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Company's pension plan assets as of the end of the year, along with the targeted mix of assets, is presented below: Domestic equity International equity Fixed income Real estate Private equity Total Target 36% 24 15 15 10 100% 2006 38% 23 16 16 7 100% 2005 40% 24 17 13 6 100%

Amounts recognized in the balance sheets related to the Company's pension plans consist of the following: 2006
(in millions)

2005 $ 456

Prepaid pension costs Other regulatory assets Current liabilities, other Other regulatory liabilities Employee benefit obligations Other property and investments Accumulated other comprehensive income

$ 689 56 (6) (218) (107) -17 -45

(109)

Presented below are the amounts included in regulatory assets and regulatory liabilities at December 31, 2006, related to the defined benefit pension plans that have not yet been recognized in net periodic pension cost along with the estimated amortization of such amounts for the next fiscal year: Prior Service Cost
Balance at December 31, 2006: (inmillions)

Net (Gain)/ Loss $ 45 (310) $(265)

Regulatory asset Regulatory liabilities Total Estimated amortization in net periodic pension cost in 2007: Regulatory assets Regulatory liabilities Total

$ 11 92 $103

2 11 $ 13

$ $

3 3

Components of net periodic pension cost (income) and other amounts recognized in other comprehensive income were as follows: 2006 Service cost Interest cost Expected return on plan assets Recognized net (gain)/loss Net amortization Net pension (income) $ 53 117 (184) 6 8 $ 2005
(in millions)

2004 $ 44 106 (184) (4) 8 $ (30)

$ 47 112 (186) 4 9 (14)

Net periodic pension cost (income) is the sum of service cost, interest cost, and other costs netted against the expected return on plan assets. The expected return on plan assets is determined by multiplying the expected rate of return on plan assets and the market-related value of plan assets. In determining the market-related value of plan assets, the Company has elected to amortize changes in the market value of all plan assets over five years rather than recognize the changes immediately. As a result, the accounting value of plan assets that is used to calculate the expected return on plan assets differs from the current fair value of the plan assets.

Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31, 2006, estimated benefit payments were as follows:
(in millions)

2007 2008 2009 2010 2011 2012 to 2016

$101 105 110 115 121 713

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Other Postretirement Benefits Changes during the year in the accumulated postretirement benefit obligations (APBO) and in the fair value of plan assets were as follows: 2006
(in millions)

2005

Change in benefit obligation Balance at beginning of year Service cost Interest cost Benefits paid Actuarial gain (loss) Retiree drug subsidy Balance at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid Fair value of plan assets at end of year Funded status at end of year Unrecognized transition amount Unrecognized prior service cost Unrecognized net (gain) loss Fourth quarter contributions Accrued liability (recognized in the balance sheet)

$ 812 11 43 (34) (27) 2 807

$ 765 11 43 (33) 26 812

362 35 48 (57) 388 (419) 20 $(399)

312 40 43 (33) 362 (450) 73 26 215 23 $(113)

Other postretirement benefits plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code. The Company's investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily as hedging tools but may also be used to gain efficient exposure to the various asset classes. The Company primarily minimizes the risk of large losses through diversification but also monitors and manages other aspects of risk. The actual composition of the Company's other postretirement benefit plan assets as of the end of the year, along with the targeted mix of assets, is presented below: Target Domestic equity International equity Fixed income Real estate Private equity Total 42% 19 29 6 4 100% 2006 44% 20 27 6 3 100% 2005 46% 18 29 5 2 100%

Amounts recognized in the balance sheets related to the Company's other postretirement benefit plans consist of the following: 2006
(in millions)

2005 $ (113)

Other regulatory assets Employee benefit obligations

$ 255 (399)

Presented below are the amounts included in regulatory assets at December 31, 2006, related to the other postretirement benefit plans that have not yet been recognized in net periodic postretirement benefit cost: Prior Service Cost Net (Gain)/ Loss Transition Obligation

(in millions)

Balance at December 31, 2006 Regulatory assets Estimated amortization in net periodic postretirement benefit cost in 2007: Regulatory assets

$24

$166

$64

$2

$ 8

$9

Components of the other postretirement benefit plans' net periodic cost were as follows: 2006 Service cost Interest cost Expected return on plan assets Net amortization Net postretirement cost $ 11 44 (25) 22 $ 52 2005
(in millions)

2004 $ 11 43 (26) 19 $ 47

$ 11 43 (23) 19 $ 50

In the third quarter 2004, the Company prospectively adopted FASB Staff Position 106-2, "Accounting and Disclosure Requirements" (FSP 106-2), related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Act). The Medicare

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Act provides a 28 percent prescription drug subsidy for Medicare eligible retirees. FSP 106-2 requires recognition of the impacts of the Medicare Act in the APBO and future cost of service for postretirement medical plan. The effect of the subsidy reduced the Company's expenses for the year ended December 31, 2006, the year ended December 31, 2005, and the six months ended December 31, 2004 by approximately $16 million, $11 million, and $5 million, respectively, and is expected to have a similar impact on future expenses. Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the APBO for the postretirement plans. Estimated benefit payments are reduced by drug subsidy receipts expected as a result of the Medicare Act as follows: Benefit Payments 2007 2008 2009 2010 2011 2012 to 2016 Actuarial Assumptions The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and postretirement benefit plans for the following year are presented below. Net periodic benefit costs for 2004 were calculated using a discount rate of 6.00 percent. 2006 Discount Annual salary increase Long-term return on plan assets 6.00% 3.50 8.50 2005 5.50% 3.00 8.50 2004 5.75% 3.50 8.50 $ 37 41 45 48 52 296 Subsidy Receipts
(in millions)

Total $ 34 38 41 44 47 263

$ 3 3 4 4 5 33

The Company determined the long-term rate of return based on historical asset class returns and current market conditions, taking into account the diversification benefits of investing in multiple asset classes. An additional assumption used in measuring the APBO was a weighted average medical care cost trend rate of 9.56 percent for 2007, decreasing gradually to 5.00 percent through the year 2015 and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the APBO and the service and interest cost components at December 31, 2006 as follows: 1 Percent Increase (in millions) Benefit obligation Service and interest costs Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85 percent matching contribution up to 6 percent of an employee's base salary. Prior to November 2006, the Company matched employee contributions at a rate of 75 percent up to 6 percent of the employee's base salary. Total matching contributions made to the plan for 2006, 2005, and 2004 were $21 million, $20 million, and $19 million, respectively. 3. CONTINGENCIES AND REGULATORY MATTERS General Litigation Matters The Company is subject to certain claims and legal actions arising in the ordinary course of business. In addition, the Company's business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury, and citizen enforcement of environmental requirements such as opacity and other air quality standards, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous $67 5 $57 4 1 Percent Decrease

materials have become more frequent. The ultimate outcome of such pending or potential litigation against the Company cannot be predicted at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on the Company's financial statements. Environmental Matters
New Source Review Actions

In November 1999, the EPA brought a civil action in the U.S. District Court for the Northern District of Georgia against certain Southern Company subsidiaries, including Alabama Power and the Company, alleging that these subsidiaries had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws at

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certain coal-fired generating facilities, including the Company's Plants Bowen and Scherer. Through subsequent amendments and other legal procedures, the EPA filed a separate action in January 2001 against Alabama Power in the U.S. District Court for the Northern District of Alabama after it was dismissed from the original action. In these lawsuits, the EPA alleged that NSR violations occurred at eight coal-fired generating facilities operated by Alabama Power and the Company (including a facility formerly owned by Savannah Electric). The civil actions request penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. On June 19, 2006, the U.S. District Court for the Northern District of Alabama entered a consent decree between Alabama Power and the EPA, resolving the alleged NSR violations at Plant Miller. The consent decree required Alabama Power to pay $100,000 to resolve the government's claim for a civil penalty, and to donate $4.9 million of sulfur dioxide emission allowances to a nonprofit charitable organization, and formalized specific emissions reductions to be accomplished by Alabama Power, consistent with other Clean Air Act programs that require emissions reductions. On August 14, 2006, the district court in Alabama granted Alabama Power's motion for summary judgment and entered final judgment in favor of Alabama Power on the EPA's claims related to Plants Barry, Gaston, Gorgas, and Greene County. The plaintiffs have appealed this decision to the U.S. Court of Appeals for the Eleventh Circuit, and on November 14, 2006, the Eleventh Circuit granted plaintiffs' request to stay the appeal, pending the U.S. Supreme Court's ruling in a similar NSR case filed by the EPA against Duke Energy. The action against the Company has been administratively closed since the spring of 2001, and none of the parties has sought to reopen the case. The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $32,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome in this case could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. Such expenditures could affect future results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. Plant Wansley Environmental Litigation In December 2002, the Sierra Club, Physicians for Social Responsibility, Georgia Forestwatch, and one individual filed a civil suit in the U.S. District Court for the Northern District of Georgia against the Company for alleged violations of the Clean Air Act at four of the units at Plant Wansley. The civil action requested injunctive and declaratory relief, civil penalties, a supplemental environmental project, and attorneys' fees. In January 2007, following the March 2006 reversal and remand by the U.S. Court of Appeals for the Eleventh Circuit, the district court ruled for the Company on all remaining allegations in this case. The only issue remaining for resolution by the district court is the appropriate remedy for two isolated, short-term, technical violations of the plant's Clean Air Act operating permit. The court has asked the parties to submit a joint proposed remedy or individual proposals in the event the parties cannot agree. Although the ultimate outcome of this matter cannot currently be determined, the resulting liability associated with the two events is not expected to have a material impact on the Company's financial statements. Environmental Remediation The Company has been designated as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act. In 1995, the EPA designated the Company and four other unrelated entities as potentially responsible parties at a site in Brunswick, Georgia, that is listed on the federal National Priorities List. As of December 31, 2006, the Company had recorded approximately $6 million in cumulative expenses associated with its agreed-upon share of the removal and remedial investigation and feasibility study costs for the Brunswick site. Additional claims for recovery of natural resource damages at the site are anticipated. The Company has also recognized $36 million in cumulative expenses through December 31, 2006 for the assessment and anticipated cleanup of other sites on the Georgia Hazardous Sites Inventory. The final outcome of these matters cannot now be determined. However, based on the currently known conditions at these sites and the nature and extent of activities relating to these sites, management does not believe that additional liabilities, if any, at these sites would be material to the Company's financial statements.

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FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. [n December 2004, the FERC initiated a proceeding to assess Southern Company's generation dominance within its retail service territory. The ability to charge market-based rates in other markets is not an issue in that proceeding. Any new market-based rate sales by the Company in Southern Company's retail service territory entered into during a 15-month refund period beginning February 27, 2005 could be subject to refund to the level of the default cost-based rates, pending the outcome of the proceeding. Such sales through May 27, 2006, the end of the refund period, were approximately $5.8 million for the Company. In the event that the FERC's default mitigation measures for entities that are found to have market power are ultimately applied, the Company may be required to charge cost-based rates for certain wholesale sales in the Southern Company retail service territory, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time. In addition, in May 2005, the FERC started an investigation to determine whether Southern Company satisfies the other three parts of the FERC's market-based rate analysis: transmission market power, barriers to entry, and affiliate abuse or reciprocal dealing. The FERC established a new 15-month refund period related to this expanded investigation. Any new market-based rate sales involving any Southern Company subsidiary, including the Company, could be subject to refund to the extent the FERC orders lower rates as a result of this new investigation. Such sales through October 19, 2006, the end of the refund period, were approximately $18.8 million for the Company, of which $3.9 million relates to sales inside the retail service territory as discussed above. The FERC also directed that this expanded proceeding be held in abeyance pending the outcome of the proceeding on the Intercompany Interchange Contract (IC) discussed below. On January 3, 2007, the FERC issued an order noting settlement of the IIC proceeding and seeking comment identifying any remaining issues and the proper procedure for addressing any such issues. The Company believes that there is no meritorious basis for these proceedings and is vigorously defending itself in this matter. However, the final outcome of this matter, including any remedies to be applied in the event of an adverse ruling in these proceedings cannot now be determined. Intercompany Interchange Contract The Company's generation fleet is operated under the IIC, as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine (1) the provisions of the IIC among Alabama Power, the Company, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the power pool of Southern Company is

operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any
parties to the IIC have violated the FERC's standards of conduct applicable to utility companies that are transmission

providers, and (3) whether Southern Company's code of conduct defining Southern Power as a "system company" rather

than a "marketing affiliate" is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power's inclusion in the IIC in 2000. The FERC also previously approved Southern Company's code of conduct.

On October 5, 2006, the FERC issued an order accepting a settlement resolving the proceeding subject to Southern Company's agreement to accept certain modifications to the settlement's terms. On October 20, 2006, Southern Company notified the FERC that it accepted the modifications. The modifications largely involve functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. Southern Company filed with the FERC on November 6, 2006 an implementation plan to comply with the modifications set forth in the order. The impact of the modifications is not expected to have a material impact on the Company's financial statements. Generation Interconnection Agreements In July 2003, the FERC issued its final rule on the standardization of generation interconnection agreements and procedures (Order 2003). Order 2003 shifts much of the financial burden of new transmission investment from the generator to the transmission provider. The FERC has indicated that Order 2003, which was effective January 20, 2004, is to be applied prospectively to new generating facilities interconnecting to a transmission system. Order 2003 was affirmed by the U.S. Court of Appeals for the District of Columbia Circuit on January 12, 2007. The

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cost impact resulting from Order 2003 will vary on a case-by-case basis for each new generator interconnecting to the transmission system. On November 22, 2004, generator company subsidiaries of Tenaska, Inc. (Tenaska), as counterparties to three previously executed interconnection agreements with subsidiaries of Southern Company, including the Company, filed complaints at the FERC requesting that the FERC modify the agreements and that the Company refund a total of $7.9 million previously paid for interconnection facilities, with interest. Southern Company has also received requests for similar modifications from other entities, though no other complaints are pending with the FERC. On January 19, 2007, the FERC issued an order granting Tenaska's requested relief. Although the FERC's order requires the modification ofTenaska's interconnection agreements, the order reduces the amount of the refund that had been requested by Tenaska. As a result, the Company estimates indicate that no refund is due Tenaska. Southern Company has requested rehearing of the FERC's order. The final outcome of this matter cannot now be determined. Right of Way Litigation Southern Company and certain of its subsidiaries, including the Company, Gulf Power, Mississippi Power, and Southern Telecom, have been named as defendants in numerous lawsuits brought by landowners since 2001. The plaintiffs' lawsuits claim that defendants may not use, or sublease to third parties, some or all of the fiber optic communications lines on the rights of way that cross the plaintiffs' properties and that such actions exceed the easements or other property rights held by defendants. The plaintiffs assert claims for, among other things, trespass and unjust enrichment, and seek compensatory and punitive damages and injunctive relief. Management believes that the Company has complied with applicable laws and that the plaintiffs' claims are without merit. In January 2005, the Superior Court of Decatur County, Georgia granted partial summary judgment in a lawsuit brought by landowners against the Company based on the plaintiffs' declaratory judgment claim that the easements do not permit general telecommunications use. The court also dismissed Southern Telecom from this case. The Company appealed this ruling to the Georgia Court of Appeals. The Georgia Court of Appeals reversed, in part, the trial court's order and remanded the case to the trial court for the determination of further issues. After the Court of Appeals' decision, the plaintiffs filed a motion for reconsideration, which was denied, and a petition for certiorari to the Georgia Supreme Court, which was also denied. On October 10, 2006, the Superior Court of Decatur County, Georgia granted the Company's motion for summary judgment. The period during which the plaintiff could have appealed has expired. This matter is now concluded. In addition, in late 2001, certain subsidiaries of Southern Company, including Alabama Power, the Company, Gulf Power, Mississippi Power, Savannah Electric, and Southern Telecom, were named as defendants in a lawsuit brought by a telecommunications company that uses certain of the defendants' rights of way. This lawsuit alleges, among other things, that the defendants are contractually obligated to indemnify, defend, and hold harmless the telecommunications company from any liability that may be assessed against it in pending and future right of way litigation. The Company believes that the plaintiff s claims are without merit. In the fall of 2004, the trial court stayed the case until resolution of the underlying landowner litigation discussed above. In January 2005, the Georgia Court of Appeals dismissed the telecommunications company's appeal of the trial court's order for lack ofjurisdiction. An adverse outcome in this matter, combined with an adverse outcome against the telecommunications company in one or more of the right of way lawsuits, could result in substantial judgments; however, the final outcome of these matters cannot now be determined. Property Tax Dispute The Company is involved in a property tax dispute with Monroe County, Georgia (Monroe County). The Monroe County Board of Tax Assessors (Monroe Board) has issued assessments reflecting substantial increases in the ad valorem tax valuation of the Company's 22.95 percent ownership interest in Plant Scherer, which is located in Monroe County, for tax years 2003, 2004, and 2005. The Company is aggressively pursuing administrative appeals in Monroe County and has filed notices of arbitration for all three years. The appeals are currently stayed, pending the outcome of the litigation discussed below. In November 2004, the Company filed suit, on its behalf, against the Monroe Board in the Superior Court of Monroe County. The Company requests injunctive relief prohibiting Monroe County and the Monroe Board from unlawfully changing the value of Plant Scherer and ultimately collecting additional ad valorem taxes from the Company. On December 22, 2005, the court granted Monroe County's motion for summary judgment. The Company has filed an appeal of the Superior Court's decision to the Georgia Supreme Court.

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If the Company is not successful in its administrative appeals and if Monroe County is successful in defending the litigation, the Company could be subject to total additional taxes through December 31, 2006 of up to $18 million, plus penalties and interest. The ultimate outcome of this matter cannot currently be determined. Retail Regulatory Matters
Merger

Effective July 1, 2006, Savannah Electric was merged into the Company. Prior to the merger, Southern Company was the sole common shareholder of both the Company and Savannah Electric. At the time of the merger, each outstanding share of Savannah Electric common stock was cancelled and Southern Company was issued an additional 1,500,000 shares of the Company's common stock, no par value per share. In addition, at the time of the merger, each outstanding share of Savannah Electric's preferred stock was cancelled and converted into the right to receive one share of the Company's 6 ' / s percent Series Class A Preferred Stock, Non-Cumulative, Par Value $25 Per Share, resulting in the issuance by the Company of 1,800,000 shares of such Class A Preferred Stock in July 2006. The exchange of preferred stock was a non-cash transaction for purposes of the statements of cash flows. Following completion of the merger, the outstanding capital stock of the Company consists of 9,261,500 shares of common stock, all of which are held by Southern Company, and 1,800,000 shares of Class A Preferred Stock. With respect to the merger, the Georgia PSC voted on June 15, 2006 to set a Merger Transition Adjustment (MTA) applicable to customers in the former Savannah Electric service territory so that the fuel rate that became effective on July 1, 2006 plus the MTA equals the applicable fuel rate paid by such customers as of June 30, 2006. See "Fuel Cost Recovery" below for additional information. Amounts collected under the MTA are being credited to customers in the original Georgia Power service territory through a Merger Transition Credit (MTC). The MTA and the MTC will be in effect until December 31, 2007, when the Company's base rates are scheduled to be adjusted.
Rate Plans

In December 2004, the Georgia PSC approved the 2004 Retail Rate Plan for the Company. Under the terms of the 2004 Retail Rate Plan, the Company's earnings are evaluated against a retail return on equity (ROE) range of 10.25 percent to 12.25 percent. Two-thirds of any earnings above 12.25 percent will be applied to rate refunds, with the remaining one-third retained by the Company. Retail rates and customer fees increased by approximately $203 million effective January 1, 2005 to cover the higher costs of purchased power, operating and maintenance expenses, environmental compliance, and continued investment in new generation, transmission, and distribution facilities to support growth and ensure reliability. In 2007, the Company will refund 2005 earnings above 12.25 percent retail ROE. No refunds are anticipated for 2006. In connection with the 2004 Retail Rate Plan, the Georgia PSC approved the transfer of the Plant McIntosh construction project from Southern Power at a total fair market value of approximately $385 million. This value reflected an approximate $16 million disallowance and reduced the Company's net income by approximately $9.5 million. The Georgia PSC also certified a total completion cost not to exceed $547 million for the project. In June 2005, Plant McIntosh units 10 and 11 were placed into service at a total cost that did not exceed the certified amount. Under the 2004 Retail Rate Plan, the Plant McIntosh revenue requirements impact is being reflected in the Company's rates evenly over the three years ending December 31, 2007. In May 2005, the Georgia PSC approved a new three-year rate plan for the fornner Savannah Electric ending May 31, 2008. Under the terms of the plan, earnings were evaluated against a retail ROE range of 9.75 percent to 11.75 percent. Retail base revenues increased in June 2005 by approximately $9.6 million. The Company is required to file a general rate case by July 1, 2007, in response to which the Georgia PSC would be expected to determine whether the 2004 Retail Rate Plan should be continued, modified, or discontinued. In connection with this case, the former Savannah Electric's base rate tariffs will be combined with the Company's. Under the terms of the 2001 Retail Rate Plan, earnings were evaluated against a retail return on common equity range of 10 percent to 12.95 percent. The Company's earnings in all three years were within the common equity range. Under the 2001 Retail Rate Plan, the Company amortized a regulatory liability of $333 million, related to previously recorded accelerated amortization expenses, equally over three years beginning in 2002. Also, the 2001 Retail Rate Plan required the Company to recognize capacity and operating and maintenance costs related to certified purchase power II-182

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contracts evenly into rates over a three-year period ended December 31, 2004. Fuel Cost Recovery The Company has established fuel cost recovery rates approved by the Georgia PSC. In March 2006, the Company and Savannah Electric filed a combined request for fuel cost recovery rate changes with the Georgia PSC to be effective July 1, 2006, concurrent with the merger of the companies. On June 15, 2006, the Georgia PSC ruled on the request and approved an increase in the Company's total annual fuel billings of approximately $400 million. The Georgia PSC order provided for a combined ongoing fuel forecast but reduced the requested increase related to such forecast by $200 million. The order also required the Company to file for a new fuel cost recovery rate on a semi-annual basis, beginning in September 2006. Accordingly, on September 15, 2006, the Company filed a request to recover fuel costs incurred through August 2006 by increasing the fuel cost recovery rate. On November 13, 2006, under agreement with the Georgia PSC staff, the Company filed a supplementary request reflecting a forecast of annual fuel costs, as well as updated information for previously incurred fuel costs. On February 6, 2007, the Georgia PSC approved an increase in the Company's total annual billings of approximately $383 million. The Georgia PSC order reduced the Company's requested increase in the forecast of annual fuel costs by $40 million and disallowed $4 million of previously incurred fuel costs. The order also requires the Company to file for a new fuel cost recovery rate no later than March 1, 2008. Estimated under recovered fuel costs through February 2007 are to be recovered through May 2009 for customers in the original Georgia Power territory and through November 2009 for customers in the former Savannah Electric territory. As of December 31, 2006, the Company had an under recovered fuel balance of approximately $898 million, of which approximately $544 million is included in deferred charges and other assets in the balance sheets. In May 2005, the Georgia PSC approved the Company's request to increase customer fuel rates by approximately 9.5 percent to recover under recovered fuel costs of approximately $508 million existing as of May 31, 2005 over a four-year period that began June 1, 2005. In November 2005, the Georgia PSC voted to approve Savannah Electric's request to increase customer rates to recover estimated under recovered fuel cost of approximately $71.8 million as of November 30, 2005 over an estimated four-year period beginning December 1, 2005, as well as future projected fuel costs. Fuel Hedging Program In 2003, the Georgia PSC approved an order allowing the Company to implement a natural gas and oil procurement and hedging program. This order allows the Company to use financial instruments to hedge price and commodity risk associated with these fuels. The order limits the program in terms of time, volume, dollars, and physical amounts hedged. The costs of the program, including any net losses, are recovered as a fuel cost through the fuel cost recovery clause. Annual net financial gains from the hedging program, through June 30, 2006, were shared with the retail customers receiving 75 percent and the Company retaining 25 percent of the total net gains. Effective July 1, 2006, the Georgia PSC ordered the suspension of the profit sharing framework related to the fuel hedging program. New profit sharing arrangements as well as other changes to the fuel hedging program are currently under development. In 2005, the Company had a total net gain of $74.6 million, of which the Company retained $18.6 million. The Company had no net gains in 2004 or 2006. 4. JOINT OWNERSHIP AGREEMENTS The Company and an affiliate, Alabama Power, own equally all of the outstanding capital stock of SEGCO which owns electric generating units with a total rated capacity of 1,020 megawatts, as well as associated transmission facilities. The capacity of the units has been sold equally to the Company and Alabama Power under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, debt service, and return on investment, whether or not SEGCO has any capacity and energy available. The term of the contract extends automatically for two-year periods, subject to either party's right to cancel upon two year's notice. The Company's share of expenses included in purchased power from affiliates in the statements of income is as follows: 2006 Energy Capacity Total $58 38 $96 2005
(in millions)

2004 $51 36 $87

$54 38 $92

The Company owns undivided interests in Plants Vogtle, Hatch, Scherer, and Wansley in varying amounts

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jointly with Oglethorpe Power Corporation (OPC), the Municipal Electric Authority of Georgia (MEAG), the city of Dalton, Georgia, Florida Power & Light Company, Jacksonville Electric Authority, and Gulf Power. Under these agreements, the Company has contracted to operate and maintain the plants as agent for the co-owners and is jointly and severally liable for third party claims related to these plants. In addition, the Company jointly owns the Rocky Mountain pumped storage hydroelectric plant with OPC who is the operator of the plant. The Company and Progress Energy Florida, Inc. jointly own a combustion turbine unit (Intercession City) operated by Progress Energy Florida, Inc. At December 31, 2006, the Company's percentage ownership and investment (exclusive of nuclear fuel) in jointly owned facilities in commercial operation were as follows: Facility (Type) Plant Vogtle (nuclear) Plant Hatch (nuclear) Plant Wansley (coal) Plant Scherer (coal) Units 1 and 2 Unit 3 Rocky Mountain (pumped storage) Intercession City (combustion-turbine) Company Ownership 45.7% 50.1 53.5 8.4 75.0 25.4 33.3 Investment
(in millions)

Accumulated Depreciation $1,857 502 179 60 291 95 2

$3,289 925 396 116 565 170 12

At December 31, 2006, the portion of total construction work in progress related to Plants Wansley, Scherer, and Rocky Mountain was $53.1 million, $8.7 million, and $1.6 million, respectively, primarily for environmental projects. The Company's proportionate share of its plant operating expenses is included in the corresponding operating expenses in the statements of income. 5. INCOME TAXES Southern Company files a consolidated federal income tax return and combined income tax returns for the States of Alabama, Georgia, and Mississippi. Under a joint consolidated income tax allocation agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis and no subsidiary is allocated more expense than would be paid if they filed a separate income tax return. In accordance with IRS regulations, each company is jointly and severally liable for the tax liability. In 2004, in order to avoid the loss of certain federal income tax credits related to the production of synthetic fuel, Southern Company chose to defer certain deductions otherwise available to the subsidiaries. The cash flow benefit associated with the utilization of the tax credits was allocated to the subsidiary that otherwise would have claimed the available deductions on a separate company basis without the deferral. This allocation concurrently reduced the tax benefit of the credits allocated to those subsidiaries that generated the credits. As the deferred expenses are deducted, the benefit of the tax credits will be repaid to the subsidiaries that generated the tax credits. The Company has recorded $9.2 million payable to these subsidiaries in Accumulated Deferred Income Taxes on the balance sheets at December 31, 2006. The transfer of the Plant McIntosh construction project from Southern Power to the Company resulted in a deferred gain to Southern Power for federal income tax purposes. The Company will reimburse Southern Power for the remaining balance of the related deferred taxes of $5.0 million reflected in Southern Power's future taxable income. $4.5 million of this payable to Southern Power is included in Other Deferred Credits and $0.5 million is included in Affiliated Accounts Payable in the balance sheets at December 31, 2006. The transfer of the Dahlberg, Wansley, and Franklin projects to Southern Power from the Company in 2001 and 2002 also resulted in a deferred gain for federal income tax purposes. Southern Power will reimburse the Company for the remaining balance of the related deferred taxes of $10.0 million reflected in the Company's future taxable income. $8.7 million of this receivable from Southern Power is included in Other Deferred Debits and $1.3 million is included in Affiliated Accounts Receivable in the balance sheets at December 31, 2006. At December 31, 2006, tax-related regulatory assets were $511 million and tax-related regulatory liabilities were $157 million. The assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. The liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits.

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Details of the federal and state income tax provisions are as follows: 2006 Total provision for income taxes: Federal: Current Deferred State: Current Deferred Deferred investment tax credits Total 2005 (in millions) $393 7 400 33 9 $442 $166 226 392 24 32 $448 $116 233 349 13 31 $393 2004

The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 2006
(in millions)

2005

Deferred tax liabilities: Accelerated depreciation


Property basis differences Employee benefit obligations Fuel clause under recovery Premium on reacquired debt Underfunded benefit plans Asset retirement obligations Other Total Deferred tax assets: Federal effect of state deferred taxes Other property basis differences Other deferred costs Employee benefit obligations Other comprehensive income Overfunded benefit plans Unbilled revenue Asset retirement obligations Other Total Total deferred tax liabilities, net Portion included in current (liabilities) assets, net Accumulated deferred income taxes in the balance sheets

$2,303
568 243 365 69 156 242 75 4,021 123 138 131 226 9 84 27 242 41 1,021 3,000 (185) $2,815

$2,281
558 163 335 72 246 87 3,742 119 139 126 73 25 15 246 40 783 2,959 (110) $2,849

In accordance with regulatory requirements, deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the statements of income. Credits amortized in this manner amounted to $13.0 million in 2006, 2005, and 2004. At December 31, 2006, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 2006 Federal statutory rate State income tax, net of federal deduction Non-deductible book depreciation 35.0% 2.2 1.1 2005 35.0% 3.1 1.2 2004 35.0% 2.6 1.2

Other
Effective income tax rate

(2.5)
35.8%

(1.8)
37.5%

(2.3)
36.5%

In 2006, the Company filed its 2005 income tax returns, which included certain state income tax credits that resulted in a lower effective income tax rate for the year ended December 31, 2006 when compared to 2005. The Company has also filed similar claims for the years 2001 through 2004. Amounts recorded in the Company's financial statements for the year ended December 31, 2006 related to these claims are not material. The Georgia Department of Revenue is currently reviewing these claims. If approved as filed, such claims could have a significant, and possibly material, effect on the Company's net income. The ultimate outcome of this matter cannot now be determined. 6. FINANCING Outstanding Classes of Capital Stock The Company currently has preferred stock, Class A preferred stock, preference stock, and common stock authorized. The Company's preferred stock and Class A preferred stock, without preference between classes, rank senior to the Company's preference stock and common stock with respect to payment of dividends and voluntary or involuntary dissolution. The Company's preference stock ranks senior to the common stock with respect to the payment of dividends and voluntary or involuntary dissolution. No shares of preferred stock or preference stock were outstanding at December 31, 2006. The outstanding Class A preferred stock is subject to redemption at the option of the Company on or after July 1, 2009.

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Mandatorily Redeemable Preferred Securities/Long-Term Debt Payable to Affiliated Trusts The Company has formed certain wholly owned trust subsidiaries for the purpose of issuing preferred securities. The proceeds of the related equity investments and preferred security sales were loaned back to the Company through the issuance of junior subordinated notes totaling $969 million, which constitute substantially all of the assets of these trusts and are reflected in the balance sheets as Long-term Debt Payable to Affiliated Trusts. The Company considers that the mechanisms and obligations relating to the preferred securities issued for its benefit, taken together, constitute a full and unconditional guarantee by it of the respective trusts' payment obligations with respect to these securities. At December 31, 2006, preferred securities of $940 million were outstanding. See Note 1 under "Variable Interest Entities" for additional information on the accounting treatment for these trusts and the related securities. Securities Due Within One Year A summary of the scheduled maturities and redemptions of securities due within one year at December 31 is as follows: 2006
(in millions)

2005 $ 3 150 15 20

Capital lease Senior notes Preferred stock First mortgage bonds Total

$ 4 300 $304

$188

Redemptions and/or maturities through 2011 applicable to total long-term debt are as follows: $304 million in 2007; $49 million in 2008; $279 million in 2009; $5 million in 2010; and $115 million in 2011. Pollution Control Bonds Pollution control obligations represent loans to the Company from public authorities of funds derived from sales by such authorities of revenue bonds issued to finance pollution control facilities. The Company is required to make payments sufficient for the authorities to meet principal and interest requirements of such bonds. The Company has incurred obligations in connection with the sale by public authorities of tax-exempt pollution control revenue bonds. The amount of tax-exempt pollution control revenue bonds outstanding at December 31, 2006 was $1.7 billion. Senior Notes The Company issued $150 million aggregate principal amount of unsecured senior notes in 2006. The proceeds of the issuance were used to repay a portion of the Company's short term indebtedness. At December 31, 2006 and 2005, the Company had $2.8 billion and $2.8 billion of senior notes outstanding, respectively. These senior notes are effectively subordinated to all secured debt of the Company. Capital Leases Assets acquired under capital leases are recorded in the balance sheets as utility plant in service, and the related obligations are classified as long-term debt. At December 31, 2006 and 2005, the Company had a capitalized lease obligation for its corporate headquarters building of $72 million and $74 million, respectively, with an interest rate of 8.1 percent. For ratemaking purposes, the Georgia PSC has treated the lease as an operating lease and has allowed only the lease payments in cost of service. The difference between the accrued expense and the lease payments allowed for ratemaking purposes has been deferred and is being amortized to expense as ordered by the Georgia PSC. See Note 1 under "Regulatory Assets and Liabilities." At December 31, 2006 and 2005, the Company had capitalized lease obligations for its Plant Kraft coal unloading dock and its vehicles of S4.1 million and $5.1 million, respectively. However, for ratemaking purposes, these obligations are treated as operating leases and, as such, lease payments are charged to expense as incurred. The annual expense incurred for these leases in 2006, 2005, and 2004 was $9.6 million, $9.7 million, and $9.6 million, respectively. Bank Credit Arrangements At the beginning of 2007, the Company had credit arrangements with banks totaling $910 million, of which $904 million was unused. Of these facilities, $40 million expires during 2007, with the remaining $870 million expiring in 2011. The facilities that expire in 2007 provide the option of converting borrowings into a two-year term loan. The Company expects to renew its facilities, as needed, prior to expiration. The agreements contain stated borrowing rates. All the agreements require payment of commitment fees based on the unused portion of the commitments or the maintenance of compensating balances with the

banks. Commitment fees are less than 1/8 of 1 percent for the Company. Compensating balances are not legally restricted from withdrawal.

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The credit arrangements contain covenants that limit the level of indebtedness to capitalization to 65 percent, as defined in the arrangements. For purposes of these definitions, indebtedness excludes the long-term debt payable to affiliated trusts. In addition, the credit arrangements contain cross default provisions that would trigger an event of default if the Company defaulted on other indebtedness above a specified threshold. At December 31, 2006, the Company was in compliance with all such covenants. None of the arrangements contain material adverse change clauses at the time of borrowings. The $904 million in unused credit arrangements provides liquidity support to the Company's variable rate pollution control bonds. The amount of variable rate pollution control bonds outstanding requiring liquidity support as of December 31, 2006 was $112 million. In addition, the Company borrows under a commercial paper program and an extendible commercial note program. The amount of commercial paper outstanding at December 31, 2006 was $733 million. The amount of commercial paper outstanding at December 31, 2005 was $327 million. There were no outstanding extendible commercial notes at December 31, 2006. Commercial paper is included in notes payable on the balance sheets. During 2006, the peak amount of short-term debt outstanding was $757 million and the average amount outstanding was $549 million. The average annual interest rate on short-term debt in 2006 was 5.1 percent. Financial Instruments The Company enters into energy-related derivatives to hedge exposures to electricity, gas, and other fuel price changes. However, due to cost-based rate regulations, the Company has limited exposure to market volatility in commodity fuel prices and prices of electricity. See Note 3 under "Retail Regulatory Matters - Fuel Hedging Program" for information on the Company's fuel hedging program. The Company also enters into hedges of forward electricity sales. There was no material ineffectiveness recorded in earnings in 2006, 2005, and 2004. At December 31, 2006, the fair value gains / (losses) of derivative energy contracts were reflected in the financial statements as follows: Amounts
(in millions)

Regulatory assets, net Net income Total fair value

$(38.0) $(38.0)

The fair value gain or loss for hedges that are recoverable through the regulatory fuel clauses are recorded in regulatory assets and liabilities and are recognized in earnings at the same time the hedged items affect earnings. The Company has energy-related hedges in place up to and including 2009. The Company enters into derivatives to hedge exposure to interest rate changes. Derivatives related to variable rate securities or forecasted transactions are accounted for as cash flow hedges. The derivatives employed as hedging instruments are structured to minimize ineffectiveness. As such, no material ineffectiveness has been recorded in earnings. Subsequent to December 31, 2006, the Company entered into $375 million notional amounts of interest rate swaps to hedge unfavorable changes in interest rates. The hedges will be terminated at the time the underlying debt is issued. In addition to interest rate swaps, the Company has also entered into certain option agreements that effectively cap its interest rate exposure in return for payment of a premium. In some cases, costless collars have been used that effectively establish a floor and a ceiling to interest rate expense. At December 31, 2006, the Company had $1.2 billion notional amounts of interest derivatives accounted for as cash flow hedges outstanding with net fair value gains as follows: Weighted Average Fixed Rate Paid

Maturity

Notional Amount $300 400 225 300 14

Fair Value Gain/(Loss)


(in millions)

2007 2.68% 2007 3.85%* 2017 5.29% 2037 5.75%* 2007 2.50%** * Interest rate collar (showing only the rate cap percentage) **Hedged using the Bond Market Association Municipal Swap Index

$1.4 0.1 (2.0) 1.4 0.2

The fair value gain or loss for cash flow hedges is recorded in other comprehensive income and is reclassified into earnings at the same time the hedged items affect earnings. In 2006, 2005, and 2004, the Company settled gains (losses) totaling $(3.9) million, $0.9 million, and $(12.4) million, respectively, upon termination of certain interest derivatives at the same time it issued debt. For the years 2006, 2005, and 2004, approximately $1.1 million, $(1.9) million, and $(3.9) million, respectively, of pre-tax gains/(losses) were

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Georgia Power Company 2006 Annual Report

reclassified from other comprehensive income to interest expense. For 2007, no material pre-tax losses are expected to be reclassified from other comprehensive income to interest expense. The Company has interest related hedges in place through 2037 and has realized gains/(losses) that are being amortized through 2017. 7. COMMITMENTS Construction Program The Company currently estimates property additions to be approximately $1.9 billion, $1.8 billion, and $1.8 billion in 2007, 2008, and 2009, respectively. These amounts include $94 million, $73 million, and $88 million in 2007, 2008, and 2009, respectively, for construction expenditures related to contractual purchase commitments for uranium and nuclear fuel conversion, enrichment, and fabrication services included under "Fuel Commitments" herein. The construction program is subject to periodic review and revision, and actual construction costs may vary from estimates because of numerous factors, including, but not limited to, changes in business conditions, changes in FERC rules and regulations, revised load growth estimates, changes in environmental regulations, changes in existing nuclear plants to meet new regulatory requirements, increasing costs of labor, equipment, and materials, and cost of capital. At December 31, 2006, significant purchase commitments were outstanding in connection with the construction program. Long-Term Service Agreements The Company has entered into a Long-Term Service Agreement (LTSA) with General Electric (GE) for the purpose of securing maintenance support for the combustion turbines at the Plant McIntosh combined cycle facility. In summary, the LTSA stipulates that GE will perform all planned inspections on the covered equipment, which includes the cost of all labor and materials. GE is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to a limit specified in each contract. In general, this LTSA is in effect through two major inspection cycles per unit. Scheduled payments to GE are made quarterly based on actual operating hours of the respective units. Total payments to GE under this agreement are currently estimated at $198.5 million over the remaining term of the agreement, which is currently projected to be approximately 12 years. However, the LTSA contains various cancellation provisions at the option of the Company. The Company has also entered into an LTSA with GE through 2014 for neutron monitoring system parts and electronics at Plant Hatch. Total remaining payments to GE under this agreement are currently estimated at $12.2 million. The contract contains cancellation provisions at the option of the Company. Payments made to GE prior to the performance of any work are recorded as a prepayment in the balance sheets. Work performed by GE is capitalized or charged to expense as appropriate net of any joint owner billings, based on the nature of the work. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Coal commitments include forward contract purchases for sulfur dioxide emission allowances. Natural gas purchase commitments contain fixed volumes with prices based on various indices at the time of delivery. Amounts included in the chart below represent estimates based on New York Mercantile Exchange future prices at December 31, 2006. Total estimated minimum long-term obligations at December 31, 2006 were as follows: Commitments Natural Gas 2007 2008 2009 2010 2011 2012 and thereafter Total $ 647 534 342 202 262 1,914 $3,901 Coal
(in millions)

Nuclear Fuel $ 94 73 88 121 101 169 $646

$1,638 1,463 983 330 62 44 $4,520

Additional commitments for fuel will be required to supply the Company's future needs. SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. The creditworthiness of Southern Power is currently inferior to the creditworthiness of the traditional operating companies. Accordingly, Southern

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Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure they will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements. Purchased Power Commitments The Company has commitments regarding a portion of a 5 percent interest in Plant Vogtle owned by MEAG that are in effect until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest. The payments for capacity are required whether or not any capacity is available. The energy cost is a function of each unit's variable operating costs. Except as noted below, the cost of such capacity and energy is included in purchased power from non-affiliates in the statements of income. Capacity payments totaled $49 million, $54 million, and $55 million in 2006, 2005, and 2004, respectively. The current projected Plant Vogtle capacity payments are: Capacity Payments
(in millions)

2007 2008 2009 2010 2011 2012 and thereafter Total

$ 49 49 54 54 54 200 $460

Portions of the payments noted above relate to costs in excess of Plant Vogtle's allowed investment for ratemaking purposes. The present value of these portions at the time of the disallowance was written off. The Company has entered into other various long-term commitments for the purchase of electricity. Estimated total longterm obligations under these commitments at December 31, 2006 were as follows: Commitments Affiliated
(in millions)

NonAffiliated $86 87 94 96 98 665 $1,126

2007 2008 2009 2010 2011 2012 and thereafter Total Operating Leases

$220 220 220 112 65 390 $1,227

The Company has entered into various operating leases with various terms and expiration dates. Rental expenses related to these operating leases totaled $33 million for 2006, $39 million for 2005, and $39 million for 2004. At December 31, 2006, estimated minimum lease payments for these noncancelable operating leases were as follows: Minimum Lease Payments Rail Cars Other
(in millions)

Total $ 32 29 26 22 22 42 $173

2007 2008 2009 2010 2011 2012 and thereafter Total

$ 18 18 16 15 16 32 $115

$14 11 10 7 6 10 $58

In addition to the rental commitments above, the Company has obligations upon expiration of certain rail car leases with

respect to the residual value of the leased property. These leases expire in 2011 and the Company's maximum obligation is $64 million. At the termination of the leases, at the Company's option, the Company may either exercise its purchase option or the property can be sold to a third party. The Company expects that the fair market value of the leased property would substantially reduce or eliminate the Company's payments under the residual value obligation. A portion of the rail car lease obligations is shared with the joint owners of Plants Scherer and Wansley. Rental expenses related to the rail car leases are fully recoverable through the fuel cost recovery clause as ordered by the Georgia PSC.

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Guarantees Alabama Power has guaranteed unconditionally the obligation of SEGCO under an installment sale agreement for the purchase of certain pollution control facilities at SEGCO's generating units, pursuant to which $24.5 million principal amount of pollution control revenue bonds are outstanding. Alabama Power has also guaranteed $50 million in senior notes issued by SEGCO. The Company has agreed to reimburse Alabama Power for the pro rata portion of such obligations corresponding to the Company's then proportionate ownership of stock of SEGCO if Alabama Power is called upon to make such payment under its guaranty. As discussed earlier in this note under "Operating Leases," the Company has entered into certain residual value guarantees related to rail car leases. 8. STOCK OPTION PLAN Southern Company provides non-qualified stock options to a large segment of the Company's employees ranging from line management to executives. As of December 31, 2006, there were 1,651 current and former employees of the Company participating in the stock option plan. The maximum number of shares of Southern Company common stock that may be issued under these programs may not exceed 57 million. The prices of options granted to date have been at the fair market value of the shares on the dates of grant. Options granted to date become exercisable pro rata over a maximum period of three years from the date of grant. The Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however for employees who are eligible for retirement the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the stock option plan. For certain stock option awards a change in control will provide accelerated vesting. As part of the adoption of SFAS No. 123(R), as discussed earlier in Note 1 under "Stock Options," Southern Company has not modified its stock option plan or outstanding stock options, nor has it changed the underlying valuation assumptions used in valuing the stock options that were used under SFAS No. 123. The Company's activity in the stock option plan for 2006 is summarized below: Shares Subject to Option Outstanding at December 31,2005 Granted Exercised Cancelled Outstanding at December 31, 2006 Exercisable at December 31, 2006 7,223,875 1,431,489 (811,013) (13,768) 7,830,583 5,106,339 WeightedAverage Exercise Price $26.87 33.81 24.02 30.97 $28.42 $26.14

The number of stock options vested, and expected to vest in the future, at December 31, 2006 is not significantly different from the number of stock options outstanding at December 31, 2006 as stated above. At December 31, 2006, the weighted average remaining contractual term for the options outstanding and options exercisable is 6.4 years and 5.3 years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable is $66 million and $55 million, respectively. As of December 31, 2006, there was $2.5 million of total unrecognized compensation cost related to stock option awards not yet vested. That cost is expected to be recognized over a weighted-average period of approximately 11 months. The total intrinsic value of options exercised during the years ended December 31, 2006, 2005, and 2004 was $10 million, $24 million, and $16 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises totaled $4 million, $9 million, and $6 million, respectively, for the years ended December 31, 2006, 2005, and 2004. 9. NUCLEAR INSURANCE

Under the Price-Anderson Amendments Act (Act), the Company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at the Company's nuclear power plants. The Act provides funds up to $10.76 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $300 million by American Nuclear Insurers (ANI), with

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the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. A company could be assessed up to $101 million per incident for each licensed reactor it operates but not more than an aggregate of $15 million per incident to be paid in a calendar year for each reactor. Such maximum assessment for the Company, excluding any applicable state premium taxes, based on its ownership and buyback interests, is $203 million per incident but not more than an aggregate of $30 million to be paid for each incident in any one year. The Company is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. Additionally, the Company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million primary coverage. This excess insurance is also provided by NEIL. NEIL also covers additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can purchase this coverage, subject to a deductible waiting period of up to 26 weeks, with a maximum per occurrence per unit limit of $490 million. After the deductible period, weekly indemnity payments would be received until either the unit is operational or until the limit is exhausted in approximately three years. The Company purchases the maximum limit allowed by NEIL subject to ownership limitations and has elected a 12-week waiting period. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The current maximum annual assessments for the Company under the NEIL policies would be $49 million. Following the terrorist attacks of September 2001, both ANI and NEIL confirmed that terrorist acts against commercial nuclear power plants would, subject to the normal policy limits, be covered under their insurance. Both companies, however, revised their policy terms on a prospective basis to include an industry aggregate for all "non-certified" terrorist acts i.e., acts that are not certified acts of terrorism pursuant to the Terrorism Risk Insurance Act of 2002, which was renewed in 2005. The aggregate for all NEIL policies, which applies to non-certified property claims stemming from terrorism within a 12-month duration, is $3.24 billion plus any amounts available through reinsurance or indemnity from an outside source. The non-certified ANI nuclear liability cap is a $300 million shared industry aggregate during the normal ANI policy period. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the Company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. All retrospective assessments, whether generated for liability, property, or replacement power, may be subject to applicable state premium taxes.
10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial information for 2006 and 2005 is as follows: Net Income
Operating Revenues $1,584 1,808 2,275 1,579 $1,459 1,554 2,369 1,694 Operating Income (in millions) $288 386 662 174 $290 325 661 172 After Dividends on Preferred Stock $132 197 382 76 $144 164 375 61

Quarter Ended March 2006 June 2006 September 2006 December 2006 March 2005 June 2005 September 2005 December 2005

The Company's business is influenced by seasonal weather conditions.

