Summary of SOUTHERN CO - Yahoo! Finance

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER 2009 vs. THIRD QUARTER 2008
AND YEAR-TO-DATE 2009 vs. YEAR-TO-DATE 2008 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, owns, 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 and telecommunications. 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

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
        $9.6                  1.2                 $(161.7)               (10.4)

Southern Company's third quarter 2009 net income after dividends on preferred and preference stock of subsidiaries was $790.0 million ($0.99 per share) compared to $780.4 million ($1.01 per share) for the corresponding period in 2008. The increase for the third quarter 2009 when compared to the corresponding period in 2008 was primarily the result of an increase in revenues from customer charges at Alabama Power, increased recognition of environmental compliance cost recovery revenues at Georgia Power in accordance with its 2007 Retail Rate Plan, lower operations and maintenance expenses, amortization of the regulatory liability related to other cost of removal obligations at Georgia Power, and an increase in allowance for equity funds used during construction (AFUDC), which is not taxable. The increase for the third quarter 2009 was partially offset by a decrease in revenues from lower KWH demand by industrial customers, a decrease in revenues from market-response rates to large commercial and industrial customers, and unfavorable weather as compared to the corresponding period in 2008.
Southern Company's year-to-date 2009 net income after dividends on preferred and preference stock of subsidiaries was $1.39 billion ($1.77 per share) compared to $1.56 billion ($2.02 per share) for the corresponding period in 2008. The decrease for year-to-date 2009 when compared to the corresponding period in 2008 was primarily the result of a litigation settlement with MC Asset Recovery, LLC (MC Asset Recovery), a decrease in revenues from lower KWH demand by residential and industrial customers, a decrease in revenues from market-response rates to large commercial and industrial customers, unfavorable weather, higher depreciation and amortization, and higher interest expense. The decrease for year-to-date 2009 was partially offset by an increase in revenues from customer charges at Alabama Power, increased recognition of environmental compliance cost recovery revenues at Georgia Power in accordance with its 2007 Retail Rate Plan, lower operations and maintenance expenses, an increase in AFUDC, which is not taxable, a 2008 charge related to tax treatment of leveraged lease investments, and a gain on the early termination of two international leveraged lease investments.

Table of Contents

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Retail Revenues

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
      $(480.6)               (10.7)               $(578.5)               (5.3)

In the third quarter 2009, retail revenues were $4.00 billion compared to $4.48 billion for the corresponding period in 2008.
For year-to-date 2009, retail revenues were $10.36 billion compared to $10.93 billion for the corresponding period in 2008. Details of the change to retail revenues are as follows:

                                                          Third Quarter                             Year-to-Date
                                                               2009                                     2009
                                                 (in millions)         (% change)          (in millions)         (% change)
Retail - prior year                             $     4,478.3                             $    10,933.8
Estimated change in -
Rates and pricing                                         4.5                0.1                   92.3               0.8
Sales growth (decline)                                  (54.1 )             (1.2 )               (195.3 )            (1.8 )
Weather                                                 (39.6 )             (0.9 )                (35.2 )            (0.3 )
Fuel and other cost recovery                           (391.4 )             (8.7 )               (440.3 )            (4.0 )

Retail - current year                           $     3,997.7              (10.7 )%       $    10,355.3              (5.3 )%

