UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission		Registrant, State of Incorporation,		I.R.S. Employer
File Number		Address and Telephone Number		Identification No.
1-3526		The Southern Company		58-0690070
		(A Delaware Corporation)
		30 Ivan Allen Jr. Boulevard, N.W.
		Atlanta, Georgia 30308
		(404) 506-5000
1-3164		Alabama Power Company		63-0004250
		(An Alabama Corporation)
		600 North 18 th Street
		Birmingham, Alabama 35291
		(205) 257-1000
1-6468		Georgia Power Company		58-0257110
		(A Georgia Corporation)
		241 Ralph McGill Boulevard, N.E.
		Atlanta, Georgia 30308
		(404) 506-6526
001-31737		Gulf Power Company		59-0276810
		(A Florida Corporation)
		One Energy Place
		Pensacola, Florida 32520
		(850) 444-6111
001-11229		Mississippi Power Company		64-0205820
		(A Mississippi Corporation)
		2992 West Beach
		Gulfport, Mississippi 39501
		(228) 864-1211
333-98553		Southern Power Company		58-2598670
		(A Delaware Corporation)
		30 Ivan Allen Jr. Boulevard, N.W.
		Atlanta, Georgia 30308
		(404) 506-5000

      Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No o

      Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes þ No o (Response applicable only to The Southern Company at this time.)

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No þ (Response applicable to all registrants.)

     This combined Form 10-Q is separately filed by The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Southern Power Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.

INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2010

				Page
				Number
DEFINITIONS					5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION					7
PART I — FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
		The Southern Company and Subsidiary Companies
		Condensed Consolidated Statements of Income			9
		Condensed Consolidated Statements of Cash Flows			10
		Condensed Consolidated Balance Sheets			11
		Condensed Consolidated Statements of Comprehensive Income			13
		Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
		Alabama Power Company
		Condensed Statements of Income			40
		Condensed Statements of Comprehensive Income			40
		Condensed Statements of Cash Flows			41
		Condensed Balance Sheets			42
		Management’s Discussion and Analysis of Financial Condition and Results of Operations			44
		Georgia Power Company
		Condensed Statements of Income			62
		Condensed Statements of Comprehensive Income			62
		Condensed Statements of Cash Flows			63
		Condensed Balance Sheets			64
		Management’s Discussion and Analysis of Financial Condition and Results of Operations			66
		Gulf Power Company
		Condensed Statements of Income			86
		Condensed Statements of Comprehensive Income			86
		Condensed Statements of Cash Flows			87
		Condensed Balance Sheets			88
		Management’s Discussion and Analysis of Financial Condition and Results of Operations			90
		Mississippi Power Company
		Condensed Statements of Income			108
		Condensed Statements of Comprehensive Income			108
		Condensed Statements of Cash Flows			109
		Condensed Balance Sheets			110
		Management’s Discussion and Analysis of Financial Condition and Results of Operations			112
		Southern Power Company and Subsidiary Companies
		Condensed Consolidated Statements of Income			134
		Condensed Consolidated Statements of Comprehensive Income			134
		Condensed Consolidated Statements of Cash Flows			135
		Condensed Consolidated Balance Sheets			136
		Management’s Discussion and Analysis of Financial Condition and Results of Operations			138
		Notes to the Condensed Financial Statements			151
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			37
Item 4.		Controls and Procedures			37
Item 4T.		Controls and Procedures			37

INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2010

				Page
				Number
PART II — OTHER INFORMATION
Item 1.		Legal Proceedings				182
Item 1A.		Risk Factors				182
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		Inapplicable
Item 3.		Defaults Upon Senior Securities		Inapplicable
Item 5.		Other Information		Inapplicable
Item 6.		Exhibits				183
		Signatures				188

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements include, among other things, statements concerning the strategic goals for the wholesale business, retail sales, customer growth, economic recovery, fuel cost recovery and other rate actions, environmental regulations and expenditures, future earnings, dividend payout ratios, access to sources of capital, financing activities, start and completion of construction projects, plans and estimated costs for new generation resources, impact of the American Recovery and Reinvestment Act of 2009, impact of recent healthcare legislation, impact of the Small Business Jobs and Credit Act of 2010, estimated sales and purchases under new power sale and purchase agreements, 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, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water quality, coal combustion byproducts, and emissions of sulfur, nitrogen, carbon, soot, particulate matter, hazardous air pollutants, including mercury, and other substances, financial reform legislation, and also changes in tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;

•

current and future litigation, regulatory investigations, proceedings, or inquiries, including the pending EPA civil actions against certain Southern Company subsidiaries, FERC matters, and IRS audits;

•

the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company’s subsidiaries operate;

•

variations in demand for electricity, including those relating to weather, the general economy and recovery from the recent recession, population and business growth (and declines), and the effects of energy conservation measures;

•

available sources and costs of fuels;

•

effects of inflation;

•

ability to control costs and avoid cost overruns during the development and construction of facilities;

•

investment performance of Southern Company’s employee benefit plans and nuclear decommissioning trusts;

•

advances in technology;

•

state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms;

•

regulatory approvals and actions related to the potential Plant Vogtle expansion, including Georgia PSC and NRC approvals and potential DOE loan guarantees;

•

regulatory approvals and actions related to the Kemper IGCC, including Mississippi PSC approvals and potential DOE loan guarantees;

•

the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities;

•

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 Southern Company or its subsidiaries;

•

the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required;

•

the ability to obtain new short- and long-term contracts with wholesale customers;

•

the direct or indirect effect on Southern 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 Southern Company’s and its subsidiaries’ credit ratings;

•

the ability of Southern Company and its subsidiaries to obtain additional generating capacity at competitive prices;

•

catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as influenzas, or other similar occurrences;

•

the direct or indirect effects on Southern Company’s business resulting from incidents affecting the U.S. electric grid or operation of generating resources;

•

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 registrants from time to time with the SEC.

Each registrant expressly disclaims any obligation to update any forward-looking statements.

THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES

The accompanying notes as they relate to Southern Company are an integral part of these condensed financial statements.

The accompanying notes as they relate to Southern Company are an integral part of these condensed financial statements.

The accompanying notes as they relate to Southern Company are an integral part of these condensed financial statements.

The accompanying notes as they relate to Southern Company are an integral part of these condensed financial statements.

The accompanying notes as they relate to Southern Company are an integral part of these condensed financial statements.

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

In the third quarter 2010, retail revenues were $4.57 billion compared to $4.00 billion for the corresponding period in 2009. For year-to-date 2010, retail revenues were $11.60 billion compared to $10.36 billion for the corresponding period in 2009.

Details of the change to retail revenues are as follows:

Revenues associated with changes in rates and pricing increased in the third quarter and for year-to-date 2010 when compared to the corresponding periods in 2009 primarily due to Rate RSE and Rate CNP Environmental increases at Alabama Power, higher contributions from market-driven rates for sales to industrial customers at Georgia Power, recovery of environmental compliance costs at Gulf Power, and increased recognition of environmental compliance cost recovery revenues at Georgia Power in accordance with the 2007 Retail Rate Plan.

Revenues attributable to changes in sales increased in the third quarter and for year-to-date 2010 when compared to the corresponding periods in 2009 due to increases in weather-adjusted retail KWH energy sales of 1.4% and 2.5%, respectively. For the third quarter 2010, weather-adjusted residential KWH energy sales increased 0.1%, weather-adjusted commercial KWH energy sales decreased 0.8%, and weather-adjusted industrial KWH energy sales increased 5.7%. For year-to-date 2010, weather-adjusted residential KWH energy sales increased 0.9%, weather-adjusted commercial KWH energy sales decreased 0.7%, and weather-adjusted industrial KWH energy sales increased 8.2%. Increased demand in the primary metals, chemicals, and transportation sectors were the main contributors to the increases in weather-adjusted industrial KWH energy sales for the third quarter and year-to-date 2010.

Revenues resulting from changes in weather increased in the third quarter 2010 as a result of warmer weather when compared to the corresponding period in 2009. For year-to-date 2010, revenues resulting from changes in weather increased as a result of warmer weather in the second and third quarters 2010 and significantly colder weather in the first quarter 2010 when compared to the corresponding periods in 2009.

