10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2004

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____to_____

Commission	Registrant, State of Incorporation,	I.R.S. Employer
File Number	Address and Telephone Number	Identification No.
1-3526	The Southern Company	58-0690070
	(A Delaware Corporation)
	270 Peachtree Street, N.W.
	Atlanta, Georgia 30303
	(404) 506-5000
1-3164	Alabama Power Company	63-0004250
	(An Alabama Corporation)
	600 North 18th Street
	Birmingham, Alabama 35291
	(205) 257-1000
1-6468	Georgia Power Company	58-0257110
	(A Georgia Corporation)
	241 Ralph McGill Boulevard, N.E.
	Atlanta, Georgia 30308
	(404) 506-6526
0-2429	Gulf Power Company	59-0276810
	(A Maine Corporation)
	One Energy Place
	Pensacola, Florida 32520
	(850) 444-6111
001-11229	Mississippi Power Company	64-0205820
	(A Mississippi Corporation)
	2992 West Beach
	Gulfport, Mississippi 39501
	(228) 864-1211
1-5072	Savannah Electric and Power Company	58-0418070
	(A Georgia Corporation)
	600 East Bay Street
	Savannah, Georgia 31401
	(912) 644-7171
333-98553	Southern Power Company	58-2598670
	(A Delaware Corporation)
	270 Peachtree Street, N.W.
	Atlanta, Georgia 30303
	(404) 506-5000

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934).

Registrant	Yes		No
The Southern Company		x
Alabama Power Company				x
Georgia Power Company				x
Gulf Power Company				x
Mississippi Power Company				x
Savannah Electric and Power Company				x
Southern Power Company				x

	Description of	Shares Outstanding
Registrant	Common Stock	at June 30, 2004
The Southern Company	Par Value $5 Per Share		738,180,277
Alabama Power Company	Par Value $40 Per Share		7,750,000
Georgia Power Company	Without Par Value		7,761,500
Gulf Power Company	Without Par Value		992,717
Mississippi Power Company	Without Par Value		1,121,000
Savannah Electric and Power Company	Par Value $5 Per Share		10,844,635
Southern Power Company	Par Value $0.01 Per Share		1,000

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

2

INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2004

	Page
	Number
DEFINITIONS		5
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
The Southern Company and Subsidiary Companies
Condensed Consolidated Statements of Income		8
Condensed Consolidated Statements of Cash Flows		9
Condensed Consolidated Balance Sheets		10
Condensed Consolidated Statements of Comprehensive Income		12
Management’s Discussion and Analysis of Results of Operations and Financial Condition		13
Alabama Power Company
Condensed Statements of Income		28
Condensed Statements of Comprehensive Income		28
Condensed Statements of Cash Flows		29
Condensed Balance Sheets		30
Management’s Discussion and Analysis of Results of Operations and Financial Condition		32
Georgia Power Company
Condensed Statements of Income		42
Condensed Statements of Comprehensive Income		42
Condensed Statements of Cash Flows		43
Condensed Balance Sheets		44
Management’s Discussion and Analysis of Results of Operations and Financial Condition		46
Gulf Power Company
Condensed Statements of Income		57
Condensed Statements of Comprehensive Income		57
Condensed Statements of Cash Flows		58
Condensed Balance Sheets		59
Management’s Discussion and Analysis of Results of Operations and Financial Condition		61
Mississippi Power Company
Condensed Statements of Income		69
Condensed Statements of Comprehensive Income		69
Condensed Statements of Cash Flows		70
Condensed Balance Sheets		71
Management’s Discussion and Analysis of Results of Operations and Financial Condition		73
Savannah Electric and Power Company
Condensed Statements of Income		82
Condensed Statements of Comprehensive Income		82
Condensed Statements of Cash Flows		83
Condensed Balance Sheets		84
Management’s Discussion and Analysis of Results of Operations and Financial Condition		86
Southern Power Company
Condensed Statements of Income		95
Condensed Statements of Comprehensive Income		95
Condensed Statements of Cash Flows		96
Condensed Balance Sheets		97
Management’s Discussion and Analysis of Results of Operations and Financial Condition		99
Notes to the Condensed Financial Statements		105
Item 3. Quantitative and Qualitative Disclosures about Market Risk		26
Item 4. Controls and Procedures		26

3

INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2004

	Page
	Number
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	118
Item 2. Changes in Securities, Unregistered Sales of Equity Securities and Use of Proceeds	Inapplicable
Item 3. Defaults Upon Senior Securities	Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders	118
Item 5. Other Information	Inapplicable
Item 6. Exhibits and Reports on Form 8-K	120
Signatures	127

4

DEFINITIONS

TERM	MEANING
Alabama Power	Alabama Power Company
AFUDC	Allowance for funds used during construction
Clean Air Act	Clean Air Act Amendments of 1990
Dynegy	Dynegy, Inc.
ECO Plan	Environmental Compliance Overview Plan
EITF	Emerging Issues Task Force
Energy Act	Energy Policy Act of 1992
EPA	U. S. Environmental Protection Agency
ESOP	Employee Stock Ownership Plan
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
Form 10-K	Combined Annual Report on Form 10-K of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric and Southern Power for the year ended December 31, 2003
Georgia Power	Georgia Power Company
Gulf Power	Gulf Power Company
IRC	Internal Revenue Code
IRS	Internal Revenue Service
LIBOR	London Interbank Offered Rate
Mirant	Mirant Corporation
Mississippi Power	Mississippi Power Company
Moody’s	Moody’s Investors Service, Inc.
NRC	Nuclear Regulatory Commission
PEP	Performance Evaluation Plan
PPA	Purchase Power Agreement
PSC	Public Service Commission
PUHCA	Public Utility Holding Company Act of 1935, as amended
retail operating companies	Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric
RTO	Regional Transmission Organization
S&P	Standard and Poor’s, a division of The McGraw-Hill Companies, Inc.
Savannah Electric	Savannah Electric and Power Company
SCS	Southern Company Services, Inc.
SEC	Securities and Exchange Commission
SMA	Supply Margin Assessment
Southern Company	The Southern Company
Southern Company GAS	Southern Company Gas LLC
Southern Company system	Southern Company, the retail operating companies, Southern Power and other subsidiaries
Southern LINC	Southern Communications Services, Inc.
Southern Power	Southern Power Company
Super Southeast	Southern Company’s traditional service territory, Alabama, Florida, Georgia and Mississippi, plus the surrounding states of Kentucky, Louisiana, North Carolina, South Carolina, Tennessee and Virginia
TVA	Tennessee Valley Authority

5

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     This Quarterly Report on Form 10-Q contains forward-looking statements in addition to historical information. Forward-looking information includes, among other things, statements concerning the strategic goals for Southern Company’s wholesale business, estimated construction and other expenditures. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. The registrants caution that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include:

• the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental, tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;

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

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

• the impact of fluctuations in commodity prices, interest rates and customer demand;

• available sources and costs of fuels;

• ability to control costs;

• investment performance of Southern Company’s employee benefit plans;

• advances in technology;

• state and federal rate regulations and pending and future rate cases and negotiations;

• effects of and changes in political, legal and economic conditions and developments in the United States, including the current state of the economy;

• the performance of projects undertaken by the non-traditional business and the success of efforts to invest in and develop new opportunities;

• internal restructuring or other restructuring options that may be pursued;

• potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries;

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

• the ability to obtain new short- and long-term contracts with neighboring utilities;

• the direct or indirect effect on Southern Company’s business resulting from the terrorist incidents on September 11, 2001, or any similar incidents or responses to such incidents;

• financial market conditions and the results of financing efforts, including Southern Company’s and its subsidiaries’ credit ratings;

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

• weather and other natural phenomena;

• the direct or indirect effects on Southern Company’s business resulting from incidents similar to the August 2003 power outage in the Northeast;

• the effect of accounting pronouncements issued periodically by standard-setting bodies; and

• other factors discussed elsewhere herein and in other reports filed by the registrants from time to time with the SEC.

