~~Georgia Power~~

~~Georgia Power's~~traditional operating companies may also have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPAs.

Wholesale Revenues



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(71)		(15.2)

Wholesale revenues consist of PPAs primarily with investor-owned utilities and electric cooperatives and short-term opportunity sales. Wholesale revenues from regulated retail operations are collected through various rate mechanisms subject to the oversight of the Georgia PSC. Georgia Power currently recovers its costs from the regulated retail business through the 2013 ARP, which includes traditional base tariff rates, Demand-Side Management (DSM) tariffs, Environmental Compliance Cost Recovery (ECCR) tariffs,PPAs (other than solar and Municipal Franchise Fee (MFF) tariffs. In addition, financing costs related to the construction of Plant Vogtle Units 3 and 4 are being collected through the NCCR tariff and fuel costs are collected through separate fuel cost recovery tariffs. See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Georgia Power" in Item 8 of the Form 10-K for additional information.

~~Renewables Development~~

As part of the Georgia Power Advanced Solar Initiative program, Georgia Power executed ten PPAs that were approved by the Georgia PSC in 2014 and provide for the purchase of energy from 515 MWs of solar capacity. These PPAs are expected to commence in December 2015 and 2016 andwind PPAs) have terms ranging from 20 to 30 years. As a result of certain acquisitions by Southern Power, Georgia Power expects that 249 MWs of the 515 MWs of contracted capacity will be purchased from solar facilities owned or under development by Southern Power.

~~On June 15, 2015, Georgia Power executed a PPA to purchase a total of 58 MWs of biomass~~both capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment. Energy revenues will vary depending on fuel prices, the market prices of wholesale energy compared to the Southern Company system's generation, demand for energy within the Southern Company system's service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Wholesale revenues at Mississippi Power include FERC-regulated municipal and rural association sales as well as market-based sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above the Southern Company system's variable cost to produce the energy.

In the first quarter 2016, wholesale revenues were $396 million compared to $467 million for the corresponding period in 2015 related to a $43 million decrease in capacity revenues and a $28 million decrease in energy revenues. The decrease in capacity revenues was primarily due to a PPA remarketing from ~~a 79-MW facility in Georgia that will begin in 2017 and end in 2047. This PPA was approved by the Georgia PSC on April 15, 2015.~~non-affiliate to affiliate at Southern Power, unit retirements at Georgia Power, ~~also entered into an energy-only PPA for~~milder weather and decreased usage at Mississippi Power, and the ~~remaining 21 MWs from the same facility.~~

~~On July 21, 2015, the Georgia PSC approved Georgia Power's request to build, own, and operate~~expiration of a ~~46-MW solar generation facility at a U.S. Marine Corps base in Albany, Georgia by the end of 2016.~~

~~Integrated Resource Plan~~

~~To comply with the April 16, 2015 effective date of the MATS rule,~~ Plant Branch Units 1, 3, and 4 (1,266 MWs), Plant Yates Units 1 through 5 (579 MWs), and Plant McManus Units 1 and 2 (122 MWs) were retired on April 15, 2015. In addition, operations were discontinued at Plant MitchellScherer Unit 3 ~~(155 MWs) and its decertification will be requested~~power sales agreement at Gulf Power. The decrease in connection with the triennial Integrated Resource Plan in 2016. The switch to natural gas as the primary fuel is complete at Plant Yates Units 7 and 6 and the units were returned to service on May 4, 2015 and June 27, 2015, respectively.

~~Gulf Power~~

~~Renewables~~

~~On April 16, 2015, the Florida PSC approved three~~ energy purchase agreements totaling 120 MWs of utility-scale solar generation located at three military installations in northwest Florida. On May 5, 2015, the Florida PSC approved an energy purchase agreement for up to 178 MWs of wind generation in central Oklahoma. Purchases under these agreements will be for energy only and will be recovered through Gulf Power's fuel cost recovery mechanism.

~~Mississippi Power~~

~~2015 Rate Case~~

~~On May 15, 2015 and July 10, 2015, Mississippi Power filed alternative rate proposals~~revenues was primarily related to ~~recovery of Kemper IGCC-related costs with the Mississippi PSC.~~ lower fuel costs.

See ~~Note (B) to the Condensed Financial Statements under "Integrated Coal Gasification Combined Cycle~~ FUTURE EARNINGS POTENTIAL – ~~Rate Recovery of Kemper IGCC Costs~~ – ~~2015 Rate Case"~~"Other Matters" herein for additional ~~information.~~information regarding the expiration of long-term sales agreements at Gulf Power for Plant Scherer Unit 3, which will impact future wholesale earnings.

Other Electric Revenues



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$18		11.0

In the first quarter 2016, other electric revenues were $181 million compared to $163 million for the corresponding period in 2015. The increase was primarily due to an adjustment for customer temporary facilities service revenues at Georgia Power.

Fuel and Purchased Power Expenses



	First Quarter 2016 vs. First Quarter 2015
	(change in millions)			(% change)
Fuel	$	(301	)	(24.8)
Purchased power	21			14.6
Total fuel and purchased power expenses	$	(280	)

In the first quarter 2016, total fuel and purchased power expenses were $1.1 billion compared to $1.4 billion for the corresponding period in 2015. The decrease was primarily the result of a $223 million decrease in the average cost

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~~Renewables~~of fuel and purchased power primarily due to lower natural gas and coal prices and a $145 million decrease in the volume of KWHs generated, partially offset by an $88 million increase in the volume of KWHs purchased.

Fuel and purchased power energy transactions at the traditional operating companies are generally offset by fuel revenues and do not have a significant impact on net income. See FUTURE EARNINGS POTENTIAL – "Retail Regulatory Matters – Retail Fuel Cost Recovery" herein for additional information. Fuel expenses incurred under Southern Power's PPAs are generally the responsibility of the counterparties and do not significantly impact net income.

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



	First Quarter 2016	First Quarter 2015
Total generation (billions of KWHs)	44	46
Total purchased power (billions of KWHs)	4	3
Sources of generation (percent) —
Coal	27	33
Nuclear	17	16
Gas	47	47
Hydro	7	3
Other Renewables	2	1
Cost of fuel, generated (cents per net KWH) —
Coal	3.24	3.70
Nuclear	0.82	0.67
Gas	2.16	2.71
Average cost of fuel, generated (cents per net KWH)	2.23	2.71
Average cost of purchased power (cents per net KWH)^(*)	5.27	7.18


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

Fuel

In ~~April~~the first quarter 2016, fuel expense was $911 million compared to $1.2 billion for the corresponding period in 2015. The decrease was primarily due to a 21.9% decrease in the volume of KWHs generated by coal, a 20.3% decrease in the average cost of natural gas per KWH generated, a 12.4% decrease in the average cost of coal per KWH generated, and ~~May 2015, Mississippi~~an 83.1% increase in the volume of KWHs generated by hydro facilities resulting from more rainfall.

Purchased Power ~~entered into separate PPAs~~

In the first quarter 2016, purchased power expense was $165 million compared to $144 million for ~~three solar facilities~~the corresponding period in 2015. The increase was primarily due to a 50.8% increase in the volume of KWHs purchased, partially offset by a 26.6% decrease in the average cost per KWH purchased primarily as a result of lower natural gas and coal prices.

Energy purchases will vary depending on demand for ~~a combined total~~energy within the Southern Company system's service territory, the market prices of ~~approximately 105 MWs. Mississippi Power would purchase all~~wholesale energy as compared to the cost of the ~~energy produced~~Southern Company system's generation, and the availability of the Southern Company system's generation.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other Operations and Maintenance Expenses



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(16)		(1.4)

In the first quarter 2016, other operations and maintenance expenses were $1.11 billion compared to $1.12 billion for the corresponding period in 2015. The decrease was primarily due to a decrease in scheduled outage and maintenance costs at generation facilities and a decrease in employee compensation and benefits including pension costs.

Depreciation and Amortization



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$54		11.1

In the first quarter 2016, depreciation and amortization was $541 million compared to $487 million for the corresponding period in 2015. The increase was primarily due to a $43 million increase related to additional plant in service at the traditional operating companies and Southern Power. Also contributing to the increase, Gulf Power recorded $14 million less of a reduction in depreciation in the first three months of 2016 compared to the corresponding period in 2015, as authorized by the ~~solar facilities for~~Florida PSC in a settlement agreement.

See Note 3 to the ~~25-year term~~financial statements of Southern Company under "Retail Regulatory Matters – Gulf Power – Retail Base Rate Case" in Item 8 of the ~~contracts. If approved~~Form 10-K and Note (B) to the Condensed Financial Statements under "Retail Regulatory Matters – Gulf Power – Retail Base Rate Case" herein for additional information.

Estimated Loss on Kemper IGCC



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$44		N/M

N/M – Not meaningful

In the first quarter 2016 and 2015, estimated probable losses on the Kemper IGCC of $53 million and $9 million, respectively, were recorded at Southern Company. These losses reflect revisions of estimated costs expected to be incurred on Mississippi Power's construction of the Kemper IGCC in excess of the $2.88 billion cost cap established by the Mississippi PSC, net of $245 million of grants awarded to the project by the DOE under the Clean Coal Power Initiative Round 2 (Initial DOE Grants) and excluding the cost of the lignite mine and equipment, the cost of the CO₂ pipeline facilities, AFUDC, and certain general exceptions, including change of law, force majeure, and beneficial capital (which exists when Mississippi Power demonstrates that the purpose and effect of the construction cost increase is to produce efficiencies that will result in a neutral or favorable effect on customers relative to the original proposal for the CPCN) (Cost Cap Exceptions). See FUTURE EARNINGS POTENTIAL – "Construction Program – Integrated Coal Gasification Combined Cycle" and Note (B) to the Condensed Financial Statements under "Integrated Coal Gasification Combined Cycle" herein for additional information.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Allowance for Equity Funds Used During Construction



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(10)		(15.9)

In the first quarter 2016, AFUDC equity was $53 million compared to $63 million for the corresponding period in 2015. The decrease was primarily due to environmental and generation projects placed in service at Alabama Power and Gulf Power.

Interest Expense, Net of Amounts Capitalized



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$33		15.5

In the first quarter 2016, interest expense, net of amounts capitalized was $246 million compared to $213 million in the corresponding period in 2015. The increase was primarily due to an increase in outstanding long-term debt, partially offset by a decrease related to interest on deposits resulting from the termination of an asset purchase agreement between Mississippi Power and SMEPA in May 2015.

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

Other Income (Expense), Net



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(13)		N/M

N/M – Not meaningful

In the first quarter 2016, other income (expense), net was $(21) million compared to $(8) million for the corresponding period in 2015. The change was primarily due to Bridge Agreement-related expenses associated with the proposed Merger.

See Note (I) to the Condensed Financial Statements under "Southern Company – Proposed Merger with AGL Resources" herein for additional information.

Income Taxes



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(52)		(19.0)

In the first quarter 2016, income taxes were $222 million compared to $274 million for the corresponding period in 2015. The decrease was primarily due to increased federal income tax benefits from ITCs and PTCs at Southern Power and an increase in tax benefits related to estimated probable losses on Mississippi Power's construction of the Kemper IGCC.

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

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are ~~expected~~not necessarily indicative of Southern Company's future earnings potential. The level of Southern Company's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Southern Company system's primary business of selling electricity. These

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

factors include the traditional operating companies' ability to maintain a constructive regulatory environment that allows for the timely recovery of prudently-incurred costs during a time of increasing costs and the completion and subsequent operation of the Kemper IGCC and Plant Vogtle Units 3 and 4 as well as other ongoing construction projects. Other major factors include the profitability of Southern Power's competitive wholesale business and successful additional investments in renewable and other energy projects. Future earnings for the electricity business in the near term will depend, in part, upon maintaining and growing sales which are subject to a number of factors. These factors include weather, competition, new energy contracts with other utilities and other wholesale customers, energy conservation practiced by customers, the use of alternative energy sources by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth or decline in the service territory. In addition, the level of future earnings for the wholesale business also depends on numerous factors including regulatory matters, creditworthiness of customers, total generating capacity available and related costs, future acquisitions and construction of generating facilities, the impact of tax credits from renewable energy projects, and the successful remarketing of capacity as current contracts expire. Demand for electricity is primarily driven by economic growth. The pace of economic growth and electricity demand may be affected by changes in regional and global economic conditions, which may impact future earnings.

As part of its ongoing effort to adapt to changing market conditions, Southern Company continues to evaluate and consider a wide array of potential business strategies. These strategies may include business combinations, partnerships, and acquisitions involving other utility or non-utility businesses or properties, disposition of certain assets, internal restructuring, or some combination thereof. Furthermore, Southern Company may engage in new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations, risks, and financial condition of Southern Company. In addition, the proposed Merger will result in a combined company that is subject to various risks that do not currently impact Southern Company.

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

Environmental Matters

Compliance costs related to federal and state environmental statutes and regulations could affect earnings if such costs cannot continue to be fully recovered in ~~service~~rates on a timely basis or through market-based contracts. Environmental compliance spending over the next several years may differ materially from the amounts estimated. The timing, specific requirements, and estimated costs could change as environmental statutes and regulations are adopted or modified, as compliance plans are revised or updated, and as legal challenges to rules are completed. Further, higher costs that are recovered through regulated rates could contribute to reduced demand for electricity, which could negatively affect results of operations, cash flows, and financial condition. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under "Environmental Matters" in Item 8 of the Form 10-K for additional information.

Environmental Statutes and Regulations

Air Quality

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Statutes and Regulations – Air Quality" of Southern Company in Item 7 of the Form 10-K for additional information regarding the EPA's final MATS rule and regional haze regulations.

On April 25, 2016, in response to a June 2015 U.S. Supreme Court opinion, the EPA published its supplemental finding regarding consideration of costs in support of the MATS rule. This finding does not impact MATS rule compliance requirements, costs, or deadlines, and all units within the Southern Company system that are subject to

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

the MATS rule have completed the measures necessary to achieve compliance with the MATS rule by the ~~end of~~applicable deadlines.

Also on April 25, 2016, ~~and~~ the ~~resulting energy purchases will be recovered through Mississippi Power's fuel cost recovery mechanism.~~EPA issued proposed revisions to the regional haze regulations. The ultimate ~~outcome~~impact of ~~this matter~~the proposed revisions will depend on their ultimate adoption, implementation, and any legal challenges and cannot be determined at this time.

Retail Regulatory Matters

Construction Program

Construction continues on Plant Vogtle Units 3 and 4 (45.7% ownership interest by Georgia Power in the two units, each with approximately 1,100 MWs) and Mississippi Power's 582-MW Kemper IGCC. See RESULTS OF OPERATIONS – "Estimated Loss on Kemper IGCC," FUTURE EARNINGS POTENTIAL – "Construction Program," and Note (B) to the Condensed Financial Statements under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" and "Integrated Coal Gasification Combined Cycle" herein for additional information. For information about Southern Power's acquisitions and construction of renewable energy facilities, see Note (I) to the Condensed Financial Statements under "Southern Power" herein.

Key Performance Indicators

Southern Company continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, execution of major construction projects, and earnings per share. For additional information on these indicators, see MANAGEMENT'S DISCUSSION AND ANALYSIS – OVERVIEW – "Key Performance Indicators" of Southern Company in Item 7 of the Form 10-K.

RESULTS OF OPERATIONS

Net Income



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(23)		(4.5)

Consolidated net income attributable to Southern Company was $485 million ($0.53 per share) for the first quarter 2016 compared to $508 million ($0.56 per share) for the first quarter 2015. The decrease was primarily the result of lower retail revenues due to milder weather in the first quarter 2016 as compared to the corresponding period in 2015, higher depreciation and amortization, higher charges related to revisions of the estimated costs expected to be incurred on Mississippi Power's construction of the Kemper IGCC, and lower wholesale capacity revenues. The decreases were partially offset by increases in revenues due to increases in non-fuel retail rates and sales growth and a decrease in income taxes primarily from income tax benefits at Southern Power.

See Note 3 to the financial statements of Southern Company under "Integrated Coal Gasification Combined Cycle" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Integrated Coal Gasification Combined Cycle" herein for additional information.

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Retail Revenues



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(165)		(4.7)

In the first quarter 2016, retail revenues were $3.4 billion compared to $3.5 billion for the corresponding period in 2015.

Details of the changes in retail revenues were as follows:



	First Quarter 2016
	(in millions)			(% change)
Retail – prior year	$	3,542
Estimated change resulting from –
Rates and pricing	110			3.1
Sales growth	22			0.6
Weather	(85		)	(2.4	)
Fuel and other cost recovery	(212		)	(6.0	)
Retail – current year	$	3,377		(4.7	)%

Revenues associated with changes in rates and pricing increased in the first quarter 2016 when compared to the corresponding period in 2015 primarily due to increased revenues at Alabama Power under Rate CNP Compliance and at Georgia Power related to increases in base tariffs under the 2013 ARP and the NCCR tariff, all effective January 1, 2016. The increase in rates and pricing was also due to the implementation of rates for certain Kemper IGCC in-service assets at Mississippi Power.

See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Alabama Power," "Retail Regulatory Matters – Georgia Power – Rate Plans" and " – Nuclear Construction," and "Integrated Coal Gasification Combined – Cycle – Rate Recovery of Kemper IGCC Costs" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.

Revenues attributable to changes in sales increased in the first quarter 2016 when compared to the corresponding period in 2015. Weather-adjusted residential KWH sales increased 1.4% in the first quarter 2016 due to customer growth and increased customer usage. Weather-adjusted commercial KWH sales increased 0.8% in the first quarter 2016 primarily due to customer growth. Industrial KWH sales decreased 1.0% in the first quarter 2016 primarily due to decreased sales in the chemicals, primary metals, non-manufacturing, and pipeline sectors, partially offset by increased sales in the paper and stone, clay, and glass sectors. A strong dollar, low oil prices, and weak global growth conditions have constrained growth in the industrial sector.

In the first quarter 2015, Mississippi Power updated the methodology to estimate the unbilled revenue allocation among customer classes. This change did not have a significant impact on net income. The KWH sales variances discussed above reflect an adjustment to the estimated allocation of Mississippi Power's unbilled first quarter 2015 KWH sales among customer classes that is consistent with the actual allocation in 2016. Without this adjustment, first quarter 2016 weather-adjusted residential sales increased 1.6%, weather-adjusted commercial sales increased 1.1%, and industrial KWH sales decreased 0.8% as compared to the corresponding period in 2015.

Fuel and other cost recovery revenues decreased $212 million in the first quarter 2016, respectively, when compared to the corresponding period in 2015 primarily due to a decrease in fuel prices.

Electric rates for the traditional operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of purchased power costs, and do not affect net income. The

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traditional operating companies may also have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPAs.

Wholesale Revenues



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(71)		(15.2)

Wholesale revenues consist of PPAs primarily with investor-owned utilities and electric cooperatives and short-term opportunity sales. Wholesale revenues from PPAs (other than solar and wind PPAs) have both capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment. Energy revenues will vary depending on fuel prices, the market prices of wholesale energy compared to the Southern Company system's generation, demand for energy within the Southern Company system's service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Wholesale revenues at Mississippi Power include FERC-regulated municipal and rural association sales as well as market-based sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above the Southern Company system's variable cost to produce the energy.

In the first quarter 2016, wholesale revenues were $396 million compared to $467 million for the corresponding period in 2015 related to a $43 million decrease in capacity revenues and a $28 million decrease in energy revenues. The decrease in capacity revenues was primarily due to a PPA remarketing from non-affiliate to affiliate at Southern Power, unit retirements at Georgia Power, milder weather and decreased usage at Mississippi Power, and the expiration of a Plant Scherer Unit 3 power sales agreement at Gulf Power. The decrease in energy revenues was primarily related to lower fuel costs.

See FUTURE EARNINGS POTENTIAL – "Other Matters" herein for additional information regarding the expiration of long-term sales agreements at Gulf Power for Plant Scherer Unit 3, which will impact future wholesale earnings.

Other Electric Revenues



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$18		11.0

Fuel and Purchased Power Expenses



	First Quarter 2016 vs. First Quarter 2015
	(change in millions)			(% change)
Fuel	$	(301	)	(24.8)
Purchased power	21			14.6
Total fuel and purchased power expenses	$	(280	)

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of fuel and purchased power primarily due to lower natural gas and coal prices and a $145 million decrease in the volume of KWHs generated, partially offset by an $88 million increase in the volume of KWHs purchased.

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



	First Quarter 2016	First Quarter 2015
Total generation (billions of KWHs)	44	46
Total purchased power (billions of KWHs)	4	3
Sources of generation (percent) —
Coal	27	33
Nuclear	17	16
Gas	47	47
Hydro	7	3
Other Renewables	2	1
Cost of fuel, generated (cents per net KWH) —
Coal	3.24	3.70
Nuclear	0.82	0.67
Gas	2.16	2.71
Average cost of fuel, generated (cents per net KWH)	2.23	2.71
Average cost of purchased power (cents per net KWH)^(*)	5.27	7.18


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

Fuel

In the first quarter 2016, fuel expense was $911 million compared to $1.2 billion for the corresponding period in 2015. The decrease was primarily due to a 21.9% decrease in the volume of KWHs generated by coal, a 20.3% decrease in the average cost of natural gas per KWH generated, a 12.4% decrease in the average cost of coal per KWH generated, and an 83.1% increase in the volume of KWHs generated by hydro facilities resulting from more rainfall.

Purchased Power

In the first quarter 2016, purchased power expense was $165 million compared to $144 million for the corresponding period in 2015. The increase was primarily due to a 50.8% increase in the volume of KWHs purchased, partially offset by a 26.6% decrease in the average cost per KWH purchased primarily as a result of lower natural gas and coal prices.

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

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Other Operations and Maintenance Expenses



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(16)		(1.4)

Depreciation and Amortization



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$54		11.1

See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Gulf Power – Retail Base Rate Case" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Retail Regulatory Matters – Gulf Power – Retail Base Rate Case" herein for additional information.

Estimated Loss on Kemper IGCC



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$44		N/M

N/M – Not meaningful

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Allowance for Equity Funds Used During Construction



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(10)		(15.9)

Interest Expense, Net of Amounts Capitalized



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$33		15.5

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

Other Income (Expense), Net



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(13)		N/M

N/M – Not meaningful

See Note (I) to the Condensed Financial Statements under "Southern Company – Proposed Merger with AGL Resources" herein for additional information.

Income Taxes



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(52)		(19.0)

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

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Southern Company's future earnings potential. The level of Southern Company's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Southern Company system's primary business of selling electricity. These

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Environmental Matters

Compliance costs related to federal and state environmental statutes and regulations could affect earnings if such costs cannot continue to be fully recovered in rates on a timely basis or through market-based contracts. Environmental compliance spending over the next several years may differ materially from the amounts estimated. The timing, specific requirements, and estimated costs could change as environmental statutes and regulations are adopted or modified, as compliance plans are revised or updated, and as legal challenges to rules are completed. Further, higher costs that are recovered through regulated rates could contribute to reduced demand for electricity, which could negatively affect results of operations, cash flows, and financial condition. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under "Environmental Matters" in Item 8 of the Form 10-K for additional information.

Environmental Statutes and Regulations

Air Quality

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the MATS rule have completed the measures necessary to achieve compliance with the MATS rule by the applicable deadlines.

Also on April 25, 2016, the EPA issued proposed revisions to the regional haze regulations. The ultimate impact of the proposed revisions will depend on their ultimate adoption, implementation, and any legal challenges and cannot be determined at this time.

Retail Regulatory Matters

Retail Fuel Cost Recovery

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Retail Regulatory Matters – Retail Fuel Cost Recovery" of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Alabama Power – Rate ECR" and "Retail Regulatory Matters – Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information regarding retail fuel cost recovery.

The traditional operating companies each have established fuel cost recovery rates approved by their respective state PSCs. Fuel cost recovery revenues are adjusted for differences in actual recoverable fuel costs and amounts billed in current regulated rates. Accordingly, changes in the billing factor will not have a significant effect on Southern Company's revenues or net income, but will affect cash flow. The traditional operating companies continuously monitor their under or over recovered fuel cost balances and make appropriate filings with their state PSCs to adjust fuel cost recovery rates as necessary.

On April 14, 2016, Georgia Power filed a request with the Georgia PSC to decrease fuel rates by 15% effective June 1, 2016, which is expected to reduce annual billings by approximately $313 million. Georgia Power is currently scheduled to file its next fuel case by February 28, 2017. The ultimate outcome of this matter cannot be determined at this time.

Renewables

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Retail Regulatory Matters – Renewables" of Southern Company in Item 7 of the Form 10-K for additional information regarding the Southern Company system's renewables activity.

As part of the Georgia Power Advanced Solar Initiative, four PPAs totaling 149 MWs of Georgia Power's solar contracted capacity from Southern Power began in the first quarter 2016.

In November 2015, the Mississippi PSC issued orders approving three solar facilities for a combined total of approximately 105 MWs. Mississippi Power will purchase all of the energy produced by the solar facilities for the 25-year term under each of the three PPAs, two of which were finalized as of December 31, 2015 and one of which was finalized as of March 2, 2016. The projects are expected to be in service by the end of 2016 and the resulting energy purchases are expected to be recovered through Mississippi Power's fuel cost recovery mechanism.

The Florida PSC issued a final approval order on Gulf Power's Community Solar Pilot Program on April 15, 2016. The program will offer all Gulf Power customers an opportunity to voluntarily contribute to the construction and operation of a solar photovoltaic facility with electric generating capacity of up to 1 MW through annual subscriptions. The energy generated from the solar facility is expected to provide power to all of Gulf Power's customers.

Alabama Power

Alabama Power's revenues from regulated retail operations are collected through various rate mechanisms subject to the oversight of the Alabama PSC. Alabama Power currently recovers its costs from the regulated retail business primarily through its Rate RSE, Rate CNP Compliance, rate energy cost recovery, and natural disaster reserve rate. In addition, the Alabama PSC issues accounting orders to address current events impacting Alabama Power. See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Alabama Power" in

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Item 8 of the Form 10-K for additional information regarding Alabama Power's rate mechanisms and accounting orders. The recovery balance of each regulatory clause for Alabama Power is reported in Note (B) to the Condensed Financial Statements herein.

Georgia Power

Georgia Power's revenues from regulated retail operations are collected through various rate mechanisms subject to the oversight of the Georgia PSC. Georgia Power currently recovers its costs from the regulated retail business through the 2013 ARP, which includes traditional base tariff rates, Demand-Side Management tariffs, Environmental Compliance Cost Recovery tariffs, and Municipal Franchise Fee tariffs. In addition, financing costs related to the construction of Plant Vogtle Units 3 and 4 are being collected through the NCCR tariff and fuel costs are collected through separate fuel cost recovery tariffs. See Note (B) to the Condensed Financial Statements under "Retail Regulatory Matters – Georgia Power – Fuel Cost Recovery" herein and Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" in Item 8 of the Form 10-K for additional information regarding Georgia Power's fuel cost recovery and the NCCR tariff, respectively.

Pursuant to the terms and conditions of a settlement agreement related to Southern Company's proposed acquisition of AGL Resources approved by the Georgia PSC on April 14, 2016, Georgia Power's 2013 ARP will continue in effect until December 31, 2019, and Georgia Power will be required to file its next base rate case by July 1, 2019. Furthermore, through December 31, 2019, Georgia Power and Atlanta Gas Light Company (collectively, Utilities) will retain the merger savings, net of transition costs, as defined in the settlement agreement; through December 31, 2022, net merger savings will be shared on a 60/40 basis between customers and the Utilities; thereafter, all merger savings will be retained by customers. See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Georgia Power" in Item 8 of the Form 10-K for additional information regarding the 2013 ARP and Note (I) to the Condensed Financial Statements under "Southern Company – Proposed Merger with AGL Resources" herein for additional information regarding the Merger.

Construction Program

Overview

The subsidiary companies of Southern Company are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. The Southern Company system intends to continue its strategy of developing and constructing new generating facilities, as well as adding or changing fuel sources for certain existing units, adding environmental control equipment, and expanding the transmission and distribution systems. For the traditional operating companies, major generation construction projects are subject to state PSC approval in order to be included in retail rates. While Southern Power generally constructs and acquires generation assets covered by long-term PPAs, any uncontracted capacity could negatively affect future earnings.

The two largest construction projects currently underway in the Southern Company system are Plant Vogtle Units 3 and 4 (45.7% ownership interest by Georgia Power in the two units, each with approximately 1,100 MWs) and Mississippi Power's 582-MW Kemper IGCC. See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" and "Integrated Coal Gasification Combined Cycle" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" and "Integrated Coal Gasification Combined Cycle" herein for additional information. For additional information about costs relating to Southern Power's acquisitions that involve construction of renewable energy facilities, see Note 12 to the financial statements of Southern Company under "Southern Power – Construction Projects" in Item 8 of the Form 10-K and Note (I) to the Condensed Financial Statements under "Southern Power – Construction Projects" herein.

Also see FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" herein for additional information regarding Southern Company's capital requirements for its subsidiaries' construction programs.