Fuel and other cost recovery revenues increased $207.5 million in the third quarter 2010 and $523.5 million for year-to-date 2010 when compared to the corresponding periods in 2009. Electric rates for the traditional operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the fuel component of purchased power costs, and do not affect net income.

Wholesale energy sales will vary depending on the market cost of available energy compared to the cost of Southern Company system-owned generation, demand for energy within the Southern Company service territory, and the availability of Southern Company system generation. Increases and decreases in revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income.

In the third quarter 2010, wholesale revenues were $565.9 million compared to $519.1 million for the corresponding period in 2009. The increase was primarily due to higher energy and capacity revenues under existing PPAs and new PPAs at Southern Power that began in January, June, and July 2010. This increase was partially offset by the expiration of long-term unit power sales contracts in May 2010 at Alabama Power and the capacity subject to those contracts being made available for retail service starting in June 2010.

For year-to-date 2010, wholesale revenues were $1.58 billion compared to $1.41 billion for the corresponding period in 2009. This increase was primarily due to higher energy and capacity revenues under existing PPAs and new PPAs at Southern Power that began in January, June, and July 2010, as well as increased energy sales that were not covered by PPAs at Southern Power due to more favorable weather year-to-date 2010 compared to the corresponding period in 2009. This increase was partially offset by the expiration of long-term unit power sales contracts in May 2010 at Alabama Power and the capacity subject to those contracts being made available for retail service starting in June 2010.

In the third quarter 2010, other electric revenues were $161.0 million compared to $139.9 million for the corresponding period in 2009. This increase was primarily the result of a $15.2 million increase in transmission revenues and a $3.1 million increase in co-generation revenues due to increased sales volume.

For year-to-date 2010, other electric revenues were $438.5 million compared to $391.1 million for the corresponding period in 2009. This increase was primarily the result of a $25.7 million increase in transmission revenues, a $10.7 million increase in co-generation revenues due to increased sales volume, a $4.1 million increase in rents from electric property, and a $2.3 million increase in outdoor lighting revenues.

Revenues from co-generation and other energy services are generally offset by related expenses and do not have a significant effect on net income.

In the third quarter 2010, other revenues were $20.4 million compared to $24.8 million for the corresponding period in 2009. The decrease was primarily the result of a $4.3 million decrease in revenues at SouthernLINC Wireless related to lower average revenue per subscriber and fewer subscribers due to increased competition in the industry.

*		Fuel includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider and is included in purchased power when determining the average cost of purchased power.

Fuel and purchased power expenses for the third quarter 2010 were $2.18 billion compared to $1.90 billion for the corresponding period in 2009. The increase was primarily the result of a $208.5 million increase related to total KWHs generated and purchased and a $70.2 million increase in the average cost of fuel and purchased power. The increase in total fuel and purchased power expenses resulted primarily from increased generation and higher fossil fuel prices when compared to the corresponding period in 2009.

For year-to-date 2010, fuel and purchased power expenses were $5.71 billion compared to $5.00 billion for the corresponding period in 2009. The increase was primarily the result of a $402.9 million increase related to total KWHs generated and purchased and a $308.6 million increase in the average cost of fuel and purchased power. The increase in total fuel and purchased power expenses resulted primarily from increased generation and higher fossil fuel prices when compared to the corresponding period in 2009.

Fuel expenses at the traditional operating companies are generally offset by fuel revenues and do not have a significant effect on net income. See FUTURE EARNINGS POTENTIAL — “State PSC Matters — Retail Fuel Cost Recovery” herein for additional information. Fuel expenses incurred under Southern Power’s PPAs are generally the responsibility of the counterparties and do not significantly affect net income.

Details of Southern Company’s cost of generation and purchased power are as follows:

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

In the third quarter 2010, other operations and maintenance expenses were $1.02 billion compared to $820.9 million for the corresponding period in 2009. The increase was primarily the result of a $42.2 million increase in fossil, hydro, and nuclear expenses, a $31.4 million increase in commodity and labor costs, a $79.5 million increase in transmission and distribution expenses, which includes an additional accrual of $40.0 million to the NDR at Alabama Power, a $37.2 million increase in administrative and general expenses, and a $9.2 million increase in customer service and sales expenses.

For year-to-date 2010, other operations and maintenance expenses were $2.85 billion compared to $2.52 billion for the corresponding period in 2009. The increase was primarily the result of a $112.1 million increase in fossil, hydro, and nuclear expenses, a $69.4 million increase in commodity and labor costs, a $108.2 million increase in transmission and distribution expenses, which includes an additional accrual of $40.0 million to the NDR at Alabama Power, a $30.4 million increase in administrative and general expenses, and a $3.5 million increase in customer service and sales expenses.

See FUTURE EARNINGS POTENTIAL — “State PSC Matters — Alabama Power Retail Regulatory Matters — Natural Disaster Cost Recovery” and Note (B) to the Condensed Financial Statements under “State PSC Matters — Alabama Power — Natural Disaster Cost Recovery” herein for additional information on the NDR.

N/M – Not Meaningful

In the first quarter 2009, Southern Company entered into a litigation settlement agreement with MC Asset Recovery which resulted in a charge of $202.0 million and required MC Asset Recovery to release Southern Company and certain other designated avoidance actions assigned to MC Asset Recovery in connection with Mirant’s plan of reorganization, as well as to release all actions against current or former officers and directors of Mirant and Southern Company that have or could have been filed. The settlement has been completed and resolves all claims by MC Asset Recovery against Southern Company. In June 2009, the case was dismissed with prejudice. See Note (B) to the Condensed Financial Statements under “Mirant Matters” herein for additional information.

In the third quarter 2010, depreciation and amortization was $426.8 million compared to $332.1 million for the corresponding period in 2009. The increase was primarily due to the amortization of $5.0 million in the third quarter 2010 compared to $54.0 million in the third quarter 2009 of the regulatory liability related to other cost of removal obligations at Georgia Power as authorized by the Georgia PSC, as well as additional depreciation on plant in service related to environmental, transmission, and distribution projects.

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For year-to-date 2010, depreciation and amortization was $1.14 billion compared to $1.10 billion for the corresponding period in 2009. The increase was primarily the result of additional depreciation on plant in service related to environmental, transmission, and distribution projects. The increase was partially offset by the amortization of $119.3 million in 2010 compared to $54.0 million in 2009 of the regulatory liability related to other cost of removal obligations at Georgia Power as authorized by the Georgia PSC.

See Note 3 to the financial statements of Southern Company in Item 8 of the Form 10-K under “Retail Regulatory Matters — Georgia Power — Cost of Removal” for additional information on the amortization of the other cost of removal regulatory liability.

In the third quarter 2010, taxes other than income taxes were $235.3 million compared to $212.9 million for the corresponding period in 2009. This increase was primarily due to higher municipal franchise fees at Georgia Power as a result of increased retail revenues, increases in ad valorem taxes, and increases in payroll taxes.

For year-to-date 2010, taxes other than income taxes were $661.5 million compared to $620.9 million for the corresponding period in 2009. This increase was primarily due to higher municipal franchise fees at Georgia Power as a result of increased retail revenues, increases in ad valorem taxes, and increases in payroll taxes.

Allowance for Equity Funds Used During Construction

In the third quarter 2010, AFUDC equity was $45.2 million compared to $51.1 million for the corresponding period in 2009. For year-to-date 2010, AFUDC equity was $139.9 million compared to $141.2 million for the corresponding period in 2009. The third quarter and year-to-date 2010 decreases were primarily due to the completion of environmental projects at Alabama Power and Gulf Power. These decreases were partially offset by increases in construction related to three new combined cycle units, two new nuclear generating units, and ongoing environmental and transmission projects at Georgia Power.

In the third quarter 2010, leveraged lease income was $5.8 million compared to $6.6 million for the corresponding period in 2009. The decrease when compared to the corresponding period in 2009 was not material.

For year-to-date 2010, leveraged lease income was $12.6 million compared to $24.7 million for the corresponding period in 2009. This decrease was primarily related to the early termination of two leveraged lease investments in the second quarter 2009.

