ML20071N592

Annual Financial Rept,1982

ML20071N592
Person / Time
Site:	Hatch, Vogtle, 05000000
Issue date:	03/10/1983
From:	Vogtle A SOUTHERN CO.
To:
Shared Package
ML20071N587	List: ML20071N583 ML20071N592 ML20071N600
References
NUDOCS 8306070127
Download: ML20071N592 (51)

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E R__.

The Southern Company is the parent firm of the nation's largest investor-owned electric utility system a system which supplies energy to some 10 million people in a four-state area of the Southeast.

The companies of the Southern electric system have more than 75 l

years' experience in planning and 3

operating major power generation facilities; they are recognized as industry leaders in the field of conservation; and they are engaged in advanced research on promising new energy and environmental technologies.

The Southern Company is owned by more than 345,000 stockholders. Through their investment, these stockholders play a vital role in shaping the energy future of the South.

1

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m Highlights 1982 1981

% Change Financial Operating revenues (n thousands)

$4,927,183

$4,256,237 15.8 Operating expenses (n thousands)

$4,041,193

$3,551,767 13.8 Consolidated net income On thousands)

$472,331*

$325,979 44.9 14.26*

10.94 30.3 Return on average common equity (percent)

The Southern Company common stock data:

$2.38*

$1.81 31.5 Earnings per chare

$1.66

$1.62 2.5 Dividends paid per share Book value per share (year end)

$16.78

$16.35 2.6

$15.625

$12.00 30.2 Market price (year-end closing)

Shares outstanding:

Average 198,800,084 180,138,845 10.4 Year-end 208,823,825 190,956,923 9.4 Stockholders of record (year-end) 346,595 347,119 (0.2)

Construction expenditures in thousands)

$1,490,529

$1,288,022 15.7 Total assets (year-end)(in thousands)

$12,'301,201

$11,198.120 9.9 Operating Peak energy demand (n thousands of kdowatts) 17,840 19,413 (8.1)

System capability - at peak demand 26,435 25,834 2.3 (in thousands of kilowatts)

Total kilowatthour sales (in thousands) 96,786,743 94,217,131 2.7 Total number of customers (year-end) 2,659,494 2,619,673 1.5

• Net income for 1982 was increased by $23.5 million, earnings per share were raised by 12 cents, and return on average common equity was increased by 0 67 of a percentage point as a result of a change in the method of recording rever.ues at Georgia Power -

The Southern Compr.ny's largest subsidiary. Th s change is explained in Note 1 to the financial statements on page 35, and the effects are shown in the Consolidated Statements of income on page 32.

Contents The Southern Electric System 2

Stockholders 20 System Service Area 3

Research and Dcvelopment 22 ToOur Stockholders 4

New Business Ventures 24 Financial Results 6

Financial Review 26 Rates 7

Auditors' Report 29 Operations 8

Officers and Directors 46 Energy Usage 12 System Companies 48 Construction and Financing 16 Stockholder Information 49 1

The Southem Electric Syst::m Operating Utilities

• 1982 Net income Retum Total Operating After Dividends On Average Kilowatthour Company Assets Revenues On Preferred Stock Common Equity Sales Customers (in thousands) (in thousands)

(in thousands)

(percent)

(in thousands)

(year-end)

Alabama Power

$4,683,358

$1.764,145

$162,257 12.62 33,939,134 1,001,832 Georgia Power

$6,159,663

$2,457,201

$258,944" 16.14 "

49,702,722 1,272,859 Gulf Power

$787,146

$357,355

$31,089 13.79 6,087,172 221,173 Mississippi Power

$617,508

$361.355

$22,505 13.28 7,057,715 163,630

• The Southern Company's subsidiaries also include Southern Electric International, Inc., a consulting firm, and Southem Company Services, Inc., an organization which provides engineering and technical services, at cost, to the other members of the Southern electric system.

' Georgia Power's net income after dividends on preferred stock and ieturn on average common equity were increased t

by $23.5 million and 1.36 percentage points, respectively, as a result of a change in the method of recording revenues.

This change is explained in Note 1 to the financial statements on page 35.

Economy of the Service Area in addition to a varied agricultural economy, the four-Unemployment in Florida and Georgia during state area has a growing, service-oriented business 1982 remained well below the national average of 9.7 sector and en expanding industrial base. Major indus-percent. Unemployment rates were substantially higher tnes throughout the region include chemicals, paper in Alabama and Mississippi. Overall, however, the I

products, primary metals, and textiles. The manufac-average unemployment rate across the region was turing of stone, clay, and glass products also is an slightly less than the national average for the 12-month important industry in Alabama and Georgia. Other period. Average per capita income of residents in the essential sectors of the economy include tourism and four states was $8,925 - 4.5 percent higher than the transportation - particularly in Florida and Georgia.

previous year but still belo'n the national average of The population of the service area increased to

$11,436 in 1982.

approximately 10 miliion in 1982 from 9.6 million the previous year.

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0 Hydroelectric Generating Plant

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8 Construction under way

'mVS M e on one or more units WD N'h g planned for the facility 43' '

Interconnection i

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Stockholders

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g,.y Total sales of electocity rose Rate Actions Mixed

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.3, by 2 7 percent dunng the year This In Novemoer tne Supreme Court of

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.-j - i gain may seem modest compared A;abama tssued an ooinion on

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with years when the energy require-A abama Power's aopeal of a 1981 1

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._ l I 6 ments of our customers registereo pubhc service commission order

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increases of seven to 10 percent Tne court's aecision led to f avoraole

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But use of electncity in the nation commission action one week iater 7..

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V as a whole dropped in 1982 - tne A $186-mnhon annua! rate inc' ease

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first dechne since the year foHowing which Alacama Power had been coh f.

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the Arab od embargo In this ccn-iecting subject to refund was mace F

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text, the sales we're reporting cermanent Oy the commission. and

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appear significantly stronger the company was awarded an addi-

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Earnings Per Share Rise effective December 1

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To Highest Level Since 1975 An essential - and f rcrr our

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.lg Earnings per share were $2 38 for wewpoint a most encouraging -

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... Q,,Q' 1982. a 31-percent increase over oart of the new rate order allc As

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./y, g the deoressed resuits of the AlaDama Power to receive periodic

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previous year This marked improve-rate adjustments in 1983 ana '984

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1 ment reflects a move towara more These adjustments wm crovide that t- - %.; C.% 1. :. ; -

reahstic rates and the success of company the coDortunity to earn a 1,

. W. _ s,.,

our efforts to control costs and 15-cercent re+ urn cn common stock-y-t

.O,, % " ' ; q, c, 4. O '-

ooerate with greater efficiency ho! der investment And the prospect J

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The ea.ntngs recovery brought of imorosea revenues dunng the

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our return en investment to 14 3 next two years has orompted three

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Dercent for 1982 And we closea the major 'ating agencies to upgrace

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gup year in a stronger financial posit:on the crecit wortniness of AtaDa"r 3 Q%,[_

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than at any t me since 1975 Power s bonds ana orefer'ed stock y

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With a positive earntngs trend in Georgia. there nas oeen a b ;,,

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in place. the Doard of directors cerioa of relative staoihty in electnc

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1 voted in July tc raise the cuarte'ly rates Decause of a forwara-looking i G. * - s M, ' - '

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dividend rate f rom 40' cents to sett!ement reached in tate 1981

?

42' > cents Der share This action amCnc Georgia Power the puolic demonstrates our resolve to orovice seruce commission tne state con-the dividend increases whicn are some's utihty counsel ano a cor.

In a year that saw the Amencan essential to retain your confidence si mer group The comoany now is economy mired m the most severe and attract new investors seeking its first increase in retad recession since the end of Worto The question we f ace now is rates since that settlement was War il it's gratifying to report that whether we can preserve the gains negotiated Georgia Power fHed on your company not only he!d its own made in 1982 ano continue our March 7.1983. for an additionaf but acnieved a substantial measure progress toward fu ! tnancial

$319 5 milhon in annual revenues l

of orcgress as weh There's no recovery The answer clearly The company has asked tha' the new doubt that 1982 was a year of aepenas on whether our coerating rates ne olacea into effect within 30 rebuMng for The Southern Com-comoantes are anowed to crarge a days If that reauest is denied.

pany - a year which strengthe"ed reahstic once for their service Georgia Power will ask that intenm our standing in the finanClk markets Unfortunately ine rate picture rates be set until the pubhc service and improved our abihty to meet the shows httle consistency acioss our commissior, reaches a final Cecision future energy needs of the region region But there were definite signs The matter of utfity regutation of imorovement dunng 1982 in Flonoa remains clouded in December. tne puohc "rvice com-mission oranted Gulf Power less inan one-tentn of me $37 muhon in 4

0 additional revenues the company States Utilities Company of Thus, in the latter part of 1982, we had requested. This inadequate in-Beaumont, Texas, is expected to began airing a series of television crease makes it impossible for Gulf make its initial purchase in 1984.

commercials - commercials which Power to achieve the return on in-Over the next several years, feature several individuals who have vestment that the commission sales to these utilities alone will pro-invested a portion of their savings in authorized. Thus, the company has vide a major source of revenue for The Southern Company. The adver-asked the commission to reconsider our system. The additional revenue tisements point out how customers its decision.

will be a positive factor as we work benefit from the investment these in Mississippi, two applications to finance completion of the power stockholders have made. Only if our for higher rates have resulted in one plants we're building.

customers realize how much their complete denial by the public ser-As we look ahead, we estimate electric service depends on stock-vice commission and one decision that growth in peak energy demand holders can we hope to win broad to grant the company less than one-will average 2.8 percent a year over acceptance of the need for realistic third of its request. Mississippi the next decade. This projection is rates.

Power has appealed both these slightly lower than the three-percent actions, and final decisions now are figure we were forecasting a year Direction for 1983 Outlined panding in the courts.

ago - reflecting our practice of in closing this letter to you, I'd like maintaining a constant watch on the to mention briefly our outlook for Adequate Rates Essential factors that influence energy usage.

1983. Our financial performance will T3 Ensure Future Service But even at the reduced rate be determined in part by the resolu-As you know, there is a direct of 2.8 percent per year, cemand for tion of the rate cases still pending in relationship between our ability to electricity would double by the year Florida and Mississippi and by the charge rates that cover the full cost 2008 - a clear indication of the outcome of the request for addi-of providing electric service and our need to complete the projects we tional revenues which Georgia ability to serve customers today and have under way.

Power - our largest subsidiary -

in the years ahead. We're projecting recently filed. Our efforts will be construction expenditures of $2 bil-Reinvested Dividands Provide directed toward ensuring that lion in 1983 to build the energy Growing Source of New Capital actions taken on these cases will be supply system our customers will in discussing our firmncing re-as calanced as possible.

neea in the future. For the three quirements, speciai. ate should be As we face the tasks ahead, years 1983 through 1985, our made of the substantial assistance we welcome the signs that national construction budget is expected to we're receiving through the Divi-economic recovery is at last visible total $6.8 billion.

dend Reinvestment and Stock on the horizon. We believe that But this program car Je car.

Furchase Plan. Stockholder contri-1982 - our year of rebuilding -

ried out only if our eamings support butions to the plan totaled more will be followed by a year of the additional financing which will be than $150 million in 1982 - well opportunity.

reqwred to make so enormous an over half the equity which 't.as With your continued support, investment One course we're pur-neeJed during tne year. And in we're optimistic that we can make it suing to improve our earnings -

1983, we expect to receive more a year of achievement.

I and thus strengthen our ability to than $170 million from this source

[

raise new capital - is the sale of of new equity capital.

Sincerely, power plant capacity and energy to As well as providing an indica-l I

neighboring utilities.

tion of your faith in the company, I

Our off-system seles increaseo this response underscores the f

in 1982 by 80 percent - to 9.2 critical role that investors play in

/

billion kilowatthours. This trend will serving the energy needs of the continue as a result of contracts Southeast.

we've negotiated with three utilities We believe it's essential for

". W. Vogh, A for sales that extend well into the that role to be recognized by the T e Southern Company 1990s. Agreemeus with Florida people who live in our service area.

March 10' 1983 Power & Light Company and the Jacksonville Electric Authority took effect on January 1,1983. Gulf 5

Financial Results Earnings PerShare(dollars)

In a year marked by recovery, The Dividend Rate increased Southern Company's net income During each of the first two quarters

)

rose to $472 million - an increase of 1982, the dividend rate was con-2" jk f

of 44.9 percent over the depressed tinued at 40% cents per share -

results of 1981.

the same level paid since the final y

2.00 Based on 198,800,084 average quarter of 1980. A dividend of 42%

shares of common stock outstand-cents was paid in both the third and ing in 1982, earnings per share fourth quarters - reflecting the in-were $2.38. This compares with crease declared by the board of

{

earnings of $1.81 in 1981, based on directors in July,1982. The new tea 160,138,845 average shares quarterly dividend rate is equivalent outstanding.

to an annual payment of $1.70 per In addition to substantial share.

improvements in net income and Total dividends paid to 0 77 78 79 80 81 82 Oarnings per share, a significant stockholders during 1982 were gain was achieved during 1982 in

$1.66 per share. The entire amount the company's return on common of dividends paid for the year was Retum on Average Common Equity stockholder investment (consoli-taxable as dividend income. (Under (percent) dated return on average common the Economic Recovery Tax Act of 25 equity). This important measure of 1981, stockholders who participate j

financial performance reached 14.3 in the company's dividend reinvest-percent for the year. Return on ment plan may elect to defer the 20 stockholder investment was 10.9 payment of federal income taxes on percent in 1981.

a limited amount of reinvested 15 The Southern Company's dividends. Reinvested dividends also g

operating results began to improve will not be subject to the withholding in the first quarter of 1982. The tax enacted by the Congress in to

%gsgF upward trend continued through the 1982.)

second and third quarters. Perform-At their January 17,1983, 5

ance then leveled off in the meeting, the directors of The remaining months of the year as Southern Company again declared a earnings stabilized at $2.38 per quarterly dividend of 42% cents per 0

77 78 79 80 81 82 share.

share, payable March 5 to stock-The stronger 1982 earnings holders of record February 7. The Dividends PerShare(dollars) resulted from higher rates billed by Southern Company has paid a divi-each of The Southern Company's dend to its common stockholders for as operating units. Also contributing to 141 consecutive quarters.

the upturn were significant sales of 2.ca electricity through long-term con-Revenues Rise to $4.9 Billion

~

tracts with neighboring utilities. In Revenues for 1982 were $4.9 billion, addition, earnings for 1982 include up 15.8 percent from $4.3 billion in ig an increase of $23.5 million or 12 1981. At December 31,1982, ap-cents per share because of a proximately $13 million of revenues 1 00 change in the method of secording billed during the year was subject to revenues at Georgia Power. (See refund pending court decisions.

Note 1 to the financial statements g

on page 35.)

0 77 78 79 80 81 82 6

R:tes The system's operating units 1984, Alabama Power will receive issued an order granting the com-continue to seek approval for rates periodic rate adjustments based on pany an increase of only $3.4 mil-which recover the full cost of its rate of return and the commer-lion. Gulf Power has petitioned the providing electric service and allow cial operation of new generating commission to reconsider its ruling.

a reasonable return on investment.

facilities. The first of these adjust-ments took effect on February 1, Court Decision Pending New Concept Adopted 1983. The adjustments will provide On Mississippi Power Case in Commission Action Alabama Power tl c opportunity to Mississippi Power's filing for On Alabama Power Request earn a return on common stock-

$21.9 million in additional revenues in mid-November,1982, the holder investment of 15 percent -

was placed into effect - subject to Alabama Public Service Commission a level in keeping with a November, refund - on May 5,1982. On Octo-ruled on a rate increase request 1982, opinion issued by the ber 1, the Mississippi Public Service-filed by Alabama Power early in the Supreme Court of Alabama.

