ML19323B478

Annual Financial Rept 1979

ML19323B478
Person / Time
Site:	Farley
Issue date:	05/05/1980
From:	ALABAMA POWER CO.
To:
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ML19323B477	List: ML19323B476 ML19323B478
References
NUDOCS 8005120422
Download: ML19323B478 (35)

Text

., s Au3MM POWER C0 sun 800512Otf D . . <

O- Balance Sheet March 1980 1979 Assets and Other Debits (Thousands of dollars)

Utility Plant $4,734,920 S4,376,333 Accumulated provision for depreciation (350,296) (740,903)

Nuclear fuel 173,229 100,570 Accumulated provision for amortization (45,761) (34,172)

Net utility plant 4,017.092 3,701,323 Nonutility property (net) 2,272 2,296 Investment in subsidiary companies 17,273 17,033 Other investments and special funds 14 9 Total other property and investments 19,564 19,393 Cash and marketabit securities 13,752 49,233 Working funds and special deposits 464 323 Receivables less provision for uncollectibles 93,375 81,914 Fuel stock 149,090 104,966 Other materials and supplies 19,904 19,387 Prepay =ents 35,654 27,381 Total current assets __ 312,739 284,209 Deferred debits 60,403 58,001 Total assets and other debits S4.404.303 S4.063.431 Liabilities and Other Credits Common capital stock S 224,353 $ 224,353 Preferred capital stock 331,900 334,400 Premium on preferred stock 461 461 Gain on cancellation of reacquired preferred capital stock 479 -

Miscellaneous paid-in capital 725,145 625,700 Earnings retained in the business (Note) 99,613 110,530 Total proprietary capital 1,431,95o 1,345,449 Long-term debt-Bonds 1,643,486 1,661,919 Other Long-term debt 230,533 253,938 Una=orti:ed premium and discount (11,856) (12,394)

Total capitalization 3,344,119 3,248,912 Notes payable 393,996 238,303 Accounts payable 151,007 129,300 Customer depcsits 13,615 16,963 Taxes accrued 21,342 22,033 Interest accrued 55,493 51,812 Other current liabilities 25,621 23,373 Total current liabilities 666,574 433.239 Accumulated deferred inccme taxes 333,236 275,771 Accumulated deferred investment tax credits 43,592 33,745 Other deferred credits 19,392 15.050 Total deferred credits 396,720 329,566 Injuries and damage reserve 2,390 1,6o4 Total liabilities and other credits Sa.409.903 S4.063.231 I

The accompanying note is an integral part of this balance sheet. I i

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l ALA3Au.A POWER COMPANY Statements of Inccme Twelve Months Ended March 1980 1979 (Thousands of dollars)

Operating revenues -

Sales of electricity $1,203,073 $1,014,033 Other operating revenues 9,579 3,406 Total operating revenues 1,212,657 1,022,439 Operating expenses -

Operation 627,654 579,473 L Maintenance 37,414 74,373 Total operation and maintenance 715,068 653,851 Depreciation and amortization 123,332 113,333 Taxes other than income taxes 77,615 64,315 Income taxes 74,520 21,311 Total operating expenses 991,035 853,310 Total electric operating income 221,622 168,629 Steam heat operating income 432 591 Total operating income 222,104 169,220 Other income and deductions -

Allowance for funds used during construction-other 25,334 38,912 Other income 10,733 9,260 Other inccme deductions 797 432 Taxes (2,515) 2,300 Total other income and deductions 38,335 45,390 Income before interest charges 260,439 214,610 Interest charges -

Interest on long-term debt 164,760 160,134 Amortization of debt discount, expense and prem. 513 873 Other interest expense 62,697 19,973 Total interest charges 227,975 130,965 Allowance for funds used during construction -

borrowed - credit (36,670) (19,693)

Income tax effect - AFUDC - Borrowed - Credit (33,163) (13,397)

Net interest charges 158,137 142,395 j Net Income 102,302 72,215 Dividends on preferred stock 31,219 31,219 Net income af ter dividends on preferred stock (Note) S 71,083 S 40.99e The accompanying note is an integral part of these statements of income.

ALABAMA POWER COMPANY 5tatements of Retained Earnings Twelve Months Ended March 1980 1979 (Thousands of Dollars)

Balance at first of period $110,530 S151,052 Add (deduct):

Net income af ter dividends on preferred stock 71,083 40,996 Cash dividends en ceccan stock (32,000) (31,400)

Preferred capital stock expense -

(113)

Balance at end of period S C9.613 S110.530 l

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ALA3AMA POWER COMPANY March, 1980 NOTES TO BALANCE SHEET AND INCOME ACCOUNT

1. The financial statements include increased revenues resulting from revised rates applicable to sales for resale in effect from September 12, 1974 to October 1, 1976, subject to refund, as shown below:

'974 Case To Date (Thousands of Dollars)

Sales For Resale 1 Revenues $29,333 2 Income Taxes 14,443 3 Other Taxes 77 4 Net Increased Income S14.308

2. On December 20, 1978, Alabama Power Company (COMPANY) filed with the Alabama Public Service Commission (APSC) a rate increase request estimated to increase retail rates by approximately $233.3 million annually. The APSC on March 6,1979, granted a 9-1/2*. emergency increase ($31.9 million annually) effective March 9,1979, in retail rates. On July 19, 1979, the APSC issued an order making permanent the 9-1/2% emergency increase and granted an additional 5% increase effective July 19, 1979, and another 3%

increase effective January 1,1980. These increases in retail revenues aggregate approximately $203 million annually. On August 20, 1979, the Company and certain intervenors appealed the APSC's order to the Supreme Court of Alabama (COURT) . On October 19, 1979, the Court permitted the Company to collect, subject to possible refund, the 3-percent increase which was otherwise not effective until January 1, 1930.

The financial statements include increased revenues resulting from revised retail rates in effect October 19, 1979, subject to refund, as shown below:

Current Year to Total to Month Date Date 4 (Thousands of Dollars)

Retail 5 Revenues S(2) S3,610 S19,708 6 Income Taxes (1) 1,640 3,956 7 Other Taxes -

156 350 3 Net Increased Income jfl) St.314 S 9.902 l

ALA3A'd_A POWR COMPAYY State =ents of Sources of Funds for Grcss Procertv Additions Twelve Months Ended March 1930 1979 (Thousands of Jollars)

SOURCES Net incese S102,302 3 72,215 Less - Dividends on ce==en s:cck 32,000 31,400 Dividends on preferred stock 31.219 31,219 (10,917) (40,404)

Add (deduct) principal noncash items -

Depreciation and amortization 140,954 144,361 Deferred income taxes, net 77,72S 15,117 Allowance for funds used during construction (gross) (95,722) (77,503) 111,943 41,571 Decrease (increase) in net current assets, other than long-ters debt due within one year and notes payable to banks -

Cash and temporary cash iavestments 35,345 S7,223 Receivables (11,961) (193)

Mate-ials and supplies (44,141) (54,668)

Accounts payable 22,466 33,273 Taxes accrued (195) 9,107 Interest accrued 3,681 (3,070)

Other, net (5,633) 20,037 (435) 96,719 other, net" 32,476 49,128 Total funds from internal sources 193,931 137,413 Sales of securities -

First certgage bonds - -

Less - bonds retired 13,433 10,345 Preferred stock - -

Less - preferred stock redeemed 2.500 -

(20,933) (10,345)

Capital contributions by The Southern Company 99,445 17,200

?cliution con:rol obligations 6,645 27,779 Sales of property, ne: book value 415 176 Obligations under capitaliced leases 19,950 5,934 Increase (decrease) in interim obligations 155,193 230,213 Total funds frem external sources 260.715 300.957 GRCSS ?RCPERTY ADDIT:CNS 3454.6o6 S433,375 i

• Includes allovance for funds used during construe:1on. )

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e' ALABAMA PCWER COMPANY Internal Cash Flow for Joseph M. Farley Nuclear Power Station (Dollars in Thousands) 1979 1980 (Actual) (Frojections)

Net Income After Taxes S 88,659 s 123,138 Less Dividends Paid (35,219) (148.001)

Retained Earnings 3,440 (24,863)

Adjustnents:

Depreciation and Amortization 137,275 179,625 Deferred Income Taxes and Investment Tax Credits 61,970 81,687 Allowance for Funds Used During Construction (Gross) _85,750)

( (97,469)

Total Adjustments 113,495 163,843 Internal Cash Flow S116,935 S 138,980 i

Average Quarterly Cash Flow $ 29,234 S 34.745 Percentage Ownership in all Operating Nuclear Units: Joseph M. Farley Units 1 & 2 100%

-l Maximum Total Contingent Liability (Note) 320,000

Note

Includes Farley Unit 2 which is estimated to be licensed and in commercial operation in late 1980, i

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Comparative Highlights i

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1979 1978 cova's E c,.ss-s.c r%sares, E!ectric Energy Sales imillicns of kwnr Res.cential 8.679 9.089

, All Ctner Fetasi . 19.964 19.207

'Ahciesale. 2.468 2.822 j Tctal 31.111 31.118 Aerage Annual Use Cer Aesicential Custerrer Awn). 10.231 10 939 C.stcmers Servec Cirectly at Enc cf ' rear . 976.200 961.440 i

4 Ccerating Pesenues. E!ectric:

l Fesicential Sales . 5 385 224 5 351.644 "I Ctner Petail Sales. 691.182 576.754

{ Whciesale Sales 77.278 78.073 Tctat frcm Sa!es of Energy . 1.153.684 1.006.471 i Ciner Pevenues . 9.939 7.972 Tctal 51.163.623 51.014.443 4

Ccerat:rg Excenses. Electric:

set . S 365.628

' S 295.186 Pu enasec and interchanged Power. Net. 124.929 161.602 Ctner- 466.516 396.728 Tctal. S 957.073 5 853.516

, !ncome 2efcre interest Charges. 5 247.325 $ 205.819 i Interest Charges tEefore crecit cf 557.196.000 in 1979 and 537.948.000 in 1978 for 4 a!Icwance for ce::t funcs used curing constructien) . 215 362 169.645 i Civicencs en Preferrec Stcck. 31.219 31.219

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Net incorne After Divicends en Preferred Stcck . 57,440 42.903 Total Utility P! ant at End cf Year . 34.814.504 54.372.725 Gross Accitions to Utility Plant Cur:ng Year. 459.533 483.430 Ccnstruction Werk in Prcgress at End cf Year 950.210 735.777 1

j TNS reOCrt anC aCC%%,ng finanC'al Stater'W"t$ are SuCr9t'ed for Se tr'f rf"a!!Cn C Cf S!OCNholders and are PCT Intenced fCf 656 in CCnr'ec 3Cn ei*n any Sale or purchase Cf. Or any Cfier Or SollC:tation of ctier$ to Duy Cr Sell. any Secunties.

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To the Stockholders For Alabama Pcwer Company. The uncerstanding suppcrt of as for cther Alabama business and the empicyees of Alabama Power industry. the 1970s were a cecade Comoarydunng this difficult tirre of considerable change. These has been a significant facter as the unstable years seemed to culminate ccmpany gradually returns to fiscal in 1979, fcrcing the corrpany to health: and we are indected. tec, to weather the mest serious financial Southern Ccmoany Services crisis since the earliest days of its employees for their cooperaticn 74-year history. and assistance.

Following court decisiens in Nature also played a major role late 1978 and early 1979 which in 1979 as the Alabama Gulf Ccast voided, on a technicality, an earlier was devastated by Hurricane Public Service Ccmmission crder Frederic on September 12. injuring granting a bacly needed $210- secres and knocking cut 90 percent million rate increase, the ccmpany of the electnc pcwer in the Mcbile was corrpelled to curtail sharply service area. There was also nearly all its malcr generating plant extensive camage to the company's construction and a substartial part system in Sirmingham. Tuscalocsa.

of transmission and distribution Jasper, Anniston and other towns construction and maintenance; throughout western and central initiate drastic cutbacks on Alabama.

expenditures: and release about Scme 2.100 stcrm repair 4.000 construction craf t workers. workers and support personnel contract personnel and company were en the jcb virtually around the employees. clcck: anc in just 21 days of almost The situation was eased superhuman effcrt, power was somewhat. but certainly not solved, restored to nearly every customer.

when the Public Service On behalf of the management and Commission issuedits orderin July stockhoidersof AlabamaPower mandating a three-phase rate Company, i express to all of our increase. Althcugh the increase employees gratitude and pride for granted was much less than the their efficient work, Icyalty and amount requested. it did allow the dedication during that time of crisis hq reinstatement of a sizeable portion and in the cay-to-day business of

.' of our lines cf crecit with a number providing service to customers. All 0I cf lending instituticns. thus of us are grateful to the employees D permitting the ccmcany to resume of Gulf and Gecrgia Power

,, limited construction work. companies and Flcrida Power gl1 i ip On December 28.1979, new Corpcration for their substantial l- $iD/.? h 1. ;, i rate schedules were filed with the and dedicated wcrk under acverse Pg*N ph :f revenuesof approximately10

' Commission for anincreasein circumstances.

,~ , 1980 began with the company

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-d E 4 percent, basically the amount denied the companyin the still cperating in a restncted mode.

reflecting less than normal fevels of m -

l.S i Commissicn's Julv retail rate maintenance and support. Our caily (b '

'N ((l I crder, escalated to mere current cperations. as well as cur g j gj l k inflationlevels.Onlyadecuate constructicn work, continue *o be j and timely revenues will allow hampered by strict out imperative the ccmcany's earnings. wnich limitations on expencitures.

have been snarply For the 19eCs. cur cnallenge is

, cetericrating for the past two sirrcle and clear: We must meet the y- years, to imprcve.

