SO 10-K & 10-Q changes, risk factors and insider trading

Southern Company and its subsidiaries are subject to substantial federal, state, and local governmental regulation, including with respect to rates. Compliance with current and future legal and regulatory requirements and procurement of necessary approvals, permits, and certificates may result in substantial costs to Southern Company and its subsidiaries. The reduction, elimination, or expiration of government incentives for, or regulations mandating or restricting the use of, renewable energy projects could reduce demand for renewable energy projects and harm the Registrants' businesses.

The traditional electric operating companies, and the power industry in general, have experienced a period of rising costs and projected capital expenditures, especially with respect to infrastructure investments, which is projected to continue for the foreseeable future. The profitability of the traditional electric operating companies' and the natural gas distribution utilities' businesses is largely dependent on their ability, through the rates that they are permitted to charge, to recover their costs and earn a reasonable rate of return on their invested capital. The traditional electric operating companies and the natural gas distribution utilities seek to recover their costs, including a reasonable return on invested capital, through their retail rates, which must be approved by the applicable state PSC or other applicable state regulatory agency. Such regulators, in a rate proceeding, may alter the timing or amount of certain costs for which recovery is allowed or modify the current authorized rate of return; rate refunds may also be required. The current period of rising costs and increased projected capital expenditures could result in increased resistance to authorizing cost recovery. Furthermore, the outcome of any suchrate proceeding could be impacted by a variety of factors, including the level of opposition from intervenors, potential impacts to customers, including affordability concerns, and past or future changes in the political, regulatory, economic, or legislative environment. See Note 2 to the financial statements under "Alabama Power" for additional information regarding the Alabama PSC's approval of a plan to keep retail rates stable through 2027, under "Georgia Power – Rate Plans" for additional information regarding the Georgia PSC's approval of a settlement agreement to extend the 2022 ARP through December 31, 2028, with no adjustments to base rates except for storm damage costs incurred through December 31, 2025, and under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects – Nicor Gas" and "Southern Company Gas – Rate Proceedings – Nicor Gas" in Item 8 herein for additional information.information regarding certain disallowances at Nicor Gas.

Additionally, the rates charged to wholesale customers by the traditional electric operating companies and Southern Power and the rates charged to natural gas transportation customers by Southern Company Gas' pipeline investments mustare besubject approvedto review by the FERC. Changes to Southern Power's and the traditional electric operating companies' ability to conduct business pursuant to FERC market-based rate authority could affect wholesale rates. Also, while a small percentage of transmission costs are recovered through wholesale electric tariffs, the majority are recovered through retail rates. Transmission planning and the resulting grid improvements could be impacted by FERC policy changes as well as North American Electric Reliability Corporation planning standard changes.

The IRA, among other items, imposes a 15% CAMT on adjusted financial statement income, as defined in the law, and is subject to the issuance of additional guidance by the U.S. Treasury Department and the IRS. Any rate recovery by the traditional electric operating companies or the natural gas distribution utilities subject to the CAMT will be determined pursuant to the regulatory processes of the FERC, state PSCs, or other applicable state regulatory agencies. There is no assurance, however, that such tax will be recoverable through the applicable regulatory process.

The Registrants are unable to predict changes in laws or regulations, regulatory guidance, legal interpretations, policy positions, and implementation actions that may resultoccur fromin the change in presidential administrations.future. The impact of any future revision or changes in interpretations or application of existing laws and regulations or the adoption of new laws and regulations applicable to Southern Company or any of its subsidiaries is uncertain. Changes in regulation,laws and regulations, the imposition of additional regulations,legal or regulatory requirements, changes in application of existing laws and regulations and in enforcement practices of regulators, as well as associated litigation, or penalties imposed for noncompliance with existing laws or regulations could influence the operating environment of the Southern Company system and may result in substantial costs.

The Southern Company system's costs of compliance with environmental laws and regulations and satisfying related AROs are significant.

The Southern Company system's operations are regulated by state and federal environmental agencies through a variety of laws and regulations governing air, GHGs, water, land, avian and other wildlife and habitat protection, and other natural resources. Compliance with existing environmental requirements involves significant capital and operating costs including the settlement of AROs, a major portion of which is expected to be recovered through retail and wholesale rates. There is no assurance, I-15 however, that all such costs will be recovered. The Registrants expect future compliance expenditures will continue to be significant.

Concern and activism about climate change continue to increase and, as a result, demand for energy conservation and sustainable assets could further increase. The public holds diverse and often conflicting views on the use of fossil fuels which may subject the Registrants to adverse publicity in connection with their use or supply of fossil fuels. Additionally, costs associated with GHG legislation, regulation, and emission reduction goals could be significant and there is no assurance such costs would be fully recovered through regulated rates or PPAs.

The Southern Company system has processes for identifying, assessing, and responding to climate-related risks, including a scenario planning process that is used to inform resource planning decisions in the states in which the traditional electric I-16 operating companies operate. This process relies on information and assumptions from internal and external sources, which may or may not be accurate in predicting future outcomes.

Because natural gas is a fossil fuel with lower carbon content relative to other fossil fuels, future carbon constraints, including, but not limited to, the imposition of a carbon tax, may create additional demand for natural gas, both for production of electricity and direct use in homes and businesses. However, such demand may be tempered by legislation limiting the use of natural gas in certain circumstances, including use in new construction and certain household appliances. Additionally, efforts to electrify the transportation, building, and other sectors may result in higher electric demand and negatively impact natural gas demand. For example, throughoutbeginning 2024in 2024, Nicor Gas' regulator, the Illinois Commission, has conducted "future of natural gas" proceedings to explore the recommendations involved with decarbonization of the gas distribution system in Illinois. The Illinois Commission's final report is expected by the end of 2026. In addition, future GHG constraints, including those related to methane emissions, designed to minimize emissions from natural I-16 gas could likewise result in increased costs to the Southern Company system and affect the demand for natural gas as well as the prices charged to customers and the competitive position of natural gas.