Commission denied completely the year. The order adopted a new rate Several intervenors have company's request. Mississippi stabilization concept which estab-appealed the commission's oroer to Power appealed the decision to the fishes a framework for periodic rate the state supreme court.

Chancery Court of Hinds County.

adjustments over tne next two While the court's ruling is pending, years. This concept was developed Georgia Power Seeks the company is collecting the full in negotiations among the commis-

$319.5 Million increase amount of its request subject to sion, the company, and a number of On March 7,1983, Georgia Power refund.

other parties in the proceedings.

filed an application for an additional In its ruling, the commission

$319.5 million in revenues. At the New Wholesale Rates Filed made permanent an annual rate date of this writing, hearings on the During 1982, the operating increase of $186 million which the request had not yet been scheduled.

companies were granted a total of company had been collecting sub.

$35.1 million annually in wholesale ject to refund. In addition, the Gulf Power Awarded rate increases by the Federal company received a rate increase

$3.4 Million Annually Energy Regulatory Commission. At of $120 million annually effective in June,1982, Gulf Power requested the date of this writing, some December 1,1982. During 1983 and a $36.9-million increase in retail

$11 million in requests for higher rates. On January 11,1983, the wholesale rates was pending.

Florida Public Service Commission R: tail Rate Increase Applications

• Retum on Retum on Annual Amount Public Service Common Equity Common Equity

, Company Requested Date Filed Commission Decision Requested Allowed AJabama Power $453.9 million 3/9/82

$306 million granted - effective 18 %

Up to 15%

12/1/82 - plus periodic future adjustments Georgia Power

$319.5 million 3/7/83 Due not later than 9/6/83 16.5 %

Gulf Power

$38.6 million 5/29/81

$6.9 million granted - $5.5 million 18 %

15.85 %

effective 2/12/82 and $1.4 million effective 6/17/82

$36.9 million 6/4/82

$3.4 million granted - effective 18 %

15.85 %

1/21/83 Mississippi

$30 3 milhon 10/20/80

$10.9 million granted - effective 16.04 %

13.50 %

Power 11/20/80

$21.9 milhon 4/5/82

~ tire request denied 10/1/82 18.28 %

15 50 %

n

• For further information, see Note 2 to the financial statements on page 36.

Operations Coalis the primary fuel of the Southern electric system. During 1982, coal was the fuel source for nearly 80 percent of the power produced by the system's generating units.

Operation and maintenance achieving maximum productivity at in another achievement at expenses were up 11.4 percent in each of the system's 20 coal-fired Plant Farley, workers refueled the 1982 - a significant improvement power plants. In the mid-1970s, a reactor for unit 2, completed from the 20-percent rise recorded in maintenance program was initiated modifications required by the 1981. Expenditures for operation specifically to help improve the Nuclear Regulatory Commission, and maintenance totaled $3 billion performance of these facilities.

and conducted routine safety in-in 'i982. This compares with Measurable progress in reaching spections in just 41 days. The work

$2.7 billion in the previous year.

this goal has been made each year was carried out in 15 percent less The more moderate increase since the program was introduced.

time than had been anticipated and resulted from several factors, includ-Average operating availability some two to four weeks less than ing extensive cost control efforts, a of the system's coal-fired units the average time needed to accom-decline in the national in'lation rate, reached 88 percent for 1982. This plish these activities at similar and slower growth in total fuel compares with an availability rating facilities across the country.

expenses. Fuel expenses rose by of 86.6 percent for 1981. The cur-Hydroelectric generation during only 4.2 percent, compared with an rent level of performance - which 1982 increased 79 percent from the increase of 14 percent in 1981.

is more than 14 percentage points previous year, providing nearly Greater output from nuclear and above availability ratings that were seven billion kilowatthours of the hydroelectric facilities enab!ed the being recorded when the program energy required by customers of the system to reduce its use of more began - meets management's Southern electric system. The higher costly coal-fired generation during goals for optimum efficiency. The production resulted from above-1982.

performance level also is well above normal rainfall during 1982 in the availability records of most other Alabama and Georgia - where all Coal Dominates Fuel Mix electric utilities.

the system's hydroelectric facilities The system continued to be one of are located. The heavier rainfall the nation's three largest users of Nuclear Unit Sets followed a prolonged drought which cos!. burning 34 million tons of this Performance Record; occurred in 1981.

fuel during the year. In 1981, some Hydro Generation Up 37 million tons of coal were con-The system's four nuclear units sumed at system generating achieved an average operating Average Operating Availability of System facilities.

availability of 67.9 percent in 1982 Coal-Fired Generating Units (percent)

Mines in Alabama, Illinois,

- up six percentage points from

,gg i

Indiana, and Kentucky provided the the level of availability recorded i

I majority of the coal which was pur-during 1981.

chased in 1982. Approximately 70 This productivity improvement 80 parcent of this fuel was delivered to was due in part to the increased system power plants via rail. During availability of unit 1 of Alabama 7

1983, delivery schedules call for Power's Farley Nuclear Electric some 75 percent of the coal which Generating Plant. In addition, unit 2 the system will buy to be shipped by of Plant Farley - which was com-40 rail,18 percent to be transported by pleted in mid-1981 - recorded an barge, and seven percent to be average operating availability of 90 gg delivered by truck or conveyor, percent during its first 12 months of commercial service. This is the Availability improved highest operating availability 0

77 78 79 80 81 82 At Generating Facilities achieved during an initial year of Because coal has been and will operation by any Westinghouse continue to be the primary fuel of pressurized water reactor in the the Southem electric system, con-United States. The performance siderable emphasis is placed on record established by unit 2 sur-passed the previous national record which was set by unit 1 of Plant Farley in 1978.

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power available is dispatched to customers.

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(Pr ec ed)

(Pr ec ed)

(Projected contract with the company.

e coal NUCLEAR M HYDRO M oil & gas When the walkout began, (7% oR LEss)

(2% oR LEss) nonunion employees of Alabama Power were sent to power plants and other facilities across the state.

l System Power Plants Equipped operating personnel, technical ad.

These employees performed the j

l With Control Room Simulators visers, and engineers. Through the Jobs vacated by union members and During 1982, on-site simulators were use of computers, the equipment ensured that electric service during l

installed at Georgia Power's Hatch can accurately duplicate hundreds the strike was maintained without l

Nuclear Electric Generating Plant of routine and emergency operating interruption.

and at the construction site of the conditions.

The contract accepted by the Vogtle Electric Generating Plant. In An on-site simulator also was union includes several provisions to mid-1983, a simulator also will begin installed during 1982 at Georgia improve productivity. These provi-operation at Alabama Power's Plant Power's Scherer Electric Generating sions specify that meter reading and Farley, providing each of the Plant - a coal-fired station in mid.

bill collecting will not be suspended Southern electric system's nuclear die Georgia. This simulator is one of automatically because of rain, that power plants with control room only three of its type in the nation.

job classifications at power plant t

simulators.

facilities will be changed to

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weather and provide the operating companies with additional time to l

prepare for possible outages and i

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7 Energy Usage Residential Energy Sales The Southern electric system Sales to Commercial, (billions of kilowatthours) recorded a 2.7-percent increase in Off System Sectors increase overall energy sales in 1982, Commercial use of electricity grew 30 although usage in three customer by 3.9 percent in 1982, rising to categories declined. A total of 96.8 18.4 billion kilowatthours. In 1981, 40 billion kilowatthours of electricity sales to commercial customers was sold during the year, compared totaled 17.7 billion kilowatthours.

with 94.2 billion kilowatthours in Off-system power sales -

g 1981.

sales covered by contracts with nonaffiliated, neighboring utilities -

20 Energy Usage Declines reached 9.2 billion kilowatthours for in Three Customer Categories 1982, climbing from 5.1 billion Electricity requirements in the kilowatthours in 1981.

30 residential, industrial, and wholesale increases in off-system power sectors registered decreases during sales are expected to continue, par-o n

78 79 80 81 82 1982.

ticularly in light of contracts which The energy needs of residential were filed with the Federal Energy Commercial Energy Sales Customers dropped six-tenths of one Regulatory Commission (FERC) in (billionsof kilowatthours) percent for the year to 24.1 billion 1982. Under these contracts, The I

kilowatthours. In-home consumption Southern Company's four operating 25 of electricity was affected by the units will supply electricity produced conservation practices of residential from coal to the Jacksonville Elec-20 customers and by the comparatively tric Authority (JEA) of Jacksonville, mild weather which was experi-Florida, and Florida Power & Light enced during much of the year.

Company (FP&L) of Miami - two 33 In the industrial sector of the utilities that are dependent on oil. A system's service area, electricity similar agreement with Gulf States to use for the year was 5.9 percent Utilities Company of Beaumont, lower - an indication of the effect Texas - a utility that relies on of the 1982 recession on the opera-natural gas - still is awaiting final 5

tions of a broad range of industries action by FERC.

in the region. Sales to industrial The contract with JEA calls for o

n 78 79 80 81 82 Customers were 33.4 billion kilowatt-that utility to buy 300,000 kilowatts hours in 1982, compared with 35.5 of coal-fired generating capacity an-billion kilowatthours in the previous nually from 1983 through 1986. The IndustrialEnergy Sales pilions of kilowatthours) year.

amount which will be purchased in-Continuing a trend which creases to 500,000 kilowatts in 1987 began in the late 1970s, sales to and decreases to 400,000 kilowatts wholesale customers in the four-for the years 1988 through 1992.

~

40 state region - municipalities and Purchases then will decrease an-cooperatives with their own electric nually to a level of 100,000 kilowatts distribution systems - declined in 1995, the final year of the three-tenths of one percent to 11.1 agreement.

billion kilowatthours in 1982. The Under a contract which was l

20 downturn in this category reflects revised and extended in 1982, FP&L i

the fact that many wholesale will buy specific amourts of capaci-customers - primarily in Georgia ty - ranging from 350,000 kilowatts

'U

- are producing an increasing por-in 1983 to two million kilowatts per tion of their energy requirements.

year from 1987 through 1992. Con-o n

78 79 80 81 82 tract amounts are substantially less in 1993,1994, and 1995.

12

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Peak Demand (millions of kilowatts)

During the 1960s, peak de-l mand for electricity across the four-7 25 l

state service area grew at an average annual rate of 9.5 percent.

Through the 1970s, the growth of 20 peak energy demand slowed to an average rate of five percent a year.

l l

Growth Rates Projected 15 The most recent studies indicate i

l that systemwide growth in peak demand will average 2.8 percent a l

year from 1983 through 1993. Sales in of electricity are expected to grow at an average annual rate of three j

percent during this period.

l 5

These forecasts take into account the anticipated impact of

(

the energy management programs 0

73 74 75 76 77 78 79 80 81 82 I

system. During 1982, a number of existing programs were expanded and several new ones were initiated, l

Gulf States Utilities plans to New Record Set for Winter Peak as the operating companies con-i buy 500,000 kilowatts of capacity In addit;on to overall sales, the other tinued to promote the efficient use l

l beginning in June,1984, and will in-important yardstick of energy usage of electricity.

l crease the amount to one million is peak demand - the highest re-The long-term thrust of the j

kilowatts per year from June,1985, quirement for electricity as marketing programs sponsored by l

through May,1992.

measured over a one-hour period.

the system companies is to help To facilitate sales of electricity On January 11,1982, electrici-limit increases in the peak demand to utilities in Florida - and to in-ty demand across the Southern for power - and minimize the need crease the reliability of service to electric system's service area to build costly new generating i

Georgia Power's customers - two reached 16,447,600 kilowatts, an all-plants. In addition, these programs l

500-kilovolt (kv) transmission lines time high for the winter months. This are designed to help reshape total were completed in 1982. These lines figure surpassed by 5.8 percent the energy usage and, thus, improve the connect Georgia Power's transmis-previous winter record of 15,540,200 utilization of existing facilities.

sion system to facilities owned by kilowatts established in 1981.

FP&L and JEA.

However, the greatest peak Efficiency Standards Urged An additional 500-kv transmis.

energy demands on the Southern For Residential Structures l

l sion line will stretch from the Daniel electric system each year occur in In the mid-1970s, each of the four i

Electric Generating Plant in Jackson summer months when air condition-operating companies established County, Mississippi, to a point near ing usage is heaviest. In 1982, the Good Cents Home programs Baton Rouge, Louisiana. This line maximum requirement from custom-through which company represen-l will improve the reliability of service ers was 17,840,100 kilowatts, a drop tatives work with architects, to Mississippi Power's customers of 8.8 percent from the record builders, manufacturers, and owners l

and will provide an initial intercon-demand set in 1980. Mild summer to ensure that new homes and nection to Gulf States Utilities.

temperatures, a slowdown in in-apartments are built to the highest dustrial activity, and efforts by standards of energy efficiency.

customers to reduce their energy bills contributed to this departure from the historical rate of growth in peak demand.

l 13

Energy Usage Reliability of service was strengthened during 1982 with the completion of new high voltage transmission lines. The lines also facilitate sales of energy to neighboring utilities.

During 1982, more than 6,000 During 1982, Mississip'pi Power will be used to help determine the single-family homes and 9,000 apart-developed a computer model to col-cost effectiveness of the ment and condominium units lect data on the new homes in its improvements.

across the four-state service area service area that have been built to A statewide assistance pro-were built to specifications outlined Good Cents standards and on older gram called Project SHARE was in-by the operating companies. Gulf homes where improvements have troduced during the year by Power led the Southern electric been made to save energy. This in-Alabama Power to help those with system in developing this program formation will be used to chart the low incomes, including the elderly and, in 1982, Southern Electric Inter-decrease in customer demand and the disabled, pay their energy national, Inc. (SEI) began marketing which is achieved with energy effi-bills. The program is administered the concept to other utilities across cient construction techniques.

by the American Red Cross.

the country. (SEI is discussed on Alabama Power launched Project page 24.) As a result, four utilities Programs Aid Elderly, SHARE with a $50,000, one-time outside the system already have Low income Individuals contribution. Customers were asked introduced Good Cents Home stan-The operating companies also pro-to support the project by making a dards to their customers.

vided direct assistance to con-voluntary donation of $1 per month.

Some 45 percent of all new sumers in making modifications to At the date of this writing, more homes built in Georgia during the existing homes and in meeting than 75,000 people - representing year were covered under the pro-emergency energy-related needs.

nine percent of the company's gram. In addition, more than 90 per-Georgia Power initiated a customers - had volunteered to cent of all new multifamily dwellings project during 1982 to weatherize, participate in the program.

were constructed to the specifica-free of charge, homes owned by Eligible participants can tions for energy efficiency. Growth persons over age 65. Retired receive one energy bill payment for in the number of Good Cents homes citizens were hired to perform the the winter season and one payment in Georgia is expected to continue work, which included caulking for the summer season. The partici-as a result of an agreement signed windows, installing weather strip-pants' energy bills are paid directly in 1982 with the state's largest ping, and insulating water heaters.

to the gas or electric utility.

home builder to use the standards This service was provided to more in all future dwellings.

than 8,000 homes.

Operating Companies Offer Another program undertaken Gulf Power established a Energy Conservation Literature by Georgia Power during the year similar effort known as Energy Con-All of the operating companies offer was designed to decrease electricity cerns of Neighborhoods, a nonprofit to their customers free of charge a demand by encouraging customers corporation which weatherizes number of brochures explaining how to select the most efficient heating homes for qualifying low-and fixed-to use energy more efficiently. One and air conditioning units. Nearly income families.

of the most popular publications is I

two-thirds of the state's equipment in a program sponsored by Gulf Power's Home Buyer's Guide dealers participated in the venture.