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Integrated Coal Gasification Combined Cycle

~~From 2013 through June 30, 2015, Southern Company recorded pre-tax charges totaling $2.08~~Mississippi Power's current cost estimate for the Kemper IGCC in total is approximately $6.58 billion, ~~($1.28~~which includes approximately $5.35 billion ~~after tax)~~of costs subject to the construction cost cap and is net of $137 million in additional DOE grants Mississippi Power received for ~~revisions of estimated costs~~the Kemper IGCC on April 8, 2016 (Additional DOE Grants), which are expected to be ~~incurred on~~used to reduce future rate impacts for customers. Mississippi ~~Power's construction of the Kemper IGCC above~~Power does not intend to seek any rate recovery for any related costs that exceed the $2.88 billion cost cap, ~~established by the Mississippi PSC,~~ net of the Initial DOE Grants and excluding the Cost Cap Exceptions. In the aggregate, Southern Company has incurred charges of $2.47 billion ($1.52 billion after tax) as a result of changes in the cost estimate above the cost cap for the Kemper IGCC through March 31, 2016. Mississippi Power's current cost estimate includes costs through September 30, 2016. In subsequent periods, any further changes in the estimated costs to complete construction of the Kemper IGCC subject to the $2.88 billion cost cap, net of the Initial DOE Grants and excluding the Cost Cap Exceptions, will be reflected in Southern Company's statements of income and these changes could be material.

On February 12, 2015, the Mississippi Supreme Court issued its decision in a legal challenge with respect to the Mississippi PSC's March 2013 order that authorized Mississippi Power's collection of $156 million annually to be recorded as Mirror CWIP. Among other things, the Mississippi Supreme Court reversed this order and directed the Mississippi PSC to enter an order requiring Mississippi Power to refund the Mirror CWIP amounts collected. As of June 30, 2015, $331 million had been collected by Mississippi Power. The Mississippi PSC ordered that the Mirror CWIP rate be terminated effective July 20, 2015.

On May 20, 2015, SMEPA notified Mississippi Power of its termination of the APA. Mississippi Power previously received a total of $275 million of deposits from SMEPA that were required to be returned to SMEPA with interest in connection with the termination of the APA. On June 3, 2015, Southern Company, pursuant to its guarantee obligation, returned approximately $301 million to SMEPA. Subsequently, Mississippi Power issued an 18-month promissory note in the aggregate principal amount of approximately $301 million to Southern Company.

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The return of approximately $301 million to SMEPA in June 2015 in connection with the termination of the APA, the required refund of the approximately $353 million of Mirror CWIP rate collections, including associated carrying costs, and the termination of the Mirror CWIP rates have adversely impacted Mississippi Power's ability to obtain financing needed for its business operations. As a result, on July 10, 2015, Mississippi Power submitted a request for interim rates designed to recover Mississippi Power's costs associated with the Kemper IGCC assets that are commercially operational and currently providing service to customers (the transmission facilities, combined cycle, natural gas pipeline, and water pipeline) and other related costs. These interim rates are designed to collect approximately $159 million annually. Evidentiary hearings on the interim rate relief are scheduled to be held on August 6, 2015. The ultimate outcome of these matters cannot be determined at this time.

~~Nuclear Construction~~

On January 29, 2015, Georgia Power announced it was notified by the Contractor of the Contractor's revised forecast for completion of Plant Vogtle Units 3 and 4, which would incrementally delay the previously disclosed estimated in-service dates by 18 months (from the fourth quarter of 2017 to the second quarter of 2019 for Unit 3 and from the fourth quarter of 2018 to the second quarter of 2020 for Unit 4).

While Georgia Power has not agreed to any change to the guaranteed substantial completion dates (April 2016 for Unit 3 and April 2017 for Unit 4) included in the engineering, procurement, and construction agreement relating to Plant Vogtle Units 3 and 4, Georgia Power's twelfth Vogtle Construction Monitoring (VCM) report, filed February 27, 2015, included a requested amendment (Requested Amendment) to the Plant Vogtle Units 3 and 4 certificate to reflect the Contractor's revised forecast, to include the estimated owner's costs associated with the proposed 18-month Contractor delay, and to increase the estimated in-service capital cost of Plant Vogtle Units 3 and 4 from $4.4 billion to $5.0 billion. No Contractor costs related to the Contractor's proposed 18-month delay were included in the twelfth VCM report. The twelfth VCM report estimated financing costs during the construction period to total approximately $2.5 billion.Civil Lawsuit

On April ~~15, 2015,~~26, 2016, a complaint against Mississippi Power was filed in Harrison County Circuit Court by Biloxi Freezing & Processing Inc., Gulfside Casino Partnership, and John Carlton Dean. The plaintiffs allege that Mississippi Power violated the ~~Georgia PSC issued a procedural order in connection with~~Mississippi Unfair Trade Practices Act and concealed, falsely represented, and failed to fully disclose important facts concerning the ~~twelfth VCM report. Pursuant to this order, the Georgia PSC deemed the Requested Amendment unnecessary~~cost and ~~withdrawn until the completion~~schedule of construction of Plant Vogtle Unit 3. The Georgia PSC recognized that the certified cost does not constitute a cost recovery cap. In accordance with the Georgia Integrated Resource Planning Act, any costs incurred by Georgia Power in excess of the certified amount will be included in rate base, provided Georgia Power shows the costs to be reasonable and prudent. Financing costs up to the certified amount will be collected through the NCCR tariff until the units are placed in service, while financing costs on any construction-related costs in excess of the $4.4 billion certified amount are expected to be recovered through AFUDC.

Additionally, there are certain risks associated with the construction program in general and certain risks associated with the licensing, construction, and operation of nuclear generating units in particular, including potential impacts that could result from a major incident at a nuclear facility anywhere in the world. The ultimate outcome of these events cannot be determined at this time.

~~Income Tax Matters~~

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

~~Section 174 Research and Experimental Deduction~~

~~Southern Company reflected deductions for research and experimental (R&E) expenditures related to~~ the Kemper IGCC and that Mississippi Power's alleged breaches interfered with and destroyed economically advantageous relationships between the plaintiffs and their current and prospective business associates. The plaintiffs seek unspecified actual damages and punitive damages as well as attorney's fees, costs, and interest. The plaintiffs also seek an injunction to prevent any Kemper IGCC costs from being charged to customers through electric rates. Mississippi Power believes this legal challenge has no merit; however, an adverse outcome in ~~its federal income tax calculations for 2013~~this proceeding could have an impact on Southern Company's results of operations, financial condition, and ~~2014. In May 2015, Southern Company amended its 2008 through 2013 federal income tax returns to include deductions for Kemper IGCC-related R&E expenditures. Due to~~liquidity. Mississippi Power will vigorously defend the ~~uncertainty related to this tax position, Southern Company had unrecognized tax benefits associated with these R&E deductions totaling approximately $390 million as of June 30, 2015. See Note 5 to~~matter, and the financial statements of Southern Company under "Unrecognized Tax Benefits" in Item 8 of the Form 10-K and Notes (B) and (G) to the Condensed Financial Statements under "Integrated Coal Gasification Combined Cycle" and "Unrecognized Tax

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~~Benefits~~ – ~~Section 174 Research and Experimental Deduction," respectively, herein for additional information. The ultimate~~final outcome of this ~~tax~~ matter cannot be determined at this time.

Other Matters

Southern Company and its subsidiaries are involved in various other matters being litigated and regulatory matters that could affect future earnings. In addition, Southern Company and its subsidiaries are subject to certain claims and legal actions arising in the ordinary course of business. The business activities of Southern Company's subsidiaries are subject to extensive governmental regulation related to public health and the environment, such as regulation of air emissions and water discharges. Litigation over environmental issues and claims of various types, including property damage, personal injury, common law nuisance, and citizen enforcement of environmental requirements, such as air quality and water standards, has occurred throughout the U.S. This litigation has included claims for damages alleged to have been caused by CO₂ and other emissions, CCR, and alleged exposure to hazardous materials, and/or requests for injunctive relief in connection with such matters.

The ultimate outcome of such pending or potential litigation against Southern Company and its subsidiaries cannot be predicted at this time; however, for current proceedings not specifically reported in Note (B) to the Condensed Financial Statements herein or in Note 3 to the financial statements of Southern Company in Item 8 of the Form 10-K, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on Southern Company's financial statements. See Note (B) to the Condensed Financial Statements herein for a discussion of various other contingencies, regulatory matters, and other matters being litigated which may affect future earnings potential.

The SEC is conducting a formal investigation of Southern Company and Mississippi Power concerning the estimated costs and expected in-service date of the Kemper IGCC. Southern Company and Mississippi Power believe the investigation is focused primarily on periods subsequent to 2010 and on accounting matters, disclosure controls and procedures, and internal controls over financial reporting associated with the Kemper IGCC. See ACCOUNTING POLICIES – "Application of Critical Accounting Policies and Estimates" herein for additional

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information on the Kemper IGCC estimated construction costs and expected in-service date. Southern Company and Mississippi Power are cooperating fully with the SEC. The ultimate outcome of this matter cannot be determined at this time; however, it is not expected to have a material impact on the financial statements of Southern Company.

Through 2015, capacity revenues from long-term non-affiliate sales out of Gulf Power's ownership of Plant Scherer Unit 3 (205 MWs) represented the majority of Gulf Power's wholesale earnings. The capacity revenues associated with these contracts covering 100% of Gulf Power's ownership represented 82% of Gulf Power's wholesale capacity revenues in 2015. Due to the expiration of a wholesale contract at the end of 2015 and another wholesale contract at the end of May 2016, Gulf Power's remaining contracted sales from the unit from June 2016 through 2019 will cover approximately 24% of the unit. The expiration of the contract in 2015 and the scheduled future expiration of the remaining contracts are not expected to have a material impact on Southern Company's earnings. The alternatives Gulf Power is actively evaluating include, without limitation, rededication of the asset to serve retail customers for whom it was originally planned and built, replacement long-term wholesale contracts or other sales into the wholesale market, or an asset sale. On May 5, 2016, Gulf Power delivered a letter to the Florida PSC requesting recognition of Gulf Power's ownership in Plant Scherer Unit 3 as being in service to retail customers when and as the contracts expire. The ultimate outcome of this matter cannot be determined at this time.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Southern Company prepares its consolidated financial statements in accordance with GAAP. Significant accounting policies are described in Note 1 to the financial statements of Southern Company in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Southern 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. See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES – "Application of Critical Accounting Policies and Estimates" of Southern Company in Item 7 of the Form 10-K for a complete discussion of Southern Company's critical accounting policies and estimates related to Electric Utility Regulation, ~~Contingent~~Asset Retirement Obligations, ~~and~~ Pension and Other Postretirement ~~Benefits.~~Benefits, and Contingent Obligations.

Kemper IGCC Estimated Construction Costs, Project Completion Date, and Rate Recovery

During ~~2015,~~2016, Mississippi Power further revised its cost estimate to complete construction and start-up of the Kemper IGCC to an amount that exceeds the $2.88 billion cost cap, net of the Initial DOE Grants and excluding the Cost Cap Exceptions. Mississippi Power does not intend to seek any rate recovery for any costs related to the construction of the Kemper IGCC that exceed the $2.88 billion cost cap, net of the Initial DOE Grants and excluding the Cost Cap Exceptions.

As a result of the revisions to the cost estimate, Southern Company recorded total pre-tax charges to income for the estimated probable losses on the Kemper IGCC of $53 million ($33 million after tax) in the first quarter 2016, $183 million ($113 million after tax) in the fourth quarter 2015, $150 million ($93 million after tax) in the third quarter 2015, $23 million ($14 million after tax) in the second quarter 2015, $9 million ($6 million after tax) in the first quarter 2015, $70 million ($43 million after tax) in the fourth quarter 2014, $418 million ($258 million after tax) in the third quarter 2014, $380 million ($235 million after tax) in the first quarter 2014, $40 million ($25 million after tax) in the fourth quarter 2013, $150 million ($93 million after tax) in the third quarter 2013, $450 million ($278 million after tax) in the second quarter 2013, and $540 million ($333 million after tax) in the first quarter 2013. In the aggregate, Southern Company has incurred charges of ~~$2.08~~$2.47 billion ($~~1.28~~1.52 billion after tax) as a result of changes in the cost estimate above the cost cap for the Kemper IGCC through ~~June 30, 2015.~~

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~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Mississippi Power has experienced, and may continue to experience, material changes in the cost estimate for the Kemper IGCC. In subsequent periods, any further changes in the estimated costs to complete construction and start-up of the Kemper IGCC subject to the $2.88 billion cost cap, net of the Initial DOE Grants and excluding the Cost Cap Exceptions, will be reflected in Southern Company's statements of income and these changes could be material.

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Any further cost increases and/or extensions of the in-service date with respect to the Kemper IGCC may result from factors including, but not limited to, labor costs and productivity, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non-performance under ~~construction~~operating or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, start-up activities for this first-of-a-kind technology (including, but not limited to, major equipment failure and system integration), and/or operational performance (including, but not limited to, additional costs to satisfy any operational parameters ultimately adopted by the Mississippi PSC).

Mississippi Power's revised cost estimate includes costs through ~~March 31,~~September 30, 2016. Any ~~further~~ extension of the in-service date beyond September 30, 2016 is currently estimated to result in additional base costs of approximately $25 million to ~~$30~~$35 million per month, which includes maintaining necessary levels of start-up labor, materials, and fuel, as well as operational resources required to execute start-up and commissioning activities. However, additional costs may be required for remediation of any further equipment and/or design issues identified. Any ~~further~~ extension of the in-service date with respect to the Kemper IGCC beyond September 30, 2016 would also increase costs for the Cost Cap Exceptions, which are not subject to the $2.88 billion cost cap established by the Mississippi PSC. These costs include AFUDC, which is currently estimated to total approximately ~~$13~~$14 million per month, as well as carrying costs and operating expenses on Kemper IGCC assets placed in service and consulting ~~fees~~ and legal fees ~~which are being deferred as regulatory assets and are estimated to total~~of approximately $7$2 million per month.

Given the significant judgment involved in estimating the future costs to complete construction and start-up, the project completion date, the ultimate rate recovery for the Kemper IGCC, and the potential impact on Southern Company's results of operations, Southern Company considers these items to be critical accounting estimates. See Note 3 to the financial statements of Southern Company under "Integrated Coal Gasification Combined Cycle" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Integrated Coal Gasification Combined Cycle" herein for additional information.

~~Asset Retirement Obligations~~Recently Issued Accounting Standards

~~AROs~~On February 25, 2016, the FASB issued ASU No. 2016-02, Leases(Topic 842) (ASU 2016-02). ASU 2016-02 requires lessees to recognize on the balance sheet a lease liability and a right-of-use asset for all leases. ASU 2016-02 also changes the recognition, measurement, and presentation of expense associated with leases and provides clarification regarding the identification of certain components of contracts that would represent a lease. The accounting required by lessors is relatively unchanged and there is no change to the accounting for existing leveraged leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. Southern Company is currently evaluating the new standard and has not yet determined its ultimate impact; however, adoption of ASU 2016-02 is expected to have a significant impact on Southern Company's balance sheet.

On March 30, 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation(Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 changes the accounting for income taxes and the cash flow presentation for share-based payment award transactions. Most significantly, entities are ~~computed~~required to recognize all excess tax benefits and deficiencies related to the exercise or vesting of stock compensation as ~~the fair value of the ultimate costs for an asset's future retirement and are recorded~~income tax expense or benefit in the ~~period in which the liability is incurred. The costs are capitalized as part of the~~income statement. Southern Company currently recognizes any excess tax benefits and deficiencies related long-lived asset and depreciated over the asset's useful life. In the absence of quoted market prices, AROs are estimated using present value techniques in which estimates of future cash outlays associated with the asset retirements are discounted using a credit-adjusted risk-free rate. Estimates of the timing and amounts of future cash outlays are based on projections of when and how the assets will be retired and the cost of future removal activities.

~~The liability for AROs primarily relates~~ to the ~~decommissioning~~exercise and vesting of ~~the nuclear facilities - Alabama Power's Plant Farley and Georgia Power's ownership interests~~stock compensation in ~~Plants Hatch and Vogtle - and facilities that are subject to the CCR Rule, primarily ash ponds. In addition, the~~additional paid-in capital. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. Southern Company ~~system~~is currently evaluating the new standard and has retirement obligations related to various landfill sites, asbestos removal, mine reclamation, and disposal of polychlorinated biphenyls in certain transformers. The Southern Company system also has identified retirement obligations related to certain transmission and distribution facilities, certain wireless communication towers, property associated with the Southern Company system's rail lines and natural gas pipelines, and certain structures authorized by the U.S. Army Corps of Engineers. However, liabilities for the removal of these assets have not been recorded because the settlement timing for the retirement obligations related to these assets is indeterminable and, therefore, the fair value of the retirement obligations cannot be reasonably estimated. A liability for these AROs will be recognized when sufficient information becomes available to support a reasonable estimation of the ARO.yet determined its ultimate impact.

On April 17, 2015, the EPA published the final CCR Rule in the Federal Register, setting October 19, 2015 as the effective date of the CCR Rule. Therefore, Alabama Power, Gulf Power, and Mississippi Power recorded new AROs for facilities that are subject to the CCR Rule. Georgia Power had previously recorded AROs as a result of state requirements in Georgia which closely align with the requirements of the CCR Rule. The cost estimates are based

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on information that was known as of June 30, 2015 using various assumptions related to closure and post-closure costs, timing of future cash outlays, inflation and discount rates, and the potential methods for complying with the CCR Rule requirements. As further analysis is performed, including evaluation of the expected timing and method of compliance and refinement of assumptions underlying the cost estimates, such as the quantities of CCR at each site, the traditional operating companies expect to periodically update these estimates. Given the significant judgment involved in estimating AROs, Southern Company considers the liabilities for AROs to be critical accounting estimates.

See Note 1 to the financial statements of Southern Company under "Asset Retirement Obligations and Other Costs of Removal" and "Nuclear Decommissioning" in Item 8 of the Form 10-K and Note (A) to the Condensed Financial Statements under "Asset Retirement Obligations" herein for additional information.

~~Recently Issued Accounting Standards~~

~~The FASB's ASC 606,~~ ~~Revenue from Contracts with Customers~~, revises the accounting for revenue recognition effective for fiscal years beginning after December 15, 2017. Southern Company continues to evaluate the requirements of ASC 606. The ultimate impact of the new standard has not yet been determined.

~~On April 7, 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03,~~ ~~Interest – Imputation of Interest (Subtopic 835-30):Simplifying the Presentation of Debt Issuance Costs~~. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and is effective for fiscal years beginning after December 15, 2015. Southern Company currently reflects unamortized debt issuance costs in unamortized debt issuance expense on its balance sheet. Upon adoption, the reclassification will not have a material impact on the results of operations, financial position, or cash flows of Southern Company.

FINANCIAL CONDITION AND LIQUIDITY

Overview

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Overview" of Southern Company in Item 7 of the Form 10-K for additional information. Southern Company's financial condition remained stable at ~~June 30, 2015.~~March 31, 2016. Through ~~June 30, 2015,~~March 31, 2016, Southern Company has incurred non-recoverable cash expenditures of ~~$1.62~~$2.11 billion and is expected to incur approximately ~~$0.46~~$0.36 billion in additional non-recoverable cash expenditures through completion of the Kemper IGCC. Southern Company intends to continue to monitor its access to short-term and long-term capital markets as well as bank credit agreements to meet future capital and liquidity needs. See "Capital Requirements and Contractual Obligations," "Sources of Capital," and "Financing Activities" herein for additional information.

Net cash provided from operating activities totaled ~~$2.1~~$0.9 billion for the first ~~six~~three months of ~~2015, an increase of $37 million from~~2016 and the corresponding period in ~~2014. The increase in net cash provided from operating activities was primarily due to an increase in fuel cost recovery, partially offset by timing of accounts payable.~~2015. Net cash used for investing activities totaled ~~$2.8~~$2.2 billion for the first ~~six~~three months of ~~2015~~2016 primarily due to gross property additions for ~~installation of equipment to comply with environmental standards,~~ construction of generation, transmission, and distribution facilities and ~~acquisitions~~installation of ~~solar facilities.~~equipment to comply with environmental standards. Net cash provided from financing activities totaled ~~$762 million~~$0.7 billion for the first ~~six~~three months of ~~2015. This was~~2016 primarily due to issuances of long-term debt, partially offset by redemptions of short-term and long-term debt and common stock dividend ~~payments and redemptions of long-term debt and preferred and preference stock.~~payments. Fluctuations in cash flow from financing activities vary from period to period based on capital needs and the maturity or redemption of securities.

Significant balance sheet changes for the first ~~six~~three months of ~~2015~~2016 include an increase of ~~$2.1~~$1.4 billion in total property, plant, and equipment to comply with environmental standards and construction of generation, transmission, and distribution ~~facilities,~~facilities; a ~~$444 million increase~~$0.7 billion decrease in ~~income taxes receivable, non-current associated with federal income tax benefits for deductions primarily related~~cash and cash equivalents due to ~~R&E expenditures for~~ the ~~Kemper IGCC,~~funding of acquisitions and ~~an increase~~construction of ~~$406 million in accounts receivable primarily related to increases in customer billings as compared to~~

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~~December 31, 2014. Other significant changes include~~renewable energy projects; a ~~$2.1~~$1.1 billion increase in short-term and long-term debt to fund the ~~Southern Company~~ subsidiaries' continuous construction programs and for other general corporate ~~purposes,~~purposes; a ~~$692 million increase~~$0.3 billion decrease in ~~AROs primarily related~~accounts payable due to the ~~CCR Rule,~~timing of vendor payments; and a ~~$619 million increase~~$0.3 billion decrease in ~~accumulated deferred income taxes for deductions primarily related to R&E expenditures for the Kemper IGCC. See Notes (A), (B), and (G)~~accrued compensation due to the ~~Condensed Financial Statements herein for additional information regarding AROs, the Kemper IGCC, and R&E expenditures, respectively.~~timing of payments.

At the end of the ~~second~~first quarter ~~2015,~~2016, the market price of Southern Company's common stock was ~~$41.90~~$51.73 per share (based on the closing price as reported on the New York Stock Exchange) and the book value was ~~$22.22~~$22.65 per share, representing a market-to-book ratio of ~~189%~~228%, compared to ~~$49.11, $21.98,~~$46.79, $22.59, and ~~223%~~207%, respectively, at the end of ~~2014.~~2015. Southern Company's common stock dividend for the ~~second~~first quarter ~~2015~~2016 was $0.5425 per share compared to $0.5250 per share in the ~~second~~first quarter ~~2014.~~2015.

Capital Requirements and Contractual Obligations

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" of Southern Company in Item 7 of the Form 10-K for a description of Southern Company's capital requirements for the construction programs of the Southern Company system, including estimated capital expenditures for new generating facilities and to comply with existing environmental statutes and regulations, scheduled maturities of long-term debt, as well as related interest, derivative obligations, preferred and preference stock dividends, leases, purchase commitments, trust funding requirements, and unrecognized tax benefits. Approximately ~~$3.7~~$2.5 billion will be required through ~~June 30, 2016~~March 31, 2017 to fund maturities and announced redemptions of long-term debt. See "Sources of Capital" herein for additional information.

In addition to the cash consideration for the Merger to be paid by Southern Company at the effective time of the Merger, Southern Company will also assume AGL Resources' outstanding indebtedness (approximately $4.3 billion at March 31, 2016). See OVERVIEW herein for additional information regarding the Merger as well as Note (I) to the Condensed Financial Statements herein.

The Southern Company system's construction program is currently estimated to total $7.3 billion for 2016, $5.2 billion for 2017, and $5.5 billion for 2018. These amounts include expenditures of approximately $0.7 billion

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

related to the construction and start-up of the Kemper IGCC in 2016; $0.6 billion, $0.7 billion, and $0.4 billion to continue construction on Plant Vogtle Units 3 and 4 in 2016, 2017, and 2018, respectively; and $2.2 billion, $0.9 billion, and $1.4 billion for Southern Power's acquisitions and/or construction of new generating facilities in 2016, 2017, and 2018, respectively.

The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental statutes and regulations; the outcome of any legal challenges to the environmental rules; changes in generating plants, including unit retirements and replacements and adding or changing fuel sources at existing units, to meet regulatory requirements; changes in FERC rules and regulations; PSC approvals; changes in the expected environmental compliance program; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; storm impacts; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Additionally, planned expenditures for plant acquisitions may vary ~~materially~~ due to market opportunities and Southern Power's ability to execute its growth strategy. See Note 12 to the financial statements of Southern Company under "Southern Power" in Item 8 of the Form 10-K and Note (I) to the Condensed Financial Statements under "Southern Power" herein for additional information regarding Southern Power's plant acquisitions. See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" and "Integrated Coal Gasification Combined Cycle" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" and "Integrated Coal Gasification Combined Cycle" herein for information regarding additional factors that may impact construction expenditures.

Sources of Capital

Southern Company intends to meet its future capital needs through operating cash flows, short-term debt, term loans, and external security issuances. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings. The amount and timing of additional equity capital and debt ~~to be raised~~issuances in ~~2015,~~2016, as well as in subsequent years, will be contingent on Southern Company's investment opportunities and the Southern Company system's capital requirements.

Except as described herein, the traditional operating companies and Southern Power plan to obtain the funds required for construction and other purposes from operating cash flows, external security issuances, term loans, short-term borrowings, and equity contributions or loans from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon prevailing market conditions, regulatory approval, and other factors. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" of Southern Company in Item 7 of the Form 10-K for additional information.

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~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

In addition, Georgia Power may make borrowings through a loan guarantee agreement (Loan Guarantee Agreement) between Georgia Power and the DOE, the proceeds of which may be used to reimburse Georgia Power for Eligible Project Costs incurred in connection with its construction of Plant Vogtle Units 3 and 4. Under the Loan Guarantee Agreement, the DOE agreed to guarantee borrowings of up to $3.46 billion (not to exceed 70% of Eligible Project Costs) to be made by Georgia Power under a multi-advance credit facility (FFB Credit Facility) among Georgia Power, the DOE, and the FFB. ~~Eligible Project Costs incurred through June 30, 2015 would allow for borrowings of up to $2.2 billion under the FFB Credit Facility, of which Georgia Power has borrowed $1.8 billion.~~ See Note 6 to the financial statements of Southern Company under "DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for additional information regarding the Loan Guarantee Agreement and Note (B) to the Condensed Financial Statements under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.

Eligible Project Costs incurred through March 31, 2016 would allow for borrowings of up to $2.5 billion under the FFB Credit Facility, of which Georgia Power has borrowed $2.2 billion.

Mississippi Power received $245 million of Initial DOE Grants in prior years that were used for the construction of the Kemper IGCC. An additional $25 million of grants from the DOE ~~Grants~~ is expected to be received for commercial operation of the Kemper IGCC. On April 8, 2016, Mississippi Power received approximately $137 million in

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Additional DOE Grants for the Kemper IGCC, which are expected to be used to reduce future rate impacts for customers. In addition, see Note ~~(B)~~3 to the ~~Condensed Financial Statements~~financial statements of Southern Company under "Integrated Coal Gasification Combined Cycle" ~~herein~~in Item 8 of the Form 10-K for information regarding legislation related to the securitization of certain costs of the Kemper IGCC.

As of ~~June 30, 2015,~~March 31, 2016, Southern Company's current liabilities exceeded current assets by ~~$2.1~~$2.4 billion, primarily due to long-term debt that is due within one year, ~~of $3.6 billion,~~ including approximately ~~$0.4~~$0.9 billion at ~~Southern Company, $0.6~~the parent company, $0.2 billion at Alabama Power, ~~$1.7~~$0.5 billion at Georgia Power, ~~$0.4~~$0.1 billion at Gulf Power, $0.3 billion at Mississippi Power, and ~~$0.5~~$0.4 billion at Southern Power. ~~In addition, Mississippi Power has $0.5 billion in short-term bank loans scheduled to mature on April 1, 2016.~~ To meet short-term cash needs and contingencies, Southern Company has substantial cash flow from operating activities and access to capital markets and financial institutions. Southern Company, the traditional operating companies, and Southern Power intend to utilize operating cash flows, as well as commercial paper, lines of credit, bank notes, and securities issuances, as market conditions permit, as well as, under certain circumstances for the traditional operating companies and Southern Power, equity contributions and/or loans from Southern Company to meet their short-term capital needs. In addition, for the remainder of ~~2015,~~2016, Georgia Power expects to utilize borrowings through the FFB Credit Facility as ~~its primary~~an additional source of long-term borrowed funds.

The financial condition of Mississippi Power was adversely affected by the return of approximately $301 million of interest bearing refundable deposits to SMEPA in June 2015. In addition, the required refund of Mirror CWIP rate collections of approximately $353 million as of June 30, 2015, including associated carrying costs, and the termination of the Mirror CWIP rate have further adversely impacted Mississippi Power's financial condition and its ability to obtain funds needed for normal business operations and completion of the Kemper IGCC. Mississippi Power plans to obtain the funds required for construction and other purposes from operating cash flows and lines of credit (to the extent available) as well as loans and, under certain circumstances, equity contributions from Southern Company. See Note (B) to the Condensed Financial Statements under "Integrated Coal Gasification Combined Cycle" herein for additional information.