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cemands for electricity that our cc"o "Y p *er de'iverY Security-cusicmers set for usin their nomes iManabement Chanbes human resources, and scopert and anc cusinesses. .vithin ever Several significant manc;e- materials services. Mr. Vcgtle's growing governmental regulaticna ment changes were mace in 1979. respcnsibilities inctuce regulatory and restraints. We are confident Elmer B. Harris. formerly senior and legislative matters, ccrpcrate l today of a greater puclic vice presicent. was electec real estate. energy services and uncerstancing cf the companyand executive vice president and chief puolic infcrmaticn.

its role in society. We celieve that finarcial officer. He has ccmmunication of our story to the responsibility for the company's puclic is essentialif the ccmpany is financial activities, including to ccntinue to meetits goals and corporate finance and planning. 1. Ameng :ncse invclvec ,n management cbiectives as a viable electric utility, Stephen E.Srac!ey whowas enanges cunng '979 were. seatec. :e+t to anc ne have ccmoletely assistant vice president fcr public ngnt. William o Ani:t anc Jesse s. Vog :e:

recrganized cur puclic informaticn infcrmation, was elected vice anc stanc:rg. reft to ngnt. E!rrer S. carns president. He centinues to have and S:epren E. Sraciey.

effcrt to this end. We cegin the new cecace with ncoe and confidence respcnsibility for the company's that pecple will cegin to understand public information prcgram, the ccmolexities inherent in In other changes. William O.

prccuc:ng and supplying electric Whitt and Jesse S. Vogtle were energy. These of us involved in this elected to the Scard of Directors.

process -all 9.000 emolcyees - Octh are executive vice presidents are striving to prcvide the most of the company. Mr. Whitt has effic:ent and reliaole product responsibility for the six possible. at a fair price. geographic divisions within the Josech M. Farley Presicent

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l 1979 in Review Revenues and Expenses Alaeama Pewer's customers Electnc ccerating revenues used 31.1 billion kilcwa!*-hcurs of i electnc energyin 1979.1.1 percent i Earnings totaled s1.1e4 eiiijon in 1979, an mcre tnan in 1978. The average l Netincome fcr 1979 a increase of 5149.2 million over 1978.

residental custon er usec 10.231 preferred stock dividenbs,fterwas Electnc cperating expenses fcr Rifowatt-nours last year. TC8 fess 557.4 mdlien. an increase cf $14.5 the year tctalec $957.1 millicn. an

'hamn 1978. j million f rom 1978. Earnings reflect a increase of $103.8 millicn or 12.1 three-step ircreasein retail rates percent. cver 1978.  ;

Rates granted the companyon July 19 Fuelecsts remain the maJcr 1979. fcitowing a rate increase expense, accounting for 31 cents On Decem er 28.1979.

request filed with the Alabama cut of every revenue deltar m, 1979. Alabama Power filecits eighth Puche Service Commission These costs tctated 538o.o millicn general rate increase recuest with in 1979, a 23.9-percent increase :he Alabama Public Service Cecemcer 20.1978. and include 58.1 millicn subject to possible ever 1978. Part of this increase was Ccmmissien (PSC).

refund. related to the third step of cue to the Farley Nuclear Elec*nc This latest request is. in effect.

this mcrease. However, the 1979 Generating Ptant being out cf the extension of rate croceecines earnings are $$9.9 minicn. or 51 cperation eignt months fcr a wnich actually beganin 1977 an'd l

cercent. tetow the $117.3 million Nuclear Regulatcry Commission have continued for more than two l mandated testing prcgram and fcr earned in 1977. and one-half years amid frequent The July 19 rate order aHowed the plant s schedulec refueling. celays and court acpeals.

an 11.7-percent return on commen Net purchased power costs. In December 1978. the company equity: but Alabama Power's actual totaling $124.9 mil {cn in 1979. filed a rate increase application for decreased by $30u million. or 22.7 5288.8 million annuaHy in adcitional

( return en average ccmmon equity percent, from 1978-fcr the 12 months ended December revenue. The crcer of the PSCin 31.1979. was 5.82 percent. cne of .

Other operation and July granted the company a three-the lowestin the naticn within the maintenance expenses. phaseincrease aggregating $208 utilityincustry. depreciaticn and amcrtization and million annually. That finalorder taxesincreased $69.8 milhen over made permanent a nine and one-1978 to $48o.o miHion* half percentemergencyincrease

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grarted in March added a five-pe* cent increase effective July 19.

Plannin and ' * ' ' " ' * * ' " " * - " "

varsfening f acuites in :ne C.:y cf anc Tace previsicn for an ei9nt- Financin e-s"*r" to =='e=*Te *'"

c:ty s wem en cceration TCP C Traff:c percent mcrease v.Nch was to Ccerations Pn gram :c :ncrease Cacac:q ceccme effective en January 1. Prciections of future cemand fcr electncity directly affect the arc Safen.

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accition cf generating and cther 2. cancy Hareman taxes a s>gn:mg min a rcl lowing an acceal to the trans:t so :nat :ne cerstructien crews can fac!htles.

Supreme Court of Alabama the 'CCWCC t'"'*" "5"'55' "0"***"U in 1979. the icng-range forecast ccmcany was aucwed to accelerate cf electncity recutrements was any s c s

'ne Octlecticn of the eight-percent revised to reflectthe expected

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pnase cf the increase on bilhng stcwer econcmic growthin the state 3. Egene C. Gewins. crew f ereman. arc cyctes af ter Octeter 19.1979. nis crew are wcrmng we me Cay of over the next avo cecades and the sirmingnam in a TCP!Cs crc:ect. The suc(ect ,c pcssicle refund. effect of conservation efforts on program is cesignec te excecite :ratfic ine macecuacycf theJuly energy usage. ficw in a safe manner.

crcer anc the cetencrat!ng financial

-'0 f t Mrs. Pegpayrara cwrs a cury

~ mt he he:cn r.ew cfrate the mcrease companrecuest-formd it t, cwans ocwed cn s:crejn Autauga Cuw. SN hes ;n ene cf

.he i new request. whicn would August 7 anc represented a 2.c,- cser eco ccmmun!!ies servec cy Alacama percent decline when ccmpared to oewer Ccmcany.

result sn accroximately $122.3 the peak hcur in 1978. This marked 5. P' ant Farley Unit Ne 1 rear Octnan nas millicn arnually in additicnal the first year since 1938 that the teen in ecmmercial ecerance since revenues, mctudes the amcunt nct cecemeer 1977 anc nas functiccec reliacty peak demand pericc cf the year did granted the ccmpany in the nct mcrease frcm the preytcus vear. anc safen< mrcugneut as initial cceranen.

?SC's July retail rate order and '

orcvices fcr the ir'cact of inflat.cn An acnormally mild summer in the c$ $)c,2 e ect n in a:e is '

Scuthin ccmcination with arc the ircreasec investment in increased conservation efforts and 6. Jonn C. Yeager is cre cf four security alart vc ~ ~ eutoment. A cec! sten by mere energy-etficient appliances guarcs at Lcgan Maren Cam. tAe ciner

,he ;mcmmission en this case is plant anc euiicirg guarcs mrcugneut tne and heatingiccohng systems was system. Yeager nas receivec spec:ahrec expected cy earty summer 19c0. responsible fcr the icwer-than- esining te crecare nim :c cretect:he fcrecasted peak. ccracany s fac:htjes.

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l The recuced Icad forecast. challenge. Alabama Pcwer reviews earnings. the company has been coupled with the forced its forecasts at l east annually anc unable toissue accitional first constructicn curtailment cue to the utilizes. among cther techniques. mor gage Ocnds since March 1973.

Company's severe financial crisis. an eccnorretric fcrecast model cr preferrec stcck since Decemcer caused the in-service dates of based on the relationshio between 1977. The issuance of sucn several generatng units to be numercus national and regional securities is restricted by earnings celayed. economic factcrs and the use cf ccserage requireme .ts in the The ccmcany continued to be a energy. The mcdel is continually company's first mortgage incenture net purchaser of electricity, further revised and updated as new and charter.

incicating the immeciate need for economic data beccme available. As a result ci being unable to completicn of these plants now Growth, inadequate earnings acquire external capital through the under constructen. Alabama Power and increasec cemand for elec- sale cf senior securities, the was a net seller of electricity for tricity during the 1970s forced the company has been forced to carry only four months during 1979. ccmpany to go to the marketplace an incrcinate amount cf shcrt-term Current forecasts indicate that for a larger prepcrtion of its dect desoite sucstantial cutbacks in ,

curing the next ten years peak financing requirements. Record- ccnstruction and coeraticn and j demand is expected to grow at an high interest rates and the increase maintenance ac*ivities. The majcr

average annual rate of approx. in shcrt-term financing required to source cf such shcrt-term l imately fcur percent down carry out the company's borrowings has been the ,

I significantly from the 1978 fcrecast const uction etforts were a major company's 5500-millicn revciving '

I cf between five and six percent. factor in interest expenses rising to crecit agreement with ten cut-of-Energy sales are also expected to an all-time high in 1979. state banks. As of Cecember 31, grew at an average annual rate of Total interest expense for the 1979 thecompanyhadoutstanding l approximately fcur percent. year was $215.9 millicn. including cver $352 millicn in shcrt-term cett.

l compared with the five percent $39 8 million en the short-term cett. including 560 million from Alacama forecast in 1977. Divicencs en preferred stcck banks. The revciving credit Accurate Icac forecasting has remained at $31.2 million for 1979. agreement expires September 30, become an increasingly cifficult As a result of inadequate 1980.

task for utilities. To meet this 1

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Funds gererated througn Alabama Pcwer purchased 1. Mrs. JuFe e Milis snewn teerat'ng internal sources provided accrox- approximately 12 mi!!icn icns of esen-ccmcactng ecu.cment at +e Sou:c;n

.rrately 54 percent. cr 5246 millicn. Cam recemructen se ne pro ect is coal in 1979 for *he fcssil-fueled "'"

cf the!ctalinvestecin plant '#"* * "

electric generating plants wnicn it l accitions and imcrcvements in operates. Approximately94 2. C T Allen ita. sucer'ntencent cf Logan

'979. cercent of this coal was purchased Manin Cam. anc C. O Gesen. manager of mer c sa nycrmnc cwatens.

g i in frcm mines in Alabama throu9n ciscuss orccuc*ien arc maintenance prans.

t Uel anG lOWer ion 9. term cent, acts and sect- Aiien nas ceen etn tne ccmcany 22 > ears market curchases. A nde G cson nas wcrkec 43 years fcr Generation 33,,y ,n ,979. sect-market ^iacama eower Alabama Power was develcped purchases had to be stccped. and 3. A H. Hale. Constructen Depar* ment. is intilally as a hycrcelectric anc then long-term purcnases reduced, in an snown ecocuctng a sanc-cene cens ty test.

as a coal system. utilizing two cf effort to conserve the company's This is cre of 't'e procedures used to Alacama's acundant natural casn. Ncrmal ccal curchases were ensure crecer ccmcacten of ear

• en not resumec until May1979, af ter

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rescurces. Coal centirues to be *ne cremary fuel. account:ng fcr accut coal stockpiles fcr ne summer 4. Vinuaily the entire transtmss.cn anc 74 percent of the tctal e!ectric:ty peak-cemand period were at less O'streutien system in vecue was severely d

generated by the CCmpany in 1979. than the cesired level. [7]C 'Scn[jyQC7n*g n y*g,*g,Q,*d2.

Hycro remains important to the At year end. there were 2.9 cenerauen mix, provicing about 17 million tons of Coal cn hand. a 111- s. Omsen Manager Peced Haucein g

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cercent. day supply based on anticipated L. McOcnougn crecx mac curing Nuc! ear power accountec for requirements. recuicing fellowing Hurricare Freceric.

six percent of the tctal generation The accicent at Three Mile cescite an e:ght-rrcnth shutdown of Island Nuclear Plant, wnich $]n [, "

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Plant Farley Unit No.1 for refue"ng occurred in March 1979. was the part cf the environmental crctecten and a Nuclear Pegulatory mest significant vent in the history system.

Ccmmission mancated testing cf commercial nuc! ear pcwer program invciving piping supports. generaticn. at least in terms of public perception. It brought new

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l fccus on he nuclear industry and licensing requirements ccula affect Nature played a malcr partin l raised many cuesticns accutits receipt cf an cperating license. Alabarra Pcwer's generaticn in safety. Nuclear generaticn was 1979. The state received heav:er Less than cne week after the significantly Icwer in 1979 cue to the than normal rainf all for the year. 24 accicent. The Scuthern Cctrpany eight-mcnth shutcown at Plant percent accse ncrmal. resultmg in fermed a task force to review the Farley, which recuced the 26 percent mere generaticn at its major cperaticnal ar.c safety ccmoany's nuclear crecucticn to hycroelectric plants than cucgeted systams of the nuclear power plants cnly six percent of the tctal fcr the year and 56 pe cent mere in the system. gereration insteac cf the crejected than in relatisely dry 1973.

Pepresentatives frcm Alatama 16 percent. Litigation invciving Sculdin Power worked for mere than three Curing the shutdcwn. ancncred Dam was still active curing 1979.

mcnths on the task force. cerrocsed piping suppcris were tested. Curing the year. Alaca'ra Power cf engineers and consultants frcm analyzed and mcdified where settled with insurers hoicing $10 teth private incustry and the necessary to previce acciticnal millicn in all.ris< coverage for 85 acacemic ccmmunity. Spec:fic assurance that Plant Farley wculd cercent cf the face arrcunt. The recernmencaticns for improvement cperate prcperly uncer all certpany's lawsuits against cther

. sere mace in five majcr areas: conciticns, even the remcte insurers are still pencing. as are plant design, cperating precedures. poss;bilityof an earthqua<e. suits agairst the centractors who personnel training. administrative Unit No.1 cf the nuclear plant built the f acility. Pecenstructicn was centrols ander ergencyplanning began ccmcrercial cperat:en in about 71 percent ccrrplete at year anc ccmmunication. All acticns to Cecemcer 1977 and functicred end. Fcr more infctmation implernent the reccmmendations reliably and safely throughcut its regarding Sculcin Dam. see Ncte 3 hme either been ccmpleted cr are initial 15 months. Felicwmg to the financial statements.

in progress. refueling and the mancated ciping As a result of the ccmpany's l The ccmpanyis ccnfident that suppcrt program. the plant was prcgram of preventive Plant Farley Unit No. 2 will be brought back on line in Ncvemcer maintenance. the availability of the cerrolete and ready for cperation in 1979. company's generating units to late 1980: however. new, errerging produce electricity remained at a high level for the thirc Ccr.secutive

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acproximately 85 percent in 1979. . .