In the third quarter 2010, interest expense, net of amounts capitalized was $225.1 million compared to $226.3 million for the corresponding period in 2009. The decrease when compared to the corresponding period in 2009 was not material.

For year-to-date 2010, interest expense, net of amounts capitalized was $666.3 million compared to $684.9 million for the corresponding period in 2009. The decrease was primarily due to a $24.8 million decrease related to lower average interest rates on variable-rate debt, an $18.7 million decrease in other interest charges, and a $1.3 million decrease related to higher capitalized interest. Partially offsetting this decrease was a $26.2 million increase associated with $1.04 billion in additional debt outstanding at September 30, 2010 when compared to September 30, 2009.

In the third quarter 2010, income taxes were $441.9 million compared to $435.9 million for the corresponding period in 2009. This increase was primarily due to higher pre-tax earnings in the third quarter 2010, partially offset by state investment tax credits at Georgia Power, and tax benefits associated with the construction of a biomass facility at Southern Power.

For year-to-date 2010, income taxes were $925.1 million compared to $828.8 million for the corresponding period in 2009. This increase was primarily due to higher pre-tax earnings in 2010, partially offset by a decrease in uncertain tax positions at Georgia Power related to state income tax credits that remain subject to litigation, state investment tax credits at Georgia Power, and tax benefits associated with the construction of a biomass facility at Southern Power.

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

See FUTURE EARNINGS POTENTIAL — “Income Tax Matters — Georgia State Income Tax Credits” and Note (B) to the Condensed Financial Statements under “Income Tax Matters — Georgia State Income Tax Credits” and Note (G) to the Condensed Financial Statements herein for additional information.

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Southern Company’s future earnings potential. The level of Southern Company’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Southern Company’s primary business of selling electricity. These factors include the traditional operating companies’ ability to maintain a constructive regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. Other major factors include profitability of the competitive wholesale supply business and federal regulatory policy, which may impact Southern Company’s level of participation in this market. Future earnings for the electricity business in the near term will depend, in part, upon maintaining energy sales which is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities and other wholesale customers, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth or decline in the service area. In addition, the level of future earnings for the wholesale supply business also depends on numerous factors including creditworthiness of customers, total generating capacity available in the Southeast, future acquisitions and construction of generating facilities, and the successful remarketing of capacity as current contracts expire. Changes in economic conditions impact sales for the traditional operating companies and Southern Power, and the pace of the economic recovery remains uncertain. The timing and extent of the economic recovery will impact growth and may impact future earnings. For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL of Southern Company 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 Southern Company in Item 7 and Note 3 to the financial statements of Southern Company 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 Southern Company in Item 7 and Note 3 to the financial statements of Southern Company 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 against certain Southern Company subsidiaries. The EPA’s action against Alabama Power is alleging that Alabama Power violated the NSR provisions of the Clean Air Act and related state laws with respect to certain of its coal-fired generating facilities. On September 2, 2010, following the end of discovery, the EPA dismissed five of its eight remaining claims against Alabama Power, leaving only three claims for summary disposition or trial, including one relating to a facility co-owned by Mississippi Power. The parties each filed motions for summary judgment on September 30, 2010. The court has set a trial date for October 2011 for any remaining claims. The ultimate outcome of this matter cannot now be determined.

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Carbon Dioxide Litigation

New York Case

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Environmental Matters — Carbon Dioxide Litigation — New York Case” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Environmental Matters — Carbon Dioxide Litigation — New York Case” in Item 8 of the Form 10-K for additional information regarding carbon dioxide litigation. The U.S. Court of Appeals for the Second Circuit denied the defendants’ petition for rehearing en banc on March 5, 2010. On August 2, 2010, the defendants filed a petition for writ of certiorari with the U.S. Supreme Court. The ultimate outcome of these matters cannot be determined at this time.

Other Litigation

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Environmental Matters — Carbon Dioxide Litigation — Other Litigation” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Environmental Matters — Carbon Dioxide Litigation — Other Litigation” in Item 8 of the Form 10-K for additional information regarding carbon dioxide litigation related to Hurricane Katrina. On May 28, 2010, the U.S. Court of Appeals for the Fifth Circuit dismissed the plaintiffs’ appeal of the case based on procedural grounds relating to the loss of a quorum by the full court on reconsideration, reinstating the district court decision in favor of the defendants. On August 27, 2010, the plaintiffs petitioned the U.S. Supreme Court for a writ of mandamus directing the U.S. Court of Appeals for the Fifth Circuit to reinstate the plaintiffs’ appeal. The ultimate outcome of this matter cannot be determined at this time.

Air Quality

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Environmental Matters — Environmental Statutes and Regulations — Air Quality” of Southern Company in Item 7 of the Form 10-K for information regarding the Industrial Boiler Maximum Achievable Control Technology regulations. On April 29, 2010, the EPA issued a proposed rule that would establish emissions limits for various hazardous air pollutants typically emitted from industrial boilers, including biomass boilers. The EPA is required to finalize the rules by January 16, 2011. The impact of these proposed regulations will depend on their final form and the outcome of any legal challenges, and cannot be determined at this time.

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Environmental Matters — Environmental Statutes and Regulations — Air Quality” of Southern Company in Item 7 of the Form 10-K for information regarding proposed sulfur dioxide (SO ₂ ) regulations. On August 23, 2010, the EPA’s final revisions to the National Ambient Air Quality Standard for SO ₂ , which included the establishment of a new short-term standard, became effective. The ultimate impact of the revised standard will depend on additional regulatory action, state implementation, and the outcome of any legal challenges, and cannot be determined at this time.

On January 22, 2010, the EPA finalized revisions to the National Ambient Air Quality Standard for Nitrogen Dioxide (NO ₂ ) by setting a new one-hour standard that became effective on April 12, 2010. The impact of this regulation will depend on additional regulatory action, state implementation, and the outcome of any legal challenges, and cannot be determined at this time. Although none of the areas within Southern Company’s service territory are expected to be designated as nonattainment for the standard, based on current ambient air quality monitoring data, the new NO ₂ standard could result in significant additional compliance and operational costs for units that require new source permitting.

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Environmental Matters — Environmental Statutes and Regulations — Air Quality” of Southern Company in Item 7 of the Form 10-K for information regarding the Clean Air Interstate Rule (CAIR). On August 2, 2010, the EPA published a proposed rule to replace CAIR, which was overturned by the U.S. Court of Appeals for the D.C. Circuit in 2008 but left in place pending the promulgation of a replacement rule. This proposed rule, referred to as the Transport Rule, would require 31 eastern

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

states and the District of Columbia (D.C.) to reduce power plant emissions of SO ₂ and nitrogen oxides (NO _x ) that contribute to downwind states’ nonattainment of federal ozone and/or fine particulate matter ambient air quality standards. To address fine particulate matter standards, the proposed Transport Rule would require D.C. and 27 eastern states, including Alabama, Florida, and Georgia, to reduce annual emissions of SO ₂ and NO _x from power plants. To address ozone standards, the proposed Transport Rule would also require D.C. and 25 states, including each of the states in Southern Company’s service territory, to achieve additional reductions in NO _x emissions from power plants during the ozone season. The proposed Transport Rule contains a “preferred option” that would allow limited interstate trading of emissions allowances; however, the EPA also requests comment on two alternative approaches that would not allow interstate trading of emissions allowances. The EPA states that it also intends to develop a second phase of the Transport Rule next year to address the more stringent ozone air quality standards as they are finalized. The EPA expects to finalize the Transport Rule in late spring of 2011 and to set the initial compliance deadline starting in 2012. The impact of this proposed regulation and potential future regulation will depend on its final form, state implementation, and the outcome of any legal challenges, and cannot be determined at this time.

These regulations could result in significant additional compliance and operational costs that could affect future unit retirement and replacement decisions and results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates.