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~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

At ~~June 30, 2015,~~March 31, 2016, Southern Company and its subsidiaries had approximately $0.8 billion of cash and cash equivalents. Committed credit arrangements with banks at ~~June 30, 2015~~March 31, 2016 were as follows:


	Expires												Executable Term Loans				Due Within One Year				Expires												Executable Term Loans				Due Within One Year
Company	2015		2016		2017		2018		Total		Unused		One Year		Two Years		Term Out		No Term Out		2016		2017		2018		2020		Total		Unused		One Year		Two Years		Term Out		No Term Out
	(in millions)								(in millions)				(in millions)				(in millions)												(in millions)				(in millions)				(in millions)
Southern Company(a)	$	—	$	—	$	—	$	1,000	$	1,000	$	1,000	$	—	$	—	$	—	$	—	$	—	$	—	$	1,000	$	1,250	$	2,250	$	2,250	$	—	$	—	$	—	$	—
Alabama Power	154		124		—		1,030		1,308		1,307		58		—		58		170		40		—		500		800		1,340		1,340		—		—		—		40
Georgia Power	—		150		—		1,600		1,750		1,737		—		—		—		150		—		—		—		1,750		1,750		1,732		—		—		—		—
Gulf Power	20		225		30		—		275		275		50		—		50		195		75		40		165		—		280		280		45		—		45		40
Mississippi Power	40		255		—		—		295		265		30		40		70		225		205		—		—		—		205		180		30		15		45		160
Southern Power	—		—		—		500		500		466		—		—		—		—
Southern Power Company ^(b)																					—		—		—		600		600		560		—		—		—		—
Other	25		45		—		—		70		70		20		—		20		50		70		—		—		—		70		70		20		—		20		50
Total	$	239	$	799	$	30	$	4,130	$	5,198	$	5,120	$	158	$	40	$	198	$	790	$	390	$	40	$	1,665	$	4,400	$	6,495	$	6,412	$	95	$	15	$	110	$	290


(a)	Excludes the $8.1 billion Bridge Agreement entered into in September 2015 that will be funded only to the extent necessary to provide financing for the Merger as discussed herein.


(b)	Excludes credit agreements (Project Credit Facilities) assumed with the acquisition of certain solar facilities, which are non-recourse to Southern Power Company, the proceeds of which are being used to finance project costs related to such solar facilities currently under construction. See Note (I) to the Condensed Financial Statements under "Southern Power" herein for additional information.

See Note 6 to the financial statements of Southern Company under "Bank Credit Arrangements" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Bank Credit Arrangements" herein for additional information.

A portion of the unused credit with banks is allocated to provide liquidity support to the traditional operating companies' variable rate pollution control revenue bonds and commercial paper programs. The amount of variable rate pollution control revenue bonds outstanding requiring liquidity support as of June 30, 2015 was approximately $1.9 billion. In addition, at June 30, 2015, the traditional operating companies had $368 million of fixed rate pollution control revenue bonds outstanding that were required to be reoffered within the next 12 months.

Most of these bank credit arrangements, as well as the term loan arrangements of Southern Company, Alabama Power, Mississippi Power, and Southern Power, contain covenants that limit debt levels and contain cross acceleration or cross default provisions to other indebtedness (including guarantee obligations) that are restricted only to the indebtedness of the individual company. Such cross default provisions to other indebtedness would trigger an event of default if the applicable borrower defaulted on indebtedness or guarantee obligations over a specified threshold. Such cross acceleration provisions to other indebtedness would trigger an event of default if the applicable borrower defaulted on indebtedness, the payment of which was then accelerated. Southern Company, the traditional operating companies, and Southern Power Company are currently in compliance with all such covenants. None of the bank credit arrangements contain material adverse change clauses at the time of borrowings.

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

A portion of the unused credit with banks is allocated to provide liquidity support to the traditional operating companies' pollution control revenue bonds and commercial paper programs. The amount of variable rate pollution control revenue bonds outstanding requiring liquidity support as of March 31, 2016 was approximately $1.8 billion. In addition, at March 31, 2016, the traditional operating companies had approximately $269 million of fixed rate pollution control revenue bonds outstanding that were required to be reoffered within the next 12 months.

Southern Company intends to fund the cash consideration for the Merger using a mix of debt and equity. Southern Company finances its capital needs on a portfolio basis and expects to issue a minimum of $8.0 billion in debt prior to closing the Merger and a minimum of $1.2 billion in equity during 2016. This capital is expected to provide funding for the Merger, the proposed acquisition of PowerSecure, and Southern Power and other Southern Company system capital projects. Total capital raised in 2016 may increase due to cash needed at the closing of the Merger, settlement of hedges, and incremental investment opportunities, including additional Southern Power projects in excess of its current capital plans. Southern Company expects to issue the debt to fund the cash consideration for the Merger in several tranches including long-dated maturities. The amount of debt issued at each maturity will depend on prevailing market conditions at the time of the offering and other factors. In addition, Southern Company entered into the $8.1 billion Bridge Agreement on September 30, 2015 to provide financing for the Merger in the event long-term financing is not available. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" of Southern Company in Item 7 of the Form 10-K for additional information.

Southern Company, the traditional operating companies, and Southern Power make short-term borrowings primarily through commercial paper programs that have the liquidity support of the committed bank credit arrangements described ~~above.~~above, excluding the Bridge Agreement. Southern Company, the traditional operating companies, and Southern Power may also borrow through various other arrangements with banks. ~~Commercial paper and short-term bank term loans~~Short-term borrowings are included in notes payable in the balance sheets.

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~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Details of short-term borrowings were as follows:


	Short-term Debt at June 30, 2015				Short-term Debt During the Period^(*)						Short-term Debt at March 31, 2016				Short-term Debt During the Period^(*)
	Amount Outstanding		Weighted Average Interest Rate		Average Outstanding		Weighted Average Interest Rate		Maximum Amount Outstanding		Amount Outstanding		Weighted Average Interest Rate		Average Amount Outstanding		Weighted Average Interest Rate		Maximum Amount Outstanding
	(in millions)				(in millions)				(in millions)		(in millions)				(in millions)				(in millions)
Commercial paper	$	512	0.3	%	$	1,155	0.3	%	$	1,563	$	757	0.8	%	$	853	0.8	%	$	1,233
Short-term bank debt	545		1.3	%	717		1.2	%	795		25		2.1	%	375		1.9	%	500
Total	$	1,057	0.7	%	$	1,872	0.7	%			$	782	0.9	%	$	1,228	1.0	%

Wholesale revenues from non-affiliates for the second quarter 2015 were $250 million compared to $260 million for the corresponding period in 2014. The decrease was due to a $5 million decrease in energy sales, primarily as a result of decreased fuel costs passed through in PPA revenues due to lower natural gas prices, partially offset by increased sales volumes and new solar PPAs. The decrease in energy revenues reflects a 14% decrease in the average price of energy, partially offset by a 12% increase in KWH sales. In addition, capacity revenues decreased $5 million primarily due to PPA expirations.

Wholesale revenues from non-affiliates for year-to-date 2015 were $481 million compared to $538 million for the corresponding period in 2014. The decrease was due to a $44 million decrease in energy sales, primarily as a result of decreased fuel costs passed through in PPA revenues due to lower natural gas prices, partially offset by increased sales volumes and new solar PPAs. The decrease in energy revenues reflects a 17% decrease in the average price of energy, partially offset by a 5% increase in KWH sales. In addition, capacity revenues decreased $13 million primarily due to PPA expirations.

~~Wholesale Revenues~~–~~Affiliates~~

Second Quarter 2015 vs. Second Quarter 2014 Year-to-Date 2015 vs. Year-to-Date 2014
(change in millions)
(% change) (change in millions) (% change)
$17 25.0 $59 42.1

Wholesale revenues from sales to affiliate companies will vary depending on demand and the availability and cost of generating resources at each company. Sales to affiliate companies that are not covered by PPAs are made in accordance with the IIC, as approved by the FERC.

Wholesale revenues from affiliates for the second quarter 2015 were $85 million compared to $68 million for the corresponding period in 2014. The increase was the result of a $10 million increase in energy revenues and a $7 million increase in capacity revenues. The increase in energy revenues is primarily the result of increased sales volume under the IIC as a result of lower natural gas prices, which increased demand for Southern Power Company's resources. The increase in energy revenues reflects a 61% increase in KWH sales, partially offset by a 21% decrease in the average price of energy. The increase in capacity revenues was primarily the result of new PPAs.

Wholesale revenues from affiliates for year-to-date 2015 were $199 million compared to $140 million for the corresponding period in 2014. The increase was the result of a $50 million increase in energy revenues and a $9 million increase in capacity revenues. The increase in energy revenues is primarily the result of increased sales volume under the IIC as a result of lower natural gas prices, which increased demand for Southern Power Company's resources. The increase in energy revenues reflects a 110% increase in KWH sales, partially offset by a 22% decrease in the average price of energy. The increase in capacity revenues was primarily the result of new PPAs.

Fuel and Purchased Power Expenses

Fuel costs constitute the single largest expense for Southern Power. Additionally, Southern Power purchases a portion of its electricity needs from the wholesale market. Details of Southern Power's generation and purchased power were as follows:

Second Quarter 2015
vs.
Second Quarter 2014 Year-to-Date 2015
vs.
Year-to-Date 2014
(change in millions)
(% change) (change in millions) (% change)
Fuel $ (13 ) (11.0) $ —
—
Purchased power – non-affiliates 1
5.9 (11 ) (24.4 )
Purchased power – affiliates (12 ) (75.0) (32 ) (69.6 )
Total fuel and purchased power expenses $ (24 ) $ (43 )



	First Quarter 2016	First Quarter 2015
Generation (in billions of KWHs)	7.7	7.9
Purchased power (in billions of KWHs)	0.6	0.5
Total generation and purchased power	8.3	8.4
Total generation and purchased power (excluding solar, wind and tolling)	5.3	5.9

Southern Power's PPAs for natural ~~gas-fired~~gas and biomass generation generally provide that the purchasers are responsible for either procuring the fuel (tolling agreements) or reimbursing Southern Power for substantially all of the cost of ~~fuel.~~fuel relating to the energy delivered under such PPAs. Consequently, any increase or decrease in such fuel ~~cost~~costs is generally

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accompanied by an increase or decrease in related fuel revenues under the PPAs and does not have a significant impact on net income. Southern Power is responsible for the cost of fuel for generating units that are not covered under PPAs. Power from these generating units is sold into the wholesale market or ~~sold to affiliates under~~into the ~~IIC.~~power pool, for capacity owned directly by Southern Power (excluding its subsidiaries).

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



	First Quarter 2016 vs. First Quarter 2015
	(change in millions)			(% change)
Fuel	$	(47	)	(34.1)
Purchased power	(7		)	(26.9)
Total fuel and purchased power expenses	$	(54	)

In the ~~second~~first quarter ~~2015,~~2016, total fuel and purchased power expenses were ~~$127~~$110 million compared to ~~$151~~$164 million for the corresponding period in ~~2014.~~2015. The decrease was ~~the result of a $58 million decrease in the average cost of fuel and purchased power~~ primarily due to ~~lower natural gas prices, partially offset by a $34~~the following:

Fuel expense decreased $47 million ~~net increase in the total volume of KWHs generated and purchased~~ primarily due to ~~increased demand resulting from lower natural gas prices.~~

~~For year-to-date 2015, total fuel and purchased power expenses were $291~~a $28 million compared to $334 million for the corresponding period in 2014. The decrease was a result of a $154 million decrease in the average cost of fuel and purchased power primarily due to lower natural gas prices, partially offset by a $111 million net increase in the total volume of KWHs generated and purchased primarily due to increased demand resulting from lower natural gas prices.

~~Fuel~~

~~In the second quarter 2015, fuel expense was $105 million compared to $118 million for the corresponding period in 2014. The decrease was due to a 36.1%~~ decrease associated with the average cost of natural gas per KWH generated and a $19 million decrease associated with the volume of KWHs generated.

Purchased power expense decreased $7 million due to a $12 million decrease in the average cost of purchased power and a $4 million decrease associated with a PPA expiration, partially offset by a ~~40.6%~~$9 million increase associated with the volume of KWHs ~~generated, primarily as a result of increased demand resulting from lower natural gas prices.~~

For year-to-date 2015 and for the corresponding period in 2014, fuel expense was $243 million. While there was no overall change, a $152 million increase in the total cost of fuel attributable to the volume of KWHs generated was offset by a $152 million decrease in the average cost of natural gas per KWH generated.

~~Purchased Power~~ – ~~Non-Affiliates and Affiliates~~

In the second quarter 2015, purchased power expense was $22 million compared to $33 million for the corresponding period in 2014. For year-to-date 2015, purchased power expense was $48 million compared to $91 million for the corresponding period in 2014. The decreases were primarily the result of 37.4% and 45.6% decreases in the volume of KWHs purchased in the second quarter 2015 and year-to-date 2015, respectively, primarily due to lower natural gas prices which resulted in higher use of Southern Power Company's generation resources.purchased.

Other Operations and Maintenance Expenses

Second Quarter 2015 vs. Second Quarter 2014 Year-to-Date 2015 vs. Year-to-Date 2014
(change in millions) (% change) (change in millions) (% change)
$— — $(1) (0.8)



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$27		51.9

In the ~~second~~first quarter ~~2015 and for the corresponding period in 2014,~~2016, other operations and maintenance expenses were $69 million. While there was no overall change, a decrease in outage expense of $10 million was offset by a $10 million increase in expenses associated with support services, transmission, and new plants placed in service in 2014 and 2015.

~~For year-to-date 2015, other operations and maintenance expenses were $121~~$79 million compared to ~~$122~~$52 million for the corresponding period in ~~2014.~~2015. The ~~decrease~~increase was primarily due to a ~~$17~~$14 million ~~decrease in outage expense,~~increase associated with

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~~largely offset by~~scheduled outage and maintenance expenses, a ~~$16~~$6 million increase in business support services expenses, and a $5 million increase in expenses associated with ~~support services,~~ new ~~plants~~solar and wind facilities placed in service in ~~2014 and~~ 2015 and ~~transmission.~~2016.

Depreciation and Amortization

Second Quarter 2015 vs. Second Quarter 2014 Year-to-Date 2015 vs. Year-to-Date 2014
(change in millions)
(% change) (change in millions) (% change)
$8 15.4 $15 14.6



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$14		23.7

In the ~~second~~first quarter ~~2015,~~2016, depreciation and amortization was ~~$60~~$73 million compared to ~~$52~~$59 million for the corresponding period in ~~2014. For year-to-date~~2015. The increase was primarily due to additional depreciation related to new solar and wind facilities placed in service in 2015 ~~depreciation~~ and ~~amortization~~2016.

Interest Expense, net of Amounts Capitalized



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(1)		(4.5)

In the first quarter 2016, interest expense, net of amounts capitalized was ~~$118~~$21 million compared to ~~$103~~$22 million for the corresponding period in ~~2014.~~2015. The ~~increases were~~decrease was primarily due to a $9 million increase in capitalized interest associated with the construction of solar facilities, largely offset by an increase of $8 million in interest expense related to ~~solar facilities placed in service in 2014~~additional debt issued primarily to fund Southern Power's growth strategy and ~~2015.~~continuous construction program.

Income Taxes (Benefit)

Second Quarter 2015 vs. Second Quarter 2014 Year-to-Date 2015 vs. Year-to-Date 2014
(change in millions)
(% change) (change in millions) (% change)
$4 133.3 $13 N/M



First Quarter 2016 vs. First Quarter 2015
(change in millions)		(% change)
$(35)		N/M

N/M – Not meaningful

In the ~~second~~first quarter ~~2015,~~2016, income ~~taxes were $1~~tax benefit was $(23) million compared to an ~~income tax benefit~~expense of $3$12 million for the corresponding period in ~~2014. For year-to-date 2015, income taxes were $13 million.~~2015. The ~~increases were~~change was primarily due to ~~higher pre-tax earnings~~a $28 million increase in ~~2015 and beneficial state income tax changes in 2014, partially offset by increased~~ federal income tax benefits from solar ITCs and wind PTCs in 2016 and a $7 million decrease in tax expense related to ~~ITCs~~lower pre-tax earnings in ~~2015.~~2016.

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

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Southern Power's future earnings potential. The level of Southern Power's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Southern Power's competitive wholesale business. These factors ~~include~~include: Southern Power's ability to achieve sales growth while containing costs; regulatory matters; creditworthiness of customers; total generating capacity available in Southern Power's market areas; the successful remarketing of capacity as current contracts expire; and Southern Power's ability to execute its ~~acquisition and value creation~~growth strategy, including ~~successfully expanding~~successful additional investments in renewable and other energy projects, and to construct generating facilities, including the impact of federal ITCs. Demand for electricity is primarily driven by economic growth. The pace of economic growth and electricity demand may be affected by changes in regional and global economic conditions, which may impact future earnings.

Other factors that could influence future earnings include weather, demand, cost of ~~generating~~generation from units within the power pool, and operational limitations. For additional information relating to these issues, see RISK FACTORS in

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Item 1A and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL of Southern Power in Item 7 of the Form 10-K.

Power Sales Agreements

See BUSINESS – "The Southern Company System – Southern Power" in Item 1 of the Form 10-K for additional information regarding Southern Power's PPAs with investor-owned utilities, independent power purchasers, municipalities, electric cooperatives, and other load-serving entities.

At December 31, 2015, Southern Power's generation contract coverage ratio, which compares contracted capacity (MW) to available demonstrated capacity (MW), was an average of 75% for the next five years (through 2020) and 70% for the next 10 years (through 2025), with an average remaining contract duration of approximately 10 years.

Southern Power believes an investment contract ratio better identifies the value of assets covered since it represents the ratio of investment under contract to total investment using the respective generation facilities' net book value (or expected in-service value for facilities under construction or being acquired) as the investment amount. At March 31, 2016, the investment coverage ratio was 91% for the next five years (through 2020) and 90% for the next 10 years (through 2025), with an average remaining contract duration of approximately 18 years. At December 31, 2015, the investment coverage ratio would have been 91% for the next five years (through 2020) and 90% for the next 10 years (through 2025), with an average remaining contract duration of approximately 18 years.

Environmental Matters

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" of Southern Power in Item 7 of the Form 10-K for information on the development by federal and state environmental regulatory agencies of additional control strategies for emissions of air pollution from industrial sources, including electric generating facilities. Compliance with possible additional federal or state legislation or regulations related to global climate change, air quality, water quality, or other environmental and health concerns could also significantly affect Southern Power. While Southern Power'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.

Acquisitions

During 2016, in accordance with its overall growth strategy, Southern Power acquired or contracted to acquire through its wholly-owned subsidiaries, Southern Renewable Partnerships, LLC or Southern Renewable Energy, Inc., the projects set forth in the following table. Acquisition-related costs were expensed as incurred and were not material. See Note (I) to the Condensed Financial Statements under "Southern Power" herein for additional information.

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Project Facility	Approx. Nameplate Capacity	Location	Percentage Ownership		Expected/Actual COD	PPA Contract Period
	(MW)
SOLAR
Calipatria^(a)	20	Imperial County, CA	90	%	February 11, 2016	20 years
East Pecos^(b)	120	Pecos County, TX	100	%	Fourth quarter 2016	15 years
WIND
Grant Wind^(c)	151	Grant County, OK	100	%	April 8, 2016	20 years
Passadumkeag^(d)	40	Penobscot County, ME	100	%	Second quarter 2016	15 years

(a) Calipatria - On February 11, 2016, Southern Power, together with the minority owner, Turner Renewable Energy, LLC (TRE), which owns 10%, acquired all of the outstanding membership interests of Calipatria Solar, LLC.

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~~Air Quality~~

~~See MANAGEMENT'S DISCUSSION AND ANALYSIS~~(b) –East Pecos ~~FUTURE EARNINGS POTENTIAL~~ – ~~"Environmental Matters~~ – ~~Environmental Statutes and Regulations~~ – ~~Air Quality" of~~- On March 4, 2016, Southern Power in Item 7 of the Form 10-K for additional information regarding the EPA's proposed regulations governing emissions during startup, shutdown, or malfunction (SSM) and the Cross State Air Pollution Rule (CSAPR).

On June 12, 2015, the EPA published a final rule requiring affected states (including Alabama, Florida, Georgia, North Carolina, and Texas) to revise or remove state implementation plan (SIP) provisions regarding excess emissions that occur during periods of SSM by no later than November 22, 2016. The ultimate impact of the final rule will depend on the outcome of any legal challenges and the development and approval of SIPs by the affected states and cannot be determined at this time.

On July 28, 2015, the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion invalidating certain emissions budgets under the CSAPR Phase II emissions trading program for a number of states, including Alabama, Florida, Georgia, North Carolina, and Texas. The court's decision leaves the emissions trading program in place and remands the rule to the EPA for further action consistent with the court's decision. The court rejectedacquired all ~~other pending challenges to the rule. The ultimate impact of this decision will depend on additional rulemaking and cannot be determined at this time.~~

~~Global Climate Issues~~

~~See MANAGEMENT'S DISCUSSION AND ANALYSIS~~ – ~~FUTURE EARNINGS POTENTIAL~~ – ~~"Environmental Matters~~ – ~~Global Climate Issues" of Southern Power in Item 7 of the Form 10-K for additional information regarding the EPA's proposed regulation of CO~~₂ ~~from fossil-fuel-fired electric generating units.~~

~~On August 3, 2015, the EPA released pre-publication versions of two final rules that would limit CO~~₂ ~~emissions from fossil fuel-fired electric generating units. One of the final rules contains specific emission standards governing CO~~₂ ~~emissions from new, modified, and reconstructed units. The other final rule establishes guidelines for states to develop plans to meet EPA-mandated CO~~₂ ~~emission rates for existing units. The EPA's final guidelines require state plans to meet interim CO~~₂ performance rates between 2022 and 2029 and final rates in 2030 and thereafter. At the same time, the EPA also proposed a federal plan and proposed model rule that states can adopt or that would be put in place if, in response to the final guidelines, a state either does not submit a state plan or its plan is not approved by the EPA. These guidelines and standards could result in operational restrictions and material compliance costs, including capital expenditures, which could affect future unit retirement and replacement decisions. Southern Power's results of operations, cash flows, and financial condition could be significantly impacted if such costs are not recovered through existing PPAs. However, the ultimate financial and operational impact of the final rules on Southern Power cannot be determined at this time and will depend on numerous factors including the Southern Company system's ongoing review of the final rules; the outcome of any legal challenges; individual state implementation of the EPA's final guidelines, including the potential that state plans impose different standards; additional rulemaking activities in response to legal challenges and related court decisions; the impact of future changes in generation and emissions related technology and costs; the impact of future decisions regarding unit retirement and replacement, including the type and amount of any such replacement capacity; and the time periods over which compliance will be required.

~~Acquisitions~~

During 2015, Southern Power Company acquired or contracted to acquire the following projects in accordance with its overall growth strategy, which are included in Southern Power's capital program estimates for 2015.

~~Kay County Wind Facility~~

On February 24, 2015, Southern Power Company, through its wholly-owned subsidiary Southern Renewable Energy, Inc., entered into a purchase agreement with Kay Wind Holdings, LLC, a wholly-owned subsidiary of Apex Clean Energy Holdings, LLC, the developer of the project, to acquire all of the outstanding membership interests of ~~Kay Wind, LLC (Kay Wind) for approximately~~ ~~$492 million, with potential purchase~~East Pecos Solar, LLC. Total construction costs, which include the acquisition price ~~adjustments based on~~

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~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~performance testing. Kay Wind is constructing and owns an approximately 299-MW wind facility in Kay County, Oklahoma. The wind facility is~~allocated to CWIP, are expected to begin commercial operation in late 2015, and the entire output of the facility is contracted under separate 20-year PPAs with Westar Energy, Inc. and Grand River Dam Authority. The completion of the acquisition is subjectbe approximately $200 million to ~~Kay Wind achieving certain construction and project milestones, as well as various other customary conditions to closing, and is expected to close in the fourth quarter 2015.~~$220 million. The ultimate outcome of this matter cannot be determined at this time. ~~See Note 2 to the financial statements of Southern Power~~ ~~in Item 8 of the Form 10-K~~ ~~for additional information.~~

~~Lost Hills-~~(c) ~~Blackwell Solar Facilities~~Grant Wind

~~On April 15, 2015,~~ - Subsequent to March 31, 2016, Southern Power ~~Company, through its subsidiary Southern Renewable Partnerships, LLC (SRP),~~ acquired ~~100% of~~all the ~~class A~~outstanding membership interests of ~~Lost Hills Blackwell Holdings, LLC (Lost Hills Blackwell) from a wholly-owned subsidiary of First Solar, Inc. (First Solar), the developer~~Grant Wind, LLC.

(d) Passadumkeag - On March 11, 2016, Southern Power entered into an agreement to acquire all of the ~~project, for approximately $74 million. Concurrently, a wholly-owned subsidiary of First Solar acquired 100% of the class B~~outstanding membership interests of ~~Lost Hills Blackwell for approximately $33 million. SRP and~~Quantum Wind Acquisition I, LLC, which is expected to close in the ~~class B member are entitled to 51% and 49%, respectively,~~second quarter 2016. The ultimate outcome of all cash distributions from Lost Hills Blackwell. In addition, Southern Power Company is entitled to substantially all of the federal tax benefits with respect to the transaction. Lost Hills Blackwell constructed and owns the approximately 22-MW Lost Hills and the approximately 13-MW Blackwell solar facilities in Kern County, California. These solar facilities began commercial operation on April 17, 2015, and their entire output is contracted under PPAs, initially to the City of Roseville, California and then to Pacific Gas and Electric Company, that together extend approximately 29 years.

~~North Star Solar Facility~~

On April 30, 2015, Southern Power Company, through its subsidiary SRP, acquired 100% of the class A membership interests of NS Solar Holdings, LLC (North Star) from a wholly-owned subsidiary of First Solar, the developer of the project, for approximately $211 million. Concurrently, a wholly-owned subsidiary of First Solar acquired 100% of the class B membership interests of North Star for approximately $100 million. SRP and the class B member are entitled to 51% and 49%, respectively, of all cash distributions from North Star. In addition, Southern Power Company is entitled to substantially all of the federal tax benefits with respect to the transaction. North Star constructed and owns the approximately 61-MW North Star solar facility in Fresno County, ~~California. The solar facility began commercial operation on June 20, 2015, and the~~ ~~entire output of the project is contracted under a 20-year PPA with Pacific Gas and Electric Company.~~this matter cannot be determined at this time.

Construction Projects

~~In December 2014,~~See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Acquisitions" and "Construction Projects" of Southern Power ~~Company announced plans to build a solar photovoltaic facility, and during 2015, Southern Power Company acquired all~~in Item 7 of the ~~outstanding membership interests of five separate solar project development entities. The construction projects are~~Form 10-K for additional information.

During the first quarter 2016, in accordance with ~~Southern Power's~~its overall growth strategy, Southern Power completed construction of and ~~included~~placed in ~~its capital program estimates for 2015. The~~service the Butler Solar Farm and Pawpaw solar facilities. In addition, Southern Power continued construction of the projects set forth in the table below. Through March 31, 2016, total ~~cost~~costs of construction incurred for ~~these~~the projects ~~through June 30, 2015 was $188 million.~~below were $2.2 billion, of which $1.5 billion remains in CWIP. The ultimate outcome of these matters cannot be determined at this time.

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Solar Facility	Approx. Nameplate Capacity	Location	Expected/Actual COD	PPA Contract Period	Estimated Construction Costs
	(MW)				(in millions)
Butler	103	Taylor County, GA	Fourth quarter 2016	30 years	$	220	-	230	(a)
Desert Stateline	299^(b)	San Bernardino County, CA	Through third quarter 2016	20 years	$	1,200	-	1,300	(c)
Garland and Garland A^(d)	205	Kern County, CA	Fourth quarter 2016 Third quarter 2016	15 years and 20 years	$	532	-	552	(e)
Roserock^(d)	160	Pecos County, TX	Fourth quarter 2016	20 years	$	333	-	353	(e)
Sandhills	146	Taylor County, GA	Fourth quarter 2016	25 years	$	260	-	280
Tranquillity^(d)	205	Fresno County, CA	Third quarter 2016	18 years	$	473	-	493	(f)


(a)	Butler - Total estimated construction costs include the acquisition price of all outstanding membership interests of the related entity.

(b) Desert Stateline - The facility has a total of 299 MWs, of which 110 MWs were placed in service in the fourth quarter 2015 and 76 MWs were placed in service in the first quarter 2016. Subsequent to March 31, 2016, 38 MWs were placed in service. The remaining 75 MWs are expected to be placed in service by the end of the third quarter 2016.

(c)

Desert Stateline - On March 29, 2016, Southern Power acquired an additional 15% interest in Desert Stateline. As a result, Southern Power and the class B member are entitled to 66% and 34%, respectively, of all cash distributions from Desert Stateline. In addition, Southern Power will continue to be entitled to substantially all of the federal tax benefits with respect to the transaction. Total estimated construction costs include the acquisition price allocated to CWIP; however, the allocation of the purchase price to individual assets has not been finalized.


(d)	Southern Power owns 100% of the class A membership interests and a wholly-owned subsidiary of the seller owns 100% of the class B membership interests. Southern Power and the class B member are entitled to 51% and 49%, respectively, of all cash distributions from the project.


(e)	Total estimated construction costs include the acquisition price allocated to CWIP. During the first quarter 2016, the allocation of the purchase price to individual assets was finalized with no changes.


(f)	Total estimated construction costs include the acquisition price allocated to CWIP; however, the allocation of the purchase price to individual assets has not been finalized.

See FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" herein for additional information.