Since 2018, Southern Company hassystem management established GHG emissions reductions goals including an intermediate goal of a 50% reduction in GHG emissions from 2007 levels by 2030 and a long-term goal of net zero GHG emissions by 2050. Due primarily to the projected electric load growth, current projections indicate it will be extremely challenging to meet the 2030 goal. Achievement of these goals is dependent on various factors, many of which the Southern Company system does not control, including load growth across the Southern Company system's service territory, including projected load growth from large load customers, energy policy and regulations, natural gas prices, customer demand for carbon-free energy, and the pace and extent of development and deployment of low- to no-GHG energy technologies and negative carbon concepts.technologies. The strategy to achieve these goals also relies on continuing to economically transition the Southern Company system's generating fleet through a diverse portfolio of resources including low-carbon and carbon-free resources; making the necessary related investments in transmission and distribution systems; continuing to implement effective energy efficiency and demand response programs; customer demand for carbon-free energy; implementing initiatives to reduce natural gas distribution emissions; continuing research and development with a focus on technologies that lower GHG emissions, including methods of removing carbon from the atmosphereemissions; and constructively engaging with policymakers, regulators, investors, customers, and other stakeholders to support outcomes leading to a net zero future. There is no guarantee that the Southern Company system will achieve these goals.

The financial performance of Southern Company and its subsidiaries depends on the successful operation of the electric generation, transmission, and distribution facilities, natural gas distribution facilities, and distributed generation storage technologies and the successful performance of necessary corporate functions. There are many risks that could affect these matters, including operator error or failure of equipment or processes, accidents, operating limitations that may be imposed by environmental or other regulatory requirements or in connection with joint owner or joint venture arrangements, failure of performance by counterparties, labor disputes, physical attacks, fuel or material supply interruptions and/or shortages, transmission disruption or capacity constraints, including with respect to the Southern Company system's and third parties' transmission, storage, and transportation facilities, inability to maintain reliability consistent with customer expectations as the traditional electric operating companies transitionadd theirgeneration, generatingtransmission, fleetsand inrelated supportinfrastructure ofto themeet Southernprojected Companyelectric system'sdemand net zero goal,growth, compliance with mandatory reliability standards, including mandatory cyber security standards, implementation of new technologies, technology system failures, cyber intrusions, environmental events, such as spills or releases, supply chain disruptions, inflation, and catastrophic events such as fires, including wildfires, land movement, earthquakes, explosions, floods, high winds, tornadoes, hurricanes and other storms, solar flares, droughts, future pandemic health events, wars, political unrest, or other similar occurrences.

The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear facilities. In the event of non-compliance, the NRC has the authority to impose fines and/or shut down any unit, depending upon its assessment of the severity of the situation, until compliance is achieved. NRC orders or regulations related to increased security measures and any future NRC safety requirements could require Alabama Power and Georgia Power to make substantial operating and capital expenditures at their nuclear plants. In addition, if a major nuclear incident were to occur, it I-17 could result in substantial costs to Alabama Power or Georgia Power and Southern Company. A major incident at a nuclear facility anywhere in the world could cause the NRC to require additional safety measures. Moreover, a major incident at any nuclear facility in the United States, including facilities owned and operated by third parties, could require Alabama Power and Georgia Power to make material contributory payments.

The Southern Company system's electric generation, transmission, and distribution and natural gas distribution and storage activities involve a variety of inherent hazards and operating risks, such as accidents, explosions, fires, mechanical problems, discharges or releases of toxic or hazardous substances or gases, and other environmental risks. These incidents could result in serious injury, loss of life, significant damage to property, environmental pollution, and disruption of the Southern Company system's operations. The location of electric generation, transmission, and distribution infrastructure and natural gas pipelines and underground natural gas storage facilities near populated areas could increase the level of damage and liability resulting from any incidents. Additionally, electric generation, transmission, and distribution infrastructure and natural gas pipelinespipelines, storage facilities, and undergroundother natural gas storage facilitiesinfrastructure are subject to various state and other regulatory requirements. Failure to comply with these requirements could result in substantial monetary penalties, which could exceed the amount of insurance coverage.

Cyber actors, including those associated with foreign governments, have attacked and threatened to attack energy infrastructure. Various regulators have increasingly stressed that these attacks, including ransomware attacks, and attacks targeting utility systems and other critical infrastructure, are growing in sophistication, magnitude, and frequency. InUse particular,of generative artificial intelligence has also increased the frequency, scale, and sophistication of cyber attacks and increased the capability of less sophisticated actors. As generative artificial intelligence continues to evolve, new technologies and increased computing power could cause these trends to continue or exacerbate. Moreover, certain actors, such as nation-state and state-sponsored actors, can deploy significant resources and employ sophisticated methods to plan and carry out attacks. Risk of these attacks may escalate during periods of heightened geopolitical tensions, such as those caused by the war in Ukraine and conflicts in the Middle East.

The Registrants and their third-party vendors have been subject, and will likely continue to be subject, to attempts to gain unauthorized access to their technology systems and confidential data or to attempts to disrupt utility and related business operations. While there have been immaterial incidents of phishing, unauthorized access to technology systems, financial fraud, and disruption of remote access across the Southern Company system, there has been no material impact on the Registrants or I-18 their operations from these attacks. However, the Registrants cannot guarantee that security efforts will have the maturity to detect or prevent breaches, operational incidents, or other breakdowns of technology systems and network infrastructure, especially in the event the Registrants are targeted by a sophisticated attacker with significant resources, such as a nation-state or state-sponsored actor. As artificial intelligence continues to evolve, new technologies and increased computing power could lead to new attack techniques and more sophisticated attacks. Further, the Registrants do not have security visibility into all operational technology communications and processes, do not maintain completely exhaustive inventories of assets and applications, and do not centrally manage or monitor all technologies, applications, and environments, which could negatively affect preparation for, investigation of, or response to an information security incident. Accordingly, the Registrants cannot provide any assurance that information security incidents will not have a material adverse effect in the future.

SCS, on behalf of the traditional electric operating companies and Southern Power, purchases fuel for the Southern Company system's generation fleet from a diverse set of suppliers. Southern Company Gas' primary business is the distribution of natural I-19 gas through the natural gas distribution utilities. Natural gas is delivered daily from different regions of the country. This daily supply is complemented by natural gas supplies stored in both company-owned and third-party storage locations. To deliver this daily supply and stored natural gas, the Southern Company system has firm transportation capacity contracted with third-party interstate pipelines whileand Southern Company Gas also utilizes its own pipeline network. Disruption in the supply and/or delivery of fuel as a result of matters such as transportation delays, weather, labor relations, natural disasters, cyber or physical attacks, other force majeure events, or environmental regulations affecting fuel supplierssuppliers, constraints on existing natural gas pipeline capacity or on construction of new natural gas pipelines, or changing economic conditions could limit the ability of the traditional electric operating companies and Southern Power to operate certain facilities, which could impact reliability and result in higher fuel and operating costs, and the ability of Southern Company Gas to serve its natural gas customers.

