Mail Stop 3561
April 11, 2006
By Facsimile and U.S. Mail
Mr. Thomas Fanning
Chief Financial Officer
The Southern Company
30 Ivan Allen Jr. Boulevard NW
Atlanta, GA 30308
Re: The Southern Company
Form 10-K for the year ended December 31, 2005
Filed February 27, 2006
File No. 1-3526
Alabama Power Company
Form 10-K for the year ended December 31, 2005
Filed February 27, 2006
File No. 1-3164
Georgia Power Company
Form 10-K for the year ended December 31, 2005
Filed February 27, 2006
File No. 1-6468
Gulf Power Company
Form 10-K for the year ended December 31, 2005
Filed February 27, 2006
File No. 0-2429
Mississippi Power Company
Form 10-K for the year ended December 31, 2005
Filed February 27, 2006
File No. 001-11229
Savannah Electric and Power Company
Form 10-K for the year ended December 31, 2005
Filed February 27, 2006
File No. 1-5072
Southern Power Company
Form 10-K for the year ended December 31, 2005
Filed February 27, 2006
File No. 333-98553
Dear Mr. Fanning:
We have reviewed your filings and have the following
comments.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
Please be as detailed as necessary in your explanation. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
The Southern Company Form 10-K for the year ended December 31,
2005
General
1. Our review encompassed the parent company, and the other
subsidiary registrants listed on the facing page of your Form 10-
K.
In the interests of reducing the number of comments, we have not
addressed each registrant with a separate comment. To the extent
a
comment is applicable to more than one registrant, please address
the
issue separately for the affected reporting subsidiary.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page II-11
2. In addition to the overall cost of generation per KWH you may
want
to segregate the average cost by fuel source. Furthermore, while
you
discuss fuel expense in an indirect price/volume variance mode,
you
should attach quantification to such fluctuations. Finally, your
statement regarding reduced 2005 purchased power volume in
response
to higher costs of purchased power may be illustrated in the
tabular
presentation by the addition of purchased power KWH`s. In this
regard, we are unable to reconcile KWH`s sold to your total
generated
KWH`s plus the imputed purchased power KWH volumes based on
average
cost and purchased power expense. Please clarify our
understanding.
If total generation KWH`s includes purchased power KWH`s you may
want
to make this clear since generation suggests company-generated
power
as opposed to procured power.
Other Operations and Maintenance Expenses, page II-14
3. Your explanations for comparable period changes do not total
the
actual change. For example, your explanations for the 2005 change
in
the components and related subcomponents of other operations and
maintenance represent approximately 88% and 89%, respectively of
the
change reported. Similarly, you indicate that other operations
and
maintenance expense increased by $148 million in 2004, although
the
explanations provided support an increase of $208 million.
Finally
the reasons for the changes in the subcomponents should be
discussed.
For example the extent to which the $33 million increase in 2005
employee benefits related to salary versus benefits and the extent
such increase was due to increase headcount versus cost per
employee
should be addressed.
Consolidated Balance Sheets, page II-39
4. Please tell us the type and amounts of equity method
investments
you hold. Explain whether they are predominantly the section 29
tax
credit entities. Tell us the amount and classification of such
investments on your balance sheet. If such entity is a
subsidiary,
explain why it is not consolidated. If a SPE has been formed in
connection with obtaining the section 29 tax credits, explain what
consideration you gave to FIN 46R in determining whether such
entity
should be consolidated. Your Consolidated Statement of Cash Flows
reflects investing cash outflows for what we presume are increases
in
investments in unconsolidated subsidiaries for the three years
ended
December 31, 2005. It appears equity method losses could be
significant pursuant to Rule 1-02(w) of Regulation S-X. To the
extent equity method investments are related to synthetic fuel
operations tell us how you include any section 29 tax credits in
the
test. In this regard, please advise the necessity of providing
summarized financial information pursuant to Rule 4-08(g) of
Regulation S-X. Lastly, please explain to us if there are any
differences between the amount at which an investment is carried
and
the amount of underlying equity in net assets and, if applicable,
the
accounting treatment of the difference.
Note 1. Summary of Significant Accounting Policies, page II-45
Regulatory Assets and Liabilities, page II-46
5. Please explain to us the nature of the asset retirement asset
versus the liability. If applicable, you should distinguish
between
legal ARO required to be accrued under SFAS no. 143 versus non-
legal
obligations for which rate recovery has been previously provided.
Also, please explain by major regulatory jurisdiction how ARO
costs
are recovered. Please tell us whether you defer any portion of
the
interest accretion or additional depreciation that resulted from
application of SFAS no. 143.
6. Regulatory assets are very significant to your balance sheet.
Prospectively, please ensure that you adhere to the disclosure
requirements of paragraph 20 of SFAS no. 71. If recovery of your
regulatory assets is provided without a return, or a return not
characteristic of the cost of capital, you should disclose the
amounts of such assets and the remaining recovery period
applicable
to them.