Curing ne entical summer months. Activities 2. eryce van.n sucerv:sor ,ar= cca, tre cperating availacility averaged Ccntinuedinflation higher " "C # 9- ** 9** '

91 percent.

interest rates en corrowed mcney. 3. -cr-e e'ectne meters measure l A ccr-putenrec technique to e'ecne:ty in ocwa*t neurs at at ur.t Nc.

new regulaticns and constructicn evaluate the future reliatihty of the delays inherent in the licensing cf 1 f Piant vivennaaes a megawaneter l cerrpany s gereration and ' "'

piants nave ecmcired to push f,$'"M~

transmissicn system has teen ~

ccnstruction ecsts to recerd levels. #

in csmg aVemmWW $ns[cc e sncan i c ar ci n nn ng e en on elecnc Mes.

e m, ewing cne of neous cerracs ecansicn ct the s! stem with the investers and customers. reia:ec to tre corrpany s cces:ruction nignest rehacility at the Iowest ccst. For the ccmoany to fulfill its oregram. '

Alacama ecwer cestgrec and cci ation to previde adecuate arc s "c geve!cced a Cynamic /citage reliatte elecinc servce to its sbcentencent. raceP!Tucxer. ant Mii'er. meenanical mctucticn Simutater whien is a customers, it must ccnstruct new

" fir st in tre industry This device 6. Vrs. Frarces Riten. staff accet.nt:rg ge ratMg plants and make assistant. nas ceen witn Alacama Pcwer 35 aics in the analYsis of 9enerating acditicns and improverrents to anc transmission f acilities needed #e ars' existing generating plants. During to supply Iarge new fluctuating 1979. the ccmpany spent $249 7' " " * '* * " * " "' " " 9 # 9'" "#

ncustriat l cads such as electric arc . crane at s"outein cam recenstruct:en site.

furnaces and minin9 dragtines. Cn ccmcietien chne prege 225 mw of projects and $211 million on hres. e:ecnca capacity will be returnec to These and cther significant substations and producticn plant see. ice.

rrorcserrents are incicative of acditions sucstantially less than the 8. Cta, ton Martin. a rcad c

sca:crer in tre riatama Pcwer s ccmmitment to amount budgeted before the ciscaten centrei room. monitcrs the output increase the etficiency and financial crisis forced a majcr frcm tre ecmpany s generating plants.

ecencmy cf Oceration cf its New s on tre transmission system and tre reduction.

gereraticn and trarsmissicn As a result of the ccmcany's in en;es with m c rer corrpanies in SYEI6*- "" '"9 *

cntical financial ccnditicn. a

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4 9 construction curtailment was censultants and crdered by the comoanyis giving a great ceal of crcered bythe company's Ecard cf Feceral Energy Pegulatcry attention to sclar economics and Directcrs in Decemcer 1978. At that Commission. tecnnicues to previce custcmers time. acrk was suscenced en all with a realistic understar.cing cf :ne malcr generating plant projec:s power Deliverv tecnnciesv-inclucing Plant Farfey Unit No. 2: -

Alabama Pow er is planring *o Miller E!ectric Generating Plant Unit At the cicse of 1979. Alabama monitor sclar energy researen Ncs. 2. 3 and 4: Harris Dam. Oculcin Power had in service a:ctal cf 8.882 inrough a space reating and water Dam anc Mitenell Dam. Werk was pcle miles cf transmissicn lines and heating prciec:in a succivisicn also suspended en criticaily neeced 39.838 pole miles of cistribution scuth cf Birmingham. Alcng with the transmissicn and distribution imes lines. it also hac 1.184 cacle miles Good Cents Solar Hcme. two anc substations. of underground transmission and centrol hcmes with icen:Ical ficcr The rate increase granted in distribution lines in service. plans will be scecially metered so July 1979 slightly irroroved the Transmission and distributicn valic cerrparisons can be made.

cerrcany's financ:ng capabilities substation capacity at year end Alabama Pcwer nas assumed a and allowed the resumption of was 38.278.329 kilcvcit-amperes. malcr role in several prciects ccrstructicn of cnly Plant Farleyin anc the :ctal numcer cf substations related to sclar energy. inctucing August and Ecutcin Dam in in operation at the end of 1979 was evaluation of sciar heating and September. Scth prclects are 1.171- cccling systems fcr ccmmerc:al scheduled for ccmoletion in late cuildings. Such as the company's 1980. Research and soiar office euncing in Montevano:

Remedial constructicn *v t' r t"' '9" 0*P't*'

continued at Logan Martin Dam Develobment programsof themanyvarmbles curing 1979 to ensure the continued Alabama Power has several affecting sciar energy: technical.

integrity of the cam and reduce projects which are part of tne ecencmic and cperating leakage under the structure. These corrpany's research and evaluaticns cf pnctovcitaic pcwer activities were maintained during cevelcpment program cn systems; studies relating to the the ccnstruction curtailment as alternative scurces of energj. The impact of solar heating and water recommended by a board of heating systems on the ccmpany's

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' crn GCO:nrcugn:ne year 2CCO: Sculcin Dami. seven fcssil e!ectnc C'C9'

• 3rc a survey cf availacle sciar gererating f aciht:es anc cne 3- C'v'5 .cencai scec:a'ist eruce a s aan vr. arc ws Gecrge simulat;cn crograms An:cn ::es: uc' ear plant. icgether Ai:n a i n s n m'cn **'

meet :lhty recuirer enis. Anctly ow nec 5c0.0004ilcwatt unit ll**[cc*j*[,$3 gj,[*, c

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Tsg Sci. ert refirec ccal SPCI

. lccatec at P! ant Gasten. in accit:cn. :nver ess succmsion rear e.rrnnsnam cdc: piart :ccated at Gasicn Alacamaocwer anc Mississicci Tne sciar ncr-e onien is ecuccec aan a E!ecirtc Gereratirg Plart rear Power Cwn, as *enants in CCemCn rocw-Dec stcrage system for sciar ass,stec

.WscnvPf e contiruec ic mame an :n :he prcporticos cf 60 cercent anc "9 "O ^aw reat ;. 4as ccerec f or eccriant cortrtout:cn in 1979 ar) cercent rescecir,ely. a fossil $9$*g*" '# #"*

icwarc:ne ceselecment of ew electric generating plant in Greene ( q,.,cyy,7 3,,c, _,,gy 3ec ,c,3 erergy scurces fcr the fu:Lre. Ccunty. Alacama. with an installec e gireer n tre -. f. tman c.stnet Ccetation cf this plant :s urcer the cacac:ty of 500.000 kilcwans. spec:an:es n e-e gy conser.ancn for cirect:cr cf Scu:hern Ocmcary The installec ge-erating ecmr-ere:ai cu.a.rgs i-ere ne aciusts a tre cm anc cter camce<s c- a resting.

Seroces. Irc.. in ccrj unc::cn wi:n cacacity of tre ccmcany. inclucing ne E!ect':c Pcwer Pesearch 50 percent cf the cacacity of :he

^"""*""****"***

5- S'"C' D"9 0m Macama Power Sitte- units of Southern Electric

• S Srce SPC tecnnc!cgy is the Generating Corroany (SEGCO) at [,y c'a flat' _

• g$r"n r cs: acvancea cf the prccesses ic Plant Gaston and 60 percent cf :he te erc3 in re e,rmirgnam area sne cr ccuce c:ean schc arc licuid fuels capacity cf the Greene County acr ec n tne ccmcanv s Generai f r :m ccal it is excec:ec that SPC plant. totalec 7.625.675 kilcwans at Acccurnng cecartmert cr cr :o rer

.m clay a significant rcie in :ne recrer ent.

"a:Icn s ccmmitment 'C cevelCp a 1. Water sccris are ccoular etn 6. Mr. C. C. Vcr4 O cf seecn Aircraft sirthetic fLe!s incustry. coster 9ers at eignt cf Atacama Pcwer Ccrocraten, anc Tec Levt semer incLstrial ceve'ccment represertatve. inscect a Ccrrcany s f ames Cts T McCuar even.cvs ~

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Pr.Operty and Plant '"9'"*'c9"""" mu ,'m n",cn.'cena,'e'eecncran c, ant,n

2. Aiacama Power argeo .ts custcreers to Se'ma Tne ciart preseatly e- cicys 100 At the erd cf 1979. Alatama start sayirg "W HCA" to ereegy maste men anc herren in assemenng anc

-c/.er Owrec and cper3:ed 13 inecucn its ccc pre-ensive. f ree erergy. mocifying a:rcraft excansien cians can *cr a !ct31 ef 450 er-CIcyaes withn thO years.

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a5L 2 a the end cf the year. SEGCO is ccmply with envircnmental Ccastal Area Soard to manage owned in ecual snares cy Alabama regulations since 1970 now exceed ccnstructen anc cther major Pcwer anc Georgia Pcwer 5314.3 millicn. activit:es in the ccastal area.

ccracanies. In Octcber 1979. the U.S. The plan pctentiallyimpcses As of Cecerncer 31.1979. Envircnmental Prctecten Agency significant acciticnal require rents Alacama Power Ccmpany's total (EPA) aoproved the State of ecen constructen activities and investment in utility plant was 54 a Alabama s request fcr cperations cf Alacama Power in the billicn. Accumulated decreciation acministration cf the Naticnal coastal area. Stucies are in and amortization provisions Pcilutant Discnarge Elimination progress to ensure precer amounted to $8co.5 million. leaving System (NPCES) by the Alacama compliance with the program.

a 54.0 billicn net investrrent in Water Improvement Ccmmissicn plant. PWIC). Granting of this authenty to [,ebjglStiOn the State of Alabama will remove The First Session cf the 96th Environmental the previously exisang dual C "9'*SS 3 ';"** 'n : ate S*'m'tt'"9 '" 't$ ' EP^ ^" the Regu1ations AWIC and aitcw Alabama Power to Cecemcer. leaving mest energy-compete on a mcre favorable basis related legislaticn soll undeciced.

Alabama Power spent $35.5 with surrounding states for Legislation pertaining to wincf all million on pcilution-centrcl f acilities desirable new industry by offering a prcfits tax. energy ccrservation, at its generating plants during 1978 and an additicnal 525.3 million dunng single authority for water cuality authorizations for the Nuclear matters. Acting on this newly Pegulatory Ccmmission, regulatory I 1979 to comply with environmental refcrm and other utility-related regulations imposed upon the acquired authcrity. the AWIC issued a final NPCES permit to Alabama mat *ers will ce considered cunng ccmpany by varicus federal, state Power Ccmpany for Plant Miller en the Second Ccngressional Session and Iccal agencies. It is estimated Cecember 20 1979. in 1960.

that another $112.4 million will be During 1979. the Alabama spent curing the next five years to The Alabama Coastal Area Management Program, apptcved by Legislature passed two measures ccmply with regulations now in the U.S.Departmentof Commerce that particularly af fect the ccmp any.

effect er anticipated. Tctat in Sectember 1979. created a One act requires that any expencitures by Alabama Power to comprehensive plan allowing the corporation which constructs cr l mimym aW mn r-- . g ~ " ' < - ' ' -

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camage m ee ecmpany s esc:nc ccerates a ruc: ear gereratmg

?acthty witnin me state mus: concuct Industrial Growth system was the acrst ever ir';uiries ,n:o the cnm;nal reccrcs cf During 1979. Alabama Power excenencec cy an electric utilityin emcic,ess Anc cerfctm cuties at ccntinued to prcmete the economic the United States.

l sucn f ac: lites. The c:Per amencs cevelecment of Atacama cy At ene scint. 290.000 Alatama me Cctruct Cractces Act anc the wer<ing closely with incestnal Power custcmers. almcst one-mird Eusiress Ccrocraticrs Act to ceve!coment prcgrams ano actvely cf me system.were without permit ccrocrattons to set oc seekmg new and expancec incustry electricity. Mcst of me damage to pctitcal acten ccmmmees icr me for me state. the ccmpany's electnc transmissten curccse f sclic:Img vctuntary During tre year. Sc5 ircustnal and cistnbution f ac:lities was in the ccrtncutcns ic ce Lsec fcr state firms announced plans to fccate cr Mccele vicinity. where Fredenc ' eft pchtical p urpcses. excard facilities in the area sersed caly one transmission line Tac ci!Is Anich c:c ret pass. cut cy Atacama Pcwer. creatmg 16.555 energized. Scrne 3.500 pcles had to cf srgnif!cance to tre :crrcany. new ; cts and an estima:ec annual be replacec, and virtually every conce"ec ailccaticn cf sersice payrollof scme 5150 millicn.When cistnbutien lire in the Mctile arc-a

ernicr.es amcng ocwer sucoliers these accit:cns arc expansicns are was camagec. Alsodestrcyedwas arc :ne fcrmaten of a munic: pal in full cperaticn. total investment fcr me 44.<ilcvcit transmission lire to e!ectnc aumenty. Tre terntonal rew and expancec industries for Dauphin Islanc. which is currently legistation wculc nave eliminated 1979 will ce 51.2 billion. ceing recuilt. Until permarent urrecessary c clication of elecinc res:craticn is ccmplete. the f ac:htes ;n irccrporated c: ties now Hurricane Frederic ccmcanyis previding temccrary sersec Oy mcre man cre elecir:c service to island residents through succher T"e munic: cal authenty Nature had a tremenccus the use of large pcrtable impact on Mama Rwer S dedC till wcuid ha%9 allowed a group cf generatcrs.

ci:!es now coerating electric system in Septem0er 1979. when Sesices the 220 crewmen in the cistributen systerrs to join together Hurncane Fredenc hit the Guif Mccile area. approximately 1.9C0 Coast with wincs up to 145 miles to purcnase er cuild generatmg and from Georgia Pcwer. Gulf Power.

ransmissicn f acilities. per hour. Alabama Power s Florida Power Corporation and f acilities were the harcest hit of any cther civisicns of Alabama Power of the utilit:es in the area. and aidea in restcration of service.

s, m;_

y. . c Commercial Electrical Heating ,, ,

W Percent Saturation 5

={ ?s Of Total Electric "' a+

Heat Pume MW U Fesis:ance Heating MW 490 Saa e w

~-

g Space Heating 13 9*.

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l 6 Q' l -

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~;" en r- 9n 9n sn 975 37s :97- 9n 979 d m :9ea '970 '972 '975 '97' '979 /

L ,

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Through a comoination of hard. program to prcvice energy aucits factcry anc frem the office to the dedicated work and 16-hour fcr approximately SCO secencary, civic c!u o.

workdays. restwation efforts were post secondary and private scheci in 1980. the comoany will ccmoleted in 21 days. builcings within the company's undertase an extensive public Alacama Power President service area. In acciticn.154 informat:en program to present:he e

Joseph M. Farley desenbed the energy-management tests and ccmpany's s: cry to the pubiic.

, restcration etfort as an almost econcmic studies were perfcrmed Day to dayccmmunicaticn with

" superhuman" task. Alabama during 1979 forindustrial employees is also an integral part Governcr Feb James remarked on customers, of :ne ccmpany's pubhc information statewide television that During the year, the Energy prcgram. Empicyees are expcsed

. AtacamaPowerCcmpanyand Services Department mace 109 daily to cus:cmer questions ard the men and wcmen that work for presentations :o municipalities, incuines about company actvities:

the Alacama Power Company have county gcVernments and schcol and only thrcugh effectve prceablydcne the greatest Jco systems on systematic metnods for channeling of informaticn can

hat's ever been dcne after any cperating their builcings with emolc>ees respond in an infctmed disaster in restering power." increased energy efficiency. manner.