Revenues associated with changes in rates and pricing increased in the third quarter and for year-to-date 2009 when compared to the corresponding periods in 2008 primarily as a result of an increase in revenues from customer charges at Alabama Power and increased recognition of environmental compliance cost recovery revenues at Georgia Power in accordance with its 2007 Retail Rate Plan, partially offset by a decrease in revenues from market-response rates to large commercial and industrial customers.
Revenues attributable to changes in sales declined in the third quarter and for year-to-date 2009 when compared to the corresponding periods in 2008 due to decreases in weather-adjusted retail KWH sales of 3.4% and 5.3%, respectively, resulting primarily from recessionary economic conditions. For the third quarter 2009, weather-adjusted residential KWH sales remained flat, weather-adjusted commercial KWH sales decreased 2.1%, and weather-adjusted industrial KWH sales decreased 9.3%. For year-to-date 2009, weather-adjusted residential KWH sales remained flat, weather-adjusted commercial KWH sales decreased 1.3%, and weather-adjusted industrial KWH sales decreased 14.6%. Reduced demand in the primary metals, fabricated metal, chemical, and textiles sectors, as well as reduced demand in the stone, clay, and glass sector, contributed most significantly to the decreases in weather-adjusted industrial KWH sales in the third quarter and for year-to-date 2009 when compared to the corresponding periods in 2008. While weather-adjusted industrial KWH sales for the third quarter 2009 decreased 9.3% when compared to the corresponding period in 2008, weather-adjusted industrial KWH sales increased 12.0% when compared to the second quarter 2009.
Revenues resulting from changes in weather decreased in the third quarter and for year-to-date 2009 as a result of unfavorable weather when compared to the corresponding periods in 2008.

Table of Contents

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fuel and other cost recovery revenues decreased in the third quarter and for
year-to-date 2009 when compared to the corresponding periods in 2008. 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

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
      $(255.7)               (33.0)               $(472.0)               (25.1)

In the third quarter 2009, wholesale revenues were $519.1 million compared to $774.8 million for the corresponding period in 2008. Wholesale fuel revenues, which are generally offset by wholesale fuel expenses and do not affect net income, decreased $258.8 million in the third quarter 2009 when compared to the corresponding period in 2008. Excluding wholesale fuel revenues, wholesale revenues increased $3.1 million in the third quarter 2009 when compared to the corresponding period in 2008. The increase was primarily the result of additional revenues associated with a new PPA at Southern Power's Plant Franklin Unit 3 which began in January 2009.
For year-to-date 2009, wholesale revenues were $1.41 billion compared to $1.88 billion for the corresponding period in 2008. Wholesale fuel revenues, which are generally offset by wholesale fuel expenses and do not affect net income, decreased $484.8 million for year-to-date 2009 when compared to the corresponding period in 2008. Excluding wholesale fuel revenues, wholesale revenues increased $12.8 million for year-to-date 2009 when compared to the corresponding period in 2008. The increase was primarily the result of additional revenues associated with a new PPA at Southern Power's Plant Franklin Unit 3 which began in January 2009, partially offset by fewer short-term opportunity sales due to lower energy prices and reduced margins on short-term opportunity sales when compared to the corresponding period in 2008. 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

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
       $(2.6)                (1.8)                $(22.7)                (5.5)

In the third quarter 2009, other electric revenues were $139.9 million compared to $142.5 million for the corresponding period in 2008. The decrease when compared to the corresponding period in 2008 was not material.
For year-to-date 2009, other electric revenues were $391.1 million compared to $413.8 million for the corresponding period in 2008. The decrease was primarily the result of a $39.6 million decrease in co-generation revenues due to lower gas prices and a decline in sales volume, partially offset by a $7.3 million increase in customer fees. Revenues from co-generation are generally offset by related expenses and do not affect net income.

Table of Contents

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Revenues

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
       $(6.1)                (19.6)               $(18.4)                (19.1)

In the third quarter 2009, other revenues were $24.8 million compared to $30.9 million for the corresponding period in 2008. The decrease was primarily the result of a $5.9 million decrease in revenues at SouthernLINC Wireless related to lower average revenue per subscriber and fewer subscribers as a result of increased competition in the industry when compared to the corresponding period in 2008.
For year-to-date 2009, other revenues were $78.3 million compared to $96.7 million for the corresponding period in 2008. The decrease was primarily the result of an $18.0 million decrease in revenues at SouthernLINC Wireless related to lower average revenue per subscriber and fewer subscribers as a result of increased competition in the industry when compared to the corresponding period in 2008.