The traditional electric operating companies are also dependent on coal, and related coal supply contracts, for a portion of their electric generating capacity. The counterparties to coal supply contracts may not fulfill their obligations to supply coal because of financial or technical problems. In addition, the suppliers and/or railroads may be delayed in supplying or delivering or may not be required to supply or deliver coal under certain circumstances, such as in the event of a natural disaster. If the traditional electric operating companies are unable to obtain their contracted coal requirements, they may be required to purchase additional coal at higher prices or limit coal generation, and these increased costs may not be recoverable through rates if deemed to be imprudently incurred. AsThe pace of retirement of coal-fired generating facilities can affect the demand for coal. If these facilities are retired,retired in the future, the demand for coal is expected to continue tomay decline. As a result, railroads may commit fewer resources to coal transportation, which could increase these risks.

The traditional electric operating companies operate under a business model that invests capital to serve customers and recovers those investments and earns a return for investors through state regulation. Southern Power's business model is primarily focused on investing capital or building energy assets to serve creditworthy counterparties using a bilateral contract model. A I-20 key premise of these business models is that generating power at power plants achieves economies of scale and produces power at a competitive cost.

The Southern Company system must attract, train, and retain a workforce to meet current and future needs. Events such as an aging workforce without appropriate replacements, increased cost or reduced supply of labor, mismatch of skill sets to future needs, or unavailability of contract resources may lead to operating challenges such as lack of resources, loss of knowledge, and a lengthy time period associated with skill development, including workforce needs associated with construction projects and ongoing operations. The Southern Company system may be subject to continuing workforce trends occurring in the United States triggered by decisions of employees to leave the workforce and/or their employer in higher rates during recent years as compared to prior years and challenges competing with other employers offering more flexible or fully-remote work options. The Southern Company system's costs, including costs for contractors to replace employees, productivity costs, and safety costs, may rise. The Southern Company system is also subject to risks associated with the failure to adequately manage contract resources. In addition, the failure to hire and adequately obtain replacement employees, including the ability to transfer significant internal historical knowledge and expertise to the new employees, or the future availability and cost of contract labor may adversely affect the Southern Company system's ability to manage and operate its business.

Supply chain disruptions, inflation, elevated interest rates, tariffs,trade policies (including tariffs and other trade measures), and other economic factors could negatively impact operations.

The Southern Company system's operations and business plans depend on the global supply chain to procure equipment, materials, and other resources. The delivery of components, materials, equipment, and other resources that are critical to the Southern Company system's operations has been impacted by domestic and global supply chain disruptions. Future pandemic health events or continued international tensions, including the ramifications of regional conflictsor international conflicts, such as those in Ukraine and the Middle East, and any strained relationships between the United States and other countries related to such conflicts, such as those in Ukraine and the Middle East, and the impact of tariffs,trade policies (including tariffs and other trade measures) of the United States and other countries, could further exacerbate global supply chain disruptions. These disruptions and shortages could adversely impact business operations. The constraints in the supply chain also could restrict availability and delay construction, maintenance, or repair of items needed to support normal operations or to continue planned capital investments.

Supply chain disruptions and trade policies have contributed to higher prices of components, materials, equipment, and other needed commodities, and these inflationary increases may continue. Further inflation, a continued elevated interest rate environment, tariffs,further impacts of trade policies, or other economic factors may negatively affect operations and the timely recovery of costs.

The businesses of the Registrants require substantial expenditures for investments in new facilities as well as capital improvements, including transmission, distribution, generation, and generationbattery energy storage facilities for the traditional electric operating companies, generation and battery energy storage facilities for Southern Power, and capital improvements to natural gas distribution facilities for Southern Company Gas, to, among other things, maintain reliability.reliability and meet projected electric demand growth. These expenditures also include those to settle AROs and meet environmental standards and goals. The traditional electric operating companies and Southern Power are in the process of constructing new generating facilities and/or adding environmental and other modifications to certain existing generating facilities and Southern Company Gas is replacing certain pipe in its natural gas distribution system and is involved in new gas pipeline construction projects. Moreover, the pace and extent of the traditional electric operating companies' planned construction program have increased as a response to projected electric demand growth. The traditional electric operating companies also are in the process of closing surface impoundments to comply with the CCR Rule and, where applicable, state CCR rules. The Southern Company system intends to continue its strategy of developing and constructing new electric generating facilities, expanding and improving the electric transmission and electric and natural gas distribution systems, and undertaking projects to maintain reliability and to comply with environmental laws and regulations. These projects are long term in nature and in some cases may include the development and construction of facilities with designs that have not been finalized or previously constructed.

Completion of these types of projects without delays or significant cost overruns is subject to substantial risks that have occurred or may occur, including changes in labor costs, availability, and productivity; challenges with the management of contractors or vendors; subcontractor performance; adverse weather conditions; shortages, delays, increased costs, or inconsistent quality of equipment, materials, and labor; contractor or supplier delay; the impacts of inflation; potentialand impacttrade policies (including tariffs and other trade measures) of newly-leviedthe tariffsUnited States and other countries; delays due to judicial or regulatory action; nonperformance under construction, operating, or other agreements; operational readiness, including specialized operator training and required site safety programs; engineering or design problems or any remediation related thereto; design and other licensing-based compliance matters; challenges with start-up activities, including major equipment failure, or system integration; and/or operational performance; challenges related to future epidemic or pandemic health events; continued public and policymaker support for projects; environmental and geological conditions; delays or increased costs to I-21 interconnect facilities to transmission grids; and increased financing costs as a result of changes in interest rates or as a result of project delays.