Damage es:imates incicate that the full ccst cf repairing, and in most cases replacing, the electric PubliC Information Human Resources system is approximately $23 As cnanges take place in the The severe financial crisis that million, the major portion of which utilityindustry and the costs of gripped Alabama Power in 1979 must be capitalized under utility producing and supplying power affected the internal Operation cf accounting requirements. increase, ccmmunication with the the ccmcanyjust as it did the ability Additionally, loss of revenues was customer becomes an essential to supply electricity to its estmated to be approximately $12 ingredientin a ccmpany's customers.

millicn as a result of the s:Orm responsibility. The massive laycff of werkers damage. Day-to-daycommunication with which began in Cecemcer 1978 cur customers remains a vital need. continued into 1979 and totaled Energy Services Despite an acvertising mcratorium aoprcximateiy a.000 ccnstrue: ion during most of 1979. impcsed byits craft workers. contract personne!

Generation of electricity at critical financial condition. :he and ccmpany employees. The plants costing millions of dcIlars is company has continued to seek layoffs brought about realignments cnly the first step in bnnging energy improved ways toinform the public witnin the comoany and the to almost one million custcmersin of its positive programs on energy tempcrary assignment of the Alabama Power sentice area. matters and the financial and approximately 125 empicyees to Involved are thousands of miles of regulatory situation and to explain other deparu nents. districts and power lines that carry the electncity company operations. procedures divisions in crder to provice to homes, stores. offices, f arms and and policies. emergency manpower.

facteries and hundreds of During 1979. :he Public At year enc. Alabama Power employees working hard to meet Information Department was employed a :ctal of 9.038 men and the electric needs of the state. ccmpletely rectganized to meet women. 6.8 percent fewer than in We live in an era of changin9 current needs and to enable the 1978. Inadequate rates have energy supplies;and since service department to function mere prevented the company's return to is part of this evolution. Alabama effectively. Because of the normal cperaticns. leaving many Pcwer is striving to serve its copertunities created by the emolcyees f aic off anc cthers en custcmers betterin manyways recrganization. new information tempcrary assignment. Dunng beyond supplying e!ectric power. rcles involving the community. 1979. there was not a single wcrk-The company first began government. ecucaticn. p rofessions related fatality amcng :he cffenng energy audits toits and consumers are row a part of an employeescf theccmcany's cus cmers in 1977 and during 1979 aggressive communication effcrt by elecinc cceraticns: and they provided approximately 10.250 company personnel. The ccmoletec:he year with an resicential anc commercial understancing of hcw a utility naticnalinjury and illness cusicmers with incividualized coerates can only ce gained ween mcicence rate cf only0.63 for eacn recommencatens en ways:o use the public is fullyinformed on 200.000 man-ncurs wer<ec. veil l electricity more wisely. In energy matters anc cur country's celow :he nat cnal average.

association with the Ala0ama ecencmic system. Our efforts. The Emcloyee Savings Fregram l Energy Management Scara. invciving a numcer of crcgrams, attrac ec an enrcilrrent .af mcre I

Alacama Pcwer also began a extend frcm :ne scnceirccm to the thanC00emo!cyees 50 cercentcf y boarcrocm. from:he hcme to the those -eligicle. Uncer the clan.

The Board of Cirectors pursues efigible ccmoany employees may save a portion of their pay. witn the i

! FinanClalInformation .ts i resocnsibility fcr reported percentage savec augmentec by financialinfcrmation thrcugh its I ccmcany centributions. Report of Aucit Comminee. ccmpcsee cf directors who are not employees.

Senefits cf the Employee Stccx Cwnersnio Plan are being previced h{angggment a he Audit Committee meys to a grcwing numcer of employees. The management of Alacama periccically with management.

At year enc. scme 7.354 employees Pcwer Companyhas prepared and internal aucitors and incepencent were partic:pating in the plan which is responsible for the financial public accountants to assure that Oegan four years ago. statements and related financial they are carrying cut

• heir Also important to employees + information incluced in this report. responsibliities and to ciscuss are the pension plan and insurance The financial statements were auditing, internal centrol and prcgrams. wnicn provide a wice preparedin accordance with financial repcrang matters. Ecth range of benefits. During 1979. Sa generally accepted accounting internal auditors and indecendent empicyees retired:and benefits princ:ples aporcpriate in the public accountants periccically

!cialing 54.987.016 were paic to circumstances. and necessarily meet alone with the Accit empiciees under the pension plan. include amounts that are cased on Committee and have free access to A very pcpular program, begun best estimates and judgments with the Ccmmittee at any time.

in 1974 and aceptec as a mccel by apprepnate consideration to We believe that these policies several cther companies. is the materiahty. Financialinformation and procedures provide reascnable Petirement Planning Program. The included elsewhere in this annual assurance that cur cperations are program provices assistance to i reportis consistent with the conducted with a hign stancard of Octh active and retired employees i financial statements. business conduct and that. SUCject in adapting to cnanges brought I The ccmpany maintains a to the effect. if any. of the final accut by retirement. Information system of internal accounting outccme of the retail revenues seminars on financial planning, controls to prcvide reasonacle billec subject to possible refund as pnysical fitress. time use. company i assurance that assets are discussed more fullyin Note 2 to the tenefits and cther tcoics are ' safeguarded and that the bocks and financial statements. the financial concucted thrcughcut the ccmcany ; recordsreflectonlyauthorized statements reflect fairlythe fcr active employees aged 60-64 l transactions of the company. financial position. results of Petired employees are provided l Limitations exist in any system of coerations and scurces of funds for with information about company l internal control based upon the grcss prcperty accitions cf the activities through newsletters. l recognition that *he cost of the company.

emcicyE Oulletins. questionnaires. ; systemshouldnotexceedthe perscna' visits and area meetings. f benefits derived. The company i

The xmpany receivec national ' believesits system of internal recogr . ton inng 1979 for its use accounting contrpis. augmented by cf the reshch Traits Analysis its internal auditing function.

l Sele . ,n System (TTA). an  ; apprcpriatelybalancesthe emr to 'entprocecurewhichwas cost; benefit relationship.

firs memented in 1976 to helo l Incepencent public ensure that positions within the  ! accountants provide an cbjective ccmpany are filled by the most j assessment of the degree to which cualified acclicants availatie. management meets its l

Arte:es aceut the ccmcany's i responsibility for fairness of j system accearea in 7he New York financial reporting. They regularly Times business cclumn. Electnc  : evaluate the system of internal

!.sgnt arc Power magarme. accountmg control and cerform 5:ectncal Wor!c magazine and sucn tests and other precedures as Sylvia Perter's syncicatec cclumn. they ceem necessary to reacn anc Tra'nmg sessicns were concuctec . excress an cpinicn on the fairness cunng the year to familianze 1 of the financial statements.

emeicyrrent interviewers. clerical anc managerial empicyees anc cecartmentinterviewers with cetai's cf the TTA system for mterviews. clacement exercises arc se ecten.

15 l

_ - _. -_ - . _ . _ _ - - _ - _ - - . ----.- _ - _ _ l

, ~

l h4 4

Summary of Operations 1979 1978 _ 1977 1976 1975 1974 1973 1972 1971 1970 1969 (In Iixmssamis)

OPEllAllrKiHEVEtJUES ELECTHIC . 51,163.623 51,014.443 59ta693 5699 667 sti3i.250 5489.455 539ti.841 5325.700 5278.325 5249.317 52M.798 OPEllATIf JG EXPEtJSES. El ECilllC:

Fuel. 3t25.628 295,1tm 250.409 206.811 218.190 15ti.065 84.573 63.528 45233 36.278 29.123 Pur chased and interchanged power (net). 124.929 161.602 183.746 118.442 33.018 43210 17.140 32.06l 32.298 27,233 24.99tl Other operation aruiniaintenance. 210.090 198.596 160.725 136.251 110.811 101,423 83.659 71.882 t,1,831 53 ti37 48.t/38 Depreciation and innlos tstation 123.075 1(f).315 69.93tl 57.692 51 JJ4 45.523 40 t>05 37.253 32.216 29.9t>3 2ti.trJ1 laxes other than income taxes 74.592 ti3.737 47.887 45.584 38.147 R 370 30.241 24.9$0 19.146 15.755 15,101 Feder al and state income taxes. 58.759 25.060 89,161 36.577 58.342 2ti,426 44 076 20.327 22.265 26.485 32,357 Total oper ating expenses. 957.073 853.516 801.tk6 601.357 SfH.924 407.037 3t10 291 250.001 213.(M9 189.351 177.177 OPEHAllrJG irJCOME, ELEC1 HIC. 206.550 160.927 166.827 98.310 121.326 82.418 96.547 75.699 65.276 59 96 i $1f21 OlllEH If JCOME:

Allowance for fueals used during consts in.tlon -

Deht aand equity . - - .. 71,110 M 151 40.328 23871 14.9 51 10 6t>7 4.4 72 4.247 Equity . 28.554 38.927 53,168 - - - - - - - -

Other . iet) , 12.221 5.965 4.268 24.442 20.861 15.055 9.909 1.728 1.971 2.6'ki 2. lff>

If1COME BEFORE lfl1 EflfiS I CilAHGES. 247,325 205,819 224.263 193862 196,338 137.801 0 0.327 92.361 71.914 (27.074 tkl 034 If J TEHEST CilARGES:

L ong ter na det et and other isiterest expense . 215.862 169.G15 137.678 115.053 10'GH 72 043 55.472 42.7tU 33.157 25.481 21,432 Allowance for debl funds used durtog constr uction. (57,106) G7,948) (54.577) _ - - _ _ _ _

tJul intes est char ges . 158ife 131.697 83.101 115.053 101.60) 12.843 $5.472 42.709 33.157 25,481 21,432 l IJEl lrJCOME. 88459 74.122 141,162 78.609 94129 61,958 74 855 49.ti72 41.757 41.591 42,t/12

]

1)lVIDEtJDS OtJ PREFEHHED STOCK. 31.219 31.219 23.886 22,385 16.947 15 9t>1 9.7t4i 9.0.!7 4 808 3.979 3.884

) f JE I If JCOME AFI EH DIVIDEtJDS Of J

! PHEF ERHED ST OCK . 5 57,440 5 42.903 5117.276 5 Mi.424 5 77.782 5 48 934 5 65 069 5 40445 5:P).949 5 37.614 5 38.718

)

i

/ e*

Manacement's Discussion and 'n 'S7S cc"$S* ""*' cc$'5 c*c"'**

a 536.673.000 frem 1978. onnc: pally attributacle to the Analysis of the Summarv of '

ava,iaeihty cf eiant vmer Unit No. , anc the avaiiacihty of the cther stearr enerating plants as previously Operations ment,cned anc an ,ncrease cf acercximateiy 56% in nycro generation. Purcnased power ccsts cecreasec S22.144.0C0 The results shewn in the foregcing summary cf in 1978 compared to 19U, largely from a f,.,Il year's coerations reflect the results of prior penocs and are nct gereration at P! ant Farley Unit No.1. In 1977. purcnased irtendec as any recresentation fcr future penocs. It is power costs mcreasec 565.304 COO cver 1976. pnmanty as expected tnat higner cperating ccsts and carrying charges a result of the celay in the ecmmere:al coeration date of en increased investment in plant. if not offset by Unit No.1 at P! ant Farley. maning it necessary to purenase crecerticrate mereases in operating revenues. either by acc:ticnal generating capacity and erergy.

periccic rate rehef cr increases in sales. will affect future Cther coeration and maintenance expenses nave earnings acversety. Increases in sales 6n the future will be increased in successive periocs cue to growth in the affected by the extent of erergy conservatten pract:ced by numter of customers served anc escalating ccsts cf labor cusicmers. elastic:ty of cemanc. weather anc the rate of and matenals. Ancther f acter affec*:ng the ircrease in 1976 ecencrric grcwth in tre ccmpany s service area. !n recent was maintenance excencitures necessitatec ty installatten ye4rs. earnmgs cf pu::nc utikty companies. inc!ucmg these of cf cellution-contret fac:hties at several generating units, as the ccrreany. have tended to cectine cunng pencds well as expencitures for other maintenance seneculed for folicwir'g the initial realization nf general rate increases a f ater date cut performed while the generat:ng units were anc prior to receipt of further rate rehef. remcVed from service for installaticn of such f acilities.

Tre fcilowing discussicn focuses on the facters that Cecreciation and amcrtizaticn have increased from Have significantly affected cperations since 1976: penod to pened as a result of accations to depreciable Operating Revenues, Electric plaat in service anc amortizatien cf the costs related to the

'rcre 3ses in ccerating revenues in each pened since cancelled Barton Nuc ear E! ectr:c Generating P! ant. The i 1976 are atintutacie princ:cally to increased sales. rate compcsite straignt line cepreciation rates were mcreases and recevery of substantial pcrtions of increased approximately 3.1 % in 1976. 3.2% in 1977. 3.4a in 1978 and fuel and net purchasec energy ccsts *hrough energy 3 5% in 1979 for all cepreciable plant and mc!ude a factor to acjustment clauses contained in rate schedules. Terntenal provide for the excected ecst of deccmmissicning nuc! ear klicwatt ncur sales mcreasec 81% in 1977,5.3% in 1978 and facihties.

1.1 % in 1979. As a result cf rate increases and bilkngs uncer Taxes other than inccme taxes have increased in each energy aclustment clauses. the average revenue per kiiowatt. period thrcugn 1979. principally cecause of additions to hour scic nas increasec from 2 51 cents in 1976 to 3.71 the preperty tax base and increased property tax rates.

cents in 1979. increased kcense taxes resulting from increased revenues

, Operating Expenses, Electric frcm saMs cf electric:ty and higher payroll taxes.