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Table of Contents SELECTED FINANCIAL AND OPERATING DATA 2002-2006


Georgia Power Company 2006 Annual Report

2006 Operating Revenues (inthousands) Net Income after Dividends on Preferred Stock (inthousands) Cash Dividends on Common Stock (inthousands) Return on Average Common Equity (percent) Total Assets (inthousands) Gross Property Additions (inthousands)
Capitalization (in thousands):

2005

2004

2003

2002

$ 7,245,644 $ 7,075,837 $ 5,727,768 $ 5,228,625 $ 5,119,466 $ $ 787,225 $ 744,373 $ 682,793 $ 654,036 $ 638,948

630,000 $ 582,800 $ 588,700 $ 588,800 $ 565,600 14.08 13.87 14.01 13.92 13.80 $19,308,730 $17,898,445 $16,598,778 $15,527,223 $14,978,520 $ 1,276,889 $ 958,563 $ 1,252,197 $ 783,053 $ 916,449 $ 5,956,251 $ 5,452,083 $ 5,123,276 $ 4,723,299 $ 4,610,396 58,547 14,569 14,569 44,991 43,909
940,000 980,000

Common stock equity Preferred stock


Mandatorily redeemable preferred securities

Long-term debt payable to affiliated trusts Long-term debt


Total (excluding amounts due within one year) Capitalization Ratios (percent):

969,073 4,242,839

969,073 4,396,250

969,073 3,947,621

3,984,825

3,277,671

$11,213,154 $10,861,315 $10,098,517 $ 9,662,693 $ 8,882,636

Common stock equity Preferred stock


Mandatorily redeemable preferred securities

53.1 0.4
-

50.2 0.4
--

50.7 0.6 9.6 39.1


100.0

48.9 0.2
9.7

51.9 0.2
11.0

Long-term debt payable to affiliated trusts Long-term debt


Total (excluding amounts due within one year)

8.6 37.9
100.0

8.9 40.5
100.0

41.2
100.0

36.9
100.0

Security Ratings: Preferred Stock Moody's Standard and Poor's Fitch Unsecured Long-Term Debt Moody's Standard and Poor's Fitch
Customers (year-end):

Baal BBB+ A A2 A A+ 1,998,643 294,654 8,008 4,371 2,305,676


9,278

Baal BBB+ A A2 A A+ 1,960,556 289,009 8,290 4,143 2,261,998


9,273

Baal BBB+ A A2 A A+ 1,926,215 283,507 7,765 4,015 2,221,502


9,294

Baal BBB+ A A2 A A+ 1,890,790 275,378 7,989 3,940 2,178,097


9,263

Baal BBB+ A A2 A A+ 1,854,561 267,505 8,321 3,822 2,134,209


9,385

Residential Commercial Industrial Other Total


Employees (year-end)
N/A Not Applicable.

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SELECTED FINANCIAL AND OPERATING DATA 2002-2006 (continued)


Georgia Power Company 2006 Annual Report

2006
Operating Revenues (in thousands):

2005

2004

2003 1,726,543 $ 1,767,487 1,051,034 63,715 4,608,779 265,029 181,355 5,055,163 173,462 5,228,625$

2002 1,738,206 1,734,423 1,036,722 61,972 4,571,323 277,031 102,398 4,950,752 168,714 5,119,466

Residential Commercial Industrial Other Total retail Sales for resale -non-affiliates Sales for resale affiliates Total revenues from sales of electricity Other revenues Total
Kilowatt-Hour Sales (in thousands):

$ 2,326,190$ 2,227,137 $ 1,900,961 $ 2,423,568 2,357,077 1,933,004 1,382,213 1,406,295 1,217,536 73,649 73,854 67,250 6,205,620 6,064,363 5,118,751 551,731 524,800 251,581 252,556 275,525 172,375 7,009,907 6,864,688 5,542,707 235,737 211,149 185,061 S 7,245,644$ 7,075,837 $ 5,727,768$ 26,206,170 32,112,430 25,577,006 660,285 84,555,891 12,314,322 5,494,436 102,364,649 8.88 7.55 5.40 7.34 4.52 6.85 13,216 $1,173
15,995

Residential Commercial Industrial Other Total retail Sales forresale Sales for resale Total

non-affiliates affiliates

25,508,472 31,334,182 25,832,265 737,343 83,412,262 11,318,403 5,033,165 99,763,830 8.73 7.52 5.44 7.27 4.89 6.88 13,119 $1,145
15,995

24,829,833 29,553,893 27,197,843 744,935 82,326,504 6,101,243 4,925,744 93,353,491 7.66 6.54 4.48 6.22 3.84 5.94 13,002 $995
14,743

23,532,467 28,401,764 26,564,261 732,900 79,231,392 8,998,272 6,029,398 94,259,062 7.34 6.22 3.96 5.82 2.97 5.36 12,555 $921
14,768

23,900,526 28,409,596 26,531,207 731,115 79,572,444 8,220,170 4,088,440 91,881,054 7.27 6.11 3.91 5.74 3.08 5.39 12,990 $945
14,847

Average Revenue Per Kilowatt-Hour (cents): Residential Commercial Industrial Total retail Sales for resale Total sales Residential Average Annual Kilowatt-Hour Use Per Customer Residential Average Annual Revenue Per Customer Plant Nameplate Capacity Ratings
(year-end) (megawatts) Maximum Peak-Hour Demand (megawatts):

Winter Summer Annual Load Factor (percent)


Plant Availability (percent):

13,528 17,159 61.8 91.4 90.7 58.0 14.2 0.9 4.8 6.2 15.9 100.0

14,360 16,925 59.4 90.0 89.3 60.0 14.4 1.8 3.0 5.6 15.2 100.0

13,087 16,129 61.0 87.1 94.8 57.0 16.4 1.5 0.1 7.0 18.0 100.0

13,929 15,575 61.6 85.9 94.1 57.9 16.0 2.0 0.3 7.3 16.5 100.0

12,539 15,896 61.6 81.1 88.8 58.8 15.4 0.8 0.5 6.2 18.3 100.0

Fossil-steam Nuclear
Source of Energy Supply (percent):

Coal Nuclear Hydro Oil and gas


Purchased power -

From non-affiliates From affiliates Total

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Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Georgia Power Company: We have audited the accompanying balance sheets and statements of capitalization of Georgia Power Company (the "Company") (a wholly owned subsidiary of Southern Company) as of December 31, 2005 and 2004, and the related statements of income, comprehensive income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages 11-152 to 1-184) present fairly, in all material respects, the financial position of Georgia Power Company at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Atlanta, Georgia February 27, 2006 11-131

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Georgia Power Company 2005 Annual Report OVERVIEW Business Activities Georgia Power Company (the Company) operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of the Company's primary business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth while containing costs, and to recover rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, and fuel prices. In December 2004, the Company completed a major retail rate proceeding that is expected to provide earnings stability (2004 Retail Rate Plan). This regulatory action also enables the recovery of substantial capital investments to facilitate the continued reliability of the transmission and distribution network and continued environmental improvements at the generating plants. Appropriately balancing environmental expenditures with customer prices will continue to challenge the Company for the foreseeable future. The Company expects further rate proceedings in 2006 to address fuel cost recovery due to higher than expected fuel costs for coal and natural gas. On December 13, 2005, the Company and Savannah Electric and Power Company (Savannah Electric) entered into a merger agreement, under which Savannah Electric will merge into the Company, with the Company continuing as the surviving corporation (the Merger). The Merger must be approved by Savannah Electric's preferred shareholders and is subject to receipt of certain regulatory approvals from the Federal Energy Regulatory Commission (FERC), the Georgia Public Service Commission (PSC), and the Federal Communications Commission. Pending regulatory approvals, the Merger is expected to be completed by July 2006. See FUTURE EARNINGS POTENTIAL "Merger" and Note 3 to the financial statements under "Retail Regulatory Matters - Merger" for additional information. Key Performance Indicators In striving to maximize shareholder value while providing low-cost energy to more than two million customers, the Company continues to focus on several key indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income. The Company's financial success is directly tied to the satisfaction of its customers. Key elements of ensuring customer satisfaction include outstanding service, high reliability, and competitive prices. Management uses customer satisfaction surveys and reliability indicators to evaluate the Company's results. Peak season equivalent forced outage rate (Peak Season EFOR) is an indicator of fossil/hydro plant availability and efficient generation fleet operations during the months when generation needs are greatest. The rate is calculated by dividing the number of hours of forced outages by total generation hours. Transmission and distribution system reliability performance is measured by the frequency and duration of outages. Performance targets for reliability are set internally based on historical performance, expected weather conditions, and expected capital expenditures. Net income is the primary component of the Company's contribution to Southern Company's earnings per share goal. The Company's 2005 results compared to its targets for some of these indicators are reflected in the following chart.
Key
Performance Indicator

2005
Target Performance

2005
Actual Performance

Customer Satisfaction Peak Season EFOR Net Income

Top quartile in customer surveys 2.75% or less $678 million

Top quartile 1.42% $715 million

See RESULTS OF OPERATIONS herein for additional information on the Company's financial performance. The strong financial performance achieved in 2005 reflects the focus that management places on these indicators, as well as the commitment shown by the employees in achieving or exceeding management's expectations. Earnings The Company's 2005 earnings totaled $715 million representing a $57 million (8.7 percent) increase over 2004. Operating income increased in 2005 due to higher base retail revenues resulting from the retail rate increase 11-132

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report effective January 1, 2005 and more favorable weather, as well as higher wholesale revenues resulting from new contracts effective January 1, 2005, partially offset by increased non-fuel operating expenses. The Company's 2004 earnings totaled $658 million representing a $27 million (4.3 percent) increase over 2003. Operating income increased in 2004 due to higher base retail revenues attributable to more favorable weather and customer growth during the year, partially offset by higher non-fuel operating expenses. In addition, lower depreciation and amortization expense resulting from a Georgia PSC three-year retail rate plan approved in 2001 (2001 Retail Rate Plan) significantly offset increased purchased power capacity expenses. The Company's 2003 earnings totaled $631 million, representing a $13 million (2.1 percent) increase over 2002 despite lower base retail revenues resulting from the extremely mild summer weather. Higher wholesale revenues and lower non-fuel operating expenses contributed to the 2003 increase. RESULTS OF OPERATIONS A condensed income statement for the Company is as follows:
Amount 2005 Increase (Decrease) From Prior Year 2005 2004 (in millions)

2003

Operating revenues Fuel Purchased power Other operation and maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating income Total other income and (expense) Income taxes Net income Dividends on preferred stock Net income after dividends on preferred stock Revenues

$6,634 1,831 1,170 1,481 504 260 5,246 1,388 (241) 431 716 1 $ 715

$1,263 598 194 81 229 32 1,134 129 (20) 52 57 -.$ 57

$457 128 200 153 (74) 15 422 35 5 13 27 $ 27

$ 92 101 92 (78) (54) 11 72 20 2 9 13 $ 13

Operating revenues in 2005, 2004, and 2003 and the percent of change from the prior year are as follows:
2005 Amount 2004
(in millions)

2003

Retail

prior year

$4,777 195 135 21 515 $5,643 519 265 784 207 $6,634 23.5%

$4,310 151 32 284 4,777 247 166 413 181 $5,371 9.3%

$4,288 30 (66) 58 4,310 260 175 435 169 $4,914 1.9%

Change in -

Base rates Sales growth Weather Fuel cost recovery and other Retail - current year Sales for resale Non-affiliates Affiliates Total sales for resale Other operating revenues Total operating revenues Percent change

Retail base revenues of $3.6 billion in 2005 increased by $351 million (10.9 percent) from 2004 primarily due to the retail rate increase effective January 1, 2005, sustained economic strength, customer growth, more favorable weather, and generally higher prices to large business customers. See Note 3 to the financial statements under "Retail Regulatory Matters Rate Plans" for additional information. Retail base revenues of $3.2 billion in 2004 increased by $183 million (6.0 percent) from 2003 primarily due to an improved economy, customer growth, generally higher prices to the Company's large business customers, and more favorable weather. Retail base revenues of $3 billion in 2003 decreased by $36 million (1.2 percent) from 2002 primarily due to extremely mild summer temperatures and the sluggish economy. Electric rates include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses, including the fuel component of purchased energy, and do not affect net income. See FUTURE EARNINGS POTENTIAL "PSC Matters Fuel Cost Recovery" herein for additional information.

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Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report Wholesale revenues from sales to non-affiliated utilities were:
2005 2004 2003

(in millions)

Unit power sales Capacity Energy Other power sales Capacity and other Energy Total

33 31 155 300 519

31 33 75 108 247

34 31 93 102 260

Revenues from unit power sales contracts remained relatively constant in 2005 and 2004. Revenues from unit power sales contracts decreased slightly in 2003 due to decreased energy sales. Revenues from other non-affiliated sales increased $272 million (148.6 percent) in 2005 and decreased $12 million (6.2 percent) and $8 million (3.9 percent) in 2004 and 2003, respectively. The increase in 2005 is due to new contracts with thirty electric membership corporation customers that went into effect in January 2005 which increased the demand for energy. The capacity component of these transactions increased $73.2 million in 2005 over 2004. Revenues from sales to affiliated companies within the Southern Company electric system, as well as purchases of energy, will vary from year to year depending on demand and the availability and cost of generating resources at each company. These affiliated sales and purchases are made in accordance with the Intercompany Interchange Contract (IIC), as approved by the FERC. In 2005, kilowatt-hour (KWH) energy sales to affiliates increased 1.5 percent due to higher demand, while the increase in associated revenues was 59.4 percent due to higher fuel prices. In 2004, KWH energy sales to affiliates decreased 18.2 percent due to lower demand. However, the decline in associated revenues was only 4.9 percent due to higher fuel prices. In 2003, KWH energy sales to affiliates increased 47.5 percent due to the combination of increased demand by Southern Power to meet contractual obligations and the availability of power due to milder-than-normal weather in the Company's service territory. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost. Other operating revenues increased $25.7 million (14.2 percent) in 2005 from 2004 primarily due to higher transmission revenues of $16 million related to work performed for the other owners of the integrated transmission system in the State of Georgia and higher revenues under the open access tariff agreement, higher outdoor lighting revenues of $5.4 million, and higher customer fees that went into effect in January 2005 of $5.9 million. Other operating revenues increased $11.7 million (6.9 percent) in 2004 over 2003 primarily due to higher revenues from outdoor lighting of $4.2 million and pole attachment rentals of $4.9 million and higher gains on sales of emission allowances of $2 million. Other operating revenues increased $4 million (2.4 percent) in 2003 from the prior year primarily due to an increase in the open access transmission tariff rate, which increased revenues $7 million, and higher revenues from increased customer demand for outdoor lighting services of $4 million, partially offset by lower revenues from the rental of electric property of $4 million. Energy Sales KWH sales for 2005 and the percent change by year were as follows:
KWH Percent Change

2005 (in billions )

2005

2004

2003

Residential Commercial Industrial Other Total retail Sales for resale Non-affiliates Affiliates Total sales for resale Total sales

23.6 29.8 25.0 0.6 79.0 11.2 4.9 16.1 95.1

2.9% 6.3 (5.0) (0.1) 1.4 88.2 1.5 49.6 7.2

5.3% 4.0 2.5 1.1 3.8 (32.5) (18.2) (26.8) (1.2)

(1.7)% (0.1) (0.1) 0.4 (0.5) 9.5 47.5 22.0 2.6

Residential KWH sales increased 2.9 percent in 2005 over 2004 due to more favorable weather, customer growth of 1.7 percent, and a 1.1 percent increase in the average energy consumption per customer. Commercial KWH sales increased 6.3 percent due to more favorable weather, sustained economic strength, customer growth of 1.8 percent, and a reclassification of customers from industrial to commercial to be consistent with the rate structure approved by the Georgia PSC when compared 11-134

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report to 2004. Industrial sales decreased 5.0 percent primarily due to this reclassification of customers. Residential KWH sales increased 5.3 percent in 2004 from 2003 due to more favorable weather and a 1.9 percent increase in residential customers. Commercial KWH sales increased 4.0 percent in 2004 due to an improved economy and a 2.8 percent increase in commercial customers. Industrial sales increased 2.5 percent in 2004 due to the improved economy. Residential KWH sales decreased 1.7 percent in 2003 from 2002 due to the effect of the milder summer weather, despite the 2.0 percent increase in residential customers. Commercial KWH sales in 2003 declined slightly due to the milder summer weather, while industrial KWH sales declined slightly due to the sluggish economy. Average retail sales growth assuming normal weather is expected to be 2.1 percent from 2006 to 2010. Fuel and Purchased Power Expenses Fuel costs constitute the single largest expense for the Company. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of generating units. The amount and sources of generation, the average cost of fuel per net KWH generated, and the average cost of purchased power per net KWH were as follows:
2005 2004 2003

Total generation (billions of KWH) Sources of generation (percent) Coal Nuclear Hydro Oil and gas Average cost of fuel per net KWH generated (cents) Average cost of purchased power per net KWH (cents)

80.5 75.3 18.6 2.4 3.7 2.04 7.25

71.5 75.4 22.5 2.0 0.1 1.55 5.17

73.1 75.4 21.6 2.7 0.3 1.46 4.03

Fuel expense increased 48.5 percent in 2005 from the prior year primarily due to an increase in the average cost of fuel, particularly natural gas, and a 12.3 percent increase in generation to meet higher demand. Fuel expense increased 11.6 percent in 2004 over 2003 primarily due to an increase in the average cost of coal and natural gas. Fuel expense increased 10.1 percent in 2003 over 2002 due to an increase in generation of 3.9 percent because of higher wholesale energy demands and a 2.8 percent higher average cost of fuel due to the higher prices of coal and natural gas in 2003. Purchased power expense increased $194 million (19.9 percent) in 2005, $200 million (25.9 percent) in 2004, and $92 million (13.3 percent) in 2003. These increases are primarily the result of new purchased power agreements (PPAs) between the Company and Southern Power that went into effect in each of 2004, 2003, and 2002. Additional capacity expenses associated with these PPAs were $30 million, $65 million, and $75 million in 2005, 2004, and 2003, respectively. The increases in purchased power expenses also reflect the impact of the significant increases in fuel costs discussed previously. A significant upward trend in the cost of coal and natural gas has emerged since 2003, and volatility in these markets is expected to continue. Increased coal prices have been influenced by a worldwide increase in demand as a result of rapid economic growth in China as well as by increases in mining costs. Higher natural gas prices in the United States are the result of increased demand and slightly lower gas supplies despite increased drilling activity. Natural gas supply interruptions, such as those caused by the 2005 and 2004 hurricanes, result in an immediate market response; however, the long-term impact of this price volatility may be reduced by imports of natural gas and liquefied natural gas. Fuel expenses generally do not affect net income, since they are offset by fuel revenues under the Company's fuel cost recovery provisions. Other Operating Expenses In 2005, other operations and maintenance expenses increased $81 million (5.8 percent). Maintenance for generating plant and transmission and distribution increased $23.5 million and $13.9 million, respectively, as a result of scheduled outages and, to a lesser extent, certain flexible projects planned for other periods. Increased employee benefit expense of $18.4 million related to pension and medical benefits and higher property insurance costs of $5.3 million resulting from storm damage also contributed to the increase. Customer II-135

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report assistance expense and uncollectible account expense also increased an additional $9.3 million in 2005 over 2004, primarily as a result of promotional expenses related to an energy efficiency program and an increased number of customer bankruptcies, respectively. In 2004, other operations and maintenance expenses increased $153 million (12.3 percent) due to the timing of generating plant maintenance of $39 million and transmission and distribution maintenance of $39 million. Increased employee benefit expense of $30 million related to pension and medical benefits and higher workers compensation expense of $8 million also contributed to the increase. In 2003, other operations and maintenance expenses decreased $78 million (5.9 percent) due to the timing of generating plant maintenance of $46 million and transmission and distribution maintenance of $8 million and lower severance costs of $8 million. Depreciation and amortization increased $229 million (83 percent) in 2005 over 2004 primarily due to the expiration at the end of 2004 of certain provisions of the Company's 2001 Retail Rate Plan. In accordance with the 2001 Retail Rate Plan, the Company amortized an accelerated cost recovery liability as a credit to amortization expense and recognized new Georgia PSC-certified purchased power costs in rates evenly over the three years ended December 31, 2004. This treatment resulted in a credit to amortization expense of $187.1 million in 2004 and a total decrease in depreciation and amortization of $74 million and $54 million in 2004 and 2003, respectively. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" for additional information. Taxes other than income taxes increased $32 million (14.1 percent) primarily due to higher municipal gross receipts taxes of $18.1 million resulting from increased operating revenues and higher property taxes of $14.0 million. Taxes other than income taxes increased $15 million (7.0 percent) in 2004 due to higher municipal gross receipts taxes associated with increased operating revenues. Taxes other than income taxes increased $11 million (5.4 percent) in 2003 due mainly to a favorable true-up of state property tax valuations in 2002. Other Income and (Expense) Allowance for equity funds used during construction remained relatively constant in 2005 and increased $15.9 million in 2004, primarily due to the construction of the McIntosh combined cycle Units 10 and 11 which were placed in service in June 2005. Interest income remained relatively constant in 2005. Interest income decreased $9 million in 2004 and increased $12 million in 2003 when compared to the prior year primarily due to interest on a favorable income tax settlement of $14.5 million in 2003. Interest expense increased $38.8 million (21.3 percent) in 2005 from 2004 primarily due to the issuance of additional senior notes in 2005 and generally higher interest rates on variable rate debt and commercial paper. Interest expense remained relatively constant in 2004. Interest expense increased in 2003 primarily due to an increase in senior notes outstanding that was partially offset by a reduction in short-term debt outstanding. The Company refinanced or retired $635 million, $400 million, and $665 million of securities in 2005, 2004, and 2003, respectively. Interest capitalized increased in 2005 and 2004 due to the Plant McIntosh construction referenced above and decreased in 2003 due to the transfer of a project to Southern Power in 2002. Other income and (expense), net increased $17.1 million in 2005 from 2004 primarily due to $14.2 million of additional gas hedge gains. Other income and (expense), net decreased in 2004 primarily due to the $13 million disallowance of Plant McIntosh construction costs in December 2004, partially offset by a $7.5 million decrease in donations and $3.4 million in increased income from a customer pricing program. See Note 3 to the financial statements under "Retail Regulatory Matters - Fuel Hedging Program" and "Plant McIntosh Construction Project" for additional information. Effects of Inflation The Company is subject to rate regulation that is based on the recovery of historical costs. In addition, the income tax laws are based on historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in utility plant with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixedII-136

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report money obligations such as long-term debt, preferred stock, and preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed in the Company's approved electric rates. FUTURE EARNINGS POTENTIAL General The Company operates as a vertically integrated utility providing electricity to retail customers within its traditional service territory located within the State of Georgia and to wholesale customers in the Southeast. Prices for electricity provided by the Company to retail customers are set by the Georgia PSC under cost-based regulatory principles. Prices for electricity relating to PPAs, interconnecting transmission lines, and the exchange of electric power are set by the FERC. Retail rates and revenues are reviewed and adjusted periodically. See ACCOUNTING POLICIES - "Application of Critical Accounting Policies and Estimates - Electric Utility Regulation" herein and Note 3 to the financial statements under "Retail Regulatory Matters" and "FERC Matters" for additional information about this and other regulatory matters. The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of the Company's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Company's business of selling electricity. These factors include the ability of the Company to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs. Future earnings in the near term will depend, in part, upon growth in energy sales, which is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth in the Company's service area. Environmental Matters New Source Review Actions In November 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S District Court for the Northern District of Georgia against the Company and Alabama Power, alleging that the Company and Alabama Power had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws with respect to certain coal-fired generating facilities. Through subsequent amendments and other legal proceedings, the EPA added Savannah Electric as a defendant to the original action and filed a separate action against Alabama Power after it was dismissed from the original action. In these lawsuits, the EPA alleges that NSR violations occurred at eight coal-fired generating facilities, including the Company's Plants Bowen and Scherer. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. On June 3, 2005, the U.S. District for the Northern District of Alabama issued a decision in favor of Alabama Power on two primary legal issues in the case; however, the decision does not resolve the case, nor does it address other legal issues associated with the EPA's allegations. In accordance with a separate court order, Alabama Power and the EPA are currently participating in mediation with respect to the EPA's claims. The action against the Company and Savannah Electric has been administratively closed since the spring of 2001, and none of the parties has sought to reopen the case. See Note 3 to the financial statements under "Environmental Matters - New Source Review Actions." The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $32,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome in this matter could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. In December 2002 and October 2003, the EPA issued final revisions to its NSR regulations under the Clean Air Act. A coalition of states and environmental organizations filed petitions for review of these regulations. On June 24, 2005, the U.S. Court of Appeals for the District of Columbia Circuit upheld, in part, the EPA's December 2002 revisions to its NSR regulations, which included changes to the regulatory exclusions and 11-137

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report methods of calculating emissions increases. However, the court vacated portions of those revisions, including those addressing the exclusion of certain pollution control projects. The October 2003 revisions, which clarified the scope of the existing Routine Maintenance, Repair and Replacement exclusion, have been stayed by the Court of Appeals pending its review of the rules. On October 20, 2005, the EPA also published a proposed rule clarifying the test for determining when an emissions increase subject to the NSR requirements has occurred. The impact of these revisions and proposed rules will depend on adoption of the final rules by the EPA and the State of Georgia's implementation of such rules, as well as the outcome of any additional legal challenges, and, therefore, cannot be determined at this time. Carbon Dioxide Litigation In July 2004, attorneys general from eight states, each outside of Southern Company's service territory, and the corporation counsel for New York City filed a complaint in the U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies' emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Under common law public and private nuisance theories, the plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining global wanning and (2) requiring each of the defendants to cap its emissions of carbon dioxide and then reduce those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. In September 2005, the U.S. District Court for the Southern District of New York granted Southern Company's and the other defendants' motions to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit on October 19, 2005. The ultimate outcome of these matters cannot be determined at this time. Plant Wansley Environmental Litigation In December 2002, the Sierra Club, Physicians for Social Responsibility, Georgia Forestwatch, and one individual filed a civil suit in the U.S. District Court for the Northern District of Georgia against the Company for alleged violations of the Clean Air Act at four of the units at Plant Wansley. The civil action requests injunctive and declaratory relief, civil penalties, a supplemental environmental project, and attorneys' fees. The Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation at each generating unit. The liability phase of the case has concluded with the court ruling in favor of the Company in part and the plaintiffs in part. In March 2005, the U.S. Court of Appeals for the Eleventh Circuit accepted the Company's petition for review of the district court's order, and oral arguments were held on January 24, 2006. The district court case has been administratively closed pending that appeal. If necessary, the district court will hold a separate trial which will address civil penalties and possible injunctive relief requested by the plaintiffs. The ultimate outcome of this matter cannot currently be determined; however, an adverse outcome could require substantial capital expenditures that cannot be determined at this time and could possibly require the payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. Environmental Statutes and Regulations General The Company's operations are subject to extensive regulation by state and federal environmental agencies under a variety of statutes and regulations governing environmental media, including air, water, and land resources. Applicable statutes include the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; the Emergency Planning & Community Right-to-Know Act; and the Endangered Species Act. Compliance with these environmental requirements involves significant capital and operating costs, a major portion of which is expected to be recovered through existing ratemaking provisions. Through 2005, the Company had invested approximately $1.2 billion in II-138

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report capital projects to comply with these requirements, with annual costs of $117.4 million, $47.4 million, and $105.7 million for 2005, 2004, and 2003, respectively. Over the next decade, the Company expects that capital expenditures could exceed an additional $3.3 billion to assure compliance with existing and new regulations, including $410 million, $674.6 million, and $515.8 million for 2006, 2007, and 2008, respectively. Because the Company's compliance strategy is impacted by changes to existing environmental laws and regulations, the cost, availability, and existing inventory of emission allowances, and the Company's fuel mix, the ultimate outcome cannot be determined at this time. Environmental costs that are known and estimable at this time are included in capital expenditures discussed under FINANCIAL CONDITION AND LIQUIDITY - "Capital Requirements and Contractual Obligations" herein. Compliance with possible additional federal or state legislation or regulations related to global climate change, air quality, or other environmental and health concerns could also significantly affect the Company. New environmental legislation or regulations, or changes to existing statutes or regulations, could affect many areas of the Company's operations; however, the full impact of any such changes cannot be determined at this time. Air Quality Compliance with the Clean Air Act and resulting regulations has been and will continue to be a significant focus for the Company. Through 2005, the Company had spent approximately $787.9 million in reducing sulfur dioxide (SO 2) and nitrogen oxide (NO x) emissions and in monitoring emissions pursuant to the Clean Air Act. Additional controls have been announced and are currently being installed at several plants to further reduce SO 2 and NO x emissions, maintain compliance with existing regulations, and to meet new requirements. Approximately $699.8 million of these expenditures are related to reducing NO x emissions pursuant to state and federal requirements in connection with the EPA's one-hour ozone standard and the 1998 regional NO x reduction rules. Although the State of Georgia was originally included in the states subject to the regional NO x rules, the EPA, in August 2005, stayed compliance with these requirements and initiated rulemakings to address issues raised in a petition for reconsideration filed by a coalition of Georgia industries. The impact of the 1998 regional NO x reduction rules for Georgia will depend on the outcome of the petition for reconsideration and/or any subsequent development and approval of the State of Georgia's state implementation plan. In 2005, the EPA revoked the one-hour ozone standard and published the final set of rules for implementation of the new, more stringent eight-hour ozone standard. Areas within the Company's service area that have been designated as nonattainment under the eight-hour ozone standard include Macon (Georgia) and a 20-county area within metropolitan Atlanta. State implementation plans, including new emission control regulations necessary to bring those areas into attainment are required for most areas by June 2007. These state implementation plans could require further reductions in NO x emissions from power plants. During 2005, the EPA's fine particulate matter "nonattainment" designations became effective for several areas within the Company's service area in Georgia, and the EPA proposed a rule for the implementation of the fine particulate matter standard. The EPA plans to finalize the proposed implementation rule in 2006. State plans for addressing the nonattainment designations are required by April 2008 and could require further reductions in SO 2 and NO x emissions from power plants. The EPA has also published proposed revisions to lower the level of particulate matter currently allowed. The EPA issued the final Clean Air Interstate Rule on March 10, 2005. This cap-and-trade rule addresses power plant SO 2 and NO x emissions that were found to contribute to nonattainment of the eight-hour ozone and fine particulate matter standards in downwind states. Twenty-eight eastern states, including the State of Georgia, are subject to the requirements of the rule. The rule calls for additional reductions of NO xand/or SO 2 to be achieved in two phases, 2009/2010 and 2015. These reductions will be accomplished by the installation of additional emission controls at the Company's coal-fired facilities or by the purchase of emission allowances from a cap-and-trade program. The Clean Air Visibility Rule (formerly called the Regional Haze Rule) was finalized on July 6, 2005. The goal of this rule is to restore natural visibility conditions in certain areas (primarily national parks 11-139

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report and wilderness areas) by 2064. The rule involves the application of Best Available Retrofit Technology (BART) requirements and a review each decade, beginning in 2018, of progress toward the goal. BART requires that sources that contribute to visibility impairment implement additional emission reductions, if necessary, to make progress toward remedying current visibility concerns. For power plants, the Clean Air Visibility Rule allows states to determine that the Clean Air Interstate Rule satisfies BART requirements for SO 2 and NO x. However, additional requirements could be imposed. By December 17, 2007, states must submit implementation plans that contain emission reduction strategies for implementing BART requirements and for achieving sufficient and reasonable progress toward the goal. On March 15, 2005, the EPA announced the final Clean Air Mercury Rule, a cap-and-trade program for the reduction of mercury emissions from coal-fired power plants. The rule sets caps on mercury emissions to be implemented in two phases, 2010 and 2018, and provides for an emission allowance trading market. The Company anticipates that emission controls installed to achieve compliance with the Clean Air Interstate Rule and the eight-hour ozone and fine-particulate standards will also result in mercury emission reductions. However, the long-term capability of emission control equipment to reduce mercury emissions is still being evaluated, and the installation of additional control technologies may be required. The impacts of the eight-hour ozone standard, the fine particulate matter nonattainment designations, the Clean Air Interstate Rule, the Clean Air Visibility Rule, and the Clear Air Mercury Rule on the Company, will depend on the development and implementation of rules at the state level. States implementing the Clean Air Mercury Rule and the Clear Air Interstate Rule, in particular, have the option not to participate in the national cap-and-trade programs and could require reductions greater than those mandated by the federal rules. Such impacts will also depend on resolution of pending legal challenges to the Clean Air Interstate Rule, the Clean Air Mercury Rule and a related petition from the State of North Carolina under section 126 of the Clean Air Act, also related to the interstate transport of air pollutants. Therefore, the full impacts of these regulations on the Company cannot be determined at this time. The Company has developed and continually updates a comprehensive environmental compliance strategy to comply with the continuing and new environmental requirements discussed above. As part of this strategy, the Company plans to install additional SO 2, NO x, and mercury emission controls within the next several years to assure continued compliance with applicable air quality requirements. Water Quality In July 2004, the EPA published final rules under the Clean Water Act for the purpose of reducing impingement and entrainment of fish and fish larvae at power plants' cooling water intake structures. The new rules require baseline biological information and, perhaps, installation of fish protection technology near some intake structures at existing power plants. The Company is installing cooling towers at additional facilities under the Clean Water Act to cool water prior to discharge. Near Atlanta, a cooling tower for one plant was completed in 2004 and two others are scheduled for completion in 2008. The total estimated cost of these projects is $173 million, with $85 million remaining to be spent. The Company is also conducting a study of the aquatic environment at another facility to determine if further thermal controls are necessary at that plant. The full impact of these new rules will depend on the results of studies and analyses performed as part of the rules' implementation and the actual requirements established by the State of Georgia, and therefore, cannot be determined at this time EnvironmentalRemediation The Company must comply with other environmental laws and regulations that cover the handling and disposal of waste and release of hazardous substances. Under these various laws and regulations, the Company could incur substantial costs to clean up properties. The Company conducts studies to determine the extent of any required cleanup and has recognized in its financial statements the costs to clean up and monitor known sites. Amounts for cleanup and ongoing monitoring costs were not material for any year presented. The Company may be liable for some or all required cleanup costs for additional sites that may require environmental remediation. See Note 3 to the financial statements under "Environmental Remediation" for additional information. 11-140

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report Under Georgia PSC ratemaking provisions, $22 million has been deferred in a regulatory liability account related to certain environmental insurance settlements. Under the 2004 Retail Rate Plan, this regulatory liability is being amortized as a credit to expense over a three-year period that began January 1, 2005. However, the Georgia PSC also approved an annual environmental accrual of $5.4 million. Environmental remediation expenditures are being charged against the resulting reserve as they are incurred. The annual accrual amount will be reviewed and adjusted in future regulatory proceedings. Global Climate Issues Domestic efforts to limit greenhouse gas emissions have been spurred by international discussions surrounding the Framework Convention on Climate Change, and specifically the Kyoto Protocol - which proposes constraints on the emissions of greenhouse gases for a group of industrialized countries. The Bush Administration has not supported U.S. ratification of the Kyoto Protocol or other mandatory carbon dioxide reduction legislation; however, in 2002, it did announce a goal to reduce the greenhouse gas intensity of the U.S. - the ratio of greenhouse gas emissions to the value of U.S. economic output- by 18 percent by 2012. A year later, the Department of Energy (DOE) announced the Climate VISION program to support this goal. Energy-intensive industries, including electricity generation, are the initial focus of this program. Southern Company is involved in the development of a voluntary electric utility sector climate change initiative in partnership with the government. In a memorandum of understanding signed in December 2004 with the DOE under Climate VISION, the utility sector pledged to reduce its greenhouse gas emissions rate by 3 percent to 5 percent by 2010-2012. The Company is continuing to evaluate future energy and emissions profiles relative to the Climate VISION program and is analyzing voluntary programs to support the industry initiative. FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates at market-based prices. The Company also has FERC authority to make short-term opportunity sales at market rates. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. In December 2004, the FERC initiated a proceeding to assess Southern Company's generation dominance within its retail service territory. The ability to charge market-based rates in other markets is not an issue in that proceeding. In February 2005, Southern Company submitted responsive information. In February 2006, the FERC suspended the proceeding. Any new market-based rate transactions in its retail service territory entered into after February 27, 2005 are subject to refund to the level of the default cost-based rates, pending the outcome of the proceeding. The impact of such sales through December 31, 2005 is not expected to exceed $4.9 million. The refund period covers 15 months. In the event that the FERC's default mitigation measures for entities that are found to have market power are ultimately applied, the Company may be required to charge cost-based rates for certain wholesale sales in the Southern Company retail service territory, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time. In addition, in May 2005, the FERC started an investigation to determine whether Southern Company satisfies the other three parts of the FERC's market-based rate analysis: transmission market power, barriers to entry, and affiliate abuse or reciprocal dealing. The FERC established a new refund period related to this expanded investigation. Any and all new market-based rate transactions both inside and outside Southern Company's retail service territory involving any Southern Company subsidiary, including the Company, will be subject to refund to the extent the FERC orders lower rates as a result of this new investigation, with the 15-month refund period beginning July 19, 2005. The impact of such sales through December 31, 2005 is not expected to exceed $10.9 million, of which $3.2 million relates to sales inside the retail service territory as discussed above. The FERC also directed that this expanded proceeding be held in abeyance pending the outcome of the proceeding on the IIC discussed below. The Company believes that there is no meritorious basis for this proceeding and is vigorously defending itself in this matter. However, the final outcome of this 11-141

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report matter, including any remedies to be applied in the event of an adverse ruling in this proceeding, cannot now be determined.
Intercompany Interchange Contract

The Company's generation fleet in its retail service territory is operated under the IIC, as approved by the FERC. In May 2005, the FERC also initiated a new proceeding to examine (1) the provisions of the IIC among Alabama Power, the Company, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and Southern Company Services, Inc., as agent, under the terms of which the power pool of Southern Company is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC's standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company's code of conduct defining Southern Power as a "system company" rather than a "marketing affiliate" is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power's inclusion in the IIC in 2000. The FERC also previously approved Southern Company's code of conduct. The FERC order directs that the administrative law judge who presided over the McIntosh PPA proceeding discussed herein under "PSC Matters - Plant Mclntosh Construction Project", be assigned to preside over the hearing in this proceeding and that the testimony and exhibits presented in that proceeding be preserved to the extent appropriate. Hearings are scheduled for September 2006. Effective July 19, 2005, revenues from transactions under the IIC involving any Southern Company subsidiaries, including the Company, are subject to refund to the extent the FERC orders any changes to the IIC. The Company believes that there is no meritorious basis for this proceeding and is vigorously defending itself in this matter. However, the final outcome of this matter, including any remedies to be applied in the event of an adverse ruling in this proceeding, cannot now be determined.
Generation Interconnection Agreements

In July 2003, the FERC issued its final rule on the standardization of generation interconnection agreements and procedures (Order 2003). Order 2003 shifts much of the financial burden of new transmission investment from the generator to the transmission provider. The FERC has indicated that Order 2003, which was effective January 20, 2004, is to be applied prospectively to interconnection agreements. Subsidiaries of Tenaska, Inc., as counterparties to three previously executed interconnection agreements with subsidiaries of Southern Company, including the Company, have filed complaints at the FERC requesting that the FERC modify the agreements and that the Company refund a total of $7.9 million previously paid for interconnection facilities, with interest. The Company has opposed all such requests, and the proceedings are still pending. The impact of Order 2003 and its subsequent rehearings on the Company and the final results of these matters cannot be determined at this time.
Transmission

In December 1999, the FERC issued its final rule on Regional Transmission Organizations (RTOs). Since that time, there have been a number of additional proceedings at the FERC designed to encourage further voluntary formation of RTOs or to mandate their fomnation. However, at the current time, there are no active proceedings that would require the Company to participate in an RTO. Current FERC efforts that may potentially change the regulatory and/or operational structure of transmission include rules related to the standardization of generation interconnection, as well as an inquiry into, among other things, market power by vertically integrated utilities. See "Generation Interconnection Agreements" and "Market-Based Rate Authority" herein for additional information. The final outcome of these proceedings cannot now be determined. However, the Company's financial condition, results of operations, and cash flows could be adversely affected by future changes in the federal regulatory or operational structure of transmission. PSC Matters
Merger

In connection with the Merger, the Company and Savannah Electric plan to establish a coastal regional organization for the Company that will be operating following completion of the Merger. Management expects that current Savannah Electric employees will fill most of the positions in the new regional organization. 11-142

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report While the Georgia PSC does not have specific approval authority over the merger of electric utilities, in January 2006, the Company and Savannah Electric filed an application with the Georgia PSC for certain approvals necessary to complete the Merger. In particular, the Company and Savannah Electric are seeking the approval of the Georgia PSC with respect to the following matters: * the transfer of Savannah Electric's generating facilities and certification of the generating facilities as the Company's assets; * amendments to the Company's Integrated Resource Plan to add the current Savannah Electric's customers and generating facilities; * the transfer of Savannah Electric's assigned service territory to the Company; * adoption of the Company's service rules and regulations to the current Savannah Electric customers; * new fuel rate and base rate schedules that would apply to the Company's sale of electricity to the current Savannah Electric customers; * adoption of a "merger transition adjustment" rate that would be used to more closely align Savannah Electric's existing base rates to those of the Company and a "merger transition credit" rate that would credit the additional revenues collected from former Savannah Electric customers to the Company's existing customers; and * the issuance of additional shares of the Company's common stock to Southern Company in exchange for Southern Company's shares of Savannah Electric common stock. The Company has also requested the Georgia PSC to better align the rates for Savannah Electric's customers with those of the Company. Currently, Savannah Electric customers pay slightly lower base rates and significantly higher fuel rates than the Company's customers. The overall effect is that Savannah Electric customers pay substantially higher overall costs for electricity. See "Fuel Cost Recovery" herein for additional information. Rate Plans In December 2004, the Georgia PSC approved the 2004 Retail Rate Plan for the three-year period ending December 31, 2007. Under the terms of the 2004 Retail Rate Plan, earnings are being evaluated annually against a retail return on common equity (ROE) range of 10.25 percent to 12.25 percent. Two-thirds of any earnings above 12.25 percent will be applied to rate refunds, with the remaining one-third retained by the Company. Retail rates were increased by approximately $194 million and customer fees were increased by approximately $9 million effective January 1, 2005 to cover the higher costs of purchased power; operation and maintenance expenses; environmental compliance; and continued investment in new generation, transmission and distribution facilities to support growth and ensure reliability. In 2005 the Company recorded $2.7 million revenue subject to refund for estimated earnings above 12.25 percent retail ROE. The Company is required to file a general rate case by July 1, 2007, in response to which the Georgia PSC would be expected to determine whether the 2004 Retail Rate Plan should be continued, modified, or discontinued. Until then, the Company will not file for a general base rate increase unless its projected retail ROE falls below 10.25 percent. However, in connection with the Merger, the Company has requested Georgia PSC approval of a "merger transition adjustment" that would be used to adjust Savannah Electric's existing base rates to more closely match the existing base rates for the Company. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" for additional information. Plant Mclntosh Construction Project In December 2002 after a competitive bidding process, the Georgia PSC certified PPAs between Southern Power and the Company and Savannah Electric for capacity from Plant McIntosh Units 10 and 11, construction of which was completed in June 2005. In April 2003, Southern Power applied for FERC approval of these PPAs. In July 2003, the FERC accepted the PPAs to become effective June 1, 2005, subject to refund, and ordered that hearings be held. Intervenors opposed the FERC's acceptance of the PPAs, alleging that they did not meet the applicable standards for market-based rates between affiliates. To ensure the timely completion of the Plant Mclntosh construction project and the availability of the units in the summer of 2005 for their retail customers, in May 2004, the Company and Savannah Electric requested the Georgia PSC to direct them to acquire the Plant McIntosh construction project. The Georgia PSC issued such an order and the transfer occurred on May 24, 2004 at a total cost of approximately $415 million, including $14 million of transmission interconnection facilities. 11-143