Coal Combustion Byproducts

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Environmental Matters — Environmental Statutes and Regulations — Coal Combustion Byproducts” of Southern Company in Item 7 of the Form 10-K for information regarding potential additional regulation of coal combustion byproducts. On June 21, 2010, the EPA published a rulemaking proposal which requested comments on two potential regulatory options for management and disposal of coal combustion byproducts: regulation as a solid waste or regulation as if the materials technically constituted a hazardous waste. Adoption of either option could require closure of or significant change to existing storage units and construction of lined landfills, as well as additional waste management and groundwater monitoring requirements. Under both options, the EPA proposes to exempt the beneficial reuse of coal combustion byproducts from regulation; however, a hazardous or other designation indicative of heightened risk could limit or eliminate beneficial reuse options. Comments on the proposed rules are due by November 19, 2010. Although its analysis is preliminary, Southern Company believes the EPA has significantly underestimated compliance costs in the proposed rule.

The outcome of these proposed regulations will depend on their final form and the outcome of any legal challenges, and cannot be determined at this time. However, additional regulation of coal combustion byproducts could have a significant impact on the management, beneficial use, and disposal of such byproducts. These changes could result in significant additional compliance and operational costs that could affect future unit retirement and replacement decisions and results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. Further, higher costs that are recovered through regulated rates could contribute to reduced demand for electricity, which could negatively impact results of operations, cash flows, and financial condition.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
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Global Climate Issues

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Environmental Matters — Global Climate Issues” of Southern Company in Item 7 of the Form 10-K for information regarding the potential for legislation and regulation addressing greenhouse gas and other emissions. On April 1, 2010, the EPA issued a final rule regulating greenhouse gas emissions from new motor vehicles under the Clean Air Act. The EPA has stated that, once this rule becomes effective on January 2, 2011, carbon dioxide and other greenhouse gases will become regulated pollutants under the Prevention of Significant Deterioration (PSD) preconstruction permit program and the Title V operating permit program, which both apply to power plants. As a result, the construction of new facilities or the major modification of existing facilities could trigger the requirement for a PSD permit and the installation of the best available control technology for carbon dioxide and other greenhouse gases. On May 13, 2010, the EPA issued a final rule, referred to as the Tailoring Rule, governing how these programs would be applied to stationary sources, including power plants. This rule establishes two phases for applying PSD and Title V requirements to greenhouse gas emissions sources. The first phase, beginning on January 2, 2011, will apply to sources and projects that would already be covered under PSD or Title V, whereas the second phase, beginning July 1, 2011, will apply to sources and projects that would not otherwise trigger those programs but for their greenhouse gas emissions. The final rules could result in significant additional compliance and operational costs that could affect future unit retirement and replacement decisions and results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. The ultimate outcome of these final rules cannot be determined at this time and will depend on the outcome of any legal challenges.

State PSC Matters

Retail Fuel Cost Recovery

The traditional operating companies each have established fuel cost recovery rates approved by their respective state PSCs. In recent years, the traditional operating companies have experienced volatility in pricing of fuel commodities with higher than expected pricing for coal and uranium and volatile price swings in natural gas. These higher fuel costs have resulted in total under recovered fuel costs included in the balance sheets of Georgia Power and Gulf Power of approximately $505 million at September 30, 2010. Alabama Power and Mississippi Power collected all previously under recovered fuel costs and, as of September 30, 2010, had a total over recovered fuel balance of approximately $102 million. At December 31, 2009, total under recovered fuel costs included in the balance sheets of Georgia Power and Gulf Power were approximately $667 million and Alabama Power and Mississippi Power had a total over recovered fuel balance of $229 million. Fuel cost recovery revenues are adjusted for differences in actual recoverable fuel costs and amounts billed in current regulated rates. Accordingly, changes to the billing factors will have no significant effect on Southern Company’s revenues or net income but will affect cash flow. The traditional operating companies continuously monitor the under or over recovered fuel cost balances. See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “PSC Matters — Fuel Cost Recovery” of Southern Company in Item 7 and Note 3 to the financial statements under “Retail Regulatory Matters — Alabama Power — Fuel Cost Recovery” and “Retail Regulatory Matters — Georgia Power — Fuel Cost Recovery” in Item 8 of the Form 10-K for additional information.

Alabama Power Retail Regulatory Matters

Nuclear Outage Accounting Order

On August 17, 2010, the Alabama PSC approved a change to the nuclear maintenance outage accounting process associated with routine refueling activities. Currently, Alabama Power accrues nuclear outage operations and maintenance expenses for the two units of Plant Farley during the 18-month cycle for the outages. In accordance with the new order, nuclear outage expenses will be deferred when the charges actually occur and then amortized over the subsequent 18-month period.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The initial result of implementation of the new accounting order is that no nuclear maintenance outage expenses will be recognized from January 2011 through December 2011, which will decrease nuclear outage operations and maintenance expenses in 2011 from 2010 by approximately $50 million. During the fall of 2011, actual nuclear outage expenses associated with one unit of Plant Farley will be deferred to a regulatory asset account; beginning in January 2012 these deferred costs will be amortized to nuclear operations and maintenance expense over an 18-month period. During the spring of 2012, actual nuclear outage expenses associated with the other unit of Plant Farley will be deferred to a regulatory asset account; beginning in July 2012 these deferred costs will be amortized to nuclear operations and maintenance expense over an 18-month period. Alabama Power will continue the pattern of deferral of nuclear outage expenses as incurred and the recognition of expenses over a subsequent 18-month period.

Natural Disaster Cost Recovery

Based on an order from the Alabama PSC, Alabama Power maintains a reserve for operations and maintenance expenses to cover the cost of damages from major storms to its transmission and distribution facilities, referred to as the NDR.

On August 20, 2010, the Alabama PSC approved an order enhancing the NDR that eliminated the $75 million authorized limit and allows Alabama Power to make additional accruals to the NDR. The order also allows for reliability-related expenditures to be charged against the additional accruals when the NDR balance exceeds $75 million. Alabama Power may designate a portion of the NDR to reliability-related expenditures as a part of an annual budget process for the following year or during the current year for identified unbudgeted reliability-related expenditures that are incurred. Accruals that have not been designated can be used to offset storm charges. Additional accruals to the NDR will enhance Alabama Power’s ability to deal with the financial effects of future natural disasters, promote system reliability, and offset costs retail customers would otherwise bear.

The structure of the monthly Rate NDR charge to customers is not altered and continues to include a component to maintain the $75 million base reserve.

In September 2010, Alabama Power accrued an additional $40 million to the NDR, resulting in an accumulated balance of approximately $118 million, which is included in the Condensed Balance Sheets herein under other regulatory liabilities, deferred. The additional accruals are reflected as operations and maintenance expense in the Condensed Statements of Income herein.

Georgia Power Retail Regulatory Matters

Rate Plans

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “PSC Matters — Georgia Power” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Retail Regulatory Matters — Georgia Power — Retail Rate Plans” and “— Cost of Removal” in Item 8 of the Form 10-K for additional information regarding the 2007 Retail Rate Plan.

On August 27, 2009, the Georgia PSC approved an accounting order that would allow Georgia Power to amortize up to $324 million of its regulatory liability related to other cost of removal obligations. Under the terms of the accounting order, Georgia Power was entitled to amortize up to one-third of the regulatory liability ($108 million) in 2009, limited to the amount needed to earn no more than a 9.75% retail return on equity (ROE). In addition, Georgia Power may amortize up to two-thirds of the regulatory liability ($216 million) in 2010, limited to the amount needed to earn no more than a 10.15% retail ROE. From July 1, 2009 through September 30, 2010, Georgia Power had amortized $161 million of the regulatory liability. Georgia Power currently expects to amortize approximately $40 million of the regulatory liability in the fourth quarter 2010; however, the final amount is subject to the limitations described previously and cannot be determined at this time.

In accordance with the 2007 Retail Rate Plan, Georgia Power filed a base rate case with the Georgia PSC on July 1, 2010. The filing includes a requested rate increase totaling $615 million, or 8.2% of retail revenues, to be effective January 1,

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2011 based on a proposed retail ROE of 11.95%. The requested increase will be recovered through Georgia Power’s existing base rate tariffs as follows: $451 million, or 6.0%, through the traditional base rate tariffs; $115 million, or 1.5%, through the Environmental Compliance Cost Recovery (ECCR) tariff; $32 million through the Demand Side Management (DSM) tariffs; and $17 million through the Municipal Franchise Fee (MFF) tariff. The majority of the increase in retail revenues is being requested to cover the costs of environmental compliance and continued investment in new generation, transmission, and distribution facilities to support growth and ensure reliability. The remainder of the increase includes recovery of higher operation, maintenance, and other investment costs to meet the current and future demand for electricity.