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~~Southern Power Company's construction projects are detailed in the table below:~~

Solar Project Seller Nameplate Capacity County Location in Georgia Expected Commercial Operation Date PPA Counterparty
for Entire Plant Output PPA Contract Period Estimated Construction Cost
(MW) (in millions)
Taylor County N/A 146 Taylor Fourth quarter 2016 Cobb, Flint, and Sawnee Electric Membership Corporations 25 years $ 260
- $280
Decatur Parkway TradeWind Energy, Inc. 84 Decatur December 2015
Georgia Power^(a)
25 years $ 170
- $173 (b)
Decatur County TradeWind Energy, Inc. 20 Decatur December 2015
Georgia Power^(a)
20 years $ 45
- $47 (b)
Butler CERSM, LLC and Community Energy, Inc. 103 Taylor December 2016
Georgia Power^(a)
30 years $ 220
- $230 (b)
Pawpaw Longview Solar, LLC 30 Taylor December 2015
Georgia Power^(a)
30 years $ 70
- $80 (b)
Butler Solar Farm Strata Solar Development, LLC 20 Taylor December 2015
Georgia Power^(a)
20 years $ 42
- $48 (b)

~~(a) Subject to FERC approval.~~

~~(b) Includes the acquisition price of all outstanding membership interests.~~

~~See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" herein for additional information.~~

~~Power Sales Agreements~~

Taking into account the PPAs and capacity from the acquisitions and construction projects discussed herein, together with various new PPAs relating to Southern Power's existing fleet, the coverage ratio of its available capacity for the next five years and the next 10 years has not changed materially as of June 30, 2015 from the period ended December 31, 2014.

~~FERC Matters~~

Southern Power has authority from the FERC to sell electricity at market-based rates. Since 2008, that authority, for certain balancing authority areas, has been conditioned on compliance with the requirements of an energy auction, which the FERC found to be tailored mitigation that addresses potential market power concerns. In accordance with FERC regulations governing such authority, the traditional operating companies and Southern Power filed a triennial market power analysis on June 30, 2014, which included continued reliance on the energy auction as tailored mitigation. On April 27, 2015, the FERC issued an order finding that the traditional operating companies' and Southern Power's existing tailored mitigation may not effectively mitigate the potential to exert market power in certain areas served by the traditional operating companies and in some adjacent areas. To retain market-based rate authority, the FERC directed the traditional operating companies and Southern Power to show why market-based rate authority should not be revoked in these areas or to provide a mitigation plan to further address market power concerns. The traditional operating companies and Southern Power filed a request for rehearing on May 27, 2015 and on June 26, 2015 filed their response with the FERC. The ultimate outcome of this matter cannot be determined at this time.

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~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Other Matters

Southern Power is involved in various other matters being litigated and regulatory matters that could affect future earnings. In addition, Southern Power is subject to certain claims and legal actions arising in the ordinary course of business. Southern Power's business activities are subject to extensive governmental regulation related to public health and the environment, such as regulation of air emissions and water discharges. Litigation over environmental issues and claims of various types, including property damage, personal injury, common law nuisance, and citizen enforcement of environmental requirements, such as air quality and water standards, has occurred throughout the U.S. This litigation has included claims for damages alleged to have been caused by CO₂ and other emissions and alleged exposure to hazardous materials, and/or requests for injunctive relief in connection with such matters.

The ultimate outcome of such pending or potential litigation against Southern Power cannot be predicted at this time; however, for current proceedings not specifically reported in Note (B) to the Condensed Financial Statements herein or in Note 3 to the financial statements of Southern Power in Item 8 of the Form 10-K, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on Southern Power's financial statements.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Southern Power prepares its consolidated financial statements in accordance with GAAP. Significant accounting policies are described in Note 1 to the financial statements of Southern Power in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Southern Power'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. See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES – "Application of Critical Accounting Policies and Estimates" of Southern Power in Item 7 of the Form 10-K for a complete discussion of Southern Power's critical accounting policies and estimates related to Revenue Recognition, Impairment of ~~Long Lived~~Long-Lived Assets and Intangibles, Acquisition Accounting, Depreciation, and ITCs.

Recently Issued Accounting Standards

~~The Financial Accounting Standards Board's (FASB) ASC 606,~~ ~~Revenue from Contracts with Customers~~, revises the accounting for revenue recognition effective for fiscal years beginning after December 15, 2017. Southern Power continues to evaluate the requirements of ASC 606. The ultimate impact of the new standard has not yet been determined.

On February ~~18, 2015,~~25, 2016, the FASB issued ~~Accounting Standards Update (ASU) 2015-02,~~ASU No. 2016-02, ~~Amendments~~Leases(Topic 842) (ASU 2016-02). ASU 2016-02 requires lessees to recognize on the ~~Consolidation Analysis, which makes certain~~balance sheet a lease liability and a right-of-use asset for all leases. ASU 2016-02 also changes ~~to both~~ the ~~variable interest model~~recognition, measurement, and ~~the voting model, including changes to~~presentation of expense associated with leases and provides clarification regarding the identification of ~~variable interests, the variable interest entity characteristics for~~certain components of contracts that would represent a ~~limited partnership or similar entity, and the primary beneficiary determination. This~~lease. The accounting required by lessors is relatively unchanged. ASU 2016-02 is effective for fiscal years beginning after December 15, ~~2015.~~2018, with early adoption permitted. Southern Power is currently evaluating ~~these requirements. The ultimate impact of this ASU~~the new standard and has not yet ~~been determined.~~determined its ultimate impact.

~~On April 7, 2015, the FASB issued ASU No. 2015-03,~~ ~~Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.~~ The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and is effective for fiscal years beginning after December 15, 2015. Southern Power currently reflects unamortized debt issuance costs in other deferred charges and assets – non-affiliated on its balance sheet. Upon adoption, the reclassification will not have a material impact on the results of operations, financial position, or cash flows of Southern Power.

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FINANCIAL CONDITION AND LIQUIDITY

Overview

Southern Power's financial condition remained stable at ~~June 30, 2015.~~March 31, 2016. Southern Power intends to continue to monitor its access to short-term and long-term capital markets as well as bank credit agreements as needed to meet future capital and liquidity needs. See "Sources of Capital" herein for additional information on lines of credit.

Net cash ~~provided from~~used for operating activities totaled ~~$251~~$110 million for the first ~~six~~three months of ~~2015,~~2016, compared to ~~$193~~$19 million for the first ~~six~~three months of ~~2014.~~2015. The increase in cash ~~provided from~~used for operating activities was primarily due to ~~lower purchased power costs and~~ an increase in income ~~tax benefits received.~~taxes paid. Net cash used for investing activities totaled ~~$570~~$873 million for the first ~~six~~three months of ~~2015~~2016 primarily due to ~~the Lost Hills, Blackwell, and North Star~~ acquisitions and ~~expenditures related to~~ the construction of ~~new solar~~renewable facilities. Net cash provided from financing activities totaled ~~$464~~$206 million for the first ~~six~~three months of ~~2015~~2016 primarily due to ~~the issuance of additional senior~~an increase in notes ~~in May 2015.~~payable. Fluctuations in cash flow from financing activities vary from period to period based on capital needs and

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the maturity or redemption of securities.

Significant balance sheet changes for the first ~~six~~three months of ~~2015~~2016 include a ~~$300~~$398 million increase in CWIP due to continued construction of new solar facilities and a $412 million increase in plant in service, ~~net of depreciation~~ primarily due to ~~the Lost Hills, Blackwell, and North Star acquisitions and a $190 million increase~~solar facilities being placed in ~~CWIP primarily due to the construction of new solar facilities.~~service. Other significant changes include ana $777 million decrease in cash and cash equivalents and a $276 million increase in ~~long-term debt~~notes payable due to funding of ~~$642 million primarily as a result of the issuance of senior notes in May 2015.~~acquisitions and construction projects, and income taxes. See FUTURE EARNINGS POTENTIAL – "Acquisitions" herein for additional information.

Capital Requirements and Contractual Obligations

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" of Southern Power in Item 7 of the Form 10-K for a description of Southern Power's capital requirements for its construction program, scheduled maturities of long-term debt, as well as the related interest, leases, derivative obligations, ~~purchase commitments, and~~ unrecognized tax ~~benefits. Subsequent~~benefits, and other purchase commitments. Approximately $400 million will be required to ~~June 30, 2015, $525 million of~~repay long-term debt ~~was repaid at maturity.~~due September 28, 2016. There are no other scheduled maturities of long-term debt through ~~June 30, 2016.~~March 31, 2017. In addition, during the first quarter 2016, Southern Power entered into four new long-term service agreements (LTSA), which begin in 2020 and result in additional future commitments totaling approximately $627 million.

The ~~capital~~construction program is subject to periodic review and revision. These amounts include estimates for potential plant acquisitions and new construction. In addition, the construction ~~as well as ongoing~~program includes capital improvements and work to be performed under ~~long-term service agreements.~~LTSAs. Planned expenditures for plant acquisitions may vary materially due to market opportunities and Southern Power's ability to execute its growth strategy. Capital expenditures of Southern Power are currently estimated to be approximately $1.4 billion for 2015, which includes approximately $1.3 billion for acquisitions and/or construction of new generating facilities. See Note (I) to the Condensed Financial Statements herein for additional information. Actual capital costs may vary from these estimates because of numerous factors such as: changes in ~~factors such as~~ business conditions; changes in the expected environmental compliance program; changes in environmental statutes and regulations; the outcome of any legal challenges to the environmental rules; changes in FERC rules and regulations; changes in load projections; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; and the cost of capital. See Note (I) to the Condensed Financial Statements herein for additional information.

Sources of Capital

Southern Power plans to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from operating cash flows, short-term debt, securities issuances, term loans, and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon prevailing market conditions, regulatory approval, and other factors. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" of Southern Power in Item 7 of the Form 10-K for additional information.

As of March 31, 2016, Southern Power's current liabilities ~~sometimes exceed~~exceeded current assets by $977 million due to long-term debt maturing in 2016, the use of short-term debt as a funding source, and construction payables, as well as cash needs, which can fluctuate significantly due to the seasonality of the ~~business.~~business and the stage of its acquisitions and construction projects. In ~~2015,~~2016, Southern Power ~~has utilized the capital markets to issue additional senior notes and~~ expects to utilize the capital markets, bank term loans, and commercial paper markets as the source of funds for the majority of its maturities.

As of March 31, 2016, Southern Power had cash and cash equivalents of approximately $53 million.

Other than borrowings pursuant to the Project Credit Facilities (defined below), Southern Power had no short-term borrowings during the first quarter 2016.

Company Facility

At March 31, 2016, Southern Power had a committed credit facility (Facility) of $600 million expiring in 2020, of which $560 million was unused. Southern Power's subsidiaries are not borrowers under the Facility.

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markets, bank term loans, and commercial paper markets, as the source of funds for the majority of its maturities and to meet short-term liquidity needs, including funding acquisition and construction costs.

To meet liquidity and capital resource requirements, Southern Power had at June 30, 2015 cash and cash equivalents of approximately $220 million and Southern Power Company had a committed credit facility of $500 million (Facility) expiring in 2018, of which $466 million is unused.

The Facility, as well as Southern Power's term loan agreement, contains a covenant that limits the ratio of debt to capitalization ~~(each as~~(as defined in the Facility) to a maximum of 65% and contains a cross default provision that is restricted only to ~~the~~ indebtedness of Southern Power. For purposes of this definition, debt excludes any project debt incurred by certain subsidiaries of Southern Power ~~Company~~to the extent such debt is non-recourse to Southern Power , and capitalization excludes the capital stock or other equity attributable to such subsidiary. Southern Power is currently in compliance with all covenants in the Facility.

Proceeds from ~~this~~the Facility may be used for working capital and general corporate purposes as well as liquidity support for Southern ~~Power Company's~~Power's commercial paper program. Subject to applicable market conditions, Southern Power ~~Company~~ expects to renew or replace the Facility, as needed, prior to expiration. In connection therewith, Southern Power ~~Company~~ may extend the maturity date and/or increase or decrease the lending commitment thereunder. See Note 6 to the financial statements of Southern Power under "Bank Credit Arrangements" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Bank Credit Arrangements" herein for additional information.

Southern ~~Power Company's~~Power's commercial paper program is used to finance acquisition and construction costs related to electric generating facilities and for general corporate purposes, including maturing debt. ~~Subsequent to June 30, 2015,~~Southern Power's subsidiaries are not borrowers under the commercial paper ~~was~~program.

Subsidiary Facilities

In connection with the construction of solar facilities by RE Tranquillity LLC, RE Roserock LLC, and RE Garland Holdings LLC, indirect subsidiaries of Southern Power, each subsidiary entered into separate credit agreements (Project Credit Facilities), which are non-recourse to Southern Power (other than the subsidiary party to the agreement). Each Project Credit Facility provides (a) a senior secured construction loan credit facility, (b) a senior secured bridge loan facility, and (c) a senior secured letter of credit facility that is secured by the membership interests of the respective project company. Proceeds from the Project Credit Facilities are being used to ~~partially fund~~finance project costs related to the ~~maturity~~respective solar facilities currently under construction. Each Project Credit Facility is secured by the assets of ~~long-term debt in July 2015.~~

~~Details~~the applicable project subsidiary and membership interests of ~~short-term borrowings were~~the applicable project subsidiary. The table below summarizes each Project Credit Facility as ~~follows:~~of March 31, 2016.

Commercial Paper at
the End of the Period

Commercial Paper During the Period^(*)

Amount
Outstanding

Weighted
Average
Interest
Rate

Average
Outstanding

Weighted
Average
Interest
Rate

Maximum
Amount
Outstanding
(in millions) (in millions) (in millions)
June 30, 2015: $ —
— % $ 163
0.6 % $ 339

~~(*) Average~~



Project	Maturity Date	Construction Loan Facility		Bridge Loan Facility		Total		Total Undrawn		Letter of Credit Facility		Total Undrawn
		(in millions)
Tranquillity	Earlier of COD or December 31, 2016	$	86	$	172	$	258	$	52	$	77	$	26
Roserock	Earlier of COD or November 30, 2016	63		180		243		121		23		16
Garland	Earlier of COD or November 30, 2016	86		308		394		309		49		32
Total		$	235	$	660	$	895	$	482	$	149	$	74

The Project Credit Facilities had total amounts outstanding as of March 31, 2016 of $413 million at a weighted average interest rate of 1.99%. For the three months ended March 31, 2016, these credit agreements had a maximum amount outstanding of $413 million, and ~~maximum amounts are based upon daily balances during the three-month period ended June 30, 2015.~~an average amount outstanding of $260 million at a weighted average interest rate of 1.99%.

Southern Power believes the need for working capital can be adequately met by utilizing the commercial paper program, the Facility, bank term loans, and operating cash flows.

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Credit Rating Risk

Southern Power 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~~Baa2, or below. These contracts are for physical electricity purchases and sales, fuel transportation and storage, ~~and~~ energy price risk ~~management.~~management, and transmission.

The maximum potential collateral requirements under these contracts at ~~June 30, 2015~~March 31, 2016 were as follows:


Credit Ratings	Maximum Potential Collateral Requirements		Maximum Potential Collateral Requirements
	(in millions)		(in millions)
At BBB and Baa2	$	9
At BBB and/or Baa2			$	11
At BBB- and/or Baa3	320		$	350
Below BBB- and/or Baa3	1,081		$	1,063

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~~SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Additionally, ~~any~~a credit rating downgrade could impact the ability of Southern ~~Power's ability~~Power to access capital markets ~~particularly~~and would be likely to impact the ~~short-term debt market.~~cost at which it does so.

In addition, Southern Power has a PPA that could require collateral, but not accelerated payment, in the event of a downgrade of Southern ~~Power Company's~~Power's credit. The PPA requires credit assurances without stating a specific credit rating. The amount of collateral required would depend upon actual losses, if any, resulting from a credit downgrade.

Financing Activities

In May 2015, Southern Power Company issued $350 million aggregate principal amount of Series 2015A 1.500% Senior Notes due June 1, 2018 and $300 million aggregate principal amount of Series 2015B 2.375% Senior Notes due June 1, 2020. The proceeds were used to repay a portion of its outstanding short-term indebtedness, for other general corporate purposes, includingDuring the three months ended March 31, 2016, Southern Power's ~~growth strategy~~subsidiary repaid $3 million of long-term debt payable to TRE and ~~continuous construction program, and for~~borrowed $2 million due February 28, 2036 under promissory notes payable to TRE.

During the three months ended March 31, 2016, Southern Power's subsidiaries borrowed $276 million pursuant to the Project Credit Facilities at a ~~portion~~weighted average interest rate of 1.99%. In addition, Southern Power's subsidiaries issued $8 million in letters of credit.

Subsequent to March 31, 2016, Southern Power's subsidiaries borrowed $187 million pursuant to the ~~subsequent repayment~~Project Credit Facilities at ~~maturity~~a weighted average interest rate of ~~$525 million aggregate principal amount of Southern Power Company's 4.875% Senior Notes on July 15, 2015.~~ 1.93%.

In addition to any financings that may be necessary to meet capital requirements and contractual obligations, Southern Power ~~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.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

ALABAMA POWER COMPANY

GEORGIA POWER COMPANY

GULF POWER COMPANY

MISSISSIPPI POWER COMPANY

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

(UNAUDITED)

INDEX TO THE NOTES TO THE CONDENSED FINANCIAL STATEMENTS

INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT

The following unaudited notes to the condensed financial statements are a combined presentation. The list below indicates the registrants to which each footnote applies.



Registrant	Applicable Notes
Southern Company	A, B, C, D, E, F, G, H, I, J
Alabama Power	A, B, C, E, F, G, H
Georgia Power	A, B, C, E, F, G, H
Gulf Power	A, B, C, E, F, G, H
Mississippi Power	A, B, C, E, F, G, H
Southern Power	A, B, C, D, E, G, H, I

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

ALABAMA POWER COMPANY

GEORGIA POWER COMPANY

GULF POWER COMPANY

MISSISSIPPI POWER COMPANY

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

NOTES TO THE CONDENSED FINANCIAL STATEMENTS:

(UNAUDITED)


(A)	INTRODUCTION

The condensed quarterly financial statements of each registrant included herein have been prepared by such registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets as of December 31, ~~2014~~2015 have been derived from the audited financial statements of each registrant. In the opinion of each registrant's management, the information regarding such registrant furnished herein reflects all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the results of operations for the periods ended ~~June 30, 2015~~March 31, 2016 and ~~2014.~~2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each registrant believes that the disclosures regarding such registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy, operating results for the periods presented are not necessarily indicative of the operating results to be expected for the full year.

Certain prior year data presented in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the results of operations, financial position, or cash flows of any registrant.

On February 6, 2015, Gulf Power announced plans to retire its coal-fired generation at Plant Smith Units 1 and 2 (357 MWs) by March 31, 2016. In March 2015, in connection with this retirement, Gulf Power reclassified the net carrying value of these units from plant in service, net of depreciation, to other utility plant, net. Gulf Power expects to recover through its rates the remaining book value of the retired units and certain costs associated with the retirements; however, recovery will be considered by the Florida PSC in future rate proceedings.

In June 2015, Georgia Power identified an error affecting the billing to a small number of large commercial and industrial customers under a rate plan allowing for variable demand-driven pricing from January 1, 2013 to June 30, 2015. In the second quarter 2015, Georgia Power recorded an out of period adjustment of approximately $75 million to decrease retail revenues, resulting in a decrease to net income of approximately $47 million. Georgia Power evaluated the effects of this error on the interim and annual periods that included the billing error, as well as the current period. Based on an analysis of qualitative and quantitative factors, Georgia Power determined the error was not material to any affected period and, therefore, an amendment of previously filed financial statements was not required.

Recently Issued Accounting Standards

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases(Topic 842) (ASU 2016-02). ASU 2016-02 requires lessees to recognize on the balance sheet a lease liability and a right-of-use asset for all leases. ASU 2016-02 also changes the recognition, measurement, and presentation of expense associated with leases and provides clarification regarding the identification of certain components of contracts that would represent a lease. The ~~Financial Accounting Standards Board's (FASB) ASC 606,~~ ~~Revenue from Contracts with Customers, revises~~accounting required by lessors is relatively unchanged and there is no change to the accounting for ~~revenue recognition~~existing leveraged leases. ASU 2016-02 is effective for fiscal years beginning after December 15, ~~2017.~~2018, with early adoption permitted. The registrants ~~continue to evaluate the requirements of ASC 606. The ultimate impact of~~are currently evaluating the new standard ~~has~~and have not yet ~~been determined.~~determined its ultimate impact; however, adoption of ASU 2016-02 is expected to have a significant impact on Southern Company and the traditional operating companies' balance sheets.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)

~~On February 18, 2015, the FASB issued Accounting Standards Update (ASU) 2015-02,~~ ~~Amendments to the Consolidation Analysis~~, which makes certain changes to both the variable interest model and the voting model, including changes to the identification of variable interests, the variable interest entity characteristics for a limited partnership or similar entity, and the primary beneficiary determination. This ASU is effective for fiscal years beginning after December 15, ~~2015. Southern Power is currently evaluating these requirements. The ultimate impact of this ASU on Southern Power has not yet been determined.~~

~~On April 7, 2015, the FASB issued ASU No. 2015-03,~~ ~~Interest – Imputation of Interest (Subtopic 835-30):Simplifying the Presentation of Debt Issuance Costs~~. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and is effective for fiscal years beginning after December 15, 2015.2016, with early adoption permitted. Southern Company ~~currently reflects unamortized debt issuance costs in unamortized debt issuance expense on its balance sheet. The traditional operating companies~~ and Southern Power currently reflect unamortized debt issuance costs in other deferred charges and assets on their balance sheets. Upon adoption, the reclassification will not have a material impact on the results of operations, financial position, or cash flows of any registrant.

~~Asset Retirement Obligations~~

See Note 1 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, and Mississippi Power under "Asset Retirement Obligations and Other Costs of Removal" in Item 8 of the Form 10-K for additional information regarding the EPA's regulation of CCR.

On April 17, 2015, the EPA published the Disposal of Coal Combustion Residuals from Electric Utilities final rule (CCR Rule) in the Federal Register, setting October 19, 2015 as the effective date of the CCR Rule. Therefore, Alabama Power, Gulf Power, and Mississippi Power recorded new asset retirement obligations (ARO) for facilities that are subject to the CCR Rule. Georgia Power had previously recorded AROs as a result of state requirements in Georgia which closely align with the requirements of the CCR Rule. The cost estimates are based on information that was known as of June 30, 2015 using various assumptions related to closure and post-closure costs, timing of future cash outlays, inflation and discount rates, and the potential methods for complying with the CCR Rule requirements. As further analysis is performed, including evaluation of the expected timing and method of compliance and refinement of assumptions underlying the cost estimates, such as the quantities of CCR at each site, the traditional operating companies ~~expect to periodically update these estimates.~~are currently evaluating the new standard and have not yet determined its ultimate impact.

As of June 30, 2015, details of the AROs, including those related to the CCR Rule, included in Southern Company's and the traditional operating companies' Condensed Balance Sheets herein were as follows:

Southern Company Alabama Power Georgia Power
Gulf
Power
Mississippi Power
(in millions)
Balance at beginning of year $ 2,201 $ 829 $ 1,255 $ 17 $ 48
Liabilities incurred 612 401 — 71 97
Liabilities settled (10 ) (1 ) (9 ) — —
Accretion 53 23 28 — 1
Cash flow revisions 58 — 82 4 2
Balance at end of period $ 2,914 $ 1,252 $ 1,356 $ 92 $ 148

~~The increases in liabilities incurred and cash flow revisions for the six months ended June 30, 2015 primarily relate to an increase in AROs associated with facilities impacted by the CCR Rule.~~

~~In connection with a proposed settlement related to the closure of Plant Scholz, Gulf Power may incur additional AROs associated with CCR of approximately $15 million to $35 million.~~

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~~(UNAUDITED)~~


(B)	CONTINGENCIES AND REGULATORY MATTERS

See Note 3 to the financial statements of the registrants in Item 8 of the Form 10-K for information relating to various lawsuits, other contingencies, and regulatory matters.

General Litigation Matters

Each registrant is subject to certain claims and legal actions arising in the ordinary course of business. In addition, business activities of Southern Company's subsidiaries are subject to extensive governmental regulation related to public health and the environment, such as regulation of air emissions and water discharges. Litigation over environmental issues and claims of various types, including property damage, personal injury, common law nuisance, and citizen enforcement of environmental requirements such as air quality and water standards, has occurred throughout the U.S. This litigation has included claims for damages alleged to have been caused by CO₂ and other emissions, CCR, and alleged exposure to hazardous materials, and/or requests for injunctive relief in connection with such matters.

The ultimate outcome of such pending or potential litigation against each registrant and any subsidiaries cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of each registrant in Item 8 of the Form 10-K, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on such registrant's financial statements.

~~Environmental Matters~~

~~New Source Review Actions~~

As part of a nationwide enforcement initiative against the electric utility industry which began in 1999, the EPA brought civil enforcement actions in federal district court against Alabama Power and Georgia Power alleging violations of the New Source Review (NSR) provisions of the Clean Air Act at certain coal-fired electric generating units, including units co-owned by Gulf Power and Mississippi Power. These civil actions sought penalties and injunctive relief, including orders requiring installation of the best available control technologies at the affected units. The case against Georgia Power (including claims related to a unit co-owned by Gulf Power) has been administratively closed in the U.S. District Court for the Northern District of Georgia since 2001. The case against Alabama Power (including claims involving a unit co-owned by Mississippi Power) was partially settled in 2006 through a consent decree with the EPA, and additional claims remain pending in the U.S. District Court for the Northern District of Alabama. On June 25, 2015, the U.S. Department of Justice filed a joint stipulation between Alabama Power, the EPA, and the U.S. Department of Justice proposing to modify the 2006 consent decree to resolve all remaining claims for relief alleged in the case against Alabama Power. If approved by the U.S. District Court for the Northern District of Alabama, Alabama Power will, without admitting liability, operate subject to emission rates and a cap on certain units and requirements to use only natural gas at certain units, including a unit co-owned by Mississippi Power; retire certain units at Plants Gorgas and Barry; pay a $100,000 civil penalty; and invest $1.5 million in electric transportation infrastructure projects over three years.

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

Environmental Remediation

The Southern Company system 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 Southern Company system could incur substantial costs to clean up ~~properties.~~affected sites. The traditional operating companies have each received authority from their respective state PSCs to recover approved environmental compliance costs through regulatory mechanisms. These rates are adjusted annually or as necessary within limits approved by the state PSCs.

Georgia Power's environmental remediation liability as of ~~June 30, 2015~~March 31, 2016 was ~~$40~~$28 million. Georgia Power has been designated or identified as a potentially responsible party (PRP) at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act

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~~(UNAUDITED)~~

(CERCLA), including a site in Brunswick, Georgia on the CERCLA National Priorities List. The ~~parties~~PRPs at the Brunswick site have completed ~~the~~a removal ~~of wastes from the Brunswick site~~action as ordered by the EPA. Additional ~~cleanup and claims for recovery of natural resource damages~~response actions at this site orare anticipated. In September 2015, Georgia Power entered into an allocation agreement with another PRP, under which that PRP will be responsible (as between Georgia Power and that PRP) for paying and performing certain investigation, assessment, remediation, and other incidental activities at the ~~assessment~~Brunswick site. Assessment and potential cleanup of other sites are anticipated.

Georgia Power and numerous other entities have been designated by the EPA as PRPs at the Ward Transformer Superfund site located in Raleigh, North Carolina. In 2011, the EPA issued a Unilateral Administrative Order (UAO) to Georgia Power and 22 other parties, ordering specific remedial action of certain areas at the site. Later in 2011, Georgia Power filed a response with the EPA stating it has sufficient cause to believe it is not a liable party under CERCLA. The EPA notified Georgia Power in 2011 that it is considering enforcement options against Georgia Power and other non-complying UAO recipients. If the EPA pursues enforcement actions and the court determines that a respondent failed to comply with the UAO without sufficient cause, the EPA may also seek civil penalties of up to ~~$37,500~~ ~~per day for the violation and punitive damages of up to~~ ~~three~~ ~~times the costs incurred by the EPA as a result of the party's failure to comply with the UAO.~~

In addition to the EPA's action at this site, Georgia Power, along with many other parties, was sued in a private action by several existing PRPs for cost recovery related to the removal action. In 2013, the U.S. District Court for the Eastern District of North Carolina Western Division ruled that Georgia Power has no liability in the private action and, on March 20, 2015, the U.S. Court of Appeals for the Fourth Circuit affirmed the lower court's ruling. Therefore, the private action is now concluded.

The ultimate outcome of these ~~remaining~~ matters will depend upon the success of defenses asserted, the ultimate number of PRPs participating in the cleanup, and numerous other factors and cannot be determined at this time; however, as a result of Georgia Power's regulatory treatment for environmental remediation expenses, these matters are not expected to have a material impact on Southern Company's or Georgia Power's financial statements. ~~See Note 1 to the financial statements of Georgia Power under "Environmental Remediation Recovery" in Item 8 of the Form 10-K for additional information regarding the regulatory treatment.~~

Gulf Power's environmental remediation liability includes estimated costs of environmental remediation projects of approximately ~~$47~~$46 million as of ~~June 30, 2015.~~March 31, 2016. These estimated costs primarily relate to site closure criteria by the Florida Department of Environmental Protection (FDEP) for potential impacts to soil and groundwater from herbicide applications at Gulf Power substations. The schedule for completion of the remediation projects is subject to FDEP approval. The projects have been approved by the Florida PSC for recovery through Gulf Power's environmental cost recovery clause; therefore, these liabilities have no impact on net income.