Fuel and Purchased Power Expenses

                                                           Third Quarter 2009                               Year-to-Date 2009
                                                                  vs.                                              vs.
                                                           Third Quarter 2008                               Year-to-Date 2008
                                                (change in millions)         (% change)         (change in millions)          (% change)
Fuel*                                             $         (419.3 )             (19.5 )           $         (637.9 )             (12.2 )
Purchased power                                             (211.5 )             (55.9 )                     (260.8 )             (39.0 )

Total fuel and purchased power expenses           $         (630.8 )                               $         (898.7 )

* Fuel includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider and is included in purchased power when determining the average cost of purchased power. In the third quarter 2009, fuel and purchased power expenses were $1.90 billion compared to $2.53 billion for the corresponding period in 2008. The decrease was primarily the result of a $317.9 million net decrease related to total KWHs generated and purchased and a $312.9 million net decrease in the average cost of fuel and purchased power when compared to the corresponding period in 2008. The net decrease in the average cost of fuel and purchased power for the third quarter 2009 resulted primarily from lower gas prices and a significant increase in hydro generation due to increased rainfall when compared to the corresponding period in 2008. For year-to-date 2009, fuel and purchased power expenses were $5.00 billion compared to $5.90 billion for the corresponding period in 2008. The decrease was primarily the result of a $602.8 million net decrease related to total KWHs generated and purchased and a $295.9 million net decrease in the average cost of fuel and purchased power when compared to the corresponding period in 2008. The net decrease in the average cost of fuel and purchased power for year-to-date 2009 resulted primarily from lower gas prices and a significant increase in hydro generation due to increased rainfall when compared to the corresponding period in 2008. Fuel expenses 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.

Table of Contents

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Details of Southern Company's cost of generation and purchased power are as
follows:

                             Third Quarter         Third Quarter          Percent         Year-to-Date        Year-to-Date         Percent
Average Cost                      2009                  2008              Change              2009                2008             Change
                                     (cents per net KWH)                                        (cents per net KWH)
Fuel                                 3.42                  3.96            (13.6 )              3.39                3.46             (2.0 )
Purchased power                      8.00                  9.70            (17.5 )              6.20                9.02            (31.3 )

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

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
      $(87.5)                (9.6)                $(197.0)               (7.2)

In the third quarter 2009, other operations and maintenance expenses were $820.9 million compared to $908.4 million for the corresponding period in 2008. The decrease was primarily the result of a $32.7 million decrease in fossil, hydro, and nuclear expenses mainly due to less planned spending on outages and maintenance, as well as other cost containment activities, which were the result of efforts to offset the effects of the recessionary economy; a $16.1 million decrease in transmission and distribution expenses mainly due to lower maintenance expenses; a $9.6 million decrease in expenses related to customer service and sales; a $4.3 million decrease in expenses related to lower sales and fewer subscribers at SouthernLINC Wireless; and a $4.1 million decrease in administrative and general expenses mainly due to a decrease in accrued expenses for the litigation and workers' compensation reserve.
For year-to-date 2009, other operations and maintenance expenses were $2.52 billion compared to $2.72 billion for the corresponding period in 2008. The decrease was primarily the result of an $80.0 million decrease in fossil, hydro, and nuclear expenses mainly due to less planned spending on outages and maintenance, as well as other cost containment activities, which were the result of efforts to offset the effects of the recessionary economy; a $57.1 million decrease in transmission and distribution expenses mainly due to lower maintenance expenses, as well as other cost containment activities; a $16.5 million decrease in expenses related to customer service and sales; a $14.4 million decrease in expenses related to lower sales and fewer subscribers at SouthernLINC Wireless; and a $13.9 million decrease in expenses related to lower litigation costs resulting from the litigation settlement with MC Asset Recovery in the first quarter 2009, as well as the fourth quarter 2008 settlement with the IRS regarding several leveraged lease investments. See Note (B) to the Condensed Financial Statements under "Mirant Matters - MC Asset Recovery Litigation" and "Income Tax Matters - Leveraged Leases" herein for additional information. Partially offsetting the year-to-date 2009 decrease was a $15.8 million increase in administration and general expenses largely related to the $29.4 million charge in the first quarter 2009 in connection with a voluntary attrition program at Georgia Power under which 579 employees elected to resign their positions effective March 31, 2009. Through the third quarter 2009, approximately two-thirds of the $29.4 million charge was offset by lower salary and employee benefits costs, and the remaining one-third will be offset during the fourth quarter 2009. This charge is not expected to have a material impact on Southern Company financial statements for the year ending December 31, 2009.