6

THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES

7

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Operating Revenues:
Retail sales	$	2,477,856		$	2,175,706		$	4,621,945		$	4,149,550
Sales for resale		343,819			322,994			694,617			657,607
Other electric revenues		94,068			227,921			187,489			319,798
Other revenues		93,152			97,343			237,159			238,046
Total operating revenues		3,008,895			2,823,964			5,741,210			5,365,001
Operating Expenses:
Fuel		870,000			738,048			1,708,750			1,448,375
Purchased power		218,066			114,694			337,824			247,248
Other operations		569,421			550,012			1,083,458			1,036,561
Maintenance		268,459			238,954			505,956			468,664
Depreciation and amortization		233,449			258,297			474,103			503,285
Taxes other than income taxes		154,583			142,737			313,067			291,563
Total operating expenses		2,313,978			2,042,742			4,423,158			3,995,696
Operating Income		694,917			781,222			1,318,052			1,369,305
Other Income and (Expense):
Allowance for equity funds used during construction		9,467			4,173			17,651			12,024
Interest income		6,455			20,589			14,109			25,087
Equity in losses of unconsolidated subsidiaries		(21,253	)		(26,275	)		(46,569	)		(53,442	)
Leveraged lease income		17,005			15,698			32,932			33,413
Interest expense, net of amounts capitalized		(138,613	)		(134,188	)		(269,198	)		(257,949	)
Interest expense to affiliate trusts		(31,985	)		—			(31,985	)		—
Distributions on mandatorily redeemable preferred securities		—			(39,951	)		(31,168	)		(79,537	)
Preferred dividends of subsidiaries		(9,539	)		(5,472	)		(15,011	)		(10,222	)
Other income (expense), net		(15,302	)		1,854			(23,464	)		(2,429	)
Total other income and (expense)		(183,765	)		(163,572	)		(352,703	)		(333,055	)
Earnings Before Income Taxes		511,152			617,650			965,349			1,036,250
Income taxes		159,020			185,763			282,075			306,931
Earnings Before Cumulative Effect of Accounting Change		352,132			431,887			683,274			729,319
Cumulative effect of accounting change — less income taxes of $231		—			—			—			367
Consolidated Net Income	$	352,132		$	431,887		$	683,274		$	729,686
Common Stock Data:
Consolidated basic earnings per share	$	0.48		$	0.60		$	0.93		$	1.01
Consolidated diluted earnings per share	$	0.47		$	0.59		$	0.92		$	1.00
Average number of basic shares of common stock outstanding (in thousands)		738,185			724,627			737,412			721,785
Average number of diluted shares of common stock outstanding (in thousands)		742,453			730,286			741,920			727,140
Cash dividends paid per share of common stock	$	0.350		$	0.343		$	0.700		$	0.685

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

8

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months
	Ended June 30,
	2004			2003
	(in thousands)
Operating Activities:
Consolidated net income	$	683,274		$	729,686
Adjustments to reconcile consolidated net income to net cash provided from operating activities —
Depreciation and amortization		567,805			597,245
Deferred income taxes and investment tax credits		314,210			180,354
Equity in losses of unconsolidated subsidiaries		46,569			53,373
Leveraged lease income		(32,932	)		(33,413	)
Pension, postretirement, and other employee benefits		(2,164	)		(11,239	)
Tax benefit of stock options		15,110			15,159
Other, net		(30,850	)		(26,520	)
Changes in certain current assets and liabilities—
Receivables, net		(284,491	)		(16,074	)
Fossil fuel stock		(7,501	)		(28,952	)
Materials and supplies		(9,699	)		(14,235	)
Other current assets		(47,016	)		(99,780	)
Accounts payable		(24,771	)		(168,832	)
Accrued taxes		(104,674	)		160,343
Accrued compensation		(199,683	)		(226,314	)
Other current liabilities		21,953			49,282
Net cash provided from operating activities		905,140			1,160,083
Investing Activities:
Gross property additions		(1,039,230	)		(1,062,621	)
Cost of removal net of salvage		(42,078	)		(36,162	)
Other		(87,687	)		(101,300	)
Net cash used for investing activities		(1,168,995	)		(1,200,083	)
Financing Activities:
Increase in notes payable, net		170,439			477,254
Proceeds—
Long-term debt		840,301			2,045,495
Mandatorily redeemable preferred securities		200,000			—
Preferred stock		175,000			125,000
Common stock		62,059			275,917
Redemptions—
Long-term debt		(494,453	)		(2,177,420	)
Mandatorily redeemable preferred securities		(240,000	)		(240,000	)
Preferred stock		(28,388	)		—
Payment of common stock dividends		(515,824	)		(493,069	)
Other		(25,388	)		(35,570	)
Net cash provided from (used for) financing activities		143,746			(22,393	)
Net Change in Cash and Cash Equivalents		(120,109	)		(62,393	)
Cash and Cash Equivalents at Beginning of Period		311,274			273,032
Cash and Cash Equivalents at End of Period	$	191,165		$	210,639
Supplemental Cash Flow Information:
Cash paid during the period for—
Interest (net of $22,613 and $31,176 capitalized for 2004 and 2003, respectively)	$	277,681		$	247,929
Income taxes (net of refunds)	$	30,810		$	(3,159	)

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

9

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Assets	2004			2003
	(in thousands)
Current Assets:
Cash and cash equivalents	$	191,165		$	311,274
Receivables—
Customer accounts receivable		722,557			678,345
Unbilled revenues		362,276			275,395
Under recovered regulatory clause revenues		405,561			204,563
Other accounts and notes receivable		289,300			338,557
Accumulated provision for uncollectible accounts		(27,878	)		(30,155	)
Fossil fuel stock, at average cost		323,627			316,126
Vacation pay		101,478			96,700
Materials and supplies, at average cost		580,486			570,787
Prepaid expenses		154,996			125,477
Other		64,919			30,380
Total current assets		3,168,487			2,917,449
Property, Plant, and Equipment:
In service		40,886,764			40,339,785
Less accumulated depreciation		14,626,931			14,303,516
		26,259,833			26,036,269
Nuclear fuel, at amortized cost		210,268			222,667
Construction work in progress		1,435,403			1,274,888
Total property, plant, and equipment		27,905,504			27,533,824
Other Property and Investments:
Nuclear decommissioning trusts, at fair value		841,664			807,893
Leveraged leases		939,152			837,843
Other		342,623			238,193
Total other property and investments		2,123,439			1,883,929
Deferred Charges and Other Assets:
Deferred charges related to income taxes		866,777			874,443
Prepaid pension costs		946,015			911,442
Unamortized debt issuance expense		151,125			151,558
Unamortized loss on reacquired debt		333,079			326,389
Other		440,778			446,149
Total deferred charges and other assets		2,737,774			2,709,981
Total Assets	$	35,935,204		$	35,045,183

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

10

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Liabilities and Stockholders’ Equity	2004			2003
	(in thousands)
Current Liabilities:
Securities due within one year	$	923,979		$	741,073
Notes payable		737,890			567,771
Accounts payable		628,438			698,758
Customer deposits		194,368			189,000
Accrued taxes —
Income taxes		149,372			153,757
Other		227,899			248,937
Accrued interest		190,152			186,935
Accrued vacation pay		132,392			128,505
Accrued compensation		232,583			436,854
Other		281,001			264,688
Total current liabilities		3,698,074			3,616,278
Long-term Debt		10,274,868			10,164,018
Long-term Debt Payable to Affiliated Trusts		1,960,644			—
Mandatorily Redeemable Preferred Securities		—			1,900,486
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		4,854,278			4,586,377
Deferred credits related to income taxes		391,663			409,339
Accumulated deferred investment tax credits		565,785			579,490
Employee benefit obligations		812,852			765,390
Asset retirement obligations		873,679			845,392
Other cost of removal obligations		1,272,603			1,268,729
Miscellaneous regulatory liabilities		475,928			576,393
Other		269,517			262,579
Total deferred credits and other liabilities		9,516,305			9,293,689
Total Liabilities		25,449,891			24,974,471
Cumulative Preferred Stock of Subsidiaries		569,738			423,126
Common Stockholders’ Equity:
Common stock, par value $5 per share — Authorized — 1 billion shares Issued — June 30, 2004: 738,396,059 Shares;           — December 31, 2003: 735,021,270 Shares Treasury — June 30, 2004: 215,782 Shares;           — December 31, 2003: 192,691 Shares Par value		3,691,980			3,675,106
Paid-in capital		806,275			746,080
Treasury, at cost		(4,720	)		(4,066	)
Retained earnings		5,509,513			5,343,471
Accumulated other comprehensive loss		(87,473	)		(113,005	)
Total Common Stockholders’ Equity		9,915,575			9,647,586
Total Liabilities and Stockholders’ Equity	$	35,935,204		$	35,045,183

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

11

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004		2003
	(in thousands)						(in thousands)
Consolidated Net Income	$	352,132		$	431,887		$	683,274	$	729,686
Other comprehensive income (loss):
Change in fair value of marketable securities, net of tax of $(754), $-, $3,307 and $-, respectively		(1,721	)		(16	)		5,902		96
Changes in fair value of qualifying hedges, net of tax of $15,514, $(9,465), $7,803 and $(10,106), respectively		25,274			(12,787	)		12,570		(13,504	)
Less: Reclassification adjustment for amounts included in net income, net of tax of $2,214, $38, $4,385 and $(4,660), respectively		3,570			1,010			7,060		(6,357	)
COMPREHENSIVE INCOME	$	379,255		$	420,094		$	708,806	$	709,921

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

12

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
SECOND QUARTER 2004 vs. SECOND QUARTER 2003
AND
YEAR-TO-DATE 2004 vs. YEAR-TO-DATE 2003

OVERVIEW

Discussion of the results of operations is focused on Southern Company’s primary business of electricity sales in the Southeast by the retail operating companies – Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric – and Southern Power. Southern Power is an electric wholesale generation subsidiary with market-based rate authority. Southern Company’s other business activities include investments in synthetic fuels and leveraged lease projects, telecommunications, energy-related services and natural gas marketing. For additional information on these businesses, see BUSINESS — The SOUTHERN System — “Retail Operating Companies,” “Southern Power” and “Other Business” in Item 1 of the Form 10-K.