The mcst significant element cf ecerating expenses Federal and state inccme tax provisiens are discussed has ceen the ecst of fuel. Average fuel cests. :n mills per more fully in Note 5 to the financial statements. The W llcw att-nour cf net fuel generation. were 10 53 in 1976. Nuctuations in income taxes meen penods are cue i 12. 4 in 1977.12.01 in 1978 and 15.62 in 1979. pnmanly to changes in net income befcre income taxes The cerncany's rates inctuce erergy adjustment and from the recuction of the feceral inccme tax rate from clauses which enable it to recover fuel and r et purchased to 46% in 1979.

energy ccsts currently. The ecst of fuel used for generation Other Income

,ncreasec $70.442.000 in 1979 over 1978. This was caused Beginnmg i 1977, the debt scrtion and associated tax

y an increase in fossil fuel expense of $66.878.000 wnicn effect of the allowance for funcs used cunng constructicn

.vas cartially offset by a decrease in nuc! ear fuel excense were recorced as recuctions in mterest charges. Because cf 516.436.C00. The mcrease in fossil fuel expense resulted of this change in repcrting, other inccrne for 1977 from an ircrease of accroximately 16% in the average cost cecreased from 1976. The cecrease in other mccme fer the per icn of ccal censumec. a fu!I year's generat:cn by Unit No. Sears 1978 and 1979 is pnmanly cue to a decrease in

• cf c' ant %Iler anc mcreasec availacihty of the company s allcwance for equity funcs usec dunng constructicn.

cirer steam gererating plants. The cecrease in nuctear 'Lel resutting frem decreasec constructicn work in progress.

e ncense resultec frem an e:ght-monin snutdown cf Unit No.1 Interest Charges and Dividends on Preferred Stock

! cf P! art rarfey fer scnecuted refuehng and a Nuclear Interest expense on long-term and cther cect anc

-egulatcry Commissicn trancatec testmg program mvetving -divicencs on preferrec stocx have mcreased as a result cf cromg succcris. The ccst of fuel usec for gereration the issuance of accitional secunt:es to finance the

,ncreasec 544R7.000 in 1978 corrcarec to 1977. essentially construction cregram arc the nigner interest and divicend frem an ircrease cf 18% in the cost per ten cf coal and a full rates en sLcn secuntres. Net mterest charces for '977

, ear s gererat:cn by Unit No.1 at P! ant Far:ey. resulting in ~

cecreasec as a result of the reclassificaticn of the cect ircreased nuc: ear fue! excense. The cost of fuel usec in pert:en and relatec tax effect of the allowance for 'uncs gereration .rcreasec 543.598.000 in t977 over '976. pnmaniy used cur:rg ccnstruc*icn.

as a result cf an tncrease in steam eiecinc generation cf l acercximate!y 5 %.

i 17

i Ul Statistical Review 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 Capitatuatusi - Lsulof Year (Iin nnasals of Ibilar si Cuisim wi Stock 224.358 224.358 224.358 224.3f.8 224.358 224.358 224.358 224.358 224.358 217,365 193 365 Othes (bid in capital . 692,145 625.700 578.5fC 483.500 333 9x) 2t6.500 151.9 0 H6,9 0 42.000 - -

Pr etnatun on Pieter sed Stock. 461 461 461 461 461 461 349 338 152 152 146

! Ear nin9s fiutained an the f

13usiness . 105.569 102,129 104.307 149,981 IM.878 137,096 134,902 115.613 110.468 108812 100,79t1 Ps cler red Stock:

liedeeniat;le-tkit tnanMtory . 3M,400 334.400 334.400 235.400 235.400 235,400 200,400 150 400 92,400 92.4(O 82,400

- Mas ulatory. 50.000 50 000 50 000 50.000 - - - - - - -

Lon9 Teren Det4. 1,007,989 1.894,352 1.681,760 1,314.bb7 1,200.287 1.02ti.982 944,354 738.418 618 614 533 739 473.826 Utility Plant (Ihousasuls of Ovilar s)

Total Utilaty Plant - Er ut of Year , 4.814.5N 4.372,725 3.903.1M 3,405.774 2.971.tel 2,544,137 2.130,174 1,759 520 1,516,144 1.321.152 1.198. ItA Gross Additkins . 459,533 483,430 M 0.076 443.951 447.966 428 874 383.114 257,338 212,157 132.008 90.410 Opes ating flevenues. Elects ic (lluxssasuisof Dollasd).

Iteshlential . 385.224 351fA4 339.393 248.306 230,161 178.949 152.6H9 126.355 100.703 97.809 90.74l Curunercial , 242.62ti 213.059 208 664 152.076 92,121 74,758 140.568 1(0.944 63.541 55 MO 51.9tei la ulustnal . 442.221 357,691 338.007 238.282 208.0t,8 165,540 127.415 104.427 88.471 77.922 7tiB21 Other. 82,391 73.543 62.535 46.618 42,280 25,176 20.937 15.053 12.445 12 635 12.511 Tutaillevenues troen 3 Electnc Sales - Terntorial . 1,152 462 995.937 948.799 685.282 621,077 479.609 393.162 320,593 274,160 244.0ti6 232.039 th anler ritorial Sales . 1,222 10.534 12,496 7.817 5,253 5,031 -

1.981 1.255 3 Uta t>43 Other Operatin9ftevenues. 9,939 7,9 72 7,398 6.568 4,920 4.815 3 679 3.12ti 2,910 2.182 2,116 Total Operatin9Fievenues.

Electuc . _

1,163 623 1,014.443 9td 693 699.ti67 631,250 489,455 3miB41 325.700 278.325 249.317 234.798 Electnc Sales (Iiwinsarkis of Kilowatt flones).

, liedhiential . 8.ti19.4 t l 9,088.85ti t)' .804.755 8,135.215 7,743.609 7,321,419 7,M 4.878 6 6$6.760 6.10t> 810 5 7501'96 5,12 8,9 U

+

Guinneraal . 5 207.513 5.282,746 5,121.461 4,793.698 4.611.863 4,306.750 4.194.288 3.797,751 3.394 637 3.209 540 2.8u5,341 ,

lawlintoal . 14.629.581 13.799.043 12,845.489 11,872,717 10,742,3/5 10.992,118 10 867,180 10 278,181 9.725 873 9.414 039 9.307,353 Other, 2.587.807 2.601 616 2,467,159 2,251,388 2,131.719 2.059.514 2,427.814 2.015 Sl5 1.t>41,119 1,ti78 781 1 690 057 Total Electoc Sales - Ter nlonal . 31,1G4,318 30 775261 29,238 864 27.053.018 25.229.516 24.679.801 2:,818.160 22,748 637 20.86tt439 20 072.676 18.984 t60 PLoterritorial . 62H6 342,302 615.423 544.327 420.868 552,995 -

104.303 145.470 381.7tn 78 791 Iotal Electoc Sales . 31.110. tot 31,117,563 29.854,287 27,597,345 25.650,384 25,232.79ti 24.8M,1to 22.852.940 21.013.9n0 20.457.465 19 0b3.48 8 ElectocCustonors - Erut ot Year:

liesklential , 856,193 841,781 821,599 806,897 787,262 773.tBI 755.251 729.840 706.491 6H6.381 673.172 Cainneeual . 115,435 115.208 112.691 110.862 107,440 105.887 144.307 101.613 97.903 94.665 92fd3 ,

lodostmal and Other . 4.572 4,451 4286 4,149 3.956 3.815 3,714 3,5tki 3.468 3.372 3.319 lotal 97ti 200 961,440 938,57ti 921208 898 658 882,7Uri Bri3.272 un017 807,862 784.418 7tt9.124 fluskientiat Senice.

Aserage Annual kale Use per Custorner . 10 231 10,939 10 840 10223 9.9M 9,575 9.895 9 285 8173 8.475 7 tal Actage.!Ilevenue per ka h - 4 448 3 87 3 85 3 05 2 97 2 44 2 08 1 90 1 80 1 70 1 77 Averago Anonal(hllper .

Costianer -. $ . 454 09 423 24 417 83 312 02 295 85 234 02 176 25 157tA 144 24 136 36 205 7(J i  :

4

l .. ..

Auditors' Report To the Ecard of Directcrs cf Alabama Power Ccmpany:

We have examined the balance sheets anc statements of capitalization of Alacama Power Ccmpany i

(an Alabama corpcration and a wnctly owned subsidiarycf The Southern Ccmpany) as cf December 31 I 1979 and 1978. and the related statements cf income. earnings retained in the business. cther paid in capital and sources of funcs for gross prcperty additions for the years then ended. Our examinations

were made in acccrcance nith generally accepted auditing standards and. accordingly, included such 4

tests of the acccontmg recercs and such cther auditing prccecures as we censidered necessary in the circumstances.

In our repcrt dated February 2.1979. our cpinien on the 1978 financial statements was cualified as being subject to the effact of adjustments. if any. that may result from tne final outcome of a pending rate matter. As explained in Ncte 1 to the financtal statements. regulatory approval was obtained to permit recovery of the deferred ccst of a cancelled nuclear generating plant. Acccrdingly. our present opinion

cn such financial statements. as presented herein, is cif ferent f rcm that expressed in cur previous

reDCrt.

l As discussed more fully in Ncte 2 to the financial statements. the Ccmpany has billed increased retail revenues subject to pcssible refund. The effect of any adjustments that may result from the final outccme cf this pending rate matter cannct presently be determined.

In cur coinion, subject to the effect, if any. on the 1979 financial statements of the final outcome of the

pending rate matter ciscussed in the prececing paragraph. the Snancial statements referred to above present fairly the financial pos Con of Alabama Pcwer Ccmcany as of Decemcer 31.1979 anc 1978 and the results of its cperations and the scurces of funds for gross prcperty additions for the years then ended, in ecnformity with generally accepted accounting principles applied on a consistent basis.

i f

Arthur Andersen & Co.

Birmingham. Alacama.

.: ecruary 15.1980.

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Balance Sheets attecember31.1979and1978 Assets 1979 1978 UTILITY PLANT (Notes 1 and 3): tin Thcusancs)

In service and held for future use, at criginal ccst . 53.695.721 $3.543.626 Less- Accumulated prevision for decreciation . 818.279 709.123 2.877.442 2.834.503 Nuclear fuel, at amertized ccst . .

130.373 63.670 Ccnstruction werx in oregress-

. Nuc! ear . 548.575 465.144 Cther . 401.635 270.633 3.958.025 3.633.950 GTHER PRCPERTY AND INVESTMENTS:

Scutnern Electric Generating Corrpany (Ncte 8) 16.400 16.400 Ncnutility prcperty at cost. 2.345 2.287 3

%scellaneous. 560 685

! 19.605 19.372 i

CUFRENT ASSETS.

Casn (Ncte 4) 9.C48 9.283 Temporary cash investments. at cost . -

8.507 Receivables. less accumulated provision for unccliectible accounts cf $1047.000 in 1979 and $811.000 in 1978, 103.262 88.347 Refundable feceral income tax (Note 5) . 3.154 -

Fossil fuel stock. at average ecst . 123.752 127.684 Materials and supplies. at average cost. 20.913 20.415 Prepayments. 15.651 11.389 275.720 265.625 CEFERRED CHAFGES:

De' erred cost cf cancelled plant (Note 1). 19.4C3 26.404 Dect expense. ceing amcrtized . 6.237 6.378 Miscellaneous. 13.636 16.177 1

39.326 48.959 54.292.736 53.967.906 Capitalization and Liabilities C APITALIZATION (See accompanying statements):

Ccmmon stock equity. 51.022.533 5 952.648 Preferred stock -

Nct sub;ect to mancatcry recemption. . 334.400 334.400 Subject to mancatory recemption (Note 7). 50.000 50.000 Leng-term cect. 1.883.684 1.851.394

3.290.617 3.188.442 CUPRENT LIAEtLITIES

Nctes payable to banks (Note 4) . . 352.478 219.253

'_cng-term cect due within one year (Ncte 6) . 24.305 42.958 Accounts payable. 158.878 109.968 Pevenues to ce refunded -

2.547

!nterest accrued . 49.093 44.359 Custcmer cecesits. 18.254 16.600 Divicencs ceclared. 7.805 7.305 Taxes accrued-Feceral and state income . 5.284 7.507 Other . . 6.177 6.396

%sce!Ianeous. 10.329 5.652 534.603 463.045 CE:E.: RED CREDITS. ETC.:

Accumulatec ceferrec mccme taxes . 302.831 263.675 Accumulated ceferred investment tax crecits . 44.017 39.054 Miscellaneous. 20.668 13.5E0 367.516 316.419 COMMITMENTS AND CCNTINGENT MATTERS (Nctes 2. 3. 4. 3 and 10) 54.292.736 53.967.9C6

'O The accomcanying nctes are an integral part cf these calance sneets.

. _ - _ = _ _ - _ - - _ - -- _.__ -_ _.-. . .. __ - . - _ . _ - . . - . - -- .

4 1

l Statements of Capitalization atcecemcer31.1979and1978 Percent of Amount Total 1979 1978 1970 1978 (In Thousancsi i CCMMCN STOCK ECUlTY; i Commen steck, par value 540 per share. authenrec 6.000.000

snares, outstancing 5.608.955 snares , 5 224.358 5 224.358 1 O*ner paid-in capital . 692.145 625.700 Premium en preferred stock . 461 461 Earnmgs retained in the ousiness (562.438.000 restncted against

cayment of cash common civicencsHNotes 2. 3 anc 9) . 105.569 102.129 j Total 1.022.533 952.648 31.1'o 29.9'b CUMULATIVE PREFERFED STOCK (Ncte 31

51 par value. authenzec 27.500.000 snares-nere cutstancirg .

{

51C0 par value, authenzec 3.850.0C0 snares -

Nct subject to mancatery redemption:

Cenes 4 20*b to 4.52*b 41.400 41.400

! 4.60*b to 4.92'b .

29.C00 29.000

{ 5.96'o to 8.04'b 22.000 32.C00 8.16'o to 9.44*b 232.000 232.000 Tctal (annual cividend recuirement 525.719.000) . 334 400 334.400 10.2 10.5 1

Sociect to mancatory recemption (Note 7)

i 11.00*o (annual civicenc requirement 55.500.000) . 50.000 50.000 1.5 1.5

) LONG-TERM CEST #4ctes 3 anc 6):

1 First mortgage bencs-Matunty Interest Rates l

! Septemcer 1.1981 3to 'b 15.000 15.000 Apnl 1.1982 3 2 e 'b 12.000 12.000

May 1.1983 4 ' e 'o . 11.939 11.939 Maren 1.1984 3. ' e ' a 17.000 17.000

1985 tnrcugn 1989 3 tm 'b to8 5s * . 161.225 161.225 4 1990 through 1994 4 2 s

• to 5'a . 72.240 81.957 1995 through 1999 47s

• to 8 Se 'o . 150.658 157.374 2000 tnrougn 2004 7 ' *e to 9 24* .

593.424 595.424

, 2005 through 2008 824 *a to 10 7s 's . 6:0.000 610.000 i Unamortized ciscount anc oremium, net . 18 143) (8.496)

Tetal first mcrtgage boncs 1.635.343 1.653.423 Pollutien-ccetret ocligations-December 1.1979 to 2004 (cue senally).

7 ' 4

• b to 9 ' e 'b . 24.700 29.700 l 2003 to 2008. 6's to 9 '2 *'b 171.7CO 171.7CO i ;unes hetc in construction func . (31.C67) (44.755)

Unamerti:ec ciscount . .

(3.841) i4.035)

Tctal pollut:en-centret ochgations . 161.492 152.610

$ Ctligations uncer cacitali:ed leases-Nuc! ear fuei 84.656 58.490 Cther. 26.498 29.829 Tctal ecligations uncer cacitatized leases 111.154 88.319 Total icng-term ceet (arruat interest recuirement 5167.608.000) . 1.907.969 1.894.352 Less-Long-term cect cue within cne year. 24.305 42.958 Long-term ce:t. exctucmg amounts cue within one year. 1.883.684 1.551.394 57 2 58.1 Tctal capitali:stien. 53.290.617 53.188.442 100 0*'. 100 0'.

The acccmoanying nctes are an integral cart of these statements.

