Summary of ALABAMA POWER CO

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER 2008 vs. SECOND QUARTER 2007
AND YEAR-TO-DATE 2008 vs. YEAR-TO-DATE 2007 OVERVIEW
Discussion of the results of operations is focused on Southern Company's primary business of electricity sales in the Southeast by the traditional operating companies - Alabama Power, Georgia Power, Gulf Power, and Mississippi Power - and Southern Power. The traditional operating companies are vertically integrated utilities providing electric service in four Southeastern states. Southern Power constructs, acquires, and manages generation assets and sells electricity at market-based rates in the wholesale market. Southern Company's other business activities include investments in leveraged lease projects, telecommunications, and energy-related services. For additional information on these businesses, see BUSINESS - The Southern Company System - "Traditional Operating Companies," "Southern Power," and "Other Businesses" in Item 1 of the Form 10-K.
Southern Company continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, 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

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$(12.8) (3.0) $7.8 1.0

Southern Company's second quarter 2008 earnings were $416.4 million ($0.54 per share) compared to $429.2 million ($0.57 per share) for the second quarter 2007. The decrease in the second quarter 2008 when compared to the same period in 2007 was primarily the result of a significant charge related to leveraged lease investments, higher other operations and maintenance expenses, and higher depreciation and amortization. The second quarter 2008 decrease was partially offset by an increase in contributions from market-response rates to large commercial and industrial customers and retail base rate increases at Alabama Power and Georgia Power.
Southern Company's year-to-date 2008 earnings were $775.6 million ($1.01 per share) compared to $767.8 million ($1.02 per share) for year-to-date 2007. The increase for year-to-date 2008 when compared to the same period in 2007 was primarily the result of an increase in contributions from market-response rates to large commercial and industrial customers, retail base rate increases at Alabama Power and Georgia Power, and an increase in allowance for equity funds used during construction. The year-to-date 2008 increase was partially offset by a significant charge related to leveraged lease investments, higher other operations and maintenance expenses, and higher depreciation and amortization. Retail Revenues

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$344.8 11.1 $606.6 10.4

In the second quarter 2008, retail revenues were $3.45 billion compared to $3.11 billion for the same period in 2007.

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                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For year-to-date 2008, retail revenues were $6.46 billion compared to
$5.85 billion for the same period in 2007.
Details of the change to retail revenues follow:

                                                        Second Quarter                             Year-to-Date
                                                             2008                                      2008
                                               (in millions)         (% change)          (in millions)         (% change)
Retail - prior year                           $       3,105.1                           $       5,848.9
Estimated change in -
Rates and pricing                                       213.5                6.9                  348.3                6.0
Sales growth                                              0.9                0.0                   23.4                0.4
Weather                                                 (14.5 )             (0.5 )                (13.3 )             (0.2 )
Fuel and other cost recovery                            144.9                4.7                  248.2                4.2

Retail - current year                         $       3,449.9               11.1 %      $       6,455.5               10.4 %

Revenues associated with changes in rates and pricing increased in the second quarter and year-to-date 2008 when compared to the same periods in 2007 primarily as a result of an increase in revenues from market-response rates to large commercial and industrial customers and retail base rate increases at Alabama Power and Georgia Power.
Revenues attributable to changes in sales growth were insignificant in the second quarter 2008 when compared to the same period in 2007. For year-to-date 2008, revenues attributable to changes in sales growth increased when compared to the same period in 2007 due to a 0.2% increase in weather-adjusted retail KWH sales resulting primarily from a 0.9% increase in customer growth, partially offset by a 0.7% decrease in usage among customers mainly due to a higher housing inventory in Southern Company's service area as compared to the same period in 2007. For year-to-date 2008, weather-adjusted residential KWH sales increased 0.1%, weather-adjusted commercial KWH sales increased 1.3%, and weather-adjusted industrial KWH sales decreased 0.7%.
Revenues resulting from changes in weather decreased because of less favorable weather in the second quarter and year-to-date 2008 when compared to the same periods in 2007.
Fuel and other cost recovery revenues increased $144.9 million in the second quarter 2008 and $248.2 million for year-to-date 2008 when compared to the same periods in 2007. 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 fuel component of purchased power costs, and do not affect net income.
Wholesale Revenues