RESULTS OF OPERATIONS

Earnings

Southern Company’s second quarter and year-to-date 2004 earnings were $352 million ($0.48 per share) and $683 million ($0.93 per share), respectively, compared with $432 million ($0.60 per share) and $730 million ($1.01 per share) in the second quarter and year-to-date 2003. The decreases in second quarter and year-to-date 2004 results are attributed to a one-time after-tax gain of $88 million included in the second quarter 2003 from termination of capacity sales contracts with Dynegy. See Note 3 to the financial statements of Southern Company under “Uncontracted Generating Capacity” in Item 8 of the Form 10-K for additional information on these contract terminations. Earnings in the second quarter and year-to-date 2004 when compared to the same periods in 2003, excluding the Dynegy contract termination, increased due to a number of positive factors including growth in customers, increased consumption of electricity by existing customers in the Southern Company service area, and generally more favorable weather conditions, as well as new generating capacity available for sale in wholesale markets. This new capacity led to increases in wholesale revenues from new contracts and sales of uncontracted capacity in those wholesale markets. These positive factors were partially offset by higher operations and maintenance cost in the second quarter as some maintenance projects not completed in 2003 and earlier this year were undertaken in the second quarter of 2004.

     Significant income statement items appropriate for discussion include the following:

	Increase (Decrease)
	Second Quarter						Year-To-Date
	(in thousands)			%			(in thousands)			%
Retail sales	$	302,150			13.9		$	472,395			11.4
Sales for resale		20,825			6.4			37,010			5.6
Other electric revenues		(133,853	)		(58.7	)		(132,309	)		(41.4	)
Fuel expense		131,952			17.9			260,375			18.0
Purchased power expense		103,372			90.1			90,576			36.6
Other operations and maintenance expenses		48,914			6.2			84,189			5.6
Depreciation and amortization expense		(24,848	)		(9.6	)		(29,182	)		(5.8	)
Taxes other than income taxes		11,846			8.3			21,504			7.4
Interest income		(14,134	)		(68.6	)		(10,978	)		(43.8	)
Other income (expense), net		(17,156	)		N/M			(21,035	)		N/M

N/M Not meaningful

13

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

     Retail sales. Excluding fuel revenues, which generally do not affect net income, retail base revenues increased by $109 million, or 7.1%, in the second quarter 2004, and increased by $181 million, or 6.2%, year-to-date 2004 when compared to the same periods in 2003. In the second quarter and year-to-date 2004, retail kilowatt-hour energy sales increased by 5.3% and 4.9%, respectively, over the same periods a year ago, primarily due to customer and demand growth and the still improving economy evidenced by increases in residential, commercial and industrial second quarter kilowatt-hour energy sales of 8.5%, 5.1% and 3.0%, respectively. Year-to-date residential, commercial and industrial kilowatt-hour energy sales increased by 6.9%, 4.3% and 3.9%, respectively, when compared to the same period in 2003. In the second quarter and year-to-date 2004, temperatures were slightly above normal, while mild weather in the same periods last year resulted in reduced demand by retail customers. The number of retail customers increased by 1.8%, and average consumption by residential customers increased by 5.2% for the year-to-date 2004 when compared to year-to-date 2003.

     Sales for resale. Sales for resale revenues increased $20.8 million, or 6.4% and $37.0 million, or 5.6% for the second quarter and year-to-date 2004, respectively, when compared to the same periods in the prior year. The increase in revenues reflected new wholesale contracts and increases in fuel revenues. An additional 2,407 megawatts of generating capacity were added in June and October 2003 by Southern Power. A portion of this new capacity contributed to the increase in sales for resale revenues for the second quarter and year-to-date 2004 as a result of increased energy revenues from PPAs with neighboring utilities. These increases in sales for resale revenues more than offset the reduction in revenues resulting from the termination of contracts with subsidiaries of Dynegy in May 2003. See Note 3 to the financial statements of Southern Company under “Uncontracted Generating Capacity” in Item 8 of the Form 10-K for additional information on these contract terminations.

     Other electric revenues. In the second quarter and year-to-date 2004, other electric revenues decreased $133.9 million, or 58.7% and $132.3 million or 41.4%, respectively, because of the $142 million in contract termination revenues from Dynegy recorded in May 2003. See “Earnings” discussion above for additional information on these contract terminations. Excluding these contract termination revenues, other electric revenues increased $8.3 million or 9.6% and $9.8 million or 5.5% for the second quarter and year-to-date 2004, respectively, when compared to the same periods in 2003 primarily as a result of increased cogeneration sales and transmission revenue.

     Fuel expense. During the second quarter and year-to-date periods of 2004, fuel expense was higher due to an increase in the average unit cost of fuel, as well as increased generating capacity at Southern Power. Total fuel generation remained flat for the second quarter and increased 2.3% for the year-to-date 2004, when compared to the same periods in the prior year. For the second quarter and year-to-date periods in 2004, the average unit cost of fuel per kilowatt-hour generated increased 13.2% and 12.9%, respectively, when compared to the same periods in the prior year. Increases in fuel expense at the retail operating companies are generally offset by fuel revenues and do not affect net income. See “Future Earnings Potential – FERC and State PSC Matters – Retail Fuel Cost Recovery” herein for additional information. Southern Power’s PPAs generally provide that the purchasers are responsible for substantially all of the costs of fuel.

     Purchased power. The increases in purchased power for the second quarter and year-to-date 2004 when compared with the same periods last year were primarily due to increased demand for energy by retail customers and to purchase energy used to meet off-system sales commitments. Also, at times additional power was available for purchase from external parties at prices lower than Southern Company’s own system generation costs. These expenses do not have a significant impact on earnings since energy expenses are generally offset by energy revenues.

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

     Other operations and maintenance expenses. The increases in other operations and maintenance expenses in the second quarter and year-to-date 2004 are mainly attributable to increases in administrative and general, transmission and distribution maintenance and other production expenses. Administrative and general expenses increased $14.7 million, or 6.5% and $40.5 million, or 9.5%, for the second quarter and year-to-date 2004, respectively, primarily as a result of payroll and employee benefits costs. Transmission and distribution expenses increased $18.6 million or 13.7% and $30.3 million or 11.9% for the second quarter and year-to-date 2004, respectively, as a result of completing work delayed from 2003. Other production expenses were up $7.1 million or 2.2% and $14.5 million, or 2.3% for the second quarter and year-to-date 2004, respectively, due to increased expenses primarily resulting from the operation of Southern Power’s new generating facilities.

     Depreciation and amortization. The second quarter and year-to-date 2004 decreases of $24.8 million and $29.2 million, respectively, in depreciation and amortization expense when compared to the same periods in 2003 are primarily the result of increased amortization of regulatory liabilities at Georgia Power and Mississippi Power. The decreases in Georgia Power’s depreciation and amortization expenses ($17 million and $35 million for the second quarter and year-to-date 2004, respectively) were caused primarily by lower regulatory charges needed to levelize purchased power capacity costs under the terms of the retail rate order effective January 1, 2002. See Note 1 to the financial statements of Southern Company under “Depreciation and Amortization” in Item 8 of the Form 10-K for additional information. The decreases in Mississippi Power’s second quarter and year-to-date 2004 depreciation and amortization expenses ($8 million and $7 million for the second quarter and year-to-date 2004, respectively) are primarily the result of the amortization of a regulatory liability as approved by the Mississippi PSC. The Mississippi PSC issued an interim accounting order in December 2003 directing Mississippi Power to expense and record in 2003 a regulatory liability in the amount of approximately $60 million. Based on the final Mississippi PSC order issued May 25, 2004 that approved this treatment, Mississippi Power recorded a credit to amortization of the regulatory liability of $8.3 million during the second quarter of 2004. The year-to-date decreases are partially offset by increases in depreciable plant in service, primarily as a result of Southern Power’s Stanton Unit A, which was placed in service in October 2003. Reference is made to Note 3 to the financial statements of Southern Company under “Mississippi Power Regulatory Filing” in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements and “FERC and State PSC Matters” herein for additional information.

     Taxes other than income taxes. The second quarter and year-to-date 2004 increases in taxes other than income taxes over the comparable periods last year are primarily a result of increases in payroll taxes, property taxes on new facilities and higher tax assessments on property. Also, franchise and gross receipts taxes increased for the respective periods due to the increase in revenues from energy sales.

     Interest income. The second quarter and year-to-date 2004 decreases in interest income when compared to the same periods in the prior year resulted from $15.6 million of interest received from a federal income tax settlement in the second quarter of 2003.

     Other income (expense), net. The second quarter and year-to-date 2004 decreases in other income (expense), net reflect decreased rental income at Georgia Power of $4.0 million and $2.5 million, respectively, as well as the impact of the ESOP contribution in June 2004 of $6.2 million when compared to the same periods in 2003. The year-to-date 2004 decrease in other income (expense), net also reflects a $5.0 million decrease related to the 2003 favorable resolution of a loss contingency by Georgia Power.