Mississippi Power, energy-saving im-

- A Guide to Good Cents Comfort Dealers earned points which quali-provements were made free of and Savings. At the end of 1982, the fied them for special training charge to several homes owned by company had received nearly 10,000 courses offered by Georgia Power low-income families in that com-requests for this booklet. (Stock-on servicing heat pumps, designing pany's service area. Energy con-holders may request a free copy of ducts, and selecting the correct air sumption in the weatherized homes the brochure by writing The South-conditioning systems.

is being monitored for a 12-month em Company, Department 343.)

period and compared with heating and cooling requirements prior to completion of the work. The data l

i 14

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l Construction and i

Financing The Southern Company and its Dalton. Georgia Power has retained Joint Ownerships Planned operating subsidiaries invested an 8.4-percent interest in unit 1, During 1982, Georgia Power and a

$15 bill:on in,1982 for the continua-which has a generating capacity of group of electric utilities in Florida tion of poafr plant construction and 818,000 kilowatts.

terminated neactiations concerning for the buitd'ng and upgrading of The system's total generating the sale of a 16.5-percent interest in f

uansmissionond distribution lines, capacity at year-end was 24,636,569 the Vogtle Electric Generating Plant substatiorld,,end othUr facilities.

Allowatts - more than any other

- a nuclear facility under construc-inveer-owned electric utility group tion near Augusta, Georgia. How-Nsw Unit Completed in the United States.

ever, Georgia Power began

' ' The first unit of Georgia Power's *

' th early 1983, Alabama preliminary discussions during the

/

Scherer Electric Generating Pip.t -

Power's Harris Dam is scheduled to year with MEAG to expand further 1

a cosi-rired facility in middle Georgia begin commercial operation. Harris that organization's ownership of f

- was brought into service in Dam - located in the east central Plant Vogtle. At the present time,

. < JAarch,1932. The unit was con-put of Alabama - is the system's MEAG has a 17.7-percent interest in j' ' / c:ructed tw Georgia Pcwer under OJrd hydroelectric ~ racility. Comple-the plant.

tiba Lg the plant will increase the Gulf Power currently is plan-

- joint owrrhhip egreements with 5

f Oglethorpe Power Corporation, the ' ' system's total generating capacity ning to purchase a 25-percent JMunicipal Electric Authority of by 135,000 kilewatts.

interest in units 3 and 4 of Plant Georgia (MEAG), and the City of

/

Scherer - the other major generat-ing station being constructed by Georgia Power. Securities and Total Generating capacit/ under construction (millions of kiiowatts)

Exchange Commission approval of this agreement is pending.

'~

i 25 l

p'. -l l

'r Construction Budget Set l

Although construction timetables f

may be revised in light of both the 20 system's ability to obtain financing and the projected demand for elec-t tricity, the operating companies plan

'S to complete those projects already 4

under way. The construction budget for 1983 is $2 billion. Construction j

~

expenditures for 1984 and 1985 are to projected to be $2.4 billion per year, l

bringing the total for the three year period 1983 through 1985 to j

$6.8 billion.

5 Funds Raised To Finance System Construction Activities 0

73 74 75 76 77 78 7p 80 81 82 External sources of funds accounted

'j for 42 percent of the $1.5 billion needed in 1982 for new construc-tion. Some $613 million was raised f

from outside financing and $20 mil-j lion from the sales of facilities.

Approximately $858 million - or 58 percent of the funds needed for construction - came from internal j

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Total Total Total Approximate

. Plant

. Estimated Generating Capacity of Investment in Anticipated Percentage (Type of Date of Capacity FaciHty at Facility at Cost of Completed at Fuel / Plant)

Completion

. Per Unit

' Completion 12/31/82 Facility 12/31/82 (in kilo $attsi' (in kilosatts)

(in thousands)

(in thousands)

Alabama Power

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Harris Dam

' 135,000

$204,875

%218.205 89 %

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(hydro)

N_

- Unit No.1 1983 67,500' Unit No. 2 1h93 67,500 Mi0er'(coal) 2,640,000

$739,342

$2.308,715 Unit No. 2

'1985 0iD,00Q 43 %

Unit No. 3 1989 660,000 3%

s Unit No;4

'1991 660.000 3%

Mitchell Dam m

159 000'2

$75,777'

$186,427' 44 %

(hydrof s-1 i

Unit No. 5 1985-

_ 50.000 Unit No. 6 -

1985 50,000 Unit No. 7 1965

'50.000 Georgia Pcwe,r Bartletts Ferry 108.000'

$7,769'

$85,194 '

17 %

(hydro) 1985 54,000 Unit No. 5 '

Unit No. 6 1985 54,000

' Goat Rock 67,000'

$277'

$75,986' 1

(hydro)

Unit No. 7 1988 33,500 Unit No. 8 1988 33,500 Rocky Vountain 847,800

$64,224

$524,208 12 %

(puiTiped itorsge)

Unit No 1 1.

1987 282,600 Unit No. 2 1987 282,600 Unit No. 3 1987'

' 282,600 Scherei (coal)'

1,773,4243'

$196,8523'

$2,011,87034 c

Unit No. 2

-1984' G8,7123 80 %

k Unit No'. 3

' 1987 818,0004 15 %

Unit No. 19h9 818.000*

7%

Vogtle (neder) 1,176,2405

$1,118,5235

$3.210,2435 Unit No. i 1987

- 588,1205 45 %

Unit No. 2 1988 588.1205 15 %

0 Field construcho' is scheduleJ to begin in 1985.

n Notes:

f

'(1) Excludes the capaeny and investment in existing urnis at (3) Excludes the 91.6-percent interests in Unit Nos.1 and 2 these facSties - unite which were placed in'o service more sold to cooperatives and municipalities in Georgia.

l' than 30 years age.

(4) Includes the 25-percent interest in Unit Nos. 3 and 4 l

(2) At the time cf completion of these units, total capacity will proposed to be sold to Gulf Power.

I be reduced by 52,500~kilows'ts bechuse of the retirement of (5) Excludes the 49.3-percent interests sold to cooperatives l

three existing units.

and municipalities in Georgia.

I 17

Construction and I

Financing Since the early 1970s, the Southern electric system has reduced the amount of generating capacity under construction by more than two thirds. Construction now is limited to some six million kilowatts.

New Common Stock issued stockholder population - were par-interest and dividend costs for the During the year, The Southern Com-ticipating at the close of the year.

securities sold during the latter part

]

pany raised a total of $239 million in The remaining three million of the year were less than have t

new common equity through the shares of common stock issued dur-been incurred in recent years.

sale of 18 million additional shares ing 1982 were sold through the Sales of common and pre-of common stock.

Employee Savings Plan and the ferred stock and the use of debt Approximately three million Employee Stock Ownership Plan.

fir.ancing enabled the Southern elec-new shares were sold to the public, Sales of shares through these plans tric system to close 1982 with no with the company's proceeds total-supplied $42 million of new short-term loans outstanding.

ing $44 rnillion.

common equity.

The Southern Company's Some 12 million of the new capital structure at the end of 1982 shares sold in 1982 were issued Bonds, Preferred Stock Sold was 56.9 percent debt,8.4 percent through the company's Dividend The operating companies raised preferred stock,2.0 percent pre-Reinvestment and Stock Purchase additional capital for construction ferred stock cubject to mandatory Plan. The common equity raised during 1982 through the sale of redemption, and 32.7 percent com-from the sale of these shares

$275 million of first mortgage bonds mon equity.

totaled $153 million - a 66-percent and $75 million of preferred stock.

One of the company's goals is increase over the $92 million in additien, Georgia Power, Gulf to raise the percentage of common realized through the plan in the Power, and Southern Electric equity in its capital structure to 40 previous year.

Generating Company - which is percent by 1987 and to 45 percent The company's current divi-jointly owned by Alabama Power by 1992. Significant progress in dend reinvestment plan was estab-and Georgia Power - were in-reaching that goal, however, lished in 1975, and the number of volved in sales by public authorities depends in large measure on the stockholders who participate has of $176 million of tax-exempt pollu-operating companies' earning suffi-increased each successive year.

tion control revenue bonds.

cient returns on the equity already During 1982, enrollment in the plan The financial markets in 1982 invested in the business.

rose some 35 percent. Approximate-were characterized by interest rates ly 132,000 stockholders - or more that moderated from the historically 1983 Plans Outlined than one-third of the company's high levels of 1981. As a result, in addition to the $125 million of bonds sold in the first quarter of Public Sales of System Securities,1982 1983, bond and preferred stock offerings totaling some $165 million Type of Principal Amount Net Annual tentatively are being planned.

Company Financing Of Offerings Cost Limited use of short-term borrowings also may be necessary during the Georgia Power First Mortgage Bonds

$125,000,000 16.52 %

$125,000,000 13.39 %

year.

To provide the operating com-Pollution Control Revenue Bonds

$90,000,000 13.85 %

panies with the equity funds needed

$10,000,000 13.47 %

to continue their construction ac-

$35,000,000 11.77 %

tivities, additional public offerings of Southern Company common stock Preferred Stock

$75,000.000 14.19 %

also may be required. However, the Gulf Power Pollution Control timing and amount of the next major Revenue Bonds

$32.000.000 13.03 %

public sale of Southern Company Mississippi Power First Mortgage Bonds

$25.000,000 16.45 %

shares have not yet been decided.

Southem Company Common Stock 3,010,000 shares Southern Electric Pollution Control Generating Company Revenue Bonds

$8.600,000 11.26 %

18

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During 1982, The Southern Company produced its i

first television commercials - commercials which i

make the point that investors are the reason some 10 l

million Southerners "

.can count on electricity."

2 Although the number of Southern area served by the operating com-of electricity for the South - is one Company stockholders remained panies. Importantly, many of these of the primary messages which The almost constant in 1982, ownership stockholders also are customers of Southern Company is conveying in in the company has expanded the operating companies.

its corporate advertising. The need l

significantly since the early 1970s.

At the close of 1982, approxi-for this communication is under-in fact, during the period 1972 mately 27 percent of The Southern scored by survey data which indi-a through 1982, the number of stock-Company's stockholders resided in cate that less than half of the adult j

holders of record nearly tripled -

the four states in which the system population in the system service standing at 346,595 at the close of serves. This compares with 26 per-area recognizes that stockholders 1982, compared with 123,296 at the cent in 1981 and 1980. There are provide the company with funds to J

end of 1972.

41,329 Southern Company stock-finance new power plant With the growth in its stock-holders in Florida: 30,290 in construction.

holder population, The Southern Georgia: 18,662 in Alabama: and i

Company's common stock has 4,013 in Mississippi.

Stockholders Featured become one of the 10 most widely in Advertising Program held corporate stocks in America. In Individual Ownership Cited A series of four advertisements -

i addition, The Southern Company's The overwhelming majority of The advertisements which feature indi-common stock is the most widely Southern Company's stockholders viduals who have invested a portion he;d electric utility stock in the are individuals - as opposed to of their savings in Southern l

nation.

institutional holders of stock. At the Company stock - has been devel-Southern Company stock-close of 1982, individuals had voting oped for use in the southeastern i

holders live in all 50 states and in control of approximately 85 percent editions of national magazines. In 45 foreign countries. The number of of the outstanding shares of addition, the first television commer-stockholders in every region has Southern Company stock.

cials ever produced for The increased, but the strongest rise in The importance of individual Southern Company are being broad-cNvnership during the past several investors - and the vital role they cast throughout the Southern years has been in the four-state play in assuring an adequate supply electric system's service area.

Highlighting actual stock-holders, the commercials focus on Stockholders of Record (thousands) the necessary support that investors provide for building the electric ser-l vice facilities needed for the future.

l SU They also emphasize that Southern Company stock is held mainly by individuals, many of whom are l

ago middle-income working or retired Southerners.

The four 30-second commer-cials are being shown during news 300 broadcasts and quality prime time l

programming in major market areas

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in the South. Collectively, the 1983 j

200 print and television advertisements will reach an estimated 22 million l

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Research cnd Development Assessing the potential of new energy sources is a major commitment of the Southern electric system.

Research efforts during 1982 tested residential, commercial, and industrial uses of solar energy.

The Southern electric system's for commercial buildings. A proto-several different types of coal-commitment to furthering the type system has been installed in derived liquids was selected for development of solar technology Alabama Power's Montevallo office.

funding by EPRI. The tests are was demonstrated in 1982 as two During 1982, the experimental scheduled to take place in mid-1983 major research projects began equipment provided some 20 per-at Mississippi Power's Sweatt Elec-operation. In April,1982, Georgia cent of the office's cooling re-tric Generating Plant.

Power completed construction of quirements,40 percent of its one of the first privately financed heating needs, and 80 percent of Projects initiated homes in the nation which uses the energy used for water heating.

To Study Acid Rain j

photovoltaic cells to generate elec-Because sulfur dioxide emissions tricity. The cells - 64 panels Research Efforts indicate from electric utilities may be one of located on the rooftop of the house Lower Production Costs several factors contributing to the

- convert the sun's rays directly For Synthetic Fuels formation of acid rain, the Southern into electricity.

A major technological advance -

electric system is actively involved The amount of electricity pro-which significantly reduces the in research to determine the causes duced by the photovoltaic process is amount of hydrogen consumed in and effects of this phenomenon.

monitored through a computer con-producing synthetic fuels - took (The term acid rain refers to any trol system. This system enables ad-place in late 1982 at The Southern precipitation with higher-than-normal

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citional energy to be purchased Company's experimental coal levels of acidity.) One pioject, from Georgia Power, as needed, to research center near Wilsonville, funded by the Southern electric meet the requirements of the home.

Alabama. The center is jointly system and several other utilities, is if excess power is generated, the owned by the Southern electric a network of rain sampling stations computer signals for the extra system and the Electric Power which have been installed across energy to be dispatched and sold to Research Institute (EPRI) - the the Southeast to collect data on the company.

research and development arm of regional and seasonal variations in

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In May, Georgia Power dedi-the electric utility industry.

the acidity levels of rain.

l cated the nation's largest industrial If sustained in testing during Recognizing the need for more application of solar collectors for 1983, the achievement could make information about acid rain, the generating electricity. The project's the cost of producing synthetic fuels Congress authorized in 1980 a 114 dish shaped collectors -

far mnre competitive with conven-

$50-million study to be conducted covering nearly five acres - form a tional energy sources.

over a 10-year period. The manage-solar-powered system which is Prelimina.y research indicates ment of the Southern electric capable of providing more than 50 that from 25 to 40 percent less system has urged that the study be percent of the electric and thermal hydrogen may be needed to tum accelerated to a five-year program energy needs of a knitwear manu-raw coal into a clean-burning liquid with full funding so that any federal facturing plant in Shenandoah, fuel - a fuel which can be burned legislation which might be enacted Georgia.

in power plants or refined into could be based on more extensive During 1983, Georgia Power gasoline and home heating oil. With scientific research.

g will conduct tests at the installation lower hydrogen consumption, the and collect data to help scientists process is more efficient - allow-Research Budget Reviewed and engineers design large-scale ing up to two-thirds of the raw coal Systemwide research and develop-

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solar energy systems that operate at to be recovered as liquid fuel.

ment expenditures for 1982 totaled maximum efficiency and minimum Testing will continue at the

$24.4 million - including a cost.

facility throughout 1983. Funding for

$13.7-million contribution to support Solar research also is being the project is expected to be pro-projects carried out by EPRI. The l

carried out by Alabama Power. In vided by the Department of Energy Southern electric system expects to addition to studying the photovoltaic and EPRI.

spend some $26.5 million on process for possible use by residen-In other synthetic fuels research and development activities tial customers, the company is research during 1982, a proposal by in 1983.

testing solar-assisted cooling, the Southern electric system to heating, and water heating systems compare the combustion of natural gas and fuel oil with the buming of 22

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New Business Ventuies Expanding beyond the traditional business of providing electricity, The Southern Company formed a new subsidiary in 1982 to market worldwide the technical expertise of the Southern electric system.