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report Subsequently, Southern Power filed a request to withdraw the PPAs and to terminate the ongoing FERC proceedings. In August 2004, the FERC issued a notice accepting the request to withdraw the PPAs and pennitting such request to become effective by operation of law. However, the FERC made no determination on what additional steps may need to be taken with respect to testimony provided in the proceedings. See "FERC Matters - Intercompany Interchange Contract" above for additional information. In connection with the 2004 Retail Rate Plan, the Georgia PSC approved the transfer of the Plant McIntosh construction project at a total fair market value of approximately $385 million. This value reflected an approximate $16 million disallowance, of which $13 million was attributable to the Company, and reduced the Company's 2004 net income by approximately $8 million. The Georgia PSC also certified a total completion cost of $547 million for the project. In June 2005, Plant McIntosh Units 10 and 11 were placed in service at a total cost that did not exceed the certified amount. Under the 2004 Retail Rate Plan, the Plant McIntosh revenue requirements impact will be reflected in the Company's rates evenly over the three years ending 2007. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" and "Plant Mclntosh Construction Project" for additional information. Fuel Cost Recovery The Company has established fuel cost recovery rates approved by the Georgia PSC. In recent months, the Company has experienced higher than expected fuel costs for coal and natural gas. Those higher fuel costs have increased the under recovered fuel costs included in the balance sheets herein. In May 2005, the Georgia PSC approved the Company's request to increase customer fuel rates by approximately 9.5 percent to recover under recovered fuel costs of approximately $508 million existing as of May 31, 2005 over a four-year period that began June 1, 2005. Under recovered fuel amounts for the period subsequent to June 1, 2005 totaled $327.5 million through December 31, 2005. The Georgia PSC's order instructed that such amounts be reviewed semi-annually beginning February 2006. If the amount under or over recovered exceeds $50 million at the evaluation date, the Company would be required to file for a temporary fuel rate change. In addition, Savannah Electric's under recovered fuel costs totaled $77.7 million at December 31, 2005. In accordance with the Georgia PSC order, Savannah Electric was scheduled to file an additional request for a fuel cost recovery increase in January 2006. The Company has agreed with a Georgia PSC staff recommendation to forego the temporary fuel rate process, and Savannah Electric has postponed its scheduled filing. Instead, the Company and Savannah Electric will file a combined request in March 2006 to increase the Company's fuel cost recovery rate. The case will seek approval of a fuel cost recovery rate based upon future fuel cost projections for the combined Company and Savannah Electric generating fleet as well as the under recovered fuel balances existing at June 30, 2006. The new fuel cost recovery rate would be billed beginning in July 2006 to all of the Company's customers, including the existing Savannah Electric customers. Under recovered amounts as of the date of the Merger will be paid by the appropriate customer groups. In August 2005, the Georgia PSC initiated an investigation of Savannah Electric's fuel practices. In February 2006, an investigation of the Company's fuel practices was initiated. The Company and Savannah Electric are responding to data requests and cooperating in the investigations. The final outcome of this matter cannot now be determined. Fuel cost recovery revenues as recorded on the financial statements are adjusted for differences in actual recoverable cost and amounts billed in current regulated rates. Accordingly, any increase in the billing factor would have no significant effect on the Company's revenues or net income, but would increase annual cash flow. Nuclear As part of a potential expansion of Plant Vogtle, the Company and Southern Nuclear have notified the Nuclear Regulatory Commission (NRC) of their intent to apply for an early site permit (ESP) this year and a combined construction and operating license (COL) in 2008. In addition, a reactor design from Westinghouse Electric Company has been selected and a purchase agreement is being negotiated. Participation agreements have been reached with each of the existing Plant Vogtle co-owners. See Note 4 to the financial statements for additional information on these co-owners. At this point, no final decision has 11-144

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report been made regarding actual construction. The NRC's streamlined licensing process for new nuclear units allows utilities to seek regulatory approval at various stages. These stages include design certification, which is obtained by the reactor vendor, and the ESP and COL, which are each obtained by the owner-operators of the units. An ESP indicates site approval is obtained before a company decides to build and the COL provides regulatory approval for building and operating the plant. In addition, any generation by the Company must be certified by the Georgia PSC. Southern Company also is participating in NuStart Energy Development, LLC (NuStart Energy), a broad-based nuclear industry consortium forned to share the cost of developing a COL and the related NRC review. NuStart Energy plans to complete detailed engineering design work and to prepare COL applications for two advanced reactor designs, then to choose one of the applications and file it for NRC review and approval. The COL ultimately is expected to be transferred to one or more of the consortium companies; however, at this time, none of them have committed to build a new nuclear plant. Other Matters In accordance with Financial Accounting Standards Board (FASB) Statement No. 87, Employers' Accounting for Pensions, the Company recorded non-cash pension income, before tax, of approximately $21 million, $35 million, and $54 million in 2005, 2004, and 2003, respectively. Postretirement benefit costs for the Company were $47 million, $44 million, and $41 million in 2005, 2004, and 2003, respectively. Both pension and postretirement costs are expected to trend upward. Such amounts are dependent on several factors including trust earnings and changes to the plans. A portion of pension income and postretirement benefit costs is capitalized based on constructionrelated labor charges. For the Company, pension income or expense and postretirement benefit costs are a component of the regulated rates and generally do not have a long-term effect on net income. For more information regarding pension and postretirement benefits, see Note 2 to the financial statements. The Company is involved in various other matters being litigated and regulatory matters that could affect future earnings. See Note 3 to the financial statements for information regarding material issues. ACCOUNTING POLICIES Application of Critical Accounting Policies and Estimates The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements. In the application of these policies, certain estimates are made that may have a material impact on the 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. Management has reviewed and discussed critical accounting policies and estimates with the Audit Committee of Southern Company's Board of Directors. Electric Utility Regulation The Company is subject to retail regulation by the Georgia PSC and wholesale regulation by the FERC. These regulatory agencies set the rates the Company is permitted to charge customers based on allowable costs. As a result, the Company applies FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation, which requires the financial statements to reflect the effects of rate regulation. Through the ratemaking process, the regulators may require the inclusion of costs or revenues in periods different than when they would be recognized by a non-regulated company. This treatment may result in the deferral of expenses and the recording of related regulatory assets based on anticipated future recovery through rates or the deferral of gains or creation of liabilities and the recording of related regulatory liabilities. The application of Statement No. 71 has a further effect on the Company's financial statements as a result of the estimates of allowable costs used in the ratemaking process. These estimates may differ from those actually incurred by the Company; therefore, the accounting estimates inherent in specific costs such as depreciation, nuclear decommissioning, and pension and postretirement benefits have less of a direct impact on the Company's results of operations than they would on a non-regulated company. As reflected in Note I to the financial statements under "Regulatory Assets and Liabilities," significant regulatory assets and liabilities have been recorded. 11-145

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report Management reviews the ultimate recoverability of these regulatory assets and liabilities based on applicable regulatory guidelines and accounting principles generally accepted in the United States. However, adverse legislative, judicial, or regulatory actions could materially impact the amounts of such regulatory assets and liabilities and could adversely impact the Company's financial statements. Contingent Obligations The Company is subject to a number of federal and state laws and regulations, as well as other factors and conditions that potentially subject it to environmental, litigation, income tax, and other risks. See FUTURE EARNINGS POTENTIAL herein and Note 3 to the financial statements for more information regarding certain of these contingencies. The Company periodically evaluates its exposure to such risks and records reserves for those matters where a loss is considered probable and reasonably estimable in accordance with generally accepted accounting principles. The adequacy of reserves can be significantly affected by external events or conditions that can be unpredictable; thus, the ultimate outcome of such matters could materially affect the Company's financial statements. These events or conditions include the following: * Changes in existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances, hazardous and solid wastes, and other environmental matters. * Changes in existing income tax regulations or changes in Internal Revenue Service interpretations of existing regulations. * Identification of additional sites that require environmental remediation or the filing of other complaints in which the Company may be asserted to be a potentially responsible party. * Identification and evaluation of other potential lawsuits or complaints in which the Company may be named as a defendant. * Resolution or progression of existing matters through the legislative process, the court systems, or the EPA. Unbilled Revenues Revenues related to the sale of electricity are recorded when electricity is delivered to customers. However, the determination of KWH sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, amounts of electricity delivered to customers, but not yet metered and billed, are estimated. Components of the unbilled revenue estimates include total KWH territorial supply, total KWH billed, estimated total electricity lost in delivery, and customer usage. These components can fluctuate as a result of a number of factors including weather, generation patterns, power delivery volume, and other operational constraints. These factors can be unpredictable and can vary from historical trends. As a result, the overall estimate of unbilled revenues could be significantly affected, which could have a material impact on the Company's results of operations. New Accounting Standards Income Taxes In December 2004, the FASB issued FASB Staff Position 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004 (FSP 109-1), which requires that the generation deduction be accounted for as a special tax deduction rather than as a tax rate reduction. The Company adopted FSP 109-1 in the first quarter of 2005 with no material impact on its financial statements. Conditional Asset Retirement Obligations Effective December 31, 2005, the Company adopted the provision of FASB Interpretation No. 47, Conditional Asset Retirement Obligations (FIN 47), which requires that an asset retirement obligation be recorded even though the timing and/or method of settlement are conditional on future events. Prior to December 2005, the Company did not recognize asset retirement obligations for asbestos removal because the timing of retirements was dependent on future events. For additional information, see Note 1 to the financial statements under "Asset Retirement Obligations and Other Costs of Removal." At December 31, 2005, the Company recorded additional asset retirement obligations (and assets) of approximately $91 million. The adoption of FIN 47 did not have any effect on the Company's income statement. 11-146

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report Stock Options On January 1, 2006, the Company adopted FASB Statement No. 123R, Share-Based Payment, on a modified prospective basis. This statement will be measured requires that compensation cost relating to share-based payment transactions be recognized in financial statements. That cost based on the grant date fair value of the equity or liability instruments issued. Although the compensation expense required under the revised statement differs slightly, the impacts on the Company's financial statements are similar to the pro forma disclosures included in Note 1 to the financial statements under "Stock Options." FINANCIAL CONDITION AND LIQUIDITY Overview The Company's financial condition continued to be stable at December 31, 2005 with emphasis on cost control measures combined with operations significantly lower costs of capital, achieved through the refinancing and/or redemption of higher-cost securities. Cash flow from from increased retail operating revenues (see RESULTS OF OPERATIONS herein), partially offset increased $56 million resulting primarily by the increase in under recovered deferred fuel costs. Fuel costs are generally recoverable in future periods and are reflected on the balance sheets as under recovered regulatory clause revenues. See FUTURE EARNINGS POTENTIAL - "PSC Matters - Fuel Cost Recovery" herein for additional information. In 2005, gross utility plant additions were $906 million. These additions were primarily related to Plant Mclntosh Units 10 and 11, transmission and distribution facilities, nuclear fuel, and equipment to comply with environmental standards. The majority of funds needed for gross property additions for the last several years have been provided from operating activities and capital contributions from Southern Company. The statements of cash flows provide additional details. The Company's ratio of common equity to total capitalization - including short-term debt - was 48.3 percent in 2005, 47.7 percent in 2004, and 48.3 percent in 2003. The Company has received investment grade ratings from the major rating agencies. Sources of Capital The Company 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. However, the type and timing of any future financings, if needed, will depend on market conditions, regulatory approval, and other factors. The issuance of long-term securities by the Company is subject to the approval of the Georgia PSC. In addition, the issuance of short-term debt securities by the Company is subject to regulatory approval by the FERC following the repeal of the Public Utility Holding Company Act of 1935, as amended, on February 8, 2006. Additionally, with respect to the public offering of securities, the Company files registration statements with the Securities and Exchange Commission under the Securities Act of 1933, as amended (1933 Act). The amounts of securities authorized by the appropriate regulatory authorities, as well as the amounts registered under the 1933 Act, are continuously monitored and appropriate filings are made to ensure flexibility in the capital markets. The Company obtains financing separately without credit support from any affiliate. See Note 6 to the financial statements under "Bank Credit Arrangements" for additional information. The Southern Company system does not maintain a centralized cash or money pool. Therefore, funds of the Company are not commingled with funds of any other company. The Company's current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet cash needs which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, the Company had credit arrangements with banks totaling $780 million, of which $778 million was unused, at the beginning of 2006. See Note 6 to the financial statements under "Bank Credit Arrangements" for additional information. The Company may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of the Company and the other retail operating companies. 11-147

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Georgia Power Company 2005 Annual Report


proceeds from Proceeds from such issuances for the benefit of the Company are loaned directly to the Company and are not commingled with company under these arrangements are several; there is no issuances for the benefits of any other operating company. The obligations of each and no extendible cross affiliate credit support. As of December 31, 2005, the Company had outstanding $268 million of commercial paper notes. commercial At the beginning of 2006, bank credit arrangements were as follows:
Total Unused 2006 Expires 2007 (in millions) 2010

$780

778

70

350

$ 360

The credit arrangements that expire in 2006 allow for the execution of term loans for an additional two-year period. Financing Activities and to During 2005, the Company issued $810 million of long-term debt. The issuances were used to refund $635 million of long-term debt fund the Company's ongoing construction program. per share. Subsequent to December 31, 2005, the Company redeemed all of its outstanding preferred stock at a redemption price of $107 Credit Rating Risk a result of a The Company does not have any credit arrangements that would require material changes in payment schedules or terminations as There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating credit rating downgrade. of credit, or cash. These change to BBB- or Baa3 or below. Generally, collateral may be provided for by a Southern Company guaranty, letter and sales. At December 31, 2005, the maximum potential collateral requirements at a contracts are primarily for physical electricity purchases BBB- or Baa3 rating were approximately $6 million. The maximum potential collateral requirements at a rating below BBB- or Baa3 were approximately $245 million. The Company is also party to certain derivative agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade. These agreements are primarily for natural gas price risk management activities. At December 31, 2005, the Company had no material exposure related to these agreements. Market Price Risk Due to cost-based rate regulation, the Company has limited exposure to market rate volatility in interest rates, commodity fuel prices, and prices of electricity. To manage the volatility attributable to these exposures, the Company nets the exposures to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company's policies in areas such as counterparty exposure and hedging practices. Company policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress tests, and sensitivity analysis. To mitigate future exposure to changes in interest rates, the Company has entered into forward starting interest rate swaps that have been designated as hedges. These swaps have a notional amount of $300 million and are related to anticipated debt issuances over the next two years. The weighted average interest rate on outstanding variable long-term debt that has not been hedged at January 1, 2006 was 3.56 percent. If the Company sustained a 100 basis point change in interest rates for all unhedged variable rate long-term debt, the change would affect annualized interest expense by approximately $3.3 million at January 1, 2006. For further information, see Notes 1 and 6 to the financial statements under "Financial Instruments." To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, into similar contracts for gas purchases. The Company has implemented a fuel hedging program at the instruction of the Georgia PSC. Fair 11-148

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report value of changes in energy-related derivative contracts and year-end valuations were as follows at December 31:
Changes in Fair Value

2005 (in millions)

2004

Contracts beginning of year Contracts realized or settled Current period changes (a) Contracts end of year (a) Current period changes also include the changes in fair value of new contracts entered into during the period.

$ 5.8 (40.0) 60.8 $ 26.6

$ 3.2 (12.2) 14.8 $ 5.8

Source of 2005 Year-End Valuation Prices Total Maturity Fair Value Year 1 1-3 Years (in millions)

Actively quoted External sources Contracts end of year

$26.8 (0.2) $26.6

$16.4 (0.2) $16.2

$10.4 $10.4

Unrealized gains and losses from mark to market adjustments on derivative contracts related to the Company's fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through the Company's fuel cost recovery mechanism. Of the net gains, the Company is allowed to retain 25 percent in earnings. In 2005, the Company had a total net gain of $64.1 million, of which the Company retained $16.0 million. See Note 3 to the financial statements under "Retail Regulatory Matters -Fuel Hedging Program" for additional information. Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. At December 31, 2005, the fair value of derivative energy contracts was reflected in the financial statements as follows:
Amounts (in millions)

Regulatory liabilities, net Net income Total fair value

$26.7 (0.1) $26.6

Unrealized gains (losses) recognized in income in 2005, 2004, and 2003 were not material. The Company is exposed to market price risk in the event of nonperformance by counterparties to the derivative energy contracts. The Company's policy is to enter into agreements with counterparties that have investment grade credit ratings by Moody's and Standard & Poor's or with counterparties who have posted collateral to cover potential credit exposure. Therefore, the Company does not anticipate market risk exposure from nonperformance by the counterparties. For additional information, see Notes 1 and 6 to the financial statements under "Financial Instruments." Capital Requirements and Contractual Obligations The construction program of the Company is currently estimated to be $1.3 billion for 2006, $1.4 billion for 2007, and $1.3 billion for 2008. Environmental expenditures included in these amounts are $410 million, $674.6 million, and $515.8 million for 2006, 2007, and 2008, respectively. Actual construction costs may vary from this estimate because of changes in such factors as: business conditions; environmental regulations; nuclear plant regulations; FERC rules and transmission regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. As a result of requirements by the NRC, the Company has established external trust funds for nuclear decommissioning costs. For additional information, see Note 1 to the financial statements under "Nuclear Decommissioning." Also as discussed in Note 1 to the financial statements under "Nuclear Fuel Disposal Costs," in 1993 the DOE implemented a special assessment over a 15-year period on utilities with nuclear plants to be used for the decontamination and decommissioning of its nuclear fuel enrichment facilities. In addition, as discussed in Note 2 to the financial statements, the Company provides postretirement benefits to substantially all employees and funds trusts to the extent required by the Georgia PSC and the FERC. Other funding requirements related to obligations associated with scheduled maturities of long-term debt and preferred securities and the related interest, redemption of preferred stock, leases, and other purchase commitments are as follows. See Notes 1, 6, and 7 to the financial statements for additional information. 11-149

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report Amounts in the following chart exclude any effects on the Company of the Merger. Contractual Obligations
2006 20072008 20092010 After 2010

Total

(in millions)

Long-term debt (a)-_ Principal Interest Preferred stock Commodity derivative obligations (b) Operating leases Purchase commitments (c)Capital (d) Coal Nuclear fuel Natural gas (e) Purchased power Long-term service agreements Trusts (0 Nuclear decommissioning Postretirement benefits DOE assessments Total (a)

153 265 15 12 34 1,251 1,579 44 577 343 7

306 496 -58 2,738 2,220 42 525 689 18

282 468 44 2,421 694 25 511 559 24 14

4,563 4,989 58

5,304 6,218 15 12 194 6,410 4,533 175 3,660 2,585 193

40 64 2,047 994 144 117

7 18 4 $ 4,309

14 41 $ 7,147

5,042

$ 13,016

152 59 4 S 29,514

All amounts are reflected based on final maturity dates. The Company plans to continue to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of January 1, 2006, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest risk. For additional information see Notes 1 and 6 to the financial statements herein. The Company generally does not enter into non-cancelable commitments for other operations and maintenance expenditures. Total other operations and maintenance expenses for the last three years were $1.5 billion, $1.4 billion, and $1.2 billion, respectively. The Company forecasts capital expenditures over a five-year period. Amounts represent current estimates of total expenditures, excluding those amounts related to contractual purchase commitments for uranium and nuclear fuel conversion, enrichment, and fabrication services. At December 31, 2005, significant purchase commitments were outstanding in connection with the construction program. Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected have been estimated based on the New York Mercantile Exchange future prices at December 31, 2005. Projections of nuclear decommissioning trust contributions are based on the 2004 Retail Rate Plan. The Company forecasts postretirement trust contributions over a three-year period. No contributions related to the Company's pension trust are currently expected during this period. See Note 2 to the financial statements for additional information related to the pension and postretirement plans, including estimated benefit payments. Certain benefit payments will be made through the related trusts. Other benefit payments will be made from the Company's corporate assets. II-150

(b) (c) (d)

(e) (f)

Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2005 Annual Report Cautionary Statement Regarding Forward-Looking Statements

The Company's 2005 Annual Report contains forward-looking statements. Forward-looking statements include, among other things, statements concerning retail sales growth, storm cost recovery and repairs, environmental regulations and expenditures, the Company's projections for postretirement benefit trust contributions, financing activities, access to sources of capital, the proposed merger of Savannah Electric and the Company, the impacts of the adoption of new accounting rules, completion of construction projects, and estimated construction and other expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will", "could," "should," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential," or "continue" or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include: * the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, and implementation of the Energy Policy Act of 2005, and also changes in environmental, tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; * current and future litigation, regulatory investigations, proceedings, or inquiries, including FERC matters and the pending EPA civil action against the Company; * the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates; * variations in demand for electricity, including those relating to weather, the general economy and population, and business growth (and declines); * available sources and costs of fuels; * ability to control costs; * investment performance of the Company's employee benefit plans; * advances in technology; * state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate cases related to fuel cost recovery; * internal restructuring or other restructuring options that may be pursued; * potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company; * the ability of counterparties of the Company to make payments as and when due; * the ability to obtain new short- and long-term contracts with neighboring utilities; * the direct or indirect effect on the Company's business resulting from terrorist incidents and the threat of terrorist incidents; * interest rate fluctuations and financial market conditions and the results of financing efforts, including the Company's credit ratings; * the ability of the Company to obtain additional generating capacity at competitive prices; * catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, or other similar occurrences; * the direct or indirect effects on the Company's business resulting from incidents similar to the August 2003 power outage in the Northeast; * the effect of accounting pronouncements issued periodically by standard-setting bodies; and * other factors discussed elsewhere herein and in other reports, including the Form 10-K, filed by the Company from time to time with the Securities and Exchange Commission.
The Company expressly disclaims any obligation to update any forward-looking statements.

11-151

Table of Contents STATEMENTS OF INCOME For the Years Ended December 31, 2005, 2004, and 2003 Georgia Power Company 2005 Annual Report

2005

2004 (in thousands)

2003

Operating Revenues: Retail sales Sales for resale-Non-affiliates Affiliates Other revenues Total operating revenues Operating Expenses: Fuel Purchased power Non-affiliates Affiliates Other operations Maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and (Expense): Allowance for equity funds used during construction Interest income Interest expense, net of amounts capitalized Interest expense to affiliate trusts Distributions on mandatorily redeemable preferred securities Other income (expense), net Total other income and (expense) Earnings Before Income Taxes Income taxes Net Income Dividends on Preferred Stock Net Income After Dividends on Preferred Stock The accompanying notes are an integral part of these financial statements. 11-152

$5,642,812 519,673 264,989 206,729 6,634,203 1,830,829 408,563 761,466 949,722 531,168 504,248 259,825 5,245,821 1,388,382

$4,776,985 246,545 166,245 181,033 5,370,808 1,232,496 304,978 671,098 902,167 498,114 275,488 227,806 4,112,147 1,258,661

$4,309,972 259,376 174,855 169,304 4,913,507 1,103,963 258,621 516,944 827,972 419,206 349,984 212,827 3,689,517 1,223,990

26,808 6,281 (221,199) (59,510) 5,742 (241,878) 1,146,504 430,812 715,692 693 $ 714,999

26,659 6,657 (182,370) (44,565) (15,839) (11,362) (220,820) 1,037,841 379,170 658,671 670 $ 658,001

10,752 15,625 (182,583) (59,675) (10,551) (226,432) 997,558 366,311 631,247 670 $ 630,577

Table of Contents STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2005, 2004, and 2003 Georgia Power Company 2005 Annual Report
2005 2004 (in thousands) 2003

Operating Activities: Net income Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization Deferred income taxes and investment tax credits, net Deferred expenses - affiliates Allowance for equity funds used during construction Pension, postretirement, and other employee benefits Tax benefit of stock options Other, net Changes in certain current assets and liabilities Receivables Fossil fuel stock Materials and supplies Prepaid income taxes Other current assets Accounts payable Accrued taxes Accrued compensation Other current liabilities Net cash provided from operating activities Investing Activities: Property additions Nuclear decommissioning trust fund purchases Nuclear decommissioning trust fund sales Purchase of property from affiliates Cost of removal net of salvage Change in construction payables, net of joint owner portion Other Net cash used for investing activities Financing Activities: Increase (decrease) in notes payable, net ProceedsSenior notes Pollution control bonds Mandatorily redeemable preferred securities Capital contributions from parent company
Redemptions -

$ 715,692 592,264 231,708 1,268 (26,808) (19,468) 15,711 (11,068) (591,498) 2,528 (53,942) (43,626) 4,108 110,118 85,098 3,822 33,289 1,049,196 (842,870) (381,235) 372,536 (29,428) 4,037 (315) (877,275) 59,509 625,000 185,000 149,034 (185,000) (450,000) (546) (556,100) (21,679) (194,782) (22,861) 33,497 $ 10,636

658,671 361,958 251,623 (10,563) (26,659) (15,868) 9,701 (19,764) (227,204) (46,730) 618 14,358 (23,672) 132,001 (64,563) (6,664) 5,836 993,079

S 631,247 424,321 199,265 (7,399) (10,752) (30,225) 11,649 18,929 (4,395) (17,490) (7,677) (3,951) 1,599 (62,553) 52,348 (3,111) 19,845 1,211,650 (717,993) (656,806) 648,107 (2) (28,265) (32,223) 1,008 (786,174) (220,400) 1,000,000 40,809 (665,000) (696) (565,800) (22,563) (433,650) (8,174) 16,873 $ 8,699

(741,151) (541,048) 532,349 (339,750) (21,756) 413 (4,961) (1,115,904) 70,956 600,000 200,000 260,068 (200,000) (200,000) (654) (565,500) (17,247) 147,623 24,798 8,699 $ 33,497

Pollution control bonds Senior notes Mandatorily redeemable preferred securities Payment of preferred stock dividends Payment of common stock dividends Other Net cash provided from (used for) financing activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Supplemental Cash Flow Information: Cash paid during the period for Interest (net of $10,871, $8,920, and $5,428 capitalized, respectively) Income taxes (net of refunds)
The accompanying notes are an integral part of these financial statements.

$ 250,445 207,973

228,190 127,115

$ 215,463 145,048

II-153

~~

~I

Table of Contents BALANCE SHEETS At December 31, 2005 and 2004 Georgia Power Company 2005 Annual Report Assets Current Assets: Cash and cash equivalents Receivables-Customer accounts receivable Unbilled revenues Under recovered regulatory clause revenues Other accounts and notes receivable Affiliated companies Accumulated provision for uncollectible accounts Fossil fuel stock, at average cost Vacation pay Materials and supplies, at average cost Prepaid expenses Other Total current assets Property, Plant, and Equipment: In service Less accumulated provision for depreciation Nuclear fuel, at amortized cost Construction work in progress Total property, plant, and equipment Other Property and Investments: Equity investments in unconsolidated subsidiaries Nuclear decommissioning trusts, at fair value Other Total other property and investments Deferred Charges and Other Assets: Deferred charges related to income taxes Prepaid pension costs Deferred under recovered regulatory clause revenues Other regulatory assets Other Total deferred charges and other assets Total Assets The accompanying notes are an integral part of these financial statements. II-154 $ 2005 10,636 418,154 141,875 454,683 110,397 84,597 (8,647) 181,739 59,190 323,908 70,825 50,248 1,897,605 19,603,249 7,575,926 12,027,323 134,798 563,155 12,725,276 68,188 486,591 71,468 626,247 500,882 476,458 295,116 330,483 195,716 1,798,655 $17,047,783 $ 2004
(in thousands)

33,497 317,937 140,027 345,542 94,377 17,042 (7,100) 184,267 57,372 270,422 32,695 28,262 1,514,340 18,681,533 7,217,607 11,463,926 124,745 766,140 12,354,811 66,192 459,194 64,571 589,957

505,664 450,270 246,462 160,834 1,363,230 $15,822,338

Table of Contents BALANCE SHEETS At December 31, 2005 and 2004 Georgia Power Company 2005 Annual Report Liabilities and Stockholder's Equity Current Liabilities: Securities due within one year Notes payable Accounts payable Affiliated Other Customer deposits Accrued taxes Income taxes Other Accrued interest Accrued vacation pay Accrued compensation Other Total current liabilities Long-term Debt (See accompanying statements) Long-term Debt Payable to Affiliated Trusts (See accompanying statements) Deferred Credits and Other Liabilities: Accumulated deferred income taxes Deferred credits related to income taxes Accumulated deferred investment tax credits Employee benefit obligations Asset retirement obligations Other cost of removal obligations Other regulatory liabilities Other Total deferred credits and other liabilities Total Liabilities Preferred Stock (See accompanying statements) Common Stockholder's Equity (See accompanying statements) Total Liabilities and Stockholder's Equity Commitments and Contingent Matters (See notes) The accompanying notes are an integral part of these financial statements. II-155 $ 2005
(in thousands)

2004 $ 452,498 208,233 194,253 310,763 115,661 78,269 129,520 74,529 44,894 127,340 83,632 1,819,592 3,709,852 969,073 2,556,040 170,973 300,018 331,002 504,515 411,692 84,678 59,733 4,418,651 10,917,168 14,609 4,890,561 $15,822,338

167,317 267,743 285,019 360,455 129,293 150,896 204,778 88,885 45,602 137,303 120,312 1,957,603 4,179,218 969,073

2,730,303 158,759 287,726 358,137 627,465 404,614 97,015 63,335 4,727,354 11,833,248 5,214,535 $17,047,783

Table of Contents STATEMENTS OF CAPITALIZATION At December 31, 2005 and 2004 Georgia Power Company 2005 Annual Report
2005
(in thousands)

2004

2005
(percentof total)

2004

Long-Term Debt: Long-term notes payable 5.50% due December 1, 2005 Variable rate (1.66% to 1.96% at 1/1/05) due 2005 6.20% due February 1, 2006 4.875% due July 15, 2007 4.10% due August 15, 2009 Variable rate (4.53% at 1/1/06) due 2009 4.00% to 6.00% due 2011-2045 Total long-term notes payable Other long-term debt Pollution control revenue bonds - non-collateralized: 2.83% to 5.45% due 2012-2034 Variable rate (2.82% to 3.08% at 1/1/06) due 2011-2032 Total other long-term debt Capitalized lease obligations Unamortized debt premium (discount), net Total long-term debt (annual interest requirement $205.5 million) Less amount due within one year Long-term debt excluding amount due within one year Long-term Debt Payable to Affiliated Trusts: 4.88% to 7.13% due 2042 (annual interest requirement $59.5 million) Cumulative Preferred Stock: $100 stated value at 4.60%
Authorized -- 5,000,000 shares

150,000 300,000 125,000 150,000 1,850,000 2,575,000

$ 150,000 300,000 150,000 300,000 125,000 150,000 1,225,000 2,400,000

812,560 873,330 1,685,890 74,484 (3,448) 4,331,926 152,708 4,179,218

812,560 873,330 1,685,890 76,982 (522) 4,162,350 452,498 3,709,852

40.3%

38.7%

969,073

969,073

9.4

10.1

Outstanding 145,689 shares (annual dividend requirement $0.7 million) Less amount due within one year Total cumulative preferred stock excluding amount due within one year Common Stockholder's Equity: Common stock, without par value
Authorized -- 15,000,000 shares

14,609 14,609 -

14,609 14,609 0.0 0.2

Outstanding 7,761,500 shares Paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total common stockholder's equity Total Capitalization The accompanying notes are an integral part of these financial statements. 11-156

344,250 2,643,012 2,261,698 (34,425) 5,214,535 $10,362,826

344,250 2,478,268 2,102,798 (34,755) 4,890,561 $9,584,095

50.3 100.0%

51.0 100.0%

Table of Contents STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 2005, 2004, and 2003 Georgia Power Company 2005 Annual Report
Other

Common
Stock

Paid-In
Capital

Retained
Earnings (in thousands)

Comprehensive
Income (loss) Total

Balance at December 31, 2002 Net income after dividends on preferred stock Capital contributions from parent company Other comprehensive income (loss) Cash dividends on common stock Balance at December 31, 2003 Net income after dividends on preferred stock Capital contributions from parent company
Other comprehensive income (loss)

$344,250

$2,156,080 52,458

$1,945,520 630,577 -(11,471) (565,800) 2,010,297 658,001 (565,500)

$ (11,403)

344,250
--.

2,208,538 269,769
-(39)

(22,874) (11,881)

$4,434,447 630,577 52,458 (11,471) (565,800) 4,540,211 658,001 269,769


(11,881)

Cash dividends on common stock


Other

(565,500)
(39)

--

Balance at December 31, 2004


Net income after dividends on preferred stock Capital contributions from parent company Other comprehensive income (loss) Cash dividends on common stock Other

344,250
-

2,478,268
164,745 (1)

2,102,798
714,999 (556,100) 1

(34,755)
330 -

4,890,561
714,999 164,745 330 (556,100) -

Balance at December 31, 2005

$344,250

$2,643,012

$2,261,698

$ (34,425)

$5,214,535

The accompanying notes are an integral part of these financial statements. STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2005, 2004, and 2003 Georgia Power Company 2005 Annual Report
2005 2004
(in thousands)

2003

Net income after dividends on preferred stock Other comprehensive income (loss): Change in additional minimum pension liability, net of tax of $(1,981), $(3,861) and $(5,133), respectively Change in fair value of marketable securities, net of tax of $317 and $(114) Changes in fair value of qualifying hedges, net of tax of $1,214, $(5,046) and $(3,241), respectively Less: Reclassification adjustment for amounts included in net income, net of tax of $848, $1,528 and $1,208, respectively Total other comprehensive income (loss) Comprehensive Income The accompanying notes are an integral part of these financial statements. II-157

$714,999

$658,001

$630,577

(3,140) 501 1,925 1,044 330 $715,329

(6,122) (181) (7,999) 2,421 (11,881) $646,120

(8,138) (5,550) 2,217 (11,471) $619,106

Table of Contents NOTES TO FINANCIAL STATEMENTS Georgia Power Company 2005 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Georgia Power Company (Company) is a wholly owned subsidiary of Southern Company, which is the parent company of five retail operating companies, Southern Power Company (Southern Power), Southern Company Services (SCS), Southern Communications Services (SoutherLINC Wireless), Southern Company Holdings (Southern Holdings), Southern Nuclear Operating Company (Southern Nuclear), Southern Telecom, and other direct and indirect subsidiaries. The retail operating companies - Alabama Power, the Company, Gulf Power, Mississippi Power, and Savannah Electric provide electric service in four Southeastern states. The Company operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Southern Power constructs, owns, and manages Southern Company's competitive generation assets and sells related to electricity at market-based rates in the wholesale market. Contracts among the retail operating companies and Southern Power jointly owned generating facilities, interconnecting transmission lines, or the exchange of electric power -are regulated by the Federal Energy Regulatory Commission (FERC). SCS - the system service company -- provides, at cost, specialized services to Southern Company and its subsidiary companies. SouthemLINC Wireless provides digital wireless communications services to the retail operating companies and also markets these services to the public within the Southeast. Southern Telecom provides fiber cable services within the Southeast. Southern Holdings is an intermediate holding subsidiary for Southern Company's investments in synthetic fuels and leveraged leases and various other energy-related businesses. Southern Nuclear operates and provides services to Southern Company's nuclear power plants. In January 2006, Southern Company completed the sale of substantially all the assets of Southern Company Gas, its competitive retail natural gas marketing subsidiary. The equity method is used for subsidiaries in which the Company has significant influence but does not control and for variable interest entities where the Company is not the primary beneficiary. Certain prior years' data presented in the financial statements have been reclassified to conform to current year presentation. Southern Company was registered as a holding company under the Public Utility Holding Company Act of 1935, as amended (PUHCA), until its repeal on February 8, 2006, and Southern Company and its subsidiaries, including the Company, were subject to the regulatory provisions of the PUHCA. The Company is subject to regulation by the FERC and the Georgia Public Service Commission (PSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by its regulatory commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and the actual results may differ from those estimates. Affiliate Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at direct or allocated cost: general and design engineering, purchasing, accounting and statistical analysis, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, and other services with respect to business and operations and power pool operations. Costs for these services amounted to $330 million in 2005, $292 million in 2004, and $303 million in 2003. Cost allocation methodologies used by SCS were approved by the Securities and Exchange Commission prior to the repeal of the PUHCA and management believes they are reasonable. The Company has an agreement with Southern Nuclear under which the following nuclear-related services are rendered to the Company at cost: general executive and advisory services, general operations, management and technical services, administrative services including procurement, accounting, employee relations, and systems and procedures services, strategic planning and budgeting services, and other services with respect to business and operations. Costs for these services amounted to $328 million in 2005, $311 million in 2004, and $289 million in 2003. The Company has an agreement with Southern Power under which the Company operates and maintains Southern Power owned plants Dahlberg, Franklin, and Wansley at cost. Billings under these agreements with Southern Power amounted to $5.2 million in 2005, $4.8 million in 2004, and $5.3 million in 2003. 11-158

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report The Company has an agreement with SoutherLINC Wireless under which the Company receives digital wireless communications services and purchases digital equipment. Costs for these services amounted to $7.3 million in 2005, $7.7 million in 2004, and $7.4 million in 2003. Southern Company holds a 30 percent ownership in Alabama Fuel Products, LLC (AFP), which produces synthetic fuel. The Company has an agreement with an indirect subsidiary of Southern Company that provides services for AFP. Under this agreement, the Company provides certain accounting functions, including processing and paying fuel transportation invoices, and the Company is reimbursed for its expenses. Amounts billed under this agreement totaled approximately $61 million in 2005, $53 million in 2004, and $38 million in 2003. In addition, the Company purchases synthetic fuel from AFP for use at plants Branch, McDonough, and Bowen. Fuel purchases totaled $216 million in 2005, $163 million in 2004, and $91 million in 2003. The Company has entered into several purchased power agreements (PPAs) with Southern Power for capacity and energy. Expenses associated with these PPAs were $419 million, $282 million, and $203 million in 2005, 2004, and 2003, respectively. Additionally, the Company recorded a reduction of $1 million and an increase of $11 million of prepaid capacity expenses included on the balance sheets at December 31, 2005 and 2004, respectively. See Note 7 under "Purchased Power Commitments" for additional information. The Company has an agreement with Gulf Power under which Gulf Power jointly owns a portion of Plant Scherer. Under this agreement, the Company operates Plant Scherer, and Gulf Power reimburses the Company for its proportionate share of the related expenses which were $4.3 million in 2005, $6.8 million in 2004, and $4.9 million in 2003. The Company has an agreement with Savannah Electric under which the Company jointly owns a portion of Plant McIntosh. Under this agreement, Savannah Electric operates Plant McIntosh, and the Company reimburses Savannah Electric for its proportionate share of the related expenses which were $5.5 million in 2005, $3.3 million in 2004, and $3.7 million in 2003. See Note 4 for additional information. The Company provides incidental services to other Southern Company subsidiaries which are generally minor in duration and amount. However, with the hurricane damage experienced by Alabama Power, Gulf Power, and Mississippi Power in the last two years, assistance provided to aid in storm restoration, including company labor, contract labor, and materials, has caused an increase in these activities. The total amount of storm assistance provided to Alabama Power, Gulf Power, and Mississippi Power in 2005 was $4.1 million, $4.4 million, and $55 million, respectively. The total amount of storm assistance provided to Alabama Power and Gulf Power in 2004 was $4.1 million and $6.4 million, respectively. These activities were billed at cost. Also see Note 4 for information regarding the Company's ownership in and PPA with Southern Electric Generating Company (SEGCO) and Note 5 for information on certain deferred tax liabilities due to affiliates. The retail operating companies, including the Company, and Southern Power may jointly enter into various types of wholesale energy, natural gas, and certain other contracts, either directly or through SCS as agent. Each participating company may be jointly and severally liable for the obligations incurred under these agreements. See Note 7 under "Fuel Commitments" for additional information. The Company has entered into an agreement to merge with Savannah Electric. See Note 3 under "Retail Regulatory Matters additional information. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. II-159 Merger" for

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report Regulatory assets and (liabilities) reflected in the Company's balance sheets at December 31 relate to the following:
2005 2004 (in millions) Note

Deferred income tax charges Premium on reacquired debt Corporate building lease Vacation pay Postretirement benefits DOE assessments Generating plant outage costs Other regulatory assets Asset retirement obligation Other cost of removal obligations Deferred income tax credits Environmental remediation Purchased power Other regulatory liabilities Total

$ 501 170 52 59 18 6 46 33 65 (404) (159) (19) (33) (30) $305

$ 506 177 53 57 20 10 40 11 (20) (412) (171) (22) (6) $243

(a) (b) (e) (d) (e) (c) (g) (e) (a) (a) (a) (f) (f) (e)

Note: The recovery and amortization periods for these regulatory assets and (liabilities) are as follows: (a) Asset retirement and removal liabilities are recorded, deferred income tax assets are recovered, and deferred tax liabilities are amortized over the related property lives, which may range up to 60 years. Asset retirement and removal liabilities will be settled and trued up following completion of the related activities. (b) Recovered over either the remaining life of the original issue or, if refinanced, over the life of the new issue which may range up to 50 years. (c) Assessments for the decontamination and decommissioning of the DOE's nuclear fuel enrichment facilities are recorded annually from 1993 through 2006. (d) Recorded as earned by employees and recovered as paid, generally within one year. (e) Recorded and recovered or amortized as approved by the Georgia PSC. (f) Amortized over a three-year period ending in 2007. See Note 3 under "Retail Regulatory Matters (g) See "Property, Plant, and Equipment" herein. In the event that a portion of the Company's operations is no longer subject to the provisions of Statement No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine if any impairment to other assets, including plant, exists and, if impaired, write down the assets to their fair value. All regulatory assets and liabilities are reflected in rates. Revenues Energy and other revenues are recognized as services are provided. Unbilled revenues are accrued at the end of each fiscal period. Electric rates for the Company include provisions to adjust billings for fluctuations in fuel costs, fuel hedging, the energy component of purchased power costs, and certain other costs. Revenues are adjusted for differences between the actual recoverable costs and amounts billed in current regulated rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts averaged less than 1 percent of revenues despite an increase in customer bankruptcies. Fuel Costs Fuel costs are expensed as the fuel is used. Fuel expense includes the cost of purchased emission allowances as they are used. Fuel expense also includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Total charges for nuclear fuel included in fuel expense amounted to $70 million in 2005, $73 million in 2004, and $74 million in 2003. Nuclear Fuel Disposal Costs The Company has contracts with the U.S. Department of Energy (DOE) that provide for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent nuclear fuel in 1998 as required by the contracts, and the Company is pursuing legal remedies against the government for breach of contract. Sufficient pool storage capacity for spent fuel is available at Plant Vogtle to maintain full-core discharge capability for both units into 2015. Construction of an on-site dry storage facility at Plant Vogtle is expected to begin in sufficient time to maintain pool full-core discharge capability. At Plant Hatch, an on-site dry storage facility is operational and can be expanded to accommodate Rate Plans."

spent fuel through the life of the plant. Also, the Energy Policy Act of 1992 required the establishment of a Uranium Enrichment Decontamination and Decommissioning Fund, which is funded in part by a special assessment on utilities with nuclear plants. This assessment has been paid over a 15II-160

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report year period; the final installment is scheduled to occur in 2006. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. The Company, based on its ownership interest, estimates its remaining liability at December 31, 2005 under this law to be approximately $4 million. Income Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Manufacturer's Tax Credits The State of Georgia provides a tax credit for qualified investment property to manufacturing companies that construct new facilities. The credit ranges from 1 percent to 8 percent of qualified construction expenditures depending upon the county in which the new facility is located. The Company's policy is to recognize these credits when management believes that they are more likely than not to be allowed by the Georgia Department of Revenue. Manufacturer's tax credits of $12.5 million, $12.9 million, and $12.0 million were recorded in 2005, 2004, and 2003, respectively. Property, Plant, and Equipment The Company's property, plant, and equipment consisted of the following at December 31 (in millions):
2005 2004

Generation Transmission Distribution General Plant acquisition adjustment Total plant in service

$ 9,571 2,994 5,953 1,057 28 $19,603

$ 9,002 2,870 5,744 1,038 28 $18,682

Property, plant, and equipment is stated at original cost, less regulatory disallowances and impairments. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the interest capitalized and/or cost of funds used during construction. The cost of replacements of property, exclusive of minor items of property, is capitalized. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense as incurred or performed with the exception of certain generating plant maintenance costs. As mandated by the Georgia PSC, the Company defers and amortizes nuclear refueling costs over the unit's operating cycle before the next refueling. The refueling cycles are 18 and 24 months for plants Vogtle and Hatch, respectively. In accordance with the Georgia PSC rate order, the Company defers the costs of certain significant inspection costs for the combustion turbines at Plant McIntosh and amortizes such costs over 10 years, which approximates the expected maintenance cycle. Depreciation and Amortization Depreciation of the original cost of plant in service is provided primarily by using composite straight-line rates, which approximated 2.6 percent in 2005, 2.6 percent in 2004, and 2.7 percent in 2003. Depreciation studies are conducted periodically to update the composite rates that are approved by the Georgia PSC. In connection with the new retail rate plan for the Company ending December 31, 2007 (2004 Retail Rate Plan), effective January 1, 2005, the depreciation rates were revised by the Georgia PSC. The revised depreciation rates had no material impact on the Company's financial statements. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its original cost, together with the cost of removal, less salvage, is charged to accumulated depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Under the three-year retail rate plan for the Company ending December 31, 2004 (2001 Retail Rate Plan), the Company discontinued recording accelerated depreciation and amortization. Also, the Company was ordered to amortize $333 million, the cumulative balance previously expensed, equally over three years as a credit to amortization expense beginning January 11-161

