts anticipated to be paid over the lifetimes of the named executive officers and their spouses. Those plans are described in the notes following the Pension Benefits
As described in the Change-in-Control Chart, the only change in the form of payment, acceleration, or enhancement of the pension benefits is that the single sum value of benefits earned up to the change-in-control date under the SBP-P and the SERP could be paid as a single payment rather than in 10 annual installments. Also, the SERP benefits vest for participants who are not
The pension benefit amounts in the tables above were calculated as of December 31, Annual Performance Pay Program The amount payable if a change in control had occurred on December 31, 2009 is the greater of target or actual performance. Because actual payouts for 2009 performance were below the target level, the amount that would have been payable was the target level amount as reported in the Grants of Plan-Based Awards table.
Performance Dividends Because the assumed termination date is December 31, However, under the Change-in-Control-Related Events, performance dividends are payable at the greater of target performance or actual performance. For the Stock Options Stock Options would be treated as described in the Termination and Change-in-Control charts above. Under a Southern Company Termination, all stock options vest. In addition, if there is an Involuntary Change-in-Control Termination or Voluntary Change-in-Control Termination for Good Reason, stock options vest. There is no payment associated with stock options unless there is a Southern Company Termination and the participants’ stock options cannot be converted into surviving company stock options. In that event, the excess of the exercise price and the closing price of the Common Stock on December 31,
DCP and SBP The aggregate balances reported in the Nonqualified Deferred Compensation Health Benefits Messrs. III-36 Financial Planning Perquisite Since Messrs. There are no other perquisites provided to the named executive officers under any of the traditional termination or change-in-control-related events. Severance Benefits The named executive officers are participants in a change-in-control severance plan. In addition to the treatment of health benefits, the annual The estimated cost of providing the six months of outplacement services is $6,000 per named executive officer. The severance payment is three times the base salary and target payout under the annual
The table below estimates the severance payments that would be made to the named executive officers if they were terminated as of December 31,
COMPENSATION RISK ASSESSMENT Southern Company reviewed its compensation policies and practices, including those of Gulf Power, and concluded that excessive risk-taking is not encouraged. This conclusion was based on an assessment of the mix of pay components and performance goals, the annual pay/performance analysis by the Compensation Committee’s consultant, stock ownership requirements, our compensation governance practices, and our “claw-back” provision. The assessment was reviewed with the Compensation Committee. III-37 DIRECTOR COMPENSATION Only non-employee directors of Gulf Power are compensated for service on the board of directors. The pay components for non-employee directors are: Annual retainers: $12,000 annual retainer Equity grants: 340 shares of Common Stock in quarterly grants of 85 shares Meeting fees:
DIRECTOR DEFERRED COMPENSATION PLAN Any deferred quarterly equity grants are required to be deferred in the Deferred Compensation Plan For Directors of Gulf Power Company (Director Deferred Compensation Plan) and are invested in Common Stock units which earn dividends as if invested in Common Stock. Earnings are reinvested in additional stock units. Upon leaving the board, distributions are made in shares of Common Stock. In addition, directors may elect to defer up to 100% of their remaining compensation in the Director Deferred Compensation Plan until membership on the board ends. Deferred compensation may be invested as follows, at the director’s election:
All investments and earnings in the Director Deferred Compensation Plan are fully vested and, at the election of the director, may be distributed in a lump sum payment or in up to 10 annual distributions after leaving the board.
DIRECTOR COMPENSATION TABLE The following table reports all compensation to Gulf Power’s non-employee directors during
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee is made up of non-employee directors of Southern Company who have never served as executive officers of Southern Company or Gulf Power. During
Security Ownership of Certain Beneficial Owners.Southern Company is the beneficial owner of 100% of the outstanding common stock of Gulf Power.
Security Ownership of Management.The following tables show the number of shares of Common Stock owned by the directors, nominees, and executive officers as of December 31,
Changes in Control.Southern Company and Gulf Power know of no arrangements which may at a subsequent date result in any change-in-control.
Equity Compensation Plan Information The following table provides information as of December 31,
Transactions with Related Persons. Review, Approval or Ratification of Transactions with Related Persons. Gulf Power does not have a written policy pertaining solely to the approval or ratification of “related party transactions.” Southern Company has a Code of Ethics as well as a Contract Guidance Manual and other formal written procurement policies and procedures that guide the purchase of goods and services, including requiring competitive bids for most transactions above $10,000 or approval based on documented business needs for sole sourcing arrangements.
Director Independence. The board of directors of Gulf Power consists of five non-employee directors (Messrs. C. LeDon Anchors, William C. Cramer, Jr., Fred C. Donovan, Sr., William A. Pullum, and Winston E. Scott) and Ms. Story, the president and chief executive officer of Gulf Power. Southern Company owns all of Gulf Power’s outstanding common ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following represents the fees billed to Gulf Power and Southern Power for the last two fiscal years by Deloitte & Touche LLP, each company’s principal public accountant for
The Southern Company Audit Committee (on behalf of Southern Company and its subsidiaries) adopted a Policy of Engagement of the Independent Auditor for Audit and Non-Audit Services that includes requirements for such Audit Committee to pre-approve audit and non-audit services provided by Deloitte & Touche LLP. All of the audit services provided by Deloitte & Touche LLP in fiscal years
PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
IV-1 THE SOUTHERN COMPANY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
IV-2 ALABAMA POWER COMPANY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
IV-3 GEORGIA POWER COMPANY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
IV-4 GULF POWER COMPANY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
IV-5 MISSISSIPPI POWER COMPANY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
IV-6 SOUTHERN POWER COMPANY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
IV-7 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Southern Company We have audited the consolidated financial statements of Southern Company and Subsidiaries (the “Company”) as of December 31, /s/ Deloitte & Touche LLP Atlanta, Georgia February 25,
IV-8 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Alabama Power Company We have audited the financial statements of Alabama Power Company (the “Company”) as of December 31, /s/ Deloitte & Touche LLP Birmingham, Alabama February 25,
IV-9 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Georgia Power Company We have audited the financial statements of Georgia Power Company (the “Company”) as of December 31, /s/ Deloitte & Touche LLP Atlanta, Georgia February 25,
IV-10 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Gulf Power Company We have audited the financial statements of Gulf Power Company (the “Company”) as of December 31, /s/ Deloitte & Touche LLP Atlanta, Georgia February 25,
IV-11 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Mississippi Power Company We have audited the financial statements of Mississippi Power Company (the “Company”) as of December 31, /s/ Deloitte & Touche LLP Atlanta, Georgia February 25, Deloitte Touche Tohmatsu IV-12 INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedules I through V not listed above are omitted as not applicable or not required. A Schedule II for Southern Power Company and Subsidiary Companies is not being provided because there were no reportable items for the three-year period ended December 31, S-1 Schedule Of Valuation And Qualifying Accounts Disclosure THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, (Stated in Thousands of Dollars)
S-2 ALABAMA POWER COMPANY SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, (Stated in Thousands of Dollars)
S-3 GEORGIA POWER COMPANY SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, (Stated in Thousands of Dollars)
S-4 GULF POWER COMPANY SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, (Stated in Thousands of Dollars)
S-5 MISSISSIPPI POWER COMPANY SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, (Stated in Thousands of Dollars)
S-6 EXHIBIT INDEX The
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E-5
E-6
E-7
E-8
E-9
E-10
E-11
E-12
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E-14
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E-18
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E-20 |