The Southern Company's new preparation of rate filings, power More than a dozen companies subsidiary - Southern Electric plant cost models, protection in the United States also have International, Inc. (SEI) - com-engineering, and system planning.

drawn on the engineering, research pleted its first full year of operation and training expertise of the on January 5,1983. The company Major Clients Acquired Southern electric system through

- headquartered in Atlanta -

During SEl's first year, contracts SEl. Several utilities, for example, markets to utilities and industrial were initiated with more than 30 have contracted with SEI to train concerns worldwide the expertise of intemational and domestic operators at sophisticated power the Southern electric system in plan-organizations.

plant simulators which are located ning and operating electric power In addition to the work being at three of the system's major facilities.

done in Puerto Rico, SEl was re-generating stations.

Early in the year, the new firm tained in early 1982 by another utili-SEl now is pursuing additional completed a detailed assessment to ty in the Caribbean - primarily to business opportunities in the design.

match the system's skills and design a formal corporate planning construction, and operatioa of large-resources with the needs of pro-program. To prepare the program, scale electric generating plants and r

spective clients. Immediate oppor-SEl surveyed several major aspects oth^r high technology projects.

tunities were identified in the areas of the utility's business - including of engineering, operations, planning, energy production and delivery, cus-New Subsidiary Utilizes and training.

tomer service, accounting systems.

Existing Resources, Personnel The services provided to the and human resource development.

SEl functions outside the limits of Puerto Rico Electric Power Authority SEl made specific recommendations conventional utility regulation and demonstrate the range of assistance to improve the power distribution prices its services based on a com-that the firm can offer. During its network of the region and now is petitive worldwide market.

first year of work in Puerto Rico, SEl helping the utility in other key For the near term, the new helped develop a maintenance pro-phases of its operations.

- firm is not expected to have a gram to improve the performance of In the Middle East, SEI has significant impact on The Southern the utility's generating units, assisted been retained by utilities to develop Company's earnings. However, long-q in establishing an employee training comprehensive training programs term growth of SEI is promising center, and provided engineering for their employees. These pro-because the venture requires little support services for a number of grams - designed to meet the capital investment and uses existing other projects.

specific educational needs of the or only moderately augmented In 1982, SEl also worked with participants - were conducted dur-resources.

utilities on highly specialized proj-ing 1982 at facilities throughout the A small corporate staff is ects related to corporate planning, Southern electric system.

responsible for the marketing, management, and administrative i

functions of SEl. When expert:se is Southern Electric Intemational needed for specific projects, SEI Representative Projects Undertaken During 1982 utilizes personnel from other Southern Company subsidiaries.

Training personnel from Caribbean, Middle Eastern, and South American Employees are available at times to utilities in operations, power station management, and customer service work on an SEI project because the P

ss tin uti ties the Caribbean and the United States to improve power e p rt se ycli n nature depending in part on the status of Performing research and testing services for more than a dozen American construction projects. The time and industrial firms and utilities expense of these employees are j

Designing a computer model to help utilities in the Middle East control the "9

cost of building power plants resources reduces the overhead b

expenses carried by the operating companies and, thus, brings direct benefits both to customers and 6

stockholders.

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Financi-l Review Contents Consolidated Statements of Earnings Retained Management's Report 26 in the Business 33 Management's Discussion and Analysis of Results Consolidated Statements of Amount Paid in for of Operations and FinancialConcition 27 Common Stock in Excess of Par Value 33 Auditors' Report 29 Consolidated Statements of Sources of Funds Consolidated Balance Sheets 30 for Gross Property Additions 34 Consolidated Statements of Capitalization 31 Notes to FiriancialStatements 35 Consolidated Statements of Income 32 Selected Consolidated Financial Data 44 M:nagement's Report The independent public accountants provide an The management of The Southern Company has objective assessment of how well management meets prepared - and is responsible for - the consolidated its responsibility for fair financial reporting. They financial statements and related information included in regularly review the system of internal accounting con-this report. These statements were prepared in accord-trol and perform such tests and other procecures they ance with generally accepted accounting principles deem necessary to reach and express an opinion on appropriate in the circumstances and necessarily in-the fairness of the financial statements.

clude amounts that are based on the best estimates The audit committee of the board of directors, and judgments of management. Financial information composed of three directors who are not employees, throug. lout this annual report is consistent with the provides a broad overview of management's financial financial statements.

reporting and control functions. Periodically, this com-The company maintains a system of internal ac-mittee meets with management, the internal auditors, counting control to provide reasonable assurance that and the independent public accountants to ensure that assets are safeguarded and that books and records these groups are fulfilling their obligations and to reflect only authorized transactions of the company.

discuss auditing, internal control, and financial report-Limitations exist in any system of internal control, ing matters. The internal auditors and independent however, based on a recognition that the cost of the public accountants have access to the members of the system should not exceed its benefits. The company audit committee at any time.

believes its system of internal accounting control, Management believes that its policies and pro-together with its internal auditing function, maintains an cedures provide reasonable assurance that the com-appropriate cost / benefit relationship.

pany's operations are conducted with a high standard of business ethics. In management's opinion, the con-I solidated financial statements present fairly the finan-cial position, results of operations, and sources of funds for gross property additions of The Southern Company and its subsidiaries.

26

Management's Discussion and Analysis by a substantial decline in sales to industrial customers Of Results of Operations and Financial Condition as a result c' the current recession. The additional revenues resul ting from rate increases and the Results of Operations recovery of increased fuel and energy costs have The Southern Company's financial performance im.

steadily increased the average revenue per kilowatt-proved significantly in 1982 as earnings recovered from hour sold from 4.04 cents in 1980 to 4.49 cents in the depressed results of the past two years. The 1981 and 5.04 cents in 1982.

stronger earnings achieved during the year resulted primarily from retail and wholesale rate increases and Expenses the positive effects of cost control efforts. However, Operation expenses continued to rise each year due to prior experience has clearly demonstrated that -

higher prices paid for fuel, increased levels of pur-especially during periods of inflation - earnings chased power during the past two years, and escalat-generally will begin to decline after higher rates have ing costs of other operation expenses. The rapid been in effect for a full 12-month cycle, unless addi.

growth in fuel expense moderated in 1982 compared to tional rate increases are granted. This decline is inten.

the two previous years because of a more favorable sified when major generating units are placed into generation mix - increased low-cost generation from service because of the substantially higher unit cost of nuclear and hydro facilities. However, total fuel new facilities compared to existing plant.

expense increased in 1982 because of higher unit costs. The increases in purchased and interchanged N:t income power expenses for the last two years resulted Consolidated net income for 1982 was $472 million, up primarily from the contractually required purchases of 45 percent from the previous year and 37 percent from energy from participants in Georgia Power's jointly results in 1980. A po tion of this increase resulted from owned generating plants. Increases in other operation the cumulative effect of a change by Georgia Power in and maintenance expenses were largely the result of its method of recording revenues. After deducting ap-escalating costs of lator, materiais, and services and plicable taxes, the change in the method of recording the additions of new facilities.

revenues increased net income by $23.5 million or 12 The increases in depreciation and amortization cents per share. (See Note 1 to the financial state-experienced during each of the last three years oc-ments.) Excluding the effect of this change, net income curred because of the continued growth in depreciable still increased 38 percent over 1981 and 30 percent plant in service. The composite straight-line deprecia-over 1980. Earnings per share of $2.38, including the tion rate was 3.6 percent in 1982 and 3.7 percent in cumulative effect of the accounting change, increased 1981 and 1980.

31 percent from 1981 and seven percent from 1980.

Fluctuations in income taxes resulted primarily However, earnings per share in 1982, excluding the from corresponding changes in taxable income.

cumulative effect of the accounting change, gained (Federal and state income tax provisions are detailed in only one percent over 1980, illustrating clearly the need Note 5 to the financial statements.)

for continuing efforts to improve earnings.

Allowance for Funds Used Revenues During Construction (AFUDC)

The continued growth in operating revenues occurred The AFUDC represents the cost of capital charged to because of rate increases, recovery of increased fuel utility plant that is under construction and not included and purchased power costs through fuel and energy in rate base. The equity portion of this credit represents adjustment provisions contained in rate schedules, and noncash income. However, the normalization of the higher energy sales (especially from nonterritorial income tax effect of the debt portion results in a non-sources). The significant gains in sales of energy to cash charge. In addition, a significant portion of current nonterritorial utilities during the past three years cash flow results from the allowance of a return on, resulted from contracts with nonaffiliated neighboring and recovery through depreciation of, previously utilities that extend to 1986. Sales to these customers capitalized amounts. The AFUDC (net of income taxes),

have risen from four billion kilowatthours in 1980, the as a percent of net income, dropped to 32.5 in 1982, first year of the agreements, to 5.1 billion in 1981 and compared to 42.4 in 1981 and 39.9 in 1980.

9.2 billion in 1982. Consequently, revenues from these sales have grown from $108 million in 1980 to

$160 million in 1981 and $276 million in 1982. The overall increase in energy sales for 1982 was slowed 27

Financi:1 Review Effects of inflation Capital Structure inflation has had a significar.t impact on the Southern The company continued to make progress in 1982 electric system in recent years. Regulated utilities toward meeting its long-term goal of increasing typically have been affected more severely by inflation common equity as a percent of total capitalization. At than other industries because regulatory commissions year-end, this ratio was 32.7 percent, compared to only have not always allowed sufficient revenues to keep 30.5 percent at the end of 1979. Conversely, the long-pace with higher costs and provide adequate returns term debt ratio has decreased from 58.1 percent to on the large investment - some 85 percent of total 56.9 percent during the same period. However, the im-assets - in utility plant. (Note 13 to the financial bedded interest rate on long-term debt continued to statements presents supplementary information about climb. During 1982, the subsidiary companies sold the approximate effects of inflation.)

$275 million principal amount of first mortgage bonds and, through public authorities, $175.6 million of pollu-Future Eamings Potential tion control obligations at a combined composite Although 1982 results of operations are significantly interest rate of 14 percent. This compares to an eight-stronger than in the past two years, the improvement is percent composite interest rate on long-term debt at not necessarily indicative of future eamings potential. It the end of 1979. Other subsidiary security sales during is expected that higher operating costs and carrying 1982 included $75 million of preferred stock (at an an-charges on the increased investment in plant - if not nual dividend rate of 13.76 percent). Additionally, The offset by increases in revenues (by either periodic rate Southern Company sold $239.2 million of common increases, growth in energy sales, or a combination of stock. The market price of the company's common both) - will adversely affect future earnings. Future stock rose from $12.00 per share at the beginning of increases in sales will be influenced by a number of the year to $15.625 per share at year-end. This rise factors, including the volume of energy sales to ne:gh-brought the market value to 93 percent of the year-end boring utilities, energy conservation practiced by book value of $16.78 per share. a significant improve-customers, the elasticity of demand, weather, and the ment from the 73-percent market-to-book value ratio rate of economic growth in the system service area.

recorded at the end of 1981 and 1930. The cash-flow coverage of common stock dividends was 3.59 times in Financial Condition 1982, compared to 3.03 in 1981 and 3.40 in 1980. Con-The major changes in the company's financial condi.

tinued efforts will be made to provide sufficient growth tion in 1982 were additions of $1.5 billion to utility plant in earnings in order to maintain a competitive position and the issuance of $613 million of additional securi.

in the marketplace. To achieve this goal, considerable ties, net of retirements. The proceeds from these sales emphasis will be placed on improving operating and the sales of some $20 million of property were efficiency, as weii as aggressiveiy pursuing adequate used to finance 42 percent of the 1982 gross property rates.

additions, with the remaining funds (58 percent) provided from internal sources. A significant portion of Capital Requirements internal sources is derived from such noncash charges The ongoing construction programs of the company's to income as depreciation and deferred income taxes.

subsidiaries will require an estimated $6.8 bi!! ion for the (See the Consolidated Statements of Sources of Funds three years 1983 through 1985. These pr ' grams are for Gross Property Additions.)

subject to revision because of factors suto as the granting of timely and adequate rate increases, new estimates of increased costs, revised load projecticns, and the availability and cost of capital. These factors have forced substantial cutbacks in the construction programs in past years, causing generating units and other facilities throughout the system to be postponed or canceled. The programs also may be reduced by the possible sales of interests in generating facilities.

28

To adapt the construction programs to changing condi-To issue additional long-term debt and preferred tions during the past several years, Georgia Power has stock, the operating subsidiaries must comply with cer-previously sold undivided interests in certain power tain earnings coverage requirements outlined in their plants and transmission facilities. In addition, the mortgage indentures and corporate charters. These system companies have contracted to sell to utilities in coverages, including Mississippi Power's revenues Florida and Texas substantial amounts of capacity and subject to refund in 1982, were, at the end of the re-energy from coal-fired units over the penod 1983 spective years, as follows:

through May,1995. These sales and any future sales will help the system companies to complete plants now Mortgage Coverage Charter Coverage under construction. (See Note 4 to the financial (2 00 Required)

(1.50 Required) statements.)

1982 1981 1982 1981 In addition to the funds needed for the construc-Alabama Power 2.83 1.93 1.60 1.33 tion programs, approximately $276 million will be Georgia Power 2.31*

1.99 1.64*

1.50 required by the end of 1985 for present sinking fund Power 1

99 requirements and maturities of long term debt.

The company and its subsidiaries plan to obtain

• Excluding the cumulative effect of a change in the metnod of the funds required for construction from similar recording revenues. these coverages would be 2.13 and 1.58 for sources and in comparable amounts as used in the m rtgage and charter. respectively.

past. However, the type and timing of financings will depend on market conditions and the maintenance of The ability to maintain these coverages and to adeouate earnings.

generate sufficient amounts of internal funds for To meet short-term cash needs and contingen-construction depends on the receipt of timely rate in-cies, the system companies had, at the beginn;ng of creases that will provide an adequate return on insest-1983, approximately $670 million of cash and tem-ment and offset the rising costs caused by inflation. If porary cash investments and $2.2 bii' ion of unused The Southern Company and the subsidiary companies credit arrangements with banks. No short-term bank are unable to obtain sufficient funds from external loans were outstanding at the end of 1982 or 1981, sources which - together with internally generated compared with $97 million at year-end 1980.

funds - would be adequate to continue construction, further delays and possible cancellations may be necessary.

Auditors' Report Ta The Board of Directors and to the possible refund. As explained in Note 2, the final out-Stockholders of The Southern Company:

come of this matter is now not exoected to have a We have examined the consolidated balance sheets material adverse effect on the financial staternents.

and consolidated statements of capitalization of The Accordingly, our present opinion on the 1981 financial Southem Company (a Delaware corporation) and sub-statements, as presented herein, is different from that sidiary companies as of December 31,1982 and 1981, expressed in our previous report.

and the related statements of income, earnings re-In our opinion, the financial statements referred to tained in the business, amount paid in for common above present fairly the financial position of The stock in excess of par value and sources of funds for Southern Company and subsidiary companies as of gross property additions for each of the three years in December 31,1982 and 1981, and the results of their the period ended December 31,1982. Our examina-operations and the sources of funds for gross property tions were made in accordance with generally additions for the periods stated, in conformity with accepted auditing standards and, accordingly, included generally accepted accounting principles, which, such tests of the accounting records and such other except for the change, with which we concur, in the auditing procedures as we considered necessary in the method of recording revenues by one of the sub-circumstances.

sidiaries as described in Note 1, were applied on a in our auditors' report dated February 19,1982, consistent basis.

our opinion on the 1981 financial statements was quahfied as being subject to the effect of such adjust-Arthur Andersen & Co.

ments, if any, which might result from the final outcome of a pending rate matter under which one Atlanta, Georgia subsidiary had billed increased revenues subject to February 18,1983.