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report 2002. Additionally, the Company was ordered to recognize new Georgia PSC certified purchased power costs in rates evenly over the three years covered by the 2001 Retail Rate Plan. As a result of the purchased power regulatory adjustment, the Company recorded amortization expenses of $14 million in 2003. The Company recorded a credit to amortization expense of $77 million in 2004. See Note 3 under "Retail Regulatory Matters Rate Plans" for additional information. Asset Retirement Obligations and Other Costs of Removal Effective January 1, 2003, the Company adopted FASB Statement No. 143, Accounting for Asset Retirement Obligations. Statement No. 143 established new accounting and reporting standards for legal obligations associated with the ultimate costs of retiring long-lived assets. The present value of the ultimate costs for an asset's future retirement is recorded in the period in which the liability is incurred. The costs are capitalized as part of the related long-lived asset and depreciated over the asset's useful life. In addition, effective December 31, 2005, the Company adopted the provisions of FASB Interpretation No. 47, Conditional Asset Retirement Obligations (FIN 47), which requires that an asset retirement obligation be recorded even though the timing and/or method of settlement are conditional on future events. Prior to December 2005, the Company did not recognize asset retirement obligations for asbestos removal because the timing of their retirements was dependent on future events. The Company has received approval from the Georgia PSC allowing the continued accrual of other future retirement costs for long-lived assets that the Company does not have a legal obligation to retire. Accordingly, the accumulated removal costs for these obligations will continue to be reflected on the balance sheets as a regulatory liability. Therefore, the Company had no cumulative effect to net income resulting from the adoption of Statement No. 143 or FIN 47. The liability recognized to retire long-lived assets primarily relates to the Company's nuclear facilities, which include the Company's ownership interests in plants Hatch and Vogtle. The fair value of assets legally restricted for settling retirement obligations related to nuclear facilities as of December 31, 2005 was $487 million. In addition, the Company has recognized retirement obligations related to various landfill sites, ash ponds, and underground storage tanks. The Company also recorded additional asset retirement obligations (and assets) of approximately $91 million related to asbestos removal. The Company has also identified retirement obligations related to certain transmission and distribution facilities, leasehold improvements, equipment on customer property, and property associated with the Company's rail lines. However, liabilities for the removal of these assets have not been recorded because no reasonable estimate can be made regarding the timing of any related retirements. The Company will continue to recognize in the statements of income the allowed removal costs in accordance with its regulatory treatment. Any difference between costs recognized under Statement No. 143 and FIN 47 and those reflected in rates are recognized as either a regulatory asset or liability in the balance sheets as ordered by the Georgia PSC. See "Nuclear Decommissioning" herein for further information on amounts included in rates. Details of the asset retirement obligations included in the balance sheets are as follows:
2005 (in millions) 2004

Balance beginning of year Liabilities incurred Liabilities settled Accretion Balance end of year

$505 91 (2) 33 $627

$476 (2) 31 $505

If FIN 47 had been adopted as of December 31, 2004, the pro forma asset retirement obligations would have been $591 million. Nuclear Decommissioning The Nuclear Regulatory Commission (NRC) requires licensees of commercial nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. The Company has external trust funds to comply with the NRC's regulations. Use of the funds is restricted to nuclear decommissioning activities and the funds are managed and invested in accordance with applicable requirements of various regulatory bodies, including the NRC, the FERC, and state PSCs, as well as the Internal Revenue Service (IRS). The trust funds are invested in a taxII-162

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report efficient manner in a diversified mix of equity and fixed income securities and are classified as available-for-sale. The trust funds are included in the balance sheets at fair value, as obtained from quoted market prices for the same or similar investments. Details of the securities held in these trusts at December 31 are as follows:
2005 Unrealized Gains Unrealized Losses (in millions) Fair Value

Equity Debt
Other

$76.7 2.8
---

$(6.3) (0.8) $(7.1)


Unrealized Losses (in millions)

$325.5 135.3
25.8

Total
2004

$79.5
Unrealized Gains

$486.6
Fair Value

Equity Debt Other Total

$68.7 5.3 $74.0

$(4.0) (0.1) S(4.1)

$308.2 138.0 13.0 $459.2

The contractual maturities of debt securities at December 31, 2005 are as follows: $3.2 million in 2006; $34.9 million in 2007-2010; $32.4 million in 2011-2015; and $57.2 million thereafter. Sales of the securities held in the trust funds resulted in proceeds of $372.5 million, $532.3 million, and $648.1 million in 2005, 2004, and 2003, respectively, all of which were re-invested. Net realized gains (losses) were $12.6 million, $14.1 million, and $21.3 million in 2005, 2004, and 2003, respectively. Realized gains and losses are determined on a specific identification basis. In accordance with regulatory guidance, all realized and unrealized gains and losses are included in the regulatory liability for Asset Retirement Obligations in the balance sheets and are not included in net income or other comprehensive income. Unrealized gains and losses are considered non-cash transactions for purposes of the statements of cash flow. Unrealized losses were not material in any period presented and do not represent any impairment of the underlying investments. Amounts previously recorded in internal reserves are being transferred into the external trust funds over periods approved by the Georgia PSC. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission only the radioactive portions of a nuclear unit based on the size and type of reactor. The Company has filed plans with the NRC to ensure that, over time the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. Annual provisions for nuclear decommissioning are based on an annuity method as approved by the Georgia PSC. The amount expensed in 2005 and fund balances were as follows:
Plant Hatch (in millions) Plant Vogtle

Amount expensed in 2005 Accumulated provisions: External trust funds, at fair value Internal reserves Total

$ $313 $313

$ 7 $174 1 $175

Site study cost is the estimate to decommission a specific facility as of the site study year. The estimated costs of decommissioning based on the most current study performed in 2003 for the Company's ownership interests in plants Hatch and Vogtle were as follows:
Plant Hatch Plant Vogtle

Decommissioning periods: Beginning year Completion year Site study costs: Radiated structures Non-radiated structures Total

2034 2065
(in millions)

2027 2048 $452 58 $510

$497 49 $546

The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making these estimates. Under the 2001 Retail Rate Plan, the Georgia PSC approved the annual decommissioning costs for ratemaking of $9 million. This amount was based on the NRC generic estimate to decommission the radioactive

II-163

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report portion of the facilities as of 2000. The estimates were $383 million and $282 million for plants Hatch and Vogtle, respectively. Significant assumptions used to determine the costs for ratemaking included an estimated inflation rate of 4.7 percent and an estimated trust earnings rate of 6.5 percent. Under the 2004 Retail Rate Plan, effective January 1, 2005, the Georgia PSC decreased the annual decommissioning costs for ratemaking to $7 million. This amount is based on the NRC generic estimate to decommission the radioactive portion of the facilities as of 2003. The estimates are $421 million and $326 million for plants Hatch and Vogtle, respectively. Significant assumptions used to determine the costs for ratemaking include an estimated inflation rate of 3.1 percent and an estimated trust earnings rate of 5.1 percent. Another significant assumption used was the change in the operating license for Plant Hatch. In January 2002, the NRC granted the Company a 20-year extension of the licenses for both units at Plant Hatch which permits the operation of units 1 and 2 until 2034 and 2038, respectively. The Company expects the Georgia PSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. Allowance for Funds Used During Construction (AFUDC) and Interest Capitalized In accordance with regulatory treatment, the Company records AFUDC. AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new regulated facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. Interest related to the construction of new facilities not included in the Company's retail rates is capitalized in accordance with standard interest capitalization requirements. For the years 2005, 2004, and 2003, the average AFUDC rates were 8.02 percent, 8.22 percent, and 5.51 percent, respectively. AFUDC and interest capitalized, net of taxes, were 4.7 percent and 4.9 percent of net income after dividends on preferred stock for 2005 and 2004, respectively, and less than 3 percent for 2003. Impairment of Long-Lived Assets and Intangibles The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on either a specific regulatory disallowance or an estimate of undiscounted future cash flows attributable to the assets, as compared with the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined by either the amount of regulatory disallowance or by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. For assets identified as held for sale, the carrying value is compared to the estimated fair value less the cost to sell in order to determine if an impairment provision is required. Until the assets are disposed of, their estimated fair value is re-evaluated when circumstances or events change. See Note 3 under "Retail Regulatory Matters" and "Plant McIntosh Construction Project" for information regarding a regulatory disallowance by the Georgia PSC in December 2004. Storm Damage Reserve The Company maintains a reserve for property damage to cover the cost of damages from major storms to its transmission and distribution lines and the cost of uninsured damages to its generation facilities and other property as mandated by the Georgia PSC. The Company accrues $6.3 million annually that is recoverable through base rates. The Company expects the Georgia PSC to periodically review and adjust, if necessary, the amounts collected in rates for storm damage costs. Environmental Cost Recovery Under Georgia PSC ratemaking provisions, $22 million has been deferred in a regulatory liability account related to certain environmental insurance settlements. Under the 2004 Retail Rate Plan, this regulatory liability is being amortized over a three-year period beginning January 1, 2005. However, the Georgia PSC also approved an annual environmental accrual of $5.4 million. Environmental remediation expenditures are charged against the reserve as they are incurred. The annual accrual amount will be reviewed and adjusted in future regulatory proceedings. II-164

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the average costs of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Fuel Inventory Fuel inventory includes the average costs of oil, coal, natural gas, and emission allowances. Fuel is charged to inventory when purchased and then expensed as used. Emission allowances granted by the Environmental Protection Agency (EPA) are included in inventory at zero cost. Stock Options Southern Company provides non-qualified stock options to a large segment of the Company's employees ranging from line management to executives. The Company accounts for its stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25. Accordingly, no compensation expense has been recognized because the exercise price of all options granted equaled the fair-market value of Southern Company's common stock on the date of grant. When options are exercised, the Company receives a capital contribution from Southern Company equivalent to the related income-tax benefit. For pro forma purposes, the Company generally recognizes stock option expense on a straight-line basis over the vesting period. Stock options granted to employees who are eligible for retirement are expensed at the grant date. The pro forma impact of fair-value accounting for options granted on earnings is as follows:
Net Income As Reported Options Impact
(in millions)

Pro Forma

2005 2004 2003

$715 $658 $631

$(3) (3) (4)

$712 $655 $627

The estimated fair value of stock options granted in 2005, 2004, and 2003 was derived using the Black-Scholes stock option pricing model. The following table shows the assumptions and the weighted average fair values of stock options.
2005 2004 2003

Interest rate Average expected life of stock options (in years) Expected volatility of common stock Expected annual dividends on common stock Weighted average fair value of stock options granted See Note 8 for additional information. Financial Instruments

3.90% 5.0 17.90% $ 1.43 $ 3.90

3.10% 5.0 19.60% $ 1.40 $ 3.29

2.70% 4.3 23.60% $ 1.37 $ 3.59

The Company uses derivative financial instruments to limit exposure to fluctuations in interest rates, the prices of certain fuel purchases, and electricity purchases and sales. All derivative financial instruments are recognized as either assets or liabilities and are measured at fair value. Substantially all of the Company's bulk energy purchases and sales contracts that meet the definition of a derivative are exempt from fair value accounting requirements and are accounted for under the accrual method. Other derivative contracts qualify as cash flow hedges of anticipated transactions or are recoverable through the Georgia PSC-approved fuel hedging program. This results in the deferral of related gains and losses in other comprehensive income or regulatory assets and liabilities, respectively, until the hedged transactions occur. Any ineffectiveness arising from cash flow hedges is recognized currently in net income. Other derivative contracts are marked to market II-165

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report through current period income and are recorded on a net basis in the statements of income. The Company is exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the Company's exposure to counterparty credit risk. The Company's financial instruments for which the carrying amounts did not equal fair value at December 31 were as follows:
Carrying Amount (in millions) Fair Value

Long-term debt: 2005 2004 The fair values were based on either closing market prices or closing prices of comparable instruments. Comprehensive Income

$5,227 $5,055

$5,195 $5,125

The objective of comprehensive income is to report a measure of all changes in common stock equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income consists of net income, changes in the fair value of marketable securities and qualifying cash flow hedges, and changes in additional minimum pension liability, less income taxes and reclassifications for amounts included in net income. Variable Interest Entities The primary beneficiary of a variable interest entity must consolidate the related assets and liabilities. The Company has established certain wholly-owned trusts to issue preferred securities. However, the Company is not the primary beneficiary of the trusts. Therefore, the investments in these trusts are reflected as Other Investments, and the related loans from the trusts are reflected as Long-Term Debt Payable to Affiliated Trusts on the balance sheets. See Note 6 under "Mandatorily Redeemable Preferred Securities/Long-Term Debt Payable to Affiliated Trusts" for additional information. 2. RETIREMENT BENEFITS The Company has a defined benefit, trusteed, pension plan covering substantially all employees. The plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). In 2005, the plan was amended to provide an additional monthly supplement to certain retirees. No contributions to the plan are expected for the year ending December 31, 2006. The Company also provides certain non-qualified benefit plans for a selected group of management and highly compensated employees. Benefits under these non-qualified plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees. The Company funds related trusts to the extent required by the Georgia PSC and the FERC. For the year ended December 31, 2006, such contributions are expected to total approximately $18.4 million. The measurement date for plan assets and obligations is September 30 for each year presented. Pension Plans The accumulated benefit obligation for the pension plans was $1.9 billion in 2005 and $1.7 billion in 2004. Changes during the year in the projected benefit obligations, accumulated benefit obligations, and the fair value of plan assets was as follows:
Projected Benefit Obligation 2005
(in millions)

2004

Balance at beginning of year Service cost Interest cost


Benefits paid

$1,885 45 106
(85)

$1,727 42 101
(85)

Plan amendments Actuarial loss Balance at end of year

13 91 $2,055
Plan Assets 2005

1 99 $1,885
2004 (in millions)

Balance at beginning of year Actual return on plan assets Benefits paid Balance at end of year

$2,181 339 (80) $2,440

$2,055 207 (81) $2,181

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Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report In 2005, the projected benefit obligations for the qualified and non-qualified pension plans were $1.945 billion and $110 million, respectively. All plan assets are related to the qualified plan. Pension plan assets are managed and invested in accordance with all applicable requirements including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). The Company's investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity, as described in the table below. Derivative instruments are used primarily as hedging tools but may also be used to gain efficient exposure to the various asset classes. The Company primarily minimizes the risk of large losses through diversification but also monitors and manages other aspects of risk.
Target Plan Assets 2005 2004

Domestic equity International equity Fixed income Real estate Private equity Total

36% 24 15 15 10 100%

40% 24 17 13 6 100%

36% 20 26 10 8 100%

The reconciliations of the funded status with the accrued pension costs recognized in the balance sheets were as follows:
2005 (in millions) 2004

Funded status Unrecognized transition amount Unrecognized prior service cost Unrecognized net actuarial gain (loss) Prepaid pension asset, net The prepaid pension asset, net is reflected in the balance sheets in the following line items:

$385 (4) 109 (54) $436

$295 (8) 108 21 $416

2005 (in millions)

2004

Prepaid pension asset Employee benefit obligations Other property and investments Accumulated other comprehensive income Prepaid pension asset, net Components of the plans' net periodic cost were as follows:
2005

$476 (96) 15 41 $436

$450 (89) 19 36 $416

2004 (in millions)

2003

Service cost Interest cost Expected return on plan assets Recognized net (gain)/loss Net amortization Net pension (income)

$ 45 106 (182) 3 7 $ (21)

$ 42 101 (180) (5) 7 $ (35)

$ 38 100 (179) (19) 6 S (54)

Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31, 2005, estimated benefit payments were as follows:
Benefit Payments

(in millions)

2006 2007 2008 2009 2010 2011 to 2015 11-167

$ 88 91 94 97 102 $607

_~__1_1

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report Postretirement Benefits Changes during the year in the accumulated benefit obligations and in the fair value of plan assets were as follows:
Accumulated Benefit Obligation 2005 2004

(in millions)

Balance at beginning of year Service cost Interest cost Benefits paid Actuarial loss Plan amendments Balance at end of year

$726 10 41 (32) 24 $769


Plan Assets

$723 10 41 (31) 42 (59) $726

2005 (in millions)

2004

Balance at beginning of year Actual return on plan assets Employer contributions Benefits paid Balance at end of year

$299 38 40 (32) $345

$265 32 33 (31) $299

Postretirement benefits plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code. The Company's investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity, as described in the table below. Derivative instruments are used primarily as hedging tools but may also be used to gain efficient exposure to the various asset classes. The Company primarily minimizes the risk of large losses through diversification, but also monitors and manages other aspects of risk.
Plan Assets

Target

2005

2004

Domestic equity International equity Domestic fixed income Global fixed income Real estate Private equity Total The accrued postretirement costs recognized in the balance sheets were as follows:

43% 21 19 11 4 2 100%

43% 22 19 11 3 2 100%

42% 23 19 11 3 2 100%

2005 (in millions)

2004

Funded status Unrecognized transition obligation Unrecognized prior service cost Unrecognized net loss Fourth quarter contributions Employee benefit obligations recognized in the balance sheets Components of the postretirement plans' net periodic cost were as follows:
2005

$(424) 70 25 203 21 $(105)

$(428) 78 27 203 15 $(105)

2004 (in millions)

2003

Service cost Interest cost Expected return on plan assets Net amortization Net postretirement cost

$ 10 41 (22) 18 $ 47

$ 10 41 (25) 18 $44

$ 9 40 (24) 16 $ 41

In the third quarter 2004, the Company prospectively adopted FASB Staff Position (FSP)106-2, Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Act). The Medicare Act provides a 28 percent prescription drug subsidy for Medicare eligible retirees. FSP 106-2 requires recognition of the impacts of the Medicare Act in the

accumulated postretirement benefit obligation (APBO) and future cost of service for postretirement medical plans. The effect of the subsidy reduced the Company's expenses for the six months ended December 31, 2004 and for the year ended December 31, 2005 by approximately $5 million and $10 million, respectively, and is expected to have a similar impact on future expenses. Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the accumulated benefit obligation for the postretirement plans. Estimated benefit payments are reduced by drug II-168

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report subsidy receipts expected as a result of the Medicare Act as follows:
Benefit Payments Subsidy Receipts (in millions) Total

2006 2007 2008 2009 2010 2011 to 2015

$ 37 39 42 46 50 280

$ (3) (4) (4) (4) (5) (34)

$ 34 35 38 42 45 246

Actuarial Assumptions The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations and the net periodic costs for the pension and postretirement benefit plans were:
2005 2004 2003

Discount Annual salary increase Long-term return on plan assets

5.50% 3.00 8.50

5.75% 3.50 8.50

6.00% 3.75 8.50

The Company determined the long-term rate of return based on historical asset class returns and current market conditions, taking into account the diversification benefits of investing in multiple asset classes. An additional assumption used in measuring the APBO was a weighted average medical care cost trend rate of 10.25 percent for 2005, decreasing gradually to 4.75 percent through the year 2014, and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the accumulated benefit obligation and the service and interest cost components at December 31, 2005, as follows:
1 Percent Increase
(in millions)

1 Percent Decrease

Benefit obligation Service and interest costs

$70 5

$62 4

Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides a 75 percent matching contribution up to 6 percent of an employee's base salary. Total matching contributions made to the plan for the years 2005, 2004, and 2003 were $19 million, $18 million, and $18 million, respectively. 3. CONTINGENCIES AND REGULATORY MATTERS General Litigation Matters The Company is subject to certain claims and legal actions arising in the ordinary course of business. In addition, the Company's business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury, and citizen enforcement of environmental requirements such as opacity and other air quality standards, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such pending or potential litigation against the Company cannot be predicted at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on the Company's financial statements. Environmental Matters New Source Review Actions In November 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S District Court for the Northern District of Georgia against the Company and Alabama Power, alleging that the Company and Alabama Power had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws with respect to certain coal-fired generating facilities. Through subsequent amendments and other legal proceedings, the EPA added Savannah Electric as a defendant to the original action and filed a separate action against Alabama Power after it was dismissed from the original action. In these lawsuits, the

II-169

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report EPA alleges that NSR violations occurred at eight coal-fired generating facilities including the Company's Plants Bowen and Scherer. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. On June 3, 2005, the U.S. District for the Northern District of Alabama issued a decision in favor of Alabama Power on two primary legal issues in the case; however, the decision does not resolve the case, nor does it address other legal issues associated with the EPA's allegations. In accordance with a separate court order, Alabama Power and the EPA are currently participating in mediation with respect to the EPA's claims. The action against the Company and Savannah Electric has been administratively closed since the spring of 2001, and none of the parties has sought to reopen the case. The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $32,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome in this case could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. Plant Wansley Environmental Litigation In December 2002, the Sierra Club, Physicians for Social Responsibility, Georgia Forestwatch, and one individual filed a civil suit in the U.S. District Court: for the Northern District of Georgia against the Company for alleged violations of the Clean Air Act at four of the units at Plant Wansley. The civil action requests injunctive and declaratory relief, civil penalties, a supplemental environmental project, and attorneys' fees. The Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation at each generating unit. The liability phase of the case has concluded with the court ruling in favor of the Company in part and the plaintiffs in part. In March 2005, the U.S. Court of Appeals for the Eleventh Circuit accepted the Company's petition for review of the district court's order, and oral arguments were held on January 24, 2006. The district court case has been administratively closed pending that appeal. If necessary, the district court will hold a separate trial which will address civil penalties and possible injunctive relief requested by the plaintiffs. The ultimate outcome of this matter cannot currently be determined; however, an adverse outcome could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. Environmental Remediation The Company has been designated as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act. In 1995, the EPA designated the Company and four other unrelated entities as potentially responsible parties at a site in Brunswick, Georgia that is listed on the federal National Priorities List. As of December 31, 2005, the Company had recorded approximately $6 million in cumulative expenses associated with the Company's agreedupon share of the removal and remedial investigation and feasibility study costs for the Brunswick site. Additional claims for recovery of natural resource damages at the site are anticipated. The Company has also recognized $36 million in cumulative expenses through December 31, 2005 for the assessment and anticipated cleanup of sites on the Georgia Hazardous Sites Inventory. The final outcome of these matters cannot now be determined. However, based on the currently known conditions at these sites and the nature and extent of the Company's activities relating to these sites, management does not believe that the Company's additional liability, if any, at these sites would be material to the financial statements. FERC Matters Market-Based Rate A uthority The Company has authorization from the FERC to sell power to non-affiliates at market-based prices. The Company also has FERC authority to make short-term opportunity sales at market rates. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. 11-170

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report In December 2004, the FERC initiated a proceeding to assess Southern Company's generation dominance within its retail service territory. The ability to charge market-based rates in other markets is not an issue in that proceeding. In February 2005, Southern Company submitted responsive information. In February 2006, the FERC agreed to allow the parties to conduct settlement discussions. Any new market-based rate transactions in its retail service territory entered into after February 27, 2005 are subject to refund to the level of the default cost-based rates, pending the outcome of the proceeding. The impact of such sales through December 31, 2005 is not expected to exceed $4.9 million. The refund period covers 15 months. In the event that the FERC's default mitigation measures for entities that are found to have market power are ultimately applied, the Company may be required to charge cost-based rates for certain wholesale sales in the Southern Company retail service territory, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time. In addition, in May 2005, the FERC started an investigation to determine whether Southern Company satisfies the other three parts of the FERC's market-based rate analysis: transmission market power, barriers to entry, and affiliate abuse or reciprocal dealing. The FERC established a new refund period related to this expanded investigation. Any and all new market-based rate transactions both inside and outside Southern Company's retail service territory involving any Southern Company subsidiary, including the Company, will be subject to refund to the extent the FERC orders lower rates as a result of this new investigation, with the 15-month refund period beginning July 19, 2005. The impact of such sales through December 31, 2005 is not expected to exceed $10.9 million, of which $3.2 million relates to sales inside the retail service territory as discussed above. The FERC also directed that this expanded proceeding be held in abeyance pending the outcome of the proceeding on the IIC discussed below. The Company believes that there is no meritorious basis for this proceeding and is vigorously defending itself in this matter. However, the final outcome of this matter, including any remedies to be applied in the event of an adverse ruling in this proceeding, cannot now be determined. Intercompany Interchange Contract The Company's generation fleet in its retail service territory is operated under the IIC, as approved by the FERC. In May 2005, the FERC also initiated a new proceeding to examine (1) the provisions of the IIC among Alabama Power, the Company, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the power pool of Southern Company is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC's standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company's code of conduct defining Southern Power as a "system company" rather than a "marketing affiliate" is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power's inclusion in the IIC in 2000. The FERC also previously approved Southern Company's code of conduct. The FERC order directs that the administrative law judge who presided over the McIntosh PPA proceeding involving an approval of PPAs between Southern Power and the Company and Savannah Electric, be assigned to preside over the hearing in this proceeding and that the testimony and exhibits presented in that proceeding be preserved to the extent appropriate. Hearings are scheduled for September 2006. Effective July 19, 2005, revenues from transactions under the IIC involving any Southern Company subsidiaries, including the Company, are subject to refund to the extent the FERC orders any changes to the IIC. The Company believes that there is no meritorious basis for this proceeding and is vigorously defending itself in this matter. However, the final outcome of this matter, including any remedies to be applied in the event of an adverse ruling in this proceeding, cannot now be determined. Generation Interconnection Agreements In July 2003, the FERC issued its final rule on the standardization of generation interconnection agreements and procedures (Order 2003). Order 2003 shifts much of the financial burden of new transmission investment from the generator to the 11-171

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report transmission provider. The FERC has indicated that Order 2003, which was effective January 20, 2004, is to be applied prospectively to interconnection agreements. Subsidiaries of Tenaska, Inc., as counterparties to previously executed interconnection agreements with the Company and another Southern Company subsidiary, have filed complaints at the FERC requesting that the FERC modify the agreements and that the Company refund a total of $7.9 million previously paid for interconnection facilities, with interest. The Company has opposed such relief and the proceedings are still pending. The impact of Order 2003 and its subsequent rehearings on the Company and the final results of these matters cannot be determined at this time. Race Discrimination Litigation In July 2000, a lawsuit alleging race discrimination was filed by three of the Company's employees against the Company, Southern Company, and SCS in the Superior Court of Fulton County, Georgia. Shortly thereafter, the lawsuit was removed to the U.S. District Court for the Northern District of Georgia and amended to add four more plaintiffs. The lawsuit also raised claims on behalf of a purported class. The plaintiffs sought compensatory and punitive damages in an unspecified amount, as well as injunctive relief. Following various court decisions in favor of the defendants and subsequent appeals by the plaintiffs, on July 13, 2005, the plaintiffs filed a petition for writ of certiorari to the U.S. Supreme Court. On October 17, 2005, the petition was denied. This matter is now concluded. Right of Way Litigation Southern Company and certain of its subsidiaries, including the Company, Gulf Power, Mississippi Power, and Southern Telecom, have been named as defendants in numerous lawsuits brought by landowners since 2001. The plaintiffs' lawsuits claim that defendants may not use, or sublease to third parties, some or all of the fiber optic communications lines on the rights of way that cross the plaintiffs' properties and that such actions exceed the easements or other property rights held by defendants. The plaintiffs assert claims for, among other things, trespass and unjust enrichment, and seek compensatory and punitive damages and injunctive relief. Management believes that the Company has complied with applicable laws and that the plaintiffs' claims are without merit. In January 2005, the Superior Court of Decatur County, Georgia granted partial summary judgment in a lawsuit brought by landowners against the Company based on the plaintiffs' declaratory judgment claim that the easements do not permit general telecommunications use. The Company appealed this ruling to the Georgia Court of Appeals. The Georgia Court of Appeals reversed, in part, the court's order and remanded the case to the trial court for the determination of further issues. After the Court of Appeals' decision, the plaintiffs filed a motion for reconsideration, which was denied, and a petition for certiorari to the Georgia Supreme Court, which is currently pending. The question of damages and other liabilities or remedies issues with respect to this action, if any, will be decided at a future trial. In the event of an adverse verdict in the case, the Company could appeal both liability and damages or other relief granted. An adverse outcome in these matters could result in substantial judgments; however, the final outcome cannot now be determined. In addition, in late 2001, certain subsidiaries of Southern Company, including Alabama Power, the Company, Gulf Power, Mississippi Power, Savannah Electric, and Southern Telecom, were named as defendants in a lawsuit brought by a telecommunications company that uses certain of the defendants' rights of way. This lawsuit alleges, among other things, that the defendants are contractually obligated to indemnify, defend, and hold harmless the telecommunications company from any liability that may be assessed against it in pending and future right of way litigation. The Company believes that the plaintiff s claims are without merit. In the fall of 2004, the trial court stayed the case until resolution of the underlying landowner litigation discussed above. In January 2005, the Georgia Court of Appeals dismissed the telecommunications company's appeal of the trial court's order for lack of jurisdiction. An adverse outcome in this matter, combined with an adverse outcome against the telecommunications company in one or more of the right of way lawsuits, could result in substantial judgments; however, the final outcome of these matters cannot now be determined. II-172

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report Property Tax Dispute The Company is involved in a significant property tax dispute with Monroe County, Georgia (Monroe County). The Monroe County Board of Tax Assessors (Monroe Board) has issued assessments reflecting substantial increases in the ad valorem tax valuation of the Company's 22.95 percent ownership interest in Plant Scherer, which is located in Monroe County, for tax years 2003, 2004, and 2005. The Company is aggressively pursuing administrative appeals in Monroe County and has filed notices of arbitration for all three years. The appeals are currently stayed, pending the outcome of the litigation discussed below. In November 2004, the Company filed suit, on its behalf, against the Monroe Board in the Superior Court of Monroe County. The Company contends that Monroe County acted without statutory authority in changing the valuation of a centrally assessed utility as established by the Revenue Commissioner of the State of Georgia and requests injunctive relief prohibiting Monroe County and the Monroe Board from unlawfully changing the value of Plant Scherer and ultimately collecting additional ad valorem taxes from the Company. On December 22, 2005, the court granted Monroe County's motion for summary judgment. The Company has filed an appeal of the Superior Court's decision to the Georgia Supreme Court. If the Company is not successful in its administrative appeals and if Monroe County is successful in defending the litigation, the Company could be subject to total additional taxes through December 31, 2005 of up to $13 million, plus penalties and interest. The ultimate outcome of this matter cannot currently be determined. Retail Regulatory Matters Merger On December 13, 2005, the Company and Savannah Electric entered into an Agreement and Plan of Merger. Savannah Electric will merge into the Company, with the Company continuing as the surviving corporation (the Merger). At the effective time of the Merger, each share of the Company's common stock will remain issued and outstanding; each share of the Company's preferred stock issued and outstanding will have been redeemed prior to the Merger; the issued and outstanding shares of Savannah Electric common stock, all of which are held by Southern Company, will be converted into the right to receive 1,500,000 shares of the Company's common stock; and each share of Savannah Electric preferred stock issued and outstanding immediately prior to the Merger will be converted into the right to receive one share of a new series of the Company's Class A Preferred Stock. The Merger must be approved by the preferred shareholders of Savannah Electric and is subject to the receipt of certain regulatory approvals from the FERC, the Georgia PSC, and the Federal Communications Commission. Pending regulatory approvals, the Merger is expected to be completed by July 2006. The Merger is not expected to have a material impact on the Company's financial statements. While the Georgia PSC does not have specific approval authority over the merger of electric utilities, the Company and Savannah Electric have filed an application with the Georgia PSC with respect to certain approvals that will be necessary to effectively complete the Merger. In particular, the Company and Savannah Electric plan to seek the approval of the Georgia PSC with respect to the following matters: the transfer of Savannah Electric's generating facilities and certification of the generating facilities as the Company's assets; * * * * * * amendments to the Company's Integrated Resource Plan to add the current Savannah Electric's customers and generating facilities; the transfer of Savannah Electric's assigned service territory to the Company; adoption of the Company's service rules and regulations to the current Savannah Electric customers; new fuel rate and base rate schedules that would apply to the Company's sale of electricity to the current Savannah Electric customers; adoption of a "merger transition adjustment" rate that would be used to more closely align Savannah Electric's existing base rates to those of the Company and a "merger transition credit" rate that would credit the additional revenues collected from former Savannah Electric customers to the Company's existing customers; and the issuance of additional shares of the Company's common stock to Southern Company in exchange for Southern Company's shares of Savannah Electric common stock. II-173

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report Rate Plans Under the terms of the 2004 Retail Rate Plan, which the Georgia PSC approved in December 2004, the Company's earnings are evaluated against a retail return on common equity (ROE) range of 10.25 percent to 12.25 percent. Two-thirds of any earnings above 12.25 percent will be applied to rate refunds, with the remaining one-third retained by the Company. Retail rates were increased by approximately $194 million and customer fees by approximately $9 million effective January 1, 2005 to cover the higher costs of purchased power; operating and maintenance expenses; environmental compliance; and continued investment in new generation, transmission, and distribution facilities to support growth and ensure reliability. In 2005, the Company recorded $2.7 million in revenue subject to refund related to earnings in excess of 12.25 percent retail ROE. The Company is required to file a general rate case by July 1,2007, in response to which the Georgia PSC would be expected to determine whether the rate order should be continued, modified, or discontinued. Until then, the Company may not file for a general base rate increase unless its projected retail ROE falls below 10.25 percent. Under the 2001 Retail Rate Plan, retail rates were decreased by $118 million effective January 1, 2002. Under the terms of the 2001 Retail Rate Plan, earnings were evaluated against a retail ROE range of 10 percent to 12.95 percent. Two-thirds of any earnings above the 12.95 percent return were to be applied to rate refunds, with the remaining one-third retained by the Company. The Company's earnings in 2004, 2003, and 2002 were within the retail ROE range. Under the 2001 Retail Rate Plan, the Company discontinued recording accelerated depreciation and amortization and began amortizing the accumulated balance equally over three years as a credit to expense beginning in 2002. Also, the 2001 Retail Rate Plan required the Company to recognize capacity and operating and maintenance costs related to new Georgia PSC-certified PPAs evenly in rates over a three-year period ended December 31, 2004. Fuel Hedging Program In 2003, the Georgia PSC approved an order allowing the Company to implement a natural gas and oil procurement and hedging program. This order allows the Company to use financial instruments to hedge price and commodity risk associated with these fuels. The order limits the program in terms of time, volume, dollars, and physical amounts hedged. The costs of the program, including any net losses, are recovered as a fuel cost through the fuel cost recovery clause. Annual net financial gains from the hedging program will be shared with the retail customers receiving 75 percent and the Company retaining 25 percent of the total net gains. In 2005, the Company had a total net gain of $64.1 million, of which the Company retained $16 million. Fuel Cost Recovery On May 17, 2005, the Georgia PSC approved the Company's request to increase customer fuel rates by approximately 9.5 percent to recover under recovered fuel costs of approximately $508 million existing as of May 31, 2005 over a four-year period that began June 1, 2005. Based on the order, a portion of the under recovered regulatory clause revenues was reclassified from current assets to deferred charges and other assets in the balance sheet. Under recovered fuel amounts for the periods subsequent to June 1, 2005 totaled $327.5 million through December 31, 2005. The Georgia PSC's order instructs that such amounts be reviewed semi-annually beginning February 2006. If the amount under or over recovered exceeds $50 million at the evaluation date, the Company would be required to file for a temporary fuel rate change. In addition, Savannah Electric's under recovered fuel costs totaled $77.7 million at December 31, 2005. In accordance with the Georgia PSC order, Savannah Electric was scheduled to file an additional request for a fuel cost recovery increase in January 2006. The Company has agreed with a Georgia PSC staff recommendation to forego the temporary fuel rate process, and Savannah Electric has postponed its scheduled filing. Instead, the Company and Savannah Electric will file a combined request in March 2006 to increase the Company's fuel cost recovery rate. The case will seek approval of a fuel cost recovery rate based upon future fuel cost projections for the combined Company and Savannah Electric generating fleet as well as the under recovered fuel balances existing at June 30, 2006. The new fuel cost recovery 11-174

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NOTES (continued) Georgia Power Company 2005 Annual Report rate would be billed beginning in July 2006 to all of the Company's customers, including the existing Savannah Electric customers. Under recovered amounts as of the date of the Merger will be paid by the appropriate customer groups. In August 2005, the Georgia PSC initiated an investigation of Savannah Electric's fuel practices. In February 2006, an investigation of the Company's fuel practices was initiated. The Company and Savannah Electric are responding to data requests and cooperating in the investigations. The final outcome of this matter cannot now be determined. Fuel cost recovery revenues as recorded on the financial statements are adjusted for differences in actual recoverable cost and amounts billed in current regulated rates. Accordingly, any increase in the billing factor would have no significant effect on the Company's revenues or net income, but would increase annual cash flow. Nuclear Performance Standards Through December 2004, the Georgia PSC had adopted a three-year performance standard for the Company's nuclear generating units. The performance standard was based on each unit's capacity factor as compared to the average of all comparable U.S. nuclear units operating at a capacity factor of 50 percent or higher during the three-year period of evaluation. Depending on the performance of the units, the Company could receive a monetary award or penalty under the performance standards criteria. For the period 2002-2004, the Company's performance fell within the criteria prescribed by the Georgia PSC; there was no associated award or penalty. Effective January 1, 2005, the Georgia PSC discontinued the nuclear performance standard. Plant Mclntosh Construction Project In December 2002 after a competitive bidding process, the Georgia PSC certified PPAs between Southern Power and the Company and Savannah Electric for capacity from Plant Mclntosh Units 10 and 11, construction of which was completed in June 2005. In April 2003, Southern Power applied for FERC approval of these PPAs. In July 2003, the FERC accepted the PPAs to become effective June 1, 2005, subject to refund, and ordered that hearings be held. Intervenors opposed the FERC's acceptance of the PPAs, alleging that they did not meet the applicable standards for market-based rates between affiliates. To ensure the timely completion of the Plant Mclntosh construction project and the availability of the units in the summer of 2005 for their retail customers, in May 2004, the Company and Savannah Electric requested the Georgia PSC to direct them to acquire the Plant McIntosh construction project. The Georgia PSC issued such an order and the transfer occurred on May 24, 2004 at a total cost of approximately $415 million, including approximately $14 million of transmission interconnection facilities. Subsequently, Southern Power filed a request to withdraw the PPAs and to terminate the ongoing FERC proceedings. In August 2004, the FERC issued a notice accepting the request to withdraw the PPAs and permitting such request to become effective by operation of law. However, the FERC made no determination on what additional steps may need to be taken with respect to testimony provided in the proceedings. See "FERC Matters Intercompany Interchange Contract" herein for additional information. In connection with the 2004 Retail Rate Plan, the Georgia PSC approved the transfer of the Plant McIntosh construction project at a total fair market value of approximately $385 million. This value reflected an approximate $16 million disallowance, of which $13 million was attributable to the Company, and reduced the Company's net income by approximately $8 million. The Georgia PSC also certified a total completion cost not to exceed $547 million for the project. In June 2005, Plant McIntosh Units 10 and 11 were placed into service at a total cost that did not exceed the certified amount. Under the 2004 Retail Rate Plan, the Plant McIntosh revenue requirements impact is being reflected in the Company's rates evenly over the three years ending 2007. See "Retail Regulatory Matters Rate Plans" herein for additional information regarding the transfer of the Plant McIntosh construction project. 4. JOINT OWNERSHIP AGREEMENTS The Company and an affiliate, Alabama Power, own equally all of the outstanding capital stock of SEGCO which owns electric generating units with a total rated capacity of 1,020 megawatts, as well as associated transmission facilities. The capacity of the units has been sold equally to the Company and Alabama Power under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, 11-175

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report debt service, and return on investment, whether or not SEGCO has any capacity and energy available. The term of the contract extends automatically for two-year periods, subject to either party's right to cancel upon two year's notice. The Company's share of expenses included in purchased power from affiliates in the statements of income is as follows:
2005 2004 (in millions) 2003

Energy Capacity Total

$54 38 $92

$51 36 $87

$55 34 $89

The Company owns undivided interests in plants Vogtle, Hatch, Scherer, and Wansley in varying amounts jointly with Oglethorpe Power Corporation (OPC), the Municipal Electric Authority of Georgia (MEAG), the city of Dalton, Georgia, Florida Power & Light Company, Jacksonville Electric Authority, and Gulf Power. Under these agreements, the Company has contracted to operate and maintain the plants as agent for the co-owners and is jointly and severally liable for third party claims related to these plants. In addition, the Company jointly owns the Rocky Mountain pumped storage hydroelectric plant with OPC who is the operator of the plant. The Company also jointly owns Plant Mcintosh combustion- turbine common facilities and Plant McIntosh combined cycle units with Savannah Electric who operates the plants. The Company and Progress Energy Florida, Inc. jointly own a combustion turbine unit (Intercession City) operated by Progress Energy Florida, Inc. At December 31, 2005, the Company's percentage ownership and investment (exclusive of nuclear fuel) in jointly owned facilities in commercial operation were as follows:
Company Accumulated

Facility (Type)

Ownership

Investment

Depreciation (in millions)

Plant Vogtle (nuclear) Plant Hatch (nuclear) Plant Wansley (coal) Plant Scherer (coal) Units 1 and 2 Unit 3 Plant McIntosh CC (combined cycle) Plant McIntosh Common Facilities (combustion-turbine) Rocky Mountain (pumped storage) Intercession City (combustion-turbine) * Investment includes write-offs

45.7% 50.1 53.5 8.4 75.0 83.9 75.0 25.4 33.3

$3,311* 935 395 115 562 436 27 169* 12

$1,809 492 172 56 270 7 5 92 2

At December 31, 2005, the portion of total construction work in progress related to Plants Wansley, Scherer, and Rocky Mountain was $8.3 million, $0.5 million, and $0.1 million, respectively, primarily for environmental projects. The Company's proportionate share of its plant operating expenses is included in the corresponding operating expenses in the statements of income. 5. INCOME TAXES Southern Company files a consolidated federal income tax return and combined income tax returns for the States of Alabama, Georgia, and Mississippi. Under a joint consolidated income tax allocation agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis and no subsidiary is allocated more expense than would be paid if they filed a separate income tax return. In accordance with Internal Revenue Service regulations, each company is jointly and severally liable for the tax liability. In 2004, in order to avoid the loss of certain federal income tax credits related to the production of synthetic fuel, Southern Company chose to defer certain II-176

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NOTES (continued) Georgia Power Company 2005 Annual Report deductions otherwise available to the subsidiaries. The cash flow benefit associated with the utilization of the tax credits was allocated to the subsidiary that otherwise would have claimed the available deductions on a separate company basis without the deferral. This allocation concurrently reduced the tax benefit of the credits allocated to those subsidiaries that generated the credits. As the deferred expenses are deducted, the benefit of the tax credits will be repaid to the subsidiaries that generated the tax credits. The Company has recorded $10 million payable to these subsidiaries in Accumulated Deferred Income Taxes on the balance sheets at December 31, 2005. The transfer of the Plant McIntosh construction project from Southern Power to the Company resulted in a deferred gain to Southern Power for federal income tax purposes. The Company will reimburse Southern Power for the remaining balance of the related deferred taxes of $5.3 million reflected in Southern Power's future taxable income. $3.7 million of this payable to Southern Power is included in Other Deferred Credits and $1.6 million is included in Affiliated Accounts Payable in the balance sheet at December 31, 2005. The transfer of the Dahlberg, Wansley, and Franklin projects to Southern Power from the Company in 2001 and 2002 also resulted in a deferred gain for federal income tax purposes. Southern Power will reimburse the Company for the remaining balance of the related deferred taxes of $12.2 million reflected in the Company's future taxable income. $10.8 million of this receivable from Southern Power is included in Other Deferred Debits and $1.4 million is included in Affiliated Accounts Receivable in the balance sheet at December 31, 2005. At December 31, 2005, tax-related regulatory assets were $501 million and tax-related regulatory liabilities were $159 million. The assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. The liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows:
2005 2004 (in millions) 2003

Total provision for income taxes: Federal: Current Deferred State: Current Deferred Deferred investment tax credits Total

$173 203 376 26 29 $431

$116 221 337 12 30 _ $379

$143 181 324 24 16 2 $366

The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows:
2005 2004 (in millions)

Deferred tax liabilities: Accelerated depreciation Property basis differences Employee benefit obligations Fuel clause under recovery Premium on reacquired debt Storm damage reserve Other Total Deferred tax assets: Federal effect of state deferred taxes Other property basis differences Other deferred costs Employee benefit obligations Other comprehensive income Unbilled revenue Other Total Total deferred tax liabilities, net Portion included in current (liabilities) assets, net Accumulated deferred income taxes in the balance sheets

$2,177 558 163 305 69 13 74 3,359 116 139 126 51 23 13 33 501 2,858 (128) $2,730

$2,050 577 149 141 72 6 81 3,076 106 147 94 55 22 11 19 454 2,622 (66) $2,556

In accordance with regulatory requirements, deferred investment tax credits are amortized over the life of the related property with such amortization normally applied

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Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report as a credit to reduce depreciation in the statements of income. Credits amortized in this manner amounted to $12 million in 2005, $12 million in 2004, and $15 million in 2003. At December 31, 2005, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
2005 2004 2003

Federal statutory rate State income tax, net of federal deduction Non-deductible book depreciation Other Effective income tax rate 6. FINANCING Mandatorily Redeemable Preferred Securities/Long-Term Debt Payable to Affiliated Trusts

35% 3 1 (1) 38%

35% 3 1 (2) 37%

35% 3 1 (2) 37%

The Company has formed certain wholly owned trust subsidiaries for the purpose of issuing preferred securities. The proceeds of the related equity investments and preferred security sales were loaned back to the Company through the issuance of junior subordinated notes totaling $969 million, which constitute substantially all of the assets of the trusts and are reflected in the balance sheets as Long-Term Debt Payable to Affiliated Trusts. The Company considers that the mechanisms and obligations relating to the preferred securities issued for its benefit, taken together, constitute a full and unconditional guarantee by it of the respective trusts' payment obligations with respect to these securities. At December 31, 2005, preferred securities of $940 million were outstanding. See Note 1 under "Variable Interest Entities" for additional information on the accounting treatment for these trusts and the related securities. Securities Due Within One Year A summary of the scheduled maturities and redemptions of securities due within one year at December 31 is as follows:
2005 (in millions) 2004