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

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors. These factors include the retail operating companies’ ability to maintain a stable regulatory environment, to achieve energy sales growth while containing costs and to recover costs related to growing demand and increasingly stricter environmental standards. Another major factor is the profitability of the competitive market-based wholesale generating business and federal regulatory policy, which may impact Southern Company’s level of participation in this market. Future earnings for the electricity business in the near term will depend, in part, upon growth in energy sales, which is subject to a number of factors, including weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand and the rate of economic growth in the service area. For additional information relating to these issues, see BUSINESS — The SOUTHERN System — “Risk Factors” in Item 1 and MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential” of Southern Company in Item 7 of the Form 10-K.

Environmental Matters

New Source Review Actions and Plant Wansley Environmental Litigation

Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs cannot be recovered. For additional information, including information on certain environmental litigation, see MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Environmental Matters” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “New Source Review Actions” and “Plant Wansley Environmental Litigation” in Item 8 of the Form 10-K. As of March 15, 2004, civil penalties under the Clean Air Act were increased prospectively to a maximum of $32,500 per day, per violation. To the extent alleged violations under either the New Source Review litigation or Plant Wansley environmental litigation are deemed to be continuing, this increased civil penalty amount could apply to such violations found to continue after that date.

     On May 3, 2004, the U.S. Supreme Court denied the EPA’s petition to review the Eleventh Circuit Court of Appeals’ decision in the EPA’s similar New Source Review enforcement action against the TVA. The cases against Alabama Power, Georgia Power and Savannah Electric have been effectively stayed pending final resolution of the TVA case. With the denial of the EPA’s petition for review, the Court of Appeals’ decision became final. Alabama Power and the EPA jointly notified the District Court for the Northern District of Alabama, where the case against Alabama Power is pending and requested that the stay be lifted. On June 16, 2004, the District Court lifted the stay, placing the case back onto the District Court’s active docket. At this time, no party to the case against Georgia Power and Savannah Electric has sought to reopen that case, which remains administratively closed in the District Court for the Northern District of Georgia. On June 10, 2004, the U.S. District Court for the Northern District of Georgia granted Georgia Power’s motion in the Plant Wansley environmental litigation for partial summary judgment regarding emissions offsets. The case has been removed from the court’s trial calendar due to pending motions for summary judgment, and a new trial date has not been scheduled. An adverse outcome in any one of these cases could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates.

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

Global Warming Litigation

On July 21, 2004, attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed a complaint in U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Plaintiffs seek relief under the federal common law or, in the alternative, under state law, of public nuisance. The environmental groups also seek relief under common law private nuisance theories. The plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining an ongoing public nuisance, global warming and (2) permanently enjoining each of the defendants to abate its contribution to the nuisance by capping its emissions of carbon dioxide and then reducing those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. Southern Company has not yet responded to the suits; however, it intends to vigorously defend against these claims. While the outcome cannot be determined at this time, an adverse judgment could result in substantial capital expenditures.

Other Environmental Matters

On March 12, 2004, the EPA redesignated the Birmingham, Alabama area from nonattainment to attainment under the one-hour ozone national ambient air quality standard. On April 30, 2004, the EPA published its eight-hour ozone nonattainment designations and a portion of the rules implementing the new eight-hour standard. Areas within the Southern Company’s service area that have been designated as nonattainment under the eight-hour ozone standard include Birmingham, Macon (Georgia), and a 20-county area within metropolitan Atlanta. Under the implementation provisions of the new rule, the EPA announced that the one-hour ozone standard will be revoked on June 15, 2005. Areas classified as “severe” nonattainment areas under the one-hour standard will not be required to impose emissions fees as a result of nonattainment. Georgia Power, therefore, will no longer be subject to imposition of emissions fees if the Atlanta area does not come into attainment with the one-hour standard. The impact of the eight-hour designations and the new standards will depend on the development and implementation of applicable state regulations and therefore cannot be determined at this time.

     In June 2004, the EPA issued its recommendations for areas to be designated “nonattainment” for the fine particle national ambient air quality standard. Areas within Southern Company’s service area that were included in the EPA’s proposed fine particulate matter designations include 24 counties in the metro-Atlanta area; counties surrounding Macon, Athens, and Columbus, Georgia; counties surrounding Birmingham, Alabama; and counties in Alabama and Georgia near Chattanooga, Tennessee. Alabama Power, Georgia Power and Southern Power own several plants located within the counties proposed for the nonattainment designations. The EPA plans to make final nonattainment designations for fine particulate matter by the end of 2004.

     On April 21, 2004, the EPA published the final regional nitrogen oxide reduction rules applicable to Georgia. These rules specify that the State of Georgia must submit a revised state implementation plan by April 2005, and affected sources must comply with the reduction requirements by May 1, 2007. The impact of these regulations will depend on the development and approval of Georgia’s state implementation plan and cannot be determined at this time.

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

     Additionally, on May 5, 2004, the EPA published proposed amendments to its Regional Haze rules with respect to Best Available Retrofit Technology guidelines and requirements. The impact of these regulations will depend on the development and implementation of the final rules and implementation by the states, and therefore cannot be determined at this time.

FERC and State PSC Matters

Market-Based Rate Authority

See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Market-Based Rate Authority” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation market power. This new interim approach includes a pivotal supplier analysis and a wholesale market share analysis, the results of which provide a rebuttable presumption regarding generation market power. The FERC’s order also sets forth procedures for rebutting these presumptions and addresses mitigation measures for those entities that are found to have market power. In the absence of specific mitigation measures, the order includes several cost-based mitigation measures that would apply by default. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

     On July 8, 2004, the FERC denied Southern Company’s request for rehearing, along with a number of others, and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time.

Transmission

See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Transmission” of Southern Company in Item 7 of the Form 10-K for information on the FERC’s order related to RTOs and the FERC’s notice of proposed rulemaking regarding open access transmission service and standard electricity market design.

Plant McIntosh Construction Project

See Note 3 to the financial statements of Southern Company under “FERC Matters” in Item 8 of the Form 10-K for information regarding PPAs between Southern Power and Georgia Power and Savannah Electric for Plant McIntosh capacity. In April 2003, Southern Power applied for FERC approval of these PPAs. In July 2003, the FERC accepted the PPAs to become effective June 1, 2005, subject to refund and ordered that hearings be held. To ensure the timely completion of construction on McIntosh units 10 and 11 and their availability in the summer of 2005 as supply side resources for the retail customers in the State of Georgia, on May 7, 2004, Savannah Electric and Georgia Power requested the Georgia PSC to direct them to acquire the McIntosh construction project. Savannah Electric and Georgia Power proposed to place the units in rate base at a cost

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

approved by the Georgia PSC and to recover the unit operation and maintenance costs as retail service expenses as may be approved by the Georgia PSC. The Georgia PSC issued such an order on May 18, 2004 and the transfer occurred on May 24, 2004. On May 20, 2004, Southern Power filed a request to withdraw the PPAs and to terminate the ongoing FERC proceedings. On August 4, 2004, the FERC issued a notice that it allowed the request to withdraw the PPAs to be accepted and to become effective by operation of law on July 20, 2004. However, the FERC made no determination on what additional steps may need to be taken with respect to testimony provided in the proceedings. The ultimate outcome of this matter cannot now be determined.

     The May 18, 2004 Georgia PSC order also directed Georgia Power and Savannah Electric to file an application within 10 days of completing such purchase to amend the resource certificate granted by the Georgia PSC in 2002 to describe the capacity resource as being the McIntosh units 10 and 11 (as opposed to the McIntosh PPAs), the approximate construction schedule (which is not expected to change) and the proposed rate base treatment. The application was filed on June 3, 2004 and the Georgia PSC will have 180 days to respond. The Georgia PSC is expected to review the application in accordance with its affiliate transaction guidelines, which require a lower of cost or market approach unless otherwise determined by the Georgia PSC. Georgia Power and Savannah Electric have submitted information showing that the book cost of the McIntosh construction project is lower than its market value. However, full recovery of the project costs depends on the outcome of the Georgia PSC’s review. In the event the Georgia PSC does not allow full recovery of the project costs, then part of such costs may have to be written off in accordance with FASB Statement No. 90, “Accounting for Abandonments and Disallowed Plant Costs.” At June 30, 2004, the investment in the McIntosh construction project totaled approximately $355.2 million and $69.7 million for Georgia Power and Savannah Electric, respectively. The ultimate outcome of the Georgia PSC’s review cannot now be determined.

Georgia Power Retail Rate Case

On July 1, 2004, Georgia Power filed a request with the Georgia PSC for an approximate 7 percent increase in retail revenues, effective January 1, 2005. The requested increase is based on a future test year ending July 31, 2005 and a proposed retail return on common equity of 12.5 percent. Georgia Power is currently operating under a three-year retail rate order that expires December 31, 2004. Under the terms of the existing order, earnings are evaluated annually against a retail return on common equity range of 10 percent to 12.95 percent. Two-thirds of any earnings above the 12.95 percent return are applied to rate refunds, with the remaining one-third retained by Georgia Power. The order required Georgia Power to file a general rate case on July 1, 2004.