29

l Fin:ncini R:vi";w Consolidated Balance Sheets At December 31,1982 and 1981 The Southern Company and Subsidiary Companies 1982 1981 (in thousands)

ASSETS Utility Plant:

Plant in service, at original cost

$12,266,578

$11,519.018 Less accumulated provision for depreciation 3,218,575 2.870.606 9,048,003 8,648,412 Nuclear fuel, at amortized cost 296,300 244,261 Construction work in progress 2,331,139 1,812,916 Total 11,675,442 10,705,589 Less property related accumulated deferred income taxes (Note 1) 1,361,010 1.216,915 Total 10,314,432 9.488,674 Other Property and Investments (principally nonutility property, net) 10,065 8,484 Current Assets:

Cash 36,218 27,187 Temporary cash investments, at cost 634,013 509,296 Receivables, less accumulated provisions for uncollectible accounts of

$3,137,000 in 1982 and $3,212,000 in 1981 432,422 399,349 Accrued unbilled revenues 55,586 4,545 Fossil fuel stock, at average cost 611,909 565,404 Materiats and supplies, at average cost 86,997 80,065 Prepayments 40,397 34,695 Total 1,897,542 1,620,541 Dxf;rred Charges:

Deferred cost of canceled plants, being amortized 3,145 10.874 Debt expense, be ng amortized 19,769 18,652 Miscellaneous _

56,248 50,895 Total 79,162 80,421 Tctil Assets

$12,301,201

$11,198.120 CAPITAllZATION AND LIABILITIES C:pitalization (see accompanying statements).

Common stock equity

$ 3,503,903

$ 3,122,908 Preferred stock 901,820 826.820 l

Preferred stock subject to mandatory redemption 211,234 217,963 Long-term debt 6,104,179 5,754.200 l

Total 10,721,136 9,921,891 Current Llabilities:

Preferred stock sinking fund requirement 3,734 94 Long-term debt due within one year 85,590 141,558 Accounts payable 380,541 294,858 Customer deposits 67,467 61,606 Taxes accrued -

Federal and state income 77,399 60,176 Other 78,399 65,409 Interest accrued 165,719 148,804 Miscellaneous 91,212 50,041 Total 950,061 822,546 DifIrred Credits, Etc.:

Accumulated deferred investment tax credits 598,910 420,513 Miscellaneous 31,094 33.170 Total 630,004 453.683 C mmitments and Contingent Matters (Notes 2,3,4, and 9)

Tctal Capitalization and Liabilities

$12,301,201

$11.198.120 Certain prior year amounts have been reclassified to conform with current year presentation.

The accompanying notes are an integral part of these statements.

30

Consolidated Statements of Capitalization At December 31,1982 and 1981

)

The Southem Company and Subsidiary Companies 1982 1981 1982 1981 Common Stock Equity:

(in thousands)

(percentof total) f Common stock, par value $5 per share-Authorized - 300,000,000 shares; Outstanding - 1982: 208,823.825 shares:

1981: 190,956,923 shares (a)

$ 1,044,119

$ 954.785 Amount paid in for common stock in excess of par value 1,545,245 1,395,395

\\

Premium on preferred stock 5,350 4.790 Earnings retained in the business (Notes 2 and 10) 909,189 767.938 Total common stock equity 3,503,903 3.122,908 32.7 %

31.5 %

Cumulative Preferred Stock of Subsidiaries:

$100 par or stated value -

4.20% to 5.96%

199,356 199.356 6.48% to 7.88%

147,000 147,000 8.04% to 9.52%

340,464 340.464

$25 stated value, Class A -

$2.52 to $2.56 100,000 100,000

$3.44 75,000 15 68 %

40,000 40.000 Total (annual oividend requirement - $76.'707.000) 901,820 826.820 8.4 8.3 Cumulative Preferred Stock of Subsidiaries Subject i

to Mandatory Redemption:

$100 par value -

10.20% to 11.36%

76,960 79,383

$25 stated value, Class A -

$2.75 63,008 63.674

$3.76 75,000 75.000 Total (annual dividend requirement - $26,539.000) 214,968 218.057 Less amount due within one year (Note 6) 3,734 94 Total excluding amount due within one year 211,234 217.963 2.0 2.2 Long-Term Debt:

First moitgage bonds of subsidiaries -

Maturity Interest Rates 1982 3%% to 9%%

52,536 1983 3%%

11,069 11,069 1983 4%%

11,939 11,939 1984 3%% to 3%%

37,915 37,915 1985 3%% to 3%%

26,988 26,988 l

1986 3%% to 3%%

29,725 29,725 1987 4%% to 8%%

104,179 104.179 1988 through 1992 3%% to 18%%

528,781 532,603 1993 through 1997 4%% to 7%%

386,449 386,449 1998 through 2002 6%% to 11%%

1,294,489 1,294,519 2003 through 2007 7%% to 11%%

1,190,968 1,190.968 2008 through 2012 9% to 17%%

1,615,000 1,340.000 Total first mortgage bonds 5,237,502 5,010.890 Other long-term debt (Note 7) 1,000,365 917,566 Unamortized debt premium (discount), net (48,098)

(40.698)

Total long-term debt (annual interest requirement - $618,784.000) 6,189,769 5.895,758 Less amount due within one year (Note 8) 85,590 141,558 Long-term debt excluding amount due within one year 6,104,179 5.754,200 56.9 58.0 Total Capitalizat'on

$10,721,136

$9.921.891 100.0 %

100.0 %

(a) At December 31,1982, a total of 16,790,596 shares was reserved for issuance pursuant to the Dividend Reinvestment and Stock Purchase Plan and the Employee Savings Plan. The Southern Company also has authority from the Securities and Exchange Commission to issue at market up to $11,308,000 of common stock through its Employee Stock Ownership Plan.

The accompanying notes are an integral part of these statements.

31

t Financial Rsvi3w Con olidated Statements of Income Fcr the Years Ended December 31,1982,1981, and 1980 Th3 Southern Company and Subsidiary Companies 1982 1981 1980 (in thousands)

Operating Revenues (Notes 1 and 2)

$4,927,183

$4.256.237

$3.763.483 Operating Expenses:

Operation -

Fuel 1,810,947 1,738,194 1,520.875 Purchased and interchanged power, net 155,189 37,731 (9.525)

Other 641,447 556,768 442.498 Maintenance 391,404 358.667 289,796 Depreciation and amortization 391,185 359.514 331.222 i

Taxes other than income taxes 234,581 207,582 179.543 l

Federal and state income taxes 416,440 293.311 326.176 l

Total operating expenses 4,041,193 3.551.767 3.080.585 Op; rating income 885,990 704,470 682.898 Oth:r income:

i Allowance for equity furids used during construction 92,707 89.488 72,640 Interest income 69,191 83,328 43.584 Other, net 2,906 (4,566) 32,518 income taxes applicable to other income (28,814)

(29,422)

(23.549)

Income Before Interest Charges 1,021,980 843.298 808.091 Int: rest Charges and Preferred Dividenos:

Interest on tong-term debt 576,807 512.544 431,416 Interest on notes payable 6,221 2,558 59,738 Amortization of debt discount, premium, and expense net 2,080 2.228 1,841 Other interest charges 9,951 7,063 18.010 Allowance for debt funds used during construction (118,277)

(94,451)

(124.598)

Preferred dividends of subsidiary companies 95,876 87.387 77,289 Net interest charges and preferred dividends 572,658 517.310 463.696 Consolidated income before cumulative effect of a change in method of recording revenues 449,322 325,979 344,395 Cumulative effect as of January 1,1982, of accruing unbilled revenues - less income taxes of $22.320.000 (Note 1) 23,009 Ccnsolidated Net income - as reported S 472,331

$ 325.979

$ 344.395

- pro forma (Note 1)

$ 449,322 5 329.400

$ 345.759 AvIrage Number of Shares of Common Stock Outstanding (in thousands) 198,800 180.139 154,392 Etrnings Per Share of Common Stock:

Before cumulative effect of a change in method of recording revenues

$2.26

$1.81

$2.23 Cumu'ative effect as of January 1,1982, of accruing unbilled revenues 0.12 Total Earnings Per Share of Common Stock - as reported

$2.38

$1.81

$2.23

- pro forma (Note 1)

$2.26

$1.83

$2.24 Ccsh Dividends Paid Per Share of Common Stock

$1.66

$1.62

$1.56 i

The accompanying notes are an integral part of these statements.

l 32

Consolidated Statements of Earnings Retained in the Business For the Years Ended December 31,1982,1981, and 1980 The Southern Company and Subsidiary Companies 1982 1981 1980 (in thousands)

Balance at beginning of period S 767,938

$ 734,733

$628,118 Consolidated net income 472,331 325.979 344,395 1,240,269 1,060,712 972,513 Cash dividends on common stock

($1.66 per share in 1982, $1.62 per share in 1981, and $1.56 per share in 1980) 327,723 288.831 23G,900 Capital stock issuance expense 3,357 3.943 880 BIlance at end of period (Note 10)

$ 909,189

$ 767,938

$734,733 Consolidated Statements of Amount Paid in for Common Stock in Excess of Par Value For the Years Ended December 31,1982,1981, and 1980 The Southern Company and Subsidiary Companies 1982 1981 1980 (in thousanos)

Balance at beginning of period

$1,395,395

$1,253,742

$1,125.823 Proceeds from sales of common stock over the par value ' hereof - 17,866,902 shares in 1982, 22.259.793 sharts in 1981, and 19,952,293 shares in 1980 149,850 141.653 127,919 Balance at end of period

$1,545,2_45

$1,395.395

$1,253.742 The accompanying notes are an integral part of these statements.

l I

l l

l l

l l

33

~

}

Financial R:;vi:;w Consolidated Statements of Sources of Funds for Gross Property Additions For the Years Ended December 31,1982,1981, and 1980 The Southern Company and Subsidiary Companies 1982 1981 1980 (in thousar.ds)

Sources of Funds for Gross Property Additions:

i Consolidated net income

$ 472,331

$ 325,979

$ 344.395 Add (deduct) principal noncash items -

I Depreciation and amortization 500,441 448.060 405,670 Deferred income taxes, net 210,170 187.621 196,417 Deferred investment tax credits 205,591 100.577 58,424 Allowance for equity funds used during construction (92,707)

(89.488)

(72,640) 1,295,826 972.749 932.266 Less dividends on common stock 327,723 288.831 236.900 968,103 683.918 695.366 Decrease (increase) in net current assets, excluding notes payable, and long-term debt and preferred stock due within one year -

Cash and temporary cash investments (133,748)

(197,683)

(138,796)

Receivables (33,073) 111.491 (207,679)

Accrued unbilled revenues (51,041)

(743) 844 Fossil fuel stock (46,505)

(12.068)

(102.938)

Materials and supplies (6,932)

(10.969)

(6.747)

Accounts payable 85,683 (89.553) 57.034 Taxes accrued 30,213 (34,540) 68,582 -

Interest accrued 16,915 21.959 10.442 Other, net 41,330 14.524 (12 528)

(97,158)

(197,582)

(331,786)

Other, net (including allowance for equity funds used during construction)

(12,484)

(13.685) 11.078 Total funds from internal sources 858,461 472,651 374.658 External sources -

First mortgage bonds 275,000 575.000 400,000 Bonds retired. reacquired, or refunded at maturity (56,388)

(45.268)

(24.923) 218,612 529.732 375,077 Preferred stock 75,000 40.000 Preferred stock subject to mandatory redemption 75,000 10,000 Preferred stock reacquired (3,089)

(13.018)

(8.695)

Common stock 239,184 252,952 227.680 Proceeds from pollution control obligations, nel 131,023 88.897 49,376 Sales of property, net book value 19,562 387,021 increase (decrease) in other long-term debt (48,224)

(61.691) 70.792 Decrease in notes payable (96.501)

(255.977)

Total funds from external sources 632,068 815.371 855.274 Gross Property Additions (including allowance for funds used during construction in the amounts of $154.255.000 in 1982,

$138,789.000 in 1981, and $139.366.000 in 1980)

$1,490,529

$1.288.022

$1.229,932 Certain orior year amounts have been reclassified to conform with current year presentation The accompanying notes are an integral part of these statements.

4 34

r The Southern Company and Subsidiary Companies Fuel Costs Notes to Financial Statements Fuel costs are expensed as the fuel is used. The sub-December 31,1982,1981, and 1980 sidiary companies' electric rates include provisions to adjust billings for fluctuations in fuel and purchased

1. Summary of Significant Accounting Policies:

power costs. Revenues are adjusted for differences General between recoverable fuel costs and amounts actually The Southern Company is the parent company of four recovered in current rates.

operating companies, a system service company, and The cost of nuclear fuel, including the estimated Southern Electric International, Inc. (SEI). The operating cost of permanent storage of spent fuel, is amortized companies provide electric service in four southeastern to fuel expense based on the quantity of heat produced states. Contracts among the companies - dealing with for the generation of electric energy. This amortization jointly owned generating facilities, interconnecting was $77,675,000 in 1982, $57,764,000 in 1981, and transmission lines, and the exchange of electric power

$48,261,000 in 1980. Final disposition of spent nuclear

- are regulated by the Federal Energy Regulatory fuel may require adjustments to fuel expense. Pending Commission (FERC) or the Securities and Exchange ultimate disposition, sufficient storage capacity for Commission. The system service company provides, at spent fuel is available into the year 2000 at Plant Hatch cost, technical and other specialized services to The and into 1994 and 2012 at Plant Farley Unit Nos.1 and Southern Company and to each of the subsidiary com-2, respectively. Alabama Power currently is planning to panies. SEl, which was formed in January,1982, expand storage facilities at Plant Farley Unit No.1 to markets to utilities and industrial concerns the facilitate storage capacity into 2010. On January 7, technical expertise of the Southern electric system in 1983, the President of the United States signed the planning and operating electric power facilities.

Nuclear Waste Policy Act relating to the storage of The Southern Company is registered as a holding spent nuclear fuel by the federal government. Manage-company under the Public Utility Holding Company Act ment is currently reviewing this legislation and does not of 1935. Both the company and its subsidiaries are expect the Act to have any material impact on its subject to the regulatory provisions of the Act. ihe financial statements.

operating companies also are subject to regulation by the FERC and their respective state regulatory commis-Utihty Plant sions. The companies follow generally accepted ac-Utility plant is stated at original cost. This cost includes counting principles and comply with the accounting appropriate administrative and general costs: payroll-policies and practices prescribed by the respective related costs such as taxes, pensions, and other commissions.

benefits; and the estimated cost of funds used during All material intercompany items have been construction. The cost of maintenance, repairs, and eliminated in consolidation. Consolidated retained earn-replacement of minor items of property is charged to ings at December 31,1982, include $626,195,000 of maintenance expense accounts. The cost of replace-undistributed retained earnings of subsidiaries.

ments of property (exclusive of minor items of property) is charged to the utility plant accounts.