In 2003, Mississippi Power and numerous other entities were designated by the Texas Commission on Environmental Quality (TCEQ) as PRPs at a site that was owned by an electric transformer company that handled Mississippi Power's transformers. The TCEQ approved the final site remediation plan in 2013 and, in March 2014, the impacted utilities, including Mississippi Power, agreed to commence remediation actions on the site. Mississippi Power's environmental remediation liability was $0.3 million as

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)

The final outcome of these matters cannot be determined at this time. However, based on the currently known conditions at these sites and the nature and extent of activities relating to these sites, management of Southern Company ~~Georgia Power,~~and Gulf ~~Power, and Mississippi~~ Power does not believe that additional liabilities, if any, at these sites would be material to their respective financial statements.

~~Nuclear Fuel Disposal Cost Litigation~~

Acting through the DOE and pursuant to the Nuclear Waste Policy Act of 1982, the U.S. government entered into contracts with Alabama Power and Georgia Power that require the DOE to dispose of spent nuclear fuel and high level radioactive waste generated at Plants Hatch and Farley and Plant Vogtle Units 1 and 2 beginning no later than January 31, 1998. The DOE has yet to commence the performance of its contractual and statutory obligation to dispose of spent nuclear fuel. Consequently, Alabama Power and Georgia Power pursued and continue to pursue legal remedies against the U.S. government for its partial breach of contract.

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~~NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)~~

~~(UNAUDITED)~~

In December 2014, the Court of Federal Claims entered a judgment in favor of Georgia Power and Alabama Power in the second spent nuclear fuel lawsuit seeking damages for the period from January 1, 2005 through December 31, 2010. Georgia Power recovered approximately $18 million, based on its ownership interests, and Alabama Power recovered approximately $26 million. The judgment amounts were paid on March 19, 2015. In March 2015, Georgia Power credited the award to accounts where the original costs were charged and reduced rate base, fuel, and cost of service for the benefit of customers. The final outcome of this matter for Alabama Power cannot be determined at this time; however, no material impact on Southern Company's or Alabama Power's net income is expected as the damage amounts collected from the government are expected to be used for the benefit of customers.

In March 2014, Alabama Power and Georgia Power filed additional lawsuits against the U.S. government for the costs of continuing to store spent nuclear fuel at Plants Farley and Hatch and Plant Vogtle Units 1 and 2 for the period from January 1, 2011 through December 31, 2013. The damage period was subsequently extended to December 31, 2014. Damages will continue to accumulate until the issue is resolved or storage is provided. No amounts have been recognized in the financial statements as of June 30, 2015 for any potential recoveries from the additional lawsuits. The final outcome of these matters cannot be determined at this time; however, no material impact on Southern Company's, Alabama Power's, or Georgia Power's net income is expected.

FERC Matters

Municipal and Rural Associations Tariff

See Note 3 to the financial statements of Mississippi Power under "FERC Matters" in Item 8 of the Form 10-K for additional information regarding a settlement agreement entered into by Mississippi Power regarding the establishment of a regulatory asset for Kemper IGCC-related costs. See Note 3 to the financial statements of Southern Company and Mississippi Power under "Integrated Coal Gasification Combined Cycle" in Item 8 of the Form 10-K and "Integrated Coal Gasification Combined Cycle" herein for information regarding Mississippi Power's construction of the Kemper IGCC.

On March 31, ~~2015,~~2016, Mississippi Power ~~reached a settlement agreement with its wholesale customers and~~ filed a request with the FERC ~~to forgo~~for an increase in wholesale base revenues as agreed upon in the settlement agreement reached with its wholesale customers under the Municipal and Rural Associations (MRA) cost-based electric tariff. The settlement agreement provides that base rates under the MRA cost-based electric tariff will increase ~~reflected~~approximately $7 million annually, with revised rates effective for services rendered beginning May 1, 2016. The increase is primarily due to the Plant Daniel Units 1 and 2 scrubbers, which were placed in service in November 2015. Additionally, under the ~~filing by, among~~settlement agreement, the tariff customers agreed in principle to similar regulatory treatment for tariff ratemaking as the treatment approved for retail ratemaking under the Mississippi PSC order (In-Service Asset Rate Order). The Kemper IGCC regulatory treatment primarily includes (i) recovery of only the Kemper IGCC assets currently operational and providing service to customers and other ~~things, increasing~~related costs and (ii) removing all of the Kemper IGCC CWIP with a corresponding increase in accrual of AFUDC ~~in lieu of including CWIP in rate base. The settlement agreement, which was accepted~~effective May 1, 2016. If approved by the FERC, ~~on May 13, 2015, provides that~~ the ~~additional accrual~~amount of ~~AFUDC was effective April 1, 2015.~~base rate revenues to be recognized in 2016 is expected to be approximately $5 million. The additional resulting AFUDC is ~~projected~~estimated to be approximately ~~$11~~$6 million. The ultimate outcome of this matter cannot be determined at this time.

Fuel Cost Recovery

Mississippi Power has a wholesale MRA and a Market Based (MB) fuel cost recovery factor. At March 31, 2016, the amount of over-recovered wholesale MRA fuel costs included in the balance sheets was $25 million ~~annually, of which $8~~compared to $24 million ~~relates~~at December 31, 2015. See Note 3 to the ~~Kemper IGCC. In addition, a settlement agreement entered into~~financial statements of Mississippi Power under "FERC Matters – Fuel Cost Recovery" in 2014 and approved by the FERC allowed for an adjustment to the wholesale revenue requirement in the event the Kemper IGCC, or any substantial portion thereof, was placed in service before or after December 1, 2014. A regulatory asset account was recorded as a result of a portionItem 8 of the Kemper IGCC being placed in service prior to the projected date. The March 31, 2015 settlement agreement provides that the regulatory asset will be amortized over nine months, beginning April 1, 2015.Form 10-K for additional information.

Market-Based Rate Authority

The traditional operating companies and Southern Power have authority from the FERC to sell electricity at market-based rates. Since 2008, that authority, for certain balancing authority areas, has been conditioned on compliance with the requirements of an energy auction, which the FERC found to be tailored mitigation that addresses potential market power concerns. In accordance with FERC regulations governing such authority, the traditional operating companies and Southern Power filed a triennial market power analysis ~~on June 30,~~in 2014, which included continued reliance on the energy auction as tailored mitigation. OnIn April ~~27,~~ 2015, the FERC issued an order finding that the traditional operating companies' and Southern Power's existing tailored mitigation may not effectively mitigate the potential to exert market power in certain areas served by the traditional operating companies and in some adjacent areas. ~~To retain market-based rate authority, the~~The FERC directed the traditional operating companies and Southern Power to show why market-based rate authority should not be revoked in these areas or to provide a mitigation plan to further address market power concerns. The traditional operating companies and Southern Power filed a request

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~~(UNAUDITED)~~

for rehearing onin May ~~27,~~ 2015 and onin June ~~26,~~ 2015 filed their response with the FERC. The ultimate outcome of this matter cannot be determined at this time.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)

Retail Regulatory Matters

Alabama Power

See Note 3 to the financial statements of Southern Company and Alabama Power under "Retail Regulatory Matters – Alabama Power" and "Retail Regulatory Matters," respectively, in Item 8 of the Form 10-K for additional information regarding Alabama Power's recovery of retail costs through various regulatory clauses and accounting orders. The ~~recovery~~ balance of each regulatory clause recovery on the balance sheet follows:

Regulatory Clause
Balance Sheet Line Item June 30, 2015
December 31,
2014

(in millions)
Rate CNP Compliance – Under^*

Deferred under recovered regulatory clause revenues $ 25

$ 2
Under recovered regulatory clause revenues, current 29
47
Rate CNP PPA – Under
Deferred under recovered regulatory clause revenues 72

29
Under recovered regulatory clause revenues, current —
27
Retail Energy Cost Recovery – Over
Deferred over recovered regulatory clause revenues 72

47
Natural Disaster Reserve
Other regulatory liabilities, deferred 81

84

* Formerly Known As Rate CNP Environmental

~~Rate CNP~~

See Note 3 to the financial statements of Southern Company under "Retail Regulatory Matters – Alabama Power – Rate CNP" and " – Non-Environmental Federal Mandated Costs Accounting Order" and of Alabama Power under "Retail Regulatory Matters – Rate CNP" and " – Non-Environmental Federal Mandated Costs Accounting Order" in Item 8 of the Form 10-K for additional information regarding Alabama Power's development of a revised cost recovery mechanism and the normal purchases and normal sales (NPNS) exception for wind PPAs.

On March 3, 2015, the Alabama PSC approved a modification to Rate CNP Environmental to include compliance costs for both environmental and non-environmental mandates. The recoverable non-environmental compliance costs result from laws, regulations, and other mandates directed at the utility industry involving the security, reliability, safety, sustainability, or similar considerations impacting Alabama Power's facilities or operations. This modification to Rate CNP Environmental was effective March 20, 2015 with the revised rate now defined as Rate CNP Compliance. Alabama Power incurred $30 million of non-environmental compliance costs during the first six months of 2015 and will be limited to recovery of $50 million for the year. Customer rates will not be impacted before January 2016; therefore, the modification will increase the under recovered position for Rate CNP Compliance during 2015.

In April 2015, the FASB proposed new accounting guidance to allow the NPNS exception for physical forward transactions in nodal energy markets, consistent with the manner in which Alabama Power currently accounts for its two wind PPAs. On July 9, 2015, the FASB ratified the consensus reached by the Emerging Issues Task Force to allow the exception in such cases and voted to issue a final accounting standard.

~~Environmental Accounting Order~~

In April 2015, as part of its environmental compliance strategy, Alabama Power retired Plant Gorgas Units 6 and 7. These units represented 200 MWs of Alabama Power's approximately 12,200 MWs of generating capacity. Additionally, in April 2015, Alabama Power ceased using coal at Plant Barry Units 1 and 2 (250 MWs), but such units will remain available on a limited basis with natural gas as the fuel source. No later than April 2016, Alabama Power expects to cease using coal at Plant Greene County Units 1 and 2 (300 MWs) and begin operating those units solely on natural gas. Subject to the final approval of the New Source Review stipulation, Alabama Power will also

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~~NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)~~

~~(UNAUDITED)~~

retire Plant Barry Unit 3 (225 MWs) which is currently unavailable for generation. See "Environmental Matters – New Source Review Actions" herein for additional information regarding the NSR actions.

In accordance with an accounting order from the Alabama PSC, Alabama Power transferred the unrecovered plant asset balances to a regulatory asset at their respective retirement dates. The regulatory asset will be amortized over the remaining useful lives, as established prior to the decision for retirement. As a result, these decisions will not have a significant impact on Southern Company's or Alabama Power's financial statements.



Regulatory Clause	Balance Sheet Line Item	March 31, 2016		December 31, 2015
		(in millions)
Rate CNP Compliance	Under recovered regulatory clause revenues, current	$	22	$	43
Rate CNP PPA	Deferred under recovered regulatory clause revenues	105		99
Retail Energy Cost Recovery	Other regulatory liabilities, current	173		238
	Deferred over recovered regulatory clause revenues	64		—
Natural Disaster Reserve	Other regulatory liabilities, deferred	74		75

Georgia Power

~~Integrated Resource Plan~~Rate Plans

See Note 3 to the financial statements of Southern Company and Georgia Power under "Retail Regulatory Matters – Georgia Power – ~~Integrated Resource~~Rate Plans" and "Retail Regulatory Matters – ~~Integrated Resource~~Rate Plans," respectively, in Item 8 of the Form 10-K for additional information.

~~To comply with~~Georgia Power's revenues from regulated retail operations are collected through various rate mechanisms subject to the ~~April 16, 2015 effective date~~oversight of the ~~MATS rule,~~Georgia PSC. Georgia Power currently recovers its costs from the regulated retail business through the 2013 ARP, which includes traditional base tariff rates, Demand-Side Management tariffs, Environmental Compliance Cost Recovery tariffs, and Municipal Franchise Fee tariffs. In addition, financing costs related to the construction of Plant ~~Branch~~Vogtle Units 1, 3 and 4 ~~(1,266 MWs), Plant Yates Units 1~~are being collected through ~~5 (579 MWs),~~the NCCR tariff and ~~Plant McManus Units 1~~fuel costs are collected through separate fuel cost recovery tariffs. See "Fuel Cost Recovery" below and ~~2 (122 MWs) were retired~~Note 3 to the financial statements of Georgia Power under "Retail Regulatory Matters – Nuclear Construction" and Southern Company under "Retail Regulatory Matters – Georgia Power – Fuel Cost Recovery" and " – Nuclear Construction" in Item 8 of the Form 10-K for additional information regarding fuel cost recovery and the NCCR tariff, respectively.

Pursuant to the terms and conditions of a settlement agreement related to Southern Company's proposed acquisition of AGL Resources approved by the Georgia PSC on April ~~15, 2015. In addition, operations were discontinued at Plant Mitchell Unit 3 (155 MWs)~~14, 2016, Georgia Power's 2013 ARP will continue in effect until December 31, 2019, and ~~its decertification~~Georgia Power will be ~~requested~~required to file its next base rate case by July 1, 2019. Furthermore, through December 31, 2019, Georgia Power and Atlanta Gas Light Company (collectively, Utilities) will retain the merger savings, net of transition costs, as defined in ~~connection with~~ the ~~triennial Integrated Resource Plan in 2016. The switch to natural gas as the primary fuel is complete at Plant Yates Units 7 and 6~~settlement agreement; through December 31, 2022, net merger savings will be shared on a 60/40 basis between customers and the ~~units were returned to service on May 4, 2015 and June 27, 2015, respectively.~~Utilities; thereafter, all merger savings will be retained by customers. See Note (I) under "Southern Company – Proposed Merger with AGL Resources" for additional information regarding the Merger.

Fuel Cost Recovery

See Note 3 to the financial statements of Southern Company and Georgia Power under "Retail Regulatory Matters – Georgia Power – Fuel Cost Recovery" and "Retail Regulatory Matters – Fuel Cost Recovery," respectively, in Item 8 of the Form 10-K for additional information.

As of ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, Georgia Power's ~~under~~over recovered fuel balance totaled ~~$106~~$177 million and ~~$199~~$116 million, ~~respectively. For June 30, 2015~~respectively, and ~~December 31, 2014, the balance~~ is included in current ~~assets and current assets~~liabilities and other deferred ~~charges and assets, respectively,~~liabilities on Southern Company's and Georgia Power's Condensed Balance Sheets herein. On April 14, 2016, Georgia Power ~~expects~~filed a

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request with the Georgia PSC to decrease fuel rates by 15% effective June 1, 2016, which is expected to reduce annual billings by approximately $313 million. Georgia Power is currently scheduled to file its next fuel c~~ase in September 2015.~~case by February 28, 2017. The ultimate outcome of this matter cannot be determined at this time.

Fuel cost recovery revenues are adjusted for differences in actual recoverable fuel costs and amounts billed in current regulated rates. Accordingly, changes in the billing factor will not have a significant effect on Southern Company's or Georgia Power's revenues or net income, but will affect cash flow.

Nuclear Construction

See Note 3 to the financial statements of Southern Company and Georgia Power under "Retail Regulatory Matters – Georgia Power – Nuclear Construction" and "Retail Regulatory Matters – Nuclear Construction," respectively, in Item 8 of the Form 10-K for additional information regarding Georgia Power's construction of Plant Vogtle Units 3 and 4, Vogtle Construction Monitoring (VCM) reports, the NCCR tariff, the Vogtle Construction Litigation (as defined below), and ~~pending litigation.~~the Contractor Settlement Agreement (as defined below).

In 2008, Georgia Power, acting for itself and as agent for the Vogtle Owners, entered into an agreement ~~(Vogtle 3 and 4 Agreement)~~ with the Contractor, pursuant to which the Contractor agreed to design, engineer, procure, construct, and test Plant Vogtle Units 3 and 4. 4 (Vogtle 3 and 4 Agreement).

Under the terms of the Vogtle 3 and 4 Agreement, the Vogtle Owners agreed to pay a purchase price that is subject to certain price escalations and adjustments, including fixed escalation amounts and index-based adjustments, as well as adjustments for change orders, and performance bonuses for early completion and unit performance. The Vogtle 3 and 4 Agreement also provides for liquidated damages upon the Contractor's failure to fulfill the schedule and performance ~~guarantees. The Contractor's liability to the Vogtle Owners for schedule and performance liquidated damages and warranty claims is~~guarantees, subject to a cap. In addition, the Vogtle 3 and 4 Agreement provides for limited cost sharing by the Vogtle Owners for Contractor costs under certain conditions (which have not occurred), with maximum additional capital costs under this provision attributable to

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Georgia Power (based on Georgia Power's ownership interest) of approximately $114 million. Each Vogtle Owner is severally (and not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to the Contractor under the Vogtle 3 and 4 Agreement. Georgia Power's proportionate share is 45.7%.

On December 31, 2015, Westinghouse acquired Stone & Webster, Inc. from Chicago Bridge & Iron Company, N.V. (CB&I) and changed the name of Stone & Webster, Inc. to WECTEC Global Project Services Inc. (WECTEC). Certain ~~payment~~ obligations of Westinghouse and ~~CB&I Stone & Webster, Inc. (formerly known as Stone & Webster, Inc.)~~WECTEC under the Vogtle 3 and 4 Agreement ~~are~~were originally guaranteed by Toshiba Corporation (Westinghouse's parent company) and The Shaw Group Inc. (a(which is now a subsidiary of ~~Chicago Bridge & Iron Company, N.V.)~~CB&I), respectively. On March 9, 2016, in connection with Westinghouse's acquisition of WECTEC and pursuant to the settlement agreement described below, the guarantee of The Shaw Group Inc. was terminated. The guarantee of Toshiba Corporation remains in place. In the event of certain credit rating downgrades of any Vogtle Owner, such Vogtle Owner will be required to provide a letter of credit or other credit enhancement. Additionally, as a result of credit rating downgrades of Toshiba Corporation, Westinghouse provided the Vogtle Owners with letters of credit in an aggregate amount of $920 million in accordance with, and subject to adjustment under, the terms of the Vogtle 3 and 4 Agreement.

The Vogtle Owners may terminate the Vogtle 3 and 4 Agreement at any time for their convenience, provided that the Vogtle Owners will be required to pay certain termination costs. The Contractor may terminate the Vogtle 3 and 4 Agreement under certain circumstances, including certain Vogtle Owner suspension or delays of work, action by a governmental authority to permanently stop work, certain breaches of the Vogtle 3 and 4 Agreement by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.

In 2009, the ~~NRC issued an Early Site Permit and Limited Work Authorization which allowed limited work~~Georgia PSC voted to ~~begin on~~certify construction of Plant Vogtle Units 3 and 4. The NRC certified the Westinghouse Design Control Document, as amended (DCD), for the AP1000 nuclear reactor design, in late 2011, and issued combined construction and operating licenses (COLs) in early 2012. Receipt of the COLs allowed full construction to begin. There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4, at the federal and state level, and additional challenges are expected as construction proceeds.

In 2012, the Vogtle Owners and the Contractor began negotiations regarding the costs associated with design changes to the DCD and the delays in the timing of approval of the DCD and issuance of the COLs, including the assertion by the Contractor that the Vogtle Owners are responsible for these costs under the terms of the Vogtle 3 and 4 Agreement. Also in 2012, Georgia Power and the other Vogtle Owners filed suit against the Contractor in the U.S. District Court for the Southern District of Georgia seeking a declaratory judgment that the Vogtle Owners are not responsible for these costs. In 2012, the Contractor also filed suit against Georgia Power and the other Vogtle Owners in the U.S. District Court for the District of Columbia alleging the Vogtle Owners are responsible for these costs. In 2013, the U.S. District Court for the District of Columbia dismissed the Contractor's suit, ruling that the proper venue is the U.S. District Court for the Southern District of Georgia. On March 10, 2015, the U.S. Court of Appeals for the District of Columbia Circuit affirmed the District Court's decision. The portion of additional costs claimed by the Contractor in its initial complaint that would be attributable to Georgia Power (based on Georgia Power's ownership interest) is approximately $425 million in 2008 dollars (approximately $591 million in 2015 dollars).The Contractor also asserted it is entitled to extensions of the guaranteed substantial completion dates of April 2016 and April 2017 for Plant Vogtle Units 3 and 4, respectively. In May 2014, the Contractor filed an amended counterclaim to the suit pending in the U.S. District Court for the Southern District of Georgia alleging that (i) the design changes to the DCD imposed by the NRC delayed module production and the impacts to the Contractor are recoverable by the Contractor under the Vogtle 3 and 4 Agreement and (ii) the changes to the basemat rebar design required by the NRC caused additional costs and delays recoverable by the Contractor under the Vogtle 3 and 4 Agreement. The Contractor did not specify in its amended counterclaim the amounts relating to these new allegations; however, the Contractor subsequently asserted estimated minimum damages related to the amended counterclaim (based on Georgia Power's ownership interest) of approximately $113 million in 2014 dollars (approximately $118 million in 2015 dollars).In June 2015, the Contractor updated its estimated damages under the initial complaint and the amended counterclaim to an aggregate (based on Georgia Power's ownership interest) of approximately $714 million (in 2015 dollars). The Contractor may from time to time continue to assert that it is entitled to additional payments with respect to these allegations, any of which could be substantial. Georgia Power has not agreed to the proposed cost or to any changes to the guaranteed substantial completion dates or that the Vogtle Owners have any responsibility for costs related to these issues. Litigation is ongoing and Georgia Power intends to vigorously defend the positions of the Vogtle Owners. Georgia Power also expects negotiations with the Contractor to continue with respect to cost and schedule. During such negotiations the parties may reach a mutually acceptable compromise of their positions.

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Georgia Power is required to file semi-annual VCM reports with the Georgia PSC by February 28 and August 31 each year. If the projected ~~certified~~ construction capital costs to be borne by Georgia Power increase by 5% above the certified cost or the projected in-service dates are significantly extended, Georgia Power is required to seek an amendment to the Plant Vogtle Units 3 and 4 certificate from the Georgia PSC. In February 2013, Georgia ~~Power's eighth VCM report filed in 2013~~Power requested an amendment to the certificate to increase the estimated in-service capital cost of Plant Vogtle Units 3 and 4 from $4.4 billion to $4.8

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billion and to extend the estimated in-service dates to the fourth quarter 2017 (from April 2016) and the fourth quarter 2018 (from April 2017) for Plant Vogtle Units 3 and 4, respectively. In October 2013, the Georgia PSC approved a stipulation (2013 Stipulation) ~~entered into by~~between Georgia Power and the Georgia PSC ~~staff~~Staff (Staff) to waive the requirement to amend the Plant Vogtle Units 3 and 4 certificate until the completion of Plant Vogtle Unit 3 or earlier if deemed appropriate by the Georgia PSC and Georgia Power. ~~The~~

On April 15, 2015, the Georgia PSC ~~has approved eleven VCM reports covering the periods through June 30, 2014, including construction capital costs incurred, which through that date totaled $2.8 billion.~~

Georgia Power believes that, pursuant to the Vogtle 3 and 4 Agreement, the Contractor is responsible for the Contractor's costs related to the Contractor's delay (including any related construction and mitigation costs, which could be material) and that the Vogtle Owners are entitled to recover liquidated damages for the Contractor's delay beyond the guaranteed substantial completion dates of April 2016 and April 2017 for Plant Vogtle Units 3 and 4, respectively. Consistentissued a procedural order in connection with the Contractor's position in the pending litigation described above, Georgia Power expects the Contractor to contest any claims for liquidated damages and to assert that the Vogtle Owners are responsible for additional costs related to the Contractor's delay.

~~On February 27, 2015, Georgia Power filed its~~ twelfth VCM report, ~~with the Georgia PSC covering the period from July 1 through December 31, 2014,~~ which requested approval for an additional $0.2 billion of construction capital costs incurred during that period. The twelfth VCM report also reflected the Contractor's revised forecast for completion of Plant Vogtle Units 3 and 4 as well as additional estimated owner-related costs, which include approximately $10 million per month expected to result from the Contractor's proposed 18-month delay, including property taxes, oversight costs, compliance costs, and other operational readiness costs. No Contractor costs related to the Contractor's proposed 18-month delay were included in the twelfth VCM report. Additionally, while Georgia Power has not agreed to any change to the guaranteed substantial completion dates, the twelfth VCM report included a requested amendment (Requested Amendment) to the Plant Vogtle Units 3 and 4 certificate to reflect the Contractor's revised forecast for completion of Plant Vogtle Units 3 and 4 (second quarter of 2019 and second quarter of 2020, respectively) as well as additional estimated Vogtle Owner's costs, of approximately $10 million per month, including property taxes, oversight costs, compliance costs, and other operational readiness costs to include the estimated ~~owner's~~Vogtle Owner's costs associated with the proposed 18-month Contractor delay and to increase the estimated total in-service capital cost of Plant Vogtle Units 3 and 4 to $5.0 billion.

~~Georgia Power will continue~~ Pursuant to incur financing costs of approximately $30 million per month until Plant Vogtle Units 3 and 4 are placed in service. The twelfth VCM report estimated financing costs during the construction period to total approximately $2.5 billion.

~~On April 15, 2015,~~ the Georgia ~~PSC issued a~~PSC's procedural ~~order in connection with the twelfth VCM report. Pursuant to this~~ order, the Georgia PSC deemed the Requested Amendment unnecessary and withdrawn until the completion of construction of Plant Vogtle Unit 3 consistent with the 2013 Stipulation. The Georgia PSC recognized that the certified cost and the 2013 Stipulation do not constitute a cost recovery cap. In accordance with the Georgia Integrated Resource Planning Act, any costs incurred by Georgia Power in excess of the certified amount will be included in rate base, provided Georgia Power shows the costs to be reasonable and prudent. Financing costs up to the certified amount will be collected through the NCCR tariff until the units are placed in service and contemplated in a general base rate case, while financing costs on any construction-related costs in excess of the $4.4 billion certified amount are expected to be recovered through AFUDC.

On December 31, 2015, Westinghouse and the Vogtle Owners entered into a definitive settlement agreement (Contractor Settlement Agreement) to resolve disputes between the Vogtle Owners and the Contractor under the Vogtle 3 and 4 Agreement, including litigation that was pending in the U.S. District Court for the Southern District of Georgia (Vogtle Construction Litigation). Effective December 31, 2015, Georgia Power, acting for itself and as agent for the other Vogtle Owners, and the Contractor entered into an amendment to the Vogtle 3 and 4 Agreement to implement the Contractor Settlement Agreement. The Contractor Settlement Agreement and the related amendment to the Vogtle 3 and 4 Agreement (i) restrict the Contractor's ability to seek further increases in the contract price by clarifying and limiting the circumstances that constitute nuclear regulatory changes in law; (ii) provide for enhanced dispute resolution procedures; (iii) revise the guaranteed substantial completion dates to match the current estimated in-service dates of June 30, 2019 for Unit 3 and June 30, 2020 for Unit 4; (iv) provide that delay liquidated damages will commence from the current estimated nuclear fuel loading date for each unit, which is December 31, 2018 for Unit 3 and December 31, 2019 for Unit 4; and (v) provide that Georgia Power, based on its ownership interest, will pay to the Contractor and capitalize to the project cost approximately $350 million, of which approximately $241 million had been paid as of March 31, 2016. In addition, the Contractor Settlement Agreement provides for the resolution of other open existing items relating to the scope of the project under the Vogtle 3 and 4 Agreement, including cyber security, for which costs were reflected in Georgia Power's previously disclosed in-service cost estimate. Further, as part of the settlement and Westinghouse's acquisition of WECTEC: (i) Westinghouse engaged Fluor Enterprises, Inc., a subsidiary of Fluor Corporation, as a new construction subcontractor; and (ii) the Vogtle Owners, CB&I, and The Shaw Group Inc. entered into mutual releases of any and all claims arising out of events or circumstances in connection with the construction of Plant Vogtle Units 3 and 4 that occurred on or before the date of the Contractor Settlement Agreement. On January 5, 2016, the Vogtle Construction Litigation was dismissed with prejudice.

On January 21, 2016, Georgia Power submitted the Contractor Settlement Agreement and the related amendment to the Vogtle 3 and 4 Agreement to the Georgia PSC for its review. In accordance with the Georgia PSC's subsequent order, on April 5, 2016, Georgia Power filed supplemental information in support of the Contractor Settlement Agreement and Georgia Power's position that all construction costs to date have been prudently incurred and that the current estimated in-service capital cost and schedule are reasonable. The Staff will conduct a review of all costs incurred related to Plant Vogtle Units 3 and 4, the schedule for completion of Plant Vogtle Units 3 and 4, and the

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Contractor Settlement Agreement and the Staff is authorized to engage in related settlement discussions with Georgia Power and any intervenors.

The order provides that the Staff is required to report to the Georgia PSC by October 19, 2016 with respect to the status of its review and any settlement-related negotiations. If a settlement with the Staff is reached with respect to costs of Plant Vogtle Units 3 and 4, the Georgia PSC will then conduct a hearing to consider whether to approve that settlement. If a settlement with the Staff is not reached, the Georgia PSC will determine how to proceed, including (i) modifying the 2013 Stipulation, (ii) directing Georgia Power to file a request for an amendment to the certificate for Plant Vogtle Units 3 and 4, (iii) issuing a scheduling order to address remaining disputed issues, or (iv) taking any other option within its authority.