     The increase in retail revenues is being requested to cover the higher costs of purchased power; operating and maintenance expenses; environmental compliance; and continued investment in new generation, transmission and distribution facilities to support growth and ensure reliability. Georgia Power expects the Georgia PSC to issue a final order in this matter during December 2004. The final outcome of this matter cannot now be determined. See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Other Matters” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Georgia Power Retail Rate Orders” in Item 8 of the Form 10-K and Note (I) to the Condensed Financial Statements herein for additional information.

Alabama Power Environmental Rate Filing

On August 2, 2004, Alabama Power made a filing with the Alabama PSC to establish a specific rate mechanism for the recovery of retail costs associated with environmental laws, regulations or other such mandates. If approved, the rate mechanism would begin operation in January 2005 and provide for the recovery of these costs pursuant to a factor that will be calculated annually. It is anticipated that for the first two years of the increase, retail rates would increase under the proposed mechanism by approximately 1% ($33 million) in 2005 and approximately an additional 1% ($30 million) in 2006. Such environmental cost recovery would include operations and maintenance expense, depreciation and a return on invested capital. The outcome of this matter cannot now be determined.

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

Mississippi Power Retail Rate Filing

On December 5, 2003, Mississippi Power filed a request with the Mississippi PSC to include 266 megawatts of Plant Daniel Units 3 and 4 generating capacity not included in jurisdictional cost of service. As part of Mississippi Power’s proposal to include the additional Plant Daniel capacity in retail rates, the Mississippi PSC, at the time of such filing, issued an interim accounting order in December 2003 directing Mississippi Power to expense and record in 2003 a regulatory liability in the amount of approximately $60 million while the Mississippi PSC fully considered the entire request. On May 25, 2004, the Mississippi PSC issued an order related to this matter. The Mississippi PSC approved Mississippi Power’s request to reclassify the 266 megawatts of Plant Daniel Unit 3 and 4 capacity to jurisdictional cost of service effective January 1, 2004 and authorized Mississippi Power to include the related costs and revenue credits in jurisdictional rate base, cost of service and revenue requirement calculations for purposes of retail rate recovery. Mississippi Power will amortize the regulatory liability established pursuant to the Mississippi PSC’s interim order in December 2003 as an increase to earnings as follows: $16.5 million in 2004, $25.1 million in 2005, $13.0 million in 2006 and $5.7 million in 2007.

     In addition, the Mississippi PSC also approved Mississippi Power’s requested changes to PEP, including the use of a forward-looking test year, with appropriate oversight; annual, rather than semi-annual, filings; and certain changes to the performance indicator mechanisms. Rate changes will be limited to 4% of retail revenues annually under the revised PEP. The Mississippi PSC will review all aspects of PEP in 2007. See Note 3 to the financial statements of Southern Company under “Mississippi Power Regulatory Filing” in Item 8 of the Form 10-K for additional information.

Retail Fuel Cost Recovery

The retail operating companies each have established fuel cost recovery rates approved by their respective state PSCs. In recent months, the companies have experienced higher than expected fuel costs for coal and gas. Those higher fuel costs have increased the under recovered fuel costs included in the Condensed Balance Sheets herein. The companies will continue to monitor the under recovered fuel cost balance in light of these higher fuel costs.

Mirant Related Matters

See Note 3 to the financial statements of Southern Company under “Mirant Related Matters” in Item 8 and MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Other Matters” of Southern Company in Item 7 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under “Mirant Related Matters”. In July 2003, Mirant filed for voluntary reorganization under Chapter 11 of the Federal Bankruptcy Code. Southern Company has various contingent liabilities associated with Mirant, including guarantees of contractual commitments, litigation and joint and several liabilities in connection with the consolidated federal income tax return. The ultimate outcome of such contingent liabilities cannot now be determined.

Income Tax Matters

See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Income Tax Matters” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Income Tax Issues” in Item 8 of the Form 10-K for information regarding IRS and other challenges to Southern Company’s transactions related to synthetic fuel tax credits and international

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

leveraged leases. See Note (B) to the Condensed Financial Statements herein under “Income Tax Matters” for information on potential additional challenges related to the international leveraged leases that could have material impacts on Southern Company’s financial statements. The ultimate outcome of these matters cannot now be determined.

Other Matters

Southern Power is completing limited construction activities on Plant Franklin Unit 3 to preserve the long-term viability of the project but has deferred final completion until the 2008-2011 period. See Note 3 to the financial statements of Southern Company under “Uncontracted Generating Capacity” in Item 8 of the Form 10-K for additional information. The final outcome of these matters cannot now be determined.

     See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Other Matters” of Southern Company in Item 7 of the Form 10-K for information on nuclear security measures. Implementation plans for the measures ordered by the NRC to be in effect by October 29, 2004 have been finalized based on current interpretations of the requirements. Alabama Power and Georgia Power — based on its ownership interest — currently estimate their respective expenditures related to these security measures to total $9.6 million and $9.3 million, of which $9.3 million and $1.3 million will be capitalized. These estimates are subject to change in the event additional NRC guidance is provided.

     Southern Company is subject to certain claims and legal actions arising in the ordinary course of business. In addition, Southern Company’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury and citizen enforcement of environmental requirements, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such litigation against Southern Company and its subsidiaries cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Southern Company’s financial statements.

     See the Notes to the Condensed Financial Statements herein for discussion of various contingencies and other matters which may affect future earnings potential.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Southern Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Southern Company in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Southern Company’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT’S DISCUSSION AND ANALYSIS — ACCOUNTING POLICIES — “Application of Critical Accounting Policies and Estimates” of Southern Company in Item 7 of the Form 10-K for a complete discussion of Southern Company’s critical accounting policies and estimates related to Electric Utility Regulation, Contingent Obligations, and Plant Daniel Capacity. Also see Note (K) to the Condensed Financial Statements herein for additional information related to Mississippi Power’s request to include the Plant Daniel capacity in jurisdictional cost of service and the related Mississippi PSC order.

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

New Accounting Standards

On March 31, 2004, Southern Company prospectively adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” which requires the primary beneficiary of a variable interest entity to consolidate the related assets and liabilities. The adoption of FASB Interpretation No. 46R had no impact on Southern Company’s net income. However, as a result of the adoption, Southern Company and the retail operating companies deconsolidated certain wholly-owned trusts established to issue preferred securities since Southern Company and the retail operating companies do not meet the definition of primary beneficiary established by FASB Interpretation No. 46R. In addition, Southern Company consolidated its 85% limited partnership investment in an energy/telecom venture capital fund that was previously accounted for under the equity method. See Note (D) to the Condensed Financial Statements herein for additional information related to the adoption of FASB Interpretation No. 46R.

     In May 2004, the FASB approved Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Act”).” FSP No. 106-2 requires recognition of the impacts of the Medicare Act in the accumulated post-retirement benefit obligation and future cost of service for post-retirement medical plans and may be applied retroactively to the enactment of the Medicare Act in December 2003 or prospectively effective for the third quarter 2004. Southern Company has elected to apply this treatment prospectively. Pending the finalization of federal regulations governing the subsidy effected in the Medicare Act, Southern Company does not anticipate a material impact on its financial statements from the adoption of FSP No. 106-2.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Major changes in Southern Company’s financial condition during the first six months of 2004 included $1.0 billion used for gross property additions to utility plant. The funds for these additions and other capital requirements were primarily obtained from net proceeds from short- and long-term security issuances of approximately $685 million and operating activities. See Southern Company’s Condensed Consolidated Statements of Cash Flows and “Financing Activities” herein for further details.

Capital Requirements and Contractual Obligations

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Capital Requirements and Contractual Obligations” of Southern Company in Item 7 of the Form 10-K for a description of Southern Company’s capital requirements for its construction program and other funding requirements associated with scheduled maturities of long-term debt, as well as the related interest, preferred stock dividends, leases, trust funding requirements and other purchase commitments. Approximately $924 million will be required by June 30, 2005 for redemptions and maturities of long-term debt.

Sources of Capital

Southern Company intends to meet its future capital needs through internal cash flow and external security issuances. The amounts and timing of additional equity capital to be raised will be contingent on Southern Company’s investment opportunities. The retail operating companies and Southern Power plan to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from operating cash flows, security issuances and term loan and short-term borrowings. However, the amount, type and timing of any financings, if needed, will depend upon market conditions and regulatory approval. See BUSINESS — “Financing Programs” in Item 1 and MANAGEMENT’S DISCUSSION AND

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

ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Sources of Capital” of Southern Company in Item 7 of the Form 10-K for additional information.

     Southern Company’s current liabilities exceed current assets because of the continued use of short-term debt as a funding source to meet cash needs, as well as scheduled maturities of long-term debt. To meet short term cash needs and contingencies, the Southern Company system had at June 30, 2004 approximately $191 million of cash and cash equivalents and approximately $3.5 billion of unused credit arrangements with banks, of which $251 million expire in 2004, $1.5 billion expire in 2005 and $1.7 billion expire in 2006 and beyond. Of the facilities maturing in 2004 and 2005, $1.22 billion contain provisions allowing two-year term loans executable at the expiration date and $215 million contain provisions allowing one-year term loans executable at the expiration date. These unused credit arrangements also provide liquidity support to variable rate pollution control bonds and commercial paper programs. Southern Company expects to renew its credit facilities, as needed, prior to expiration. The retail operating companies may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of each of the retail operating companies. At June 30, 2004, the Southern Company system had outstanding commercial paper of $727 million and extendible commercial notes of $10.9 million.