Capital lease Senior notes Preferred stock Total

3 150 15 $168 $

$ 2 450 $452

Serial maturities through 2010 applicable to total long-term debt and preferred stock are as follows: $168 million in 2006; $303 million in 2007; $3 million in 2008; $278 million in 2009; and $4 million in 2010. Pollution Control Bonds Pollution control obligations represent loans to the Company from public authorities of funds derived from sales by such authorities of revenue bonds issued to finance pollution control facilities. The Company is required to make payments sufficient for the authorities to meet principal and interest requirements of such bonds. The Company has incurred obligations in connection with the sale by public authorities of tax-exempt pollution control revenue bonds. The amount of tax-exempt pollution control revenue bonds outstanding at December 31, 2005 was $1.7 billion. Senior Notes The Company issued a total of $625 million of unsecured senior notes in 2005. The proceeds of these issues were used to redeem or repay at maturity long-term debt, to repay short-term indebtedness, and for other general corporate purposes. At December 31, 2005 and 2004, the Company had $2.6 billion and $2.4 billion of senior notes outstanding, respectively. These senior notes are subordinate to all secured debt of the Company. Capital Leases Assets acquired under capital leases are recorded in the balance sheets as utility plant in service, and the related obligations are classified as long-term debt. At December 31, 2005 and 2004, the Company had a II-178

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report capitalized lease obligation for its corporate headquarters building of $74 million and $77 million, respectively, with an interest rate of 8.1 percent. For ratemaking purposes, the Georgia PSC has treated the lease as an operating lease and has allowed only the lease payments in cost of service. The difference between the accrued expense and the lease payments allowed for ratemaking purposes has been deferred and is being amortized to expense as ordered by the Georgia PSC. See Note 1 under "Regulatory Assets and Liabilities." Bank Credit Arrangements At the beginning of 2006, the Company had credit arrangements with banks totaling $780 million, of which $778 million was unused. Of these facilities, $70 million expires at various times throughout 2006; $350 million expires in 2007, with the remaining $360 million expiring in 2010. The facilities that expire in 2006 provide the option of converting borrowings into a two-year term loan. The Company expects to renew its facilities, as needed, prior to expiration. The agreements contain stated borrowing rates. All the agreements require payment of commitment fees based on the unused portion of the commitments or the maintenance of compensating balances with the banks. Commitment fees are less than 1/8 of 1 percent for the Company. Compensating balances are not legally restricted from withdrawal. A fee is also paid to the agent bank. The credit arrangements contain covenants that limit the level of indebtedness to capitalization to 65 percent, as defined in the arrangements. For purposes of these definitions, indebtedness excludes the long-term debt payable to affiliated trusts. In addition, the credit arrangements contain cross default provisions that would trigger an event of default if the Company defaulted on other indebtedness above a specified threshold. At December 31, 2005, the Company was in compliance with all such covenants. None of the arrangements contain material adverse change clauses at the time of borrowings. The $778 million in unused credit arrangements provides liquidity support to the Company's variable rate pollution control bonds. The amount of variable rate pollution control bonds outstanding requiring liquidity support as of December 31, 2005 was $106 million. In addition, the Company borrows under a commercial paper program and an extendible commercial note program. The amount of commercial paper outstanding at December 31, 2005 was $268 million. The amount of commercial paper outstanding at December 31, 2004 was $208 million. There were no outstanding extendible commercial notes at December 31, 2005. Commercial paper is included in notes payable on the balance sheets. During 2005, the peak amount of short-term debt outstanding was $549 million and the average amount outstanding was $242 million. The average annual interest rate on short-term debt in 2005 was 3.20 percent. Financial Instruments The Company enters into energy-related derivatives to hedge exposures to electricity, gas, and other fuel price changes. However, due to costbased rate regulations, the Company has limited exposure to market volatility in commodity fuel prices and prices of electricity. See Note 3 under "Retail Regulatory Matters - Fuel Hedging Program" for information on the Company's fuel hedging program. The Company also enters into hedges of forward electricity sales. There was no material ineffectiveness recorded in earnings in 2005, 2004, and 2003. At December 31, 2005, the fair value of derivative energy contracts was reflected in the financial statements as follows:
Amounts

(in thousands)

Regulatory liabilities, net Other comprehensive income Net income Total fair value

$26,643 (81) $26,562

The fair value gain or loss for hedges that are recoverable through the regulatory fuel clauses are recorded in regulatory assets and liabilities and are recognized in earnings at the same time the hedged items affect earnings. The Company has energy-related hedges in place up to and including 2008. The Company enters into derivatives to hedge exposure to interest rate changes. Derivatives related to variable rate securities or forecasted transactions are accounted for as cash flow hedges. The derivatives are generally structured to mirror the critical terms of the hedged debt instruments; therefore, no material 11-179

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report ineffectiveness has been recorded in earnings. In addition to interest rate swaps, the Company has also entered into certain options agreements that effectively cap its interest rate exposure in return for payment of a premium. In some cases, costless collars have been used that effectively establish a floor and a ceiling to interest rate expense. At December 31, 2005, the Company had $1.0 billion notional amounts of interest derivatives accounted for as cash flow hedges outstanding with net fair value gains as follows: Fair Value
Weighted Average Notional Gain /

Maturity 2007 2006-2007 2037 * **

Fixed Rate Paid 2.67% 2.09% -3.85%* 4.58% -5.75%**

Amount

(Loss) (inmillions) $2.4 $300 $ 1.2 $400 $(1.1) $300

Series of interest rate caps and collars (showing the lowest floor and highest cap) with variable rate based on one-month LIBOR Interest rate collar

The fair value gain or loss for cash flow hedges is recorded in other comprehensive income and is reclassified into earnings at the same time the hedged items affect earnings. In 2005, 2004, and 2003, the Company settled gains (losses) totaling $0.9 million, $(12.4) million, and $(11.3) million, respectively, upon termination of certain interest derivatives at the same time it issued debt. For the years 2005, 2004, and 2003, approximately $1.9 million, $3.9 million, and $3.4 million, respectively, of pre-tax losses were reclassified from other comprehensive income to interest expense. For 2006, pre-tax losses of approximately $0.5 million are expected to be reclassified from other comprehensive income to interest expense. The Company has gains/losses that are being amortized through 2017. 7. COMMITMENTS

Construction Program
The Company currently estimates property additions to be approximately $1.3 billion, $1.4 billion, and $1.3 billion in 2006, 2007, and 2008, respectively. These amounts include $44 million, $28 million, and $14 million in 2006, 2007, and 2008, respectively, for construction expenditures related to contractual purchase commitments for uranium and nuclear fuel conversion, enrichment, and fabrication services included under "Fuel Commitments" herein. The construction program is subject to periodic review and revision, and actual construction costs may vary from estimates because of numerous factors, including, but not limited to, changes in business conditions, changes in FERC rules and transmission regulations, revised load growth estimates, changes in environmental regulations, changes in existing nuclear plants to meet new regulatory requirements, increasing costs of labor, equipment, and materials, and cost of capital. At December 31, 2005, significant purchase commitments were outstanding in connection with the construction program. The Company completed construction of Plant McIntosh Units 10 and 11 in June 2005 and has no other generating plants currently under construction. Construction related to new transmission and distribution facilities and capital improvements to existing generation, transmission and distribution facilities, including those needed to meet environmental standards, is ongoing. Long-Term Service Agreements The Company and Savannah Electric have entered into a Long-Term Service Agreement (LTSA) with General Electric (GE) for the purpose of securing maintenance support for the combustion turbines at the Plant McIntosh combined cycle facility. In summary, the LTSA stipulates that GE will perform all planned inspections on the covered equipment, which includes the cost of all labor and materials. GE is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to a limit specified in each contract. In general, this LTSA is in effect through two major inspection cycles per unit. Scheduled payments to GE are made at various intervals based on actual operating hours of the respective units. Total payments to GE under this agreement are currently estimated at $186 million over the remaining term of the agreement, which may range up to 30 years. However, the LTSA contains various cancellation provisions at the option of the Company. The Company has also entered into an LTSA with GE through 2014 for neutron monitoring system parts and electronics at Plant Hatch. Total remaining payments to GE under this agreement are currently II-180

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NOTES (continued) Georgia Power Company 2005 Annual Report estimated at $13.1 million. The contract contains cancellation provisions at the option of the Company. Payments made to GE prior to the performance of any work are recorded as a prepayment in the balance sheets. Work performed by GE is capitalized or charged to expense as appropriate net of any joint owner billings, based on the nature of the work. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Coal commitments include forward contract purchases for sulfur dioxide emission allowances. Natural gas purchase commitments contain fixed volumes with prices based on various indices at the time of delivery. Amounts included in the chart below represent estimates based on New York Mercantile Exchange future prices at December 31, 2005. Total estimated minimum long-term obligations at December 31, 2005 were as follows:
Commitments Natural Gas Coal (in millions) Nuclear Fuel

2006 2007 2008 2009 2010 2011 and thereafter Total

$ 577 325 200 257 254 2,047 $3,660

$1,579 1,313 907 422 272 40 $4,533

$ 44 28 14 11 14 64 $175

Additional commitments for coal and for nuclear fuel will be required to supply the Company's future needs. SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company retail operating companies, Southern Power, and Southern Company Gas. Under these agreements, each of the retail operating companies, Southern Power, and Southern Company Gas may be jointly and severally liable. The creditworthiness of Southern Power and Southern Company Gas is currently inferior to the creditworthiness of the retail operating companies. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the retail operating companies to insure they will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power or Southern Company Gas as a contracting party under these agreements. Purchased Power Commitments The Company has commitments regarding a portion of a 5 percent interest in Plant Vogtle owned by MEAG that are in effect until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest. The payments for capacity are required whether or not any capacity is available. The energy cost is a function of each unit's variable operating costs. Except as noted below, the cost of such capacity and energy is included in purchased power from non-affiliates in the Company's statements of income. Capacity payments totaled $54 million, $55 million, and $57 million in 2005, 2004, and 2003, respectively. The current projected Plant Vogtle capacity payments are:
Capacity Payments

2006 2007 2008 2009 2010 2011 and thereafter Total

(in millions) $ 53 52 54 54 54 261 $528

Portions of the payments noted above relate to costs in excess of Plant Vogtle's allowed investment for ratemaking purposes. The present value of these portions at the time of the disallowance was written off. 11-181

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report The Company has entered into other various long-term commitments for the purchase of electricity. Estimated total long-term obligations under these commitments at December 31, 2005 were as follows:
Commitments

NonAffiliated Affiliated (in millions)

2006 2007 2008 2009 2010 2011 and thereafter Total Operating Leases

$ 205 205 205 205 112 455 $1,387

$ 85 86 87 68 66 278 $670

The Company has entered into various operating leases with various terms and expiration dates. Rental expenses related to these operating leases totaled $38 million for 2005, $38 million for 2004, and $36 million for 2003. At December 31, 2005, estimated minimum lease payments for these noncancelable operating leases were as follows:
Rail Cars Minimum Lease Payments Other (in millions) Total

2006 2007 2008 2009 2010 2011 and thereafter Total

$ 17 17 16 15 14 48 $127

$17 14 11 9 6 10 $67

$ 34 31 27 24 20 58 $194

In addition to the rental commitments above, the Company has obligations upon expiration of certain rail car leases with respect to the residual value of the leased property. These leases expire in 2011 and the Company's maximum obligation is $68 million. At the termination of the leases, at the Company's option, the Company may either exercise its purchase option or the property can be sold to a third party. The Company expects that the fair market value of the leased property would substantially reduce or eliminate the Company's payments under the residual value obligation. A portion of the rail car lease obligations is shared with the joint owners of plants Scherer and Wansley. Rental expenses related to the rail car leases are fully recoverable through the fuel cost recovery clause as ordered by the Georgia PSC. Guarantees Alabama Power has guaranteed unconditionally the obligation of SEGCO under an installment sale agreement for the purchase of certain pollution control facilities at SEGCO's generating units, pursuant to which $24.5 million principal amount of pollution control revenue bonds are outstanding. Alabama Power has also guaranteed $50 million in senior notes issued by SEGCO. The Company has agreed to reimburse Alabama Power for the pro rata portion of such obligations corresponding to the Company's then proportionate ownership of stock of SEGCO if Alabama Power is called upon to make such payment under its guaranty. As discussed earlier in this note under "Operating Leases," the Company has entered into certain residual value guarantees related to rail car leases. 8. STOCK OPTION PLAN Southern Company provides non-qualified stock options to a large segment of the Company's employees ranging from line management to executives. As of December 31, 2005, 1,551 current and former employees of the Company participated in the stock option plan. The maximum number of shares of Southern Company common stock that may be issued under this plan may not exceed 55 million. The prices of options granted to date have been at the fair market value of the shares on the dates of grant. Options granted to date become exercisable pro rata over a maximum period of three years from the date of grant. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the stock option plan. Activity from 2003 to 2005 for the options granted II-182

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report to the Company's employees under the stock option plan is summarized below:
Shares Subject To Option Average Option Price Per Share

Balance Options Options Options Balance Options Options Options Balance Options Options Options Balance

at December granted canceled exercised at December granted canceled exercised at December granted canceled exercised at December

31, 2002

31,2003

31, 2004

31, 2005

7,178,597 1,455,517 (54,860) (1,428,273) 7,150,981 1,434,915 (6,371) (1,450,309) 7,129,216 1,427,618 (12,910) (1,838,033) 6,705,891

$19.73 27.98 25.47 16.92 21.92 29.50 25.99 18.25 24.19 32.71 23.75 21.23 $26.82

Options exercisable: At December 31, 2003 At December 31, 2004 At December 31, 2005 The following table summarizes information about options outstanding at December 31, 2005:

3,956,234 4,304,091 3,989,722

13-21

Dollar Price Range of Options 21-28

28-35

Outstanding: Shares (in thousands) Average remaining life (in years) Average exercise price Exercisable: Shares (in thousands) Average exercise price 9. NUCLEAR INSURANCE

991 4.2 $17.25 991 $17.25

2,922 6.0 $25.94 2,496 $25.59

2,794 8.5 $31.13 503 $29.75

Under the Price-Anderson Amendments Act, the Company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at the Company's nuclear power plants. The Act provides funds up to $10.76 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $300 million by American Nuclear Insurers (ANI), with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. The Company could be assessed up to $101 million per incident for each licensed reactor it operates but not more than an aggregate of $15 million per incident to be paid in a calendar year for each reactor. Such maximum assessment for the Company, excluding any applicable state premium taxes based on its ownership and buyback interests is $203 million per incident but not more than an aggregate of $30 million to be paid for each incident in any one year. The Company is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. Additionally, the Company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million primary coverage. This excess insurance is also provided by NEIL. NEIL also covers additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can purchase this coverage, subject to a deductible waiting period of up to 26 weeks, with a maximum per occurrence per unit limit of $490 million. After the deductible period, weekly indemnity payments would be received until either the unit is operational or until the limit is exhausted in approximately three years. The Company purchases the maximum limit allowed by NEIL subject to ownership limitations and has elected a 12 week waiting period. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The current maximum annual assessments for the Company under the NEIL policies would be $48 million. Following the terrorist attacks of September 2001, both ANI and NEIL confirmed that terrorist acts against commercial nuclear power plants would, subject to the normal policy limits, be covered under their insurance. Both companies, however, revised their policy terms on

11-183

Table of Contents NOTES (continued) Georgia Power Company 2005 Annual Report a prospective basis to include an industry aggregate for all "non-certified" terrorist acts i.e., acts that are not certified acts of terrorism pursuant to the Terrorism Risk Insurance Act of 2002, which was renewed in 2005. The aggregate for all NEIL policies, which applies to non-certified property claims stemming from terrorism within a 12-month duration, is $3.24 billion plus any amounts available through reinsurance or indemnity from an outside source. The non-certified ANI nuclear liability cap is a $300 million shared industry aggregate during the normal ANI policy period. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the Company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. All retrospective assessments, whether generated for liability, property, or replacement power, may be subject to applicable state premium taxes. 10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial information for 2005 and 2004 is as follows:
Net Income

After Dividends on
Operating Operating Preferred

Quarter Ended

Revenues

Income (in millions)

Stock

March 2005 June 2005 September 2005 December 2005 March 2004 June 2004 September 2004 December 2004 The Company's business is influenced by seasonal weather conditions. II-184

$1,370 1,459 2,219 1,586 $1,199 1,353 1,582 1,237

$286 311 626 165 $285 322 486 166

$142 158 355 60 $144 156 287 71

Table of Contents SELECTED FINANCIAL AND OPERATING DATA 2001-2005 Georgia Power Company 2005 Annual Report
2005 2004 2003 2002 2001

Operating Revenues (in thousands) Net Income after Dividends on Preferred Stock (in thousands) Cash Dividends on Common Stock (in thousands) Return on Average Common Equity (percent) Total Assets (in thousands) Gross Property Additions (in thousands) Capitalization (in thousands) : Common stock equity Preferred stock Mandatorily redeemable preferred securities Long-term debt payable to affiliated trusts Long-temn debt Total (excluding amounts due within one year) Capitalization Ratios (percent): Common stock equity Preferred stock Mandatorily redeemable preferred securities Long-term debt payable to affiliated trusts Long-term debt Total (excluding amounts due within one year) Security Ratings: Preferred Stock Moody's Standard and Poor's Fitch Unsecured Long-Term Debt Moody's Standard and Poor's Fitch Customers (year-end): Residential Commercial Industrial Other Total Employees (year-end)
N/A = Not Applicable.

$ 6,634,203 $ 714,999 $ 556,100 14.15 $17,047,783 $ 906,248 $ 5,214,535 969,073 4,179,218 $10,362,826 50.3 9.4 40.3 100.0

$ 5,370,808 $ 658,001 $ 565,500 13.95 $15,822,338 $ 1,126,064 $ 4,890,561 14,609 969,073 3,709,852 $ 9,584,095 51.0 0.2 10.1 38.7 100.0

$ 4,913,507 $ 630,577 $ 565,800 14.05 $14,850,754 $ 742,810 $ 4,540,211 14,569 940,000 3,762,333 $ 9,257,113 49.0 0.2 10.2 40.6 100.0

$ 4,822,460 $ 617,629 $ 542,900 13.99 $14,342,656 $ 883,968 $ 4,434,447 14,569 940,000 3,109,619 $ 8,498,635 52.2 0.2 11.1 36.5 100.0

$ 4,965,794 $ 610,335 $ 527,300 14.12 $14,447,973 $ 1,389,751 $ 4,397,485 14,569 789,250 2,961,726 $ 8,163,030 53.9 0.2 9.6 36.3 100.0

Baal BBB+ A A2 A A+ 1,832,520 270,373 8,206 3,536 2,114,635 8,713

Baal BBB+ A A2 A A+ 1,801,426 265,543 7,676 3,482 2,078,127 8,731

Baal BBB+ A A2 A A+ 1,768,662 258,276 7,899 3,434 2,038,271 8,714

Baal BBB+ A A2 A A+ 1,734,430 250,993 8,240 3,328 1,996,991 8,837

Baal BBB+ A A2 A A+ 1,698,407 244,674 8,046 3,239 1,954,366 9,048

II-185

Table of Contents SELECTED FINANCIAL AND OPERATING DATA 2001-2005 (continued) Georgia Power Company 2005 Annual Report
2005 2004 2003 2002 2001

Operating Revenues (in thousands): Residential Commercial Industrial Other Total retail Sales for resale -- non-affiliates Sales for resale affiliates Total revenues from sales of electricity Other revenues Total Kilowatt-Hour Sales (in thousands): Residential Commercial Industrial Other Total retail Sales for resale - non-affiliates Sales for resale - affiliates Total Average Revenue Per Kilowatt-Hour (cents): Residential Commercial Industrial Total retail Sales for resale Total sales Residential Average Annual Kilowatt-Hour Use Per Customer Residential Average Annual Revenue Per Customer Plant Nameplate Capacity Ratings (year-end) (megawatts) Maximum Peak-Hour Demand (megawatts): Winter Summer Annual Load Factor (percent) Plant Availability (percent): Fossil-steam Nuclear Source of Energy Supply (percent): Coal Nuclear Hydro Oil and gas Purchased power From non-affiliates From affiliates Total

$ 2,024,204 2,206,252 1,351,731 60,625 5,642,812 519,673 264,989 6,427,474 206,729 $ 6,634,203 23,585,115 29,768,402 25,027,371 601,330 78,982,218 11,234,527 4,854,914 95,071,659 8.58 7.41 5.40 7.14 4.88 6.76 12,974 1,113 15,097 13,501 15,953 59.7 90.7 89.3 60.8 15.1 1.9 2.9 5.7 13.6 100.0 II-186

$ 1,736,072 1,812,096 1,172,936 55,881 4,776,985 246,545 166,245 5,189,775 181,033 $ 5,370,808 22,930,372 28,014,357 26,357,271 602,202 77,904,202 5,969,983 4,782,873 88,657,058 7.57 6.47 4.45 6.13 3.84 5.85 12,838 972 13,978 12,208 15,180 61.5 90.3 94.8 57.9 17.3 1.5 0.1 7.0 16.2 100.0

S 1,583,082 1,661,054 1,012,267 53,569 4,309,972 259,376 174,855 4,744,203 169,304 $ 4,913,507 21,778,582 26,940,572 25,703,421 595,742 75,018,317 8,835,804 5,844,196 89,698,317 7.27 6.17 3.94 5.75 2.96 5.29 12,421 903 13,980 13,153 14,826 61.0 87.6 94.2 58.6 16.8 2.1 0.3 7.5 14.7 100.0

S 1,600,438 1,631,130 1,004,288 52,241 4,288,097 270,678 98,323 4,657,098 165,362 $ 4,822,460 22,144,559 26,954,922 25,739,785 593,202 75,432,468 8,069,375 3,962,559 87,464,402 7.23 6.05 3.90 5.68 3.07 5.32 12,867 930 14,059 11,873 14,597 60.4 80.9 88.8 59.5 16.2 0.9 0.3 6.3 16.8 100.0

$ 1,507,031 1,682,918 1,106,420 52,943 4,349,312 366,085 99,411 4,814,808 150,986 $ 4,965,794 20,119,080 26,493,255 25,349,477 583,007 72,544,819 8,110,096 3,133,485 83,788,400 7.49 6.35 4.36 6.00 4.14 5.75 11,933 894 14,474 11,977 14,294 61.7 88.5 94.4 58.5 18.1 1.1 0.4 7.8 14.1 100.0

APPENDIX L GPC CURRENT YEAR QUARTERLY FINANCIAL STATEMENTS

Table of Contents

GEORGIA POWER COMPANY


46

Table of Contents GEORGIA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED)


For the Three Months Ended March 31,

2008
(in thousands)

2007

Operating Revenues: Retail revenues Wholesale revenues Non-affiliates Affiliates Other revenues Total operating revenues Operating Expenses: Fuel Purchased power Non-affiliates Affiliates Other operations Maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and (Expense): Allowance for equity funds used during construction Interest income Interest expense, net of amounts capitalized Other income (expense), net Total other income and (expense) Earnings Before Income Taxes Income taxes Net Income Dividends on Preferred and Preference Stock Net Income After Dividends on Preferred and Preference Stock

$1,575,007 152,692 73,910 63,238 1,864,847 637,923 58,031 252,935 241,092 127,723 150,608 71,286 1,539,598 325,249 27,757 787 (86,337) (3,294) (61,087) 264,162 83,801 180,361 4,345 $ 176,016

$1,412,329 143,767 41,788 59,286 1,657,170 593,894 46,093 184,542 230,748 124,442 126,149 72,341 1,378,209 278,961 13,179 475 (85,465) (4,216) (76,027) 202,934 70,980 131,954 689 $ 131,265

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


For the Three Months

Ended March 31, 2008 2007


(in thousands)

Net Income After Dividends on Preferred and Preference Stock Other comprehensive income (loss): Qualifying hedges: Changes in fair value, net of tax of $(6,043) and $(1,082), respectively Reclassification adjustment for amounts included in net income, net of tax of $206 and $(29), respectively Marketable securities: Change in fair value, net of tax of $- and $42, respectively Total other comprehensive income (loss) COMPREHENSIVE INCOME

$176,016

$131,265

(9,580) 327 (9,253) $166,763

(1,714) (46) 65 (1,695) $129,570

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 47

Table of Contents GEORGIA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31, 2008 2007
(in thousands)

Operating Activities: Net income Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization Deferred income taxes and investment tax credits Deferred revenues Deferred expenses - affiliates Allowance for equity funds used during construction Pension, postretirement, and other employee benefits Hedge settlements Other, net Changes in certain current assets and liabilities

$ 180,361 178,735 (5,709) 35,057 21,209 (27,757) 9,863 (15,816) (18,819)

$ 131,954 149,339 12,709 (240) 21,524 (13,179) 5,289 (3,923) (3,980)

Receivables Fossil fuel stock Prepaid income taxes Other current assets Accounts payable Accrued taxes
Accrued compensation Other current liabilities

77,075 1,293 22,380 (4,041) (44,570) (79,097)


(72,174) 22,630

81,442 (14,009) 19,084 (8,047) (86,459) (124,431)


(111,026) 35,473

Net cash provided from operating activities


Investing Activities:

280,620 (517,606)
16,094 (113,811) 106,931 (11,346) 8,608 (11,239) (522,369) (359,113) 250,000 241,800 300,000 (683) (417) (3,947) (180,300) (2,630) 244,710 2,961 15,392 $ 18,353

91,520 (352,475)
(94,131) 87,251 (8,937) 379 (11,714) (379,627) (58,951) 250,000 269,949

Property additions
Distribution of restricted cash from pollution control bonds Nuclear decommissioning trust fund purchases Nuclear decommissioning trust fund sales Cost of removal, net of salvage Change in construction payables, net of joint owner portion Other Net cash used for investing activities Financing Activities: Decrease in notes payable, net Proceeds Senior notes Capital contributions from parent company Other long-term debt Redemptions Capital leases Senior notes Payment of preferred and preference stock dividends Payment of common stock dividends Other Net cash provided from financing activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Period Cash and Cash Equivalents at End of Period Supplemental Cash Flow Information: Cash paid during the period for Interest (net of $11,837 and $5,251 capitalized for 2008 and 2007, respectively) Income taxes (net of refunds)

(1,841) (832) (172,475) (1,560) 284,290 (3,817) 16,850 $ 13,033

$ 70,452 $ 450

$ 64,595 $ 6,585

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 48

Table of Contents GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED)


Assets At March 31, 2008 At December 31. 2007

Current Assets: Cash and cash equivalents Restricted cash


Receivables -.

(in thousands)

18,353 32,185 502,523 143,269 379,394 89,343 19,717 (7,686) 391,929 338,008 68,397 28,722 109,211 2,113,365

15,392 48,279 491,389 137,046 384,538 147,498 21,699 (7,636) 393,222 337,652 69,394 51,101 55,169 2,144,743 22,011,215 8,696,668 13,314,547 198,983 1,797,642 15,311,172 53,813 588,952 47,914 690,679

Customer accounts receivable Unbilled revenues Under recovered regulatory clause revenues Other accounts and notes receivable Affiliated companies Accumulated provision for uncollectible accounts Fossil fuel stock, at average cost Materials and supplies, at average cost Vacation pay Prepaid income taxes Other Total current assets Property, Plant, and Equipment: In service Less accumulated provision for depreciation Nuclear fuel, at amortized cost Construction work in progress Total property, plant, and equipment Other Property and Investments: Equity investments in unconsolidated subsidiaries Nuclear decommissioning trusts, at fair value Other Total other property and investments Deferred Charges and Other Assets: Deferred charges related to income taxes Prepaid pension costs Deferred under recovered regulatory clause revenues Other regulatory assets Other Total deferred charges and other assets Total Assets

22,157,064 8,823,496 13,333,568 247,562 2,105,094 15,686,224 55,349 555,163 49,098 659,610 544,686 1,046,140 284,629 606,326 266,461 2,748,242 $21,207,441

532,539 1,026,985 307,294 541,014 268,335 2,676,167 $ 20,822,761

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 49

Table of Contents GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholder's Equity At March 31, At December 31. 2008 2007 (in thousands)

Current Liabilities: Securities due within one year Notes payable Accounts payable Affiliated Other Customer deposits Accrued taxes Income taxes Other Accrued interest Accrued vacation pay Accrued compensation Other Total current liabilities Long-term Debt Deferred Credits and Other Liabilities: Accumulated deferred income taxes Deferred credits related to income taxes Accumulated deferred investment tax credits Employee benefit obligations Asset retirement obligations Other cost of removal obligations Other regulatory liabilities Other Total deferred credits and other liabilities Total Liabilities Preferred and Preference Stock Common Stockholder's Equity: Common stock, without par value Authorized - 20,000,000 shares Outstanding - 9,261,500 shares Paid-in capital Retained earnings Accumulated other comprehensive loss Total common stockholder's equity Total Liabilities and Stockholder's Equity

348,310 356,478 202,150 478,125 177,700 134,205 87,737 84,438 55,064 44,550 167,698 2,136,455 6,338,121

198,576 715,591 236,332 463,945 171,553 68,782 219,585 74,674 56,303 114,974 103,225 2,423,540 5,937,792 2,850,655 146,886 269,125 678,826 663,503 414,745 577,642 158,670 5,760,052 14,121,384 265,957

2,827,668 144,335 265,898 697,404 653,275 412,896 628,981 167,982 5,798,439 14,273,015 265,957

398,473 3,621,364 2,671,778 (23,146) 6,668,469 $21,207,441

398,473 3,374,777 2,676,063 (13,893) 6,435,420 $ 20,822,761

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 50

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER 2008 vs. FIRST QUARTER 2007 OVERVIEW Georgia Power operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of Georgia Power's business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, and fuel prices. Appropriately balancing required costs and capital expenditures with customer prices will continue to challenge Georgia Power for the foreseeable future. In December 2007, the 2007 Retail Rate Plan, which should provide earnings stability over its three-year term, was approved. This regulatory action enables the recovery of substantial capital investments to facilitate the continued reliability of the transmission and distribution networks, continued generation and other investments as well as the recovery of increased operating costs. The 2007 Retail Rate Plan also includes a tariff specifically for the recovery of costs related to environmental controls mandated by state and federal regulations. Georgia Power filed a fuel cost recovery case with the Georgia PSC on February 29, 2008 and a final order is expected on May 20, 2008. The results of this fuel rate filing are expected to be effective June 1, 2008. Georgia Power continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income after dividends on preferred and preference stock. For additional information on these indicators, see MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW - "Key Performance Indicators" of Georgia Power in Item 7 of the Form 10-K. RESULTS OF OPERATIONS Net Income
First Quarter 2008 vs. First Quarter 2007 (change in millions)

% change
34.1

$44.7

Georgia Power's net income after dividends on preferred and preference stock for the first quarter 2008 was $176.0 million compared to $131.3 million for the corresponding period in 2007. The increase was primarily attributed to higher base retail revenues resulting from the retail rate increase effective January 1, 2008. Retail Revenues
First Quarter 2008 vs. First Quarter 2007 (change in millions) % change

S162.7

11.5

In the first quarter 2008, retail revenues were $1.6 billion compared to $1.4 billion in the corresponding period in 2007. 51

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Details of retail revenues are as follows:
First Quarter 2008
(in millions) % change

Retail -prior year Estimated change in Rates and pricing Sales growth Weather Fuel and other cost recovery Retail - current year

$ 1,412.3 77.8 (0.6) 8.0 77.5 $ 1,575.0 5.5 0.6 5.4 11.5%

Revenues associated with changes in rates and pricing increased in the first quarter 2008 when compared to the corresponding period in 2007 due to the application of new rates established in January 2008 and higher market-response rates for sales to large commercial and industrial customers. Revenues attributable to changes in sales growth decreased in the first quarter 2008 when compared to the corresponding period for 2007. This decrease was primarily due to a slowing economy partially offset by an increase of 1.2% in retail customers. Total retail KWH sales increased 0.6% from the corresponding period in 2007. Residential KWH sales increased 1.3% and commercial KWH sales increased 2.3% but were partially offset by lower industrial KWH sales which decreased 1.9% from the corresponding period in 2007. Revenues attributable to changes in weather increased in the first quarter 2008 when compared to the corresponding period for 2007 due to more favorable weather. Fuel and other cost recovery revenues increased by $77.5 million in the first quarter 2008 when compared to the corresponding period for 2007 as a result of higher fuel and purchased power expenses. Georgia Power electric rates 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 - Non-Affiliates
First Quarter 2008 vs. First Quarter 2007 (change in millions) % change

$8.9

6.2

Wholesale revenues from non-affiliates will vary depending on the market cost of available energy compared to the cost of Georgia Power and Southern Company system owned generation, demand for energy within the Southern Company service territory, and availability of Southern Company system generation. In the first quarter 2008, wholesale revenues from non-affiliates were $152.7 million compared to $143.8 million in the corresponding period in 2007. This increase was primarily the result of higher energy prices due to increased fuel costs. This was partially offset by a 1.0% decrease in KWH energy sales. 52

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Wholesale Revenues - Affiliates
First Quarter 2008 vs. First Quarter 2007
(change in millions) % change

$32.1

76.9

Wholesale revenues from affiliated companies will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings as the energy is generally sold at marginal cost. In the first quarter 2008, wholesale revenues from affiliates were $73.9 million compared to $41.8 million for the corresponding period in 2007. The increase was a result of higher prices primarily due to higher fuel costs and a 27.3% increase in KWH sales due to the availability of lower cost Georgia Power generating resources to meet affiliate demands at various times during the first quarter 2008. Fuel and Purchased Power Expenses
First Quarter 2008 vs. First Quarter 2007
(change in millions) % change

Fuel Purchased power non-affiliates Purchased power - affiliates Total fuel and purchased power expenses

$ 44.0 11.9 68.4 $124.3

7.4 25.9 37.1

In the first quarter 2008, total fuel and purchased power expenses were $948.8 million compared to $824.5 million for the corresponding period in 2007. The increase in fuel and purchased power expenses was due to an $82.4 million increase in the average cost of fuel and purchased power and a $41.9 million increase in total KWH generated or purchased. Fuel and purchased power transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Georgia Power's energy cost recovery clause. Details of Georgia Power's cost of generation and purchased power are as follows:
Average Cost First Quarter 2008 First Quarter 2007 Percent Change

(cents per net KWH)

Fuel Purchased power

2.84 7.32

2.62 6.60

8.4 10.9

In the first quarter 2008, fuel expense was $637.9 million compared to $593.9 million for the corresponding period in 2007. The increase was the result of an 8.4% increase in the average cost of fuel per KWH generated which was primarily due to an increase in fuel commodity prices resulting from global demand pressures and increased transportation costs. The average cost of coal per KWH generated increased 12.1% as a result of increases in commodity costs and transportation costs. The average cost of oil and natural gas per KWH generated increased 11.0% primarily as a result of increases in commodity prices. See FUTURE EARNINGS POTENTIAL - "FERC and Georgia PSC Matters - Retail Fuel Cost Recovery" herein for additional information. 53

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Non-affiliates In the first quarter 2008, purchased power expense - non-affiliates was $58.0 million compared to $46.1 million for the corresponding period in 2007. This increase was primarily the result of a 23.3% volume increase in KWH purchased from available lower priced market energy alternatives as well as an increase in the average cost per KWH purchased. Energy purchases from non-affiliates will vary depending on the market cost of available energy being lower than Southern Company systemgenerated energy, demand for energy within the Southern Company system service territory, and availability of Southern Company system generation. Affiliates In the first quarter 2008, purchased power from affiliates was $252.9 million compared with $184.5 million for the corresponding period in 2007. The increase was the result of a 14.1% volume increase in KWHs purchased from available lower cost resources within the Power Pool as well as an increase in the average cost of KWHs purchased. Energy purchases from affiliated companies will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC, as approved by the FERC. Other Operations and Maintenance Expenses
First Quarter 2008 VS. First Quarter 2007
(change in millions) % change

Other operations Maintenance Total other operations and maintenance expenses

$10.3 3.3 $13.6

4.5 2.6

In the first quarter 2008, other operations and maintenance expenses were $368.8 million compared to $355.2 million in the corresponding period in 2007. This increase was primarily the result of timing of maintenance activities, the regulatory amortization of nuclear outages, and an increase in customer account expenses related to meter reading and records and collections activities. Depreciation and Amortization
First Quarter 2008 vs. First Quarter 2007
(change in millions) % change

$24.5

19.4

In the first quarter 2008, depreciation and amortization was $150.6 million compared to $126.1 million in the corresponding period in 2007. The increase was primarily the result of an increase in plant in service due to transmission, distribution, and environmental projects. 54

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Allowancefor Equity Funds Used During Construction
First Quarter 2008 vs. First Quarter 2007
(change in millions) % change

$14.6

110.6

In the first quarter 2008, the allowance for equity funds used during construction was $27.8 million compared with $13.2 million for the corresponding period in 2007. This increase was primarily related to increases in construction work in progress balances related to Georgia Power's ongoing construction program, including three combined cycle units at Plant McDonough and ongoing environmental projects. Income Taxes
First Quarter 2008 vs. First Quarter 2007
(change in millions) % change

$12.8

18.1

In the first quarter 2008, income taxes were $83.8 million compared with $71.0 million for the corresponding period in 2007. This was primarily the result of increased pre-tax income, partially offset by an increase in non-taxable items, particularly the allowance for equity funds used during construction, as well as state tax credits and the federal production activities deduction. See Note (H) to the Condensed Financial Statements herein for additional information on Georgia Power's effective tax rate. Dividends on Preferred and Preference Stock
First Quarter 2008 vs. First Quarter 2007
(change in millions) % change

$3.6

530.6

In the first quarter 2008, dividends on preferred and preference stock were $4.3 million compared with $0.7 million for the corresponding period in 2007. This was primarily the result of the issuance of $225 million of preference stock in the fourth quarter 2007. FUTURE EARNINGS POTENTIAL The results of operations discussed above are not necessarily indicative of Georgia Power's future earnings potential. The level of Georgia Power's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Georgia Power's business of selling electricity. These factors include Georgia Power's 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. Future earnings in the near term will depend, in part, upon growth in energy sales which is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth in Georgia Power's service area. For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT'S DISCUSSION AND ANALYSIS FUTURE EARNINGS POTENTIAL of Georgia Power in Item 7 of the Form 10-K. 55

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Environmental Matters Compliance costs related to the Clean Air Act and other environmental statutes and regulations could affect earnings if such costs cannot continue to be fully recovered in rates on a timely basis. See MANAGEMENT'S DISCUSSION AND ANALYSIS FUTURE EARNINGS POTENTIAL "Environmental Matters" of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under "Environmental Matters" in Item 8 of the Form 10-K for additional information.
Eight-Hour Ozone Regulations

See MANAGEMENT'S DISCUSSION AND ANALYSIS FUTURE EARNINGS POTENTIAL "Environmental Matters - Environmental Statutes and Regulations Air Quality" of Georgia Power in Item 7 of the Form 10-K for additional information regarding revisions to the eight-hour ozone air quality standard. In March 2008, the EPA finalized its revisions to the eight-hour ozone standard, increasing its stringency. The EPA plans to designate nonattainment areas based on the new standard by 2010, and new nonattainment areas within Georgia Power's service territory are expected. The ultimate outcome of this matter cannot be determined at this time and will depend on subsequent legal action and/or future nonattainment designations and regulatory plans.
CarbonDioxide Litigation

On February 26, 2008, the Native Village of Kivalina and the City of Kivalina filed a suit in the U.S. District Court for the Northern District of California against several electric utilities (including Southern Company), several oil companies, and a coal company. The plaintiffs are the governing bodies of an Inupiat village in Alaska. The plaintiffs contend that the village is being destroyed by erosion allegedly caused by global warming that the plaintiffs attribute to emissions of greenhouse gases by the defendants. The plaintiffs assert claims for public and private nuisance and contend that the defendants have acted in concert and are therefore jointly and severally liable for the plaintiffs' damages. The suit seeks damages for lost property values and for the cost of relocating the village, which cost is alleged to be $95 million to $400 million. Southern Company believes that these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. The ultimate outcome of this matter cannot be determined at this time. FERC and Georgia PSC Matters
Retail Fuel Cost Recovery

On February 6, 2007. the Georgia PSC approved an increase in Georgia Power's total annual billings of approximately $383 million related to fuel cost recovery effective March 1, 2007. The order also required Georgia Power to file for a new fuel cost recovery rate no later than March 1, 2008. On February 29, 2008, Georgia Power filed a request with the Georgia PSC to change the fuel cost recovery rate effective June 1,2008. If approved as filed, total annual fuel billings will increase by $222 million. The Georgia PSC is scheduled to rule on the request May 20, 2008. The ultimate outcome of this matter cannot be determined at this time. As of March 31, 2008, Georgia Power had an under recovered fuel balance of approximately $664.0 million as compared to $691.8 million at December 31, 2007. See MANAGEMENT'S DISCUSSION AND ANALYSIS FUTURE EARNINGS POTENTIAL - "PSC Matters Fuel Cost Recovery" of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under "Retail Regulatory Matters -Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information. Fuel cost recovery revenues as recorded on the financial statements are adjusted for differences in actual recoverable costs and amounts billed in current 56

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS regulated rates. Accordingly, any changes in the billing factor will not have a significant effect on Georgia Power's revenues or net income, but will affect cash flow. Nuclear Nuclear Projects See MANAGEMENT'S DISCUSSION AND ANALYSIS FUTURE EARNINGS POTENTIAL "Nuclear - Nuclear Projects" of Georgia Power in Item 7 of the Form 10-K for information regarding the potential expansion of Plant Vogtle. In August 2006, Southern Nuclear, on behalf of Georgia Power, OPC, MEAG Power, and Dalton Utilities (collectively, Owners), filed an application with the NRC for an early site permit approving two additional nuclear units on the site of Plant Vogtle. In March 2008, Southern Nuclear filed an application with the NRC for a combined construction and operating license (COL) for the new units. On April 8, 2008, Georgia Power, acting for itself and as agent for the Owners, and a consortium consisting of Westinghouse and Stone & Webster (collectively, Consortium) entered into an engineering, procurement, and construction agreement to design, engineer, procure, construct, and test two AP1000 nuclear units with electric generating capacity of approximately 1,100 MWs each and related facilities, structures, and improvements at Plant Vogtle (Vogtle 3 and 4 Agreement). The Vogtle 3 and 4 Agreement is an arrangement whereby the Consortium supplies and constructs the entire facility with the exception of certain items provided by the Owners. Under the terms of the Vogtle 3 and 4 Agreement, the Owners will pay a purchase price that will be subject to certain price escalation and adjustments, adjustments for change orders, and performance bonuses. Each Owner is severally (and not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to the Consortium under the Vogtle 3 and 4 Agreement. Georgia Power's proportionate share, based on its current ownership interest, is 45.7%. Under the terms of a separate joint development agreement, the Owners must finalize their ownership percentages by July 2, 2008, except for allowed changes, under certain limited circumstances, during the Georgia PSC certification process. Georgia Power submitted its self-build nuclear proposal to the Georgia PSC on May 1, 2008 in connection with its 2016-2017 baseload capacity request for proposals (RFP). No other responses to the RFP were received. Georgia Power will work with the Georgia PSC's Independent Evaluator to finalize information required for certification, including updated fossil fuel and generation technology costs, before submitting a final recommendation on August 1, 2008 for the Georgia PSC's approval. A final certification decision is expected in March 2009. If certified by the Georgia PSC and licensed by the NRC, Vogtle Units 3 and 4 are scheduled to be placed in service in 2016 and 2017, respectively. The total plant value to be placed in service will also include financing costs for each of the Owners, the impacts of inflation on costs, and transmission and other costs that are the responsibility of the Owners. Georgia Power's proportionate share of the estimated in-service costs, based on its current ownership interest, is approximately $6.4 billion, subject to adjustments and performance bonuses under the Vogtle 3 and 4 Agreement. The Owners and the Consortium have agreed to certain liquidated damages upon the Consortium's failure to comply with the schedule and performance guarantees. The Owners and the Consortium also have agreed to certain bonuses payable to the Consortium for early completion and unit performance. The Consortium's liability to the Owners for schedule and performance liquidated damages and warranty claims is subject to a cap. 57

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The obligations of Westinghouse and Stone & Webster under the Vogtle 3 and 4 Agreement are guaranteed by Toshiba Corporation and The Shaw Group, Inc., respectively. In the event of certain credit rating downgrades of any Owner, such Owner will be required to provide a letter of credit or other credit enhancement. The Vogtle 3 and 4 Agreement is subject to certification by the Georgia PSC. In addition, the Owners may terminate the Vogtle 3 and 4 Agreement at any time for their convenience, provided that the Owners will be required to pay certain termination costs and, at certain stages of the work, cancellation fees to the Consortium. The Consortium may terminate the Vogtle 3 and 4 Agreement under certain circumstances, including delays in receipt of the COL or delivery of full notice to proceed, certain 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 Owners, Owner insolvency, and certain other events. Income Tax Matters
Bonus Depreciation

On February 13, 2008, President Bush signed the Economic Stimulus Act of 2008 (Stimulus Act) into law. The Stimulus Act includes a provision that allows 50% bonus depreciation for certain property acquired in 2008 and placed in service in 2008 or, in certain limited cases, 2009. Georgia Power is currently assessing the financial implications of the Stimulus Act and estimates the cash flow reduction to tax payments for 2008 to be between $50 million and $90 million. Other Matters Georgia Power is involved in various other matters being litigated, regulatory matters, and certain tax-related issues that could affect future earnings. In addition, Georgia Power is subject to certain claims and legal actions arising in the ordinary course of business. Georgia Power's business activities are subject to extensive governmental regulation related to public health and the environment. 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 opacity and air and water quality standards, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such pending or potential litigation against Georgia Power cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Georgia Power in Item 8 of the Form 10-K, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Georgia Power's financial statements. See the Notes to the Condensed Financial Statements herein for discussion of various other contingencies, regulatory matters, and other matters being litigated which may affect future earnings potential. ACCOUNTING POLICIES Application of Critical Accounting Policies and Estimates Georgia Power prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Georgia 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 Georgia 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 58