If a Subsidiary Registrant is unable to complete the development or construction of a project or decides to delay or cancel construction of a project, it may not be able to recover its investment in that project and may incur substantial cancellation payments under equipment purchase orders or construction contracts, as well as other costs associated with the closure and/or abandonment of the project. Further, the traditional electric operating companies are incurring, and may in the future incur, significant engineering, design, and equipment costs in advance of receiving approval of generation, distribution, and transmission projects. If any of these projects are canceled for any reason, including if a traditional electric operating company is not selected through a PSC-approved request for proposalRFP process or due to constructfailure forto itselfreceive additionalother capacitynecessary needs,regulatory approvals and/or siting or environmental permits, significant cancellation penalties under the equipment purchase orders and construction contracts could occur and such traditional electric operating company may not be able to recover through customer rates all such penalties or registration, prepayment, cancellation, or other fees incurred in such process. See Note 2 to the financial statements under "Georgia Power – Integrated Resource Plans – 20222025 IRP" and " – Certification Requests" in Item 8 herein for additional information.

In addition, partnership and joint ownership agreements may provide partners or co-owners with certain decision-making authority in connection with projects under construction. Any failure by a partner or co-owner to perform its obligations under the applicable agreements could have a material negative impact on the applicable project under construction. Southern Company Gas' current pipeline development projectsproject involveinvolves a joint owners or other joint venture participantsowner that controlcontrols management of the projectsproject, and Southern Power participates in partnership agreements with respect to a majority of its renewable energy projects. See Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information regarding other jointly-owned facilities.

Even if a construction project (including a joint venture construction project) is completed, the total costs may be higher than estimated or deemedcertified imprudent andor may be disalloweddeemed imprudent, disallowed, or otherwise not recoverable through regulated rates, if applicable. In addition, construction delays and contractor performance shortfalls can result in the loss of revenues. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Construction Programs" in Item 7 herein for additional information.

Southern Company Gas, through SNG, has approved a significant investment in a pipeline development project. The pipeline development project will be constructed and operated by a third party. If the third party fails to perform in a proper manner, the book value of the investment could be impaired and Southern Company Gas could lose part or all of its investment. In addition, Southern Company Gas is required to fulfill capital obligations related to other pipelines in which Southern Company Gas has an ownership interest or, as necessary, guarantee the obligations related thereto.thereto, and Southern Company Gas may participate in other pipeline development projects in the future.

The generation, energy marketing, and natural gas operations of the Southern Company system are subject to changes in energy prices and fuel costs, which could increase the cost of producing power, decrease the amount received from the sale of energy, I-22 and/or make electric generating facilities and natural gas distribution systems less competitive. The market prices for these commodities may fluctuate significantly over relatively short periods of time as a result of changes in supply and/or demand, which could increase the expenses and/or reduce the revenues of the Registrants. For the traditional electric operating companies and Southern Company Gas' regulated gas distribution operations, such impacts may not be fully recoverable through rates.

Southern Power and the traditional electric operating companies purchase natural gas as a fuel source for their power generation needs and the natural gas distribution utilities purchase natural gas for sale to their customers. Accordingly, the price of natural gas affects, among other things, Southern Power's and the traditional electric operating companies' costs of generation and the natural gas distribution utilities' cost of natural gas. Natural gas remains a volatile commodity. Slight supply and demand imbalances can quickly result in significant price moves both up and down. These price movements may be short-lived, but the impacts can be pronounced. Natural gas supplies have continued to grow; however, this growth has been accompanied by LNG export growth. Forward curves project prices will remain in the mid- to high-$3 per mmBtu range through 2030; however, short-term price volatility is expected and future prices could be materially impacted by various factors, including unexpected geopolitical eventsevents, asincreased welldemand asfor natural gas, including to fuel electric generation to serve data centers and other large load customers, and government policies related to natural gas and energy, including infrastructure development, production, and exports.

The traditional electric operating companies and Southern Company Gas from time to time have experienced and may continue to experience underrecoveredunder recovered fuel and purchased power and/or purchased gas cost balances. While the traditional electric operating companies and Southern Company Gas are generally authorized to recover fuel and purchased power and/or I-23 purchased gas costs through cost recovery clauses, recovery may be delayed or may be denied if costs are deemed to be imprudently incurred.

The consumption and use of energy are linked to economic activity. This relationship is affected over time by changes in the economy, customer behaviors, and technologies. An economic downturn could be caused by a variety of factors, including wars, geopolitical instability, acts of terrorism, political or financial crises,crises or uncertainty, government shutdowns, trade policies (including tariffs and other trade measures) of the United States and other countries, government fiscal policy, future pandemic health events, or cyclical economic factors. Any economic downturn could negatively impact customer growth and usage per customer. Additionally, any economic downturn or disruption of financial markets, both nationally and internationally, could negatively affect the financial stability of customers and counterparties of the Subsidiary Registrants.

Customers could also voluntarily reduce their consumption of energy in response to decreases in their disposable income, elimination of government energy assistance programs, government shutdowns, increases in energy prices, or individual conservation efforts.

In addition, the adoption of technology by customers can have both positive and negative impacts on sales. Many new technologies utilize less energy than in the past. However, electric and natural gas technologies such as data centers and electric and natural gas vehicles can create additional demand. Given that these technologies are rapidly evolving, the extent of any additional demand is uncertain. In particular, future incremental electric demand from data centers could be substantial or, on the other hand, future technological advances could offset or eliminate any such demand. Accordingly, future energy demand may vary widely from projections. The Southern Company system seeks to incorporate the effects of changes in customer behavior, state and federal programs, state PSC or other applicable state regulatory agency mandates, and technology, but the Southern Company system's planning processes may not accurately estimate and incorporate these effects.

Volatile or significant weather events could result in substantial damage to the transmission and distribution lines of the traditional electric operating companies, the generating facilities of the traditional electric operating companies and Southern Power, and the natural gas distribution and underground storage facilities of Southern Company Gas, which is likely to negatively impact revenue.revenue and/or earnings. The Subsidiary Registrants have significant investments in the Atlantic and Gulf Coast regions and Southern Power and Southern Company Gas have investments in various states that could be subject to severe weather and I-23 natural disasters, including hurricaneshurricanes, wildfires, and wildfires.extreme temperatures. Further, severe drought conditions can reduce the availability of water and restrict or prevent the operation of certain generating facilities. These volatile weather events may result in unexpected increases in customer load, requiring procurement of additional power at wholesale prices, or create other grid reliability issues.