     Management believes that the need for working capital can be adequately met by utilizing commercial paper programs and lines of credit without maintaining large cash balances.

Off-Balance Sheet Financing Arrangements

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Off-Balance Sheet Financing Arrangements” of Southern Company in Item 7 and Note 7 to the financial statements of Southern Company under “Operating Leases” in Item 8 of the Form 10-K for information related to Mississippi Power’s lease of a combined cycle generating facility at Plant Daniel.

Credit Rating Risk

Southern Company and its subsidiaries do not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral — but not accelerated payment — in the event of a credit rating change to below investment grade. These contracts are primarily for physical electricity purchases and sales, fixed-price physical gas purchases and agreements covering interest rate swaps. At June 30, 2004, the maximum potential collateral requirements were approximately $429.8 million. Generally, collateral may be provided for by a Southern Company guaranty, letter of credit or cash.

Market Price Risk

Southern Company’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2003 reporting period. In addition, Southern Company is not aware of any facts or circumstances that would significantly affect such exposures in the near term.

     Due to cost-based rate regulations, the retail operating companies have limited exposure to market volatility in interest rates, commodity fuel prices and prices of electricity. To mitigate residual risks relative to movements in electricity prices, the retail operating companies and Southern Power enter into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, similar contracts for gas purchases. Also, the retail operating companies have each implemented fuel-hedging

23

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

programs at the instruction of their respective PSCs. The fair value of derivative energy contracts at June 30, 2004 was as follows:

	Second Quarter
	2004			Year-to-Date
	Changes			Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	43,512		$	15,825
Contracts realized or settled		(19,702	)		(25,349	)
New contracts at inception		—			—
Changes in valuation techniques		—			—
Current period changes		2,808			36,142
Contracts at June 30, 2004	$	26,618		$	26,618

	Source of June 30, 2004
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1		1-3 Years
	(in thousands)
Actively quoted	$	26,618	$	23,155	$	3,463
External sources		—		—		—
Models and other methods		—		—		—
Contracts at June 30, 2004	$	26,618	$	23,155	$	3,463

     For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Market Price Risk” of Southern Company in Item 7 and Notes 1 and 6 to the financial statements of Southern Company under “Financial Instruments” in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein.

Financing Activities

In the first six months of 2004, Southern Company subsidiaries issued $775 million of senior notes, $265 million of other long-term debt, $175 million of preferred stock and $62 million of common stock through employee and director stock plans. The issuances were primarily used to refund senior notes and other long-term debt and to fund ongoing construction projects. The remainder was used to repay short-term debt. See Southern Company’s Condensed Consolidated Statements of Cash Flows herein for further details on financing activities during the first six months of 2004.

     In January 2004, Georgia Power issued $100 million of Series S 4.00% Senior Notes due January 15, 2011 and $100 million of Series T 5.75% Senior Public Income Notes due January 15, 2044. The proceeds from these sales were used in March 2004 to redeem all of its outstanding Series H 6.70% Senior Insured Quarterly Notes due March 1, 2011 and Series D 6 5/8% Senior Notes due March 31, 2039.

     Further in January 2004, Georgia Power Capital Trust VII, a statutory trust, sold $200 million of its 5 7/8% Trust Preferred Securities, which are guaranteed by Georgia Power. The net proceeds from this issuance were used to redeem 6.85% Trust Preferred Securities of Georgia Power Capital Trust IV. In connection with this transaction, Georgia Power issued $206 million of its junior subordinated debentures to Georgia Power Capital Trust VII.

24

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

     In February 2004, Alabama Power issued 4,000,000 shares ($100 million aggregate stated capital) of 5.30% Class A Preferred Stock, Cumulative, Par Value $1 Per Share (Stated Capital $25 Per Share) and $200 million of Series Z 5.125% Senior Notes due February 15, 2019. The proceeds from these sales were used to repay a portion of Alabama Power’s outstanding short-term indebtedness and for other general corporate purposes, including Alabama Power’s continuous construction program.

     Also in February 2004, Georgia Power issued $150 million of Series U Floating Rate Senior Notes due February 17, 2009. The proceeds of this sale were used for general corporate purposes.

     In March 2004, Mississippi Power issued $40 million of Series F Floating Rate Senior Notes due March 9, 2009. The proceeds from this sale, along with other monies of Mississippi Power were used to repay $80 million aggregate principal amount of Mississippi Power’s Series D Floating Rate Senior Notes due March 12, 2004.

     Additionally, in April 2004, Alabama Power issued $150 million of Series AA 5 5/8% Senior Notes due April 15, 2034 and terminated $150 million of swaps at a gain of $6 million. The proceeds from the sale were used together with other funds to redeem, in May 2004, $200 million in aggregate principal amount of the Series J 6.75% Senior Notes due June 30, 2039. The gain from the terminated swaps was deferred in Other Comprehensive Income and will be amortized to income over the life of the Series AA Senior Notes.

     Also in April 2004, Gulf Power issued $35 million of Series J 5.875% Senior Notes due April 1, 2044. The proceeds from this issue were used for general corporate purposes, including Gulf Power’s continuous construction program.

     Also, in April 2004, Mississippi Power issued 1,200,000 Depositary Shares ($30 million aggregate stated capital) each representing one-fourth of a share of 5.25% Series Preferred Stock, cumulative, par value $100 per share. The proceeds from this sale were primarily used to redeem various issues of preferred stock and the remainder was used for general corporate purposes.

     Further, in June, 2004, Savannah Electric issued 1,800,000 shares ($45 million aggregate par value) of 6.00% Series Preferred Stock, non-cumulative, par value $25 per share. The proceeds from this sale were used to repay a portion of its outstanding short-term indebtedness that had been incurred primarily to finance the purchase of its share of Units 10 and 11 of Plant McIntosh.

     Subsequent to June 30, 2004, Alabama Power has entered into interest rate hedging transactions related to the anticipated issuance of senior notes totaling approximately $125 million. The notes are expected to be issued in 2005.

     Southern Company and its subsidiaries plan to continue, to the extent possible, a program to retire higher-cost debt and replace these securities with lower-cost capital.

     The market price of Southern Company’s common stock at June 30, 2004 was $29.15 per share and the book value was $13.43 per share, representing a market-to-book ratio of 217%, compared to $30.25, $13.13 and 230%, respectively, at the end of 2003. The dividend for the second quarter 2004 was $0.35 per share compared to $0.3425 per share in the second quarter 2003.

25

PART I

Item 3.     Quantitative And Qualitative Disclosures About Market Risk. 

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Market Price Risk” herein for each registrant and Notes 1 and 6 to the financial statements of each registrant under “Financial Instruments” in Item 8 of the Form 10-K. Also, see Note (F) to the Condensed Financial Statements herein for information relating to derivative instruments.

Item 4.     Controls and Procedures. 

     (a)     Evaluation of disclosure controls and procedures.

As of the end of the period covered by this quarterly report, Southern Company, the retail operating companies and Southern Power conducted separate evaluations under the supervision and with the participation of each company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based upon those evaluations, the Chief Executive Officer and the Chief Financial Officer, in each case, concluded that the disclosure controls and procedures are effective in alerting them in a timely manner to material information relating to each company (including its consolidated subsidiaries) required to be included in periodic filings with the SEC.

     (b)     Changes in internal controls.

There have been no changes in Southern Company’s, the retail operating companies’ or Southern Power’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the second quarter of 2004 that have materially affected or are reasonably likely to materially affect, Southern Company’s, the retail operating companies’ or Southern Power’s internal control over financial reporting.

