Form 10-Q for the quarterly period ended September 30, 2025

Overview

Southern Company is a major utility holding company that owns electric and natural gas distribution companies across the Southeast. The company’s primary businesses are the sale of electricity by its traditional electric operating companies (Alabama Power, Georgia Power, and Mississippi Power) and Southern Power, as well as the distribution of natural gas by Southern Company Gas.

Southern Company continues to focus on key performance indicators like customer satisfaction, plant availability, system reliability, and execution of major construction projects. The company also tracks earnings per share and net income as key financial metrics.

Recent Developments

Alabama Power received approval from the state regulator to implement changes related to the Jurisdictional Separation Study, which will impact how costs are allocated between retail and wholesale services starting in 2026. The company also completed the acquisition of Tenaska Alabama Partners and received approval to establish a regulatory liability for nuclear production tax credits.

Georgia Power received approval to extend its 2022 Alternate Rate Plan for an additional three years through 2028, with no base rate adjustments except for storm costs. The company also received approval for several new generation and storage projects as part of its Integrated Resource Plan.

Mississippi Power received approval for a retail rate increase and completed the acquisition of a 50% ownership interest in Plant Daniel from Florida Power & Light.

Southern Power continued development of wind repowering projects that will add 200 MW of capacity under new and amended power purchase agreements.

Southern Company Gas subsidiaries in Virginia and Illinois reached rate case settlements, with Virginia Natural Gas receiving a $40 million annual revenue increase.

Results of Operations

Southern Company

• Consolidated net income increased 1.5% year-to-date, driven by higher retail electric and natural gas revenues, partially offset by higher expenses.
• Retail electric revenues increased 9.2% year-to-date, due to rate changes, sales growth, and higher fuel cost recovery.
• Wholesale electric revenues increased 17.6% year-to-date, due to higher energy volumes and prices.
• Natural gas revenues increased 10.3% year-to-date, primarily from rate increases and higher gas costs passed through to customers.
• Fuel and purchased power expenses increased 18.2% year-to-date, due to higher fuel prices and volumes.
• Depreciation and amortization increased 13.9% year-to-date, due to additional plant in service and accelerated depreciation for wind repowering projects.

Alabama Power

• Net income increased 12.4% year-to-date, driven by higher retail revenues from rate changes and sales growth.
• Retail revenues increased 7.2% year-to-date, due to rate changes and sales growth.
• Wholesale revenues to non-affiliates increased 25.9% year-to-date, due to higher volumes and prices.
• Other operations and maintenance expenses increased 2.6% year-to-date, primarily from higher generation and employee costs.

Georgia Power

• Net income increased 9.0% year-to-date, due to higher retail and wholesale revenues, partially offset by increased expenses.
• Retail revenues increased 10.3% year-to-date, driven by rate changes, sales growth, and higher fuel cost recovery.
• Wholesale revenues increased 97.0% year-to-date, due to higher volumes and prices.
• Other operations and maintenance expenses increased 21.2% year-to-date, primarily from higher generation, technology, and employee costs.

Mississippi Power

• Net income increased 6.5% year-to-date, due to higher retail revenues from rate changes.
• Retail revenues increased 11.5% year-to-date, driven by rate changes and sales growth.
• Wholesale revenues to affiliates increased 38.6% year-to-date, due to higher volumes and prices.
• Depreciation and amortization increased 11.3% year-to-date, from higher depreciation rates and additional plant.

Southern Power

• Net income attributable to Southern Power decreased 46.6% year-to-date, primarily due to accelerated depreciation for wind repowering projects.
• Operating revenues increased 8.1% year-to-date, driven by higher energy and capacity revenues.
• Fuel and purchased power expenses increased 19.5% year-to-date, due to higher fuel and purchased power costs.
• Depreciation and amortization increased 52.4% year-to-date, primarily from the wind repowering projects.

Southern Company Gas

• Net income decreased 1.1% year-to-date, as higher revenues were offset by increased expenses.
• Natural gas revenues increased 10.3% year-to-date, due to rate increases and higher gas costs passed through.
• Cost of natural gas increased 22.8% year-to-date, reflecting higher gas prices.
• Other operations and maintenance expenses increased 5.9% year-to-date, driven by higher employee costs and expenses passed through to customers.

Analysis

Southern Company’s overall financial performance was solid in the first nine months of 2025, with increases in net income across its major business segments. The traditional electric operating companies saw strong growth in retail electric revenues, driven by rate changes, sales growth, and higher fuel cost recovery. This helped offset increases in fuel, purchased power, and other operating expenses.

The electric utilities continue to make significant investments in their generation, transmission, and distribution systems to maintain reliability, comply with environmental regulations, and support growth. These investments, along with the inclusion of new generation assets in retail rates, have led to higher depreciation and amortization expenses.

Southern Power’s results were impacted by accelerated depreciation related to wind repowering projects, which reduced the segment’s net income. However, the company continues to see strong demand for its wholesale generation capacity and energy.

Southern Company Gas benefited from rate increases at its natural gas distribution utilities, though higher natural gas costs and operating expenses partially offset the revenue growth. The company’s gas pipeline investments and marketing services segments saw declines in earnings.

Overall, Southern Company is navigating a challenging operating environment marked by high inflation, supply chain disruptions, and economic uncertainty. The company’s diversified portfolio of regulated electric and gas utilities, along with its competitive generation business, has helped it maintain relatively stable financial performance. Going forward, the company’s ability to manage costs, execute major construction projects, and adapt to evolving customer and regulatory demands will be critical to sustaining earnings growth.

Outlook

Southern Company faces several key challenges and opportunities that will shape its future earnings potential:

• Maintaining constructive regulatory environments that allow timely recovery of rising costs for fuel, environmental compliance, system reliability, and capital investments
• Continuing to grow sales, especially to large commercial and industrial customers, to offset trends of declining usage per customer
• Executing major construction projects, like power plant upgrades and expansions, on time and on budget
• Adapting to policy changes and evolving customer preferences around energy efficiency, renewable energy, and electrification
• Effectively managing the risks and opportunities presented by volatile commodity prices, supply chain disruptions, and economic uncertainty

The company’s regulated electric and gas utilities provide a stable earnings base, but the competitive generation business faces market risks around fuel costs, power prices, and customer demand. Southern Power’s ability to recontract expiring power purchase agreements and develop new renewable projects will be crucial.

Southern Company Gas must also navigate potential policy changes that could limit natural gas usage, while capitalizing on growth opportunities in its gas distribution and pipeline investment businesses. Managing the volatility of natural gas prices will be an ongoing challenge.

Overall, Southern Company appears well-positioned to navigate the complex operating environment, but will need to continue executing its strategic priorities around operational excellence, cost management, and prudent capital allocation to sustain earnings growth and shareholder value over the long term.