INTRODUCTION

The condensed quarterly financial statements of each registrant included herein have been prepared by such registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets as of December 31, 2015 have been derived from the audited financial statements of each registrant. In the opinion of each registrant's management, the information regarding such registrant furnished herein reflects all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the results of operations for the periods ended June 30, 2016 and 2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each registrant believes that the disclosures regarding such registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy, operating results for the periods presented are not necessarily indicative of the operating results to be expected for the full year.

Certain prior year data presented in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the results of operations, financial position, or cash flows of any registrant.

Recently Issued Accounting Standards

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires lessees to recognize on the balance sheet a lease liability and a right-of-use asset for all leases. ASU 2016-02 also changes the recognition, measurement, and presentation of expense associated with leases and provides clarification regarding the identification of certain components of contracts that would represent a lease. The accounting required by lessors is relatively unchanged and there is no change to the accounting for existing leveraged leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The registrants are currently evaluating the new standard and have not yet determined its ultimate impact; however, adoption of ASU 2016-02 is expected to have a significant impact on Southern Company and the traditional electric operating companies' balance sheets.

On March 30, 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 changes the accounting for income taxes and the cash flow presentation for share-based payment award transactions. Most significantly, entities are required to recognize all excess tax benefits and deficiencies related to the exercise or vesting of stock compensation as income tax expense or benefit in the income statement. Southern Company and the traditional electric operating companies currently recognize any excess tax benefits and deficiencies related to the exercise and vesting of stock compensation in additional paid-in capital. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted and Southern Company and the traditional electric operating companies intend to adopt the ASU in the fourth quarter 2016. The adoption is not expected to have a material impact on the results of operations, financial position, or cash flows of Southern Company and the traditional electric operating companies.

Affiliate Transactions

In 2014, prior to Southern Company's acquisition of PowerSecure International, Inc. (PowerSecure) on May 9, 2016, Georgia Power entered into two agreements with PowerSecure to build solar power generation facilities at two U.S. Army bases, as approved by the Georgia PSC. Payments of approximately $102 million made by Georgia Power to PowerSecure under the two agreements since inception in 2014 are included in CWIP at June 30, 2016. PowerSecure construction service costs of approximately $13 million are included in accounts payable, affiliated in Georgia Power's balance sheet at June 30, 2016. The facilities will be owned and operated by Georgia Power and are expected to be operational by the end of 2016. The ultimate outcome of this matter cannot be determined at this time.

See Note (I) under "Southern Company – Acquisition of PowerSecure International, Inc." for additional information regarding Southern Company's acquisition of PowerSecure.

Asset Retirement Obligations

See Note 1 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, and Mississippi Power under "Asset Retirement Obligations and Other Costs of Removal" in Item 8 of the Form 10-K for additional information regarding the EPA's regulation of CCR.

The cost estimates below are based on information as of June 30, 2016 using various assumptions related to closure and post-closure costs, timing of future cash outlays, inflation and discount rates, and the potential methods for complying with the Disposal of Coal Combustion Residuals from Electric Utilities final rule requirements for closure in place or by other methods. As further analysis is performed, including evaluation of the expected method of compliance, refinement of assumptions underlying the cost estimates, such as the quantities of CCR at each site, and the determination of timing, including the potential for closing ash ponds prior to the end of their currently anticipated useful life, the traditional electric operating companies expect to continue to periodically update these estimates.

As of June 30, 2016, details of the asset retirement obligations (ARO) included in the registrants' Condensed Balance Sheets were as follows:



	Southern Company			Alabama Power			Georgia Power			Gulf Power			Mississippi Power			Southern Power
	(in millions)
Balance at beginning of year	$	3,759		$	1,448		$	1,916		$	130		$	177		$	21
Liabilities incurred	9			5			—			—			—			4
Liabilities settled	(66		)	(6		)	(52		)	(1		)	(7		)	—
Accretion	77			36			34			1			2			1
Cash flow revisions	699			19			673			3			6			2
Balance at end of period	$	4,478		$	1,502		$	2,571		$	133		$	178		$	28

The traditional electric operating companies' increases in cash flow revisions for the six months ended June 30, 2016 primarily relate to changes in ash pond closure strategy. The increase for Georgia Power was due to its decision in June 2016 to cease operating and stop receiving coal ash at all of its ash ponds within the next three years and to eventually close all of its ash ponds either by removal, consolidation, and/or recycling for the beneficial use of coal ash or through closure in place using advanced engineering methods.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following:



	At June 30, 2016
	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
		(in millions)
Intangibles subject to amortization:
Southern Company
Customer relationships	14-26 years	$	47	$	—		$	47
Trade names	5-9 years	43		—			43
Patents	3-10 years	4		—			4
Backlog	5 years	5		—			5
Southern Power
PPA fair value adjustments	20 years	330		(14		)	316
Total intangibles subject to amortization		$	429	$	(14	)	$	415

Intangibles not subject to amortization:
Southern Company
Federal Communications Commission licenses		$	75	$	—		$	75

Goodwill:
Southern Company		$	262	$	—		$	262
Southern Power		2		—			2
Total goodwill and other intangible assets		$	768	$	(14	)	$	754

Amortization expense associated with intangible assets during the three and six months ended June 30, 2016 was immaterial.

Intangibles at December 31, 2015 consisted primarily of Southern Power's PPA fair value adjustments with a net carrying amount of $317 million. The increases in goodwill and other intangibles relate to Southern Company's acquisition of PowerSecure on May 9, 2016.

See Note 12 to the financial statements of Southern Company under "Southern Power" and Note 2 to the financial statements of Southern Power in Item 8 of the Form 10-K for additional information regarding Southern Power's PPA fair value adjustments. See Note (I) under "Southern Company – Acquisition of PowerSecure International, Inc." for additional information regarding Southern Company's acquisition of PowerSecure.