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS statements. See MANAGEMENT'S DISCUSSION AND ANALYSIS - ACCOUNTING POLICIES - "Application of Critical Accounting Policies and Estimates" of Georgia Power in Item 7 of the Form 10-K for a complete discussion of Georgia Power's critical accounting policies and estimates related to Electric Utility Regulation, Contingent Obligations, and Unbilled Revenues. FINANCIAL CONDITION AND LIQUIDITY Overview Georgia Power's financial condition remained stable at March 31, 2008. Net cash provided from operating activities totaled $280.6 million for the first quarter 2008, compared to $91.5 million for the first quarter 2007. The $189.1 million increase in cash provided from operating activities in the first quarter 2008 is primarily due to higher retail operating revenues. Net cash used for investing activities totaled $522.4 million for the first quarter 2008 primarily due to gross property additions to utility plant of $538.3 million. Net cash provided from financing activities totaled $244.7 million for the first quarter 2008 compared to $284.3 million for the first quarter 2007. The decrease was primarily due to lower capital contributions from Southern Company as well as dividend payments for new preference stock issued in the fourth quarter 2007. Significant balance sheet changes for the first three months of 2008 include a $307.5 million increase in construction work in progress and the refinancing of notes payable to other short-term and long-term forms of financing. Capital Requirements and Contractual Obligations See MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND LIQUIDITY - "Capital Requirements and Contractual Obligations" of Georgia Power in Item 7 of the Form 10-K for a description of Georgia Power's capital requirements for its construction program, scheduled maturities of long-term debt, as well as related interest, derivative obligations, preferred and preference stock dividends, leases, purchase commitments, and trust funding requirements. Approximately $348 million will be required through March 31, 2009 to fund maturities of long-term debt. In addition, in connection with entering into the Vogtle 3 and 4 Agreement, as described under FUTURE EARNINGS POTENTIAL "Nuclear- Nuclear Projects" herein, the Georgia Power Board of Directors approved revisions to Georgia Power's capital budget of $600 million in 2009 and $700 million in 2010, for a revised estimated total construction program of $2.0 billion in 2008, $2.6 billion in 2009, and $2.5 billion in 2010. Actual construction costs may vary from these estimates because of changes in such factors as: business conditions; environmental statutes and regulations; nuclear plant regulations; FERC rules and regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Sources of Capital Georgia Power plans to obtain the funds required for construction and other purposes from sources similar to those utilized in the past. Recently, Georgia Power has primarily utilized funds from operating cash flows, short-term debt, external security offerings, and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon regulatory approval, prevailing market conditions, and other factors. See MANAGEMENT'S DISCUSSION AND ANALYSIS -FINANCIAL CONDITION AND LIQUIDITY - "Sources of Capital" of Georgia Power in Item 7 of the Form 10-K for additional information. Georgia Power's current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet scheduled maturities of long-term debt as well as cash needs which can 59

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, Georgia Power had at March 31, 2008 approximately $18.4 million of cash and cash equivalents and approximately $1.3 billion of unused credit arrangements with banks. Of the unused credit arrangements, $40 million expire in 2008, $185 million expire in 2009, and $1.1 billion expire in 2012. Of the facilities that expire in 2008, all contain provisions allowing two-year term loans executable at expiration. Georgia Power expects to renew its credit facilities, as needed, prior to expiration. See Note 6 to the financial statements of Georgia Power under "Bank Credit Arrangements" in Item 8 of the Form 10-K for additional information. These unused credit arrangements provide liquidity support to Georgia Power's obligations with respect to variable rate pollution control bonds and commercial paper. Georgia Power may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of Georgia Power and other Southern Company subsidiaries. At March 31, 2008, Georgia Power had approximately $256 million of commercial paper and $100 million of short-term bank loans outstanding. Management believes that the need for working capital can be adequately met by utilizing commercial paper programs and lines of credit without maintaining large cash balances. Credit Rating Risk Georgia 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- or Baa3 or below. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. These contracts are primarily for physical electricity purchases and sales. At March 31, 2008, the maximum potential collateral requirements at a BBB- or Baa3 rating were approximately $8 million. The maximum potential collateral requirements at a rating below BBB- or Baa3 were approximately $514 million. Georgia Power is also party to certain agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for Georgia Power and/or Alabama Power. These agreements are primarily for natural gas and power price risk management activities. At March 31, 2008, Georgia Power's total exposure related to these types of agreements was approximately $47 million. Market Price Risk Georgia Power's market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2007 reporting period. In addition, Georgia Power is not aware of any facts or circumstances that would significantly affect such exposures in the near term. Due to cost-based rate regulation, Georgia Power has limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. To mitigate residual risks relative to movements in electricity prices, Georgia Power enters into physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. Georgia Power continues to manage a fuel-hedging program at the instruction of the Georgia PSC. 60

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The change in fair value of energy-related derivative contracts and valuations at March 31, 2008 were as follows:
First Quarter

2008 Changes Fair Value


(in millions)

Contracts outstanding at the beginning of the period, assets (liabilities), net Contracts realized or settled Current period changes (a) Contracts outstanding at the end of the period, assets (liabilities), net (a) Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

$ (0.4) 5.9 78.1 $83.6

Gains and losses on energy-related derivative contracts related to Georgia Power's fuel hedging program are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as they are recovered through the fuel cost recovery mechanism. Certain other gains and losses on energy-related derivatives, designated as hedges, are initially deferred in other comprehensive income before being recognized in income in the same period as the hedged transaction. Gains and losses on energy-related derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. The fair value gain/(loss) of energy-related derivative contracts outstanding at March 31, 2008 was reflected in the financial statements as follows:
Amounts
(in millions)

Regulatory liabilities, net Accumulated other comprehensive income Net income Total fair value gain/(loss)

$83.8 (0.2) $83.6

Unrealized pre-tax gains and losses recognized in income for the three months ended March 31, 2008 and 2007 for energy-related derivative contracts that are not hedges were not material. The maturities of the energy-related derivative contracts and the level of the fair value hierarchy in which they fall at March 31, 2008 are as follows:
March 31, 2008 Fair Value Measurements Maturity Year I
(in millions)

Total Fair Value

1-3 Years

Level 1 Level 2 Level 3 Fair value of contracts outstanding at end of period 61

83.6 83.6

65.5 65.5

$ 18.1 $ 18.1

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As part of the adoption of SFAS No. 157 to increase consistency and comparability in fair value measurements and related disclosures, the table above now uses the three-tier fair value hierarchy, as discussed in Note (C) to the Condensed Financial Statements herein, as opposed to the previously used descriptions "actively quoted," "external sources," and "models and other methods." The three-tier fair value hierarchy focuses on the fair value of the contract itself, whereas the previous descriptions focused on the source of the inputs. Because Georgia Power uses over-the-counter contracts that are not exchange traded but are fair valued using prices which are actively quoted, the valuations of those contracts now appear in Level 2; previously they were shown as "actively quoted." For additional information, see MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND LIQUIDITY "Market Price Risk" of Georgia Power in Item 7 and Notes 1 and 6 to the financial statements of Georgia Power under "Financial Instruments" in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein. Financing Activities In the first quarter 2008, Georgia Power issued $250 million of Series 2008A Floating Rate Senior Notes due March 17, 2010. The proceeds were used to repay a portion of its outstanding short-term indebtedness. In addition, Georgia Power entered into a $300 million long-term floating rate bank loan that bears interest based on one-month LIBOR. Proceeds were used to repay a portion of Georgia Power's short-term indebtedness and for other corporate purposes, including Georgia Power's continuous construction activities. Also in the first three months of 2008, Georgia Power entered into derivative transactions designed to mitigate interest rate risk related to taxable floating rate obligations. The total notional amount of these derivatives was $600 million. See Note (F) to the Condensed Financial Statements herein for further details. Also in the first four months of 2008, Georgia Power converted its entire $819 million of obligations related to auction rate tax-exempt securities from auction rate modes to other interest rate modes. Approximately $332 million of the auction rate tax-exempt securities were converted to fixed interest rate modes and approximately $487 million were converted to daily floating rate modes. Georgia Power also entered into hedges totaling $301 million to hedge interest rate risk on tax-exempt variable rate demand notes. See Note (F) to the Condensed Financial Statements herein for further details. In addition to any financings that may be necessary to meet capital requirements and contractual obligations, Georgia Power 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. 62

Table of Contents

GEORGIA POWER COMPANY


53

Table of Contents GEORGIA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED)


For the Three Months Ended June 30, 2008 2007 (in thousands) For the Six Months Ended June 30, 2008 2007 (in thousands)

Operating Revenues: Retail revenues Wholesale revenues Non-affiliates Affiliates Other revenues Total operating revenues Operating Expenses: Fuel Purchased power Non-affiliates Affiliates Other operations Maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and (Expense): Allowance for equity funds used during construction Interest income Interest expense, net of amounts capitalized Other income (expense), net Total other income and (expense) Earnings Before Income Taxes Income taxes Net Income Dividends on Preferred and Preference Stock Net Income After Dividends on Preferred and Preference Stock

$1,830,753 142,276 72,164 65,969 2,111,162 683,299 107,723 247,842 266,024 125,757 159,204 79,485 1,669,334 441,828 23,981 1,050 (83,728) 1,372 (57,325) 384,503 132,279 252,224 4,346 $ 247,878

$1,585,563 135,055 58,826 64,705 1,844,149 650,830 67,670 179,655 249,538 136,816 127,262 71,610 1,483,381 360,768 14,687 632 (87,080) 301 (71,460) 289,308 100,204 189,104 689 $ 188,415

$3,405,760 294,968 146,074 129,207 3,976,009 1,321,222 165,754 500,777 507,116 253,480 309,812 150,771 3,208,932 767,077 51,738 1,837 (170,065) (1,922) (118,412) 648,665 216,080 432,585 8,691 $ 423,894

$2,997,892 278,822 100,614 123,991 3,501,319 1,244,724 113,763 364,197 480,286 261,258 253,411 143,951 2,861,590 639,729 27,866 1,107 (172,545) (3,915) (147,487) 492,242 171,184 321,058 1,378 $ 319,680

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


For the Three Months Ended June 30, 2008 2007 (in thousands) For the Six Months Ended June 30, 2008 2007 (in thousands)

Net Income After Dividends on Preferred and Preference Stock Other comprehensive income (loss): Qualifying hedges: Changes in fair value, net of tax of $6,027, $10,812, $(16), and $9,730, respectively Reclassification adjustment for amounts included in net income, net of tax of $489, $31, $695, and $2, respectively Marketable securities: Change in fair value, net of tax of $-, $(6), $-, and $36, respectively Total other comprehensive income (loss) COMPREHENSIVE INCOME

$247,878

$188,415

$423,894

$319,680

9,556 774 10,330 $258,208

17,140 50 (7) 17183 $205598

(24) 1,101 1,077 $424971

15,426 4 58 15,488 $335168

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 54

Table of Contents GEORGIA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 2008 2007 (in thousands)

Operating Activities: Net income Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization Deferred income taxes and investment tax credits Deferred revenues Deferred expenses - affiliates Allowance for equity funds used during construction Pension, postretirement, and other employee benefits Hedge settlements Other, net Changes in certain current assets and liabilities Receivables Fossil fuel stock Prepaid income taxes Other current assets Accounts payable Accrued taxes Accrued compensation Other current liabilities Net cash provided from operating activities Investing Activities: Property additions Distribution of restricted cash from pollution control bonds Nuclear decommissioning trust fund purchases Nuclear decommissioning trust fund sales Cost of removal, net of salvage Change in construction payables, net of joint owner portion Other Net cash used for investing activities Financing Activities: Increase (decrease) in notes payable, net Proceeds Senior notes Pollution control bonds Capital contributions from parent company Other long-term debt Redemptions Capital leases Senior notes Pollution control bonds Other long-term debt Payment of preferred and preference stock dividends Payment of common stock dividends Other Net cash provided from financing activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Period Cash and Cash Equivalents at End of Period Supplemental Cash Flow Information: Cash paid during the period for Interest (net of $21,619 and $11,386 capitalized for 2008 and 2007, respectively) Income taxes (net of refunds)

432,585 367,910 29,175 60,898 21,571 (51,738) 6,304 (20,486) (20,337) (193372) (40,214) 4,303 (14,873) 102,384 (12,300) (49,119) 54,940 677,631

$ 321,058 302,523 12,347 (479) 21,933 (27,866) 6,035 4,836 8,336 (46,080) (51,433) (46,479) (9,680) 814 (60,944) (88,796) 35,025 381,150 (753,046) (184,246) 177,366 (18,042) 20,517 (6,059) (763,510) 79,495 850,000 269,949 (1,957)

(992,317) 13,221 (225,477) 218,597 (15,957) 7,200 (16,754) (1,011,487) (347,612) 500,000 94,935 251,262 300,000 (759) (45,812) (41,935) (8,309) (360,600) (7,671) 333,499 (357) 15,392 $ 15,035

(453,608) (1,550) (344,950) (4,664) 392,715 10,355 16,850 $ 27,205

$ $

154,225 130,091

$ 157,693 $ 158,849

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 55

Table of Contents GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED)


Assets At June 30, At December 31, 2008 2007 (in thousands)

Current Assets: Cash and cash equivalents Restricted cash Receivables Customer accounts receivable Unbilled revenues Under recovered regulatory clause revenues Other accounts and notes receivable Affiliated companies Accumulated provision for uncollectible accounts Fossil fuel stock, at average cost Materials and supplies, at average cost Vacation pay Assets from risk management activities Prepaid income taxes Other Total current assets Property, Plant, and Equipment: In service Less accumulated provision for depreciation Nuclear fuel, at amortized cost Construction work in progress Total property, plant, and equipment Other Property and Investments: Equity investments in unconsolidated subsidiaries Nuclear decommissioning trusts, at fair value Other Total other property and investments Deferred Charges and Other Assets: Deferred charges related to income taxes Prepaid pension costs Deferred under recovered regulatory clause revenues Other regulatory assets Other Total deferred charges and other assets Total Assets

15,035 41,198 608,671 215,656 404,855 75,819 53,397 (8,269) 433,436 349,013 68,639 127,737 46,799 67,989 2,499,975

15,392 48,279 491,389 137,046 384,538 147,498 21,699 (7,636) 393,222 337,652 69,394 4,262 51,101 50,907 2,144,743 22,011,215 8,696,668 13,314,547 198,983 1,797,642 15,311,172 53,813 588,952 47,914 690,679

23,280,746 8,924,909 14,355,837 256,546 1,415,177 16,027,560 58,188 549,815 42,847 650,850 555,156 1,055,718 311,479 628,903 275,780 2,827,036 $22,005,421

532,539 1,026,985 307,294 541,014 268,335 2,676,167 $20,822,761

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 56

Table of Contents GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholder's Equity At June 30, At December 31, 2008 2007 (in thousands)

Current Liabilities: Securities due within one year Notes payable Accounts payable Affiliated Other Customer deposits Accrued taxes Income taxes Other Accrued interest Accrued vacation pay Accrued compensation Other regulatory liabilities Other Total current liabilities Long-term Debt Deferred Credits and Other Liabilities: Accumulated deferred income taxes Deferred credits related to income taxes Accumulated deferred investment tax credits Employee benefit obligations Asset retirement obligations Other cost of removal obligations Other regulatory liabilities Other Total deferred credits and other liabilities Total Liabilities Preferred and Preference Stock Common Stockholder's Equity: Common stock, without par value Authorized - 20,000,000 shares Outstanding - 9,261,500 shares Paid-in capital Retained earnings Accumulated other comprehensive loss Total common stockholder's equity Total Liabilities and Stockholder's Equity

303,353 367,979 331,132 486,433 181,155 104,110 157,797 79,734 55,064 70,617 160,171 88,161 2,385,706 6,638,738 2,895,715 144,338 262,672 704,191 667,049 416,457 690,687 177,113 5,958,222 14,982,666 265,957

198,576 715,591 236,332 463,945 171,553 68,782 219,585 74,674 56,303 114,974 14,601 88,624 2,423,540 5,937,792 2,850,655 146,886 269,125 678,826 663,503 414,745 577,642 158,670 5,760,052 14,121,384 265,957

398,473 3,631,784 2,739,357 (12,816) 6,756,798 $22,005,421

398,473 3,374,777 2,676,063 (13,893) 6,435,420 $ 20,822,761

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 57

Table of Contents GEORGIA POWER COMPANY 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 Georgia Power operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of Georgia Power's business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, and fuel costs. Appropriately balancing the need to recover these increasing costs with customer prices will continue to challenge Georgia Power for the foreseeable future. In December 2007, the 2007 Retail Rate Plan was approved, which should provide earnings stability over its three-year term. This regulatory action enables the recovery of substantial capital investments to facilitate the continued reliability of the transmission and distribution networks, continued generation and other investments as well as the recovery of increased operating costs. The 2007 Retail Rate Plan also includes a tariff specifically for the recovery of costs related to environmental controls mandated by state and federal regulations. On May 20, 2008, Georgia Power received a final order from the Georgia PSC to increase its fuel cost recovery rate effective June 1, 2008. Georgia Power is required to file its next fuel cost recovery case by March 1, 2009. Georgia Power continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income after dividends on preferred and preference stock. For additional information on these indicators, see MANAGEMENT'S DISCUSSION AND ANALYSIS - OVERVIEW - "Key Performance Indicators" of Georgia Power in Item 7 of the Form 10K. RESULTS OF OPERATIONS Net Income
Second Quarter 2008 vs. Second Quarter 2007
(change in millions) (% change)

Year-to-Date 2008 vs. Year-to-Date 2007


(change in millions) (% change)

$59.5

31.6

$104.2

32.6

Georgia Power's net income after dividends on preferred and preference stock for the second quarter 2008 was $247.9 million compared to $188.4 million for the corresponding period in 2007. Georgia Power's net income after dividends on preferred and preference stock for year-to-date 2008 was $423.9 million compared to $319.7 million for the corresponding period in 2007. These increases were primarily related to increased contributions from market-response rates to large commercial and industrial customers, higher retail base rates resulting from the retail rate increase effective January 1, 2008, and the effects of the allowance for equity funds used during construction (AFUDC). 58

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Retail Revenues
Second Quarter 2008 vs. Second Quarter 2007 (change in millions) (% change) Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change)

$245.2

15.5

$407.9

13.6

In the second quarter 2008, retail revenues were $1.83 billion compared to $1.59 billion for the corresponding period in 2007. For year-to-date 2008, retail revenues were $3.41 billion compared to $3.00 billion for the corresponding period in 2007. Details of the change to retail revenues are as follows:
Second Quarter Year-to-Date

2008
(in millions) (% change) (in millions)

2008
(% change)

Retail - prior year Estimated change in Rates and pricing Sales growth Weather Fuel and other cost recovery Retail - current year

$1,585.6 146.2 (5.2) (5.8) 110.0 $1,830.8 9.2 (0.3) (0.3) 6.9 15.5%

$2,997.9 227.0 (5.8) 2.2 184.5 $3,405.8 7.6 (0.2) 0.1 6.1 13.6%

Revenues associated with changes in rates and pricing increased in the second quarter and year-to-date 2008 when compared to the corresponding periods in 2007 due to higher market-response rates for sales to large commercial and industrial customers and the application of new rates established in January 2008. Revenues attributable to changes in sales growth decreased in the second quarter and year-to-date 2008 when compared to the corresponding periods in 2007. These decreases were primarily the result of a slowing economy within the Southeast. Weather-adjusted total retail KWH sales decreased 1.2% and 0.8% for the second quarter and year-to-date 2008, respectively. Weather-adjusted residential KWH sales decreased 0.5% and 1.1%, weather-adjusted commercial KWH sales increased 0.5% and 1.1%, and weather-adjusted industrial sales decreased 4.1% and 2.9% for the second quarter and year-to-date 2008, respectively, when compared to the corresponding periods in 2007. Revenues attributable to changes in weather decreased in the second quarter and increased year-to-date 2008 when compared to the corresponding periods in 2007. The decrease in second quarter 2008 revenues attributable to weather effects was primarily due to milder weather in April and May 2008 than in the corresponding periods in 2007. This was partially offset by more favorable weather in June 2008 than June 2007. The increase in year-to-date 2008 revenues attributable to weather effects was primarily due to significant weather volatility in January and June 2008 compared to the corresponding periods in 2007. Fuel cost recovery revenues increased by $110.0 million in the second quarter 2008 and by $184.5 million year-to-date 2008 when compared to the corresponding periods in 2007 as a result of higher fuel and purchased power expenses. Georgia Power's electric rates 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. 59

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Wholesale Revenues - Non-Affiliates
Second Quarter 2008 vs. Second Quarter 2007 (change in millions) (% change) Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change)

$7.2

5.3

$16.2

5.8

Wholesale revenues from non-affiliates will vary depending on the market cost of available energy compared to the cost of Georgia Power and Southern Company system-owned generation, demand for energy within the Southern Company service territory, and availability of Southern Company system generation. In the second quarter 2008, wholesale revenues from non-affiliates were $142.3 million compared to $135.1 million for the corresponding period in 2007. For year-to-date 2008, wholesale revenues from non-affiliates were $295.0 million compared to $278.8 million for the corresponding period in 2007. These increases were primarily driven by the fuel recovery component within non-affiliate wholesale prices which has increased with the effects of higher fuel and purchased power costs. These increases were partially offset by 3.1% and 2.0% decreases in KWII energy sales in the second quarter and year-to-date 2008, respectively, as well as decreased contributions from the emissions allowance component of market-based wholesale prices. Wholesale Revenues - Affiliates
Second Quarter 2008 vs. Second Quarter 2007 (change in millions) (% change) Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change)

$13.4

22.7

$45.5

45.2

Wholesale revenues from affiliates will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since the energy is generally sold at marginal cost. In the second quarter 2008, wholesale revenues from affiliates were $72.2 million compared to $58.8 million for the corresponding period in 2007. For year-to-date 2008, wholesale revenues from affiliates were $146.1 million compared to $100.6 million for the corresponding period in 2007. These increases were primarily the result of higher Power Pool rates for these sales due to higher fuel and purchased power costs. These increases were partially offset by 30.6% and 3.9% decreases in KWH energy sales in the second quarter and year-to-date 2008, respectively. Fuel and Purchased Power Expenses
Second Quarter 2008
vs.

Year-to-Date 2008
vs.

Second Quarter 2007 (change in millions) (% change)

Year-to-Date 2007 (change in millions) (% change)

Fuel Purchased power - non-affiliates Purchased power - affiliates Total fuel and purchased power expenses 60

$ 32.5 40.1 68.1 $140.7

5.0 59.2 38.0

$ 76.5 52.0 136.6 $265.1

6.1 45.7 37.5

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In the second quarter 2008, total fuel and purchased power expenses were $1.04 billion compared to $898.2 million for the corresponding period in 2007. The increase in fuel and purchased power expenses was due to a $143.5 million increase in the average cost of fuel and purchased power, partially offset by a $2.8 million decrease in total KWIIs generated and purchased. For year-to-date 2008, total fuel and purchased power expenses were $1.99 billion compared to $1.72 billion for the corresponding period in 2007. The increase in fuel and purchased power expenses was due to a $224.2 million increase in the average cost of fuel and purchased power and a $40.9 million increase in total KWHs generated and purchased. Fuel and purchased power transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Georgia Power's energy cost recovery clause. See FUTURE EARNINGS POTENTIAL - "FERC and Georgia PSC Matters - Retail Fuel Cost Recovery" herein for additional information. Details of Georgia Power's cost of generation and purchased power are as follows:
Average Cost Second Quarter 2008 Second Quarter 2007 Percent Change Year-to-Date 2008 Year-to-Date 2007 Percent Change

(centsper net KWH)

(cents per net KWH)

Fuel Purchased power

3.03 8.90

2.67 7.38

13.5 20.6

2.94 8.07

2.65 6.99

10.9 15.5

In the second quarter 2008, fuel expense was $683.3 million compared to $650.8 million for the corresponding period in 2007. For year-to-date 2008, fuel expense was $1.32 billion compared to $1.24 billion for the corresponding period in 2007. The increases in fuel expense were the result of 13.5% and 10.9% increases in the average cost of fuel per KWH generated in the second quarter and year-to-date 2008, respectively. These increases were primarily due to an increase in fuel commodity prices, resulting from global demand pressures. The average cost of coal per KWH generated increased 17.0% and 14.6% in the second quarter and year-to-date 2008, respectively. The average cost of oil and natural gas per KWH generated increased 23.9% and 17.0% in the second quarter and year-to-date 2008, respectively. Non-affiliates In the second quarter 2008, purchased power from non-affiliates was $107.7 million compared to $67.7 million for the corresponding period in 2007. For year-to-date 2008, purchased power from non-affiliates was $165.8 million compared to $113.8 million for the corresponding period in 2007. These increases were primarily the result of 32.7% and 28.8% volume increases in KWHs purchased from available lower priced market energy alternatives in the second quarter and year-to-date 2008, respectively, and increases in the average cost per KWH purchased. Energy purchases from non-affiliates will vary depending on the market cost of available energy compared to the cost of Southern Company system-generated energy, demand for energy within the Southern Company system service territory, and availability of Southern Company system generation. 61

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Affiliates In the second quarter 2008, purchased power from affiliates was $247.8 million compared with $179.7 million for the corresponding period in 2007. For year-to-date 2008, purchased power from affiliates was $500.8 million compared with $364.2 million for the corresponding period in 2007. These increases were primarily the result of higher average cost of KWHs purchased due to the influence of higher fuel costs within the purchase price. Also contributing to the increases in purchased power from affiliates were 0.9% and 7.8% increases in the volume of KWHs purchased from available lower cost resources within the Power Pool in the second quarter and year-to-date 2008, respectively. Energy purchases from affiliates will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC, as approved by the FERC. Other Operations and Maintenance Expenses
Second Quarter 2008 vs. Second Quarter 2007 (change in millions) (% change) Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change)

Other operations Maintenance Total other operations and maintenance

$ 16.5 (11.1) $ 5.4

6.6 (8.1)

$26.8 (7.8) $19.0

5.6 (3.0)

In the second quarter 2008, other operations and maintenance expenses were $391.8 million compared to $386.4 million for the corresponding period in 2007. The increase was primarily the result of a $3.6 million increase in the accrual for property damage approved under the 2007 Retail Rate Plan. Also contributing to the increase were customer account expenses of $5.1 million primarily related to records and collections and uncollectible accounts, as well as $1.8 million related to medical expenses. These increases were partially offset by a decrease of $5.9 million in transmission operations expenses. For year-to-date 2008, other operations and maintenance expenses were $760.6 million compared to $741.6 million for the corresponding period in 2007. The increase was primarily the result of a $7.0 million increase in nuclear expenses and a $7.3 million increase in the accrual for property damage approved under the 2007 Retail Rate Plan. Also contributing to the increase were customer account expenses of $10.9 million primarily related to meter reading, records and collections, and uncollectible accounts, as well as $3.8 million related to medical expenses. These increases were partially offset by a decrease of $11.8 million in transmission operations expenses. Depreciation and Amortization
Second Quarter 2008 vs. Second Quarter 2007 (change in millions) (% change) Year-to-Date 2008 vs. Year-to-Date 2007 (change in millions) (% change)

$31.9

25.1

$56.4

22.3

In the second quarter 2008, depreciation and amortization was $159.2 million compared to $127.3 million for the corresponding period in 2007. For year-to-date 2008, depreciation and amortization was $309.8 million compared to $253.4 million for the corresponding period in 2007. These increases were primarily the result of increases in plant in service related to completed transmission, distribution, and environmental projects and changes in depreciation rates effective January 1, 2008 related to the 2007 Retail Rate Plan. 62

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Taxes Other Than Income Taxes
Second Quarter 2008 vs. Second Quarter 2007
(change in millions) (% change)

Year-to-Date 2008 vs. Year-to-Date 2007


(change in millions) (% change)

$7.9

11.0

$6.8

4.7

In the second quarter 2008, taxes other than income taxes were $79.5 million compared with $71.6 million for the corresponding period in 2007. For year-to-date 2008, taxes other than income taxes were $150.8 million compared with $144.0 million for the corresponding period in 2007. These increases were primarily the result of higher municipal franchise fees resulting from retail revenue increases during these periods. Allowance for Equity Funds Used During Construction
Second Quarter 2008 vs. Second Quarter 2007
(change in millions) (% change)

Year-to-Date 2008 vs. Year-to-Date 2007


(change in millions) (% change)

$9.3

63.3

$23.8

85.7

In the second quarter 2008, AFUDC was $24.0 million compared with $14.7 million for the corresponding period in 2007. For year-to-date 2008, AFUDC was $51.7 million compared with $27.9 million for the corresponding period in 2007. These increases were primarily the result of increases in construction work in progress balances related to ongoing environmental and transmission projects as well as three combined cycle generating units at Plant McDonough. Income Taxes
Second Quarter 2008 vs. Second Quarter 2007
(change in millions) (% change)

Year-to-Date 2008 vs. Year-to-Date 2007


(change in millions) (% change)

$32.1

32.0

$44.9

26.2

In the second quarter 2008, income taxes were $132.3 million compared with $100.2 million for the corresponding period in 2007. For year-to-date 2008, income taxes were $216.1 million compared with $171.2 million for the corresponding period in 2007. These increases were primarily the result of increased pre-tax income. These increases were partially offset by increases in non-taxable items, particularly AFUDC, as well as additional state tax credits and an increase in the federal production activities deduction amount. Dividends on Preferred and Preference Stock
Second Quarter 2008 vs. Second Quarter 2007
(change in millions) (% change)

Year-to-Date 2008 vs. Year-to-Date 2007


(change in millions) (% change)

$3.6 N/M - Not Meaningful

N/M

$7.3

N/M

In the second quarter 2008, dividends on preferred and preference stock were $4.3 million compared with $0.7 million for the corresponding period in 2007. For year-to-date 2008, dividends on preferred and preference stock were $8.7 million compared with $1.4 million for the corresponding period in 2007. These increases in dividends on preferred and preference stock were primarily the result of the issuance of $225 million of preference stock in the fourth quarter 2007 which has quarterly dividends of approximately $3.7 million. 63

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FUTURE EARNINGS POTENTIAL The results of operations discussed above are not necessarily indicative of Georgia Power's future earnings potential. The level of Georgia Power's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Georgia Power's business of selling electricity. These factors include Georgia Power's 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. Future earnings in the near term will depend, in part, upon growth in energy sales which is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth in Georgia Power's service area. For additional information relating to these issues, see RISK FACTORS in Item IA and MANAGEMENT'S DISCUSSION AND ANALYSIS FUTURE EARNINGS POTENTIAL of Georgia Power in Item 7 of the Form 10-K. Environmental Matters Compliance costs related to the Clean Air Act and other environmental statutes and regulations could affect earnings if such costs cannot continue to be fully recovered in rates on a timely basis. See MANAGEMENT'S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL "Environmental Matters" of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under "Environmental Matters" in Item 8 of the Form 10-K for additional information. New Source Review Actions See MANAGEMENT'S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL - "Environmental Matters - New Source Review Actions" of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under "Environmental Matters - New Source Review Actions" in Item 8 of the Form 10-K for additional information regarding civil actions brought by the EPA alleging that Georgia Power and Alabama Power had violated the NSR provisions of the Clean Air Act and related state laws with respect to certain of their coal-fired generating facilities. The action against Georgia Power has been administratively closed since 2001, and the case has not been reopened. In the action involving Alabama Power, on July 24, 2008, the U.S. District Court for the Northern District of Alabama granted partial summary judgment in favor of Alabama Power regarding the proper legal test for determining whether projects are routine maintenance, repair, and replacement and therefore are excluded from NSR permitting. The decision does not resolve the case, the ultimate outcome of which cannot be determined at this time. Clean Air Interstate Rule See MANAGEMENT'S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL - "Environmental Matters - Environmental Statutes and Regulations - Air Quality" of Georgia Power in Item 7 of the Form 10-K for background regarding the Clean Air Interstate Rule (CAIR). On July 11, 2008, in response to petitions brought by certain states and regulated industries challenging particular aspects of CAIR, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision vacating CAIR in its entirety and remanding it to the EPA for further action consistent with its opinion. Georgia Power's overall environmental compliance strategy has been developed in response to numerous federal and state regulatory requirements, many of which, including the State of Georgia's Multi-Pollutant Rule, remain unaffected by the court's ruling; however, the court's decision has the potential to impact future decision making regarding capital expenditures, the installation and operation of pollution control equipment, and the purchase, use, and associated carrying values of emissions allowances. The ultimate impact of the court's decision cannot be 64

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS determined at this time and may depend on subsequent legal action, including issuance of the court's mandate, and future rulemaking and regulatory treatment. Eight-Hour Ozone Regulations See MANAGEMENT'S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL - "Environmental Matters - Environmental Statutes and Regulations - Air Quality" of Georgia Power in Item 7 of the Form 10-K for additional information regarding revisions to the eighthour ozone air quality standard. In March 2008, the EPA finalized its revisions to the eight-hour ozone standard, increasing its stringency. The EPA plans to designate nonattainment areas based on the new standard by 2010, and new nonattainment areas within Georgia Power's service territory are expected. The ultimate outcome of this matter cannot be determined at this time and will depend on subsequent legal action and/or future nonattainment designations and regulatory plans. Carbon Dioxide Litigation On February 26, 2008, the Native Village of Kivalina and the City of Kivalina filed a suit in the U.S. District Court for the Northern District of California against several electric utilities (including Southern Company), several oil companies, and a coal company. The plaintiffs are the governing bodies of an Inupiat village in Alaska. The plaintiffs contend that the village is being destroyed by erosion allegedly caused by global warming that the plaintiffs attribute to emissions of greenhouse gases by the defendants. The plaintiffs assert claims for public and private nuisance and contend that the defendants have acted in concert and are therefore jointly and severally liable for the plaintiffs' damages. The suit seeks damages for lost property values and for the cost of relocating the village, which cost is alleged to be $95 million to $400 million. On June 30, 2008, all defendants filed motions to dismiss this case. Southern Company believes that these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. The ultimate outcome of this matter cannot be determined at this time. FERC and Georgia PSC Matters Retail Fuel Cost Recovery On February 6, 2007, the Georgia PSC approved an increase in Georgia Power's total annual billings of approximately $383 million related to fuel cost recovery effective March 1, 2007. On February 29, 2008, Georgia Power filed a request with the Georgia PSC to change the fuel cost recovery rate effective June 1, 2008. The request was approved on May 20, 2008. Total annual fuel recovery billings increased by approximately $222 million. The order also required Georgia Power to file for a new fuel cost recovery rate no later than March 1, 2009. As of June 30, 2008, Georgia Power had an under recovered fuel balance of approximately $716 million as compared to $692 million at December 31, 2007. See MANAGEMENT'S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL - "PSC Matters - Fuel Cost Recovery" of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under "Retail Regulatory Matters - Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information. Fuel cost recovery revenues as recorded on the financial statements are adjusted for differences in actual recoverable costs and amounts billed in current regulated rates. Accordingly, any changes in the billing factor will not have a significant effect on Georgia Power's revenues or net income, but will affect cash flow. 65

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Nuclear Nuclear Projects See MANAGEMENT'S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL - "Nuclear - Nuclear Projects" of Georgia Power in Item 7 of the Form 10-K for information regarding the potential expansion of Plant Vogtle. In August 2006, Southern Nuclear, on behalf of Georgia Power, OPC, MEAG Power, and Dalton Utilities (collectively, Owners), filed an application with the NRC for an early site permit approving two additional nuclear units on the site of Plant Vogtle. On March 31, 2008, Southern Nuclear filed an application with the NRC for a combined construction and operating license (COL) for the new units. On April 8, 2008, Georgia Power, acting for itself and as agent for the Owners, and a consortium consisting of Westinghouse and Stone & Webster (collectively, Consortium) entered into an engineering, procurement, and construction agreement to design, engineer, procure, construct, and test two API 000 nuclear units with electric generating capacity of approximately 1,100 MWs each and related facilities, structures, and improvements at Plant Vogtle (Vogtle 3 and 4 Agreement). The Vogtle 3 and 4 Agreement is an arrangement whereby the Consortium supplies and constructs the entire facility with the exception of certain items provided by the Owners. Under the terms of the Vogtle 3 and 4 Agreement, the Owners will pay a purchase price that will be subject to certain price escalation and adjustments, adjustments for change orders, and performance bonuses. Each Owner is severally (and not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to the Consortium under the Vogtle 3 and 4 Agreement. Georgia Power's proportionate share, based on its current ownership interest, is 45.7%. Under the terms of a separate joint development agreement, the Owners finalized their ownership percentages on July 2, 2008, except for allowed changes under certain limited circumstances during the Georgia PSC certification process. Georgia Power submitted its self-build nuclear proposal to the Georgia PSC on May 1, 2008 in connection with its 2016-2017 base load capacity request for proposals (RFP). No other responses to the RFP were received. On August 1, 2008, Georgia Power submitted an application for the Georgia PSC to certify the project. A final certification decision is expected in March 2009. If certified by the Georgia PSC and licensed by the NRC, Vogtle Units 3 and 4 are scheduled to be placed in service in 2016 and 2017, respectively. The total plant value to be placed in service will also include financing costs for each of the Owners, the impacts of inflation on costs, and transmission and other costs that are the responsibility of the Owners. Georgia Power's proportionate share of the estimated in-service costs, based on its current ownership interest, is approximately $6.4 billion, subject to adjustments and performance bonuses under the Vogtle 3 and 4 Agreement. The Owners and the Consortium have agreed to certain liquidated damages upon the Consortium's failure to comply with the schedule and performance guarantees. The Owners and the Consortium also have agreed to certain bonuses payable to the Consortium for early completion and unit performance. The Consortium's liability to the Owners for schedule and performance liquidated damages and warranty claims is subject to a cap. The obligations of Westinghouse and Stone & Webster under the Vogtle 3 and 4 Agreement are guaranteed by Toshiba Corporation and The Shaw Group, Inc., respectively. In the event of certain credit rating downgrades of any Owner, such Owner will be required to provide a letter of credit or other credit enhancement. 66

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Vogtle 3 and 4 Agreement is subject to certification by the Georgia PSC. In addition, the Owners may terminate the Vogtle 3 and 4 Agreement at any time for their convenience, provided that the Owners will be required to pay certain termination costs and, at certain stages of the work, cancellation fees to the Consortium. The Consortium may terminate the Vogtle 3 and 4 Agreement under certain circumstances, including delays in receipt of the COL or delivery of full notice to proceed, certain 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 Owners, Owner insolvency, and certain other events. Income Tax Matters Bonus Depreciation On February 13, 2008, President Bush signed the Economic Stimulus Act of 2008 (Stimulus Act) into law. The Stimulus Act includes a provision that allows 50% bonus depreciation for certain property acquired in 2008 and placed in service in 2008 or, in certain limited cases, 2009. The State of Georgia does not allow the bonus depreciation deduction allowed by the Stimulus Act for state income tax purposes. Georgia Power is currently assessing the financial implications of the Stimulus Act and estimates the cash flow reduction to tax payments for 2008 to be between $50 million and $90 million. Other Matters Georgia Power is involved in various other matters being litigated, regulatory matters, and certain tax-related issues that could affect future earnings. In addition, Georgia Power is subject to certain claims and legal actions arising in the ordinary course of business. Georgia Power's business activities are subject to extensive governmental regulation related to public health and the environment. 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 opacity and air and water quality standards, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such pending or potential litigation against Georgia Power cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Georgia Power in Item 8 of the Form 10-K, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Georgia Power's financial statements. See the Notes to the Condensed Financial Statements herein for discussion of various other contingencies, regulatory matters, and other matters being litigated which may affect future earnings potential. ACCOUNTING POLICIES Application of Critical Accounting Policies and Estimates Georgia Power prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note I to the financial statements of Georgia 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 Georgia 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 Georgia Power in Item 7 of the Form 10-K for a complete discussion of Georgia Power's critical accounting policies and estimates related to Electric Utility Regulation, Contingent Obligations, and Unbilled Revenues. 67

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION AND LIQUIDITY Overview Georgia Power's financial condition remained stable at June 30, 2008. Net cash provided from operating activities totaled $677.6 million for the first six months of 2008, compared to $381.2 million for the corresponding period in 2007. The $296.4 million increase in cash provided from operating activities in the first six months of 2008 is primarily due to higher retail operating revenues. Net cash used for investing activities totaled $1.01 billion for the first six months of 2008 primarily due to gross property additions to utility plant of $1.05 billion. Net cash provided from financing activities totaled $333.5 million for the first six months of 2008 compared to $392.7 million for the corresponding period in 2007. This was primarily due to the repayment of notes payable and the timing of financings in 2008 compared to 2007. Significant balance sheet changes for the first six months of 2008 include a $1.27 billion increase in plant in service and the refinancing of notes payable to other forms of financing. Capital Requirements and Contractual Obligations See MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND LIQUIDITY - "Capital Requirements and Contractual Obligations" of Georgia Power in Item 7 of the Form 10-K for a description of Georgia Power's capital requirements for its construction program, scheduled maturities of long-term debt, as well as related interest, derivative obligations, preferred and preference stock dividends, leases, purchase commitments, and trust funding requirements. Approximately $303 million will be required through June 30, 2009 to fund maturities of long-term debt. In addition, in connection with entering into the Vogtle 3 and 4 Agreement, as described under FUTURE EARNINGS POTENTIAL - "Nuclear - Nuclear Projects" herein, the Georgia Power Board of Directors approved revisions to Georgia Power's capital budget of $600 million in 2009 and $700 million in 2010, for a revised estimated total construction program of $2.0 billion in 2008, $2.6 billion in 2009, and $2.5 billion in 2010. Actual construction costs may vary from these estimates because of changes in such factors as: business conditions; environmental statutes and regulations; nuclear plant regulations; FERC rules and regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Sources of Capital Georgia Power plans to obtain the funds required for construction and other purposes from sources similar to those utilized in the past. Recently, Georgia Power has primarily utilized funds from operating cash flows, short-term debt, external security offerings, and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon regulatory approval, prevailing market conditions, and other factors. See MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND LIQUIDITY "Sources of Capital" of Georgia Power in Item 7 of the Form 10-K for additional information. Georgia Power's current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet scheduled maturities of long-term debt as well as cash needs which can fluctuate significantly due to the seasonality of the business. To meet shortterm cash needs and contingencies, Georgia Power had at June 30, 2008 approximately $15.0 million of cash and cash equivalents and approximately $1.3 billion of unused credit arrangements with banks. Of the unused credit arrangements, $225 million expire in 2009 and $1.1 billion expire in 2012. 68

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Of the facilities that expire in 2009, $40 million contain provisions allowing two-year term loans executable at expiration. Georgia Power expects to renew its credit facilities, as needed, prior to expiration. See Note 6 to the financial statements of Georgia Power under "Bank Credit Arrangements" in Item 8 of the Form 10-K for additional information. These credit arrangements provide liquidity support to Georgia Power's commercial paper program and have $743 million dedicated to funding purchase obligations related to variable rate pollution control bonds. Georgia Power may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of Georgia Power and other Southern Company subsidiaries. At June 30, 2008, Georgia Power had approximately $268 million of commercial paper and $100 million of short-term bank loans outstanding. Management believes that the need for working capital can be adequately met by utilizing commercial paper programs and lines of credit without maintaining large cash balances. Credit Rating Risk Georgia 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/or Baa3 or below. These contracts are primarily for physical electricity purchases and sales and for the construction of new generation. At June 30, 2008, the maximum potential collateral requirements at a BBB- or Baa3 rating were approximately $27 million. The maximum potential collateral requirements at a rating below BBB- and/or Baa3 were approximately $829 million. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Georgia Power, along with all members of the Power Pool, is party to certain agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for Georgia Power and/or Alabama Power. These agreements are primarily for natural gas and power price risk management activities. At June 30, 2008, Georgia Power's total exposure related to these types of agreements was approximately $68 million. Market Price Risk Georgia Power's market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2007 reporting period. In addition, Georgia Power is not aware of any facts or circumstances that would significantly affect such exposures in the near term. Due to cost-based rate regulation, Georgia Power has limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. To mitigate residual risks relative to movements in electricity prices, Georgia Power enters into physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. Georgia Power continues to manage a fuel-hedging program at the instruction of the Georgia PSC. 69

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The change in fair value of energy-related derivative contracts and valuations at June 30, 2008 were as follows:
Second Quarter Year-to-Date 2008 2008 Changes Changes Fair Value
(in millions)

Contracts outstanding at the beginning of the period, assets (liabilities), net Contracts realized or settled Current period changes (a) Contracts outstanding at the end of the period, assets (liabilities), net (a)

$ 83.6 (27.3) 112.2 $168.5

$ (0.4) (21.4) 190.3 $168.5

Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

Gains and losses on energy-related derivative contracts related to Georgia Power's fuel hedging program are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as they are recovered through the fuel cost recovery mechanism. Certain other gains and losses on energy-related derivatives, designated as hedges, are initially deferred in other comprehensive income before being recognized in income in the same period as the hedged transaction. Gains and losses on energy-related derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. The fair value gain/(loss) of energy-related derivative contracts outstanding at June 30, 2008 was reflected in the financial statements as follows:
Amounts
(in millions)

Regulatory liabilities, net Accumulated other comprehensive income Net incomeTotal fair value gain/(loss)

$168.5

$168.5

Unrealized pre-tax gains and losses recognized in income for the three months and six months ended June 30, 2008 and 2007 for energy-related derivative contracts that are not hedges were not material. The maturities of the energy-related derivative contracts and the level of the fair value hierarchy in which they fall at June 30, 2008 are as follows:
June 30, 2008 Fair Value Measurements
Total Fair Value Maturity Year 1 (in millions) 1-3 Years

Level 1 Level 2 Level 3 Fair value of contracts outstanding at end of period 70

168.5 $168.5

120.7 --

$ 47.8 $47.8

$120.7

Table of Contents GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As part of the adoption of SFAS No. 157 to increase consistency and comparability in fair value measurements and related disclosures, the table above now uses the three-tier fair value hierarchy, as discussed in Note (C) to the Condensed Financial Statements herein, as opposed to the previously used descriptions "actively quoted," "external sources," and "models and other methods." The three-tier fair value hierarchy focuses on the fair value of the contract itself, whereas the previous descriptions focused on the source of the inputs. Because Georgia Power uses over-thecounter contracts that are not exchange traded but are fair valued using prices which are actively quoted, the valuations of those contracts now appear in Level 2; previously they were shown as "actively quoted." For additional information, see MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND LIQUIDITY - "Market Price Risk" of Georgia Power in Item 7 and Notes 1 and 6 to the financial statements of Georgia Power under "Financial Instruments" in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein. Financing Activities In the first quarter 2008, Georgia Power issued $250 million of Series 2008A Floating Rate Senior Notes due March 17, 2010. The proceeds were used to repay a portion of its outstanding short-term indebtedness. In addition, Georgia Power entered into a three-year $300 million long-term floating rate bank loan that bears interest based on one-month LIBOR. Proceeds were used to repay a portion of Georgia Power's short-term indebtedness and for other corporate purposes, including Georgia Power's continuous construction activities. Related to the bank note, Georgia Power settled interest rate hedges of $225 million notional amount at a loss of $16 million. These losses were deferred in other comprehensive income and will be amortized to income over the original term of the hedges. Also in the first three months of 2008, Georgia Power entered into derivative transactions designed to mitigate interest rate risk related to taxable floating rate obligations. The total notional amount of these derivatives was $600 million. See Note (F) to the Condensed Financial Statements herein for further details. Also in the first four months of 2008, Georgia Power converted its entire $819 million of obligations related to auction rate tax-exempt securities from auction rate modes to other interest rate modes. Initially, approximately $332 million of the auction rate tax-exempt securities were converted to fixed interest rate modes and approximately $487 million were converted to daily floating rate modes. Georgia Power also entered into hedges totaling $301 million to hedge interest rate risk on tax-exempt variable rate demand notes in February. In June 2008, Georgia Power converted approximately $98 million of its daily floating rate securities to fixed interest rate modes. See Note (F) to the Condensed Financial Statements herein for further details. In June 2008, Georgia Power issued $250 million of Series 2008B 5.40% Senior Notes due June 1, 2018. The proceeds were used to repay outstanding short-term indebtedness, a portion of which was incurred to pay at maturity $45 million aggregate principal amount of its Savannah Electric and Power Company Series C 6.55% Senior Notes, and for general corporate purposes. Georgia Power also terminated derivative contracts related to the issuance of $100 million of the Series 2008B Senior Notes. These contracts were settled at a loss of approximately $5 million, which will be amortized over the life of the Series 2008B Senior Notes. Also in June 2008, Georgia Power incurred obligations related to the issuance of $53 million of pollution control revenue bonds for Georgia Power's Plant Hammond Project. The proceeds will be held by the trustee and will be transferred to Georgia Power for reimbursement of project costs. In addition to any financings that may be necessary to meet capital requirements and contractual obligations, Georgia Power 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. 71

APPENDIX M GPC CREDIT HISTORY

Sm

Global Credit Research Credit Opinion 21 DEC 2007

Credit Opinion: Georgia Power Company

Georgia Power Company

Atlanta, Georgia, United States

Ratings Category Outlook Issuer Rating First Mortgage Bonds Senior Secured MTN Sr Unsec Bank Credit Facility Senior Unsecured Jr Subordinate Shelf Preferred Stock Parent: Southern Company (The) Outlook Sr Unsec Bank Credit Facility Senior Unsecured Commercial Paper Georgia Power Capital Trust VIII Outlook Preferred Shelf Georgia Power Capital Trust IX Outlook Preferred Shelf Contacts Analyst Michael G. Haggarty/New York William L. Hess/New York Key Indicators Phone 212.553.7172 212.553.3837 Moody's Rating Stable A2 Al Al A2 A2 (P)A3 Baal Stable A3 A3 P-1 Stable (P)A3 Stable (P)A3

[1]
Georgia Power Company ACTUALS (CFO Pre-W/C + Interest) / Interest Expense [2] (CFO Pre-W/C) / Debt [2] (CFO Pre-W/C - Dividends) / Debt [2] (CFO Pre-W/C - Dividends) / Capex [2] Debt / Book Capitalization EBITA Margin LTM 3Q07 5.3x 22.5% 12.9% 52.6% 42.8% 20.1% 2006 5.2x 21.6% 11.9% 61.4% 42.7% 20.8% 2005 6.2x 26.2% 16.6% 107.0% 42.2% 19.6% 2004 5.8x 22.0% 11.8% 83.6% 42.7% 22.6%

[1] All ratios are calculated using Moody's Standard Adjustments [2] CFO pre-W/C, which is also referred to as FFO in the Global Regulated Electric Utilities Rating Methodology, is equal to net cash flow from operations less net changes in working capital items

Note: Fordefinitions of Moody's most common ratio terms please see the accompanying User's Guide.