In the event a traditional electric operating company or Southern Company Gas experiences any of these weather events or any natural disaster or other catastrophic event, recovery of costs in excess of reserves and insurance coverage is subject to the approval of its state PSC or other applicable state regulatory agency. The traditional electric operating companies from time to time have experienced and may continue to experience deficits in their storm cost recovery reserve balances. For example, in September 2024, Hurricane Helene caused significant damage to Georgia Power's transmission and distribution facilities. The incremental restoration costs related to this hurricane totaled approximately $870$880 million, of which approximately $750$780 million was deferred in the regulatory asset for storm damage, approximately $90$75 million was capitalized to property, plant, and equipment, and approximately $30$25 million was deferred as future billings to open access transmission tariff customers. See Note 2 to the financial statements in Item 8 herein for more information regarding storm damage balances. Additionally, the applicable state PSC or other applicable state regulatory agency may deny or delay recovery of any portion of such costs. Any I-24 such delay or failure in recovering costs by the Subsidiary Registrants could have a material adverse effect on the Registrants, including lower credit ratings and, thus, higher costs for future debt issuances, as well as limitations on their ability to fund capital expenditures and support economic development opportunities.

Southern Company and its subsidiaries have made significant acquisitions, dispositions, and investments in the past and may continue to do so, including through SNG's pipeline development projects. Such actions cannot be assured to be completed or beneficial to Southern Company or its subsidiaries. Southern Company and its subsidiaries continually seek opportunities to create value through various transactions, including acquisitions or sales of assets.assets or businesses (or interests therein). Specifically, Southern Power continually seeks opportunities to execute its strategy to create value through various transactions, including acquisitions, dispositions, and sales and purchases of partnership interests, development and construction of new generating facilities, and entry into PPAs primarily with investor-owned utilities, IPPs, municipalities, electric cooperatives, and other load-serving entities, as well as commercial and industrial customers. Additionally, Southern Company Gas continues to make significant investments in existing pipelines, most of which are operated by third parties. If one of these agents fails to perform in a proper manner, the value of the investment could decline and Southern Company Gas could lose part or all of its investment. In addition, Southern Company Gas is required to fulfill capital obligations to pipeline joint ventures.

Southern Company and Southern Company Gas are holding companies and, as such, they have no operations of their own. Substantially all of Southern Company's and Southern Company Gas' and many of Southern Power's respective consolidated assets are held by subsidiaries. Southern Company's, Southern Company Gas' and, to a certain extent, Southern Power's ability to meet their respective financial obligations, including making interest and principal payments on outstanding indebtedness, and, for Southern Company, to pay dividends on its common stock, is dependent on the net income and cash flows of their respective subsidiaries and the ability of those subsidiaries to pay upstream dividends or to repay borrowed funds. Prior to I-24 funding Southern Company, Southern Company Gas, or Southern Power, the respective subsidiaries have financial obligations and, with respect to Southern Company and Southern Company Gas, regulatory restrictions that must be satisfied, including among others, debt service. In addition, Southern Company, Southern Company Gas, and Southern Power may provide capital contributions or debt financing to subsidiaries under certain circumstances, which would reduce the funds available to meet their respective financial obligations, including making interest and principal payments on outstanding indebtedness, and to pay dividends on Southern Company's common stock.

There are numerous factors that rating agencies evaluate to determine credit ratings for the Registrants, Southern Company Gas Capital, and Nicor Gas, including capital structure, regulatory environment, business risk, the ability to cover liquidity requirements, other commitments for capital, and certain other controllable and uncontrollable events. The Registrants, Southern Company Gas Capital, and Nicor Gas could experience a downgrade in their ratings if any rating agency concludes that the level of business or financial risk of the industry or the applicable company has deteriorated. Changes in ratings methodologies by the agencies could also have a negative impact on credit ratings. If any rating agency downgrades any Registrant, Southern Company Gas Capital, or Nicor Gas, borrowing costs likely would increase, including potential automatic increases in interest rates or fees under applicable term loans and credit facilities, the pool of investors and funding sources would likely decrease, and, particularly for any downgrade to below investment grade, significant collateral requirements may be triggered in a number of contracts. Any credit rating downgrade could require altering the mix of debt financing currently used and could require the issuance of secured indebtedness (which would rank senior to unsecured indebtedness) and/or indebtedness with additional restrictive covenants binding the applicable company.

The traditional electric operating companies are currently obligated to supply power to retail customers, as well as wholesale customers under long-term PPAs. Southern Power is currently obligated to supply power to wholesale customers under long-term PPAs. At peak times, the demand for power required to meet obligations could exceed the Southern Company system's available generation capacity. Market or competitive forces may require that the traditional electric operating companies purchase capacity in the open market or build additional generation and transmission facilities and that Southern Power purchase energy or capacity in the open market. Because regulators may not permit the traditional electric operating companies to pass all of these purchase or construction costs on to their customers, the traditional electric operating companies may not be able to recover some or all of these costs or may have exposure to regulatory lag associated with the time between the I-25 incurrence of costs of purchased or constructed capacity and the traditional electric operating companies' recovery through regulated rates. Under Southern Power's long-term fixed price PPAs, Southern Power may not be able to recover all of these costs.

The Registrants and Nicor Gas rely on access to both short-term and longer-term capital markets as a significant source of liquidity to meet capital requirements not satisfied by the cash flow from their respective operations.operations, including capital expenditures to meet projected electric demand growth. Access to capital markets may also be critical to finance unexpected material expenditures such as unusually volatile commodity costs or significant storm restoration activities for severe weather events. If any of the Registrants or Nicor Gas is not able to access capital at competitive rates or on favorable terms, its ability to implement its business plan will be limited due to weakened capacity to fund capital investments or acquisitions that it may otherwise rely on to achieve future earnings and cash flows.flows and affordability concerns from increased borrowing costs could require the Registrants and Nicor Gas, unilaterally or at the direction of their regulators, to significantly scale back infrastructure investment, which could lead to additional risks related to safety and reliability. In addition, the Registrants and Nicor Gas rely on committed credit facilities as back-up liquidity for access to low cost money markets. Certain market disruptions, whether in the United States or globally, including an economic downturn or uncertainty, increases in interest rates, bankruptcy or financial distress at an unrelated utility company, financial institution, or sovereign entity, capital markets volatility and disruption, either nationally or internationally, changes in fiscal, monetary, trade, or tax policy, volatility in market prices for electricity and natural gas, actual or threatened cyber or physical attacks on facilities within the Southern Company system or owned by unrelated utility companies, impacts of any future pandemic health events, geopolitical instability, war or threat of war, or the overall health of the utility and financial institution industries, may increase the cost of borrowing or adversely affect the ability to raise capital through the issuance of securities or other borrowing arrangements or the ability to secure committed bank lending agreements used as back-up sources of capital. Furthermore, some financial institutions may be limited in their ability to provide capital to the Registrants as a result of such financial institution's investment criteria, including criteria related to GHG.