Revenues Alabama Power and Mississippi Power recognize Allowance for Funds Used revenues concurrent with billings to customers on a During Construction (AFUDC) cycle billing basis. Gulf Power, in 1975, and Georgia This allowance represents the estimated debt and Power, in 1982, began accruing for service rendered equity costs of capital funds which are necessary to but unbilled at the end of each fiscal period to more finance the construction of new facilities. The com-closely match revenues and expenses. The effect of posite rates used by the companies to calculate this change in accounting method by Georgia Power AFUDC during the years 1980 through 1982 ranged was to increase 1982 net income by $498,000 before from 7.7 percent to 9.9 percent.

the cumulative effect for prior periods. The cumulative effect of the change and the pro forma effect on prior periods, assuming the change had been applied retro-actively, are shown in the Consolidated Statements of Income.

35

s Financi:1 R view Depreciation arid Amortization increase in the 1981 contribution of $27,783,000. Ac-Depreciation of the original cost of depreciable utility cumulated pension benefit information as of the valua-plant in service is provided using composite straicht-tion dates (January 1 of each year) follows:

line rates which approximated 3.6 percent in 1982 and 1982 1981 3.7 percent in 1981 and 1980. Depreciation includes a factor to provide for the expected cost of decommis.

on mousands)

Act " P sioning nuclear facilities. This cost, based on decom-ufa ed acc an n fits-missioning promptly after the unit is taken out of Vested

$453,459

$393.331 service, is estimated at approximately $32 million per Nonvested 9,447 8.528 unit for Georgia Power's ownership interest in Plant Total

$462,946 5401.859 Hatch and $37 million per unit at Alabama Power's weighted average rates of retum Plant Farley. These estimates will be adjusted assumed in determining periodically to reflect changing price levels and actuanal present vabe of technology. When property subject to depreciation is accumulated ptan benefits 8%

8%

retired or otherwise disposed of in the normal course Net assets available for benefits

$576,716

$493.487 of business, its cost - together with the cost of removal, less salvage - is charged to the ac-The actuarial present value of accumulated plan cumulated provision for depreciation. The deferred benefits was determined on the basis of accrued bene-costs of canceled plants are being amortized over five-fits as of January 1 of the respective years, whereas year periods. This amortization amounted to $7,750,000 the plan is funded based on the premise that the plan in 1982, $9,125,000 in 1981, and $9,272,000 in 1980.

will continue in existence, which requires that future events be considered The unfunded prior service cost Pension Costs under the plans and supplemental contracts amounted The companies have trusteed and noncontributory to approximately $229,004,000 at December 31,1982.

pensior' pians which cover substantially a!! regular This amount is being amortized over a period of ap-employees. The policy of the companies is to fund proximately 15 years.

each year's accrued pension cost for the plans. This cost amounted to $84,504,000 in 1982, $75.880,000 in income Taxes 1981, and $41,018,000 in 1980. Of these amounts.

The companies provide deferred income taxes for all

$55,146.000 in 1982, $49,267,000 in 1981, and significant income tax timing differences. Investment

$26,078,000 in 1980 were charged to operating ex-tax credits utilized are deferred and amortized over the penses, and the balance was charged to construction average lives of the related property. Provisions for and other accounts. Amendments to the plans in 1981 property-related deferred income taxes reflect con-liberalized retirement benefits, including increased sumption of part of the value of the plant and equip-terminal pay formulas and expanded benefits to ment to which they relate. Consequently, the related employees. The effects of these amendments were a accumulated deferred income taxes are a valuation net increase of $215,664,000 in the accrued liability reserve deducted from the plant investment in the with respect to past service under the plans and an Consolidated Balance Sheets. Other deferred income taxes are included in taxes accrued. (See Note 5 for further information regarding income taxes.)

2. Rate Matters:

Mississippi Power has pending before the Supreme Court of Mississippi a $39.3-million annual retail rate request which was placed in effect on November 20, 1980. The request was appealed to the Supreme Court of Mississippi by the Mississippi Public Service Com-mission (MPSC) following a March 19,1982, decision by the Chancery Court of Hinds County which upheld a substantial portion of the company's annual re-quested increase.

36

In addition, Mississippi Power has a $21.9-million On June 4,1982, Gulf Power filed a retail rate annual retail rate request on appeal in the Chancery request with the Florida Public Service Commission Court of Hinds County. This request was placed in ef-(FPSC) to increase revenues by approximately fect, subject to refund, on May 5,1982, and was

$36.9 million annually. On January 11,1983. the FPSC denied in its entirety by the MPSC on October 1,1982.

issued an order granting an increase of approximately in connection with the above cases, the Con-

$3.4 million annually effective January 21,1983. On solidated Statements of locome include a portion of the January 26,1983. Gulf Power petitioned the FPSC for increased revenues which, based on prior court deci-reconsideration of the order.

sions and the opinion of Mississippi Power's legal On March 7,1983, Georgia Power filed a retail counsel, are expected to be ultimately retained. Such rate request with the Georgia Public Service Commis-amounts increased revenues and net income by sion to increase revenues by $319.5 million annually.

$37,572.000 and $19.016,000 in 1982, $37,820,000 and New wholesale rates for Georgia Power have

$19,156.000 in 1981, and $2.054,000 and $1,043,000 in been approved by the FERC. These rates, which 1980, respectively. It is management's opinion that any became effective February 1,1983, are designed to in-refund liability related to the 1980 case is remote, and crease wholesale revenues by approximately $12.5 mil-management does not consider these revenues to be lion annually.

subject to refund.

Alabama Power, Gulf Power, and Mississippi On February 15,1983, the Chancery Court of Power have pending with the FERC some $11 million Forrest County issued an opinion that rates collected annually in wholesale rate requests which are sched-under bond are unconstitutional and monies collected uled to become effective in 1983.

should be refunded. In the opinion of Mississippi Power's legal counsel, tha maximum liability to the

3. Construction Program, Financing, company is approximately $181 million, plus applicable And Fuel Commitments:

interest for both rate cases mentioned above; however, The subs! diary companies are engaged in continuous any actual refund obligation is considered to be construction programs, currently estimated to total remote. Mississippi Power will appeal any adverse some $2.0 billion in 1983, $2.4 billion in 1984, and ruling by the court.

$2.4 billion in 1985. These estimates include the

!n the opinion of management, the ultimate out.

allowance for funds used during construction and come of these cases will not have a material adverse reflect the present ownership percentage in all effect on the financial position or results of operations.

generating faciiities under construction. Tne above con-In response to the teversal and remand by the struction estimates will be reduced if the proposed sale Supreme Court of Alabama of a 1981 rate decision and by Georgia Power of an additional interest in Plant as a result of negotiations, the Alabama Public Service Vngtle to the Municipal Electric Authority of Georgia is Commission (APSC) on November 12,1982, issued a realized. (See Note 4.) The construction programs are consolidated order in Alabama Power's 1981 and 1982 subject to periodic review and revision, and actual con-retail rate cases, granting an annual revenue increase struction costs incurred may vary from the above of approximately $306 million and adopting rates which estimates because of factors such as granting of timeiy provide for periodic adjustments based upon Alabama and adequate rate increases, new estimates of in-Power's earned return on common equity. The first creased costs, revised load estimates the availability such adjustment was a two-percent revenue increase and cost of capital, and changes in the amount and made etfective on February 1.1983. The rates also timing of proposed asset sales.

provide for adjustments to recognize the placing of To the extent possible, the subsidiary companies' new generating facihties in service. As part of the pro.

construction programs are expected to be financed ceedings. Alabama Power agreed not to file for any from the issuance of additional long term debt and general retail rate increase orior to January 1,1985.

preferred stock, from the sale of pollution control bonds Appeals by certain intervenors from the APSC order by public authorities, and from the receipt of additional are pending in the Supreme Court of Alabama. Approxi.

paid-in capital provided by The Southern Company from the sales of common stock. Should The Southern mately $198 million in revenues which had been billed in 1982, subject to refund, was made permanent by Company and subsidiary companies be unable to ob-orders of the APSC and the Supreme Court of tain funds from such methods of financing, the com-Alabama.

panies would have to use short-term indebtedness or other alternative, and possibly costlier, means of financing or it could become necessary to cancel or delay certain construction projects.

37

s Fin ncui Review At the beginning of 1983, unused credit ar-

4. Facility Sales and Joint Ownership Agreements:

rangements with banks totaled $2.2 billion, of which Through December 31,1982, Georgia Power had sold

$200 million expires on September 30,1983, approxi-undivided interests in Plants Hatch, Wansley, Scherer, mately $400 million at various times during 1983, and and Vogtle in varying amounts, together with transmis-the balance on December 31,1990.

sion facilities, to Oglethorpe Power Corporation, an The unused amount expiring on September 30, electric membership generation and transmission cor-1983, is the revolving credit agreement of Alabama poration (OPC); the Municipal Electric Authority of Power. This agreement contains: (1) restrictions which, Georgia, a public corporation and an instrumentality of among other things,(a) limit the amount of certain the State of Georgia (MEAG): and the City of Dalton, types of additional indebtedness which A!abama Power Georgia. In 1982 and 1980, these sales resulted in may incur, and (b) require that a substantial portion of gains, after income taxes, of $3,873,000 and the proceeds from sales of properties or securities,

$7,425,000, respectively. There were no sales of j

with certain exceptions, be applied to repayment of the facilities during 1981. Georgia Power also is negotiating notes and (2) the requirement for payment of a commit-to sell an additional interest in Plant Vogtle to MEAG.

ment fee.

The consummation of any future sales is subject to all The amounts expiring in 1990 represent revolving requisite governmental approvals, the negotiation of credit agreements of Georgia Power. During the term agreements satisfactory to the respective parties, and of these agreements, Georgia Power (at its option) may the completion of satisfactory financial arrangements convert short-term borrowings into term loans. Such by the proposed purchasers. At December 31,1982, term loans would be payable in 12 equal quarterly in-Georgia Power's percentage ownership and investment stallments during the years 1991 through 1993 or at an in these jointly owned facilities were as follows:

earlier date (at Georgia Power's option). In connection with this credit agreement, Georgia Power has agreed Georgia Power te pay certain fees and/or maintain compensating rotal Percent Plant in r

balances with the banks.

Capac ty lvnershto Service Progress in connection with all other lines of credit, the (megawatts)

On thousands) companies maintain compensating balances, which are Plant Hatch 1.630 50.1 % $516.928 $ 62.491 substantially all the cash of the companies except for Plant Wansley 1,779 53 5 288.448 464 daily working funds and like items. These balances are Plant Scherer not legally restricted from withdrawal.

Unit Nos.1 & 2 1,636 84 40.906 34.640 The amounts of first mortgage bonds, preferred Cornmon FacMties 23.5 64.418 5.281 stock, and common stock which can be issued in the Plant Vogtle 2,320 50.7 1,139.034 future will be contingent on market conditions, the maintenance of adequate earnings leveis, and other Each participant provides for its own construction factors. At December 31,1982, each of the operating financing. Georgia Power's proportionate share of plant companies had sufficient coverages to permit the sale operating expenses is included in the corresponding of additional bonds and preferred stock.

operating expenses in the Consolidated Statements of To supply a portion of the fuel requirements of Income. Georgia Power is obligated contractually to their generating plants, the subsidiary companies have complete these jointly owned units still under construc-entered into various long-term commitments for the tion and to operate and maintain the units as agent for procurement of fossil and nuclear fuel. In most cases, the joint owners.

these contracts contain provisions for price escala-In connection with these sales, Georgia Power tions, minimum production levels, and other financial has entered into agreements which require the com-commitments. Additional commitments for coal and pany to purchase declining fractions of OPC's and nuclear fuel will be required in the future to supply the MEAG's capacity and energy of the respective subsidiary companies' fuel needs.

generating units during a period of up to 10 years following commercial operation. The payment for this capacity will be made whether any capacity is available. The cost of capacity and energy, which is included in purchased power in the Consolidated 38

Statements of Income, totaled $214,866,000, depreciation of those property costs exceeds the

$91,474,000, and $104,298,000 in 1982,1981, and related tax deductions. The amortization of deferred 1980, respectively. The capacity payments included investment tax credits is applied as a credit to reduce above were $115,374,000, $38,330,000, and depreciation in the Consolidateo Statements of Income

$48,240,000 in 1982,1981, and 1980, respectively, and and amounted to $13,463.000 in 1982, $10,751,000 in for units currently in service are estimated to amount 1981, and $8,529,000 in 1980. At December 31,1982, to some $116,300,000 in 1983, $99,700,000 in 1984, investment tax credits totaling approximately

$75,600,000 in 1985, $56,800,000 in 1986, and

$191 million - expiring from 1996 to 1997 - had

$41,900,000 in 1987. The energy cost of these pur-not been utilized and are available to reduce federal chases is a function of each entity's variable operating income taxes payable in future years.

costs and the energy actually purchased.

The total provision for federal income tax as a The system operating companies have entered percent of income before federal income tax was less into agreements with certain Florida and Texas utilities than the statutory federal income tax rate for the regarding power sales of specific amounts of coal-fired following reasons:

generating capacity over the period 1983 through May, 1995. These sales of capacity range from 650 mega.

1982 1981 1980 watts in 1983 to 3,500 megawatts in 1987, with Effective federal, income tax rate substantially lesser amounts to be sold during 1993, Peen eductons in tax 1994, and 1995. The energy enmponent of these power expense resutting from statutory sales is a function of the variable operating expenses exclusons from taxable income-atid the energy actually sold.

Equity component of AFUDC 4.3 58 46 Other 1.1 10 26 Effectue federalincome tax cate S. Income Taxes.

before timing d.fferences 47.8 48 1 49 8 A detail of the federal and state income tax provisions Reversal of pror years' timirig is set forth below:

differences not normalized-Difference in depreciaton 1962 1981 1960 basis and rates (2.1)

(2 3)

(1.9)

(in thousands)

Excess of tax gain over book Total provisco for income taxes:

proSt on sales of utikty Federal -

propertes (2.3)

Currently payable

$ 25,417 $ 20.914 $ 73.253 Other 0.1 Deferred 268,476 213,608 217.129 Miscellaneous 0.3 02 03 Deferred in prior years (credit)

(81,739) (44.419)

(36,156)

Statutory federalincome tax rate 46.0 %

46 0 %

46 0 %

Deterred investment tax credits 205,591 100.577 58.424 417,745 290.680 312.650

6. Cumulative Preferred Stock Subject State -

To Mandatory Redemption:

Currently payable 26,396 13.621 21,631 Redemption requirements are five percent annually of the original number of shares issued, commencing in in pror years (credit)

(,

)

)

)

yeat h co@M aggmgate aMM d 49,829 32.053 37.075 redemption requirements for these series through 1987 Total 467,574 322,733 349.725 Less income taxes chargeo to totals $7,750.000 per year for the years 1983 and Other income 28,814 29.422 23.549 1984, $8,250,000 for 1985, and $12 million per year for Cumulative effect as of im82 of 1986 and 1987. At December 31,1932, $4,016.000 of accruing unbilled revenues 22,320 the 1983 sinking fund requirement had been reac-a$e c arg cNatons

$416,440 $293.311 $326.176

, as weH as M,000 to partially satisfy future re-t quirements. The gains on the reacquisitions of The provision for deferred income taxes results

$560,000, $2.015,000, and $1,019,000 for the years primarily from the companies' tax deductions for ac.

1982,1981, and 1980, respectively, are included with celerated methods of depreciation and other write-offs premium on preferred stock as shown in the Con-of property costs - as provided for by the income tax solidated Statements of Capitalization.

laws - being significantly greater than the book depreciation of such costs. Income taxes deferred in prior years are credited to income when the book 39

s Financial Rcvim l

7. Other Long Term Debt:

8. Long Term Debt Due Within One Year:

Details of other long-term debt are as follows:

A summary of the sinking fund requirement and scheduled maturities of long-term debt due within one December 31.