Leveraged Leases, page II-51
7. It appears you enter into leverage leases as either the owner-
lessor or lessee-user of the asset. If our understanding is
incorrect, please clarify it. To the extent you are the owner-
lessor, you should consider providing disclosure as to the
relative
credit quality of the various lessees. This may be done in the
footnote or MD&A. In this regard, explain to us how you evaluate
impairment for your investment where you are the owner-lessor.
Note 2. Retirement Benefits, page II-53
8. Please explain to us how you calculate your market-related
value
of plan assets as discussed in paragraph 30 of SFAS 87`. Since
you
have a choice and the method by which you calculate market-related
value can have an impact on net income, it should be disclosed as
an
accounting policy.
Note 6. Financing
Financial Instruments, page II-69
9. Please help us understand the extent to which you enter into
derivative contracts to hedge risk associated with purchases or
sales
that would qualify as normal under SFAS no. 133. Tell us the
amount
of such fair value adjustments that are included in regulatory
assets/liabilities versus net income. Tell us the amount of cash
flow hedge fair value adjustments included in regulatory
assets/liabilities that, absent probability of rate recovery,
would
be classified in other comprehensive income. On this point,
please
specifically advise how the MTM adjustments relating to your
interest
rate swaps and options have been included in the income statement,
balance sheet or statement of other comprehensive income. In this
regard, we do not note any apparent regulatory liability
associated
with such instruments based on the descriptions of regulatory
items
on page II-46. In this regard, you may want to reconcile the
amount
of "Regulatory liabilities, net" of $103.4 million with the
related
items and captions in your listing of regulatory assets and
liabilities on page II-46. Finally, your basis for netting the
regulatory assets and liabilities on page II-69 given the
probability
that regulatory assets may be in different jurisdictions than
regulatory liabilities should be explained to the staff.
Note 8. Common Stock, page II-72
10. You reference the fact that all options granted under the
plans
had an exercise price equal to the market value on the date of
grant.
In this regard, we note no stock compensation tax related items in
your Consolidated Statements of Stockholders` Equity. Please
explain
to us how you classify the tax benefit on non-compensatory option
grants; especially when the grant involves non-qualified options.
Please explain how you classify the tax benefit regarding the
exercise of non-qualifying stock options or disqualifying
dispositions, if applicable.
Alabama Power Company Form 10-K for the year ended December 31,
2005
Note 6. Financing, II-123
11. Please explain and prospectively disclose the pertinent rights
and privileges of any securities outstanding. In this regard, we
assume a liquidation preferences may exist with your preferred
stock.
See SFAS no. 129.
Georgia Power Company Form 10-K for the year ended December 31,
2005
Statements of Cash Flows, page II-153
12. Explain to us why you have recorded construction payables as a
component of the net cash used for investing activities.
Gulf Power Company Form 10-K for the year ended December 31, 2005
Statements of Cash Flows, page II-209
13. We reissue our prior comment twelve regarding construction
payables.
Note 6 - Financing, page II-228
14. We reissue our prior comment eleven regarding your securities
outstanding.
Mississippi Power Company Form 10-K for the year ended December
31,
2005
Statements of Cash Flows, page II-258
15. We reissue our prior comment twelve regarding construction
payables.
16. You indicate in your sources of capital discussion on page II-
251
that the company had outstanding $152 million in commercial paper
notes. Please reconcile this to the amount reported on the
balance
sheet and statements of cash flows of $202,124. Also, please
explain
whether the reported amounts are affiliate borrowings.
Note 6 - Financing, page II-278
17. We reissue our prior comment eleven regarding your securities
outstanding.
Savannah Electric and Power Company Form 10-K for the year ended
December 31, 2005
Note 6 - Financing, page II-326
18. We reissue our prior comment eleven regarding your securities
outstanding.
Southern Power Company Form 10-K for the year ended December 31,
2005
Statements of Cash Flows, page II-349
19. We reissue our prior comment twelve regarding construction
payables.
Note 2. Contingencies and Regulatory Matters, page II-356
Oleander Acquisition, page II-357
20. Please tell us how you have accounted for the Oleander
acquisition. Explain to us how you evaluated the transaction
under
SFAS no. 141. Please be detailed in your response.
Please respond to these comments within 10 business days
or
tell us when you will provide us with a response. Please furnish
a
letter with your responses to our comments and provide any
requested
supplemental information. Please understand that we may have
additional comments after reviewing your responses to our
comments.
Please file your response letter on EDGAR as a correspondence
file.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
If you have any questions regarding this comment, please
direct them to Robert Babula, Staff Accountant, at (202) 551-3339
or,
in his absence, to the undersigned at (202) 551-3849. Any other
questions regarding disclosures issues may be directed to H.
Christopher Owings, Assistant Director at (202) 551-3725.
Sincerely,
Jim Allegretto
Senior Assistant Chief Accountant
Mr. Thomas Fanning
The Southern Company
April 11, 2006
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