Unlike rate plans based on traditional one-year test periods, the 2007 Retail Rate Plan was designed to operate for the three-year period ending December 31, 2010. The 2010 rate case request includes proposed enhancements to the structure of the 2007 Retail Rate Plan to fit the current economic climate, including a process of annual tariff compliance reviews that would allow it to continue to operate for multiple years (Proposed Alternate Rate Plan). The primary points of the Proposed Alternate Rate Plan include:

	§		Continuation of a plus or minus 100 basis point range for ROE.
	§		Creation of an Adjustable Cost Recovery (ACR) tariff. If approved, beginning with an effective date of January 1, 2012, the ACR will work to maintain Georgia Power’s earnings within the ROE band established by the Georgia PSC in this case. If Georgia Power’s earnings projected for the upcoming year are within the ROE band, no adjustment under the ACR tariff will be requested. If Georgia Power’s earnings projected for the upcoming year are outside (either above or below) the approved ROE band, the ACR tariff will be used to adjust projected earnings back to the mid-point of the approved ROE band.
			The ACR tariff would also return to the sharing mechanism used prior to the 2007 Retail Rate Plan whereby two-thirds of any actual earnings for the previous year above the approved ROE band would be refunded to customers, with the remaining one-third retained by Georgia Power as incentive to manage expenses and operate as efficiently as possible. In addition, if earnings are below the approved ROE band, Georgia Power would accept one-third of the shortfall and retail customers would be responsible for the remaining two-thirds.
	§		Creation of a new Certified Capacity Cost Recovery (CCCR) tariff to recover costs related to new capacity additions certified by the Georgia PSC and updated through applicable project construction monitoring reports and hearings.
	§		Continuation and enhancement of the ECCR and DSM-Residential tariffs from the 2007 Retail Rate Plan and creation of a DSM-Commercial tariff to recover environmental capital and operating costs resulting from governmental mandates and DSM costs approved and certified by the Georgia PSC.
	§		Implementation of an annual review of the MFF tariff to adjust for changes in relative gross receipts between customers served inside and outside municipal boundaries.

These proposed enhancements would become effective in 2012 with revenue requirements for each tariff updated through separate compliance filings based on Georgia Power’s budget for the upcoming year. Based on Georgia Power’s 2010 budget, earnings are currently projected to be slightly below the proposed ROE band in 2012 and within the band in 2013. However, updated budgets and revenue forecasts may eliminate, increase, or decrease the need for an ACR tariff adjustment in either year. In addition, Georgia Power currently estimates the ECCR tariff would increase by $120 million in 2012 and would decrease by $12 million in 2013. The CCCR tariff would begin recovering the costs of Plant McDonough Units 4, 5, and 6 with increases of $99 million in February 2012, $77 million in June 2012, and $76 million in February 2013. The DSM tariffs would increase by $17 million in 2012 and $18 million in 2013 to reflect the terms of the stipulated agreement in Georgia Power’s 2010 DSM Certification proceeding. Amounts recovered under the MFF tariff are based on amounts recovered under all other tariffs.

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Hearings on Georgia Power’s direct testimony were held in October 2010. In direct testimony filed on October 22, 2010, the Georgia PSC Staff proposed various adjustments based on a traditional one-year test period that would result in a proposed increase of $436 million in 2011 using a 10.5% ROE. The Georgia PSC Staff recommendation would also allow additional increases of $181 million and $88 million in 2012 and 2013, respectively, to recover the costs associated with Plant McDonough Units 4, 5, and 6. These additional increases would be recovered through Georgia Power’s traditional base rate tariffs. While supporting the proposed DSM and MFF tariffs, the Georgia PSC Staff recommended against approval of the proposed ECCR, CCCR, and ACR tariffs. Georgia Power disagrees with the Georgia PSC Staff’s positions. Hearings on the Georgia PSC Staff and intervenor direct testimony will be held in November 2010. Georgia Power’s rebuttal hearings will occur in early December 2010. The Georgia PSC is scheduled to issue a final order in this matter on December 21, 2010.

The final outcome of these matters cannot now be determined.

Fuel Cost Recovery

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “PSC Matters — Fuel Cost Recovery” of Southern Company in Item 7 and Note 3 to the financial statements under “Retail Regulatory Matters — Georgia Power — Fuel Cost Recovery” in Item 8 of the Form 10-K for additional information.

On March 11, 2010, the Georgia PSC voted to approve the stipulation among Georgia Power, the Georgia PSC Staff, and three customer groups with the exception that the under recovered fuel balance be collected over 42 months. The new rates, which became effective April 1, 2010, will result in an increase of approximately $373 million to Georgia Power’s total annual fuel cost recovery billings. Georgia Power is required to file its next fuel case by March 1, 2011.

Legislation

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Legislation” of Southern Company in Item 7 of the Form 10-K for additional information.

Healthcare Reform

On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (HCERA and, together with PPACA, the Acts), which makes various amendments to certain aspects of the PPACA, was signed into law. The Acts effectively change the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are at least actuarially equivalent to the corresponding benefits provided under Medicare Part D. The federal subsidy paid to employers was introduced as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MPDIMA). Since the 2006 tax year, Southern Company and the traditional operating companies have been receiving the federal subsidy related to certain retiree prescription drug plans that were determined to be actuarially equivalent to the benefit provided under Medicare Part D. Under the MPDIMA, the federal subsidy does not reduce an employer’s income tax deduction for the costs of providing such prescription drug plans nor is it subject to income tax individually. Under the Acts, beginning in 2013, an employer’s income tax deduction for the costs of providing Medicare Part D-equivalent prescription drug benefits to retirees will be reduced by the amount of the federal subsidy. Under GAAP, any impact from a change in tax law must be recognized in the period enacted regardless of the effective date; however, as a result of state regulatory treatment, this change had no material impact on the financial statements of Southern Company. Southern Company is in the process of assessing the extent to which the legislation may affect its future health care and related employee benefit plan costs. Any future impact on the financial statements of Southern Company cannot be determined at this time.

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Stimulus Funding

On April 28, 2010, Southern Company signed a Smart Grid Investment Grant agreement with the DOE, formally accepting a $165 million grant under the American Recovery and Reinvestment Act of 2009. This funding, to be matched by Southern Company, will be used for transmission and distribution automation and modernization projects that must be completed by April 28, 2013.

Income Tax Matters

Georgia State Income Tax Credits

Georgia Power’s 2005 through 2009 income tax filings for the State of Georgia include state income tax credits for increased activity through Georgia ports. Georgia Power had also filed similar claims for the years 2002 through 2004. The Georgia Department of Revenue has not responded to these claims. In July 2007, Georgia Power filed a complaint in the Superior Court of Fulton County to recover the credits claimed for the years 2002 through 2004. On March 22, 2010, the Superior Court of Fulton County ruled in favor of Georgia Power’s motion for summary judgment. The Georgia Department of Revenue has appealed to the Georgia Court of Appeals. An unrecognized tax benefit has been recorded related to these credits. If Georgia Power prevails, no material impact on Southern Company’s net income is expected as a significant portion of any tax benefit is expected to be returned to retail customers. If Georgia Power is not successful, payment of the related state tax could have a significant, and possibly material, negative effect on Southern Company’s cash flow. See Note 5 to the financial statements of Southern Company under “Unrecognized Tax Benefits” in Item 8 of the Form 10-K and Note (G) to the Condensed Financial Statements herein for additional information. The ultimate outcome of this matter cannot now be determined.