The debt and credit agreements of the Registrants, SEGCO, Southern Company Gas Capital, and Nicor Gas contain various financial and other covenants. Georgia Power's loan guarantee agreement with the DOE contains additional covenants, events of default, and mandatory prepayment events relating to the ongoing operation of Plant Vogtle Units 3 and 4. Future debt and credit agreements may contain additional or different covenants, events of default, and mandatory prepayment events. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements.

The costs of providing pension and other postretirement benefit plans are dependent on a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, changes in actuarial assumptions, government regulations, and/or life expectancy, and the frequency and amount of the Southern Company system's required or voluntary contributions made to the plans. Changes in actuarial assumptions and differences between the assumptions and actual values, as well as a significant decline in the value of investments that fund the pension and other postretirement plans, if not offset or mitigated by a decline in plan liabilities, could increase pension and other postretirement expense, and the Southern Company system could be required from time to time to fund the pension plans with significant amounts of cash. See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES – "Application of Critical Accounting Policies and Estimates – Pension and Other Postretirement Benefits" in Item 7 herein and Note 11 to the financial statements in Item 8 herein for additional information regarding the defined benefit pension and other I-27 postretirement plans. Additionally, Alabama Power and Georgia Power each hold significant assets in their nuclear decommissioning trusts to satisfy obligations to decommission their nuclear plants. The rate of return on assets held in those trusts can significantly impact both the funding available for decommissioning and the funding requirements for the trusts. See Note 6 to the financial statements under "Nuclear Decommissioning" in Item 8 herein for additional information.

DuringIn the threefirst months ended March 31,quarter 2026, Southern Power committed to development projects to upgrade certain turbines at its existing Franklin and Wansley natural gas facilities, which are projected to add up to 400 MWs of incremental capacity. Commercial operations for the incremental capacity at the natural gas facilities are projected to occur between the second quarter 2029 and the firstfourth quarter 2031.2030. The ultimate outcome of these matters cannot be determined at this time. In addition, induring the first quartersix months of 2026 and subsequent to MarchJune 31,30, 2026, Southern Power placed in service 51all 200 MWs of the 200-MW repowering project at the Kay wind facility. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

At MarchJune 31,30, 2026, Southern Power's average investment coverage ratio for its generating assets, including those owned with various partners, based on the ratio of investment under contract to total investment using the respective facilities' net book value (or expected in-service value for facilities under construction) as the investment amount was 97% through 2030 and 88% through 2035, with an average remaining contract duration of approximately 12 years.

Consolidated net income attributable to Southern Company was $1.2 billion ($1.03 per share) in the firstsecond quarter 2026 wascompared $1.36to $0.9 billion ($1.21$0.80 per share) for the corresponding period in 2025. For year-to-date 2026, consolidated net income attributable to Southern Company was $2.5 billion ($2.24 per share) compared to $1.33$2.2 billion ($1.21$2.01 per share) for the corresponding period in 2025. The increaseincreases waswere primarily due to increases inwithin retail electric revenues associated with sales growth, higher natural gas revenues associated with base rate increases, higherdecreases non-fuel-relatedin wholesaleincome electric revenues,taxes, and an increaseincreases in AFUDC equity,equity and earnings from equity method investments, partially offset by an increaseincreases in depreciation and amortization,amortization. decreasesAlso contributing to the increase in retailthe electricssecond revenuesquarter associated2026 withwas weathera impacts, and an increasedecrease in interest expense.

In the firstsecond quarter 2026, retail electric revenues were $4.64$4.75 billion compared to $4.60$4.76 billion for the corresponding period in 2025. For year-to-date 2026, retail electric revenues were $9.39 billion compared to $9.36 billion for the corresponding period in 2025. Details of the changes in retail electric revenues were as follows:

Changes in rates and pricing resulted in a decreasedecreases in revenues in the firstsecond quarter and year-to-date 2026 when compared to the corresponding periodperiods in 2025 primarily due to lower contributions from commercial and industrial customers with variable demand-driven pricing at Georgia Power, partially offset by an increase in Rate CNP Compliance revenues at Alabama Power and higher revenues associated with a tolling arrangement accounted for as a sales-type lease at Mississippi Power. Also partially offsetting the decrease in revenues for year-to-date 2026 were increases in PEP rates at Mississippi Power. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" and "Mississippi Power – Performance Evaluation Plan" in Item 8 of the Form 10-K for additional information.

Changes in sales resulted in an increaseincreases in revenues in the firstsecond quarter and year-to-date 2026 when compared to the corresponding periodperiods in 2025. Weather-adjusted residential KWH sales increaseddecreased 0.9%0.7% in the firstsecond quarter 2026 primarily due to decreased customer usage, partially offset by customer growth. Weather-adjusted residential KWH sales increased 0.1% for year-to-date 2026 primarily due to customer growth, partially offset by decreased customer usage. Weather-adjusted commercial KWH sales increased 4.6%7.4% and 6.0% in the firstsecond quarter 2026and year-to-date 2026, respectively, primarily due to increased customer usage, largely driven by data centers at Georgia Power. IndustrialWeather-adjusted industrial KWH sales increasedwere 1.5%flat in the firstsecond quarter 2026 primarily due to increases in the primary metals and miscellaneous manufacturing sectors, offset by decreases in the paper, textiles, and chemicals sectors. Weather-adjusted industrial KWH sales increased 0.7% for year-to-date 2026 primarily due to increases in the primary metals, pipeline,miscellaneous manufacturing, and stone, clay, and glass sectors, partially offset by decreases in the paper and chemicals sectors.

Fuel and other cost recovery revenues increaseddecreased $48$70 million and $21 million in the firstsecond quarter 2026and year-to-date 2026, respectively, compared to the corresponding periodperiods in 2025 primarily due to higherlower recoverable fuel costs. Electric rates for the traditional electric operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.