Table of Contents

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MC Asset Recovery Litigation Settlement

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
         -                     -                   $202.0                 N/M

N/M - Not Meaningful
In the first quarter 2009, Southern Company entered into a litigation settlement
agreement with MC Asset Recovery which resulted in a charge of $202.0 million.
See Note (B) to the Condensed Financial Statements under "Mirant Matters - MC
Asset Recovery Litigation" herein for additional information.
Depreciation and Amortization

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
      $(34.9)                (9.5)                 $29.6                  2.8

In the third quarter 2009, depreciation and amortization was $332.1 million compared to $367.0 million for the corresponding period in 2008. The decrease was primarily the result of $54.0 million of amortization of the regulatory liability related to other cost of removal obligations as authorized by the Georgia PSC, partially offset by an increase in plant in service related to environmental, transmission, and distribution projects at Georgia Power. For year-to-date 2009, depreciation and amortization was $1.10 billion compared to $1.07 billion for the corresponding period in 2008. The increase was primarily the result of an increase in plant in service related to environmental, transmission, and distribution projects at Alabama Power and Georgia Power and the completion of Southern Power's Plant Franklin Unit 3 in June 2008, as well as an increase in depreciation rates at Southern Power. The increase was partially offset by $54.0 million of amortization of the regulatory liability related to other cost of removal obligations as authorized by the Georgia PSC.
See FUTURE EARNINGS POTENTIAL - "FERC and State PSC Matters - Retail Rate Matters" herein for additional information regarding the Georgia PSC order.

Taxes Other Than Income Taxes

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
       $(2.4)                (1.1)                 $18.3                  3.0

In the third quarter 2009, taxes other than income taxes were $212.9 million compared to $215.3 million for the corresponding period in 2008. The decrease when compared to the corresponding period in 2008 was not material. For year-to-date 2009, taxes other than income taxes were $620.9 million compared to $602.6 million for the corresponding period in 2008. The increase was primarily the result of increases in state and municipal public utility license tax bases at Alabama Power and increases in franchise fees at Gulf Power. Increases in franchise fees are associated with increases in revenues from retail energy sales.

Table of Contents

                 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

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
       $15.6                  43.7                 $29.6                  26.5

In the third quarter 2009, AFUDC was $51.1 million compared to $35.5 million for the corresponding period in 2008.
For year-to-date 2009, AFUDC was $141.2 million compared to $111.6 million for the corresponding period in 2008.
The third quarter and year-to-date 2009 increases were primarily the result of additional investments in environmental projects at Alabama Power and Gulf Power, as well as additional investments in transmission and distribution projects at Alabama Power.

Leveraged Lease Income (Losses)

   Third Quarter 2009 vs. Third Quarter         Year-to-Date 2009 vs. Year-to-Date
                   2008                                        2008

     (change in            (% change)            (change in            (% change)
     millions)                                   millions)
        $0.3                  3.7                  $78.3                 146.1

In the third quarter 2009, leveraged lease income (losses) was $6.6 million compared to $6.3 million for the corresponding period in 2008. The increase when compared to the corresponding period in 2008 was not material. For year-to-date 2009, leveraged lease income (losses) was $24.7 million compared to $(53.6) million for the corresponding period in 2008. Southern Company has several leveraged lease investments in 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 year-to-date 2009 increase was primarily the result of the 2008 application of certain accounting standards related to leveraged leases, including a second quarter 2008 after tax charge of $51.2 million. See Note (B) to the Condensed Financial Statements under "Income Tax Matters - Leveraged Leases" herein for additional information.

Gain on Disposition of Lease Termination

. . .