1982 1981 year is as follows:

(in thousanos) 1982 1981 Obhgatons incurred in connection with the sale by pubic authorit,es (in thousands) of tax-exempt pol!ution control Bond sinking fund requirement

$66,868

$ 62.608 revenue bonds-Less -

Collaterahzed-Portion to be satisfeed by bonding 5 8% to 13.75% due 2003 property additons 58,483 54.311 to 2012

$ 545,530

$413.530 Reacquired bonds 3,220 7.612 Noncollaterahzed-Cash sinking fund requirement 5,165 685 59% to 7.4% due senally First mortgage bond matuntes 23,008 52,536 1982-2003 16,750 16.850 Other long-term debt maturites 7.7% to 9.125% due senah (Note 7) 57,417 88.337 1982-2004 22,700 23.200 Total

$85,590

$141.558 7 2% to 11.5% due 1994 to 2012 204,450 160.850 Less funds on deposit with trustees 73,701 29.724 The annual sinking fund requirement for first mort-715,729 584.706 gage bonds is one percent of the sum of bonds Capitahzed lease obhgator.s-authenticated before January 1 each year. If mortgage a ra5i a comages are met Ws requkement may be sadsfied Buildings 98,457 92.581 by using bonds authenticated for this purpose against Transportaton and other 14,637 16.884 unfunded property additions equal to 166-2/3 percent of 231,387 237.341 the requirement. Georgia Power's 11-5/8 percent series Notes payable-due August 1,2000, is subject to a mandatory cash 115% due 1982 42.000 sinking fund of $5 million annually.

8.75% due 1982-1989 17,100 19.550 9 75% due 19824010 11,538 11.619

9. Nuclear insurance.

6% to 16% due 1982-1986 2,836 2.350 Feating interest rates Under the Price-Anderson Act, Alabama Power and due 1983-1987 Georgia Power maintain agreements of indemnity with (981% to 10 375% at 12/31/82) 21,775 20.000 the Nuclear Regulatory Commission (NRC) which, 53,249 95.519 together with private insurance, cover third-party liabili-Total

$1,000,365

$917.566 ty arising from any nuclear incident occurring at the companies' nuclear power plants. The Act limits to The subsidiary companies have authenticated and

$560 million public liability claims that could arise from delivered to trustees a like principal amount of first a sing le nuclear incident. Each reactor at the com-mortgage bonds as security for obligations under col-panies' nuclear plants is insured against this liability to lateralized installment agreements. The principal and in-a maximum of $160 million by private insurance (the terest on the first mortgage bonds will be payable only maximum amount currently available) and the remain-in the event of default under the installment purchase der is provided by indemnity agreements with the NRC.

agreements.

In the event of a nuclear incident involving any com-Assets acquired under capital leases are recorded mercial nuclear facility in the country, Alabama Power as utility plant in service, and the related obligation is and Georgia Power could be assessed up to $5 million classified as other long term debt. The net book value per incident for each licensed reactor operated by of capitalized leases included in utility plant in service them, but not more than $10 million to be paid in a was $221.212,000 and $234,254,000 at December 31, calendar year. On the basis of Alabama Power's 1982 and 1981, respectively. At December 31,1982, ownership of two reactors in service and Georgia the composite interest rates for nuclear fuel, coal Power's current ownership interest in two reactors now i

railcars, buildings, and transportation and other were in service, the companies could be assessed a maxi-10.35,9.56,8 22, and 11.96 percents, respectively.

mum of $10 million and $5.010.000, respectively, for Sinking fund requirements and/or serial maturities any such incident, but not more than $20 million and through 1987 applicable to other long-term debt are as

$10,020,000, respectively, to be paid in any one year.

follows: $57,417,000 in 1983, $54,766,000 in 1984,

$36,174,000 in 1985, $12,086,000 in 1986, and

$9.217,000 in 1987.

1 1

40

Alabama Power and Georgia Power are members

12. Quarterly Financial Data (Unaudited):

of Nuclear Mutual Limited, a mutual insurer establisheo Summarized quarterly financial data for 1981 and 1982 to provide property damage insurance for members' are as follows:

nuclear generating facilities. The companies are sub-ject to a retrospective premium adjustment in the event a[7t9, gt gj,ter ba"r'ter st nd rd t"

that losses exceed accumulated funds. Alabama (amounts in mousands except for per snare cara; 1981 Power's and Georgia Power's maximum assessments are limited to approximately $50 million and $28 million, 0 j; tfj.'Lerus-51.003.076 s1.001.260 si 246.172 51.005.729 respectively, per policy year.

Pro forms 1.001.207 1.016.100 1.234.330 1.011.478 Both companies also are members of Nuclear OPj;,t[jg**-

169.320 138.512 236.561 160.077 Electric Insurance Limited, a mutual insurer which pro-Pro forma 168 389 145.895 230.670 162.937 vides insurance to cover, separately, (a) the extra costs con *[I e* "*'

n which would be incurred in obtainirg replacement As reported 78.501 44.883 135 079 67.516 power during a prolonged accidental outage at a Per conn s'nare member's nuclear plant and (b) contamination and Earnings-property damage to nuclear generating facilities in As7gond gp g25 g 75 g 35 o n excess of $500 million. Members are insured against oudends pad 040s 0 40s 0 4u',

0 40',

increased costs of replacement power in the amount of M @ "'

12 %

12v.

12 s 12.

$2,500,000 per week (starting 26 weeks after the Low 11 7 10%

11 ".

11 '.

outage) for one year and $1,250,000 per week for the 1982 second year. Under each policy, members are subject operat;ng revenues-to retroactive assessrnents if losses exceed the ac.

AsdS!

$ $ N $ N >5$ $ $ ks38 51.174.5]

e g

cumulateo funds available to the insurer under that ocerating income-policy. The present maxirnum assessments per policy AsEt[$*

!1 g g 5 g8 8g 191 896 e

g year for Alabama Power and Georgia Power would be consoicated net approximately $15.2 million and $12 million, respective-

"Cf3 me--

eoocted 109.744 84.094 179.634 82.285 ly, under the replacement power policy and $9.4 million Restated 128.650 89.341 172.055 na Pe com on share and $4 million, respectively, under the property damage policy.

As reported 0.57 0 43 0 90 0 39 Restated 0 67 0 45 0 87 na l

10. Common Stock Dividend Restrictions:

g[go 4r, 0 42',

0 42",

4 l

The income of The Southern Company is derived main-1"

'f f'

Q Q'

I ly from equity in earnings of its operating subsidiaries.

At December 31,1982. $301,340,000 of consolidated Quarterly earnings for the first three quarters of retained earnings was restricted against the payment 1982 have been restated to reflect a change in the by the operating affiliates of cash dividends on com.

method of recording revenues (see Note 1). The mon stock under terms of bond indentures or charters.

restated amount for the first quarter includes the cumulative effect of the change on years prior to 1982,

11. Assets Subject to Lien:

amounting to $23,009,000 after applicable taxes. The The companies' mortgages, as amended and sup-pro forma amounts for 1981 assume the change had piemented, which secure the first mortgage bonds been applied retroactively.

issued by the companies. constitute a direct first lien The company's business is influenced by seasonal l

on substantially all of the companies' fixed property weather conditions and the timing of rate increases.

and franchises.

41

o Financi:1 Review

13. Supplementary Information Concerning replacement cost of existing productive capacity The Effects of Changing Prices (Unaudited):

because the utility plant is not expected to be replaced The following supplementary information conceming precisely in kind.

the effects of changing prices is presented in accord-The accumulated provision for depreciation for ance with the general concepts set forth in Financial current cost was developed t:y applying, for each Accounting Standards Board Statement No. 33, as major class of plant, the same percentage relationship modified to reflect the economic effects imposed on that existed between gross plant and accumulated pro-the Southern electric system by regulatory authorities.

vision for depreciation on a historical basis to the ad-It should be viewed as an estimate of the approximate justed plant data. Depreciation expense for both effects of inflation, rather than a precise measure.

methods was determined by applying the current Constant dollar amounts represent historical cost depreciation rates to the respective indexed plant stated in terms of dollars of equal purchasing power, amounts reduced by the amortization of investment tax as measured by the Consumer Price Index for All credits which were first adjusted to average 1982 con-Urban Consumers. Current ccst amounts reflect the stant dollar amounts by year of addition.

changes in specific prices of plant from the date the Increases in the cost of electric generating fuel plant was acquired to the present. They differ from are recoverable in revenues through operation of fuel constant dollar amounts to the extent that specific cost recovery mechanisms. Such increases effectively prices have i icreased more or less rapidly than the are receivables from customers. Therefore, such in-general rate of inflation. The current cost of plant was creases are not included in income but instead are determined by indexing each major class of plant using treated as monetary assets. Income tax expense was the Handy Whitman Index of Public Utility Construction not adjusted because only historical costs are deducti-Costs. Current cost does not necessarily represent the ble for income tax purposes.

Statment of Income Adjusted for Changing Prices For the Year Ended December 31,1982 On thousands of average 1982 dollars)

Constant Current Dollar Cost income Applicable to Common Stockholders, Pro Forma *

$449.322

$449.322 Erosion of Common Stockholders' Equity Because of Changing Prices:

Cost in excess of the original cost of productive facilities not recoverable in rates as depreciation-Reportable as an additional provision for depreciation 429.683 498.337 Reportable as an adjustment to net recoverable cost (20.911)

(102.385) 408,772 395,952 Excess of the general level of prices ($865.395) in the current year over increase in specific price changes ($852.575)"

12.820 Offsetting effect of debt financing (280.046)

(280.046)

Net erosion of common stockholders' equity 128.726 128.726 income Applicable to Common Stockholders, as Adjusted *"

(including the effect of debt financing)

$320.596

$320.596 i

• Pro forma excludes the cumulative effect as of January 1.1982 ($23,009,000 after taxes) of a change in the method of recording revenues (see Note 1).

" At December 31,1982, current cost of proparty, plant, and eauipment, net of accumulated depreciation, was

$23.3 billion and historical cost or net cost recoverable through depreciation was $11.4 billion.

• " Adjusted income applicable to common stockholders would be $20 million on a constant dollar basis and a loss of

$49 million on a current cost basis if only the amount reportable as an additional provision for depreciation were deducted from the reported amount of such income.

42

}

(

A

\\

Under the ratemaking prescribed by the received in the future for these items will purchase regulatory commissions to which the subsidiaries of less. Conversely, holding monetary liabilities, primarily The Southern Company are subject, only the historical icng-term debt, results in a gain because the oayment cost of plant is recoverable in revenues as deprecia-in the future will be made with nominal dollars having tion, and plant in rate base is limited to original cost.

less purchasing power. The Soutern electric system Therefore, the cost of plant stated in terms of constant has a net gain due to the significant amounts of long-dollars or current cost that varies from the historical term debt outstanding. While the use of debt f;nancing cost of plant is not presently reflected in rates charged reduced the effect of the loss to common stockholders, to customers. The amount of this variance in the cur-earnings were not adequate to offset the erosion in the rent year is reflected as an adjustment to net purchasing power of their investment.

recoverable cost.

Hoiding assets such as receivables, prepayments, and inventory results in a loss of purchasing power dur-ing periods af inflation because the amount of cash Fiv:-Year Comparison of Selected Supplementary Financial D'.ta Adjusted for Effects of Changing Prices (in thousands of dollars) 1982 1981 1980 1979 1978 Operating Revenues:

Pro forma historical cost *

$4,927,183

$4,263,115

$3,766,229

$3,118,486

$2,909,215 As adjusted *

• 4,927,183 4,518,902 4.406,488 4,147,586 4,305,638 Income (Loss) Applicable to Common Stockholders:

Pro forma historical cost *

$449,322

$329,400

$345,759

$214.321 As adjusted for the net erosion of common stockholders' equity" 320,596 97,845 64,761 (110,027)

Income (Loss) Per Common Share:

Pro forma historical cost *

$2.26

$1.83

$2.24

$1.48 As adjusted for the net erosion of common stockholders' equity' 1.61 0.54 0.42 (0.76)

C:mmon Stockholders' investment (Net Assets), at Year End:

Pro forma historical cost *

$3,503,903

$3.145,917

$2,854,324

$?,517,645

$2.445.212 As adjusted *

• 3,468,864 3.240,293 3,196,843 3,172,233 3,472,201 Excess of the General Level of Prices Over increase in Specific Price Changes"

$ 12,820

$ 46,735

$370.297

$827,679 Effect of Debt Financing"

$280,046

$562,885

$834,425

$975,994 R; turn on Average Common Equity:

Pro forma historical

• 13.51 %

10.98 %

12.87 %

8.64 %

As adjusted for the net erosion of common stockholders' equity" 9.56 3.04

?.03 (3 31)

Cash Dividends Per Common Share:

Historical cost

$1.66

$1.62

$1.56

$1.54

$1.54 As adjusted *

• 1.66 1.72 1.83 2.05 2.28 i

Market Price Per Common Share:

Historical

$15.63

$12.00

$12.25

$11.50

$13.38

- _l As adjusted" 15.47 12.36 13.72 14.49 19.00 Av: rage Consumer Price Index 289.1 272.4 246.8 217.4 195.4

• Pro forma historical cost for 1982 excludes the cumulative effect as of January 1,1982 ($23,009,000 after taxes) of a change in the method of recording revenues (see Note 1). Pro forma historical cost for years pricr to 1982 assumes the change had been applied retroactively.

• • Adjusted amounts represent average 1982 dollars.

43

[

s l '

9'

, s Fin:nci:1 R:vi:w Selected Consclidated Fl.1ancial Data The Southem Company and Subsidiary Companies 1982 1981 1980 Condensed Statements of income (in thousands):

Operating Revenues

$4,927,183

$4,256.237

$3,763,483 Operating Expenses -

Operation and maintenance 2,998,987 2.691,360 2,243,644 Depreciat;on and amortization 391,185 359.514 331,222 Tayes other than income taxes 234,581 207,582 179,543 Federal and state income taxes 416,440 293,311 326,176 Total Operating Expenses 4,041,193 3.551,767 3,080,585 Operat!ng Income 885,990 704,470 682,898 Other Income. Net 135,990 138,828 125,193 income Before interest Charges 1,021,980 843,298 808.091 Net Interest Charges 476,782 429,932 386,407 Preferred D;vidends of Subsidiary Cornpanies 95,876 87,387 77.289 Consolidated income before cumulatwa effect of a change in method of recording rev?nues 449,322 325,979 344,395 CJmulatiVe effect as of Jartary 1,1982, of accruing unbilled revenues - less income taxes of $22.320,000 (Note 1) 23,009 Consolidated Net income - as reported S 472,331

$ 325,979

$ 344,395

- pro forma (Note 1)

$ 449,322

$ 329,400

$ 345,759 Average Number of Shares of Common Stock Outstanding (in thousands) 198,800 180.139 154,392 Elmings Per Share of Common Stock:

Before cumulative effect of a chsnge in method of recording revenues

$2.26

$1.81

$2.23 C_umulative effect of accruing unbdled revenues 0.12 Tctal Earnings Per Share of Common Stock - as reported

$2.38

$1.81

$2.23

- pro forma (Note 1)

$2.26

$1.83

$2.24 Ccsh Dividends Per Share of Common Stock

$1.66

$1.62

$1.56 R; turn on Average Common Equity (percent) 14.26 10.94 12.91 rotal Ass 9ts lin thcusands)

$12,301,201

$11.198,120

$10.378,699 Capitalizatic>,1 On thcusands).