In the firstsecond quarter 2026, wholesale electric revenues were $965$699 million compared to $744$681 million for the corresponding period in 2025. The increase was primarily due to an increase in energy revenues associated with a $145 million increase related to the average cost per KWH sold primarily resulting from higher fuel and purchased power prices and a $76$48 million increase related to the volume of KWHs sold resulting from higher demand.demand, partially offset by a decrease of $27 million related to the average cost per KWH sold primarily resulting from lower fuel and purchased power prices.

In the firstsecond quarter 2026, other electric revenues were $265$242 million compared to $242$220 million for the corresponding period in 2025. For year-to-date 2026, other electric revenues were $507 million compared to $463 million for the corresponding period in 2025. The increaseincreases wasin the second quarter and year-to-date 2026 were primarily due to increases of $15$20 million and $37 million, respectively, in open access transmission tariff sales at the traditional electric operating companies and $8 million in realized gains associated with price stability products for retail customers on variable demand-driven pricing tariffs at Georgia Power.companies.

In the firstsecond quarter 2026, natural gas revenues were $2.2$966 million compared to $979 million for the corresponding period in 2025. For year-to-date 2026, natural gas revenues were $3.16 billion compared to $1.8$2.82 billion for the corresponding period in 2025. Details of the changes in natural gas revenues were as follows:

Changes in rates resulted in an increaseincreases in revenues in the firstsecond quarter and year-to-date 2026 as compared to the corresponding periodperiods in 2025 primarily due to base rate increases at Nicor Gas and Atlanta Gas Light. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

Revenues associated with gas costs and other cost recovery decreased in the second quarter 2026 as compared to the corresponding period in 2025 primarily due to lower cost of natural gas driven by lower natural gas prices, as well as decreases in other expenses passed through to customers. Revenues associated with gas costs and other cost recovery increased infor the first quarteryear-to-date 2026 as compared to the corresponding period in 2025 primarily due to higher cost of natural gas driven by higher natural gas prices,prices in the first quarter 2026, as well as increases in other expenses passed through to customers. See "Cost of Natural Gas" herein for additional information. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities.

Revenues from gas marketing services decreased in the second quarter 2026 as compared to the corresponding period in 2025 primarily due to lower commodity prices. Revenues from gas marketing services increased infor the first quarteryear-to-date 2026 as compared to the corresponding period in 2025 primarily due to higher commodity prices,prices in the first quarter 2026, partially offset by weather impacts.

In the firstsecond quarter 2026, other revenues were $336$325 million compared to $349$335 million for the corresponding period in 2025. The decrease was primarily due to a decreasedecreases of $18$12 million in unregulated sales associated with energy conservation projects at Georgia Power and $7$8 million in customer charges related to contributions in aidsales of constructionunregulated includedproducts inand rates in 2025services at MississippiAlabama Power, partially offset by an increase of $13$10 million in unregulated sales associated with power delivery construction and maintenance projects at Georgia Power.

In the firstsecond quarter 2026, total fuel and purchased power expenses were $1.7$1.34 billion compared to $1.5$1.38 billion for the corresponding period in 2025. The increasedecrease was due to a $99$103 million increasenet decrease related to the average cost of fuel and purchased powerpower, andpartially offset by a $94$69 million net increase related to the volume of KWHs generated and purchased.

Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, the natural gas distribution utilities' rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities. See Note 2 to the financial statements under "Southern Company Gas – Natural Gas Cost Recovery" in Item 8 of the Form 10-K for additional information. Cost of natural gas at the natural gas distribution utilities represented 84.2%87.0% and 84.7% of the total cost of natural gas in the firstsecond quarter 2026.and year-to-date 2026, respectively.

In the firstsecond quarter 2026, cost of natural gas was $926$177 million compared to $674$255 million for the corresponding period in 2025. The increasedecrease reflects higherlower gas cost recovery as a result of a 38.0%15.8% increasedecrease in natural gas prices.

In the firstsecond quarter 2026, cost of other sales was $181$176 million compared to $199$167 million for the corresponding period in 2025. The decreaseincrease was primarily relateddue to a decreaseincreases of $25 million in expenses at PowerSecure primarily related to distributed infrastructure and energy efficiency projects, partially offset by an increase of $11$12 million in expenses associated with unregulated power delivery construction and maintenance projects at Georgia Power and $5 million related to energy service contracts at Southern Company Gas, partially offset by a decrease of $10 million in expenses related to sales of unregulated products and services at Alabama Power.

In the firstsecond quarter 2026, other operations and maintenance expenses were $1.65$1.71 billion compared to $1.62$1.69 billion for the corresponding period in 2025. The increase was primarily due to a $24$22 million increase in certain employee compensation and benefit expenses, $20 million in weather-related damage at a Southern Power solar project,expenses and increases of $15$13 million in storm damage recovery and $13 million in transmission and distribution expensesoperational atcosts, the traditional electric operating companies, $14 million in customer education and assistance expensesboth at Georgia Power, $13partially offset by decreases of $19 million in technology infrastructure and application production costs, $10 million in expenses at PowerSecure primarily related to distributed infrastructure projects, and $7 million related to certain deferred expenses at Southern Company Gas. Partially offsetting the increase was a $21 million decrease associated with utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses at Alabama Power, a $21 million increase in nuclear property insurance refunds at Alabama Power and Georgia Power, an $18$16 million decrease in plannedtechnology outages at the traditional electric operating companies,infrastructure and anapplication $18production million decrease in legal expenses at Southern Company Gas.costs.

In the firstsecond quarter 2026, depreciation and amortization was $1.4 billion compared to $1.3 billion for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $2.85 billion compared to $2.61 billion for the corresponding period in 2025. The increaseincreases wasin the second quarter and year-to-date 2026 were primarily due to increases of $127$98 million and $224 million, respectively, in accelerated depreciation related to wind repowering projects at Southern Power and $102 million and $207 million, respectively, associated with additional plant in service, partially offset by a decrease of $98$99 million and $197 million, respectively, resulting from the extension of Georgia Power's 2022 ARP. See Note 2 to the financial statements under "Georgia Power – Rate Plans" for additional information related to Georgia Power's 2022 ARP. Also see Note (K) to the Condensed Financial Statements under "Southern Power – Wind Repowering Projects" herein and Notes 5 and 15 to the financial statements under "Depreciation and Amortization – Southern Power" and "Southern Power – Wind Repowering Projects," respectively, in Item 8 of the Form 10-K for additional information regarding Southern Power's wind repowering projects.