26

ALABAMA POWER COMPANY

27

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Operating Revenues:
Retail sales	$	847,148		$	748,906		$	1,591,781		$	1,419,735
Sales for resale —
Non-affiliates		120,491			116,212			232,436			235,493
Affiliates		53,945			54,741			119,733			116,728
Other revenues		37,233			30,287			74,561			68,311
Total operating revenues		1,058,817			950,146			2,018,511			1,840,267
Operating Expenses:
Fuel		277,110			240,791			549,089			480,535
Purchased power —
Non-affiliates		65,508			27,476			94,150			56,306
Affiliates		60,400			52,613			120,332			94,109
Other operations		160,889			159,642			307,275			294,185
Maintenance		90,718			81,646			171,105			156,221
Depreciation and amortization		106,146			104,505			211,499			204,716
Taxes other than income taxes		59,328			56,482			123,775			116,567
Total operating expenses		820,099			723,155			1,577,225			1,402,639
Operating Income		238,718			226,991			441,286			437,628
Other Income and (Expense):
Allowance for equity funds used during construction		3,914			3,062			8,024			7,799
Interest income		3,890			4,270			8,329			7,546
Interest expense, net of amounts capitalized		(52,367	)		(58,941	)		(102,446	)		(113,514	)
Interest expense to affiliate trusts		(4,181	)		—			(4,181	)		—
Distributions on mandatorily redeemable preferred securities		—			(3,939	)		(3,938	)		(7,380	)
Other income (expense), net		(6,415	)		(4,315	)		(10,753	)		(10,034	)
Total other income and (expense)		(55,159	)		(59,863	)		(104,965	)		(115,583	)
Earnings Before Income Taxes		183,559			167,128			336,321			322,045
Income taxes		72,567			55,758			129,835			114,831
Net Income		110,992			111,370			206,486			207,214
Dividends on Preferred Stock		6,705			4,747			11,452			8,772
Net Income After Dividends on Preferred Stock	$	104,287		$	106,623		$	195,034		$	198,442

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2004		2003			2004		2003
	(in thousands)					(in thousands)
Net Income After Dividends on Preferred Stock	$	104,287	$	106,623		$	195,034	$	198,442
Other comprehensive income:
Change in fair value of marketable securities, net of tax of $285 and $285, respectively		470		—			470		—
Changes in fair value of qualifying hedges, net of tax of $11,847, $(627), $5,685 and $(1,423), respectively		19,486		(686	)		9,350		(1,994	)
Less: Reclassification adjustment for amounts included in net income, net of tax of $718, $893, $1,572 and $1,645, respectively		1,180		1,808			2,585		3,044
COMPREHENSIVE INCOME	$	125,423	$	107,745		$	207,439	$	199,492

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

28

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months
	Ended June 30,
	2004			2003
	(in thousands)
Operating Activities:
Net income	$	206,486		$	207,214
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		239,039			232,181
Deferred income taxes and investment tax credits, net		85,355			32,712
Pension, postretirement, and other employee benefits		(19,862	)		(15,160	)
Tax benefit of stock options		5,419			8,029
Other, net		(28,142	)		(41,268	)
Changes in certain current assets and liabilities —
Receivables, net		(107,575	)		(10,236	)
Fossil fuel stock		(1,631	)		(7,857	)
Materials and supplies		(3,800	)		(3,732	)
Other current assets		(30,012	)		(32,999	)
Accounts payable		(105,485	)		(63,625	)
Accrued taxes		66,254			60,963
Accrued compensation		(32,216	)		(41,073	)
Other current liabilities		18,023			35,113
Net cash provided from operating activities		291,853			360,262
Investing Activities:
Gross property additions		(376,470	)		(351,330	)
Cost of removal net of salvage		(18,743	)		(17,752	)
Other		14,832			3,031
Net cash used for investing activities		(380,381	)		(366,051	)
Financing Activities:
Increase in notes payable, net		45,978			33,940
Proceeds —
Senior notes		350,000			1,065,000
Preferred stock		100,000			125,000
Common stock		20,000			25,000
Capital contributions from parent company		—			133
Redemptions —
Senior notes		(200,000	)		(1,000,800	)
Other long-term debt		(1,443	)		(472	)
Payment of preferred stock dividends		(9,274	)		(8,659	)
Payment of common stock dividends		(218,650	)		(215,100	)
Other		(13,035	)		(11,881	)
Net cash provided from financing activities		73,576			12,161
Net Change in Cash and Cash Equivalents		(14,952	)		6,372
Cash and Cash Equivalents at Beginning of Period		42,752			22,685
Cash and Cash Equivalents at End of Period	$	27,800		$	29,057
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $3,343 and $3,953 capitalized for 2004 and 2003, respectively)	$	81,471		$	85,222
Income taxes (net of refunds)	$	9,554		$	48,385

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

29

ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Assets	2004			2003
	(in thousands)
Current Assets:
Cash and cash equivalents	$	27,800		$	42,752
Receivables —
Customer accounts receivable		244,269			223,865
Unbilled revenues		117,483			95,953
Under recovered regulatory clause revenues		98,155			16,697
Other accounts and notes receivable		44,064			53,547
Affiliated companies		41,346			48,876
Accumulated provision for uncollectible accounts		(5,688	)		(4,756	)
Fossil fuel stock, at average cost		88,624			86,993
Vacation pay		35,530			35,530
Materials and supplies, at average cost		215,490			211,690
Prepaid expenses		63,342			44,608
Other		36,308			19,454
Total current assets		1,006,723			875,209
Property, Plant, and Equipment:
In service		14,389,837			14,224,117
Less accumulated provision for depreciation		4,984,801			4,905,920
		9,405,036			9,318,197
Nuclear fuel, at amortized cost		94,076			93,611
Construction work in progress		402,384			321,316
Total property, plant, and equipment		9,901,496			9,733,124
Other Property and Investments:
Equity investments in unconsolidated subsidiaries		47,995			47,811
Nuclear decommissioning trusts, at fair value		404,223			384,574
Other		26,211			16,992
Total other property and investments		478,429			449,377
Deferred Charges and Other Assets:
Deferred charges related to income taxes		319,255			321,077
Prepaid pension costs		467,081			446,256
Unamortized loss on reacquired debt		113,520			110,946
Other		140,394			134,635
Total deferred charges and other assets		1,040,250			1,012,914
Total Assets	$	12,426,898		$	12,070,624

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

30

ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,		At December 31,
Liabilities and Stockholder’s Equity	2004		2003
	(in thousands)
Current Liabilities:
Securities due within one year	$	525,015	$	526,019
Notes payable		45,978		—
Accounts payable —
Affiliated		113,263		135,017
Other		87,781		162,314
Customer deposits		49,828		47,507
Accrued taxes —
Income taxes		86,242		83,544
Other		67,639		22,273
Accrued interest		51,089		46,489
Accrued vacation pay		35,530		35,530
Accrued compensation		43,404		75,620
Other		33,218		34,513
Total current liabilities		1,138,987		1,168,826
Long-term Debt		3,529,766		3,377,148
Long-term Debt Payable to Affiliated Trusts		309,279		—
Mandatorily Redeemable Preferred Securities		—		300,000
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		1,687,565		1,571,076
Deferred credits related to income taxes		154,943		162,168
Accumulated deferred investment tax credits		210,830		216,309
Employee benefit obligations		181,923		180,960
Deferred capacity revenues		31,015		36,567
Asset retirement obligations		370,892		358,759
Asset retirement obligation regulatory liability		133,777		127,346
Other cost of removal obligations		585,849		574,445
Miscellaneous regulatory liabilities		74,952		86,323
Other		31,582		37,525
Total deferred credits and other liabilities		3,463,328		3,351,478
Total Liabilities		8,441,360		8,197,452
Cumulative Preferred Stock		472,512		372,512
Common Stockholder’s Equity:
Common stock, par value $40 per share —
Authorized — 15,000,000 shares
Outstanding — June 30, 2004: 7,750,000 Shares
— December 31, 2003: 7,250,000 Shares		310,000		290,000
Paid-in capital		1,932,387		1,926,970
Premium on preferred stock		99		99
Retained earnings		1,266,102		1,291,558
Accumulated other comprehensive income (loss)		4,438		(7,967	)
Total common stockholder’s equity		3,513,026		3,500,660
Total Liabilities and Stockholder’s Equity	$	12,426,898	$	12,070,624

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

31

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SECOND QUARTER 2004 vs. SECOND QUARTER 2003
AND
YEAR-TO-DATE 2004 vs. YEAR-TO-DATE 2003

RESULTS OF OPERATIONS

Earnings

Alabama Power’s net income after dividends on preferred stock for the second quarter and year-to-date 2004 was $104.3 million and $195.0 million, respectively, compared to $106.6 million and $198.4 million, respectively, for the corresponding periods of 2003. Earnings in the second quarter of 2004 decreased by $2.3 million, or 2.2%, primarily due to higher maintenance expenses and income and other taxes, partially offset by an increase in retail base-rate revenues and a decrease in interest expense. Earnings year-to-date 2004 decreased by $3.4 million, or 1.7%, principally due to higher maintenance expense, depreciation expense, and income and other taxes. These increases were partially offset by an increase in base rate revenues and a decrease in interest expense.

     Significant income statement items appropriate for discussion include the following:

	Increase (Decrease)
	Second Quarter						Year-To-Date
	(in thousands)			%			(in thousands)			%
Retail sales	$	98,242			13.1		$	172,046			12.1
Other revenues		6,946			22.9			6,250			9.1
Fuel expense		36,319			15.1			68,554			14.3
Purchased power — non-affiliates		38,032			138.4			37,844			67.2
Purchased power — affiliates		7,787			14.8			26,223			27.9
Maintenance expense		9,072			11.1			14,884			9.5
Depreciation and amortization		1,641			1.6			6,783			3.3
Taxes other than income taxes		2,846			5.0			7,208			6.2
Interest expense, net of amounts capitalized		(6,574	)		(11.2	)		(11,068	)		(9.8	)
Income taxes		16,809			30.1			15,004			13.1
Dividends on preferred stock		1,958			41.2			2,680			30.6

     Retail sales. Excluding energy cost recovery revenues and revenues associated with PPAs certificated by the Alabama PSC, which generally do not affect net income, retail sales revenues increased by $25.5 million, or 4.6%, for the second quarter 2004 and $47.1 million, or 4.5%, year-to-date 2004 when compared to the corresponding periods in 2003. See Note 3 to the financial statements of Alabama Power under “Retail Rate Adjustment Procedures” in Item 8 of the Form 10-K for additional information. Kilowatt-hour energy sales to residential, commercial, and industrial customers increased 7.1%, 4.2%, and 3.0%, respectively, for the second quarter 2004 and increased 5.7%, 3.4% and 5.8%, respectively, year-to-date 2004 when compared to the corresponding periods of 2003 primarily due to more favorable weather conditions and improved industrial sales mainly in the coal mining, primary metal and automotive sectors.