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Statements of Income fcr tne years encea Cecemcer 31. *979 arc '978 1979 1978 ilnThousancs CPERAT NG FEVENLES. ELECTRIC ' Note 2) 51.*63 623 51.014.443 CPERAT'NG EXPENSES. ELECTAIC:

Coe ratien --

cel. 365.628 295.186 Purenased and intercnangec power. net 124 929 161.602 Otrer. 129 430 '22.511 Maintenance. 30.660 76 085 Cepreciat:en and amcrtizaticn . 123.075 1C9.315 Taxes cther than income taxes . 74592 63.737 Feceral and state inccme taxes iNete 5: 58.759 25.080 Total ecerating e*penses 957 073 553 5tS CPERATING .NCOME. ELECTFIC . 2C6 550 160 927 OTHER ;NCCME.

Aacwance fer eccity funds used during ccnstruct:cn iNcte 1) 28.554 38.927 Crvicencs from subsidiary .Nete 8) . 2.425 2.511 Other. ret 9.796 3.454 income before interest cnarges . 24T.325 M 319 INTEREST CHAPGES.

Interest en tong-term cect . '63 343 155 353 Other interest expense 52.519 14 292 Allowance for deot funcs usec dur:ng construction (Note 1) 157 196) (37.948)

Net mterest cnarges. 153 6E6 131.697 NET NCCME Sa659 74.122 DIVICENCS CN FREFERRED STOCK 31 219 31 2'9 NET !NCCME AFTER DIV!CENCS CN FREFEFRED STOCK iNetes 2 and 3). 5 57440 5 42.903 The accorrpanying notes are an integral part of these statements.

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Statements for tne years eneec Dacemcer 31.1979 anc 1978 l 1979 1978 Earnings Retained in the Business (in Thcusancs) i Balarce. beginning of pened . 5102.129 St68.307 Acd (Ceduct):

Net inccme after divicends en preferred stocx INotes 2 arc 3) . 57.440 42.903 Casn civicenes on commen stocx. (54.000) (108.500) 1 Preferrec stock issuarce expense. -

1. 231)

! Balance, end of pened (restrctec as incicated on statements cf capitalization). 5105.569 5102.129 ,

Other Paid-In Capital Balance. beginning of period . 3625.7C0 5578300 Casn centnbution to capital by parent ccmpany . 66.4 5 47 2C0 Salance.end cf pericd. 5692.i45 5825.700 4 Sources of Funds for Gross Property Additions Net ircome (Nctes 2 and 31 5 58.659 5 74 122 Less-Civicencs on ecmmen stock . 54.000 108.800 Cividencs en preferred stock . 31.219 31.219 i

Peinvested earnings 3.440 (65.897)

Pnnc: cal noncash items-

Depreciation and amertization . 137.275 140.C87

! Ceferred inccme taxes. ret . 61.970 25.151 Allowance for funcs used curing ccnstruction (grcss) . 185.750) (76.875) 116.935 22.466 Cecrease (ircrease) in net current assets. ether than long-term debt cue mthin ene year and notes payacle to tanks-l Casn and temperary casn investments 8.742 (9356)

Peceivables (14.915) (9.805)

Aefundable federalincome taxes. (3.154) 25.985 1 Fossil fuel stcck . 3.932 (37.846)

Matenals and supplies. (498) (2.038) 3 ACCeunts payable. 48.910 26.082 Pevenues to be refunded. (2.547) (12.855) interest accrued . 4.734 9.688 Taxes accrued 'M2) 6.208

! Ctner, net 2.069 66.798)

46.831 (10.935)

Ciner. net (includes alicwance fcr funcs used cunng constructien) . 82.579 43.494 l Tetat internal sources. 246.345 55.025 Safe cf securities-irirst mortgage bcnds. -

200.000 Less-Soncs retired . 18A33 10.345

(18.433) 189.655 Cacital centribution cy parent ccmcany 66.445 47200 Oc:lutien-centrol cetigators 8.688 26365 Cthgatices uncer cacitalized leases . 22.835 (754)

Sales of creperty, net tcck value . 428 176 79.963 262.842 ircrease in notes payabte to banks 133.225 *65363 Tctal external scurces . 213.188 429.405 Grcss Property Acciticns tinc:cces net allcwance fer funcs usec cunng corstructen in the amount of 558386.000 in 1979 and 558.134 000 in 1978). 5459 333 5483.430 i

The acccmcanying nctes are an integral part cf these statements.

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. - _ _ - . .-- . . _ _, . . . . . - . - - - . , _ _ , , . - _ _ - _ . - - - _ . - , . . _ - . _ _ - , _ - - - _ . . , , . - - ~ -

Notes to Financial Statements

1.

SUMMARY

OF SIGNIFICANT ACCOUNTING Allowance for Funds Used During Construction-POLICIES: The allowance for funcs used cunng constructen is an General- acwMg pxemeWew meamm The ccmcany is a wholly owned subsidiary cf The mesmags m cehcs am a emm mal used to hnarce cmsnam are cnargedo dwamn Southern Ccmpany whicn is me parent company of f our the same manner as construct:cn laccr and material costs.

coeratmg ccmpanies and a system service cornpany. The The accrual c' allcwance for f uncs used cunng coerating ccmpanies are engaged in the business of construction is in acecrc with estaolished rate-making providmg elecinc utility service in four soutneastern states.

orccedures and acccuntmg policies cf the industry, but Operatmg contracts among me companies. cevenng inter-cces not represent current casn mccrre.

q connecten arrangements. 6ntercnange cf electric cower The compcsite rate used to cetermme tre amount cf the and loint ownersnio of generating facilities. are subject to alicwance. net of the inccrre tax effect of capitalized cett regulation by the e,eceral Energy rsegulatory Ccmmission ecst, was 8.1 % in 1979 and 8.2*. in 1978.

iFwC) anc the Secunties and Exchange Commission iS EC). The system service ccmpany provides. at ecst. Depreciation-technical anc cmer specialized services to the parent Depreciation of the enginal ccst cf ceprec:acle utilir/

cmcacy and to eacn of the cperatng ccmcanies. plant in service is previced usmg ccmccsite straignt-lire The parent company is registered as a hcicing ccmcany rates whicn acproximated 3 are anc 3.37?. in 1979 and under the Public Utility Holcing Company Act of 1935. and it 1978. respectively. and incluces a f acter to previce for me and its subsicianes are subject to the regulatory provisiens expec*ed ccst of decommissioning nuclear facilities.

of the Act. The ccmpany is also subject to regulatien by the Ceccmmissicning ccst fer P! ant Farley Unit No.1 is FERC and the Alabama Puclic Service Commission (PSC) estimated at approximately $30.000.000. This ccst is based and fcilcws generally accepted accounting pnnciples and on current price levels and prompt ceccmmissioning after the accounting pclicies anc practices presenbec by the the unit is taxen out of service. This estimate will be respeC!ive Commissions. aciusted periodically Consicenng Changmg pnCe levels and technology.

Revenues- When prcperty subject to depreciaticn is retired or

, Revenues, mcludmg those subject to pcssible refund. ctherwise cisposed cf in the normal course of busmess, its

! are inctuced in mccme as billed mcnthly to custorrers en a ccst. together with its ccst of remcval. !ess salvage. is cycle oilling basis (see Note 2). Charged to the accumulatec prevision for cepreciation.

Fuel Costs - Maintenance-Fuel ccsts are expensed as t*e f uel is consumed. The The ccst cf mamtenarce. repairs and replacemerts of ccmpany's rates inc:uce erergy adjustment clauses uncer minor items of prcperty is cnargcc to mamtenance expense picn fuel and net purchased energy costs accve er below acccunts. The ecst of replacements of prcperty texclusive certain base lesets are billed or crecited to customers on a cf minor items cf prcpertyIis charged to the utility plant current basis. The ccst of nuclear fuel, inc!ucing the accounts.

estimated cost of anticipated permanent storage ci spent fuel. is amcrtzed to f uel expense based en the cuantity of Pension Costs-heat produced fer generatien of electnc energy. Such The corrpany has a trusteed and noncentributcry amertizaticn Aas 58.500.000 in 1979 and S24.945.000 in pesion plan which ccvers substantially all regular ig73, empicyees. The pclicy of the company is to fund eacn Fmal disposition cf spent fuel may recuire future War s acen.ied pense msdom plan which ammmed to aclustments to f uel excense. Pencing ultimate disocsition. Min W9 and M3N M Wese the ccmpany has suffic:ent storage cacacity at its nuc! ear ammms E2M m e am mh M wem plant for storage cf the scent fuel until 1991 and 1994 for c we cperam expenses. me balances wem Plant carley Unit Ncs.1 and 2. respectively. Cnarg@o cmSWction aCm acmms. N pesicn func assets are excected to exceed the actuanally Utility Plant- corrputed value of me vested benefits at Cecemoer 31.

Utility plant rs stated at ongmal cost. Such ccst :nctuces t979. The unfunced ener service ccst uncer the plan and ac clicacle acmmistrative and general ccsts: payrcil- succlemental centracts amcunted to accrcximately re!ated ecs s sucn as censicns. taxes arc cther fnnge 517476.000 at Cecemcer 31.1979. and is ceing amcrtred

cenefits: anc me estimatec cost of funcs used cunng ever a cened of acoreximately 15 years.

constructien~

The comoany has cancelled construction of P? ant Income Taxes-The ccmcany previces deferred income taxes fcr a:s Barten. Cbligaticns related to ecuicment cesign and ncome tax tming cifferences to me extent permitted by the engineermg anc termmation cf contracts acclicaole to this acercenate regulatcry agencies. The company is me!ucec piar t amountec to accrcximately 534.000.C00. The in the censclicatec feceral inccme tax return of The i cerrcany nas receivec regulatcry accreval to amerti:e and Southern Ccmcany. (See Note 5 for further mformaten recover nese ecsts as an cperatmg expense. rataciy cver regarcing inccrre taxes.)

a five-year pened. :,::cen amcrtization is meluced in "Cecreciatien anc amcrti:stion ' and amcuntec to 37.'45.C00 in 1979 anc 57.116.000 in 1978.

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1

8. RATE MATTERS: gereratmg ptant anc ctrer ecnstmeton crojec:s in 4

e n Cecemcer 20.1978. me ccmpany fdec aith the PSC Cecemcer 1973. After rece4ving increased retail rates in July 1979 (see Ncte 21, ccrstructen acevites were resumec

] a r ate merease recuest estirnated te increase retad rates by at Unit No 2 cf Piant Farley anc Scu;cm Cam tut l acoreximate!y $2S8.8 miilien annually The PSC on Marcn 6. constructico ceIays centmuec at :re etner major prelec:s.

1 9 9. gran:ec a 9' . percent errergency mcrease 15819 The cu*taned ccrstruc9en arcgram will result in accatecal

< . illion annuallyleffectve Marcn 9. ;9'9 in retad rates. Cn ecs:s onmanly frcm tratenal anc laccr escalaten arc an

Jety ? 9.1979. me PSC isa.ec an orcer maxmg permanent increase n allowarce fer funcs useo cunng constructen,

, ?e 9'a -percent emergency merease and grantec an an.cn could be sucstantial cepencing on me curation of me 1 accitional 5-percert meresse effectve Ju!y 19.1979 anc an construction et.rtailrrent.

3-percent increase effectve January 1 1980 These Cn Fecruary *0.1975. a crean cccurrec at the corrpany's mcreases in retatt reveaues aggregate accrcomate!y 52C8 Scuicin Cam causmg extensive camage mereto arc i millicn annuady. Cn August 20.1979. me ccccany arc resutting in me remcval frem seroce cf me hycrcelectnc certain mtersencrs accealec :re CSC s creer to tre gererating f acilities (225.000 kilcwatts) at me cam fer an sucrerre Ccur;cf Aacama. Cn Oc ccer 19.19a tre incefin:te cenoc. Tne Ocs:s cf reconstructen arc recair St.c reme Court permittec tre ccmoany to collect. suciec: to r.ere eanier estimatec to ce accrcxirrately 537.062.000 anc

. cess.cre etunc. he Scercert ncrease wnich was 320.000.000. respectsely. Mcweser. pnmanly as a result of j ctrer.sise net effectse untit jaruary ? 1980 At Cecemcer me ir ciementation cf :ne cccstructen celays. sucn ecs:s j y 19~9 sucn increasec retan resenues suelect to pcssicle have mereased anc are new estmatec to ce accrcximately refunc tetaiec 5 6 098.0CO. Ahich. after ceducun9 542.56i000 and S22.180.000 respectsely. The ccrepany is acc acacle tses. ncreared ret mccme for 1979 by engagec m litigaticn wch the ccetracters responsible fer 18 Cea C00.

constructen of the cam arc with certain all-nsk msurers.