In the firstsecond quarter 2026, taxes other than income taxes were $464$367 million compared to $445$403 million for the corresponding period in 2025. For year-to-date 2026, taxes other than income taxes were $831 million compared to $848 million for the corresponding period in 2025. The increasedecreases wasin the second quarter and year-to-date 2026 were primarily due to decreases of $37 million and $30 million, respectively, in property taxes primarily resulting from the actualization of prior-year tax assessments at Georgia Power. Partially offsetting the decrease for year-to-date 2026 were increases of $7 million in propertymunicipal franchise fees and utility license taxes primarily related to an increase inat the assessedtraditional valueelectric ofoperating propertycompanies and $6$5 million in revenue taxes at Nicor Gas as a result of higher natural gas revenues.revenues at Nicor Gas.

In the firstsecond quarter 2026, allowance for equity funds used during construction was $121$128 million compared to $73$80 million for the corresponding period in 2025. For year-to-date 2026, allowance for equity funds used during construction was $248 million compared to $153 million for the corresponding period in 2025. The increaseincreases waswere primarily associated with an increase in capital expenditures subject to AFUDC at Georgia Power.

In the firstsecond quarter 2026, earnings from equity method investments were $50$86 million compared to $32$10 million for the corresponding period in 2025. For year-to-date 2026, earnings from equity method investments were $136 million compared to $43 million for the corresponding period in 2025. The increaseincreases wasin the second quarter and year-to-date 2026 were primarily due to an increaseincreases of $10$58 million and $68 million, respectively, at Southern Holdings related to investment gains and losses associated with investments in energy-related venture capital funds and aincreases $7of $9 million increaseand $16 million, respectively, at Southern Company Gas related to SNG. See Note 7 to the financial statements in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Southern Company" and "Southern Company Gas" herein for additional information.

In the firstsecond quarter 2026, income taxes were $228$187 million compared to $280$289 million for the corresponding period in 2025. For year-to-date 2026, income taxes were $414 million compared to $569 million for the corresponding period in 2025. The decreasedecreases waswere primarily due to andecreases increaseof $93 million and $87 million, respectively, in charges to a valuation allowance on certain state tax credit carryforwards at Georgia Power and increases of $35 million and $71 million, respectively, related to higher wind PTCs resulting from the purchase of the noncontrolling membership interest in the SP Wind tax equity partnership at Southern PowerPower, partially offset by higher pre-tax earnings and an increasedecreases of $16$17 million and $29 million, respectively, in amortizationthe flowback of federalexcess PTCsstate deferred income taxes at Georgia Power. See Note (G) to the Condensed Financial Statements herein and Note 15 to the financial statements under "Southern Power – Purchase of Renewable Facility Interests" in Item 8 of the Form 10-K for additional information.

Net Income (Loss) Attributable to Noncontrolling Interests

Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the firstsecond quarter 2026, net income attributable to noncontrolling interests was $14 million compared to a $27 million net loss for the corresponding period in 2025. For year-to-date 2026, net loss attributable to noncontrolling interests was $18$4 million compared to $64$91 million for the corresponding period in 2025. The decreasechanges wasin the second quarter and year-to-date 2026 were primarily due to $41$38 million and $79 million, respectively, in lower HLBV loss allocations to Southern Power's tax equity partners, primarilylargely resulting from Southern Power's purchase of the noncontrolling membership interests in the SP Wind tax equity partnership, and $5 million in higher income allocations to Southern Power's equity partners.partnership. See Note 15 to the financial statements under "Southern Power – Purchase of Renewable Facility Interests" in Item 8 of the Form 10-K for additional information.

Alabama Power's net income in the firstsecond quarter 2026 was $425$437 million compared to $375$381 million for the corresponding period in 2025. The increase was primarily due to a decrease in other operations and maintenance expenses and an increase in retailother revenuesincome associated(expense), with sales growth,net, partially offset by weatheran impacts.increase in depreciation and amortization.

In the firstsecond quarter 2026, retail revenues were $1.73$1.71 billion compared to $1.72 billion for the corresponding period in 2025. For year-to-date 2026, retail revenues were $3.438 billion compared to $3.441 billion for the corresponding period in 2025. Details of the changes in retail revenues were as follows:

Changes in rates and pricing resulted in an increaseincreases in revenues in the firstsecond quarter and year-to-date 2026 as compared to the corresponding periodperiods in 2025 primarily due to an increase in Rate CNP Compliance revenues.revenues resulting from higher recoverable costs. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.

Changes in sales resulted in ana increasedecrease in revenues in the firstsecond quarter 2026 and an increase in revenues for year-to-date 2026 as compared to the corresponding periodperiods in 2025. Weather-adjusted residential KWH sales increaseddecreased 2.2%1.3% in the second quarter 2026 primarily due to increaseda decrease in customer usageusage. andWeather-adjusted residential KWH sales increased 0.5% for year-to-date 2026 primarily due to customer growth. Weather-adjusted commercial KWH sales increaseddecreased 0.9% and 0.3% in the second quarter and year-to-date 2026, respectively, primarily due to decreases in customer growth.usage. Industrial KWH sales increased 4.0%2.0% and 3.0% in the second quarter and year-to-date 2026, respectively, primarily due to an increaseincreases in the primary metals sector.and mining sectors, partially offset by decreases in the chemicals and pulp and paper sectors.

Fuel and other cost recovery revenues increaseddecreased in the firstsecond quarter and year-to-date 2026 as compared to the corresponding periodperiods in 2025 primarily as a result of higherlower recoverable fuel costs. Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the NDR. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

InFor the first quarteryear-to-date 2026, wholesale revenues from sales to non-affiliates were $117$202 million compared to $91$189 million for the corresponding period in 2025. The increase consisted of a $36$34 million increase in energy revenues due to increases of $31$27 million related to the volume of KWH sales associated with higher market demand and $7 million related to the average cost per KWH sold due to higher Southern Company system fuel and purchased power prices and $5 million related to the volume of KWH sales associated with higher market demand,prices, partially offset by a $10$21 million decrease in non-fuel revenues from wholesale capacity contracts. The decrease in capacity revenues was primarily due to the expiration of a power sales agreement in December 2025, partially offset by the commencement of a new power sales agreement in October 2025 associated with the acquisition of the Lindsay Hill Generating Station. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.