Opinion Company Profile

Georgia Power Company (GPC) operates as a vertically integrated utility subsidiary of The Southern Company, providing electricity to retail customers within Georgia and to wholesale customers in the Southeast. In total, GPC serves over 2.3 million customers. The company owns approximately 15,200 MW of generating capacity and operates within the Southern Company power pool. Recent Developments 2007 Rate Case Resolution On December 18, 2007, the Georgia Public Service Commission approved a new three-year rate plan from January 1, 2008 through December 31, 2010. The settlement includes a base rate increase of $99.7 million, an environmental compliance cost recovery or ECCR tariff of $222 million for recovery of environmental costs; a rate of return of 11.25%; and sharing provisions on an ROE range of 10.25% to 12.25%. GPC had requested a $406.7 million (6%) rate increase based on a 12.5% ROE and 52.75% equity ratio. The settlement appears sufficient to maintain GPC's credit metrics at historical levels with an ROE that is reasonable relative to other integrated utilities. Rating Rationale Georgia Power Company's A2 senior unsecured debt rating is based on the utility's strong financial metrics and competitive position in a robust service territory that demonstrates continued above-average sales growth; and a reasonably constructive regulatory environment in Georgia with its recent rate settlement providing greater certainty of recovery for increased environmental expenditures. The ratings incorporate the company's conservative management approach that emphasizes financial flexibility and liquidity. The rating also reflects Moody's expectation that GPC's expected near term capital expenditures will continue to be manageable given the company's financial flexibility. The key rating drivers include: - Strong cash flow coverage credit metrics that are consistent with a low to mid A rating category, although some ratios were lower in 2006 and 2007 than in previous years Applying guidelines in Moody's Global Regulated Electric Utilities Rating Methodology, GPC's financial metrics map to the low to mid A rating category. These include a ratio of cash from operations before working capital (CFO pre-WC) to debt of approximately 22.5% and a CFO pre-WC to interest coverage ratio of 5.3x for the twelve months ending September 30, 2007, calculated in accordance with Moody's standard global adjustments. The metrics declined modestly in 2006 and 2007 as CFO pre-WC interest coverage averaged approximately 6.0x from 2003 through 2005 and CFO pre-WC to debt was 26% in 2005. The decline is primarily due to higher operation and maintenance expenses and an increase in debt issuance and interest expense to finance rising capital expenditures. - Reasonably constructive Georgia regulatory environment GPC's regulatory environment in Georgia is generally constructive and recent regulatory decisions of the Georgia Public Service Commission (GPSC) have been generally supportive. In December 2007, the GPSC approved a three year rate order for GPC that includes a base rate increase of $99.7 million and allowed GPC to earn within a band of 10.25% and up to 12.25% return on equity prior to sharing. The rate decision also affords GPC $222 million of recovery on environmental spending. GPC has built up significant unrecovered fuel balance of $812 million as of September 30, 2007. In February 2007, the GPSC approved an fuel cost related rate increase of $383 million and GPC is required to file another fuel cost rate plan by March 2008. As part of its fuel recovery filings, GPC is allowed to include forecasted expected fuel and purchased power costs in its fuel rate filings. Although GPC's fuel recovery plans appears to be a reasonable mechanism for recovery of fuel, Moody's views the relatively high fuel cost deferrals to be a relative weakness for GPC's near term cash flows. While no electric restructuring legislation has been introduced in Georgia to effect retail competition, the Georgia Territorial Act of 1973 gives large retail customers the one-time option of choosing their energy supplier. With its relative lower cost generation sources, GPC has maintained a 60% to 80% market share among these large customers in Georgia. - Significant environmental expenditures The rating incorporates the expectation that GPC will continue to have substantial exposure to environmental compliance costs over the next several years for its coal-fired plants. In 2008 and 2009, GPC is expected to spend approximately $1.8 billion annually on capital expenditures, of which approximately $637 million and $316 million, respectively, are for environmental capital expenditures in these years. Moody's expects this high level of capital spending to be financed with a mix of equity contributed from the parent company and debt raised at GPC. This could continue to put pressure on credit metrics though Moody's expects GPC's metrics to remain adequate for its

current rating category assuming fuel cost deferrals do not continue to rise. Stable, low cost generation mix GPC's approximately 15,200 MW of generating capacity is largely lower cost coal and nuclear based with approximately 81% of total delivered energy from those sources. GPC has indicated that it is planning for new nuclear and coal capacity additions over the longer term. GPC operates under the Intercompany Interchange Contract with other Southem Company affiliates and benefits from the larger Southern Company power pool for its electricity requirements. The company has demonstrated a good power generating plant operating record, including the operation of over 3,000 MW of nuclear generating capacity. Liquidity GPC maintains a satisfactory liquidity profile with $902 million of unused bank credit arrangements and $15 million of cash on hand as of September 30, 2007. Subsequent to September 30, 2007, the company added $250 million of credit arrangements and now has $1.15 billion of unused credit arrangements. The utility has two credit facilities, a $40 million facility that expires in 2008 and an $1.11 billion facility that expires in 2012, of which $301 million of these lines are dedicated to funding purchase obligations related to pollution control bonds. The facilities are generally used as support for GPC's commercial paper program (issued through a Southern Company subsidiary organized to issue and sell commercial paper) and are not expected to be drawn. As of September 30, 2007, GPC had approximately $566 million of commercial paper and no bank loans or extendible commercial notes outstanding. Subsequent to September 30, 2007, the company entered a six month $100 million bank note. If GPC's credit rating is downgraded below investment grade, the utility's potential collateral requirement is $388 million. The company's cash flow generation has been strong and stable, with GPC generating $1.5 billion of cash from operations for the twelve months ended September 30, 2007 on a Moody's adjusted basis, versus the $1.2 billion generated in 2006. This improvement to operating cash flow is primarily driven by improved working capital collections. Internally generated cash flow is sufficient to support substantial dividends to the parent company, which totaled $675 million for the 12 months ended September 30, 2007. As of September 30, 2007, GPC had $432 million of securities due over the next year including $45 million of longterm debt maturities in May 2008. Due to its significant planned construction program, GPC has on-going needs for capital, including capital expenditures of $1.8 billion in 2008, which Moody's expects it to meet partly with equity infusions from the parent company and debt issuance at the utility. Rating Outlook The rating outlook is stable. While GPC's cash flow credit metrics may continue to be pressured over the near term due to timing impacts associated with fuel cost deferrals, higher operation and maintenance costs, and near term increases in debt levels to finance the company's capital funding needs, reasonable recovery provisions contained in its recent rate case settlement should allow it to maintain financial metrics sufficient to maintain its current ratings. What Could Change the Rating - Up An upgrade could be considered if there is a sustained improvement in key financial metrics, including CFO preWC to interest coverage ratio above approximately 5.5x and the CFO pre-WC to debt ratio above approximately 25% based on Moody's standard global adjustments, combined with a reduced level of fuel cost deferrals. What Could Change the Rating - Down The ratings could be pressured if there is a deterioration in key financial ratios, including CFO pre-WC to interest coverage ratio below approximately 4.0x and CFO pre-WC to debt ratio below approximately 20% for a sustained period; a substantial delay in the recovery of fuel costs, an unanticipated change in the regulatory environment in Georgia.

Rating Factors Georgia Power Company Select Key Ratios for Global Regulated Electric Utilities Rating Level of Business Risk CFO pre-W/C to Interest (x) [1] Aa >6 Aa >5 A 3.5-6.0 A 3.0Baa Baa Ba <2.5 Ba <2 Medium Low Medium Low Medium Low Medium Low 2.7-5.0 2-4.0

5.7 CFO pre-W/C to Debt (%) [1] CFO pre-W/C - Dividends to Debt (%) [1] Total Debt to Book Capitalization (%) >30 >25 <40 >22 >20 <50 22-30 13-25 40-60 12-22 9-20 50-70 13-25 8-20 50-70 5-13 3-10 60-75 <13 <10 >60 <5 <3 >70

[1] CFO pre-W/C, which is also referred to as FFO inthe Global Regulated Electric Utilities Rating Methodology, is equal to net cash flow from operations less net changes in working capital items Copyright 2008, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together, "MOODY'S"). All rights reserved.
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June 30, 2008

Summary:

Georgia Power Co.


Primary Credit Analyst Dimitri Nikas, New York (1)212-438-7807; dimitri_nikas@standardandpoors.com

Table Of Contents
Rationale

Outlook

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Summary:

Georgia Power Co.


Credit Rating: A/Stable/A-1

Rationale
The ratings on Georgia Power Co. (GPC) reflect the consolidated credit profile of its parent, Southern Co. The ratings on Southern reflect the company's focus on regulated utility operations that provide for stable and predictable cash flow generation. Material capital-spending needs and fuel cost deferrals offset those positive attributes. Southern has an excellent business risk profile, and its financial risk profile risk is intermediate. Southern had $17.6 billion of adjusted debt as of March 31, 2008, excluding $1.4 billion of debt of Southern Power Co. GPC is Southern's largest subsidiary, serving 2.3 million customers throughout the state of Georgia and providing about 45% of operating income and cash flow during 2007. The large service territory has attractive demographics and above-average customer growth of about 1.9%. Residential and commercial customers provide 55% of revenues and 57% of sales, with industrial customers providing 19% of revenues and 25% of sales. There is no meaningful customer concentration. Sales for resale are moderate at 11% of revenues and 17% of sales and are generally accomplished through longer-term contracts and with little meaningful fuel exposure. Total generating capacity is 15,995 MW, with coal-fired generation providing 58% of energy needs, nuclear 14.2%, gas 4.8%, and purchases providing 22%. Plant availability continued to be consistently high during 2007, exceeding 90% for both coal-fired and nuclear plants. Retail rates are competitive at about 83% of the national average, but could come under pressure as the company recovers deferred fuel costs and invested capital. We view the regulatory environment for GPC as generally supportive of credit quality. This allows GPC to recover invested capital as well as capacity and fuel costs while earning an adequate ROE. In December 2007, the Georgia Public Services Commission approved a new three-year rate plan that provides for a $99.7 million base rate increase along with a $222 million environmental compliance cost recovery tariff. The increases will provide rate stability and allow for recovery of new investment for environmental compliance, customer growth, new generation, and transmission and distribution system expansion. The new rate structure maintains an allowed ROE band that ranges from 10.25% to 12.25%, with earnings above 12.25% shared two thirds with ratepayers and the remainder applied to the environmental compliance cost recovery. In February 2008, GPC filed a request to increase fuel costs by $222 million to recover deferred fuel cost balances which totaled $664 million as of March 31, 2008, a small decline from $692 million at Dec. 31, 2007. For purchased power agreements, the energy portion is recovered through a fuel clause adjustment, while the capacity payments are recovered in base rates. Southern's cash flow protection has been consistent and strong, benefiting from the preponderance of regulated utility operations and a growing customer base. For the 12 months ended March 31, 2008, adjusted FFO was $3.38 billion, while total adjusted debt was $17.6 billion, leading to adjusted FFO interest coverage of 4.4x, adjusted FFO to debt of 19.2%, and adjusted total debt to total capital of 56.9%. These ratios account for about $412 million of trust preferred securities and $1.08 billion of preferred and preference shares as having intermediate equity credit; $300 million in off-balance-sheet obligations related to capitalization of operating leases; and just under $1 billion in off-balance-sheet obligations related to capitalization of capacity payments for purchased power agreements. Of

Standard & Poor's RatingsDirect I June 30, 2008


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Summary: GeorgiaPower Co.

Southern's credit protection measures, FFO interest coverage is adequate for the rating, while FFO to debt and debt to capital are slightly weak for the rating despite the company's excellent business risk profile. The company's plans to spend about $14.4 billion for capital programs over the next three years could pressure the financial risk profile if it can't recover such expenses (along with deferred fuel costs that totaled about $957 million) on a timely basis. Short-term credit factors The 'A-l' short-term rating reflects Southern's corporate credit rating, but also accounts for stable cash flow and sufficient liquidity to meet upcoming debt maturities and capital-spending needs. Southern's consolidated maturities are manageable with $1.05 billion in 2008, $609 million in 2009 and $291 million in 2010. Capital-spending needs are significant to address maintenance and growth projects, as well as to meet increasingly stringent environmental requirements. Of the company's forecast $14.4 billion capital-spending program over the next three years, 35%-40% will be targeted for environmental-compliance projects and 25%-30% will accommodate the company's growing customer base. As of March 31, 2008, consolidated liquidity was ample, with $249 million of cash on hand, and about $2.65 billion unused capacity under existing credit facilities with banks that total about $3.9 billion. Of the total available credit facilities, Southern has $1 billion available for short-term needs and commercial paper backup, all of which expires in 2012; Alabama Power has $1.3 billion in available facilities; Georgia Power $1.3 billion; Gulf Power $125 million; and Mississippi Power $181 million. The bulk of the credit facilities mature after 2008. Most facilities include a 65% debt to total capitalization ratio, for which Southern and its subsidiaries are well in compliance. Only about $10 million of the total availability is subject to a material adverse change clause. Southern's liquidity could come under pressure if the company continues to accumulate deferred fuel costs. These totaled about $957 million as of March 30, 2008.

Outlook
The stable outlook on GPC reflects the outlook of its parent, which accounts for Southern's stable, regulated electric utility operations that benefit from constructive regulatory decisions, strong operations, and service territories with attractive demographics. An outlook revision to positive is currently not contemplated, but such a change would largely depend on a consistently stronger financial profile. However, we could revise the outlook to negative if the company's financial profile weakens over the next few years as a result of the substantial capital spending budget of about $14.4 billion, the inability to recover such expenses in rates in a timely manner, or the inability to recover the large deferred fuel cost balance.

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Standard & Poor's RatingsDirect I June 30, 2008

FitchRatngs
Global Power
U.S. and Canada

Corporates
Georgia Power Company
A Subsidiary of Southern Company
Rating Rationale
Fitch affirmed the ratings of Georgia Power Company (GPC) on Jan. 22, 2008. The
Rating Outlook is Stable.

Credit Update
atings
security class
Issuer Default Rating (IDR)

current Rating
A

Senior Unsecured Debt Preferred Stock

A+

Short-Term IDR Outlook Stable

A F1

GPC's ratings reflect the continued strong operating performance of a mostly coal and nuclear fleet, growing service territory economy, and a strong, stable financial condition. The December 2007 base rate settlement was supportive of ratings. Fitch's primary credit rating concerns are the lack of a permanent environmental cost-adjustment mechanism in the face of rising emissions compliance-related spending and carbon uncertainty, as well as escalating costs for fuel, operations and maintenance. GPC's recent rate settlement enables recovery of prudent costs associated with environmental projects that enter service during the next three years and should enable GPC to earn its allowed returns. However, the company requires continuing regulatory support to recover capital expenditures operating expenses and capacity
needs.

Financial Data
Georgia Power Company

(SMi.)

* 9/30 7,524 3,884


1,352 2,009 13,214 12.98 326.9

Revenues Gross Margin


Cash From
Operations Operating EBITDA Total Capitalization ROE (%) (%)

2006 7,246

3,868

1,200
2,008 12,250 13.8 245.9

Key Rating Drivers


Events that could lead to a positive rating action: * None expected in the normal course of business.

Capex/Depreciation Analysts

Events that could lead to a negative rating action:


Sharon Bonelli

+1212 908-0581
sharon.bonelti@f tchratings.com Karen Anderson +1 312 368-3165

* *

Carbon legislation could contribute to significantly higher rates, eventually resulting in regulatory fatigue. Weakening of cash flow coverage and leverage ratios.

karen.anderson@fitchratings.com

Recent Events:
Recent Events:

Related Research SCredit Analysis, Southern Company, doted Feb. 19, 2008.

The Georgia Public Service Commission (GPSC) reached a settlement with GPC on Dec. 18, 2007, on the company's tri-annual base rate filing. The settlement increases rates by $323 million, of which $99.7 million consists of a base rate increase, and $222.3 million is related to revenues that will be collected annually for each of the next three years through an environmental compliance cost recovery (ECCR) tariff. GPC received an 11.25% return on equity (ROE), with an ROE range of 10.25% to 12.25%. Onethird of any earnings above 12.25% would be credited first to any deferred ECCR costs, and second, to accelerate the depreciation of environmental costs; and two-thirds would be refunded to customers. GPC has ongoing needs for capacity to maintain reserve margins, which are estimated at 13.5% through 2009 and 15% for the long term. GPC signed contracts totalirng 1,795 megawatts (MW) for needs starting in 2010 with Southern Power and with Exelon in 2007. While near-term needs are being met with gas-fired capacity, longer term, GPC is considering the construction of a new nuclear plant at the existing Vogtle site. On June 22, 2006, the GPSC authorized GPC to defer the costs incurred in developing, filing, and obtaining permits and licenses for the potential construction of a new nuclear facility in Georgia.

www.fitchratings.com

February 19, 2008

FitchRatngs
KNOW YOUR RISK

Corporates
Liquidity and Debt Structure
GPC's liquidity position is considered strong, and there are limited debt maturities for the next four years: $195 million in 2008, $275 million in 2009, $0 in 2010 and $110 million in 2011. GPC increased the amount of its credit facility by $250 million to $1.16 billion of credit facilities that expire in 2008 ($40 million) and 2012 ($1.12 billion) in December 2007 to accommodate plans to increase the amount of variable-rate pollution control bonds (PCBs). The facility supported outstanding commercial paper borrowings of $560 million, as of Sept. 30 2007, as well as existing variable-rate debt remarketing obligations. GPC will supplement internal cash flow to fund its capital plan. (For further information, please refer to the Capital Spending and Capital Structure tables in the Southern Company Credit Analysis, dated Feb. 19, 2008.)

Georgia Power Company

February 19, 2008

FitchRatings
KNOW YOUR RISK

Corporates

Financial Summary - Georgia Power Company


($ Mil., Years Ended Dec. 31) LTM 9/30/07 Fundamental Ratios (x) Funds from Operations (FFO)/Interest Expense Cash Flow from Operations (CFO)/Interest Expense Debt/FFO Operating EBIT/Interest Expense Operating EBITDA/Interest Expense Debt/Operating EBITDA Common Dividend Payout (%) Internal Cash/Capital Expenditures (%) Capital Expeditors/Depreciation (%) Profitability Revenues Net Revenues Operating and Maintenance Expense Operating EBITDA Depreciation and Amortization Expense Operating EBIT Gross Interest Expense Net Income for Common Operating Maintenance Expense %of Net Revenues Operating EBIT %of Net Revenues Cash Flow Cash Flow from Operations Change in Working Capital Funds from Operations Dividends Capital Expenditures Free Cash Flow Net Other Investment Cash Flow Net Change in Debt Net Change in Equity Capital Structure Short-Term Debt Long-Term Debt Total Debt Preferred and Minority Equity Common Equity Total Capital Total Debt/Total Capital (%) Preferred and Minority Equity/Total Capital (%) Common Equity/Total Capital (%) 5.1 5.0 4.5 4.4 5.9 3.2 84.9 40.6 326.9 7,524 3,884 1,572 2,009 508 1,501 341 795 40.5 38.7 1,352 (53) 1,405 (678) (1,659) (985) 32 663 317 566 5,780 6,347 420 6,447 13,214 48.0 3.2 48.8 2006 5.4 4.8 4.0 4.7 6.3 2.8 80.0 46.3 245.9 7,246 3,868 1,560 2,008 499 1,510 318 787 40.3 39.0 1200 (194) 1,394 (633) (1,226) (659) (15) 387 298 733 4,800 5,534 761 5,956 12,250 45.2 6.2 48.6 2005 6.4 4.7 3.2 4.9 6.7 2.6 78.3 55.2 170.9 7,076 3,822 1,571 1,975 527 1,448 295 744 41.1 37.9 1083 (507) 1,590 (586) (900) (403) (27) 272 149 327 4,823 5,150 760 5,452 11,362 45.3 6.7 48.0 2004 5.8 4.9 3.8 5.0 6.1 3.0 85.9 56.9 272.2 5,371 3,162 1,400 1,534 275 1,259 252 658 44.3 39.8 993 (216) 1,209 (566) (750) (323) (26) 471 260 208 4,408 4,616 738 4,891 10,245 45.1 7.2 47.7 2003 6.0 5.9 3.3 4.9 6.4 2.6 89.7 88.8 207.6 4,914 3,034 1,247 1,574 350 1,224 248 631 41.1 40.3 1212 (25) 1,237 (566) (727) (82) (59) 115 41 137 4,003 4,141 716 4,540 9,397 44.1 7.6 48.3 2002 5.1 6.1 4.1 5.0 6.7 2.5 87.9 75.6 219.1 4,822 3,135 1,325 1,608 404 1,204 239 618 42.3 38.4 1212 223 989 (544) (884) (216) (34) (230) 116 358 3,670 4,028 716 4,434 9,178 43.9 7.8 48.3

Note: Numbers may not add due to rounding. Numbers are adjusted for interest and principal payments on transition property securitization certificates. Long-term debt includes trust preferred securities. LTM - Latest 12 months. Operating EBIT - Operating income plus total reported state and federal income tax expense. Operating EBITDA - Operating income plus total reported state and federal income tax expense plus depreciation and amortization expense. Source: Financial data obtained from SNL Energy Information System, provided under license by SNL Financial, LC of Charlottesville, VA.

Copyright 0 2008 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries. One State Street Plaza, NY, NY10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. All of the information contained herein has been obtained from sources which Fitch believes are reliable, but Fitch does not verify the truth or accuracy of the information. The information in this report is provided "as is" without any representation or warranty of any kind. A Fitch rating is an opinion as to the creditworthiness of a security, not a recommendation to buy, sell or hold any security.

Georgia Power Company

February 19, 2008

ATTN:Kati Lawrence Report Printed:July 22, 2008

Live Report : GEORGIA POWER COMPANY


D-U-N-S Number: 00-692-4989 Trade Names: (SUBSIDIARY OF SOUTHERN COMPANY, THE, ATLANTA, GA) Endorsement/Billing Reference: klawrenc@southernco.com D&B Address Address 241 Ralph Mcgill Blvd Ne Atlanta,GA - 30308 Phone 404 506-6526 Fax Location Type Web Headquarters (Subsidiary) www.georgiapower.com

Score Bar

D&B 12-month PAYDEX@

PAYDEX
Commercial Credit Score Class Financial Stress Class Credit Limit - D&B Conservative D&B Rating

74
1 1 $1,000,000.00 5A3

12-month D&B PAYDEX:

(Lowest Risk: 100; Highest Risk:1) When weighted by dollar amount, Payments to suppliers average 9 days beyond terms

74

D&B Company Overview This is a headquarters (subsidiary) location

D&B 3-month PAYDEX

Branch(es) or Division(s) exist Y Chief Executive MICHAEL D GARRETT, CEO-

3-month D&B PAYDEX:


average 8 Days Beyond Terms

75
Year Started

PRES
1930

(Lowest Risk:100; Highest Risk:1) When weighted by dollar amount, Payments to suppliers

Management Control
Employees

1945
9270 (2250 Here) SECURED 4911 Electric utility 221119 CLEAR GOOD

Commercial Credit Score Class

Financing SIC

Commercial Credit Score Class:

Line of business NAICS History Status

(Lowest Risk:1; Highest Risk:5) Low risk of severe payment delinquency over next 12 months.

Financial Overview

Financial Condition

Financial Statement Date Total Current Assets

0313012008 Financial Stress Score Class $2,144,743,000.00

Total Current Liabilities


Total Assets Total Liabilities + Equity Total Liabilities + Equity Current Ratio Quick Ratio Total Liabilities to Net Worth Ratio Sales to Net Working Capital Ratio

$2,423,540,000.00
$20,822,761,000.00 $20,822,761,000.00 $20,822,761,000.00 0.9 0.2 223.6

inancial te c Financial Stress Score Class: 1


Lineof Eectrc (Lowest Risk:1; Highest Risk:5) bsines utlil Low risk of severe financial stress over the next 12 months.

Public Filings ii ubi


The following data includes both open and closed filings found in D&B's database on this company. Record Type Record Type Number of Records Most Recent Filing Date

(27.2)

Net Worth

$6,435,420,000.00

Annual Sales

$7,571,652,000.00

Bankruptcies Judgments Liens

0 0
0 1 02/17/04

Corporate Linkage

Suits

36

10/30/03

This is a Headquarters (Subsidiary) location

GEORGIA POWER COMPANY Atlanta , GA D-U-N-S@ Number 00-692-4989 The Parent Company is THE SOUTHERN COMPANY Georgia D-U-N-S@ Number 00-692-5341

06/13108 564 UCC's The public record items contained herein may.have been paid, terminated, vacated or released prior to todays date.

Corporate Linkage
Parent
Company City, State __ ___ D-U-N-S NUMBER

THE SOUTHERN COMPANY

ATLANTA, Georgia

00-692-5341

Subsidiaries (Domestic)
Company _ City,State_ D-U-N-S NUMBER

PIEDMONT-FORREST CORPORATION

ATLANTA,

Georgia

09-238-0146

Branches (Domestic)
Company City, State D-U-N-S NUMBER

GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY
GEORGIA POWER COMPANY

MARIETTA, SNELLVILLE, LITHONIA,

Georgia Georgia Georgia Georgia Georgia

00-354-9792 00-354-9875 01-241-2479 01-868-4196 02-092-3954 02-233-6481 02-408-0785 02-953-3382 03-433-6610 03-748-5328 03-748-5336

CLARKESVILLE, BRUNSWICK, ROME,

Georgia Georgia Georgia

ATLANTA,

FOREST PARK, ATHENS,

Georgia

STATESBORO, Georgia MADISON, Georgia Georgia

TALLULAH FALLS, UNION CITY, ATLANTA, SAVANNAH,

03-748-5419 03-975-5637 03-983-4218 04-111-4526 04-296-3074 04-245-0366


04-690-2920

Georgia

Georgia Georgia Georgia

MILLEDGEVILLE, SNELLVILLE,
ALBANY,

Georgia

Georgia

GEORGIA POWER COMPANY

SAVANNAH,

Georgia

05-103-3710
2

GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY GEORGIA POWER COMPANY This list is limited to the first 25 branches.

BAXLEY,

Georgia Georgia Georgia

07-247-8605 07-298-0530 07-345-7090 07-345-7322 07-349-3582

CARROLLTON, STOCKBRIDGE, TUCKER, ROME,

Georgia Georgia Georgia

SWAINSBORO,

07-345-8387

Affiliates (Domestic)
Company SOUTHERN TELECOM INC SAVANNAH ELECTRIC AND POWER COMPANY ALABAMA POWER COMPANY GULF POWER COMPANY MISSISSIPPI POWER COMPANY SOUTHERN POWER COMPANY SOUTHERN COMPANY SERVICES INC SOUTHERN COMPANY GAS LLC SOUTHERN COMPANY ENERGY SOLUTIONS, LLC POWERCALL, INC SOUTHERN NUCLEAR OPERATING COMPANY, INC SOUTHERN COMMUNICATIONS SERVICES INC ALABAMA POWER FOUNDATION, INC. SOUTHERN COMPANY CAPITAL TRUST III . City, State ATLANTA, SAVANNAH, BIRMINGHAM, PENSACOLA, GULFPORT, ATLANTA, ATLANTA, ATLANTA, ATLANTA, __._ Georgia Georgia Alabama Florida Mississippi Georgia Georgia Georgia Georgia Florida Alabama . .. D-U-N-S@ NUMBER 00-391-7973 00-692-6539 00-690-0120 00-692-3429 00-696-4118 06-578-6043 07-546-3174 11-377-8794 14-815-8090 78-305-7086 79-077-8997 87-754-3462 79-077-3571 78-882-3883 _

PENSACOLA, BIRMINGHAM, ATLANTA,

Georgia Alabama .

BIRMINGHAM, ATLANTA,

Georgia

Predictive Scores
Credit Capacity Summary This credit rating was assigned because of D&B's assessment of the company's financial ratios and its cash flow. For more information, see the " D&B Rating Key". D&B Rating 5A3 Below Is an overview of the company's rating history since 01-01-1991 D&B Rating 5A3 5A2 Date Applied 04-26-2004 01-01-1991 Financial Strength: 5A indicates $50 million and over Composite credit appraisal: 3 is fair $7,571,652,000.00 Sales: ( Up by 4.5% from last year) Number of Employees Total: 9,270 (2250 here)

It is D&Bs policy tion of the Rating (the Rating Classification) indicates that the company has a worth in excess of $50 million. The &quot;3 &quot; on the right (Composite Credit Appraisal) indicates an overall &quot;fair &quot; credit appraisal. This credit appraisal was assigned because the parent company has a Composite Credit Appraisal of a &quot;3 &quot;. It is D &B's policy not to rate a subsidiary higher than its parent. Therefore, this company also has a Composite Credit Appraisal of &quot;3 &quot;. However, D &B's assessment of the company's December 31, 2007, fiscal financial statement is &quot;good &quot;. As of 12/31/07 Worth: Working Capital: $6,435,420,000 ( Up by 8.0% from last year) ($278,797,000) 3

Payment Activity: Average High Credit: Highest Credit: Total Highest Credit:

(based on 747 experiences) $62,348 $10,000,000 $42,319,550

D&B Credit Limit Recommendation . Conservative credit Limit ..


Conservative credit Limit Aggressive credit Limit: Risk category for this business :

$1,000,000.
$1,000,000 $1,000,000 LOW

This recommended Credit Limit is based on the company profile and on profiles of other companies with similarities in size, industry, and credit usage. Risk is assessed using D&Bs scoring methodology and is one factor used to create the recommended limits. See Help for details.

Financial Stress Class Summary


The Financial Stress Class Summary Model predicts the likelihood of a firm ceasing business without paying all creditors in full, or reorganization or obtaining relief from creditors under state/federal law over the next 12 months. Scores were calculated using a statistically valid model derived from D&Bs extensive data files. The Financial Stress Class of 1 for this company shows that firms with this classification had a failure rate of 1.2% (120 per 10,000), which is lower than the average of businesses in D & B's database

Financial Stress Class :


(Lowest Risk:1; Highest Risk:5)

Low risk of severe financial stress, such as bankruptcy, over the next 12 months.
Incidence of Financial Stress:

* * * *

Among Businesses with this Classification: 1.20 % (120 per 10000) Average of Businesses in D&Bs database: 2.60 % ( 260 per 10000) Financial Stress National Percentile : 99 (Highest Risk: 1; Lowest Risk: 100) Financial Stress Score :&nbsp 1549 (Highest Risk: 1001; Lowest Risk: 1875)

The Financial Stress Class of this business is based on the following factors: * Return on Sales Ratio suggests lower risk of financial stress. * Control age or date entered in D & B files indicates lower risk. Notes: * The Financial Stress Class indicates that this firm shares some of the same business and financial characteristics of other companies with this classification. It does not mean the firm will necessarily experience financial stress.
* The Incidence of Financial Stress shows the percentage of firms in a given Class that discontinued operations over the past year with loss to

creditors. The Incidence of Financial Stress - National Average represents the national failure rate and is provided for comparative purposes. * The Financial Stress National Percentile reflects the relative ranking of a company among all scorable companies in D&Bs file. * The Financial Stress Score offers a more precise measure of the level of risk than the Class and Percentile. It isespecially helpful to customers using a scorecard approach to determining overall business performance. * All Financial Stress Class, Percentile, Score and Incidence statistics are based on sample data from 2004

Norms This Business Region: SOUTH ATLANTIC Industry: INFRASTRUCTURE Employee range: 500+ Years in Business: 26+

National % 99 52 49 99 74

This Business has a Financial Stress Percentile that shows: Lower risk than other companies in the same region. Lower risk than other companies in the same industry. Similar risk compared to other companies in the same employee size range. Lower risk than other companies with a comparable number of years in business.

Credit Score Class Summary ..........................................................................................................................................................................................


The Credit Score class predicts the likelihood of a firm paying in a severely delinquent manner (90+ Days Past Terms) over the next twelve months. It was calculated using statistically valid models and the most recent payment information in D&Bs files. The Credit Score class of 1 for this company shows that 2.0% of firms with this classification paid one or more bills severely delinquent, which is lower than the average of businesses in D & B's database.
4

Credit Score Class :

(Lowest Risk:1; Highest Risk:5) Low risk of severe payment delinquency over next 12 months.

Incidence of Delinquent Payment * * * * Among Companies with this Classification: 2.00 % Average compared to businesses in D&B's database: 20.10 %/ Credit Score Percentile : 100 (Highest Risk: 1; Lowest Risk: 100) Credit Score : 628 (Highest Risk: 101; Lowest Risk:670)

The Credit Score Class of this business is based on the following factors: * D & B files indicate a net worth of $6,435,420,000.

Notes: * The Credit Score Class indicates that this firm shares some of the same business and payment characteristics of other companies with this classification. It does not mean the firm will necessarily experience delinquency. * The Incidence of Delinquent Payment is the percentage of companies with this classification that were reported 90 days past due or more by creditors. The calculation of this value is based on an inquiry weighted sample. * The Percentile ranks this firm relative to other businesses. For example, a firm in the 80th percentile has a lower risk of paying in a severely delinquent manner than 79% of all scorable companies in D&Bs files. * The Credit Score offers a more precise measure of the level of risk than the Class and Percentile. It is especially helpful to customers using a scorecard approach to determining overall business performance. * All Credit Class, Percentile, Score and Incidence statistics are based on sample data from 2004 Norms This Business Region: SOUTH ATLANTIC Industry: INFRASTRUCTURE Employee range: 500+ Years in Business: 26+ National % 100 51 42 79 79

This business has a Credit Score Percentile that shows: Lower Lower Lower Lower risk than other companies risk than other companies risk than other companies risk than other companies in the same region. in the same industry. in the same employee size range. with a comparable number of years in business.

Trade Payments
D&B PAYDEX The D&B PAYDEX is a unique, dollar weighted indicator of payment performance based on payment experiences as reported to D&B by trader references. Learn more about the D&B PAYDEX Score Timeliness of historical payments for this company. Equal to 9 days beyond terms ( Pays more slowly than the average for its industry of 5 days beyond terms ) 74 Current PAYDEX is Equal to 5 days beyond terms 77 Industry Median is Unchanged, compared to payments three months ago Payment Trend currently is 4 Indications of slowness can be the result of dispute over merchandise, skipped invoices etc. Accounts are sometimes placed for collection even though the existence or amount of the debt is disputed. Total payment Experiences in D&Bs File Payments Within Terms (not dollar weighted) Trade Experiences with Slow or Negative Payments(%) Total Placed For Collection Average High Credit Largest High Credit Highest Now Owing Highest Past Due 747 74 % 25.90% 1 $62,348 $10,000,000 $6,000,000 $1,000,000

12-Month D& PAYDEX :

74

(Lowest Risk: 100; Highest Risk:1) Based on payments collected over last 12 months. When weighted by dollar amount, payments to suppliers average 9 days beyond terms

3-Month D& PAYDEX:

75

(Lowest Risk:100; Highest Risk:1) Based on payments collected over last 3 months. When weighted by dollar amount, payments to suppliers average 8 days beyond terms

D& PAYDEX@ .. ...... n........... . . .......................... .. Comparison . .


Current Year

............... ......................

......................................

. . . . ............

PAYDEX of this Business compared to the Primary Industry from each of the last four quarters. The Primary Industry is Electric utility , based on SIC code 4911. Shows the trend in D&B PAYDEX scoring over the past 12 months. 8/079/0710/0711/0712/071/082/083/084/085/086/087/08 74 75 74 72 73 73 73 73 73 73 73 75 79 .76 .71 . . . . . 79 76 71 . . 79 77 71 . . . . 79 77 71

This Business Industry Quartiles Upper Median Lower

* Current PAYDEX for this Business is 74 , or equal to 9 days beyond terms * The 12-month high is 75 , or equal to 8 DAYS BEYOND terms * The 12-month low is 72, or equal to 12 DAYS BEYOND terms Previous Year Shows PAYDEX of this Business compared to the Primary Industry from each of the last four quarters. The Primary Industry is Electric utility, based on SIC code 4911.

Previous Year This Business Industry Quartiles Upper Median Lower Based on payments collected over the last 4 quarters. * Current PAYDEX for this Business is 74 , or equal to 9 days beyond terms * The present industry median Score is 77, or equal to 5 days beyond terms * Industry upper quartile represents the performance of the payers in the 75th percentile * Industry lower quartile represents the performance of the payers in the 25th percentile

09/0612/06 03107 06107 Q3'06Q4'06Q1'07Q2'07 75 76 76 77 79 76 71 79 77 71 79 76 71 79 76 71

Payment Habits

...

. s...................... . . ....................................... . Ha..

. .................................................................................................

For all payment experiences within a given amount of credit extended, shows the percent that this Business paid within terms. Provides number of experiences to calculate the percentage, and the total credit value of the credit extended. $ Credit Extended Over 100,000 50,000-100,000 15,000-49,999 5,000-14,999 1,000-4,999 Under 1,000 # Payment Experiences 35 27 90 133 166 218 $ Total Dollar Amount $36,250,000 $1,880,000 $2,265,000 $927,500 $317,500 $71,050 % of Payments Within Terms 82% 75% 74% 70% 70% 76%

Based on payments collected over last 12 months. For all Payment experiences reflect how bills are met in relation to the terms granted. In some instances, payment beyond terms can be the result of disputes over merchandise, skipped invoices etc.

Payment Summary
There are 747 payment experience(s) in D&Bs file for the most recent 12 months, with 497 experience(s) reported during the last three month period. The highest Now Owes on file is $6,000,000. The highest Past Due on file is $1,000,000 Below is an overview of the company's dollar-weighted payments, segmented by its suppliers' primary industries: Total Revd Total Dollar Amts Largest High Credit Days Slow Within Terms <31 31-60 61-90 90> 6

Top Industries Whol industrial suppl Nonclassified Trucking non-local Misc equipment rental Whol electrical equip Whol electronic parts Public finance Radiotelephone commun Telephone communictns Whol metal Misc business credit Mfg cleaning products Short-trm busn credit Whol industrial equip Mfg refrig/heat equip Whol office supplies Whol office equipment Misc publishing Mfg power transformer Mfg measure devices Mfg pumping equipment Whol service paper Misc business service Whol plumb/hydronics Mfg misc office eqpt Railroad Drywall/insulate work Mfg photograph equip Mfg relays/controls Mfg paint/allied prdt Coating/engrave svcs Help supply service Whol misc profsn eqpt Mfg fluid power pumps Executive office Mfg plate work Limestone mining Mfg misc elect, equip Hvy const eqpt rental Whol petroleum prdts Mfg industrial gases Local truck w/storage Mfg computers Whol chemicals Whol durable goods Whol refrig equip Ret furniture Photocopying service Mfg motors/generators Mfg comrcl light fixt Mfg tires/inner tubes Gravel/sand mine Mfg electric test prd Truck rental/leasing Mfg signs/ad specltys Mfg medical instrmnt Whol furniture Security systems svcs Aluminum roll/drawing Mfg blowers/fans Mfg computer terminal Whol general grocery Ret mail-order house Mfg process controls Management services Whol hardware Refuse system Whol computers/softwr Mfg structural metal Newspaper-print/publ Mfg male work clothes Granite mining Whol const/mine equip Ret-direct selling Mfg environment cntri Prepackaged software Security broker/deal Mfg misc plastic prdt Mfg public bldg furn Whol medical equip Data processing svcs Mfg fluid meters Mfg surgical supplies Ret auto supplies Whol heating/ac equip

(#)
33 33 32 27 27 21 21 21 19 19 19 18 17 11 10 10 10 9 8 8 8 8 7 7 7 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

($)
821,050 225,050 103,000 2,237,750 406,000 512,000 107,300 30,750 181,800 179,500 115,700 21,600 586,150 27,300 272,600 36,850 37,100 8,800 640,000 312,100 225,750 44,750 20,400 18,650 4,500 17,093,250 1,695,000 172,500 81,250 83,300 25,850 33,750 36,250 23,750 500 1,103,500 575,000 410,500 120,000 113,750 63,850 117,500 66,500 46,250 15,500 7,750 7,000 50 3,032,600 515,000 190,000 79,000 16,000 17,500 3,350 3,750 6,500 6,500 4,090,000 1,005,100 112,500 50,000 7,850 5,500 3,100 3,000 4,000 2,000 2,020,000 102,500 100,250 105,000 66,000 47,500 32,500 26,000 15,500 7,750 10,000 7,500 5,250 3,500 1,100 1,050 1,050

($)
100,000 55,000 10,000 2,000,000 200,000 400,000 -65,000 10,000 100,000 80,000 15,000 5,000 500,000 10,000 200,000 15,000 15,000 7,500 500,000 250,000 100,000 30,000 20,000 10,000 2,500 10,000,000 1,000,000 55,000 40,000 30,000 15,000 15,000 15,000 10,000 100 1,000,000 500,000 200,000 100,000 90,000 55,000 45,000 25,000 25,000 7,500 5,000 2,500 50 3,000,000 400,000 85,000 75,000 10,000 7,500 2,500 2,500 2,500 2,500 2,000,000 1,000,000 55,000 45,000 7,500 5,000 2,500 2,500 2,500 750 2,000,000 100,000 100,000 100,000 65,000 45,000 30,000 25,000 15,000 7,500 5,000 5,000 5,000 2,500 1,000 1,000 1,000

( )
71 64 57 53 88 59 100 75 76 64 99 86 100 95 21 71 39 51 52 90 37 99 100 35 52 100 94 37 100 82 23 56 44 22 100 55 7 51 95 99 49 81 51 89 82 67 100 0 0 52 100 49 100 36 3 93 100 73 100 100 22 100 4 100 41 96 38 100 100 51 50 48 100 100 96 100 100 3 100 100 52 100 55 0 5

(%)
10 7 9 3 22 1 121 37 2 3 1 0 46 0 1 5 0 6 1 40 1 0 0 0 .0 0 0 24 1 0 0 13 9 0 2 35 0 1 0 0 0 1 0 7 7 0 0 0 0 0 0 4 0 0 1 42 37 0 0 20 1 1 7 24 0 2017 43 3 0 3 8 40 0 0 10 0 0 0 44 0 0 19 0 0 0 1 0 0 0 0 25 0 1327 39 6 3 0 0 0 0 0 3 3 0 0 35 12 160 0 0 0 0 0 3 150 58 0 0 19 22 0 220 21 21 0 14 24 1 3221 0 0 0 0 45 0 0 0 50 0 43 0 0 24 1 24 5 0 0 0 1 0 0 0 2 43 0 6 19 0 0 0 49 0 0 0 11 0 0 0 16 2 0 0 16 0 170 0 0 0 0 1000 0 0 51 49 0 0 48 0 0 0 0 0 0 0 48 3 0 0 0 0 0 0 43 21 0 0 22 0 0 75 0 0 0 7 0 0 0 0 0 0 0 27 0 0 0 0 0 0 0 0 78 0 0 0 0 0 0 0 48 48 0 0 0 0 0 0 16 0 403 4 0 0 0 31 0 0 31 0 0 0 0 0 0 0 0 49 0 0 0 50 0 0 0 52 0 0 0 0 0 0 0 0 0 0 0 4 0 0 0 0 0 0 0 0 0 0 0 97 0 0 0 0 0 0 0 0 0 0 0 48 0 0 0 0 0 0 0 45 0 0 0 0 52 480 0 95 0 0
7

Mfg scales/balances Whol nondurable goods Mfg canned fruit/veg Ret computer/software Mfg forged iron/steel Steel works Mfg gypsum products Mfg organic chemicals Mfg concrete products Whol printing paper Mfg analytic instrmnt Transportation svcs Armature rewinding Mfg nonelec wire dvcs Paper mill Electric eqpt repair Mfg ball/roll bearing Industrial launderer Mfg laminated plastic Mfg misc special mach Misc repair services Whol roof/side/insul Clay refractory Mfg telephone equip Mfg misc trnsmsn eqpt Whol lumber/millwork Passenger car rental Central Reserve Bank Mfg surface agents Mfg envelopes Mfg hand/edge tools Whol tires/tubes Mfg elect, connectors Mfg laminated paper Mfg general machinery Mfg cutting tool/part Regulate trnsprtation Engineering services Mfg wood products Mfg semiconductors Mfg soft drinks Custom programming Mfg sporting goods Mfg extracts/syrup Natural gas distrib Mfg sheet metalwork Lithographic printing Police protection Mfg valve/pipe fittng Mfg industrial valves Mfg glass products Mfg sealing devices Mfg overhead hoists Paperboard mill Mfg industry furnaces Gas transmission dist Petroleum terminal Whol auto parts Other payment categories Cash experiences Payment record unknown Unfavorable comments Placed for collections: With D&B Other Total in D&Bs file

2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 20 23 2 0 1 747

1,250 750 750 350 200,000 200,000 65,000 60,000 50,000 40,000 35,000 35,000 35,000 30,000 25,000 25,000 25,000 15,000 7,500 7,500 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 1,000 1,000 1,000 1,000 1,000 1,000 1,000 500 500 500 500 500 500 250 250 100 50 50 50 12,600 595,600 300 0 N/A 42,319,550

750 500 500 250 200,000 200,000 65,000 60,000 50,000 40,000 35,000 35,000 35,000 30,000 25,000 25,000 25,000 15,000 7,500 7,500 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 1,000 1,000 1,000 1,000 1,000 1,000 1,000 500 500 500 500 500 500 250 250 100 50 50 50 5,000 500,000 250 0 0 10,000,000

70 100 67 29 100 100 100 100 100 100 0 100 100 100 100 0 50 50 100 0 100 100 50 50 50 100 50 100 100 100 100 100 100 100 0 100 100 100 100 100 100 100 0 50 100 100 100 100 100 100 100 100 100 0 0 100 0 0

30 0 0 0 0 0 0 0 33 0 0 0 0 0 0 71 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1000 0 0 50 0 0 0 50 0 0 0 0 0 0 0 0 0 0 100 0 0 0 0 0 0 0 0 50 0 0 0 50 0 0 0 0 0 0 50 0 0 0 0 0 0 500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 0 1000 0 0 0 500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 50 0 0 50 1000 0 0 0 0 0 0 1000 0 0 0 1000 0

Accounts are sometimes placed for collection even though the existence or amount of the debt is disputed. Indications of slowness can be result of dispute over merchandise, skipper invoices etc.