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$104.9 21.6 $137.9 14.3

In the second quarter 2008, wholesale revenues were $591.8 million compared to $486.9 million for the same period in 2007. The increase was primarily attributable to a rise in fuel revenues due to a 14.2% increase in the average unit cost of fuel per net KWH generated, higher revenues associated with new and existing wholesale contracts, and generating plant operational performance incentives on existing wholesale contracts.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For year-to-date 2008, wholesale revenues were $1.11 billion compared to $0.97 billion for the same period in 2007. The increase was primarily attributable to a rise in fuel revenues due to a 12.0% increase in the average unit cost of fuel per net KWH generated and higher revenues associated with new and existing wholesale contracts. Partially offsetting the year-to-date 2008 increase were lower revenues from short-term opportunity sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above Southern Company's variable cost to produce the energy. Other Electric Revenues

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$11.6 8.9 $20.5 8.2

In the second quarter 2008, other electric revenues were $141.2 million compared to $129.6 million for the same period in 2007. The increase was primarily the result of a $6.1 million increase in co-generation revenues due to higher natural gas prices and a $6.6 million increase related to the settlement of transmission service agreements with Calpine Corporation (Calpine). For year-to-date 2008, other electric revenues were $271.4 million compared to $250.9 million for the same period in 2007. The increase was primarily the result of a $9.2 million increase in co-generation revenues due to higher natural gas prices, a $6.6 million increase related to the settlement of transmission service agreements with Calpine, an increase in customer fees of $3.8 million, and an increase in outdoor lighting revenues of $3.6 million. Other Revenues

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$(18.1) (35.8) $(47.5) (41.9)

In the second quarter 2008, other revenues were $32.3 million compared to $50.4 million for the same period in 2007. The decrease was primarily the result of a $15.3 million decrease in fuel procurement service revenues following a contract termination in 2007.
For year-to-date 2008, other revenues were $65.8 million compared to $113.3 million for the same period in 2007. The decrease was primarily the result of a $31.8 million decrease in fuel procurement service revenues following a contract termination in 2007 and a $3.9 million decrease in revenues at a subsidiary that provides energy-related services.

Fuel and Purchased Power Expenses

                                                          Second Quarter 2008                               Year-to-Date 2008
                                                                  vs.                                              vs.
                                                          Second Quarter 2007                               Year-to-Date 2007
                                               (change in millions)          (% change)          (change in millions)          (% change)
Fuel                                           $               164.6                11.3        $                300.0                10.8
Purchased power                                                 97.1                97.0                         126.0                76.7

Total fuel and purchased power expenses        $               261.7                            $                426.0

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the second quarter 2008, fuel and purchased power expenses were $1.82 billion compared to $1.56 billion for the same period in 2007. The increase in fuel and purchased power expenses was due to a $226.5 million net increase in the average cost of fuel and purchased power, primarily related to an 18.5% increase in the cost of coal per net KWH generated. Also contributing to the increase was a $35.2 million net increase related to total KWHs generated and purchased when compared to the same period in 2007.
For year-to-date 2008, fuel and purchased power expenses were $3.36 billion compared to $2.94 billion for the same period in 2007. The increase in fuel and purchased power expenses was due to a $367.8 million net increase in the average cost of fuel and purchased power, primarily related to a 15.7% increase in the cost of coal per net KWH generated. Also contributing to the increase was a $58.2 million net increase related to total KWHs generated and purchased when compared to the same period in 2007.
Increases in fuel expense at the traditional operating companies are generally offset by fuel revenues and do not affect net income. See FUTURE EARNINGS POTENTIAL - "FERC and State PSC 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 affect net income.
Details of Southern Company's cost of generation and purchased power are as follows:

                                 Second Quarter          Second Quarter          Percent          Year-to-Date          Year-to-Date          Percent
Average Cost                          2008                    2007               Change               2008                  2007              Change

                                (cents per net KWH)                                              (cents per net KWH)
Fuel                                        3.29                    2.88             14.2                  3.18                  2.84             12.0
Purchased power                             8.82                    7.80             13.1                  7.47                  6.51             14.8

Energy purchases will vary depending on demand for energy within the Southern Company service area, the market cost of available energy as compared to the cost of Southern Company system-generated energy, and the availability of Southern Company system generation.