Tax Method of Accounting for Repairs

Southern Company submitted a change in the tax accounting method for repair costs associated with Southern Company’s generation, transmission, and distribution systems with the filing of the 2009 federal income tax return in September 2010. The new tax method is expected to result in net positive cash flow for 2010 of approximately $243 million. Although IRS approval of this change is considered automatic, the amount claimed is subject to review because the IRS will be issuing final guidance on this issue. Currently, the IRS is working with the utility industry in an effort to resolve this matter in a consistent manner for all utilities. Due to uncertainty concerning the ultimate resolution of this issue, an unrecognized tax benefit has been recorded for the change in the tax accounting method for repair costs. See Note (G) to the Condensed Financial Statements herein for additional information. The ultimate outcome of this matter cannot be determined at this time.

Bonus Depreciation

On September 27, 2010, the Small Business Jobs and Credit Act of 2010 (SBJCA) was signed into law. The SBJCA includes an extension of the 50% bonus depreciation for certain property acquired in 2010 and placed in service in 2010 or, in certain limited cases, 2011. Southern Company has estimated the cash flow reduction to tax payments for 2010 to be approximately $309 million.

Construction Projects

The subsidiary companies of Southern Company are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. Southern Company intends to continue its strategy of developing and constructing new generating facilities, including units at Southern Power, proposed new nuclear units, and a proposed IGCC facility, as well as adding environmental control equipment and expanding the transmission and distribution systems. For the traditional operating companies, major generation construction projects are subject to state PSC approvals in order to be included in retail rates. While Southern Power generally constructs and acquires generation assets covered by long-term PPAs, any uncontracted capacity could negatively affect future earnings. See Note 7 to the

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financial statements of Southern Company under “Construction Program” in Item 8 of the Form 10-K for estimated construction expenditures for the next three years. In addition, see Note 3 to the financial statements of Southern Company under “Retail Regulatory Matters — Georgia Power — Nuclear Construction” and “Retail Regulatory Matters — Integrated Coal Gasification Combined Cycle” in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under “State PSC Matters — Georgia Power — Nuclear Construction” and “State PSC Matters — Mississippi Power— Integrated Coal Gasification Combined Cycle” herein for additional information.

On September 3, 2010, Georgia Power filed with the Georgia PSC the Nuclear Construction Cost Recovery tariff, as authorized in April 2009 under the Georgia Nuclear Energy Financing Act. The filing includes a rate increase of approximately $218 million to recover financing costs associated with the construction of two additional nuclear units on the site of Plant Vogtle (Plant Vogtle Units 3 and 4), effective January 1, 2011.

Other Matters

Southern Company and its subsidiaries are involved in various other matters being litigated, regulatory matters, and certain tax-related issues that could affect future earnings. In addition, Southern Company and its subsidiaries are subject to certain claims and legal actions arising in the ordinary course of business. The business activities of Southern Company’s subsidiaries are subject to extensive governmental regulation related to public health and the environment, such as regulation of air emissions and water discharges. 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 and other claims for damages caused by alleged exposure to hazardous materials, and common law nuisance claims for injunctive relief and property damage allegedly caused by greenhouse gas and other emissions, have become more frequent. The ultimate outcome of such pending or potential litigation against Southern Company and its subsidiaries cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Southern Company 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 Southern Company’s financial statements.

The coastal contamination resulting from the oil spill that began in April 2010 in the Gulf of Mexico has not significantly impacted operations, but has had and may continue to have significant economic impacts on the affected areas within Southern Company’s service territory.

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

Southern Company prepares its consolidated 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 Southern Company 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 Southern 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. See MANAGEMENT’S DISCUSSION AND ANALYSIS — ACCOUNTING POLICIES — “Application of Critical Accounting Policies and Estimates” of Southern Company in Item 7 of the Form 10-K for a complete discussion of Southern Company’s critical accounting policies and estimates related to Electric Utility Regulation, Contingent Obligations, Unbilled Revenues, and Pension and Other Postretirement Benefits.

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FINANCIAL CONDITION AND LIQUIDITY

Overview

Southern Company’s financial condition remained stable at September 30, 2010. Southern Company intends to continue to monitor its access to short-term and long-term capital markets as well as its bank credit arrangements to meet future capital and liquidity needs. See “Sources of Capital” and “Financing Activities” herein for additional information.

Net cash provided from operating activities totaled $3.5 billion for the first nine months of 2010, an increase of $1.2 billion from the corresponding period in 2009. Significant changes in operating cash flow for the first nine months of 2010 compared to the corresponding period in 2009 include an increase in net income as previously discussed, a reduction in fossil fuel stock, and an increase in deferred income taxes primarily due to the change in the tax accounting method for repair costs as previously discussed. Net cash used for investing activities totaled $3.0 billion for the first nine months of 2010, an increase of $150 million from the corresponding period in 2009. The increase was due to proceeds received on sales of property in 2009. Net cash provided from financing activities totaled $48 million for the first nine months of 2010, a decrease of $638 million from the corresponding period in 2009, primarily due to fewer issuances of securities in the first nine months of 2010 and a reduction in notes payable outstanding. Fluctuations in cash flow from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.

Significant balance sheet changes for the first nine months of 2010 include an increase in cash and cash equivalents of $569 million and an increase of $2.0 billion in total property, plant, and equipment for the installation of equipment to comply with environmental standards and construction of generation, transmission, and distribution facilities. Other significant changes include an increase in equity of $1.4 billion.

The market price of Southern Company’s common stock at September 30, 2010 was $37.24 per share (based on the closing price as reported on the New York Stock Exchange) and the book value was $19.38 per share, representing a market-to-book ratio of 192%, compared to $33.32, $18.15, and 184%, respectively, at the end of 2009. The dividend for the third quarter 2010 was $0.4550 per share compared to $0.4375 per share in the third quarter 2009.

Capital Requirements and Contractual Obligations

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Capital Requirements and Contractual Obligations” of Southern Company in Item 7 of the Form 10-K for a description of Southern Company’s capital requirements for its construction program, scheduled maturities of long-term debt, interest, preferred and preference stock dividends, leases, trust funding requirements, other purchase commitments, unrecognized tax benefits and interest, and derivative obligations. Approximately $2 billion will be required through September 30, 2011 to fund maturities and announced repurchases and redemptions of long-term debt. Georgia Power met its obligations to repurchase $462.5 million in pollution control revenue bonds subsequent to September 30, 2010 with a portion of its current cash and cash equivalents balance at September 30, 2010. Gulf Power met its obligations to redeem $75 million in senior notes subsequent to September 30, 2010 with a portion of its current cash and cash equivalents balance at September 30, 2010. No mandatory contributions to Southern Company’s pension plan are expected for the years ending December 31, 2010 and 2011, although management may consider making discretionary contributions. The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental statutes and regulations; changes in generating plants to meet new regulatory requirements; changes in FERC rules and regulations; PSC approvals; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered.

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Sources of Capital

Southern Company intends to meet its future capital needs through internal cash flow and external security issuances. Equity capital can be provided from any combination of Southern Company’s stock plans, private placements, or public offerings. The amount and timing of additional equity capital to be raised in 2010, as well as in subsequent years, will be contingent on Southern Company’s investment opportunities. Except as described below with respect to potential DOE loan guarantees, the traditional operating companies and Southern Power plan to obtain the funds required for construction and other purposes from sources similar to those utilized in the past, which were primarily from operating cash flows, security issuances, term loans, short-term borrowings, and equity contributions from Southern Company.

However, the amount, type, and timing of any future financings, if needed, will depend upon prevailing market conditions, regulatory approval, and other factors. See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Sources of Capital” of Southern Company in Item 7 of the Form 10-K for additional information.

On June 18, 2010, Georgia Power reached an agreement with the DOE to accept terms for a conditional commitment for federal loan guarantees that would apply to future Georgia Power borrowings related to Plant Vogtle Units 3 and 4. Any borrowings guaranteed by the DOE would be full recourse to Georgia Power and secured by a first priority lien on Georgia Power’s 45.7% undivided ownership interest in Plant Vogtle Units 3 and 4. Total guaranteed borrowings would not exceed the lesser of 70% of eligible project costs or approximately $3.4 billion, and are expected to be funded by the Federal Financing Bank. Final approval and issuance of loan guarantees by the DOE are subject to receipt of the combined construction and operating license for Plant Vogtle Units 3 and 4 from the NRC, negotiation of definitive agreements, completion of due diligence by the DOE, receipt of any necessary regulatory approvals, and satisfaction of other conditions. There can be no assurance that the DOE will issue loan guarantees for Georgia Power.