Payment Details
Date Reported (mm/yy) Paying Record 06/08 Ppt Ppt Ppt Ppt Ppt Ppt High Credit 10,000 10,000 2,500 2,500 1,000 750 Now Owes () 7,500 2,500 0 0 0 0 Past Due Selling Terms Sale Within (month) 2-3 mos 2-3 mos 6-12 mos 1 mo 6-12 mos 2-3 mos
8

ON30 0 ON30 ON30

Ppt Ppt Ppt Ppt Ppt Ppt-Slow 60


Ppt-Slow 60 Ppt-Slow 90+

500 500 250 100 50 55,000


40,000 2,500

0 0 0 0 0 0
15,000 100

ON30 ON30 0 0 0 0
0

6-12 mos 6-12 mos 6-12 mos 6-12 mos 6-12 mos 6-12 mos
2-3 mos 1 mo

05/08

Ppt-Slow 90+ Ppt-Slow 120 Slow 30 Slow 60 Disc Disc Disc Disc Disc Disc Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt Ppt-Slow 15 Ppt-Slow 30 Ppt-Slow 30 Ppt-Slow 30 Ppt-Slow 30 Ppt-Slow 30 Ppt-Slow 30 Ppt-Slow 30 Ppt-Slow 60 Ppt-Slow 90 Slow 20 Slow 30 Slow 30 Slow 30 Slow 30 Slow 60 Slow 15-80 Slow 90 Slow 60-120 Slow 30-120 Slow 60-120+ (079) Bad debt. (080)

1,000 7,500 7.500 1,000 85,000 35,000 35,000 35,000 5,000 50 1,000,000 200,000 90,000 30,000 15,000 10,000 7,500 5,000 5,000 5,000 5,000 2,500 2,500 2,500 2,500 2,500 2,500 1,000 1,000 750 750 500 500 250 250 250 100 100 0 0 0 0 0 15,000 100,000 25,000 5,000 2,500 1,000 500 100 5,000 25,000 10,000 2,500 750 500 250 250 250 2,500 5,000 2,500 10,000 50 0

50 0 0 1,000 5,000 35,000 35,000 35,000 500 0 1,000,000 100 0 15,000 0 0 7,500 0 0 2,500 2,500 0 2,500 0 2,500 0 2,500 0 0 50 0 0 0 50 0 0 0 0 0 0 0 0 0 0 65,000 0 0 500 0 500 0 2,500 25,000 2,500 0 0 0 250 0 250 0 0 2.500 10,000 50 0

50 0 0 1.000 0 35,000 15,000 35,000 500 0 ON30 100N30 0 0 0 0 01 10 N30 ON30 01/2 10 N30 750N30 0 ON30 ON30 0 ON30 OPROX 01/2 10 N30 01 10 N30 ON30 501 10 N30 01/2 10 N30 0 0 0 0 0 0 0 0 0 ON30 0 0 ON30 30,000 0 ORegular terms 0 01/2 10 N30 500 ON30 100N30 5,000 2,500 0 0 0 250 0 250 0 0 2,500 7.500 N30 50 OCash account

6-12 mos 6-12 mos 6-12 mos 2-3 mos 1 mo 1 mo 1 mo 2-3 mos 1 mo 2-3 mos 1 mo 2-3 mos 4-5 mos 1 mo 6-12 mos 6-12 mos 1 mo 6-12 mos 6-12 mos 1 mo 2-3 mos 1 mo 2-3 mos 1 mo 6-12 mos 1 mo 1 mo 6-12 mos 4-5 mos 2-3 mos 1 mo 6-12 mos 4-5 mos 6-12 mos 6-12 mos 6-12 mos 2-3 mos 6-12 mos 4-5 mos 6-12 mos 4-5 mos 1 mo 6-12 mos 1 mo 4-5 mos 6-12 mos 1 mo 1 mo 1 mo 4-5 mos 1 mo 1 mo 1 mo 6-12 mos 4-5 mos 6-12 mos 1 mo 4-5 mos 2-3 mos 4-5 mos 6-12 mos 6-12 mos 1 mo 1 mo

Payments Detail Key: 30 or more days beyond terms Payment experiences reflect how bills are met in relation to the terms granted. In some instances payment beyond terms can be the result of disputes over merchandise, skipped invoices etc. Each experience shown is from a separate supplier. Updated trade experiences replace those previously reported.

Public Filings
9

Summary
The following data includes both open and closed filings found in D&B's database on this company. Most Recent Filing Date # of Records Record Type 0 Bankruptcy Proceedings 0 Judgments 02/17/04 1 Liens 10/30/03 36 Suits 06/12/08 564 UCCs The following Public Filing data is for information purposes only and is not the official record. Certified copies can only be obtained from the official source.

Liens A lien holder can file the same lien in more than one filing location. The appearance of multiple liens filed by the same lien holder against a debtor may be indicative of such an occurrence. $318 Amount Open Status 9/347 BOOK/PAGE State Tax Type STATE OF GEORGIA Filed By GA POWER CO, COLUMBUS, GA Against MUSCOGEE COUNTY SUPERIOR COURT, COLUMBUS, GA Where Filed 02/17/04 Date Status Attained 02/17/04 Date Filed 07/05/04 Latest Info Received

Suits ..................... ....... ................. .................................................... ........................ Status CASE NO. Plaintiff Defendant Cause Where filed Date status attained Date filed Latest Info Received Status CASE NO. Plaintiff Defendant Cause Where filed Date status attained Date filed Latest Info Received Pending 2003 CV 77241 HARDING ERECTORS INC. GEORGIA POWER CO. AND OTHERS CONTRACT/ACCOUNT FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 10/30/03 10/30/03 11/19/03 Pending CV200300021800 POUND JOHN E GEORGIA POWER COMPANY, ATLANTA, GA AND OTHERS NEGLIGENCE-GENERAL LEE COUNTY CIRCUIT COURT, OPELIKA, AL 04/04/03 04/04/03 06/09/03 Change of venue granted CV9900073300 BAKER CHRISTOPHER HI-RANGER, INC. AND OTHERS WALKER COUNTY CIRCUIT COURT, JASPER, AL 10/09/00 11/12/99 10/15/03 $$22,545 Pending 99VS0158811 FIDELITY & GUARANTY INS CO GEORGIA POWER CO FULTON COUNTY STATE COURT, ATLANTA, GA

. . ..................................... . ...............

Status CASE NO. Plaintiff Defendant Where filed Date status attained Date filed Latest Info Received Suit Amount Status DOCKET NO. Plaintiff Defendant Where filed

Date status attained 10/24/99 10/24/99 Date filed Latest Info Collected 11/08/99

Status DOCKET NO. Plaintiff Defendant

Pending 99VS0157831 ROBIN Y WILSON GEORGIA POWER CO

10

Cause Where filed

Personal injury - non-death FULTON COUNTY STATE COURT, ATLANTA, GA

Date status attained 09/28/99 09/28/99 Date filed Latest Info Collected 10/17/99 Status DOCKET NO. Plaintiff Defendant Cause Where filed Pending 99VS0157732 MICHAEL ANGLIN GEORGIA POWER CO Personal injury - non-death FULTON COUNTY STATE COURT, ATLANTA, GA

Date status attained 09/23/99 09/23/99 Date filed Latest Info Collected 10/10/99 Status DOCKET NO. Plaintiff Defendant Where filed Pending 99VS0155789 GARY W FOREHAND GEORGIA POWER CO FULTON COUNTY STATE COURT, ATLANTA, GA

Date status attained 07/27/99 07/27/99 Date filed Latest Info Collected 03/14/00 Suit Amount Status DOCKET NO. Plaintiff Defendant Where filed $$12,391 Pending 99VS0155025 ATLANTA FLEA MARKET INC GEORGIA POWER CO FULTON COUNTY STATE COURT, ATLANTA, GA

Date status attained 07/06/99 07/06/99 Date filed Latest Info Collected 07/25/99 Status DOCKET NO. Plaintiff Defendant Where filed Pending 99CV-2584 CHERYL LEE SCHENK GEORGIA POWER CO AND OTHERS CLAYTON COUNTY STATE COURT, JONESBORO, GA

Date status attained 06/28/99 06/28/99 Date filed Latest Info Collected 06/29/99 Status DOCKET NO. Plaintiff Defendant Where filed Pending 99VS0148577 KAREN PHELPS GEORGIA POWER CO AND OTHERS FULTON COUNTY STATE COURT, ATLANTA, GA

Date status attained 01/20/99 01/20/99 Date filed Latest Info Collected 02/01/99 If it is indicated that there are defendants other than the report subject, the lawsuit may be an action to clear title to property and does not necessarily imply a claim for money against the subject.

UCC Filings
Collateral Type Sec. Party Debtor Filing No. Filed With Date Filed Latest Info Received Original UCC Filed Date Original Filing No. Negotiable instruments - Proceeds - Account(s) - Chattel paper - and OTHERS Amendment FEDERAL NATIONAL MORTGAGE ASSOCIATION, WASHINGTON, DC GEORGIA POWER COMPANY, ATLANTA, GA and OTHERS 06098023269 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 1998-11-12 12/10/98 1996-03-25 06096005670

Collateral Type Sec. Party

Inventory - Chattel paper - General intangibles(s) - Equipment - MISCELLANEOUS GOODS Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL

11

Assignee Debtor Filing No. Filed With Date Filed Latest Info Received

SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 00700008454 BARROW COUNTY SUPERIOR COURT CLERKS OFFICE, WINDER, GA 2000-07-17 08/14/00

Collateral Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received

Inventory - Chattel paper - General intangibles(s) - Equipment - MISCELLANEOUS GOODS Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 00700008400 BARROW COUNTY SUPERIOR COURT CLERKS OFFICE, WINDER, GA 2000-07-14 08/14/00

Collateral Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received

Inventory - Chattel paper - General intangibles(s) - Equipment - MISCELLANEOUS GOODS Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 00700008399 BARROW COUNTY SUPERIOR COURT CLERKS OFFICE, WINDER, GA 2000-07-14 08/14/00

Collateral Type Sec. Party Debtor Filing No. Filed With Date Filed Latest Info Received

Chattel paper - Equipment Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL GEORGIA POWER COMPANY 06000005900 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 2000-03-31 04/12/00

Collateral Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received Original UCC Filed Date Original Filing No.

Inventory - Proceeds - Chattel paper - General intangibles(s) - and OTHERS Assignment GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 06000008469 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 2000-05-08 06/07/00 2000-03-31 06000005900

Collateral Type Sec. Party Debtor Filing No. Filed With Date Filed Latest Info Received

Chattel paper - Equipment Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL GEORGIA POWER COMPANY 06000003199 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 2000-02-17 03/08/00

Collateral Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received Original UCC Filed Date Original Filing No.

Inventory - General intangibles(s) - Equipment - MISCELLANEOUS GOODS Assignment GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 06000008468 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 2000-05-08 06/07/00 2000-02-17 06000003199
12

Collateral Type Sec. Party Debtor Filing No. Filed With Date Filed Latest Info Received

Chattel paper - Equipment Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL GEORGIA POWER COMPANY 06000004842 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 2000-03-14 04/12/00

Collateral Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received Original UCC Filed Date Original Filing No.

Inventory - General intangibles(s) - Equipment - MISCELLANEOUS GOODS Assignment GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 06000008467 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 2000-05-08 06/07/00 2000-03-14 06000004842

Collateral Type Sec. Party Debtor Filing No. Filed With Date Filed Latest Info Received

Chattel paper - Equipment Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL GEORGIA POWER COMPANY 06099015318 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 1999-08-06 09/16/99

Collateral

Inventory - Proceeds - Account(s) - Chattel paper - and OTHERS

Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received Original UCC Filed Date Original Filing No.

Assignment GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 06099020773 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 1999-10-26 11/04/99 1999-08-06 06099015318

Collateral Type Sec. Party Debtor Filing No. Filed With Date Filed Latest Info Received

Chattel paper - Equipment Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL GEORGIA POWER COMPANY 06099014741 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 1999-07-29 08/10/99

Collateral

Inventory - Proceeds - Account(s) - Chattel paper - and OTHERS

Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received Original UCC Filed Date Original Filing No.

Assignment GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 06099017166 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 1999-09-01 09/16/99 1999-07-29 06099014741

Collateral Type Sec. Party Debtor Filing No.

Chattel paper - Equipment Original GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL GEORGIA POWER COMPANY 06099012025
13

Filed With Date Filed Latest Info Received

FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 1999-06-21 08/10/99

Collateral Type Sec. Party Assignee Debtor Filing No. Filed With Date Filed Latest Info Received Original UCC Filed Date Original Filing No.

Inventory - Proceeds - Account(s) - Chattel paper - and OTHERS Assignment GATX TECHNOLOGY SERVICES CORPORATION, TAMPA, FL SUNAMERICA LIFE INSURANCE COMPANY, HOUSTON, TX GEORGIA POWER COMPANY 06099017165 FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, ATLANTA, GA 1999-09-01 09/16/99 1999-06-21 06099012025

There are additional UCCs in D&Bs file on this company available by contacting 1-800-234-3867. There may be additional suits, liens, or judgments in D&B's file on this company available in the U.S. Public Records Database, also covered under your PPP for D&Bi contract. If you would like more information on this database, please contact the Customer Resource Center at 1-800-234-3867. The public record items contained herein may have been paid, terminated, vacated or released prior to today's date.

Government Activity Activity summary Borrower (Dir/Guar) Administrative Debt Contractor Grantee Party excluded from federal program(s) Possible candidate for socio-economic program consideration Labour Surplus Area Small Business 8(A) firm N/A N/A N/A NO YES YES NO NO

The details provided in the Government Activity section are as reported to Dun & Bradstreet by the federal government and other sources.

History and Operations


Company Overview Company Name: Doing Business As : Street Address: Phone: URL: History Operations Present management control GEORGIA POWER COMPANY (SUBSIDIARY OF SOUTHERN COMPANY, THE, ATLANTA, GA) 241 Ralph Mcgill Blvd Ne Atlanta , 30308 404-506-6526 http://www.georgiapower.com Is clear Profitable 63 years

History
The following information was reported: 04/29/2008 MICHAEL D GARRETT, PRES-CEO+ CLIFF S THRASHER, EXEC V PRES-CFO-TREAS Officer(s): MICKEY A BROWN, EXEC V PRES CUSTOMER SERVICE ORG CHRISTOPHER C WOMACK, EXEC V PRES EXTERNAL AFFAIRS JAMES H MILLER III, SR V PRES-GEN CNSL The officers identified by (+) and Robert L Brown Jr, Ronald D Brown, Anna R Cablik, David M Ratcliffe, Jimmy C Tallent and D Gary Thompson. Business started 1930. Present control succeeded 1945. 100% of capital stock is owned by The Southern Company. Georgia Power Company was incorporated under the laws of the State of Georgia on June 26, 1930. Has operated as a wholly-owned subsidiary of Southern Company since 1945. The Company was admitted to do business in Alabama on September 15, 1948. There is no market for the company's common stock, all the outstanding shares are owned by Southern Company. As of December 31, 2007, the sole beneficial owner of the company's common stock was Southern Company with 100% ownership. RELATED COMPANIES. Alabama Power Company and Georgia Power Company each own 50% of the outstanding common stock of Southern Electric Generating Company
14

DIRECTOR(S):

Wilsonville, (SEGCO). SEGCO owns electric generating units with an aggregate capacity of 1,019,680 kilowatts at Plant Gaston on the Coosa River near SEGCO's agent in Alabama, and Alabama Power and Georgia Power are each entitled to one-half of SEGCO's capacity and energy. Alabama Power acts as the operation of SEGCO's units and furnishes coal to SEGCO as fuel for its units. SEGCO also owns three 230,000 volt transmission lines extending from Plant Gaston to the Georgia state line at which point connection is made with the Georgia Power transmission line system. EVENT. Effective July 1, 2006, Savannah Electric and Power Company (Savannah Electric), which was also a wholly owned subsidiary of Southern Company, was the Companys financial merged into the Company. The Company has accounted for the merger in a manner similar to a pooling of interests, and statements included herein now reflect the merger as though it had occurred on January 1, 2004. MICHAEL D GARRETT. He is the President, CEO and Director of the company since April 2004. Previously served its President and Director from January 2004 to April 2004; President, CEO and Director of Mississippi Power from May 2001 through December 2003. CLIFF S THRASHER. He is the Executive Vice President, CFO and Treasurer since March 2005. Previously served as Senior Vice President, Comptroller, and CFO of Southern Power from November 2002 to March 2005 and Vice President of SCS from June 2002 to March 2005. Vice MICKEY A BROWN. He is the Executive Vice President of the Customer Service Organization since January 2005. Previously served as Senior from May 2001 through December 2004. President of Distribution of Fossil CHRISTOPHER CWOMACK. He is the Executive Vice President of External Affairs since March 2006. Previously served as Senior Vice President and Hydro Generation and Senior Production Officer from December 2001 to February 2006. General JAMES H MILLER III. He is the Senior Vice President and General Counsel since March 2004. Previously served as Vice President and Associate 2004. Counsel for SCS and Senior Vice President, General Counsel and Assistant Secretary of Southern Power from August 2001 through February ROBERT L BROWN JR. Director since 2003. He is the President and CEO of R L Brown & Associates Inc. RONALD D BROWN. Director since 2004. He isthe President and CEO of Atlanta Life Financial Group. ANNA RCABLIK. Director since 2001. She is the is President of Anatek, Inc. DAVID M RATCLIFFE. Director since 1999. He is the is Chairman of the Board, President and CEO of Southern Company. JIMMY CTALLENT. Director since 2007. He isthe President, CEO and Director of United Community Banks, Inc. DGARY THOMPSON. Director since 2003. He is a retired as CEO of Georgia Banking. RICHARD W USSERY. Director since 2001. He isa retired as Chairman of the Board of Total System Services, Inc. W JERRY VEREEN. Director since 1988. He is the Chairman, President and CEO of Riverside Manufacturing Company. E JENNER WOOD III. Director since 2001. He is the Chairman, President and CEO of SunTrust Bank.
SISTER SUBSIDIARIES :

Southern Power Georgia Power Company is a wholly owned subsidiary of Southern Company, which is the parent company of five operating companies, (Southern Company (Southern Power), a system service company (SCS), Southern Communications Services (Southern LINC), Southern Company Gas other direct GAS), Southern Company Holdings (Southern Holdings), Southern Nuclear Operating Company (Southern Nuclear), Southern Telecom, and and indirect subsidiaries. The operating companies - Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric provide electric service in four southeastern states. Southern Power constructs, owns, and manages Southern Company's competitive generation assets and sells electricity at marketbased rates in the wholesale market.

.........................................................

Business Registration

......................

........................................................................................................

CORPORATE AND BUSINESS REGISTRATIONS PROVIDED BY MANAGEMENT OR OTHER SOURCE The Corporate Details provided below may have been submitted by the management of the subject business and may not have been verified with the government agency which records such data. Registered Name: Business type: Corporation type: Date incorporated: State of Incorporation: Filing date: Status: Where filed: Georgia Power Company CORPORATION PROFIT Jun25 1930 GEORGIA Jun 25 1930 ACTIVE SECRETARY OF STATE/BUSINESS SERVICES AND REGULATIONS/CORPORATE DIVISION , ATLANTA, GA

Operations
04/2912008

Subsidiary of SOUTHERN COMPANY, THE, ATLANTA, GA started 1945 which operates as a public utility holding company. Parent company owns 100% of capital stock. Parent company has several other subsidiary(ies). As noted, this company is a subsidiary of Southern Company, The, Atlanta, GA, DUNS #00-692-5341 and reference is made to that report for background information on the parent and its management.

Description:

electricity. The company is engaged in the generation and purchase of electricity and the transmission, distribution and sale of such Principal utility billings made monthly. Net due 30 days. Sells to residential, commercial & industrial accounts, municipalities & other electric utilities. Territory : Georgia. The demand for electric power generation is affected by seasonal differences in the weather. At the traditional operating companies and Southern Power, the demand for power peaks during the summer months, with market prices reflecting the demand of power and available generating resources at that time. Power demand peaks can also be recorded during the winter. 9,270 which includes officer(s). 2,250 employed here. Leases premises in a multi story concrete block building. Central business section on main street. This business has multiple branches, detailed branch information is available in D & B's linkage or family tree products. This business has multiple subsidiaries, detailed subsidiary information is available in D & B's linkage or family tree products.

Employees: Facilities: Location: Branches: Subsidiaries:

SIC & NAICS


15

SIC: Based on information in our file, D&B has assigned this company an extended 8-digit SIC. D&Bs use of 8-digit SICs enables us to be more specific to a companys operations that if we use the standard 4-digit code. The 4-digit SIC numbers link to the description on the Occupational Safety & Health Administration (OSHA) Web site. Links open in a new browser window. 4911 9902 Generation, electric power 4911 9903 Transmission, electric power 4911 9901 Distribution, electric power
NAICS:

221119 Other Electric Power Generation 221121 Electric Bulk Power Transmission and Control 221122 Electric Power Distribution

Financial Statements
Company Financial: D&B

Three-year Statement Comparative: Fiscal Dec 31 2005 $2,000,187,000 $2,088,302,000 0.96 ($88,115,000) $17,698,258,000 $5,452,083,000 $7,075,837,000 $10,314,151,000 $747,766,000 Fiscal Dec 31 2006 $1,986,285,000 $2,717,163,000 0.73 ($730,878,000) $17,322,445,000 $5,956,251,000 $7,245,644,000 $10,590,325,000 $792,064,000 Fiscal Dec 31 2007 $2,144,743,000 $2,423,540,000 0.88 ($278,797,000) $18,678,018,000 $6,435,420,000 $7,571,652,000 $11,963,801,000 $842,142,000

Current Assets Current Liabilities Current Ratio Working Capital Other Assets Net Worth Sales Long Term Liab Net Profit (Loss)

Statement Update 05/07/2008 Interim statement dated MAR 31 2008: Assets $18,353,000 Cash Accts Rec $502,523,000 Inventory $729,937,000 Restricted Cash $32,185,000 Unbilled Revenues $143,269,000 $379,394,000 Under Recovered Reg Clause Rev $89,343,000 Other Accounts & Notes Receivable $28.722,000 Prepaid $189,639,000 Other Curr Assets Curr Assets $2,113,365,000 Fixt & Equip Total Deferred Charges & Other Asse Investments-Other $15,686,224,000 $2,748,242,000 $659,610,000

Liabilities Accts Pay Notes Pay Securities Due Withion 1 Year Accruals Accounts Payable-Other Customer Deposits Other Curr Liabs Curr Liabs Long-Term Debt Total Def Credits & Other Liabs L.T. Liab-Other COMMON STOCK ADDIT. PD.-IN CAP ACCUM OTHER COMPREHENSIVE LOSS RETAINED EARNINGS Total Liabilities + Equity

$202,150,000 $356,478,000 $348,310,000 $405,994,000 $478,125,000 $177,700,000 $167,698,000 $2,136,455,000 $6,338,121,000 $5,798,439,000 $265,957,000 $398,473,000 $3,621,364,000 ($23,146,000) $2,671,778,000 $21,207,441,000

Total Assets $21,207,441,000 From JAN 01 2008 to MAR 31 2008 sales $1,864,847,000; gross profit $1,864,847,000; operating expenses $1,539,598,000. Operating income $325,249,000; other income $28,544,000; other expenses $89,631,000; net income before taxes $264,162,000; Federal income tax $83,801,000; net income $180,361,000. Statement obtained from Securities And Exchange Commission. Prepared from books without audit. Fixed assets shown net less $8,823,496,000 depreciation. Explanations Other Current Assets consist of Affiliated companies, Accumulated provision for uncollectible accounts, Vacation pay and Other.

Additional Financial Data

Fiscal statement dated DEC 31 2007 Assets Cash $15,392,000 Liabilities Accts Pay $236,332,000
16

Accts Rec Inventory Restricted Cash Unbilled Revenues Under Recovered Reg Clause Revenues Other Accounts & Notes Receivable Prepaid Other Curr Assets Curr Assets Fixt & Equip Total Other Property & Investments Total Deferred Charges/Other Assets

$483,753,000 $730,874,000 $48,279,000 $137,046,000 $384,538,000 $147,498,000 $51,101,000 $146,262,000 $2,144,743,000 $15,311.172,000 $690,679,000 $2,676,167,000

Notes Pay Securities Accruals Accounts Payable-Other Customer Deposits Other Curr Liabs

$715,591,000 $198,576,000 $534,318,000 $463,945,000 $171,553,000 $103,225,000

Curr Liabs Long-Term Debt Total Def Credits & Other Liabs L.T. Liab-Other COMMON STOCK ADDIT. PD.-IN CAP ACCUM OTHER COMPREHENSIVE LOSS RETAINED EARNINGS Total Liabilities + Equity

$2,423,540,000 $5,937,792,000 $5,760,052,000 $265,957,000 $398,473,000 $3,374,777,000 ($13,893,000) $2,676,063,000 $20,822,761,000

Total Assets

$20,822,761,000

From JAN 01 2007 to DEC 31 2007 annual sales $7,571,652,000. Gross profit $7,571,652,000; operating expenses $6,054,969,000. Operating income $1,516,683,000; other income $86,442,000; other expenses $343,462,000; net income before taxes $1,259,663,000; Federal income tax $417,521,000. Net income $842,142,000. Statement obtained from Securities And Exchange Commission. Prepared from statement(s) by Accountant: Deloitte & Touche, LLP, Atlanta, Georgia. ACCOUNTANTS OPINION A review of the accountant's opinion indicated that the financial statement meets generally accepted accounting principles and the audit contains no qualifications. Accounts receivable shown net less $7,636,000 allowance. Fixed assets shown net less $8,696,668,000 depreciation. Explanations other current assets consist of affiliated companies, vacation pay and other; other liabilities consists of preferred and preference stock; other income consists of allowance for equity funds, interest income and other income; other expense consists of interest expense. The financial statement provided did not include any explanation of statement items for other current assets. The report was updated using information the company filed with the Securities and Exchange Commission.

Request Financial Statements


Request Financial Statements Requested financials are provided by GEORGIA POWER COMPANY and are not DUNSRight certified.

Key Business Ratios

Statement Date Based on this Number of Establishments Industry Norms Based On 128 Establishments This Business Industry Median Profitability Return on Sales Return on Net Worth Short-Term Solvency Current Ratio Quick Ratio Efficiency Assets/Sales Sales / Net Working Capital Utilization Total Liabilities / Net Worth 11.1 13.1 0.9 0.2 275.0 (27.2) 223.6 4.9 7.1 1.1 0.5 210.0 15.9 190.2

Dec 31 2007 128 Industry Quartile 1 1 3 4 4 4 3

This information may not be reproduced in whole or in part by any means of reproduction.

ii.J

Georgia Power Company


DOE Loan Guarantee Application Appendix N - Financial Model - Revised GPC Vogtle Expansion Project
October 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained in worksheets 2 - 4 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Project Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation

*REDACTED*

DOE

Loan Guarantee Application

EI

This page contains confidentialtrade secret and proprietaryinformationthat meetsthe criteriafor protectionfrompubic disclosure 5 in .s.. 552(b)(4). U.S.C. 1905. 10C.F.R. 104.11((). 18 and S This informationshall not be released personsoutsideDOE, exceptfor personsin other UnitedStates FederalGovernment to agences whose reviewisrequired or approval of the GPC VogUle ExpansionProjectLoanGuarantee Application DOE andother required reviewerssha usoe informationonly or purposes of review and valuation the

GPC Vogtle Expansion Project


Capitalized AFUDC Financial Data Income Statement Revenue Fuel Expense Purchased Power Expense Non-fuel O&M Expense Depreciation and Amortization Taxes other than income Other Income (excl. AFUDC Equity) Earning Before Interest & Taxes AFUDC - Equity AFUDC - Debt / Capitalized Interest Gross Interest Expense Trust Preferred Distributions Preference Dividends Preferred Dividends Income Taxes Net Income 2008

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Balance Sheet Property, Plant, and Equipment Current Assets Deferred Debits Total Assets Long Term Debt DOE Guaranteed Loan Intercompany Debt Preferred Stock Preference Stock Trust Preferred Equity Total Capitalization Short Term Debt Other Current Liabilities Unamortized ITC Deferred Taxes Deferred Credits Total Capitalization and Liabilities

Cash Flows Statement

DOE Loan Guarantee Application G PC Vogtle Expansion Project


Capitalized AFUDC

SA-This

page contains confidentialtrade secret and proprietary Informationthat meet the criteria for protection from public disclosure in 5 .S.C. 552(b)(4), 18 U.S.C. 1905.and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE. except for persons in other UnitedStates FederalGoverment agencies whose review is required for approval of the GPC Vogtle Expansion Project Loan Guarantee Application. DOE and other required f reviewers shal use the Informatio lyfor purposes ofreview on and evaluation 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Net Income Principal Non-Cash Items: Depreciation and Amortization - Cash Flows Change in Deferred Taxes AFUDC Equity Other Non Cash Items Balance Sheet Changes Net Cash Provided from Operations
Investing Activities:

Gross Construction Expenditures Inv in Subs. And Other Investing Adj


Net Cash Used for Investing

Free Cash Flow Financing Activities: Common Stock Dividend Payments Net Free Cash Flow Issuances/Redemptions from Financing Common Stock Issues (Redemptions) Capital Contributions (Return of capital) Preferred Stock Issues (Redemptions) Preference Stock Issues (Redemptions) Trust Preferred Issues (Redemptions) Debt Issues (Redemptions) Intercompany Debt Issues Other Financing Activities Total IssuanceslRedemptions Change in Short Term Debt Net Change in Cash &Equivalents Cash Interest Paid (excluding trust preferred distributions)

*REDACTED*

DOE Loan

Guarantee Application GPC VngGe Exp Provernment

Sa

Thispage containsconfidenlal trade secret and proprietaryinformation that meets the criteria forprotectionfrompublic dsosur in 5 U.S.C. 552(b(4). U.S.C. 1905, and 10C.F.R. 10.4.1l(). This informationshallnot be releasedto persons outside DOE,except for persons inother UnitedStates Federal agenies whosereview is required approvalof the GPC Vogte ExpansionProjectLoanGuarantee tor

GjPC Vogtle Expansion Project


Capitalized AFUDC Financial Data Income Statement Revenue Fuel Expense Purchased Power Expense Non-fuel O&M Expense Depreciation and Amortization Taxes other than income Other Income (excl. AFUDC Equity) Earning Before Interest & Taxes AFUDC - Equity AFUDC - Debt / Capitalized Interest Gross Interest Expense Trust Preferred Distributions Preference Dividends Preferred Dividends Income Taxes Net Income

oApplication. and other requiredreviewersshal usethe informationonlyfor purposesof reviewand evaluation DOE 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039

*REDACTED*

Balance Sheet Property, Plant, and Equipment Current Assets Deferred Debits Total Assets Long Term Debt DOE Guaranteed Loan Intercompany Debt Preferred Stock Preference Stock Trust Preferred Equity Total Capitalization Short Term Debt Other Current Liabilities Unamortized ITC Deferred Taxes Deferred Credits Total Capitalization and Liabilities

Cash Flows Statement

DOE Loan Guarantee Application DOE Loan Guarantee Application PC


Voge

This pageontainscoiential trade secret proprietary and inormation mee te iteria protection public that for from iscdosr.in 5 .S.C.s 552b)(4. 1 u.s.c. 19. and10 C.F.R.S 1004.Il(t.
This information shal notbe released personsoutsideDOE. except for persons inother United StatesFederal to

E ansion Project t Sxpans n Pr


2026 2027 2028

Capitalized AFUDC Net Income Principal Non-Cash Items: Depreciation and Amortization - Cash Flows Change in Deferred Taxes AFUDC Equity Other Non Cash Items Balance Sheet Changes Net Cash Provided from Operations Investing Activities: Gross Construction Expenditures Inv in Subs. And Other Investing Adj Net Cash Used for Investing Free Cash Flow

Govement agenies whose riew is requiredr approvl o theGPC Vogte Expansion Project Garantee Loan Application and other requred DOE reviewrs shalusetheinformation forpurposes review evaluation only o and 2029 2030 2031 2032 2033 2034 2035

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Financing Activities: Common Stock Dividend Payments Net Free Cash Flow IssuanceslRedemptions from Financing Common Stock Issues (Redemptions) Capital Contributions (Retum of capital) Preferred Stock Issues (Redemptions) Preference Stock Issues (Redemptions) Trust Preferred Issues (Redemptions) Debt Issues (Redemptions) Intercompany Debt Issues Other Financing Activities Total IssuanceslRedemptions Change in Short Term Debt Net Change in Cash & Equivalents Cash Interest Paid (excluding trust preferred distributions)

*REDACTED*

DO

LoanGuarantee Application

This page contains confidentialtrade secret and proprietary informationthat meets the criteria for protection from public discosure in5 U.S.C. 552(b(4). U.S.C. 1905. and 10 C.F.R. 1004.11( 18

G PC Vogtle Expansion Project


CWIP In Rate Base 2008

Thisinformation shaH not be released persons outside DOE,exceptfor persons in other United StatesFederalGoverment agencies to Applcation. OOEand other required ExpansionProjectLoan Guarantee whose review requiredforapprovalof the GPC Vogtle SEn oreviewers sha usthe information only for purposesof reviewand evaluation te 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Financial Data Income Statement Revenue Fuel Expense Purchased Power Expense Non-fuel O&M Expense Depreciation and Amortization Taxes other than income Other Income (excl. AFUDC Equity) Earning Before Interest & Taxes AFUDC - Equity AFUDC - Debt/ Capitalized Interest Gross Interest Expense Trust Preferred Distributions Preference Dividends Preferred Dividends Income Taxes Net Income *REDACTED*

Balance Sheet Property, Plant, and Equipment Current Assets Deferred Debits
Total Assets Long Term Debt DOE Guaranteed Loan Intercompany Debt Preferred Stock Preference Stock Trust Preferred Equity Total Capitalization

Short Term Debt Other Current Liabilities Unamortized ITC Deferred Taxes Deferred Credits Total Capitalization and Liabilities

Cash Flows Statement

DOE Loan Guarantee Application


PC Vogte Expansion Prjet
CWIP In Rate Base

SThis

page contains confidentia trade secret and proprietaryinformation that meet the criteriafor protection from publicdisclosure in 5 U.s.c. 52(bX4). 18 U.S.C. 1905, and 10 C.F.R. 1004.11n). This information shall not be released to persons outside DOE,except for persons inother United States Federal Government agencies

EnVogtle GPC

ect
2008

whose review required epproval the GPC is for of Vogtle Expansion Project LoanGuarantee Application. and otherrequired DOE
reviewers shalluse the information onlyfor purposes of review and evaluation

2009

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Net Income Principal Non-Cash items: Depreciation and Amortization - Cash Flows Change in Deferred Taxes AFUDC Equity Other Non Cash Items Balance Sheet Changes Net Cash Provided from Operations
Investing Activities: Gross Construction Expenditures Inv in Subs. And Other Investing Adj Net Cash Used for Investing Free Cash Flow

Financing Activities: Common Stock Dividend Payments Net Free Cash Flow

*REDACTED*
Issuances/Redemptions from Financing Common Stock Issues (Redemptions) Capital Contributions (Retum of capital) Preferred Stock Issues (Redemptions) Preference Stock Issues (Redemptions) Trust Preferred Issues (Redemptions) Debt Issues (Redemptions) Intercompany Debt Issues Other Financing Activities Total Issuances/Redemptions Change in Short Term Debt Net Change in Cash &Equivalents Cash Interest Paid (excluding trust preferred distributions)

DOE Loan Guarantee Application

This pagecontains confidentialtrade secretand proprietaryinformtion that meets the criteria for protectionfrom pubic discloure in SU.S.C. 5552(b)(4). 18U.S.C. 1905,and O0C.F.R. 1004.11(f). This information shag not be releasedto personsoutside DOE,except for personsin other UnitedStates Federal Govemment agencieswhose reiew is requiredfor approval of the GPC Voge Expansion ProjectLoanGuarantee Application. DOE and other requiredreviewers shal use Information for purposeso review and evaluation the only

GrPC Vogtle Expansion Project


CWIP In Rate Base Financial Data Income Statement Revenue Fuel Expense Purchased Power Expense Non-fuel O&M Expense Depreciation and Amortization Taxes other than income Other Income (excl. AFUDC Equity) Earning Before Interest & Taxes AFUDC - Equity AFUDC - Debt / Capitalized Interest Gross Interest Expense Trust Preferred Distributions Preference Dividends Preferred Dividends Income Taxes Net Income 2026 2027 2028

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Property, Plant, and Equipment

*REDACTED*

Current Assets Deferred Debits


Total Assets Long Term Debt DOE Guaranteed Loan Intercompany Debt Preferred Stock Preference Stock Trust Preferred Equity Total Capitalization Short Term Debt Other Current Liabilities Unamortized ITC

Deferred Taxes
Deferred Credits Total Capitalization and Liabilities

Cash Flows Statement

DOE Loan Guarantee A licat SLoan G arantee Application


GPC Vogte

Thispagecontainsonfidential trade secret and proprietary infoaton thatmeets the criteria protection public for from disosure in5 U.S.C. 552(b)(4). 18 U.S.C. 1905,and 10C.F.R. 1004.11(f).

GPC Vogtle Expansion Pr ct Expansion Project


2026 2027 2028

Thisinformation shal notbe released personsoutsideDOE.except for persons inother United StatesFederal to Gvernment agencies whosereiew is requiredfor approvalof the GPC Vogt ExpansionProjectLoan Guarantee Applicatior DOE andother requiredreviewersshal usethe informationonlyfor purposesof review and evaluation

CWIP In Rate Base

2029

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Net Income Principal Non-Cash Items: Depreciation and Amortization - Cash Flows Change in Deferred Taxes AFUDC Equity Other Non Cash Items Balance Sheet Changes Net Cash Provided from Operations Investing Activities: Gross Construction Expenditures Inv in Subs. And Other Investing Adj Net Cash Used for Investing Free Cash Flow Financing Activities: Common Stock Dividend Payments Net Free Cash Flow

Issuances/Redemptions from Financing Common Stock Issues (Redemptions) Capital Contributions (Return of capital) Preferred Stock Issues (Redemptions) Preference Stock Issues (Redemptions) Trust Preferred Issues (Redemptions) Debt Issues (Redemptions) Intercompany Debt Issues Other Financing Activities Total Issuances/Redemptions Change in Short Term Debt Net Change in Cash & Equivalents Cash Interest Paid (excluding trust preferred distributions)

*REDACTED*

Georgia Power Company


DOE Loan Guarantee Application Appendix O: Certifications and

Assurances
GPC Vogtle Expansion Project

September 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained on pages 2-3 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 1(f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.

18 U. This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), S.C. 1905, and 10 C.F.R. 1004.11 (f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.

GPC Vogtle Expansion Project DOE Loan Guarantee Application

CERTIFICATIONS FOR DEPARTMENT OF ENERGY LOAN GUARANTEES FOR USE WITH APPLICATIONS UNDER TITLE XVII OF THE ENERGY POLICY ACT OF 2005 The following certifications must be completed and submitted by applicants with each application for a loan guarantee under Title XVII of the Energy Policy Act of 2005 (Public Law 109-58, August 8, 2005) ("Title XVII") pursuant to the authority of the Department of Energy under 10 CFR section 609.6(b)(29) and other applicable laws and regulations, as set forth herein. The name and title of the person responsible for making the certifications and assurances must be typed in the signature block on the certification form. These certifications shall be treated as material representations of fact upon which reliance will be placed when the Department of Energy determines whether to issue a loan guarantee under Title XVII. If it is later determined that the applicant knowingly rendered an erroneous certification, in addition to other remedies available to the Federal Government, the Department of Energy may terminate the loan guarantee. The applicant shall provide immediate written notice to the Loan Guarantee Program Office of the Department of Energy if at any time the applicant learns that its certification was erroneous when submitted or has become erroneous by reason of changed circumstances. Additional certifications and assurances may be required of the applicant as a condition on the receipt of a loan guarantee under Title XVII. 1. LOBBYING The undersigned states, to the best of his or her knowledge and-belief, that: If any funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this commitment providing for the United States to insure or guarantee a loan, the undersigned shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions. Submission of this statement is a prerequisite for making or entering into this transaction imposed by section 1352, title 31, U.S. Code. Any person who fails to file the required statement shall be subject to a civil penalty of not less than $10,000 and not more than $110,000 for each such failure. 2. DEBARMENT, SUSPENSION, AND OTHER RESPONSIBILITY MATTERS

(a) The applicant participant certifies to the best of its knowledge and belief, that it and its principals are in compliance with the Federal regulations providing Office of Management and Budget guidance for Federal agencies on the govermentwide debarment and suspension system for nonprocurement programs and activities at 2 CFR part 180, including any subsequent amendments of those regulations. (b) The applicant certifies that it and its principals: (i) Are not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from covered transactions by any Federal department or agency; (ii) Have not within a three-year period preceding this proposal been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public or private agreement or transaction; violation of Federal or State antitrust statutes, including those proscribing price fixing between competitors, and bid rigging; commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, receiving stolen property, making false claims or obstruction of justice; or commission of any other offense indicating a lack of business integrity or business honesty that seriously

GPC Vogtle Expansion Project DOE Loan Guarantee Application


This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.

S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal
Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall

use the information only for purposes of review and evaluation.

and directly affects the applicant's present responsibility; (iii) Are not presently indicted for or otherwise criminally or civilly charged by a governmental entity (Federal, State or local) with commission of any of the offenses enumerated in paragraph (ii) of this certification; and (iv) Have not within a three-year period preceding this application had one or more public transactions (Federal, State or local) terminated for cause or default. (3) Where the applicant is unable to certify to any of the statements in paragraph (b) of this certification, such prospective participant shall submit an explanation to the Loan Guarantee Program Office of the Department of Energy.

SIGNATURE As the duly authorized representative of the applicant, I hereby certify that the applicant will comply with the above certifications. Name of Applicant:

6&eo . N4 oucr
Printed Name and Title of Authorized Representative:

Co em ox

CL[F

Throskfr, Exetcu+i

Vf'0 CFOA o4 Veruartr

SIGNATURE

DATE