Other Operations and Maintenance Expenses

                                                               Second Quarter 2008                                 Year-to-Date 2008
                                                                       vs.                                                vs.
                                                               Second Quarter 2007                                 Year-to-Date 2007
                                                    (change in millions)           (% change)          (change in millions)           (% change)
Other operations                                   $                 33.0                  5.6        $                 58.0                  5.0
Maintenance                                                           6.6                  2.3                          31.0                  5.4

Total other operations and maintenance             $                 39.6                             $                 89.0

In the second quarter 2008, other operations and maintenance expenses were $915.0 million compared to $875.4 million for the same period in 2007. The increase in other operations and maintenance expenses resulted primarily from a $17.9 million increase in fossil and hydro expenses due to costs incurred for scheduled outages and maintenance of fossil and hydro generating units, as well as expenses for new facilities; a $13.2 million increase in administrative and general expenses mainly resulting from increases in affiliated service company expenses and property damage expenses; a $7.8 million increase in customer account expenses largely related to increases in records and collections expenses and bad debt expense; and a $5.4 million increase in nuclear expenses due to costs incurred for maintenance of nuclear generating units and increases in commodity and labor costs.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For year-to-date 2008, other operations and maintenance expenses were $1.81 billion compared to $1.72 billion for the same period in 2007. The increase in other operations and maintenance expenses resulted primarily from a $46.2 million increase in fossil and hydro expenses due to costs incurred for scheduled outages, maintenance of fossil and hydro generating units, increases in commodity and labor costs, and expenses for new facilities; a $20.1 million increase in administrative and general expenses mainly resulting from increases in affiliated service company expenses and property damage expenses; a $17.2 million increase in customer account expenses largely related to increases in records and collections expenses, bad debt expense, and meter reading; and a $16.9 million increase in nuclear expenses due to costs incurred for maintenance of nuclear generating units and increases in commodity and labor costs. Depreciation and Amortization

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$48.4 15.6 $86.0 13.9

In the second quarter 2008, depreciation and amortization was $358.7 million compared to $310.3 million for the same period in 2007.
For year-to-date 2008, depreciation and amortization was $702.6 million compared to $616.6 million for the same period in 2007.
The increases in depreciation and amortization in the second quarter and year-to-date 2008 when compared to the same periods in 2007 resulted primarily from an increase in plant in service related to environmental, transmission, and distribution projects mainly at Alabama Power and Georgia Power. An increase in depreciation rates at Georgia Power and Southern Power also contributed to the second quarter and year-to-date 2008 increases, as well as the completion of Southern Power's Plant Oleander Unit 5 in December 2007 and Plant Franklin Unit 3 in June 2008.
Taxes Other Than Income Taxes

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$13.5 7.3 $19.7 5.4

In the second quarter 2008, taxes other than income taxes were $198.0 million compared to $184.5 million for the same period in 2007.
For year-to-date 2008, taxes other than income taxes were $387.3 million compared to $367.6 million for the same period in 2007.
The increases in taxes other than income taxes in the second quarter and year-to-date 2008 when compared to the same periods in 2007 resulted primarily from increases in franchise fees and municipal gross receipt taxes associated with increases in revenues from energy sales.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Allowance for Equity Funds Used During Construction

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$11.9 50.4 $32.3 73.8

In the second quarter 2008, allowance for equity funds used during construction was $35.5 million compared to $23.6 million for the same period in 2007. For year-to-date 2008, allowance for equity funds used during construction was $76.1 million compared to $43.8 million for the same period in 2007. The increases in allowance for equity funds used during construction in the second quarter and year-to-date 2008 when compared to the same periods in 2007 were primarily the result of additional investments in environmental projects mainly at Georgia Power and Gulf Power, transmission projects at Georgia Power, as well as generation facilities at Georgia Power. Additional investments in environmental projects at Alabama Power also contributed to the year-to-date 2008 increase.
Interest Income