Cn Cecemcer 28.1979 the company filed revised retail The cer pany has previously consummated a settlement rate screcules Ai:h tre PSC seemrg to increase retail with machirery creaxccwn insurance carriers fcr resences by accremmate'y 5122 3 millicn annually. 0asec 51.850.000 and consummated a settfement curing 1979 with

)1 en a test year ecc.rg Nesemcer 30 1979 The PSC certain all-nsk insurers havmg $10.000.000 cf the total suscencec me etfectve ca:e cf :he rew rates through July 540.000.000 all-nsK insurar'Ce ccverage fer 85*a of the face 2e. i980. uniess otherwise crcerec, pencing neanngs- amount of tre pciic:es. The centrac cr litigaticn. as well as Coreceraten of the rate cesign stancarcs of the Puctic me two cases seening recovery of the remainmg Utility Pegulatcry Pcocies Act of 1978 cas ceen

$30.000.000 cf insurance ceserage remams pending. It is

, ccnscucated mio the percing proceeding- the ccmicn of management that a sucstantial cortion cf the

!t is nct ocssitie at this time to crecict the final outccr*e earlier estmated ces:s of recorstructon anc repair will be cf me tcregemg retail rate proceec:ngs. receverable througn me ccmcinec prcceecs of the Percmg tefcre me FEPC are wnciesale rate tanffs of company s insurance and contrac:cr litigations.

me corrcany filec in June 1974. creocsing to increase Anciesale revenues frcm cis*nouticn cocceratives and Financing-munic:patites by acercomately 512.6 millicn anrually over 8 he acility of the cmpany to cary wt its ccnstmeten a test year enc:ng June T.1975. The increased rates were plan cecencs en the amcunt cf funcs generated internally permittec to go ir:o effect as cf Septemoer 12.1974. sutiect and the f uncs it can raise by external f mancmg. The to refund of mat pcrton, if ary. cf me increase nct company s pnmag souces cWiemal francmg am sa@s sucsequently approvec by me FEPC. On August 1.1979 :he of long-term cect and preferred stocx to the public receipt FEPC issued an ecmien modifyirg me ir:tial cec:sien of the of accit onal paic-in cacital frcm The s,cuthern Company.

i acmmistrate.e law judge m mis proceecing. The cor pany safe cf pektemecc rcameae tems by pdc anc mtersenmg cistnbution cocceratives and authenties and feasing of nuc! ear matenal.

municipalities acclied fcr reheanng of sucn opinten. and en r'3'd-in cacitalis planned c ce prwicec to the extent September 28.1979. :he FERC issued an orcer clanfying its possible. cv The Southern Company f rom the sale cf previous coinion and cenying acclications for rehearing. It accacnal ecmmen stcck m amats am at ames mt ye s me comion of maragement mat me company will be acle cetermmec; however. mere is no assurance that The

o re:am substantially all cf me resente ccitected uncer Scuthern Comcany can contmue to sell accitenal shares of

! .me mes. 'ts ccmmon stecx in :ne amounts anc witn :he frecuency that

.veutc ce recuirec:o crovice funcs for me company s I

3. CONSTRUCT 10N PLAN. FINANCING, AND constructen crcgram.

FUEL COMMITMENTS: In creer to issue accincral icng-term cect and pref errec stocx. the ccmpany must ccmcly with certain earnings l Construction Plan- coverage recuirements certamec mts mertgage incenture The comcany s estr"a:ec ctant accitions, as cf Cciccer anccer cratechar*er.Themost'estncaveof these

!9. i979. 'cr me g /s 19EO.1981 anc 1982 were crcmciens generally recuires fcr me issuance of accitional 5459.iE1000.1491.267.2C0 am 5575.945.000. rescectvely- cect sec: nties mat cefere inccme tax earrmgs ccver The constructen crcgram is suelect *o cenccic review anc crcferma annual mierest charges at f east t.vice: anc fcr revisicn. anc ac*ual ccr struencn ecsts to ce mcurrec may .ssuance of acciticnal creferrec stcck. mat after mecme :ax vary frem tre at:cve estmates ::ecause of f ac: Ors sucn as earnmgs cover preferma annual interest cnarges and grantrg cf treiy anc acecuate rate increases. new creferrec s:cck civicencs at ! east cre arc cne-half tmes.

est: mates Of mcreasec ccsts. revisec Icac estmates. anc These ccverages. irc:ucmg revenues eniec suc;ect tc me avaiiacinty arc ccst cf cacitai.

cessicle refunc as ciscussec in Ncte 2. fcr first rect' gage As a resu:t cf macecuate earvgs anc mstffic:ert casn- Ocncs arc ter preferrec stocx fcr me year enced Cecemcer me ccccany cegan :r-Oiemertmg ce'ays in i:s maicr 25

31.1979. were 2.17 and 1.19. respectively. Without revenues Puctic 12:1 ty Hoteirg Company Act cf 1935. to have suelect to ref und. these ccverages were 2.04 and 1.16. outstancing mrcugn Septemcer 30.1960. a maximum cf rescectively. $455.C00.000 in sncrt-term financmg.

Because the company has been unacle to fund fully its Details cf me unsecured short-term rctes cayable to construction program witn sufficient amounts cf long-term barx s cutstancmg durmg 1979 and 1978 are se: for*h secunties. its short-term unsecured bcrrowmgs have teen betow:

outstancing for longer penocs cf time and in larger 1979 1978 amounts than would otherwise be the case. Weignted average interest rate The cerrpany's ability to cotain funcs f rom external en borrowings sources and generate acequate amounts cf mternal funcs cutstanding at end cf AniCh will enable it to finance its Ccnstruction Oregram is penod. 17.09*. 12 82'e cecendent on receivmg acequate and timely rate relief. Vaximum amcunt of bor-(See Ncte 2 regardmg status cf rate matters.) Should the rowmgs outstand:ng at company te unable to ottain funds f rom external sources in any month end . 3352.478 000 $219.253.000 amounts wnich, together with irtemally generated f uncs. Average caily cerrowmgs would be acecuate to carry out the present ccnstn.cticn cunng pened $244 446.000 552.101.000 crogram. further celays and possible cancellations wculd We'ghted average interest ce recessary. ccst Of bcrrowings curing Oerloc . 14 27 % ' 0.41 '.

Fuel Commitments -

i To supply a pcrtion cf the fuel recuirements cf its 5. INCOME TAXES:

generating plants. the comcany has entered into varicus long-term commitments for :he precurement cf fossit and A cetail of :he tctal federal and state inceme tax nuclear f uels. In seme cases. such centrac:s contain P'CV'sions is set forth telew:

provisions for pnce escalations and minimum prcduction 1979 1978 levels. In additlen, centracts with certain coal contracters On Thousancs) require reimbursement or purchase, at net bocx value. of Federal-neir investments in mmes er equipment upon termination Currently refundable . 5 (3.154) 3 -

cf me centract. Accitional commitments for ccal and fer Deferred . 68.540 33.918 nuclear f uel will te requirec in the future to supply the Deferred in pner years company's fuel neecs. terecit) . (10.1781 0 0.483) 5 20e 23.435

4. NOTES PAYABLE TO BANKS:

State -

Nctes payable to banks are also utilized to finance Ceferred . 4.259 2.088 construct:en expenditures on an intenm basis. and at Deferred in poor years December 31.1979. 5352.478.000 cf nctes payable was (credit). CC8)

.. C43) outstancing under various credit arrangements. At ,8 Cecemcer 31.1973, the company had credit arratigements ~51 1'645 with banks for apprcximately $569.0C0.000. Tctal aoplicable to inctuced in these credit arrangements is an agreement electnc ccerations. 58.759 25.C80 with a group of banks for credit of $500.000.000, which income taxes acplicable terminates Septemeer 30.1960. The loan agreement to Other Inccme . 0.864) 2.389 contains: O ) restnctions which, among cthe" things. (a) limit Totalincome taxes . . S 56.295 $ 27.469 the amcunt cf certain types of accitionalindebtedness Anicn the company may mcur. and Ib) require that a The ccmpany received a federal mcome tax refund of sucstantial portien of the proceeds from sales of prcperties 58.770.000 for the year ended Decemeer 31.1978. and or secunties. with certain exceptions. be acplied to accrued a refund of feceralincorre tax cf $3.1%000 at recayrrent of the nctes: and (2) recuirefrents for the December 31.1979. attnbutable to the use cf net coerating payment of fees. which fluctuate with changes in the pnme Icsses for tax purpcses in The Southem Ccmpan'/s interest rate and commitment utili:ation. These fees censolicated income tax return. Net operating ! css tax amcunted to $6.693.000 and %832.000 in 1979 and 1978. benefits totaling acprcxima:ely $15.000.000 and rescec::vety. 527.000.000 frem the years 1979 and 1978. rescectively. are Arrangements with respect to the $69.000.000 remaining availacle to recuce federal income taxes ird;ture years anc fines cf crecit excire at vancus times cunng 1980 and are reflected as a recucticn in the provisicn fcr ceferred previce fer average annual corroensatmg balances income taxes.

onmanly ecual to either 15. of the line. whether used cr Re prov sion for ceterred mccme taxes results frem the not. cr 10'. of eacn line clus 10's of amounts terrewed. ccmcany's tax ceduction of accelerated decreciaticn anc Secause the arrangements are based en an average c:her wnte-off s cf procerty costs. as crovicec for ey the balance, me cemoany cces not consicer any of its cash mccre tax laws, beirg significantly greater :han me calances to be restnc*ed as cf any scecific cate. !nc!ucing straight-line cecrectation cf sucn ecsts. 'ncerre taxes ccmcensa:mg balances. *he ccmcany has maintained ceferred in pncr years are crecited to income when ceratmg acccunt calances in these banks averagmg straignt-ime ceoreciation of tncse prcoer:y costs exceeds acoreximately $9.091.000 in 1979. the relatec tax decuctions.

The cemeany has autncnty from the SEC. under :he The tctal crevision for feceral income tax as a percent cf 2:5

/ .*

incorre cef cre it'ccrre tax was le3s than the sta!LtCry agreemC"its. No pnnC: cal er interest Cn these first mer' gag 3 feceral mccme tax rate fer me following reasons: bencs is payacle un:ess and until a cetault occurs en tre 1979 1978 mstaHet eucnase agreemems.

The corrcany nas cacital22ed leased rucl ear matenal Effecove federal mccme tax rate anc recercec re elatec lease celigatens, whicn amcunted as reccrtec . 37 7*. 25 a'*

to $84 6E000 at Cecemcer 31.19 9. arc $58.490.000 at Pecuctors m tax Cecemcer 31.1978. Cne arrargerrent crovices fer me experse resulting frcm payrrent cf mierest mcnthly. in ac/ance. based en the pnr-e statutcry exclusions frcm

nterest rate. as cefired. plus l's 'o 074 *. at Cecemcer taxac!e meer e- 31.1979). The ctrer arrangement previces for the paymert Ecu:ty ccmcorent cf me of mterest at tne tme cf eacn extension cf crect at an

, allowance 'cr forcs used mterest rata casec cn tre secorcary market cid escount cunrg ccnstruct.cn. 92 18 7 rate for tirre certficates cf cepcsits, plus certain accacnal Percentage ce:teten en coal charges (accrex:mately 165 s *. at Cecemcer 31.1979).

reserves mined 1 3. t p,incical payrrents are recuired uncer betn arrangements Cther t3 3.0 basec en the ecst of fuel burred.

E'fecuse 'ecerat mccme !ax rate The company ras also cacitahzed certain venic!e. office cefere vfect cf timing cuildmg anc ecuier ent ! eases. Thevenicte fease citferences 48 8 50 5 cchgatiens amountec tc S14 558.000 and $17.354 000 at T ming cfferences " flowed Cecemcer 31.1979, and 1978. respectively Cthgaticns mrcugn ' for account:rg and uncer the effice buildmg and constructicn ecuiprrent rate-maxing ourpcses - leases amounted to 511.940. COO at Cecemcer 31.1979, and Usmg cfferent cecrec:ation 512.475.000 at Cecemcer 31.1978. Mcnthly pnncipal cases arc rates than xe payments plus mterest are recuired anc at Cecemter 31.

used for bec< curposes. 1979. me interest rate was 17' 4 *. for vehicles and 9% 'o lcr ret (3 0) (2.5) cther ' eases.

Cther 2 I .11 The estimated aggregate annual maturity cf the Feceral income tax statutcry rate . 46 0*. 48 0*. cerrcany's cacitalizec lease cc.igaticos thrcugh 1984 is as folicws: $23.305 OCO in 1980. 530.957.000 in 1981 Investment tax crects utihzed are ceferred and are $27.634.000 in 1982. 510065 000 :n 1983 and 52.620.000 in amcrtized cser me average hfe cf the preperty whicn gave nse to me creets. Sucn amortzaten is acphec as a crect Long-term cebt due wimin one year consists of

, te recuce cepreciaticn in me Statements cf Income and 51.000.000 fcr pcuttion-control ochgations and 523.3C5.000 for caNaHzedlease cchgations.

amcunted !0 $1.713.000 in 1979 and $1.668.000 in '978. At Cecemcer 31.1979. mvestment tax crects tetakng accrexirrately $200.000.000. expiring at vancus times from 7. PREFERRED STOCK-SUBJECTTO 1984 to 19% nave nct teen uthzed and are availacie to M ANDATORY REDEMPTION:

reduce feceral mccme taxes payacle in future years. The 11'4 preferrec stock is subject to a cumulative sinking func recuinng the ccmpany to redeem annually or

6. LONG-TERM DEST: purchase 25.0C0 snares (52.500.000) of tre stock ine anrcal first mortgace cond sinxmg fund aNag t W N cmag has m opp recuiremert ae en June 1!1980(1* cf the aggregate to cade m neer cf shams re@ee anone par amcunt of bcncs. other than refuncing ecncs. authent:cated a anL N h m s m eman 6 pner to January 11. amcunts to $18.433.000. This smking fund purpcses at 5100 per share. plus accruec recuirement ma ce satisfied by the cepcsit cf cash or &cas m W care oWemptenhanges have reaccuired bcncs or by the celivery of concs scec:fically caen me wW sharesmtstaneg ee aumenticated for sucn purecse against unfunced preperty waag s prefermc sm subpo mamatcq acetiens. Satisfac icn of me sinkmg func recuirement cy ecemption anng 1978 am M cehvery cf ocncs against unfuncec precerty acotions is cecencent ucen ccmcriance with certain eamings

8. INVESTMENTIN JOINTLYOWNED FACILITIES:

ceserage recurements oscussec in Ncte 3.

Sciluten-centrci cchgaticns represent msta!!rrent The ccmcany and one cf its affiliates. Georgia Power curenases of polluten-centrol fac:lities financed cy funcs Ccmcany (GECRGIA). own ecually all of the cutstanding censec frcm sales cy cuche authent;es cf revenue ccncs. cacital stock cf Scuthern E! ectr:c Generatmg Comcany We cercary is racuired to make annual payments tSEGCC). whien cwns elecinc generating units with a tctal suf fic:ent fer me aumenties te meet onnc: cal anc interest rated cacac:ty cf 1.019.680 kilowatts. tcgether with rec: iremerts cf sucn ::encs. The first cement en crinc: cal asscc:ated transmissicn facilities. The cacac:ty cf mese 4as mace in 1979 in the arr.wnt of 55.000.000. witn units .s scia ecually to the cerrcany and GECRGIA uncer a

$1.000 CCO cue in 1980 and 5500.000 due 'eacn cf me years centract excinng in 1994 wnich, in sucstance. recures 1981. t 982 anc 1983. anc $3.500.000 cue in 1984. Witn cayments suffic:ent to previce for me cceratng excerses.

rescect to $32.500.000 cf sucn ccilut:en-centret congatens. taxes anc cect service. inc:ucing a return on mvestment.