Common stock equity

$ 3,503,903

$3,122,908

$2.834,736 Prefarred sd 901,820 826,820 786,820 Preferred stock sub,ect to mandatory redemption 211,234 217,963 152,000 Long-term dcbt -

6,104,179 5,754,200 5,226,851 Total capita!;ntpn

$10,721,136

$9,921,891

$9,000,407 Gross Property Additic,1s (in thcusands)

$1,490,529

$1,288,022

$1,229,932 Kilowatthour Safes (a thousandst-Residential 24,095,512 24,239,470 24,651,737 Commercial 18,409,093 17,714,872 17,282,986 Industrial 33,369,042 35,451,363 34.833,664 Sales for resale ano other tarritorial sales 11,657,894 11,666,134 11,666,894 Sales to utilities outside tciritory 9,254,302 5,145,292 4,023,960 Total kilowatthour sales 96,786,743 94,217,131 92,459.241 Operating Revenues (in thcesands):

Residential

$1,469,107

$1,286.103

$1,186,206 Commercia!

1,173,323 985,106 879,291 Industrial 1,480,187 1,367,715 1,199,204 Sales for resale and ohr tarntodal sales 480,405 426,970 363,200 Capto utilities outside terthory 278,234 161,581 110,243 Tcta! tcvenues from sales of electricity 4,881,256 4.227,475 3,738,144 OtNr revenues 45,927 28,762 25,359

. gal operating revenues

$4,927,183

$4,256.237

$3,763,483 s

Employees (year-end) 29,882 28,944 27,940 Average Revente Per Kilowatthour - Total Sales (cents) 5.04 4.49 4.04 Average Cost cf Fuel Per Kilowatthour Generated (cents) 1.93 1.81 1.61 Certain poor year amounts have been reclassified to conform with current year presentation.

\\

]

ec -

+

1976 1977 1976 1975 1974 1973 1972 1970

$3.128,169

$2.9C6,672

$2.652,085

$2.199.531

$1.998.912

$1.488,995

$1,165.825

$983.233 1.S08,448 1.816,508 1,629,709 1,337,845 1,130,955 927,267 593,416 512,017 304,188 269,012 216,060 190,178 170,791 153.361 132,762 114,943 171,174 157,127 129,956 120,718 104,198 88,949 75,908 65,432 208.263 191.156 246.624 164,115 195.278 46.560 94.510 66.177 2,592.073 2.433.803 2.222.349 1.812.856 1,601.222 1,216.137 896.596 758.569 51G,036 472.869 429,736 386.675 397,690 272,858 269.229 224.664 122.673 110.018 131.839 169.574 154.395 121.086 85,632 52.807 658.769 582.887 561,575 556,249 552,085 393.944 354.861 277,471 363,E21 310,436 253.117 303,487 273,316 233,406 176,175 132.265 76 821 70.883.

63.301 58 189 40.600 37,672 30.488 24.701 219.127 201,568 245,067 194,573 238,169 122.866 148,198 120,505

$ 219,127

$ 201,5M

$ 245,067

$ 194.573

$ 238,169

$ 122,866

$ 148,198

$120,505

$ 214.321

$ 202.790

$ 250,468

$ 195.433

$ 241,802

$ 123.266

$ 150.681

$121,476

• 45,038 139.005 125.846 120.072 105.264 87,083 71,625 63.833

$1.51

$1.45

$1.95

$1.62

$2.26

$1.41

$2.07

$1.88

$1.51

$1.45

$1.95

$1.62

$2.26

$1.41

$2.07

$1.88

$1.48

$1.46

$1.99

$1.63

$2.30

$1.41

$2.10

$1.90

. $1.54

$1.54

$1.48

$1.41 %

$1.40

$1.39%

$1.34

$1.30 8.90 8.44 11 10 9.91 13.62 7.89 10.75 10.29

$9.568.610

$9,011.366

$8,332.620

$7.473.500

$6,735.120

$6,183,815

$5,065.143

$4,241,760

$2.499,422

$2,422,182

$2,353,285

$2.064.172

$1.662.018

$1,636,794

$1,480,324

$1,278,439 756,820 726.8N 723.820 612,820 562,820 562,820 512,820 462,820 149,750 155,000 155,000 155,000 105,000 4,769,066 4.522.888 4.221.694 3.744.495 3,400,210 2,939,388 2.529,421 2,165.265

$8.205.058

$7.826,800

$7.456.799 56.576,487

$5,933,048

$5.139.002

$4.522,565

$3.906.524 IU164.956

$1.082.431

$1,218.404

$994.839

$992,087

$1,212,125

$1,002,289

$859,383 2i'.645,723 23,606.119 22,820.156 20,985.791 20,275,134 19,404.815 19,587,400 17,675.269 16.433,689 16,586,919 17,763,462 16,741,435 15,556,668 14,797,312 14,687,449 13,316,030 34.912,745 33,524,232 30,0C7,083 28.334,488 25 955,374 26,719.209 26,569,020 24,909.785 11,964,415 12,925,477 13,758 826 13,155,453 12.822,148 12,151,177 12,168.591 10.486,908 G4,102 392,240 934.978 1 138,673 931,397 799.691 50.917 303.390 86.020 674 87.034,987 85.353,505 80,355.860 75.540,721 73.872.204 73.063.377 66,691.382

$ 952,085 S 914.625

$ 3?8,200

$ 673,653

$ 632,765

$ 479.096

$ 400,182

$337,348 742,065 681,349 689,945 589,680 531.256 399.267 324.884 273,517 1,056.075 922 288 773.447 619,640 558.704 416.653 312,037 262,234 348,359 344,603 317,594 282.473 248,744

.173,683 116.572 94,396 2.955 12.460 19,846 19.050 12.844 8,518 565 5.855 3.102,939 2,883.325 2.620.032 2,184,496 1,984.313 1.477.217 1,154.240 973.350 25,230 23.347 23.053 15.035 14.599 11.778 11.585 9.883

$3,128,169

$2,906.C72

$2.652,085

$2.199,531

$1.998,912

$1,488,995

$1.165.825

$983.233 26.540 26.465 24,632 22,385 20,684 21.115 20,509 19,004

.3 61 3.31 3.08 2.72 2.63 2.00 1.58 1.46

~ 1.52 1.36 1.27 1.13 1.11 0.87 0.49 0.44 45

l The Southem Company Officers A. F. Dantzler8 H. G. Pattillo 8 W. C. Vereen, Jr.*

President Chairman of the Board Chairman of the Board Alvin W. Vogtle, Jr.

Dantzler Boat & Barge Pattillo Construction Riverside Manufacturing President Company Company, Inc.

Company Age 64; 42 years of service Pascagoula, Mississippi Decatur, Georgia (Textiles)

Aga 67; elected 1972 Age 56; elected 1 /2 Moultrie, Georgia George B. Campbell Age 69; elected 1962 Financial Vice President Joseph M. Farley Robert H. Radcliff, Jr.

Age 60; 43 years of service President Chairman of the Board Alvin W. Vogtle, Jr.8 Alabama Power Company Radcliff Marine Services, Inc. President William B, Reed Birmingham, Alabama Fairhope, Alabama The Southern Company Vice President (Engineering)

Age 55; elected 1970 Age 65; elected 1966 Atlanta, Georgia Aga 54; 13 years of service Age 64; elected 1962 Tommy Chisholm President General Partner Secretary and Assistant The Langdale Company Durnford Enterpnses, Ltd.

Advisory Directors Treasurer (Forest products (Real estate)

Age 41; 18 years of service manufacturing)

Pensacola, Florida V. J. Daniel, Jr.

Valdosta, Georgia Age 66; elected 1975 Former Chairman of the Therrell Murphy, Jr.

Age 65; elected 1977 Board Treasurer William B. Reed Mississippi Power Company Age 40; 13 years of service William W. McTyelre, Jr.8 President Gulfport Mississippi President Southem Company Age 66; elected 1973 Nell H. Justice McTyeire Enterprises, Inc.

Services, Inc.

Named Advisory Director, Assistant Secretary (Holding company for real Birmingham, A!aba,na 1982 Age 55; 29 years of service estate and other interests)

Age 54; elected 1977 Birmingham, Alabama Edwin 1. Hatch Age 69; elected 1972 William J. Rushton, ll18 8 Former Chairman of the Directors Chairman Board William S. Morris, Ill 8 Protective Corporation Georgia Power Company Edward L. Addison Chairman (Life and health insurance)

Atlanta, Georgia President Morris Communications Birmingham, Alabama Age 69; elected 1965 Gulf Power Company Corporation Age 53; elected 1971 Named Advisory Director, Pensacola, Florida (Newspaper publishers, 1978 Age 52; elected 1978 printing, computer services)

Frank P. Samford, Jr.

Augusta, Georgia Chairman of the Board 1 Member, Audit Committee Alan R. Barton Age 48; elected 1971 Torchmark Corporation 2 Member, Compensaten President (Life insurance and Committee Mississippi Power Company William A. Parker, Jr.t8 financial services) l Q, fo'mInNng C$m$ tee Gulfport, Mississipoi Chairman of the Board Birmingham, Alabama Age 57; elected 1982 Cherokee Investment Age 61; elected 1972 Company, Inc.

(Private investments)

Robert W. Scherer Atlanta, Georgia Chairman of the Board Age 55; elected 1973 Georgia Power Company Atlanta, Georgia Age 57; elected 1977 Herbert Stockham*

Chairman, President Stockham Valves &

Fittings, Inc.

Birmingham, Alabama Age 54; elected 1978 46 j

i J

t Southem Company Services, Inc, Officers William A. Dunlap Ruble A. Thomas Directors Vice President Vice President Alvin W. Vogtle, Jr.

Age 49,23 years of service Age 61; 34 years of service Edward L Addison Chairman of the Board Pensacola, Florida Age 64; 42 years of service Douglas E. Dutton Robert O. Usry Age 52; elected 1977 Vice President Vice President William B. Reed Age 40; 22 years of service Age 54; 36 years of service Alan R. Barton President Guifport, Mississippi Age 54; 13 years of service Robert C. Ford M. Euel Wade, Jr.

Age 57; elected 1982 Vice President Vice President Bill M. Guthrie Age 46; 17 years of service Age 45; 19 years of service Joseph M. Farley Executive Vice President Birmingham, Alabama Age 49; 31 years of service S. R. Hart, Jr.

E. L Williamson Age 55; elected 1970 Vice President Vice President Douglas L McCrary Age 55; 33 years of service Age 58; 33 years of service Harold C. McKenzie, Jr.

Executrve Vice President Atlanta, Georgia A,ge 53; 29 years of service W. Dean Hudson Clarence B. Grund, Jr.

Age 51; elected 1982 Vice President Assistant Vice President George B. Campbell Age 35; 10 years of service Age 57; 30 years of service William B. Reed Financial Vice President Birmingham, Alabama Age 60; 43 years of service Gale E. Klappa E. Ray Perrf Age 54; elected 1972 Vice President Assistant Comptroller and Robert F. Ellis, Jr.

Age 32; 8 years of service Assistant Secretary Robert W. Scherer Senior Vice President Age 57; 32 years of service Atlanta, Georgia Age 60; 37 years of service James C. Ludwig Age 57; elected 1978 Vice President Malcolm D. Sanders William B. Harrison Age 46; 24 years of service Assistant Comptroller Alvin W. Vogtle, Jr.

Senior Vice President Age 48; 23 years of service Atlanta, Georgia Age 60; 13 years of service William A. Manor,Ill Age 64; elected 1966 Vice President Nell H. Justice Thomas A. Nunnelly Age 43; 17 years of service Assistant Secretary Senior Vice President Age 55; 29 years of service Age 50; 24 years of service Therrell Murphy, Jr.

Vice President, T reasurer, Houston L Welch, Jr.

Tommy Chisholm and Assistant Comptroller Assistant Secretary Vice President and Secretary Age 40; 13 years of service Age 47; 22 years of service Age 41; 18 years of service William O. Reece Ormond W. Frazier t

Vice President and Assistant Treasurer Comptroller Age 52; 20 years of service Age 53; 18 years of service 47

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William B. Reed Robert W. scherer Prewlent P e%3ert Cha+rman of the Brard Cstbit'P'n { WirtC 60u?P?rn @N"y 6ef%eCe9 IOC GeOFQ 1 Power Cornpany etern4Sonat inc Alabama Power Company Southern Company Southern Electric 600 North 18th Street Services, Inc.

International, Inc.

Birmingham, Alabama 35291 64 Perimeter Center East 41 Perimeter Center East (205) 250-1000 Atlanta, Georgia 30346 Suite 490 (404) 393-0650 Atlanta, Georgia 30346 Georgia Power Company (404) 393 2340 333 Piedmont Avenue, N.E.

800 Shades Creek Parkway Atlanta, Georgia 30308 Birmingham, Alabama 35209 (404) 526-6526 (205) 870-6011 Gulf Power Company One Wall Street 75 North Pace Boulevard Suite 4200 Pensacola, Florida 32505 New York, New York 10005 (904) 434-8111 (212) 269-8842 Mississippi Power Company 1101 17th Street, N.W.

2992 West Beach Suite 405 Gulfport, Mississippi 39501 Washington, D.C. 20036 (601) 864 1211 (202) 775-0944 48 k.

Il t=r==r b EErMmMEUE.E m e

Stockholder I

information

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The Southern Company Dividend Reinvestment Plan Stockholder Inquiries

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64 Perimeter Center East The Dividend Reinvestment and Questions regarding ownership of

)

Atlanta, Georgia 30346 Stock Purchase Plan provides a Southern Company stock or any Telephone:(404) 393 0650 convenient method for stockholders inquiries about the company's to acquire new shares through the operations tray be directed to the Annual Meeting investment of quarterly dividends office of t' e Corporate Secretary The 1983 annual meeting of stock-and through optional cash pay-(404 393-4498).

holders will be held on Wednesday, ments. The price of shares pur-May 25, at 10:00 a.m. (EDT) at the chased with reinvested dividends is Transfer Agent, Dividend Paying Augusta-Richmond County Civic discounted five percent from an Agent, Dividend Reinvestment Center, Augusta, Georgia.

average market price. The price of Agent, and Registrar stock purchased with cptional cash The First National Bank of Atlanta Form 10 K payments is equal to 100 percent of Corporate Trust Department i

A copy of Form 10-K as filed with an average market price. Optional P.O. Box 3260 the Securities and Exchange Com-cash payments can be made monih-Atlanta, Georgia 30302 mission will be provided without ly from a minimum of $25 to a Telephone: (404) 588-6676 charge to stockholders upon written maximum of $6,000 per account for request to the office of the each calendar quarter. The Auditors Corporate Secretary. A copy of the company charges no service fee or Arthur Andersen & Co.

company's Financial and Statistical commission, and all stockholders of 25 Park Place, N.E.

Review also is available on request.

record are eligible to participate. A Atlanta, Georgia 30303 prospectus describing the plan and Cassette Recordings the method for calculating averag?

Legal Counsel Cassette recordings of the 1982 market price may be obtained from Troutman, Sanders, annual report are available without the office of the Corporate Lockerman & Ashmore charge as a service to the visually Secretary.

127 Peachtree Street, N.E.

impaired. Requests should be Under the Economic Recovery Atlanta, Georgia 30043 directed to News and Corporate Tax Act of 1981, individua!s who information, Department 343.

participate in The Southern Company's dividend reinvestment Common Stock Listing plan may defer the payment of The common stock of The Southern federal income taxes on reinvested dividends. A maximum of $750 Company is listed and traded on the New York Stock Exchange. In addi.

annually may be deferred on an tion, the stock is traded on regional individual return; up to $1,500 stock exchanges across the United annually on a joint return.

Re, invested dividends also are States. (The ticker symbol for Southern Company common stock not subject to the withholding tax is SO. The symbol SouthCo is used law enacted by the Congress in 1982.

in the newspaper stock listi 1s.)

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