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$(8.5) (87.7) $(9.2) (45.6)

In the second quarter 2008, interest income was $1.2 million compared to $9.7 million for the same period in 2007.
For year-to-date 2008, interest income was $11.0 million compared to $20.2 million for the same period in 2007.
The decreases in interest income in the second quarter and year-to-date 2008 when compared to the same periods in 2007 were primarily the result of the reversal of accrued interest income on IRS deposits related to sale-in-lease-out (SILO) transactions.
Equity in Income (Losses) of Unconsolidated Subsidiaries

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$14.7 108.1 $21.7 107.0

In the second quarter 2008, equity in income (losses) of unconsolidated subsidiaries was $1.1 million compared to $(13.6) million for the same period in 2007.
For year-to-date 2008, equity in income (losses) of unconsolidated subsidiaries was $1.4 million compared to $(20.3) million for the same period in 2007. The increases in equity in income (losses) of unconsolidated subsidiaries in the second quarter and year-to-date 2008 when compared with the same periods in 2007 were primarily the result of Southern Company ending its investment in synthetic fuel production facilities in December 2007.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Leveraged Lease Income (Losses)

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$(80.6) (830.2) $(79.6) (406.4)

In the second quarter 2008, leveraged lease income (losses) were $(70.9) million compared to $9.7 million for the same period in 2007.
For year-to-date 2008, leveraged lease income (losses) were $(60.0) million compared to $19.6 million for the same period in 2007.
Southern Company has several leveraged lease agreements which relate to international and domestic energy generation, distribution, and transportation assets. Southern Company receives federal income tax deductions for depreciation and amortization, as well as interest on long-term debt related to these investments. The decreases in leveraged lease income in the second quarter and year-to-date 2008, when compared to the same periods in 2007, were primarily the result of a $51.2 million after tax adjustment in the second quarter 2008 relating to the application of FASB Staff Position No. 13-2, "Accounting for a Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction" (FSP 13-2). See FUTURE EARNINGS POTENTIAL - "Income Tax Matters - Leveraged Lease Transactions" and Note (B) to the Condensed Financial Statements under "INCOME TAX MATTERS - Leveraged Lease Transactions" herein for further information.
Preferred and Preference Dividends of Subsidiaries

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$6.1 59.9 $12.1 59.9

In the second quarter 2008, preferred and preference dividends of subsidiaries were $16.2 million compared to $10.1 million for the same period in 2007. For year-to-date 2008, preferred and preference dividends of subsidiaries were $32.4 million compared to $20.3 million for the same period in 2007. The increases in preferred and preference dividends of subsidiaries in the second quarter and year-to-date 2008 when compared to the same periods in 2007 resulted primarily from the issuance of $470 million of preference stock in September and October 2007, partially offset by the redemption of $125 million of preferred stock in January 2008. See MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND LIQUIDITY - "Financing Activities" of Southern Company in Item 7 of the Form 10-K and herein for further information. Income Taxes

Second Quarter 2008 vs. Second Quarter 2007 Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change) (change in millions) (% change)
$19.4 9.4 $41.9 11.6

In the second quarter 2008, income taxes were $225.0 million compared to $205.6 million for the same period in 2007.
For year-to-date 2008, income taxes were $403.1 million compared to $361.2 million for the same period in 2007.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The increases in income taxes in the second quarter and year-to-date 2008 when compared to the same periods in 2007 resulted primarily from higher pre-tax earnings and a decrease in net synthetic fuel tax credits, partially offset by lower leveraged lease income, the tax benefit associated with an increase in allowance for equity funds used during construction, and an increase in the IRC
Section 199 production activities deduction. See Note (H) to the Condensed Financial Statements under "Effective Tax Rate" herein for further 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 Southern Company's primary business of selling electricity. These factors include the traditional operating companies' ability to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. . . .