The Georgia PSC has approved thirteen VCM reports covering the periods through June 30, 2015, including construction capital costs incurred, which through that date totaled $3.1 billion. On February 26, 2016, Georgia Power filed its fourteenth VCM report with the Georgia PSC covering the period from July 1 through December 31, 2015. The fourteenth VCM report does not include a requested amendment to the certified cost of Plant Vogtle Units 3 and 4. Georgia Power is requesting approval of $160 million of construction capital costs incurred during that period. Georgia Power anticipates to incur average financing costs of approximately $27 million per month from January 2016 until Plant Vogtle Units 3 and 4 are placed in service. The updated in-service capital cost forecast is $5.44 billion and includes costs related to the Contractor Settlement Agreement. Estimated financing costs during the construction period total approximately $2.4 billion. Georgia Power's CWIP balance for Plant Vogtle Units 3 and 4 was approximately $3.7 billion as of March 31, 2016.

There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4, at the federal and state level, and additional challenges may arise as construction proceeds. Processes are in place that are designed to assure compliance with the requirements specified in the ~~DCD~~Westinghouse Design Control Document and the ~~COLs,~~combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. As a result of

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such compliance processes, certain license amendment requests have been filed and approved or are pending before the NRC. Various design and other licensing-based compliance issues ~~are expected to~~may arise as construction proceeds, which may result in additional license amendments or require other resolution. If any license amendment requests or other licensing-based compliance issues are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs either to the Vogtle Owners or the Contractor or to both.

As construction continues, the risk remains that ~~ongoing~~ challenges with Contractor performance including ~~additional challenges in its~~ fabrication, assembly, delivery, and installation of the shield building and structural modules, delays in the receipt of the remaining permits necessary for the operation of Plant Vogtle Units 3 and 4, or other issues could arise and may further impact project schedule and cost. In addition, the IRS allocated production tax credits to each of Plant Vogtle Units 3 and 4, which require the applicable unit to be placed in service before 2021.

~~Additional~~Future claims by the Contractor or Georgia Power (on behalf of the Vogtle Owners) ~~are also likely to~~could arise throughout construction. These claims may be resolved through formal and informal dispute resolution procedures under the Vogtle 3 and 4 Agreement ~~but also~~and, under the enhanced dispute resolution procedures, may be resolved through ~~litigation.~~litigation after the completion of nuclear fuel load for both units.

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

Gulf Power

Retail Base Rate Case

See Note 3 to the financial statements of Gulf Power under "Retail Regulatory Matters – Retail Base Rate Case" in Item 8 of the Form 10-K for additional information.

In ~~December~~ 2013, the Florida PSC approved a settlement agreement providing that ~~provides~~ Gulf Power may reduce depreciation ~~expense~~ and record a regulatory asset up to $62.5 million between January 2014 and June 2017. In any given month, such depreciation ~~expense~~ reduction may not exceed the amount necessary for the retail ROE, as reported to the Florida PSC

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monthly, to reach the midpoint of the authorized retail ROE range then in effect. For 2014, 2015, and the first three months of 2016, Gulf Power recognized ~~a $19.6 million reduction~~reductions in depreciation ~~expense in the first six months~~ of ~~2015.~~$8.4 million, $20.1 million, and $5.6 million, respectively.

Cost Recovery Clauses

See Note 3 to the financial statements of Gulf Power under "Retail Regulatory Matters – Cost Recovery Clauses" in Item 8 of the Form 10-K for additional information regarding Gulf Power's recovery of retail costs through various regulatory clauses and accounting orders. Gulf Power has four regulatory clauses which are approved by the Florida PSC. The ~~recovery~~ balance of each regulatory clause recovery on the balance sheet follows:

Recovery Clause
Balance Sheet Location
June 30, 2015
December 31, 2014

(in millions)
Fuel Cost Recovery – Under
Under recovered regulatory clause revenues
$ 24

$ 40
Purchased Power Capacity Recovery – Under
Under recovered regulatory clause revenues
2

—
Environmental Cost Recovery – Under
Under recovered regulatory clause revenues
7

10
Energy Conservation Cost Recovery – Under
Under recovered regulatory clause revenues
—

3



Regulatory Clause	Balance Sheet Location	March 31, 2016		December 31, 2015
		(in millions)
Fuel Cost Recovery	Other regulatory liabilities, current	$	20	$	18
Purchased Power Capacity Recovery	Under recovered regulatory clause revenues	4		1
Environmental Cost Recovery	Under recovered regulatory clause revenues	17		19
Energy Conservation Cost Recovery	Other regulatory liabilities, current	2		4

Mississippi Power

~~2015 Rate Case~~

On May 15, 2015 and July 10, 2015, Mississippi Power filed alternative rate proposals related to recovery of Kemper IGCC-related costs with the Mississippi PSC. See "Integrated Coal Gasification Combined Cycle – ~~Rate Recovery of Kemper IGCC Costs~~ – ~~2015 Rate Case" herein for additional information.~~

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Performance Evaluation Plan

See Note 3 to the financial statements of Mississippi Power under "Retail Regulatory Matters – Performance Evaluation Plan" in Item 8 of the Form 10-K for additional information regarding Mississippi Power's base rates.

On ~~March 17, 2015,~~April 1, 2016, Mississippi Power submitted its annual PEP lookback filing for ~~2014,~~2015, which ~~indicated no~~reflected the need for a $5 million surcharge ~~or refund. On March 26, 2015,~~to be recovered from customers. The filing has been suspended for review by the Mississippi ~~PSC suspended the filing to allow it more time for review.~~PSC. The ultimate outcome of this matter cannot be determined at this time.

~~System Restoration Rider~~

~~See Note 1 to the financial statements of Mississippi Power under "Provision for Property Damage" in Item 8 of the Form 10-K for additional information.~~

On February 2, 2015, Mississippi Power submitted its 2015 System Restoration Rider (SRR) rate filing with the Mississippi PSC, which proposed that the 2015 SRR rate remain level at zero and Mississippi Power be allowed to accrue $3 million to the property damage reserve in 2015. On March 3, 2015, the Mississippi PSC suspended the filing to allow it more time for review. The ultimate outcome of this matter cannot be determined at this time.

~~Environmental Compliance Overview Plan~~

~~See Note 3 to the financial statements of Mississippi Power under "Retail Regulatory Matters – Environmental Compliance Overview Plan" and "Other Matters~~ – ~~Sierra Club Settlement Agreement" in Item 8 of the Form 10-K for information on Mississippi Power's annual environmental filing with the Mississippi PSC and information on Plant Watson Units 4 and 5.~~

In 2012, the Mississippi PSC approved Mississippi Power's request for a CPCN to construct scrubbers on Plant Daniel Units 1 and 2, which are scheduled to be placed in service in September and November 2015, respectively. These units are jointly owned by Mississippi Power and Gulf Power, with 50% ownership each. The estimated total cost of the project is approximately $660 million, with Mississippi Power's portion being $330 million, excluding AFUDC. Mississippi Power's portion of the cost is expected to be recovered through the ECO Plan following the scheduled completion of the project. As of June 30, 2015, total project expenditures were $604 million, of which Mississippi Power's portion was $308 million, excluding AFUDC of $27 million.

On February 25, 2015, Mississippi Power submitted its annual ECO filing for 2015, which indicated an annual increase in revenues of approximately $8 million. On February 27, 2015, the Mississippi PSC suspended the filing to allow it more time to review. The ultimate outcome of this matter cannot be determined at this time.

On April 16, 2015, the assets that supported coal generation at Plant Watson Units 4 and 5 were retired. The remaining net book value of these two units was approximately $32 million excluding the reserve for cost of removal and has been reclassified to other regulatory assets, deferred, on Mississippi Power's Condensed Balance Sheet herein in accordance with an accounting order from the Mississippi PSC. Mississippi Power expects to recover through its rates the remaining book value of the retired assets and certain costs, including unusable inventory, associated with the retirements; however, the ultimate method and timing of recovery will be considered by the Mississippi PSC in future rate proceedings.

Fuel Cost Recovery

See Note 3 to the financial statements of Mississippi Power under "Retail Regulatory Matters – Fuel Cost Recovery" in Item 8 of the Form 10-K for information regarding Mississippi Power's retail fuel cost recovery.

At ~~June 30, 2015,~~March 31, 2016, the amount of over-recovered retail fuel costs included on Mississippi Power's Condensed Balance Sheet herein was ~~$24~~$80 million compared to ~~under-recovered~~over-recovered retail fuel costs of $2$71 million at December 31, ~~2014.~~2015.

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~~NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)~~

~~(UNAUDITED)~~

~~Ad Valorem Tax Adjustment~~

~~See Note 3~~$120 million annually in fuel cost recovery rates on January 5, 2016, effective with the first billing cycle of February. As required by the order, on February 1, 2016, Mississippi Power submitted updated natural gas price forecasts and resulting fuel factors to the ~~financial statements of~~ Mississippi ~~Power under "Retail Regulatory Matters – Ad Valorem Tax Adjustment" in Item 8 of the Form 10-K for additional information.~~

On April 23, 2015, Mississippi Power filed its annual ad valorem tax adjustment factor filing for 2015, which requested an annual rate decrease of 0.35%, or $2 million in annual retail revenues, primarily due to a decrease in average millage rates. On May 26, 2015PSC. If approved by the Mississippi PSC, ~~suspended~~ the ~~filing to allow it more time to review.~~updated forecast would decrease fuel cost recovery rates by an additional $36 million annually. The ultimate outcome of this matter cannot be determined at this time.

Integrated Coal Gasification Combined Cycle

See Note 3 to the financial statements of Southern Company and Mississippi Power under "Integrated Coal Gasification Combined Cycle" in Item 8 of the Form 10-K for information regarding Mississippi Power's construction of the Kemper IGCC.

Kemper IGCC Overview

Construction of Mississippi Power's Kemper IGCC is nearing completion and start-up activities will continue until the Kemper IGCC is placed in service. The Kemper IGCC will utilize an IGCC technology with an output capacity

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of 582 MWs. The Kemper IGCC will be fueled by locally mined lignite (an abundant, lower heating value coal) from a mine owned by Mississippi Power and situated adjacent to the Kemper IGCC. The mine, operated by North American Coal Corporation, started commercial operation in 2013. In connection with the Kemper IGCC, Mississippi Power constructed and plans to operate approximately 61 miles of CO₂ pipeline infrastructure for the planned transport of captured CO₂ for use in enhanced oil recovery.

Kemper IGCC Schedule and Cost Estimate

In 2012, the Mississippi PSC issued the 2012 MPSC CPCN Order, a detailed order confirming the CPCN originally approved by the Mississippi PSC in 2010 authorizing the acquisition, construction, and operation of the Kemper IGCC.

The certificated cost estimate of the Kemper IGCC included in the 2012 MPSC CPCN Order was $2.4 billion, net of $245 million of grants awarded to the Kemper IGCC project by the DOE under the Clean Coal Power Initiative Round 2 ~~(DOE~~(Initial DOE Grants) and excluding the cost of the lignite mine and equipment, the cost of the CO₂ pipeline facilities, and AFUDC related to the Kemper IGCC. The 2012 MPSC CPCN Order approved a construction cost cap of up to $2.88 billion, with recovery of prudently-incurred costs subject to approval by the Mississippi PSC. The Kemper IGCC was originally projected to be placed in service in May 2014. Mississippi Power placed the combined cycle and the associated common facilities portion of the Kemper IGCC in service using natural gas in August 2014 and ~~continues~~currently expects to ~~focus on completing~~place the remainder of the Kemper IGCC, including the gasifier and the gas clean-up facilities, ~~for which~~in service during the ~~in-service date is currently expected to occur in the first half~~third quarter 2016.

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Recovery of the ~~Kemper IGCC~~ costs subject to the cost cap and the cost of the lignite mine and equipment, the cost of the CO₂ pipeline facilities, AFUDC, and certain general exceptions, including change of law, force majeure, and beneficial capital (which exists when Mississippi Power demonstrates that the purpose and effect of the construction cost increase is to produce efficiencies that will result in a neutral or favorable effect on customers relative to the original proposal for the CPCN) (Cost Cap Exceptions) remains subject to review and approval by the Mississippi PSC. Mississippi Power's Kemper IGCC 2010 project estimate, current cost estimate (which includes the impacts of the Mississippi Supreme Court's (Court) ~~decision)~~decision discussed herein under "Rate Recovery of Kemper IGCC Costs – 2013 MPSC Rate Order"), and actual costs incurred as of ~~June 30, 2015, as adjusted for the Court's decision,~~March 31, 2016, are as follows:

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Cost Category	2010 Project Estimate^(f)		Current Estimate		Actual Costs at June 30, 2015		2010 Project Estimate^(f)		Current Cost Estimate^(a)			Actual Costs
	(in billions)						(in billions)
Plant Subject to Cost Cap^(a)(g)	$	2.40	$	4.96	$	4.51	$	2.40	$	5.35		$	4.99
Lignite Mine and Equipment	0.21		0.23		0.23		0.21		0.23			0.23
CO₂ Pipeline Facilities	0.14		0.11		0.11		0.14		0.11			0.12
AFUDC^(b)(c)	0.17		0.62		0.52
AFUDC^(c)							0.17		0.71			0.62
Combined Cycle and Related Assets Placed in Service – Incremental^(d)(g)	—		0.02		—		—		0.02			0.01
General Exceptions	0.05		0.10		0.08		0.05		0.10			0.09
Deferred Costs^(e)(g)	—		0.19		0.15		—		0.20			0.18
Total Kemper IGCC^(a)(c)	$	2.97	$	6.23	$	5.60
Additional DOE Grants^(h)							—		(0.14		)	—
Total Kemper IGCC							$	2.97	$	6.58		$	6.24


(a)	Amounts in the Current Cost Estimate reflect estimated costs through September 30, 2016.

(b)

The 2012 MPSC CPCN Order approved a construction cost cap of up to $2.88 billion, net of the Initial DOE Grants and excluding the Cost Cap Exceptions. The Current Cost Estimate and the Actual Costs include non-incremental operating and maintenance costs related to the combined cycle and associated common facilities placed in service in August 2014 that are subject to the $2.88 billion cost cap and exclude post-in-service costs for the lignite mine. See "Rate Recovery of Kemper IGCC Costs – 2013 MPSC Rate Order" herein for additional information. The Current Cost Estimate and the Actual Costs ~~include~~reflect 100% of the ~~15% undivided interest in~~costs of the Kemper ~~IGCC that was previously projected to be purchased by SMEPA. On May 20, 2015, SMEPA notified Mississippi Power of its termination of theasset purchase agreement (APA) and requested the return of a total of $275 million of deposits, which was returned with accrued interest on June 3, 2015.~~IGCC. See note (g) for additional information.

~~(b)~~(c)

Mississippi Power's original estimate included recovery of financing costs during construction rather than the accrual of AFUDC. This approach was not approved by the Mississippi PSC in 2012 as described in "Rate Recovery of Kemper IGCC Costs." The current estimate ~~includes an approximately $11 million decrease in AFUDC due to a decrease in AFUDC rates resulting from an increase in short-term debt, partially offset by an $8 million increase in AFUDC related to~~reflects the impact of a settlement agreement with the wholesale customers for cost-based rates under FERC's jurisdiction. See "FERC Matters" herein for additional information.


~~(c)~~	~~Amounts in the Current Estimate reflect estimated costs through March 31, 2016.~~


(d)	Incremental operating and maintenance costs related to the combined cycle and associated common facilities placed in service in August 2014, net of costs related to energy sales. See "Rate Recovery of Kemper IGCC Costs – 2013 MPSC Rate Order" herein for additional information.


(e)	The 2012 MPSC CPCN Order approved deferral of non-capital Kemper IGCC-related costs during construction as described in "Rate Recovery of Kemper IGCC Costs – Regulatory Assets and ~~Liabilities."~~Liabilities" herein.


(f)	The 2010 Project Estimate is the certificated cost estimate adjusted to include the certificatedestimate for the CO₂ pipeline facilities ~~which was~~ approved in 2011 by the Mississippi PSC.


(g)	Beginning in the third quarter 2015, certain costs, including debt carrying costs (associated with assets placed in service and other non-CWIP accounts), that previously were deferred as regulatory assets are now being recognized through income; however, such costs continue to be included in the Current Cost Estimate and the Actual Costs at March 31, 2016.


(h)	On April 8, 2016, Mississippi Power received approximately $137 million in additional grants from the DOE for the Kemper IGCC, which are expected to be used to reduce future rate impacts for customers.

Of the total costs, including post-in-service costs for the lignite mine, incurred as of ~~June 30, 2015, $3.42~~March 31, 2016, $3.61 billion was included in property, plant, and equipment (which is net of the Initial DOE Grants and estimated probable losses of ~~$2.08~~$2.47 billion), $2$6 million in other property and investments, ~~$58~~$75 million in fossil fuel stock, ~~$41~~$45 million in materials and supplies, ~~$198~~$22 million in other regulatory assets, ~~$16~~current, $196 million in other regulatory assets, deferred, $1 million in other current assets, and $11 million in other deferred charges and assets ~~and $24 million in AROs~~ in the balance ~~sheet, with $1 million previously expensed.~~sheet.

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(UNAUDITED)

Mississippi Power does not intend to seek ~~any~~ rate recovery for any costs related to the construction of the Kemper IGCC that exceed the $2.88 billion cost cap, net of the Initial DOE Grants and excluding the Cost Cap Exceptions. Mississippi Power recorded pre-tax charges to income for revisions to the cost estimate above the cost cap of ~~$23~~$53 million ($~~14 million after tax) in the second quarter 2015 and $9 million ($6~~33 million after tax) in the first quarter ~~2015. These amounts are~~2016. Since 2012, in ~~addition to~~the aggregate, Mississippi Power has incurred charges ~~totaling $868 million ($536 million after tax), $1.10~~of $2.47 billion ($~~681 million after tax), and $78 million ($48 million~~1.52 billion after tax) as a result of changes in ~~2014, 2013, and 2012, respectively. Southern Company recorded pre-tax charges to income for revisions to~~ the cost estimate ~~of $868 million ($536 million after tax) and $1.2 billion ($729 million after tax) in 2014 and 2013, respectively.~~above the cost cap for the Kemper IGCC through March 31, 2016. The ~~increases~~increase to the cost estimate in the first ~~and second quarters~~quarter 2016 primarily reflects costs for the extension of ~~2015 primarily reflected costs for~~the Kemper IGCC's projected in-service date through September 30, 2016, and increased efforts related to ~~equipment rework, scope modifications,~~operational readiness and ~~the related additional labor costs~~challenges in ~~support of~~ start-up and ~~operational readiness activities. The current estimate~~commissioning activities which includes ~~costs through March 31, 2016.~~the cost of repairs and modifications to the refractory lining inside the gasifiers. Any ~~further~~ extension of the in-service date beyond September 30, 2016 is currently estimated to result in additional base costs of approximately $25 million to ~~$30~~$35 million per month, which includes maintaining necessary levels of start-up labor, materials, and fuel, as well as operational resources required to execute start-up

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~~(UNAUDITED)~~

and commissioning activities. However, additional costs may be required for remediation of any further equipment and/or design issues identified. Any ~~further~~ extension of the in-service date with respect to the Kemper IGCC beyond September 30, 2016 would also increase costs for the Cost Cap Exceptions, which are not subject to the $2.88 billion cost cap established by the Mississippi PSC. These costs include AFUDC, which is currently estimated to total approximately ~~$13~~$14 million per month, as well as carrying costs and operating expenses on Kemper IGCC assets placed in service and consulting and legal fees ~~which are being deferred as regulatory assets and are estimated to total~~of approximately $7$2 million per month. For additional information, see "2015 Rate Case" herein.

~~Any further~~Mississippi Power's analysis of the time needed to complete the start-up and commissioning activities for the Kemper IGCC will continue until the remaining Kemper IGCC assets are placed in service. Further cost increases and/or extensions of the in-service date with respect to the Kemper IGCC may result from factors including, but not limited to, labor costs and productivity, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non-performance under ~~construction~~operating or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, start-up activities for this first-of-a-kind technology (including major equipment failure and system integration), and/or operational performance (including additional costs to satisfy any operational parameters ultimately adopted by the Mississippi PSC). In subsequent periods, any further changes in the estimated costs to complete construction and start-up of the Kemper IGCC subject to the $2.88 billion cost cap, net of the Initial DOE Grants and excluding the Cost Cap Exceptions, will be reflected in Southern Company's ~~statements of income~~ and Mississippi Power's statements of ~~operations~~income and these changes could be material.

Rate Recovery of Kemper IGCC Costs

See "FERC Matters" herein for additional information regarding Mississippi Power's MRA cost based tariff relating to recovery of a portion of the Kemper IGCC costs from Mississippi Power's wholesale customers. Rate recovery of the retail portion of the Kemper IGCC is subject to the jurisdiction of the Mississippi PSC. See Note (G) under "Unrecognized Tax Benefits – Section 174 Research and Experimental Deduction" for additional tax information related to the Kemper IGCC.

The ultimate outcome of the rate recovery matters discussed herein, including the resolution of legal challenges, determinations of prudency, and the specific manner of recovery of prudently-incurred costs, cannot be determined at this time, but could have a material impact on Southern Company's and Mississippi Power's results of operations, financial condition, and liquidity.

2012 MPSC CPCN Order

The 2012 MPSC CPCN Order included provisions relating to both Mississippi Power's recovery of financing costs during the course of construction of the Kemper IGCC and Mississippi Power's recovery of costs following the date the Kemper IGCC is placed in service. With respect to recovery of costs following the in-service date of the Kemper IGCC, the 2012 MPSC CPCN Order provided for the establishment of operational cost and revenue parameters based upon assumptions in Mississippi Power's petition for the CPCN. Mississippi Power expects the Mississippi PSC to apply operational parameters in connection with ~~the evaluation of the 2015 Rate Case and any alternative~~future proceedings related to the operation of the Kemper

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(UNAUDITED)

IGCC. To the extent the Mississippi PSC determines the Kemper IGCC does not meet the operational parameters ultimately adopted by the Mississippi PSC or Mississippi Power incurs additional costs to satisfy such parameters, there could be a material adverse impact on Southern Company's or Mississippi Power's financial statements.

2013 ~~Settlement Agreement~~MPSC Rate Order

In January 2013, Mississippi Power entered into a settlement agreement with the Mississippi PSC that ~~among other things, established~~was intended to establish the process for resolving matters regarding cost recovery related to the Kemper IGCC (2013 Settlement Agreement). Under the 2013 Settlement Agreement, Mississippi Power agreed to limit the portion of prudently-incurred Kemper IGCC costs to be included in retail rate base to the $2.4 billion certificated cost estimate, plus the Cost Cap Exceptions, but excluding AFUDC, and any other costs permitted or determined to be excluded from the $2.88 billion cost cap by the Mississippi PSC. The 2013 Settlement Agreement also allowed Mississippi Power to secure alternate financing for costs not otherwise recovered in any Mississippi PSC rate proceedings contemplated by the 2013 Settlement Agreement. The Court found the 2013 Settlement Agreement unenforceable due to a lack of public notice for the related proceedings. See "2015 Mississippi Supreme Court Decision" herein for additional information.

Legislation to authorize a multi-year rate plan and legislation to provide for alternate financing through securitization of up to $1.0 billion of prudently-incurred costs was enacted into law in 2013. Mississippi Power's

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~~(UNAUDITED)~~

intent under the 2013 Settlement Agreement was to securitize (1) prudently-incurred costs in excess of the certificated cost estimate and up to the $2.88 billion cost cap, net of the DOE Grants and excluding the Cost Cap Exceptions, (2) accrued AFUDC, and (3) other prudently-incurred costs, which include carrying costs from the estimated in-service date until securitization is finalized and other costs not included in Mississippi Power's 2013 revision to the proposed rate recovery plan filed with the Mississippi PSC for the Kemper IGCC for cost recovery through 2020 (2013 Rate Mitigation Plan) as approved by the Mississippi PSC. The Court's decision did not impact Mississippi Power's ability to utilize alternate financing through securitization, the 2012 MPSC CPCN Order, or the February 2013 legislation. See "2015 Mississippi Supreme Court Decision" herein for additional information.

~~2013 MPSC Rate Order~~

~~Consistent with the terms of the 2013 Settlement Agreement, in~~In March 2013, the Mississippi PSC issued a rate order approving retail rate increases of 15% effective March 19, 2013 and 3% effective January 1, 2014, which collectively were designed to collect $156 million annually beginning in 2014 (2013 MPSC Rate Order) to be used to mitigate customer rate impacts after the Kemper IGCC is placed in ~~service.~~ service, based on a mirror CWIP methodology (Mirror CWIP rate).

Because the 2013 MPSC Rate Order did not provide for the inclusion of CWIP in rate base as permitted by the Baseload Act, Mississippi Power continues to record AFUDC on the Kemper ~~IGCC through the in-service date.~~IGCC. Mississippi Power will not record AFUDC on any additional costs of the Kemper IGCC that exceed the $2.88 billion cost cap, except for Cost Cap Exception amounts. ~~Mississippi Power will continue to record AFUDC through the in-service date until directed to do otherwise by the Mississippi PSC.~~

In August 2014, Mississippi Power provided an analysis of the costs and benefits of placing the combined cycle and the associated common facilities portion of the Kemper IGCC in service, including the expected accounting treatment for costs and revenues associated with the operation of the combined cycle as well as the treatment of revenues collected under the 2013 MPSC Rate Order. See "2015 Mississippi Supreme Court Decision" for additional information regarding the decision of the Court which discontinues the collection of rates under the 2013 MPSC Rate Order and requires the refund of all amounts previously collected.

In addition, Mississippi Power's August 2014 filing with the Mississippi PSC requested confirmation of Mississippi Power's accounting treatment by the Mississippi PSC of the continued accrual of AFUDC through the in-service date of the remainder of the Kemper IGCC. See "Regulatory Assets and Liabilities" for additional information. Any action by the Mississippi PSC that is inconsistent with the treatment requested by Mississippi Power could have a material impact on the results of operations, financial condition, and liquidity of Southern Company and Mississippi Power.

~~2015 Mississippi Supreme Court Decision~~

On February 12, 2015, the ~~Court issued its decision in the legal challenge to the 2013 MPSC Rate Order. The~~ Court reversed the 2013 MPSC Rate Order based on, among other things, its findings that (1) the Mirror CWIP rate treatment was not provided for under the Baseload Act and (2) the Mississippi PSC should have determined the prudence of Kemper IGCC costs before approving rate recovery through the 2013 MPSC Rate Order. The Court also found the 2013 Settlement Agreement unenforceable due to a lack of public notice for the related proceedings. On March 12, 2015, Mississippi Power and the Mississippi PSC each filed motions for rehearing, both of which were denied on June 11, 2015. The Court's ruling remanded the matter to the Mississippi PSC to (1) fix by order the rates that were in existence prior to the 2013 MPSC Rate Order, (2) fix no rate increases until the Mississippi PSC is in compliance with the Court's ruling, and (3) enter an order refunding amounts collected under the 2013 MPSC Rate Order. Through June 30, 2015, Mississippi Power had collected $331 million through rates under the 2013 MPSC Rate Order and had accrued $22 million in associated carrying costs. On July 7, 2015, the Mississippi PSC ordered that the Mirror CWIP rate be terminated effective July 20, ~~2015. Mississippi Power submitted a~~2015 and required the fourth quarter 2015 refund ~~plan to~~of the ~~Mississippi PSC on July 21, 2015, which proposed two alternative refund plans for~~$342 million collected under the ~~Mississippi PSC's consideration: (1) bill credit~~2013 MPSC Rate Order, along with ~~check option;~~associated carrying costs of $29 million. The Court's decision did not impact the 2012 MPSC CPCN Order or ~~(2) check-only option. Hearings on~~ the ~~refund plan are scheduled to be held on August 6, 2015.~~February 2013 legislation described below.

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2015 Rate Case

As a result of the 2015 ~~Mississippi Supreme~~ Court decision, and the Mirror CWIP refund, the 2013 Rate Mitigation Plan is no longer viable. See "2015 Mississippi Supreme Court Decision" herein for additional information. On May 15, 2015, Mississippi Power sought alternate rate recovery and filed a rate case (2015 Rate Case) with the Mississippi PSC. This filing included three alternative rate proposals requesting an increase in retail rates and charges in connection with the Kemper IGCC: (i) a traditional rate case, (ii) a rate mitigation plan fixing rates through 2017 (RMP 2017), and (iii) a rate mitigation plan fixing rates through 2019 (RMP 2019). Under the traditional proposal, rates would increase above May 2015 levels by approximately 11.8%, or $114 million annually, effective June 1, 2015, and would be projected to increase approximately an additional 12.0%, or $120 million annually, effective June 1, 2016. The traditional proposal assumes termination of the Mirror CWIP rate and the refund of the Mirror CWIP regulatory liability over the period from May 2015 through May 2017. RMP 2017 presents revenue requirements calculated consistent with a rate mitigation plan authorized by Mississippi state law that would mitigate the Kemper IGCC's initial retail revenue impact over two years (June 1, 2015 through May 31, 2017). Under RMP 2017, rates would increase above May 2015 levels by approximately 2.6%, or $25 million annually, effective June 1, 2015, and approximately an additional 19.0%, or $197 million annually, effective June 1, 2016. This proposal assumes termination of the Mirror CWIP rate and the refund of the Mirror CWIP regulatory liability over the period from May 2015 through May 2017. In light of the Mississippi PSC's July 7, 2015 order, RMP 2019 is no longer viable as originally proposed by Mississippi Power.