In addition, Mississippi Power has applied to the DOE for federal loan guarantees to finance a portion of the eligible construction costs of the Kemper IGCC. Mississippi Power is in advanced due diligence with the DOE but has yet to begin discussions with the DOE regarding the terms and conditions of any loan guarantee. There can be no assurance the DOE will issue federal loan guarantees to Mississippi Power.

Southern 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 as well as scheduled maturities of long-term debt. To meet short-term cash needs and contingencies, Southern Company has substantial cash flow from operating activities and access to capital markets, including commercial paper programs (which are backed by bank credit facilities), to meet liquidity needs. At September 30, 2010, Southern Company and its subsidiaries had approximately $1.3 billion of cash and cash equivalents and approximately $4.8 billion of unused committed credit arrangements with banks. Of the cash and cash equivalents, approximately $1.1 billion was held in various money market mutual funds. The money market mutual funds invest in a portfolio of highly-rated, short-term securities, and redemptions from the funds are available on a same day basis up to the full amount of the investment. Of the unused credit arrangements, $126 million expire in 2010, $1.4 billion expire in 2011, and $3.2 billion expire in 2012. Of the credit arrangements expiring in 2010 and 2011, $81 million contain provisions allowing two-year term loans executable at expiration and $922 million contain provisions allowing one-year term loans executable at expiration. At September 30, 2010, approximately $1.8 billion of the credit facilities were dedicated to providing liquidity support to the traditional operating companies’ variable rate pollution control revenue bonds. Subsequent to September 30, 2010, Gulf Power renewed an existing credit agreement totaling $30 million and increased an existing credit agreement by $5 million; both agreements contain provisions allowing a one-year term loan executable at expiration and extended the expiration date to 2011. See Note 6 to the financial statements of Southern Company under “Bank Credit Arrangements” in Item 8 of the Form 10-K and Note (E) to the Condensed Financial

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements under “Bank Credit Arrangements” herein for additional information. The traditional operating companies may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper at the request and for the benefit of each of the traditional operating companies. At September 30, 2010, the Southern Company system had approximately $345 million of commercial paper borrowings outstanding with a weighted average interest rate of 0.4% per annum. During the third quarter 2010, Southern Company had an average of $814 million of commercial paper outstanding at a weighted average interest rate of 0.3% per annum and the maximum amount outstanding was $1.1 billion. Management believes that the need for working capital can be adequately met by utilizing commercial paper programs, lines of credit, and cash.

Off-Balance Sheet Financing Arrangements

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Off-Balance Sheet Financing Arrangements” of Southern Company in Item 7 and Note 7 to the financial statements of Southern Company under “Operating Leases” in Item 8 of the Form 10-K for information related to Mississippi Power’s lease of a combined cycle generating facility at Plant Daniel. In April 2010, Mississippi Power was required to notify the lessor, Juniper Capital L.P., if it intended to terminate the lease at the end of the initial term expiring in October 2011. Mississippi Power chose not to give notice to terminate the lease. Mississippi Power has the option to purchase the units or renew the lease. Mississippi Power will have to provide notice of its intent to either renew the lease or purchase the facility by July 2011. The ultimate outcome of this matter cannot be determined at this time.

Credit Rating Risk

Southern Company 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 of certain subsidiaries to BBB and Baa2, or BBB- and/or Baa3 or below. These contracts are for physical electricity purchases and sales, fuel purchases, fuel transportation and storage, emissions allowances, energy price risk management, and construction of new generation. At September 30, 2010, the maximum potential collateral requirements under these contracts at a BBB and Baa2 rating were approximately $9 million and at a BBB- and/or Baa3 rating were approximately $483 million. At September 30, 2010, the maximum potential collateral requirements under these contracts at a rating below BBB- and/or Baa3 were approximately $2.5 billion. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Additionally, any credit rating downgrade could impact Southern Company’s ability to access capital markets, particularly the short-term debt market.

On January 22, 2010, Fitch applied new guidelines regarding the ratings of various hybrid capital instruments and preferred securities of companies in all sectors, including banks, insurers, non-bank financial institutions, and non-financial corporate entities, including utilities. As a result, the Fitch ratings of the preferred stock, preference stock, and long-term debt payable to affiliated trusts of the traditional operating companies decreased from A to A- at Alabama Power and Georgia Power, from A- to BBB+ at Gulf Power, and from A+ to A at Mississippi Power. These ratings are not applicable to the collateral requirements described above.

On August 12, 2010, Moody’s downgraded the issuer and long-term debt ratings of Southern Company (senior unsecured to Baa1 from A3), Georgia Power (senior unsecured to A3 from A2), Gulf Power (senior unsecured to A3 from A2) and Mississippi Power (senior unsecured to A2 from A1). Moody’s also announced that it had downgraded the short-term ratings of Southern Company and a financing subsidiary of Southern Company that issues commercial paper for the benefit of Southern Company subsidiaries (including Georgia Power, Gulf Power, and Mississippi Power) to P-2 from P-1. In addition, Moody’s announced that it had downgraded the variable rate demand obligation ratings of Georgia Power, Gulf Power, and Mississippi Power to VMIG-2 from VMIG-1 and the preferred and preference stock ratings of Georgia Power (to Baa2 from Baa1), Gulf Power (to Baa2 from Baa1), and Mississippi Power (to Baa1 from A3). Moody’s also downgraded the trust preferred securities rating of Georgia Power to Baa1 from A3. All of these companies have stable ratings outlooks from Moody’s.

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On September 3, 2010, Fitch downgraded the issuer and long-term debt ratings of Mississippi Power (senior unsecured to A+ from AA- and issuer default rating to A from A+). Fitch also announced that it had downgraded the short-term ratings of Mississippi Power to F1 from F1+. In addition, Fitch announced that it had downgraded the pollution control revenue bond ratings of Mississippi Power to A+ from AA- and the preferred stock ratings of Mississippi Power to A- from A. Fitch announced that the ratings outlook for Mississippi Power is stable. Also, Fitch announced that the ratings outlook of Southern Company had been revised to negative.

Market Price Risk

Southern Company’s market risk exposure relative to interest rate changes for the third quarter 2010 has not changed materially compared with the December 31, 2009 reporting period. Since a significant portion of outstanding indebtedness is at fixed rates, Southern Company is not aware of any facts or circumstances that would significantly affect exposures on existing indebtedness in the near term. However, the impact on future financing costs cannot now be determined.

Due to cost-based rate regulation, the traditional operating companies continue to have limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. In addition, Southern Power’s exposure to market volatility in commodity fuel prices and prices of electricity is limited because its long-term sales contracts shift substantially all fuel cost responsibility to the purchaser. However, during 2010, Southern Power is exposed to market volatility in energy-related commodity prices as a result of sales of uncontracted generating capacity. The traditional operating companies continue to manage fuel-hedging programs implemented per the guidelines of their respective state PSCs. To mitigate residual risks relative to movements in electricity prices, the traditional operating companies enter into physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. To mitigate residual risks relative to movements in gas prices, the registrants may enter into fixed-price contracts for natural gas purchases; however, a significant portion of contracts are priced at market. As such, Southern Company had no material change in market risk exposure for the third quarter 2010 when compared with the December 31, 2009 reporting period.

The changes in fair value of energy-related derivative contracts for the three and nine months ended September 30, 2010 were as follows:

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

The change in the fair value positions of the energy-related derivative contracts for the three and nine months ended September 30, 2010 was a decrease of $47 million and a decrease of $71 million, respectively, substantially all of which is due to natural gas positions. The change is attributable to both the volume and prices of natural gas. At September 30, 2010, Southern Company had a net hedge volume of 138 million mmBtu with a weighted average contract cost of approximately $1.85 per mmBtu above market prices, compared to 134 million mmBtu at June 30, 2010 with a weighted average contract cost of approximately $1.56 per mmBtu above market prices and compared to 145 million mmBtu at December 31, 2009 with a weighted average contract cost of approximately $1.23 per mmBtu above market prices. The majority of the natural gas hedges are recovered through the traditional operating companies’ fuel cost recovery clauses.