Se company nas aumenticatec ard cehvered to me trustees wrether er nct SEGCC has any cacacity and energy a :ike onrc: cal ar cunt cf first mer gage ccncs as secunty availacle. 'he ecmpany's share cf sucn amcunts tctaled fer s c::kgaten uncer me installment curcnase 27

..- r

$64 849.000 and S50171.000 in 1979 and 1978. respectively. 11. QUARTERLY FINANCIAL DATA and is included in "Purcnased and interchanged pcwer. (UNAUDITED):

ta io c r guaranteed unconciticnally y, a mane @inamaMaW e rd s tre celigaticn of SEGCO under an instattment sale '

Netinecr e agreement for the purchase cf certain pollution-control one,ating Ccerating Af*er Divicenes f ac:lities at SEGCO's gererating units. pursuant to wnich Fesenues. inccme. en P eferred

$17.4CO.'00 pnnopai amourt cf pcttutien-centrcl revenue E;ectnc E!ectne Stock ccncs have been issued. GECRGIA has agread to (in Thousancs) reimeurse me ccmpany for the prorata pertion of such 1979 ocligation corresconding to its then prcporticnate First $244.657 547.05a S 3.401 owrership of stocx cf SEGCOif the companyis called upon second 271.173 42.889 33*3 to mase such payment under its guaranty. Third 353.489 59.950 27.012 At Cecember 31.1979. the capitahzation cf SEGCO Fourtn* 294 299 56.653 19.684 consisted cf $32.800.000 of equity and 549.120.000 cf Icng-term dett on % nich the annual mterest requirerrent is 1978

$3.138.000. Through December 31.1979. SEGCO has paid First $21662 539.356 $10.3C8 divicencs ecual to its net income. Second 231.549 31.103 4.413 The corrpany and cne of its affiliates. Mississippi Pcwer Third 310 ~63 53.536 26.308 Corrpany. cwn as tenants in common in the prcpertions of F unn 235.9E9 1 932 1.374 60*. and 40% respectively, a 500.000-kilowatt steam

• Includes revenues celled subject to possicle refunc as e!ectnc generating plant in Greene Ccunty. Alabama. The discussed in Ncte 2.

ptart was placec in service in 1965, anc the company's irsestment at December 31.1979. amounted to $52.038.000. 12. SUPPLEMENTARYINFORMATION TO The ccrrpany'sshareof expensesisincludedinthe DISCL0SE THE EFFECTS OF CHANGING ccrresponcing cperating expense accounts in the PRICES (UNAUDITED):

Staterrents of income.

The felicwing supplementary infcrmation, mace

9. DIVIDEND RESTRICTIONS: censistent with Statement No. 33 of the Financial Accounting Stancarcs Scard t F ASS ), is intended to set forth Under terms cf the company's first mortgage bond the effect of both general inflation and changes in spec:fic mcenture $23.482.000 of earnmgs retained in the busmess pnces on the company. lt should be viewed as an estimate at Decemcer 31.1979. is restncted against the payrent cf cf the approximate effect of inflation. rather than as a

ash common divicends. In adcition. the company's charter precise rneasure. As stated by the F SS. the measurement contains previsions which prcnibit the payment of cash and use cf information on cnanging prices will require a ecmmen civicencs (excect mose paid concurrent!y with the substantial learnmg process on the part of all concemed.

rece:pt of a cash capital contribution in like amcunt) in The FASS makes no pretense of having solved all cf the cases Ahere retained earnings are nct at least equal to two implementation prcblems and intencs to review the times me annust preferred stock dividencs. At December recuirements of th S statement on an cogoing basis.

31.1979. this restncticn amounted to $62.438.000. Constant collar amcunts represent histcrical cost stated in terms of collars of equal purchasing pcwer, as measured

10. CONTINGENCIES: by the Consumer Pnce Index for All Urcan Consumers.

The cerrcanyis a member of Nuclear Mutual Limited. Current cost amounts reflect me changes in specific prices established to provide insurance Coverage ag3 inst prCperty of plant from the Cate the plant was acquired to the present.

camage to members' nuc! ear generating f acilities. In the and cif fer f rem ccnstant collar amounts to the extent that event Cf a loss Oy a member Company, the Correanycould specific pnces have increased more or less raCicly than the be assessed a retrospective premium actustment up to a general rate of inflation. The current ccst of utility plant.

maximum of $22.176.000. whicn inc!udes land, land rights intangtbIe plant. prcperty in accition. uncer me Pnce-Ancerson Act. me ccmcany held for future use and construction work in progress, was maintains envate msurance arc agreements cf incemnity determmec by incexing the surviving plant by the Hancy-

.vch me Nuclear Regulatory Commissien (NRC) to cover mitman !ncex cf Puolic Utility Construction Costs. Since thirc-carty liacihty ansmg f rom a nuc! ear incident wrien the utikty plant is nct expected to be replaced prectsely in might occur at the company's nuclear pcwer plant. There is kinc current cost cces not necessanly represent the a hmit cf $560.000.000 en eacn nuclear generating unit for replacement cost of existmg productive cacac:ty.

ouche liacility cf aims that could anse frcm a single nuc! ear Deprectation was determined by acotymg the current mcicent. The comcany is insured against this liability to a decreciation rates to the indexec plant amounts.

maximum cf $* 60.000.000 by pnvate insurance ithe Fuel inventones and me c0st of fuel used in generation rnaximum amcunt presently available), and the remaincer is have not been restated f rcm their historical cost. Regulatten crevicec Uncemnity agreements with me NRC. In the hmits the reccvery of fuel ccsts through the oceration cf avent cf an irc: cent. me ccmpany could be assessed aclustment clauses er aciustments in basic rate senecules

$i000.000 cer inc: cent for its reactor new in service. to a to actual ccsts. Fcr this reason fuel inventenes are I

maximum cf $10.000.000 per reacter in anyyear, etfectivelymonetary assets.

emce cnly histoncal costs are decuctible for income tax curocses. me income tax expense in the histencal cost financial statements was not aciusted.

2S Fevenues and other cceration anc maintenance 1

_ m _ . _ _ _ __ _ _ . . .__m. _ . _ __

s ,=

e <Ce"ses alre8C/ ire!Lce Ine average e*fects of inff at:Cn recuc'!cn *O ret reccNeraCle amCurt.

t r:rg me period in n SICrICal cCilars 3Cc. Inere'cre, no Eec3use Only Te hsteric Ccs! Cf ceOrectat'cn is actustraea S naNe been r"aCO !C trem rcceseraOle .n rates. present ar'c f uture ceOrd( tat lCO IJrcer tre rate-mantry prcCecures CresCr: Cec by tre Or0 visions are it'acecuate fCr pur0Cses Cf maintaining tre

'Ktula!ces ccmmissiCt's to hnicn me Company is subject. DurCnasir'g PCwer irNested by !ne COmtrcn stCcknCicers crir me r.ister

c ccst cf plant is receverable in revenues as arc the related casn ficas are inaceauate fcr reciac:Og me cecreC:3!:Cn. 7herefcre. Te e* Cess Cf Te C:st Of plant prCCer'y The irrCaCt Cf Inis rate-reamrg prCCess On Ine ita'ec in terr"s cf ccrstant Octlars cr current Ccst that Ccmmen stccx nCicers is mitigatec to tre extent trat l 9xcencs tre nistCric Ccs! cf Clart ts "ct prese"tly ceCrec:amte crCCer*y is financec Al*n CeO! AnICn Can Ce accseracte n rates as cecreciaticr arc ts ref'ectec as a repaic wim ccilars cf fess purenasing power.

1 Statement of income From Continuing Operations Adjusted for Changing Prices For the Year Ended December 31,1979 Constant Current Conventional Dollar Cost Historical Average Average Cost 1979 Dollars 1979 Dollars iln incusarcsi

Cceratirg 'evenues si '63.623 51.163 623 51/ 63.623 I Ccaration anc maictenance 700 647 700 647 700 647 Cecrec

aticn anc amertizaticn . 123 C75 215.002 234.382 Twes cmer man incor e taxes- 74.592 74 592 74.592

-ceral arc state trccme taxes 5a.759 58.759 54.759 Ct er .rccme arc cecucticns ret (40.7~5) 840.775) #40.775) ote'est cra ;es and cre'e rec civice"cs. 189 Ea5 *a9 265 189 585 i

1 ?C6 !83 1.198.110 1.217.490

'rccr e t!csst frcm ccntinuirg ccerat;cns exclusive cf ecucticn !c net reccser20!e ar cunt. 5 57 440 S I34.487) $ 153 $67)

Peturn or average ccr men e:uity 5 22 % (3 49)*o 15.45 P'.

rcrease in spec.f c cr.ces?

i 5 556.333 Ce2 ct:cn to aet recoveracle amcunt . 5 (344.441) f6.170)

.rcrease in gereral pr:ce evel. 815.224)

E scess cf ircrease in gereral price 'evel cver increase n icec fic prices af ter recucticn to cet recoveracle ar-cant (325.C61)

Ceauct:cn of purcnasing Ocwer loss inrcugn cect arc preferrec sicca f narc:rg 3*8 556 318 556 Net 5 (25.385) 5 (6.505)

+ 4: Cecemter 3' 1979. current ecst cf utihty plant. net of accumulatec cepreciation. was 37 2 tilhen unile nistcrical ecst er ret amcort receveracle inrcugn cecreciation was 53 3 bilhen.

Five-Year Comparison Of Selected Supplementary Financial l Data Adjusted for Effects Of Changing Prices Sestatec to Average 1979 Ocilarsi j Years Ended December 31, 1979 1978 1977 1976 1975 Ocerat:rg revertes itncusancs cf ccitarst 51 ?63.623 $1 126.C32 31/62.432 3 595.574 5852.188 Cas 1 cer men civicencs cec:arec j tacusancs cf cci arsi. 5 54 OCO $ '20?68 5 t13 58C 5 76 8CO 5 31 GC0 l Net assets at year er.c at aet reccseracle amount (thousarcs or ccilarsi 5 3714C6 51 019.333 31.126 202 31 072.575 5934 288 i Aerage censLmer crece :ncex

. case year 1967 = ?CO) 2C4 '95 4 iSt 5 * ~0 5 161 2 29

! General Officers Division Officers l

Joseph M. Farley, Presicent W. D. Sciten. Vice Presicent. Annisten I Alan R. Barton. Executive Vice President Jchn 8. Syars. Jr.. Vice Presicent. Euf aula Elmer B. Harris. Executive Vice Presicent Hugh P. Foreman. Vice President. Montgcmery Walter F. Jonnsey. Executive Vice Presicent(1) William L. McDcncugn. Vice Presicent. Mcbile

! Jesse S. Vogtle. Executive Vice President A. C. Rogers. Jr.. Vice President. Tuscalcosa Wilham O. Whitt. Executive Vice President H. H. Turner Jr.. Vice Presicent. Sirmingham +

Fred L. Clagen. Jr. Senicr Vice President Jchn D. Jones. Senior Vice President Transfer Agents Kenneth L. Allums. Group Vice President Alabama Power Company th S Ocb Andrews. Vice President. Human Resources n . a a a E'91 S. H. Becker. Vice President. Energy Services 8 rmingnam Trust Natienal Bank (2)

Travis J. Bowden. Vice President and Treasurer Post Office Ecx 2554 Stechen E. Bradley. Vice President. Birmingham. Alabama 35290 Public Infcrmation (Only for the 11 'o and 9*e Series Preferred Stock)

Rayferd F. Davis. Vice President. Power Delivery Chemical Bank R. P. Mcdonald Vice President. Nuclear 55 f et )

e Yr e y i (Only for the 8.72*b Series Preforred Stock)

Jacksen W. Minor. Vice President and Comptroller Continental Stock Transfer & Trust Company G. Thcrnton Nelson. Vice President. Industrial 19 Recter Street Development New York, New York 10006 Ollie D. Smith. Vice President. Corporate Real (All series except 8.72*h Series Preferred Stock)

Estate Alvin W. Wgtle. Jr.. Vice President Registrars i J. T. Young. Vice President. Fossil / Hydro The First Naticnal Bank of Birmingham Generation Birmingham. Alabama 35288 Richard A. Scwron. Secretary Citibank. N.A.

! Charles M. Deason. Assistant Comptroller New York New York 10015 l Ernest E. Glass. Jr. Assistant Comptroller Dale W. Oliver. Assistant Comptroller (1) Retired Septemcer 1.1979 Robert C. Ford. Assistant Secretary and (2) Resigned February 1,1980 Assistant Treasurer E. Ray Perry. Assistant Secretary and Assistant Treasurer Cercthy L. Essig, Assistant Secretary j John H. Snyder. Assistant Secretary l W. L. Sanders. Jr.. Assistant Treasurer William L. Smitn. Assistant Treasurer All executive efficers are full-time employees of the comoany with the exception of Mr. Alvin W. Vogtle. Jr.,

f The Southern Ccmpany; and Mr. Pccert C. Ford and Mr. E. Ray Perry. Southern Ccmcany Services. Inc.

t 30

l 3

WiUi m J. Pushton. lH. Skmingham (19704

Directors Presicent Jcseph M. Farley. Sirmingham (1965)t Prctective Life Insurance Company Pres: cent Sales and Service of Life and Health Insurance

Frank M. Moccy. Tuscalocsa (1956)* Jchn W.Woccs. Sirmingnam (1973)t i Chairman of the Scarc Chairman of the Boarc The First National Sans cf Tuskalcosa Alabama Bancerocration Commercial Banking Multibank Holding Ccmpany i

D. H. Morris. Ill. Enterprise (1956) Ernest F. Ladd. Jr.. Mcbile (1974)

Presicent Chairman Emeritus FacricsArrerica Division Southland Bancorpcration Sama Mill Multitank Holding Ccmpany liied Precucts Ccrocratien Manufacturer anc Finisher of Textile Procucts Emil Hess. Birmingnam (1975)t" j Chairmanof the Board

+

T. Massey Eecscle. Mcbile (1963) Parisian Inc.

I Partner Apparel Hanc. Arendall.Becscle. Greaves & Jennsten Attorneys Walter F. Jchnsey. Birmingham (1975)(1)

Howarc Murfee. Prattville (1963)

, Chairman of the Board Fred Morgan Clark. Eufaula (1977)*

) McCueen Smith Farms. Inc. Senior Vice President and Cirector Civersified Farmers and Ginners United Feceral Sav:ngs and Lean Association Financial Service of Savings and Lean Associatien James C. Inzer. Jr . Gacscen (1965)*

Partrer Jchn C. Webb. IV. Demcpolis (1977)

Inzer. Suttle. Swann & Stivender. P.A. President Attorneys Webb Lumber Company. Inc.

Wholesale Lumter Alan R. Barton. Eirmingham (1968)t Executive Vice President Jesse S.Vogtle. Birmingham (1979)

Executive Vice Presicent Alvin W. Vogtle. Jr.. Atlanta (1968) t President William O. Whitt. Birmingham (1979)

The Scuthern Company Executive Vice President Electric Utility HClcing Ccmpany Crawferd T. Johnscn. Ill. Birmingham (1969)t Presicent Coca-Cola Bottling Company United. Inc.

Ecttlers of Scft Crinks G. Thornton Nelsen. Sirmingham (1969)t Vice Presicent Frank A. P!ummer. Montgcmery (1969) l Chairman c' *t e Boarc l First Alacama Bancsnares. Inc.

Multicank Mciding Comcany

• Accit Committee memcer l " Audit Committee alternate memcer S. Eason Salcn. Sirmingnam (1970) tExecutive Committee member Partner (1)Petirec Septemcer 1.1979 Salcn. Sincnam. Saxer. Hawthctne. Williams & Warc Atterreys ,

Years in parentheses incicate cate of elec* cn.

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