Onon July 10, 2015, Mississippi Power filed a supplemental filing including a request for interim rates ~~(the Supplemental~~(Supplemental Notice) with the Mississippi PSC ~~in response to the July 7, 2015 order of the Mississippi PSC. The Supplemental Notice presents~~which presented an ~~additional~~ alternative rate proposal (In-Service Asset Proposal) ~~for consideration by the Mississippi PSC. The In-Service Asset Proposal is based upon the test period of June 2015 to May 2016, is~~ designed to recover Mississippi Power's costs associated with the Kemper IGCC assets that are commercially operational and currently providing service to customers (the transmission facilities, combined cycle, natural gas pipeline, and water pipeline) and other related ~~costs, and is~~costs. On August 13, 2015, the Mississippi PSC approved the implementation of the requested interim rates designed to collect approximately $159 million ~~annually. The Supplemental Notice requests that~~annually effective with the first billing cycle in September 2015, subject to refund and certain other conditions.

On December 3, 2015, the Mississippi PSC issued the In-Service Asset ~~Proposal be implemented immediately as interim rates, subject to refund, until such time as~~Rate Order adopting in full a stipulation entered into between Mississippi Power and the Mississippi ~~PSC renders a final decision on the In-Service Asset Proposal and requests that the Mississippi PSC establish a scheduling order for consideration of permanent rates under~~Public Utilities Staff (MPUS) regarding the In-Service Asset Proposal. ~~Evidentiary hearings~~The In-Service Asset Rate Order provided for retail rate recovery of an annual revenue requirement of approximately $126 million, based on ~~the interim rate relief are scheduled to be held~~Mississippi Power's actual average capital structure, with a maximum common equity percentage of 49.733%, a 9.225% return on ~~August 6, 2015.~~

common equity, and actual embedded interest costs. The ~~revenue requirements set forth~~In-Service Asset Rate Order also included a prudence finding of all costs in the ~~alternative rate proposals exclude~~stipulated revenue requirement calculation for the in-service assets. The stipulated revenue requirement excluded the costs of the Kemper IGCC related to the 15% undivided interest that was previously projected to be purchased by SMEPA. ~~See "Termination~~Mississippi Power continues to evaluate its alternatives with respect to its investment and related costs associated with the 15% undivided interest.

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~~If the Mississippi PSC does not act on the Supplemental Notice or the 2015 Rate Case within 120 days~~

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)

With implementation of the ~~Supplemental Notice~~new rate on December 17, 2015, the interim rates were terminated and, in March 2016, Mississippi Power completed customer refunds of approximately $11 million for the difference between the interim rates collected and the permanent rates.

Pursuant to the In-Service Asset Rate Order, Mississippi Power is required to file a subsequent rate request within 18 months. As part of the filing, Mississippi Power expects to ~~put one~~request recovery of certain costs that the Mississippi PSC had excluded from the revenue requirement calculation.

On February 25, 2016, Greenleaf CO2 Solutions, LLC filed a notice of appeal of the ~~three viable alternative~~In-Service Asset Rate Order with the Court. On May 5, 2016, the Court dismissed the appeal.

Legislation to authorize a multi-year rate ~~proposals~~plan and legislation to provide for alternate financing through securitization of up to $1.0 billion of prudently-incurred costs was enacted into ~~effect as temporary rates under bond~~law in 2013. Mississippi Power expects to securitize prudently-incurred qualifying facility costs in excess of the certificated cost estimate of $2.4 billion. Qualifying facility costs include, but are not limited to, pre-construction costs, construction costs, regulatory costs, and ~~subject~~accrued AFUDC. The Court's decision regarding the 2013 MPSC Rate Order did not impact Mississippi Power's ability to ~~refund pursuant to Mississippi state law.~~utilize alternate financing through securitization or the February 2013 legislation.

Mississippi Power ~~also~~ expects to seek additional rate relief to address recovery of the remaining Kemper IGCC assets. In addition to current estimated costs at ~~June 30, 2015~~March 31, 2016 of ~~$6.23~~$6.58 billion, Mississippi Power anticipates that it will incur additional costs after the Kemper IGCC in-service date until the Kemper IGCC cost recovery approach is finalized. These costs include, but are not limited to, regulatory costs and additional carrying costs which could be material. Recovery of these costs would be subject to approval by the Mississippi PSC.

~~Prudence Reviews~~

The Mississippi PSC's review of Kemper IGCC costs is ongoing. In August 2014, the Mississippi PSC ordered that a consolidated prudence determination of all Kemper IGCC costs be completed after the entire project has been placed in service and has demonstrated availability for a reasonable period of time as determined by the Mississippi PSC and the Mississippi Public Utilities Staff (MPUS). The Mississippi PSC has encouraged the parties to work in good faith to settle contested issues and Mississippi Power is working to reach a mutually acceptable resolution. On July 10, 2015, Mississippi Power submitted the Supplemental Notice to the Mississippi PSC. The Supplemental

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~~(UNAUDITED)~~

Notice requests that the Mississippi PSC establish a scheduling order for review of the In-Service Asset Proposal. Mississippi Power expects the Mississippi PSC to address the In-Service Asset Proposal before the end of 2015, although Mississippi Power believes that such a prudence finding is not required for interim rate relief to be granted. See "2015 Mississippi Supreme Court Decision" and "2015 Rate Case" herein for additional information.

Regulatory Assets and Liabilities

Consistent with the treatment of non-capital costs incurred during the pre-construction period, the Mississippi PSC issued an accounting order in 2011 granting Mississippi Power the authority to defer all non-capital Kemper IGCC-related costs to a regulatory asset through the in-service date, subject to review of such costs by the Mississippi PSC. Such costs include, but are not limited to, carrying costs on Kemper IGCC assets currently placed in service, costs associated with Mississippi PSC and MPUS consultants, prudence costs, legal fees, and operating expenses associated with assets placed in service.

In August 2014, Mississippi Power requested confirmation by the Mississippi PSC of Mississippi Power's authority to defer all operating expenses associated with the operation of the combined cycle subject to review of such costs by the Mississippi PSC. In addition, Mississippi Power is authorized to accrue carrying costs on the unamortized balance of such regulatory assets at a rate and in a manner to be determined by the Mississippi PSC in future cost recovery mechanism proceedings. Beginning in the third quarter 2015, in connection with the implementation of interim rates, Mississippi Power began expensing certain ongoing project costs and certain debt carrying costs (associated with assets placed in service and other non-CWIP accounts) that previously were deferred as regulatory assets and began amortizing certain regulatory assets associated with assets placed in service and consulting and legal fees. The amortization periods for these regulatory assets vary from two years to 10 years as set forth in the In-Service Asset Rate Order. As of ~~June 30, 2015,~~March 31, 2016, the ~~regulatory asset~~ balance associated with these regulatory assets was $120 million, of which $22 million is included in current assets. Other regulatory assets associated with the remainder of the Kemper IGCC ~~was $198 million. The projected balance at~~totaled $98 million as of March 31, ~~2016 is estimated to total approximately $276 million.~~2016. The amortization period for ~~any such costs approved for recovery remains subject~~these assets is expected to ~~approval~~be determined by the Mississippi ~~PSC.~~PSC in future rate proceedings following completion of construction and start-up of the Kemper IGCC and related prudence reviews.

See ~~"2015 Mississippi Supreme Court Decision"~~"2013 MPSC Rate Order" herein for ~~additional~~ information related to the July 7, 2015 Mississippi PSC order terminating the Mirror CWIP rate and requiring refund of collections under Mirror CWIP.

See Note 1 to the financial statements of Southern Company and Mississippi Power under "Regulatory Assets and Liabilities" in Item 8 of the Form 10-K for additional information.

The In-Service Asset Rate Order requires Mississippi Power to submit an annual true-up calculation of its actual cost of capital, compared to the stipulated total cost of capital, with the first occurring as of May 31, 2016. As of

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(UNAUDITED)

March 31, 2016, Mississippi Power recorded a related regulatory liability of approximately $3 million. See "2015 Rate Case" herein for additional information.

Lignite Mine and CO₂ Pipeline Facilities

In conjunction with the Kemper IGCC, Mississippi Power will own the lignite mine and equipment and has acquired and will continue to acquire mineral reserves located around the Kemper IGCC site. The mine started commercial operation in June 2013.

In 2010, Mississippi Power executed a 40-year management fee contract with Liberty Fuels Company, LLC (Liberty Fuels), a wholly-owned subsidiary of The North American Coal Corporation, which developed, constructed, and is operating and managing the mining operations. The contract with Liberty Fuels is effective through the end of the mine reclamation. As the mining permit holder, Liberty Fuels has a legal obligation to perform mine reclamation and Mississippi Power has a contractual obligation to fund all reclamation activities. In addition to the obligation to fund the reclamation activities, Mississippi Power currently provides working capital support to Liberty Fuels through cash advances for capital purchases, payroll, and other operating expenses. See Note 1 to the financial statements of Mississippi Power under "Asset Retirement Obligations and Other Costs of Removal" and "Variable Interest Entities" in Item 8 of the Form 10-K for additional information.

In addition, Mississippi Power has constructed and will operate the CO₂ pipeline for the planned transport of captured CO₂ for use in enhanced oil recovery. Mississippi Power has entered into agreements with Denbury Onshore (Denbury), a subsidiary of Denbury Resources Inc., and Treetop Midstream Services, LLC (Treetop), an affiliate of Tellus Operating Group, LLC and a subsidiary of Tengrys, LLC, pursuant to which Denbury will purchase 70% of the CO₂ captured from the Kemper IGCC and Treetop will purchase 30% of the CO₂ captured from the Kemper IGCC. The agreements with Denbury and Treetop provide Denbury and Treetop with termination rights as Mississippi Power has not satisfied its contractual obligation to deliver captured CO₂ by May 11, 2015. Since May 11, 2015, Mississippi Power has been engaged in ongoing discussions with its off-takers regarding the status of the CO₂delivery schedule as well as other issues related to the ~~respective~~CO₂ agreements. As a result of discussions with Treetop, on August 3, 2015, Mississippi Power agreed to amend certain provisions of their agreement that do not affect pricing or minimum purchase quantities. Potential requirements imposed on CO₂ off-takers under the Clean Power Plan (if ultimately enacted in its current form, pending resolution of litigation) and the potential adverse financial impact of low oil prices on the off-takers increase the risk that the CO₂ contracts may be terminated or materially modified. Any termination or material modification of these agreements could result in a material reduction in Mississippi Power's revenues to the extent Mississippi Power is not able to enter into other similar contractual arrangements. Additionally, if the contracts remain in place, sustained oil price reductions could result in significantly lower revenues than Mississippi Power forecasted to be available to offset customer rate impacts, which could have a material impact on Mississippi Power's financial statements.

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

Civil Lawsuit

On April 26, 2016, a complaint against Mississippi Power was filed in Harrison County Circuit Court by Biloxi Freezing & Processing Inc., Gulfside Casino Partnership, and John Carlton Dean. The plaintiffs allege that Mississippi Power violated the Mississippi Unfair Trade Practices Act and concealed, falsely represented, and failed to fully disclose important facts concerning the cost and schedule of the Kemper IGCC and that Mississippi Power's alleged breaches interfered with and destroyed economically advantageous relationships between the plaintiffs and their current and prospective business associates. The plaintiffs seek unspecified actual damages and punitive damages as well as attorney's fees, costs, and interest. The plaintiffs also seek an injunction to prevent any Kemper IGCC costs from being charged to customers through electric rates. Mississippi Power believes this legal challenge has no merit; however, an adverse outcome in this proceeding could impact Southern Company's results of operations, financial condition, and liquidity and could have a material impact on Mississippi Power's results of operations, financial condition, and liquidity. Mississippi Power will vigorously defend the matter, and the final outcome of this matter cannot be determined at this time.

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(UNAUDITED)


(C)	FAIR VALUE MEASUREMENTS

~~affect pricing or minimum purchase quantities. Any termination or material modification~~As of ~~these agreements could result in~~March 31, 2016, assets and liabilities measured at fair value on a ~~material reduction in future chemical product sales revenues and could have a material financial impact on Mississippi Power to~~recurring basis during the ~~extent Mississippi Power is not able to enter into other similar contractual arrangements.~~

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

~~Termination of Proposed Sale of Undivided Interest to SMEPA~~

In 2010 and as amended in 2012, Mississippi Power and SMEPA entered into an APA whereby SMEPA agreed to purchase a 15% undivided interest in the Kemper IGCC. On May 20, 2015, SMEPA notified Mississippi Power of its terminationperiod, together with their associated level of the ~~APA between Mississippi Power and SMEPA. Mississippi Power previously received a total of $275 million of deposits from SMEPA that~~fair value hierarchy, were required to be returned to SMEPA with interest in connection with the termination of the APA. On June 3, 2015, Southern Company, pursuant to its guarantee obligation, returned approximately $301 million to SMEPA. Subsequently, Mississippi Power issued an 18-month promissory note in the aggregate principal amount of approximately $301 million to Southern Company.as follows:

~~Investment Tax Credits~~

The IRS allocated $279 million (Phase II) of Internal Revenue Code Section 48A tax credits to Mississippi Power in connection with the Kemper IGCC. Through June 30, 2015, Mississippi Power had recorded tax benefits totaling $276 million for the Phase II credits, of which approximately $242 million had been utilized through that date. These credits will be amortized as a reduction to depreciation and amortization over the life of the Kemper IGCC and are dependent upon meeting the IRS certification requirements, including an in-service date no later than April 19, 2016 and the capture and sequestration (via enhanced oil recovery) of at least 65%~~of the CO~~₂ produced by the Kemper IGCC during operations in accordance with the Internal Revenue Code. Mississippi Power currently expects to place the Kemper IGCC in service in the first half of 2016. The ultimate outcome of this matter cannot be determined at this time.



	Fair Value Measurements Using
As of March 31, 2016:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives	$	—	$	12	$	—	$	—	$	12
Interest rate derivatives	—		33		—		—		33
Nuclear decommissioning trusts^(a)	624		898		—		16		1,538
Cash equivalents	503		—		—		—		503
Other investments	9		—		1		—		10
Total	$	1,136	$	943	$	1	$	16	$	2,096
Liabilities:
Energy-related derivatives	$	—	$	201	$	—	$	—	$	201
Interest rate derivatives	—		193		—		—		193
Total	$	—	$	394	$	—	$	—	$	394

Alabama Power
Assets:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3
Nuclear decommissioning trusts^(b)
Domestic equity	365		67		—		—		432
Foreign equity	46		48		—		—		94
U.S. Treasury and government agency securities	—		25		—		—		25
Corporate bonds	11		137		—		—		148
Mortgage and asset backed securities	—		21		—		—		21
Private Equity	—		—		—		16		16
Other	—		9		—		—		9
Cash equivalents	321		—		—		—		321
Total	$	743	$	310	$	—	$	16	$	1,069
Liabilities:
Energy-related derivatives	$	—	$	49	$	—	$	—	$	49

~~Section 174 Research and Experimental Deduction~~

Southern Company, on behalf of Mississippi Power, reflected deductions for research and experimental (R&E) expenditures related to the Kemper IGCC in its federal income tax calculations for 2013 and 2014. In May 2015, Southern Company amended its 2008 through 2013 federal income tax returns to include deductions for Kemper IGCC-related R&E expenditures. Due to the uncertainty related to this tax position, Southern Company and Mississippi Power had unrecognized tax benefits associated with these R&E deductions totaling approximately $390 million as of June 30, 2015. See Note 5 to the financial statements of Southern Company and Mississippi Power under "Unrecognized Tax Benefits" in Item 8 of the Form 10-K and Note (G) herein under "Unrecognized Tax Benefits – ~~Section 174 Research and Experimental Deduction" for additional information. The ultimate outcome of this tax matter cannot be determined at this time.~~

~~167~~139

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)


~~(C)~~	~~FAIR VALUE MEASUREMENTS~~

~~As of June 30, 2015, assets and liabilities measured at fair value on a recurring basis during the period, together with the associated level of the fair value hierarchy, were as follows:~~


	Fair Value Measurements Using								Fair Value Measurements Using
As of June 30, 2015:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of March 31, 2016:									Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)								(in millions)
Southern Company
Georgia Power
Assets:
Energy-related derivatives	$	—	$	5	$	—	$	5	$	—	$	4	$	—	$	—	$	4
Interest rate derivatives	—		11		—		11		—		14		—		—		14
Nuclear decommissioning trusts^(a)	677		887		7		1,571
Cash equivalents	533		—		—		533
Other investments	9		—		1		10
Total	$	1,219	$	903	$	8	$	2,130
Liabilities:
Energy-related derivatives	$	—	$	180	$	—	$	180
Interest rate derivatives	—		14		—		14
Total	$	—	$	194	$	—	$	194

Alabama Power
Assets:
Energy-related derivatives	$	—	$	2	$	—	$	2
Nuclear decommissioning trusts^(b)
Nuclear decommissioning trusts^{(b) (c)}
Domestic equity	381		78		—		459		180		1		—		—		181
Foreign equity	51		50		—		101		—		115		—		—		115
U.S. Treasury and government agency securities	—		36		—		36		—		111		—		—		111
Municipal bonds									—		66		—		—		66
Corporate bonds	10		121		—		131		—		146		—		—		146
Mortgage and asset backed securities	—		17		—		17		—		145		—		—		145
Other	—		6		7		13		22		7		—		—		29
Cash equivalents	81		—		—		81		57		—		—		—		57
Total	$	523	$	310	$	7	$	840	$	259	$	609	$	—	$	—	$	868
Liabilities:
Energy-related derivatives	$	—	$	48	$	—	$	48	$	—	$	11	$	—	$	—	$	11

Gulf Power
Assets:
Cash equivalents									$	20	$	—	$	—	$	—	$	20
Liabilities:
Energy-related derivatives									$	—	$	94	$	—	$	—	$	94
Interest rate derivatives	—		7		—		7		—		5		—		—		5
Total	$	—	$	55	$	—	$	55	$	—	$	99	$	—	$	—	$	99

Mississippi Power
Assets:
Cash equivalents									$	24	$	—	$	—	$	—	$	24
Liabilities:
Energy-related derivatives									$	—	$	44	$	—	$	—	$	44

Southern Power
Assets:
Energy-related derivatives									$	—	$	5	$	—	$	—	$	5
Interest rate derivatives									—		1		—		—		1
Cash equivalents									39		—		—		—		39
Total									$	39	$	6	$	—	$	—	$	45
Liabilities:
Energy-related derivatives									$	—	$	3	$	—	$	—	$	3

~~168~~140

Table of Contents

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)

Fair Value Measurements Using
As of June 30, 2015:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
(in millions)
Georgia Power
Assets:
Energy-related derivatives $ —
$ 3
$ —
$ 3
Interest rate derivatives —
5
—
5
Nuclear decommissioning trusts^{(b) (c)}

Domestic equity 182
1
—
183
Foreign equity —
125
—
125
U.S. Treasury and government agency securities —
95
—
95
Municipal bonds —
78
—
78
Corporate bonds —
169
—
169
Mortgage and asset backed securities —
108
—
108
Other 53
3
—
56
Total $ 235
$ 587
$ —
$ 822
Liabilities:
Energy-related derivatives $ —
$ 17
$ —
$ 17
Interest rate derivatives —
4
—
4
Total $ —
$ 21
$ —
$ 21

Gulf Power
Assets:
Cash equivalents $ 18
$ —
$ —
$ 18
Liabilities:
Energy-related derivatives —
74
—
74

Mississippi Power
Assets:
Cash equivalents $ 182
$ —
$ —
$ 182
Liabilities:
Energy-related derivatives —
41
—
41

Southern Power
Assets:
Cash equivalents $ 206
$ —
$ —
$ 206


(a)	For additional detail, see the nuclear decommissioning trusts sections for Alabama Power and Georgia Power in this table.


(b)	Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies.


(c)	Includes the investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. As of ~~June 30, 2015,~~March 31, 2016, approximately ~~$39~~$58 million of the fair market value of Georgia Power's nuclear decommissioning trust funds' securities were on loan to creditors under the funds' managers' securities lending program.

~~169~~

~~Table~~Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. For the three months ended March 31, 2016 and March 31, 2015, the change in fair value of ~~Contents~~the funds, including reinvested interest and dividends and excluding the funds' expenses, increased by $20 million and $33 million, respectively, at Southern Company. For the three months ended March 31, 2016 and March 31, 2015, Alabama Power recorded an increase in fair value of $11 million and $15 million, respectively, as an increase in regulatory liabilities related to its asset retirement obligations. For the three months ended March 31, 2016 and March 31, 2015, Georgia Power recorded an increase in fair value of $9 million and $18 million, respectively, as a reduction of its regulatory asset related to its asset retirement obligations.

~~NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)~~

~~(UNAUDITED)~~

Valuation Methodologies

The energy-related derivatives primarily consist of over-the-counter financial products for natural gas and physical power products, including, from time to time, basis swaps. These are standard products used within the energy industry and are valued using the market approach. The inputs used are mainly from observable market sources, such as forward natural gas prices, power prices, implied volatility, and overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter ~~financial~~ products that are valued using ~~the~~observable market ~~approach. Inputs for~~data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflect the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include ~~LIBOR interest rates, interest rate futures contracts,~~the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The interest rate derivatives are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note (H) ~~herein~~ for additional information on how these derivatives are used.

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. For fair value measurements of the investments within the nuclear decommissioning trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' ~~judgment,~~judgments, are also obtained when available.

~~Investments~~ See Note 1 to the financial statements of Southern Company, Alabama Power, and Georgia Power under "Nuclear Decommissioning" in private equity and real estate within Alabama Power's nuclear decommissioning trusts are generally classified as Level 3, as the underlying assets typically do not have observable inputs. The fund manager values these assets using various inputs and techniques depending on the natureItem 8 of the ~~underlying investments. The fair value of partnerships is determined by aggregating the value of the underlying assets.~~Form 10-K for additional information.

"Other investments" include investments that are not traded in the open market. The fair value of these investments have been determined based on market factors including comparable multiples and the expectations regarding cash flows and business plan executions.

~~170~~141

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)

As of ~~June 30, 2015,~~March 31, 2016, the fair value measurements of private equity investments held in the nuclear decommissioning trust that are calculated at net asset value per share (or its equivalent), as a practical expedient, as well as the nature and risks of those investments, were as follows:

As of June 30, 2015:
Fair
Value

Unfunded
Commitments

Redemption
Frequency

Redemption
Notice Period
(in millions)
Southern Company
Nuclear decommissioning trusts:
Foreign equity funds $ 125
None Monthly 5 days
Equity - commingled funds 50
None Daily Daily
Debt - commingled funds 16
None Daily 5 days
Other - commingled funds 3
None Daily Not applicable
Other - money market funds 53
None Daily Not applicable
Trust-owned life insurance 117
None Daily 15 days
Cash equivalents:
Money market funds 533
None Daily Not applicable
Alabama Power
Nuclear decommissioning trusts:
Equity - commingled funds $ 50
None Daily Daily
Debt - commingled funds 16
None Daily 5 days
Trust-owned life insurance 117
None Daily 15 days
Cash equivalents:
Money market funds 81
None Daily Not applicable
Georgia Power
Nuclear decommissioning trusts:
Foreign equity funds $ 125
None Monthly 5 days
Other - commingled funds 3
None Daily Not applicable
Other - money market funds 53
None Daily Not applicable
Gulf Power
Cash equivalents:
Money market funds $ 18
None Daily Not applicable
Mississippi Power
Cash equivalents:
Money market funds $ 182
None Daily Not applicable
Southern Power
Cash equivalents:
Money market funds $ 206
None Daily Not applicable



As of March 31, 2016:	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
	(in millions)
Southern Company	$	16	$	29	Not Applicable	Not Applicable
Alabama Power	$	16	$	29	Not Applicable	Not Applicable

~~The NRC requires licensees of commissioned nuclear power reactors to establish~~Private equity funds include a plan for providing reasonable assurance of funds for future decommissioning. Alabama Power and Georgia Power have external trust funds (the Funds) to comply with the NRC's regulations. The foreign equity fund in Georgia Power's nuclear decommissioning trusts seeks to provide long-term capital appreciation. In pursuing this investment objective, the foreign equity fund primarilyfund-of-funds that invests in high-quality private equity funds across several market sectors, a ~~diversified portfolio of equity securities of foreign companies, including those~~fund that invests in ~~emerging markets. These equity securities may include, but are not limited to, common stocks, preferred stocks,~~ real estate ~~investment trusts, convertible securities, depositary receipts (including American depositary receipts, European depositary receipts,~~assets, and ~~global depositary receipts), and rights and warrants~~a fund that acquires companies to buy common stocks. Georgia Power may withdraw all or a portion of its investment on the last business day of each month subject to a minimum withdrawal of $1 million, provided that a minimum investment of $10 million remains. If notices of withdrawal exceed 20% of the aggregate value of the foreigncreate resale value. Private equity ~~fund, then the foreign equity fund's board may refuse to~~

~~171~~

~~Table of Contents~~

~~NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)~~

~~(UNAUDITED)~~

permit the withdrawal of all such investments and may scale down the amounts to be withdrawn pro rata and may further determine that any withdrawal that has been postponed will have priority on the subsequent withdrawal date.

~~The other-commingled~~ funds and other-money market funds in Georgia Power's nuclear decommissioning trusts are invested primarily in a diversified portfolio of high-quality, short-term, liquid debt securities. The funds represent ~~cash collateral received under the Funds' managers' securities lending program and/or excess cash held within each separate investment account.~~ The primary objective of the funds is to provide a high level of current income consistent with stability of principal and liquidity. The funds invest primarily in, but not limited to, commercial paper, floating and variable rate demand notes, debt securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, time deposits, repurchase agreements, municipal obligations, notes, and other high-quality short-term liquid debt securities that mature in 90 days or less. Redemptions are available on a same day basis up to the full amount of the investment in the fund. See Note 1 to the financial statements of Southern Company and Georgia Power under "Nuclear Decommissioning" in Item 8 of the Form 10-K for additional information.

Alabama Power's nuclear decommissioning trusts include investments in Trust-Owned Life Insurance (TOLI). The taxable nuclear decommissioning trusts invest in the TOLI in order to minimize the impact of taxes on the portfolios and can draw on the value of the TOLI through death proceeds, loans against the cash surrender value, and/or the cash surrender value, subject to legal restrictions. The amounts reported in the table above reflect the fair value of investments the insurer has made in relation to the TOLI agreements. The nuclear decommissioning trusts do not ~~own~~have redemption rights. Distributions from these funds will be received as the underlying investments but the fair value of the investments approximates the cash surrender value of the TOLI policies. The investments made by the insurer are in commingled funds. These commingled funds, along with other equity and debt commingled funds held in Alabama Power's nuclear decommissioning trusts, primarily include investments in domestic and international equity securities and predominantly high-quality fixed income securities. These fixed income securities may include U.S. Treasury and government agency fixed income securities, non-U.S. government and agency fixed income securities, domestic and foreign corporate fixed income securities, and mortgage and asset backed securities. The passively managed funds seek to replicate the performance of a related index. The actively managed funds seek to exceed the performance of a related index through security analysis and selection. See Note 1 to the financial statements of Southern Company and Alabama Power under "Nuclear Decommissioning" in Item 8 of the Form 10-K for additional information.

~~Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held~~ in the nuclear decommissioning trust funds. For the three and six months ended June 30, 2015, the change in fair value of the funds, including reinvested interest and dividends reduced by the funds' expenses, increased by $44 million and $109 million, respectively, at Southern Company. For the three and six months ended June 30, 2015, Alabama Power recorded an increase in fair value of $50 million and $97 million, respectively, as an increase in regulatory liabilities. For the three and six months ended June 30, 2015, Georgia Power recorded a decrease in fair value of $6 million and an increase of $12 million, respectively, as a reduction of its regulatory asset related to its ARO.

~~The money market~~ funds are ~~short-term investments of excess funds in~~liquidated. Liquidations are expected to occur at various ~~money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by~~times over 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 investment in the money market funds.next ten years.

~~172~~

~~Table of Contents~~

~~NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)~~

~~(UNAUDITED)~~

As of ~~June 30, 2015,~~March 31, 2016, other financial instruments for which the carrying amount did not equal fair value were as follows:


	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)				(in millions)
Long-term debt, including securities due within one year:
Southern Company	$	26,156	$	26,973	$	28,341	$	29,827
Alabama Power	$	7,295	$	7,621	$	7,089	$	7,688
Georgia Power	$	10,379	$	10,767	$	10,549	$	11,400
Gulf Power	$	1,370	$	1,438	$	1,303	$	1,366
Mississippi Power	$	2,275	$	2,246	$	3,209	$	2,938
Southern Power	$	2,262	$	2,302	$	3,123	$	3,171

The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to the registrants.