Energy-related derivative contracts that are designated as regulatory hedges relate to the traditional operating companies’ fuel-hedging programs, where gains and losses 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 clauses. Gains and losses on energy-related derivatives that are designated as cash flow hedges are mainly used by Southern Power to hedge anticipated purchases and sales and are initially deferred in OCI 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 or fail to qualify as hedges are recognized in the statements of income as incurred.

Total net unrealized pre-tax gains (losses) recognized in income for the three and nine months ended September 30, 2010 were $(4) million and $(2) million, respectively. For the three and nine months ended September 30, 2009, the total net unrealized pre-tax gains (losses) recognized in income were $2 million and $1 million, respectively.

Southern Company uses over-the-counter contracts that are not exchange-traded but are fair valued using prices which are actively quoted, and thus fall into Level 2. The maturities of the energy-related derivative contracts at September 30, 2010 were as follows:

See Note (C) to the Condensed Financial Statements herein for further discussion on fair value measurements.

For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Market Price Risk” of Southern Company in Item 7 and Note 1 under “Financial Instruments” and Note 11 to the financial statements of Southern Company in Item 8 of the Form 10-K and Note (H) to the Condensed Financial Statements herein.

Financing Activities

During the third quarter 2010, Southern Company issued approximately $198 million of common stock through the Southern Investment Plan and employee and director stock plans. In addition, Southern Company issued approximately 2 million shares of common stock through at-the-market issuances pursuant to sales agency agreements related to Southern Company’s continuous equity offering program and received cash proceeds of approximately $73 million, net of $0.6 million in fees and commissions. The proceeds were primarily used to fund ongoing construction projects, to repay short-term and long-term indebtedness, and for general corporate purposes.

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the first nine months of 2010, Southern Company issued approximately $475 million of common stock through the Southern Investment Plan and employee and director stock plans. In addition, Southern Company issued approximately 4 million shares of common stock through at-the-market issuances pursuant to sales agency agreements related to Southern Company’s continuous equity offering program and received cash proceeds of approximately $143 million, net of $1.2 million in fees and commissions. The proceeds were primarily used to fund ongoing construction projects, to repay short-term and long-term indebtedness, and for general corporate purposes.

In March 2010, Georgia Power issued $350 million aggregate principal amount of Series 2010A Floating Rate Senior Notes due March 15, 2013. The net proceeds were used to repay at maturity $250 million aggregate principal amount of Series 2008A Floating Rate Senior Notes due March 17, 2010, to repay a portion of its outstanding short-term indebtedness, and for general corporate purposes, including Georgia Power’s continuous construction program.

In April 2010, Gulf Power issued $175 million aggregate principal amount of Series 2010A 4.75% Senior Notes due April 15, 2020. The net proceeds were used to repay at maturity $140 million aggregate principal amount of its Series 2009A Floating Rate Senior Notes due June 28, 2010, to repay a portion of its outstanding short-term indebtedness, and for general corporate purposes, including Gulf Power’s continuous construction program.

In June 2010, Georgia Power issued $600 million aggregate principal amount of Series 2010B 5.40% Senior Notes due June 1, 2040. The net proceeds from the sale of the Series 2010B Senior Notes were used for the redemption of all of the $200 million aggregate principal amount of Georgia Power’s Series R 6.00% Senior Notes due October 15, 2033 and all of the $150 million aggregate principal amount of Georgia Power’s Series O 5.90% Senior Notes due April 15, 2033, to repay a portion of its outstanding short-term indebtedness, and for general corporate purposes, including Georgia Power’s continuous construction program.

In June 2010, Gulf Power incurred obligations in connection with the issuance of $21 million aggregate principal amount of the Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Gulf Power Plant Scherer Project), First Series 2010. The net proceeds were used to fund pollution control and environmental improvement facilities at Plant Scherer.

In September 2010, Southern Company issued $400 million aggregate principal amount of Series 2010A 2.375% Senior Notes due September 15, 2015. The net proceeds will be used for the announced redemption of $250 million aggregate principal amount of Southern Company Capital Funding, Inc.’s Series C 5.75% Senior Notes due November 15, 2015 and were also used to repay a portion of its outstanding short-term indebtedness, and for other general corporate purposes.

In September 2010, Mississippi Power entered into a one-year $125 million aggregate principal amount long-term floating rate bank loan that bears interest based on one-month LIBOR. The proceeds were used to repay a portion of Mississippi Power’s short-term indebtedness and for general corporate purposes, including Mississippi Power’s continuous construction program.

In September 2010, Georgia Power issued $500 million aggregate principal amount Series 2010C 4.75% Senior Notes due September 1, 2040. The net proceeds were used to redeem all of the $250 million aggregate principal amount of Georgia Power’s Series X 5.70% Senior Notes due January 15, 2045, $125 million aggregate principal amount of Georgia Power’s Series W 6% Senior Notes due August 15, 2044, $100 million aggregate principal amount of Georgia Power’s Series T 5.75% Senior Public Income Notes due January 15, 2044, and $35 million aggregate principal amount of Savannah Electric and Power Company’s (Savannah Electric) Series G 5.75% Senior Notes due December 1, 2044 (which were assumed by Georgia Power upon its merger with Savannah Electric).

Also in September 2010, Georgia Power issued $500 million aggregate principal amount Series 2010D 1.30% Senior Notes due September 15, 2013. Subsequent to September 30, 2010, the net proceeds were used for the repurchase of all of the $114.3 million aggregate principal amount of outstanding Development Authority of Burke County Pollution Control Revenue Bonds (Georgia Power Plant Vogtle Project), First Series 2009, due January 1, 2049; $40 million aggregate principal amount of the outstanding Development Authority of Monroe County Pollution Control Revenue Bonds (Georgia Power Plant Scherer Project), First Series 2009, due January 1, 2049; $173 million aggregate principal

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

amount of the outstanding Development Authority of Bartow County (Georgia) Pollution Control Revenue Bonds (Georgia Power Plant Bowen Project), First Series 2009, due December 1, 2032; $89.2 million aggregate principal amount of the outstanding Development Authority of Monroe County Pollution Control Revenue Bonds (Georgia Power Plant Scherer Project), Second Series 2009, due October 1, 2048; and $46 million aggregate principal amount of the outstanding Development Authority of Burke County Pollution Control Revenue Bonds (Georgia Power Plant Vogtle Project), First Series 1996, due October 1, 2032, and for other general corporate purposes, including Georgia Power’s continuous construction program. The pollution control revenue bonds repurchased by Georgia Power are being held by Georgia Power and may be remarketed to investors in the future.

In September 2010, Gulf Power issued $125 million aggregate principal amount of its Series 2010B 5.10% Senior Notes due October 1, 2040. The net proceeds were used to repay a portion of its outstanding short-term indebtedness, for general corporate purposes, including Gulf Power’s continuous construction program, and, subsequent to September 30, 2010, for the redemption of all of the $40 million aggregate principal amount of Gulf Power’s Series I 5.75% Senior Notes due September 15, 2033 and $35 million aggregate principal amount of Gulf Power’s Series J 5.875% Senior Notes due April 1, 2044.

Subsequent to September 30, 2010, Alabama Power issued $250 million aggregate principal amount of Series 2010A 3.375% Senior Notes due October 1, 2020. Subsequent to September 30, 2010, the net proceeds were used for the redemption of $150 million aggregate principal amount of Alabama Power’s Series AA 5.625% Senior Notes due April 15, 2034 and for other general corporate purposes, including Alabama Power’s continuous construction program.

See Southern Company’s Condensed Consolidated Statements of Cash Flows herein for further details regarding financing activities during the first nine months of 2010.

In addition to any financings that may be necessary to meet capital requirements and contractual obligations, Southern Company and its subsidiaries plan to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.

PART I

In August 2010, Alabama Power implemented a new general ledger system and Mississippi Power implemented new general ledger, supply chain, and work management systems. These systems provide additional operational and internal control benefits including system security and the automation of previously manual controls. These process improvement initiatives were not in response to an identified internal control deficiency.

ALABAMA POWER COMPANY