(D)	STOCKHOLDERS' EQUITY

Earnings per Share

For Southern Company, the only difference in computing basic and diluted earnings per share is attributable to awards outstanding under the stock option and performance share plans. See Note 8 to the financial statements of Southern Company in Item 8 of the Form 10-K for information on the stock option and performance share plans. The effect of both stock options and performance share award units was determined using the treasury stock method. Shares used to compute diluted earnings per share were as follows:


	Three Months Ended June 30, 2015	Three Months Ended June 30, 2014	Six Months Ended June 30, 2015	Six Months Ended June 30, 2014	Three Months Ended March 31, 2016	Three Months Ended March 31, 2015
	(in millions)				(in millions)
As reported shares	909	895	910	892	916	910
Effect of options and performance share award units	3	4	4	4	6	5
Diluted shares	912	899	914	896	922	915

142

Table of Contents

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(UNAUDITED)

Stock options and performance share award units that were not included in the diluted earnings per share calculation because they were anti-dilutive were ~~15 million and 1 million~~immaterial for the three ~~and six~~ months ended ~~June 30, 2015, respectively,~~March 31, 2016 and ~~were 8 million and 17 million for the three and six months ended June 30, 2014, respectively.~~2015.

~~173~~

~~Table of Contents~~

~~NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)~~

~~(UNAUDITED)~~

Changes in Stockholders' Equity

The following table presents year-to-date changes in stockholders' equity of Southern Company:


	Number of Common Shares			Common Stockholders' Equity				Preferred and Preference Stock of Subsidiaries								Total Stockholders' Equity			Number of Common Shares					Common Stockholders' Equity				Preferred and Preference Stock of Subsidiaries							Total Stockholders' Equity
	Issued	Treasury					Noncontrolling Interest^(*)					Issued			Treasury							Noncontrolling Interests^(*)		Common Stockholders' Equity				Preferred and Preference Stock of Subsidiaries							Total Stockholders' Equity
	(in thousands)			Common Stockholders' Equity		(in millions)															(in thousands)					(in millions)
Balance at December 31, 2015																			915,073			(3,352	)	$	20,592			$	609		$	781			$	21,982
Consolidated net income attributable to Southern Company																			—			—		485				—			—				485
Other comprehensive income (loss)																			—			—		(114		)		—			—				(114		)
Stock issued																			6,572			—		270				—			—				270
Stock-based compensation																			—			—		60				—			—				60
Cash dividends on common stock																			—			—		(497		)		—			—				(497		)
Contributions from noncontrolling interests																			—			—		—				—			129				129
Distributions to noncontrolling interests																			—			—		—				—			(4		)		(4		)
Purchase of membership interests from noncontrolling interests																			—			—		—				—			(129		)		(129		)
Net income attributable to noncontrolling interests																			—			—		—				—			1				1
Other																			—			(35	)	1				—			—				1
Balance at March 31, 2016																			921,645			(3,387	)	$	20,797			$	609		$	778			$	22,184

Balance at December 31, 2014	908,502	(725	)	$	19,949			Preferred and Preference Stock of Subsidiaries		$	756			$	221	Total Stockholders' Equity			$	20,926		908,502		(725	)		$	19,949		$	756			$	221			$	20,926
Net income after dividends on preferred and preference stock	—	—		1,138				—				—				1,138
Consolidated net income attributable to Southern Company																			—			—		508				—			—				508
Other comprehensive income (loss)	—	—		7				—				—				7			—			—		(15		)		—			—				(15		)
Stock issued	3,222	—		117				—				—				117			3,094			—		112				—			—				112
Stock-based compensation	—	—		66				—				—				66			—			—		53				—			—				53
Stock repurchased, at cost	—	(2,599	)	(115		)		—				—				(115		)	—			(2,599	)	(115		)		—			—				(115		)
Cash dividends on common stock	—	—		(972		)		—				—				(972		)	—			—		(478		)		—			—				(478		)
Preference stock redemption	—	—		—				(150		)		—				(150		)
Contributions from noncontrolling interest	—	—		—				—				135				135
Distributions to noncontrolling interest	—	—		—				—				(5		)		(5		)
Net income attributable to noncontrolling interest	—	—		—				—				4				4
Other	—	25		(8		)		3				—				(5		)	—			(11	)	3				—			—				3
Balance at June 30, 2015	911,724	(3,299	)	$	20,182			$	609			$	355			$	21,146

Balance at December 31, 2013	892,733	(5,647	)	$	19,008			$	756			$	—			$	19,764
Net income after dividends on preferred and preference stock	—	—		962				—				—				962
Other comprehensive income (loss)	—	—		4				—				—				4
Treasury stock re-issued	—	4,739		216				—				—				216
Stock issued	3,898	—		161				—				—				161
Stock repurchased, at cost	—	—		(5		)		—				—				(5		)
Cash dividends on common stock	—	—		(920		)		—				—				(920		)
Other	—	(27	)	—				—				—				—
Balance at June 30, 2014	896,631	(935	)	$	19,426			$	756			$	—			$	20,182
Balance at March 31, 2015																			911,596			(3,335	)	$	20,017			$	756		$	221			$	20,994



Commission File Number	Registrant, State of Incorporation, Address and Telephone Number	I.R.S. Employer Identification No.
1-3526	The Southern Company (A Delaware Corporation) 30 Ivan Allen Jr. Boulevard, N.W. Atlanta, Georgia 30308 (404) 506-5000	58-0690070

1-3164	Alabama Power Company (An Alabama Corporation) 600 North 18^th Street Birmingham, Alabama 35203 (205) 257-1000	63-0004250

1-6468	Georgia Power Company (A Georgia Corporation) 241 Ralph McGill Boulevard, N.E. Atlanta, Georgia 30308 (404) 506-6526	58-0257110

001-31737	Gulf Power Company (A Florida Corporation) One Energy Place Pensacola, Florida 32520 (850) 444-6111	59-0276810

001-11229	Mississippi Power Company (A Mississippi Corporation) 2992 West Beach Boulevard Gulfport, Mississippi 39501 (228) 864-1211	64-0205820

333-98553	Southern Power Company (A Delaware Corporation) 30 Ivan Allen Jr. Boulevard, N.W. Atlanta, Georgia 30308 (404) 506-5000	58-2598670



Registrant	Large Accelerated Filer	Accelerated Filer	Non- accelerated Filer	Smaller Reporting Company
The Southern Company	X
Alabama Power Company			X
Georgia Power Company			X
Gulf Power Company			X
Mississippi Power Company			X
Southern Power Company			X



Registrant	Description of Common Stock	Shares Outstanding at ~~June 30, 2015~~March 31, 2016
The Southern Company	Par Value $5 Per Share	~~908,424,808~~918,258,425
Alabama Power Company	Par Value $40 Per Share	30,537,500
Georgia Power Company	Without Par Value	9,261,500
Gulf Power Company	Without Par Value	5,642,717
Mississippi Power Company	Without Par Value	1,121,000
Southern Power Company	Par Value $0.01 Per Share	1,000



		Page Number
DEFINITIONS		5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION		7

	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	The Southern Company and Subsidiary Companies
	Condensed Consolidated Statements of Income	10
	Condensed Consolidated Statements of Comprehensive Income	11
	Condensed Consolidated Statements of Cash Flows	12
	Condensed Consolidated Balance Sheets	13
	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
	Alabama Power Company
	Condensed Statements of Income	4036
	Condensed Statements of Comprehensive Income	4036
	Condensed Statements of Cash Flows	4137
	Condensed Balance Sheets	4238
	Management's Discussion and Analysis of Financial Condition and Results of Operations	4440
	Georgia Power Company
	Condensed Statements of Income	6051
	Condensed Statements of Comprehensive Income	6051
	Condensed Statements of Cash Flows	6152
	Condensed Balance Sheets	6253
	Management's Discussion and Analysis of Financial Condition and Results of Operations	6455
	Gulf Power Company
	Condensed Statements of Income	8269
	Condensed Statements of Comprehensive Income	8269
	Condensed Statements of Cash Flows	8370
	Condensed Balance Sheets	8471
	Management's Discussion and Analysis of Financial Condition and Results of Operations	8673
	Mississippi Power Company
	Condensed Statements of ~~Operations~~Income	~~102~~85
	Condensed Statements of Comprehensive Income ~~(Loss)~~	~~102~~85
	Condensed Statements of Cash Flows	~~103~~86
	Condensed Balance Sheets	~~104~~87
	Management's Discussion and Analysis of Financial Condition and Results of Operations	~~106~~89
	Southern Power Company and Subsidiary Companies
	Condensed Consolidated Statements of Income	~~134~~110
	Condensed Consolidated Statements of Comprehensive Income	~~134~~110
	Condensed Consolidated Statements of Cash Flows	~~135~~111
	Condensed Consolidated Balance Sheets	~~136~~112
	Management's Discussion and Analysis of Financial Condition and Results of Operations	~~138~~114
	Notes to the Condensed Financial Statements	~~149~~124
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3834
Item 4.	Controls and Procedures	3834



		Page Number
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	~~195~~166
Item 1A.	Risk Factors	~~195~~166
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~195~~ Inapplicable
Item 3.	Defaults Upon Senior Securities	Inapplicable
Item 4.	Mine Safety Disclosures	Inapplicable
Item 5.	Other Information	Inapplicable
Item 6.	Exhibits	~~196~~166
	Signatures	~~200~~169



Term	Meaning

2012 MPSC CPCN Order	A detailed order issued by the Mississippi PSC in April 2012 confirming the CPCN originally approved by the Mississippi PSC in 2010 authorizing the acquisition, construction, and operation of the Kemper IGCC
2013 ARP	Alternative Rate Plan approved by the Georgia PSC in 2013 for Georgia Power for the years 2014 through 2016 and subsequently extended through 2019
AFUDC	Allowance for funds used during construction
AGL Resources	AGL Resources Inc.
Alabama Power	Alabama Power Company
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Baseload Act	State of Mississippi legislation designed to enhance the Mississippi PSC's authority to facilitate development and construction of baseload generation in the State of Mississippi
Bridge Agreement	Senior unsecured Bridge Credit Agreement, dated as of September 30, 2015, among Southern Company, the lenders identified therein, and Citibank, N.A.
CCR	Coal combustion residuals
Clean Air Act	Clean Air Act Amendments of 1990
~~Contractor~~	~~Westinghouse and CB&I Stone & Webster, Inc. (formerly known as Stone & Webster, Inc.), a subsidiary of The Shaw Group Inc., which was acquired by Chicago Bridge & Iron Company N.V.~~
CO₂	Carbon dioxide
COD	Commercial operation date
Contractor	Westinghouse and its affiliate, WECTEC Global Project Services Inc. (formerly known as CB&I Stone & Webster, Inc.), formerly a subsidiary of The Shaw Group Inc. and Chicago Bridge & Iron Company N.V.
CPCN	Certificate of public convenience and necessity
CWIP	Construction work in progress
DOE	U.S. Department of Energy
ECO Plan	Mississippi Power's Environmental Compliance Overview Plan
Eligible Project Costs	Certain costs of construction relating to Plant Vogtle Units 3 and 4 that are eligible for financing under the Title XVII Loan Guarantee Program
EPA	U.S. Environmental Protection Agency
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FFB	Federal Financing Bank
Fitch	Fitch Ratings, Inc.
Form 10-K	Combined Annual Report on Form 10-K of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Southern Power for the year ended December 31, ~~2014~~2015
GAAP	~~Generally~~U.S. generally accepted accounting principles
Georgia Power	Georgia Power Company
Gulf Power	Gulf Power Company
IGCC	Integrated coal gasification combined cycle
IIC	Intercompany interchange contract
Internal Revenue Code	Internal Revenue Code of 1986, as amended
IRS	Internal Revenue Service
ITC	Investment tax credit
Kemper IGCC	IGCC facility under construction by Mississippi Power in Kemper County, Mississippi
KWH	Kilowatt-hour
LIBOR	London Interbank Offered Rate
MATS rule	Mercury and Air Toxics Standards rule
Merger	The merger of Merger Sub with and into AGL Resources on the terms and subject to the conditions set forth in the Merger Agreement, with AGL Resources continuing as the surviving corporation and a wholly-owned, direct subsidiary of Southern Company



Term	Meaning

Merger Agreement	Agreement and Plan of Merger, dated as of August 23, 2015, among Southern Company, AGL Resources, and Merger Sub
Merger Sub	AMS Corp., a wholly-owned, direct subsidiary of Southern Company
Mirror CWIP	A regulatory liability account for use in mitigating future rate impacts for Mississippi Power customers
Mississippi Power	Mississippi Power Company
mmBtu	Million British thermal units
Moody's	Moody's Investors Service, Inc.
MW	Megawatt



~~Term~~	~~Meaning~~

NCCR	Georgia Power's Nuclear Construction Cost Recovery
NRC	U.S. Nuclear Regulatory Commission
OCI	Other comprehensive income
PEP	Mississippi Power's Performance Evaluation Plan
Plant Vogtle Units 3 and 4	Two new nuclear generating units under construction at Georgia Power's Plant Vogtle
power pool	The operating arrangement whereby the integrated generating resources of the traditional operating companies and Southern Power Company (excluding subsidiaries) are subject to joint commitment and dispatch in order to serve their combined load obligations
PPA	Power purchase agreement
PSC	Public Service Commission
PTC	Production tax credit
Rate CNP	Alabama Power's Rate Certificated New Plant
Rate CNP Compliance	Alabama Power's Rate Certificated New Plant Compliance
Rate CNP ~~Environmental~~	~~Alabama Power's Rate Certificated New Plant Environmental~~
~~Rate CNP~~ PPA	Alabama Power's Rate Certificated New Plant Power Purchase Agreement
Rate RSE	Alabama Power's Rate Stabilization and Equalization plan
registrants	Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Southern Power Company
ROE	Return on equity
S&P	Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc.
scrubber	Flue gas desulfurization system
SEC	U.S. Securities and Exchange Commission
SMEPA	South Mississippi Electric Power Association
Southern Company	The Southern Company
Southern Company system	Southern Company, the traditional operating companies, Southern Power, Southern Electric Generating Company, Southern Nuclear, Southern Company Services, Inc. (the Southern Company system service company), Southern Communications Services, Inc., and other subsidiaries
Southern Nuclear	Southern Nuclear Operating Company, Inc.
Southern Power	Southern Power Company and its subsidiaries
traditional operating companies	Alabama Power, Georgia Power, Gulf Power, and Mississippi Power
Vogtle Owners	Georgia Power, Oglethorpe Power Corporation, the Municipal Electric Authority of Georgia, and the City of Dalton, Georgia, an incorporated municipality in the State of Georgia acting by and through its Board of Water, Light, and Sinking Fund Commissioners
Westinghouse	Westinghouse Electric Company LLC


	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2015			2014			2015			2014			2016			2015
	(in millions)						(in millions)						(in millions)
Operating Revenues:
Retail revenues	$	3,714		$	3,770		$	7,256		$	7,628		$	3,377		$	3,542
Wholesale revenues	448			515			915			1,119			396			467
Other electric revenues	162			169			325			334			181			163
Other revenues	13			13			24			30			11			11
Total operating revenues	4,337			4,467			8,520			9,111			3,965			4,183
Operating Expenses:
Fuel	1,200			1,462			2,412			3,109			911			1,212
Purchased power	171			133			315			320			165			144
Other operations and maintenance	1,100			1,019			2,222			2,005			1,106			1,122
Depreciation and amortization	500			504			987			1,001			541			487
Taxes other than income taxes	245			246			497			493			256			252
Estimated loss on Kemper IGCC	23			—			32			380			53			9
Total operating expenses	3,239			3,364			6,465			7,308			3,032			3,226
Operating Income	1,098			1,103			2,055			1,803			933			957
Other Income and (Expense):
Allowance for equity funds used during construction	39			62			102			119			53			63
Interest expense, net of amounts capitalized	(180		)	(210		)	(393		)	(416		)	(246		)	(213		)
Other income (expense), net	(12		)	(6		)	(19		)	(13		)	(21		)	(8		)
Total other income and (expense)	(153		)	(154		)	(310		)	(310		)	(214		)	(158		)
Earnings Before Income Taxes	945			949			1,745			1,493			719			799
Income taxes	302			321			576			497			222			274
Consolidated Net Income	643			628			1,169			996			497			525
Less:
Dividends on Preferred and Preference Stock of Subsidiaries	14			17			31			34			11			17
Consolidated Net Income After Dividends on Preferred and Preference Stock of Subsidiaries	$	629		$	611		$	1,138		$	962
Net income attributable to noncontrolling interests													1			—
Consolidated Net Income Attributable to Southern Company													$	485		$	508
Common Stock Data:
Earnings per share (EPS) —
Basic EPS	$	0.69		$	0.68		$	1.25		$	1.08		$	0.53		$	0.56
Diluted EPS	$	0.69		$	0.68		$	1.25		$	1.07		$	0.53		$	0.56
Average number of shares of common stock outstanding (in millions)
Basic	909			895			910			892			916			910
Diluted	912			899			914			896			922			915
Cash dividends paid per share of common stock	$	0.5425		$	0.5250		$	1.0675		$	1.0325		$	0.5425		$	0.5250



Assets	At June 30, 2015			At December 31, 2014
	(in millions)
Current Assets:
Cash and cash equivalents	$	813		$	710
Receivables —
Customer accounts receivable	1,312			1,090
Unbilled revenues	579			432
Under recovered regulatory clause revenues	173			136
Other accounts and notes receivable	209			307
Accumulated provision for uncollectible accounts	(17		)	(18		)
Fossil fuel stock, at average cost	795			930
Materials and supplies, at average cost	1,043			1,039
Vacation pay	177			177
Prepaid expenses	564			665
Deferred income taxes, current	499			506
Other regulatory assets, current	382			346
Other current assets	76			50
Total current assets	6,605			6,370
Property, Plant, and Equipment:
In service	71,462			70,013
Less accumulated depreciation	23,918			24,059
Plant in service, net of depreciation	47,544			45,954
Other utility plant, net	87			211
Nuclear fuel, at amortized cost	889			911
Construction work in progress	8,487			7,792
Total property, plant, and equipment	57,007			54,868
Other Property and Investments:
Nuclear decommissioning trusts, at fair value	1,572			1,546
Leveraged leases	751			743
Miscellaneous property and investments	232			203
Total other property and investments	2,555			2,492
Deferred Charges and Other Assets:
Deferred charges related to income taxes	1,533			1,510
Unamortized debt issuance expense	208			202
Unamortized loss on reacquired debt	234			243
Other regulatory assets, deferred	4,763			4,334
Income taxes receivable, non-current	444			—
Other deferred charges and assets	832			904
Total deferred charges and other assets	8,014			7,193
Total Assets	$	74,181		$	70,923



Liabilities and Stockholders' Equity	At June 30, 2015			At December 31, 2014
	(in millions)
Current Liabilities:
Securities due within one year	$	3,643		$	3,333
Interest-bearing refundable deposits	—			275
Notes payable	1,057			803
Accounts payable	1,395			1,593
Customer deposits	398			390
Accrued taxes —
Accrued income taxes	12			151
Other accrued taxes	391			487
Accrued interest	241			295
Accrued vacation pay	222			223
Accrued compensation	305			576
Mirror CWIP	353			271
Other current liabilities	677			570
Total current liabilities	8,694			8,967
Long-term Debt	22,674			20,841
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	12,187			11,568
Deferred credits related to income taxes	186			192
Accumulated deferred investment tax credits	1,290			1,208
Employee benefit obligations	2,375			2,432
Asset retirement obligations	2,860			2,168
Other cost of removal obligations	1,206			1,215
Other regulatory liabilities, deferred	408			398
Other deferred credits and liabilities	996			594
Total deferred credits and other liabilities	21,508			19,775
Total Liabilities	52,876			49,583
Redeemable Preferred Stock of Subsidiaries	118			375
Redeemable Noncontrolling Interest	41			39
Stockholders' Equity:
Common Stockholders' Equity:
Common stock, par value $5 per share —
Authorized — 1.5 billion shares
Issued — June 30, 2015: 912 million shares
— December 31, 2014: 909 million shares
Treasury — June 30, 2015: 3.3 million shares
— December 31, 2014: 0.7 million shares
Par value	4,555			4,539
Paid-in capital	6,123			5,955
Treasury, at cost	(142		)	(26		)
Retained earnings	9,767			9,609
Accumulated other comprehensive loss	(121		)	(128		)
Total Common Stockholders' Equity	20,182			19,949
Preferred and Preference Stock of Subsidiaries	609			756
Noncontrolling Interest	355			221
Total Stockholders' Equity	21,146			20,926
Total Liabilities and Stockholders' Equity	$	74,181		$	70,923



Assets	At March 31, 2016			At December 31, 2015
	(in millions)
Current Assets:
Cash and cash equivalents	$	754		$	1,404
Receivables —
Customer accounts receivable	988			1,058
Unbilled revenues	380			397
Under recovered regulatory clause revenues	43			63
Income taxes receivable, current	—			144
Other accounts and notes receivable	236			398
Accumulated provision for uncollectible accounts	(13		)	(13		)
Fossil fuel stock, at average cost	837			868
Materials and supplies, at average cost	1,085			1,061
Vacation pay	181			178
Prepaid expenses	486			495
Other regulatory assets, current	394			402
Other current assets	90			71
Total current assets	5,461			6,526
Property, Plant, and Equipment:
In service	76,553			75,118
Less accumulated depreciation	24,566			24,253
Plant in service, net of depreciation	51,987			50,865
Other utility plant, net	218			233
Nuclear fuel, at amortized cost	941			934
Construction work in progress	9,406			9,082
Total property, plant, and equipment	62,552			61,114
Other Property and Investments:
Nuclear decommissioning trusts, at fair value	1,540			1,512
Leveraged leases	761			755
Miscellaneous property and investments	488			485
Total other property and investments	2,789			2,752
Deferred Charges and Other Assets:
Deferred charges related to income taxes	1,572			1,560
Unamortized loss on reacquired debt	220			227
Other regulatory assets, deferred	4,957			4,989
Income taxes receivable, non-current	413			413
Other deferred charges and assets	771			737
Total deferred charges and other assets	7,933			7,926
Total Assets	$	78,735		$	78,318


	Second Quarter 2015					Year-to-Date 2015					First Quarter 2016
	(in millions)			(% change)		(in millions)			(% change)		(in millions)			(% change)
Retail – prior year	$	3,770				$	7,628				$	3,542
Estimated change resulting from –
Rates and pricing	30			0.8		107			1.4		110			3.1
Sales growth	23			0.6		41			0.5		22			0.6
Weather	46			1.2		8			0.1		(85		)	(2.4	)
Fuel and other cost recovery	(155		)	(4.1	)	(528		)	(6.9	)	(212		)	(6.0	)
Retail – current year	$	3,714		(1.5	)%	$	7,256		(4.9	)%	$	3,377		(4.7	)%



	Second Quarter 2015 vs. Second Quarter 2014				Year-to-Date 2015 vs. Year-to-Date 2014
	(change in millions)			(% change)	(change in millions)			(% change)
Fuel	$	(262	)	(17.9)	$	(697	)	(22.4)
Purchased power	38			28.6	(5		)	(1.6)
Total fuel and purchased power expenses	$	(224	)		$	(702	)


	Second Quarter 2015	Second Quarter 2014	Year-to-Date 2015	Year-to-Date 2014	First Quarter 2016	First Quarter 2015
Total generation (billions of KWHs)	46	47	92	94	44	46
Total purchased power (billions of KWHs)	4	2	6	5	4	3
Sources of generation (percent) —
Coal	39	44	36	45	27	33
Nuclear	15	17	16	16	17	16
Gas	42	36	44	35	47	47
Hydro	3	3	3	4	7	3
Renewables	1	—	1	—
Other Renewables					2	1
Cost of fuel, generated (cents per net KWH) —
Coal	3.37	3.79	3.52	4.00	3.24	3.70
Nuclear	0.84	0.89	0.75	0.89	0.82	0.67
Gas	2.76	3.82	2.73	4.00	2.16	2.71
Average cost of fuel, generated (cents per net KWH)	2.70	3.28	2.70	3.46	2.23	2.71
Average cost of purchased power (cents per net KWH)^(*)	5.63	7.41	6.26	8.20	5.27	7.18


(*)	Average and maximum amounts are based upon daily balances during the three-month period ended ~~June 30, 2015.~~March 31, 2016.



Company^(a)	Senior Note Issuances		Senior Note Maturities and Redemptions		Revenue Bond Maturities, Redemptions, and Repurchases		Other Long-Term Debt Issuances			Other Long-Term Debt Redemptions and Maturities^(b)
	(in millions)
Alabama Power	$	400	$	200	$	—	$	45		$	—
Georgia Power	650		250		4		—			1
Mississippi Power	—		—		—		1,100			426
Southern Power	—		—		—		2			3
Other	—		—		—		—			4
Elimination^(c)	—		—		—		(200		)	—
Total	$	1,050	$	450	$	4	$	947		$	434


(a)	Southern Company and Gulf Power did not issue or redeem any long-term debt during the first three months of 2016.


(b)	Includes reductions in capital lease obligations resulting from cash payments under capital leases.


(c)	Intercompany loans from Southern Company to Mississippi Power eliminated in Southern Company's Consolidated Financial Statements.



Company^(a)	Senior Note Issuances		Senior Note Redemptions		Revenue Bond Issuances and Reofferings of Purchased Bonds^(b)		Revenue Bond Maturities and Repurchases		Other Long-Term Debt Issuances		Other Long-Term Debt Redemptions and Maturities^(c)
	(in millions)
Southern Company	$	600	$	—	$	—	$	—	$	—	$	—
Alabama Power	975		250		80		134		—		—
Georgia Power	—		125		170		65		600		5
Mississippi Power	—		—		—		—		—		351
Southern Power	650		—		—		—		—		—
Other	—		—		—		—		—		9
Total	$	2,225	$	375	$	250	$	199	$	600	$	365


~~(a)~~	~~Gulf Power did not issue or redeem any long-term debt during the first six months of 2015.~~


~~(b)~~	Includes reoffering by Alabama Power of $80 million aggregate principal amount of revenue bonds previously purchased and held by Alabama Power since April 2015 and reofferings by Georgia Power of $104.6 million and $65 million aggregate principal amount of revenue bonds previously purchased and held by Georgia Power since 2013 and April 2015, respectively.


~~(c)~~	~~Includes reductions in capital lease obligations resulting from cash payments under capital leases.~~


(b)	Changes in internal ~~controls.~~controls over financial reporting.



Liabilities and Stockholder's Equity	At June 30, 2015			At December 31, 2014
	(in millions)
Current Liabilities:
Securities due within one year	$	600		$	454
Accounts payable —
Affiliated	244			248
Other	267			443
Customer deposits	88			87
Accrued taxes —
Accrued income taxes	3			2
Other accrued taxes	88			37
Accrued interest	75			66
Accrued vacation pay	54			54
Accrued compensation	66			131
Other current liabilities	105			82
Total current liabilities	1,590			1,604
Long-term Debt	6,699			6,176
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	3,937			3,874
Deferred credits related to income taxes	71			72
Accumulated deferred investment tax credits	121			125
Employee benefit obligations	308			326
Asset retirement obligations	1,252			829
Other cost of removal obligations	742			744
Other regulatory liabilities, deferred	219			239
Deferred over recovered regulatory clause revenues	72			47
Other deferred credits and liabilities	79			79
Total deferred credits and other liabilities	6,801			6,335
Total Liabilities	15,090			14,115
Redeemable Preferred Stock	85			342
Preference Stock	196			343
Common Stockholder's Equity:
Common stock, par value $40 per share —
Authorized — 40,000,000 shares
Outstanding — 30,537,500 shares	1,222			1,222
Paid-in capital	2,324			2,304
Retained earnings	2,331			2,255
Accumulated other comprehensive loss	(28		)	(29		)
Total common stockholder's equity	5,849			5,752
Total Liabilities and Stockholder's Equity	$	21,220		$	20,552



	Second Quarter 2015				Year-to-Date 2015
	(in millions)		(% change)		(in millions)			(% change)
Retail – prior year	$	1,249			$	2,546
Estimated change resulting from –
Rates and pricing	56		4.5		103			4.1
Sales growth	1		0.1		10			0.4
Weather	18		1.5		(2		)	(0.1	)
Fuel and other cost recovery	2		0.1		(63		)	(2.5	)
Retail – current year	$	1,326	6.2	%	$	2,594		1.9	%


~~(a)~~	~~KWHs generated by hydro are excluded from the average cost of fuel, generated.~~


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


(a)	KWHs generated by hydro are excluded from the average cost of fuel, generated.



	Short-term Debt at June 30, 2015			Short-term Debt During the Period(*)
	Amount Outstanding		Weighted Average Interest Rate	Average Outstanding		Weighted Average Interest Rate	Maximum Amount Outstanding
	(in millions)			(in millions)			(in millions)
Commercial Paper	$	—	—%	$	17	0.2%	$	100



	Short-term Debt During the Period^(*)
	Average Amount Outstanding		Weighted Average Interest Rate		Maximum Amount Outstanding
	(in millions)				(in millions)
Commercial paper	$	19	0.6	%	$	100



Expires								Due Within One Year
2016		2018		Total		Unused		Term Out		No Term Out
(in millions)				(in millions)				(in millions)
$	150	$	1,600	$	1,750	$	1,737	$	—	$	150


~~(*)~~	~~Includes energy produced during the test period for the Kemper IGCC which is accounted for in accordance with FERC guidance.~~

Second Quarter 2015 vs. Second Quarter 2014

Year-to-Date 2015 vs. Year-to-Date 2014

(change in millions)

(% change)

(change in millions)

(% change)