32

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Other revenues. The increases in other revenues for the second quarter and year-to-date 2004 are attributed to a $3.4 million increase in revenues from cogeneration steam facilities due to increased fuel revenue resulting from higher gas prices, a $1.6 million increase in rent from pole attachments and a $1.0 million increase in transmission revenues when compared to the same periods in 2003. Since cogeneration steam fuel revenues are generally offset by fuel expense, these revenues do not have a significant impact on earnings.

     Fuel expense. Fuel expense was higher in the second quarter 2004 when compared to the corresponding period in 2003 mainly due to a 35.7% increase in natural gas prices and a 10.8% increase in generation from natural gas-fired generating facilities. The year-to-date 2004 increase in fuel expense when compared to the same period in 2003 is mainly due to a 30.6% increase in natural gas prices and a 24.0% increase in generation from gas-fired generating facilities. These increases in generation from gas-fired facilities in the second quarter and year-to-date 2004 when compared to the corresponding periods in 2003 are mainly due to an increased energy demand coupled with a 68.4% decrease and a 48.4% decrease, respectively, in generation from Alabama Power’s hydroelectric facilities. Since energy expenses are generally offset by energy revenues, these expenses do not have a significant impact on earnings. See “Future Earnings Potential – FERC and Alabama PSC Matters – Retail Fuel Cost Recovery” herein for additional information.

     Purchased power – non-affiliates. In the second quarter and year-to-date 2004, purchased power from non-affiliates increased when compared to the same periods in 2003 primarily due to a 99.5% increase in energy purchased during the second quarter 2004 even though purchased power prices decreased by 31.0% during the second quarter 2004. Increased purchases were used to help meet the increased energy demand for retail sales. These transactions did not have a significant impact on earnings since energy purchases are generally offset by energy revenues through Alabama Power’s energy cost recovery clause.

     Purchased power — affiliates. Purchased power from affiliates increased in the second quarter and year-to-date 2004 over the same periods in 2003 due to a PPA between Alabama Power and Southern Power that began in June 2003. The capacity component of these transactions was $13.0 million in the second quarter 2004 and $22.4 million year-to-date 2004. Purchases of energy will vary depending on demand and the availability and cost of generating resources at each company. These transactions did not have a significant impact on earnings since energy purchases are generally offset by energy revenues through Alabama Power’s energy cost recovery clause. See Note 3 to the financial statements of Alabama Power under “Retail Rate Adjustment Procedures” in Item 8 of the Form 10-K for additional information on base rate adjustments for certificated PPA expenses.

     Maintenance expense. The increase in maintenance expense for the second quarter 2004 when compared to the same period in 2003 is attributed to a $3.3 million increase in distribution expense, a $2.1 million increase in Washington County combined cycle turbine expense primarily due to caustic water damage and a $1.9 million increase in transmission expense. The year-to-date 2004 increase in maintenance expense is mainly due to a $6.6 million increase in distribution expense and a $3.7 million increase in transmission expense. These increases in transmission and distribution are mainly related to scheduled work performed on overhead lines.

     Depreciation and amortization expense. The increases in depreciation and amortization expense for the second quarter and year-to-date 2004 are attributed to an increase in utility plant in service when compared to the same periods in 2003. See Note 7 to the financial statements of Alabama Power under “Construction Program” in Item 8 of the Form 10-K for additional information.

     Taxes other than income taxes. The second quarter 2004 increase in taxes other than income taxes is mainly due to a $1.3 million increase in property tax expense as a result of a higher assessed property values when compared to the corresponding period in 2003. The year-to-date 2004 increase in taxes other than income

33

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

taxes when compared to the same period in 2003 is primarily due to a $2.7 million increase in payroll taxes, a $2.7 million increase in property tax expense and a $1.7 million increase in the state public utility license tax because of increased retail revenues.

     Interest expense, net of amounts capitalized. The decrease in interest expense, net of amounts capitalized, during the second quarter and year-to-date 2004 when compared to the same periods in 2003 is the result of refinancing higher cost debt. For additional information, see FINANCIAL CONDITION AND LIQUIDITY – “Financing Activities” herein.

     Income taxes. Income tax expense increased for the second quarter and year-to-date of 2004 due primarily to greater taxable income in the second quarter of 2004 compared to 2003, resulting in an additional $6.5 million tax expense. Income tax expense increased an additional $4.2 million in the second quarter of 2004 due to a state income tax actualization adjustment. Also, an income tax settlement which was recorded in 2003 resulted in a $4.7 million increase to net income in the second quarter of 2003.

     Dividends on preferred stock. Dividends on preferred stock increased for the second quarter and year-to-date 2004 due to the issuance of 4,000,000 shares ($100 million aggregate stated capital) of 5.30% Class A Preferred Stock, Cumulative, Par Value $1 Per Share (Stated Capital $25 Per Share) in February 2004.

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors including Alabama Power’s ability to maintain a stable regulatory environment, to achieve energy sales growth while containing costs and to recover costs related to growing demand and increasingly stricter environmental standards. Growth in energy sales is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand and the rate of economic growth in Alabama Power’s service area. For additional information relating to these issues, see BUSINESS – The SOUTHERN System — “Risk Factors” in Item 1 and MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential” of Alabama Power in Item 7 of the Form 10-K.

Environmental Matters

New Source Review Actions

Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs cannot be recovered. For additional information about these issues, including the EPA litigation, see MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – “Future Earnings Potential – Environmental Matters” of Alabama Power in Item 7 and Note 3 to the financial statements of Alabama Power under “New Source Review Actions” in Item 8 of the Form 10-K. As of March 15, 2004, civil penalties under the Clean Air Act were increased prospectively to a maximum of $32,500 per day, per violation. To the extent alleged violations under the New Source Review litigation are deemed to be continuing, this increased civil penalty amount could apply to such violations found to continue after that date.

     On May 3, 2004, the U.S. Supreme Court denied the EPA’s petition to review the Eleventh Circuit Court of Appeals’ decision in the EPA’s similar New Source Review enforcement action against the TVA. The case against Alabama Power had been effectively stayed pending final resolution of the TVA case. With the denial of the EPA’s petition for review, the Court of Appeals’ decision became final. Alabama Power and the EPA

34

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

jointly notified the District Court for the Northern District of Alabama, where the case against Alabama Power is pending and requested that the stay be lifted. On June 16, 2004, the District Court lifted the stay, placing the case back onto the District Court’s active docket. An adverse outcome in this case could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates.

Global Warming Litigation

On July 21, 2004, attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed a complaint in U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Plaintiffs seek relief under the federal common law or, in the alternative, under state law, of public nuisance. The environmental groups also seek relief under common law private nuisance theories. The plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining an ongoing public nuisance, global warming and (2) permanently enjoining each of the defendants to abate its contribution to the nuisance by capping its emissions of carbon dioxide and then reducing those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. Southern Company has not yet responded to the suits; however, it intends to vigorously defend against these claims. While the outcome cannot be determined at this time, an adverse judgment could result in substantial capital expenditures.

Other Environmental Matters

On March 12, 2004, the EPA redesignated the Birmingham, Alabama area from nonattainment to attainment under the one-hour ozone national ambient air quality standard. On April 30, 2004, the EPA published its eight-hour ozone nonattainment designations and a portion of the rules implementing the new eight-hour standard. Within Alabama Power’s service area, Birmingham has been designated as nonattainment under the eight-hour ozone standard. Under the implementation provisions of the new rule, the EPA announced that the one-hour ozone standard will be revoked on June 15, 2005. The impact of the eight-hour designations and the new standards will depend on the development and implementation of applicable state regulations and therefore cannot be determined at this time.

     Additionally, on May 5, 2004, the EPA published proposed amendments to its Regional Haze rules with respect to Best Available Retrofit Technology guidelines and requirements. The impact of these regulations will depend on the development and implementation of the final rules and implementation by the states, and therefore cannot be determined at this time.

     In June 2004, the EPA issued its recommendations for areas to be designated “nonattainment” for the fine particle national ambient air quality standard. Areas within the Alabama Power’s service area that were included in the EPA’s proposed fine particulate matter designations include counties surrounding Birmingham, Alabama. Alabama Power owns several plants located within the counties proposed for the nonattainment designation. The EPA plans to make final nonattainment designations for fine particulate matter by the end of 2004.

35

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

FERC and Alabama PSC Matters

Market-Based Rate Authority

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – “Future Earnings Potential – FERC Matters – Market-Based Rate Authority” of Alabama Power in Item 7 of the Form 10-K and Note 3 to the financial statements of Alabama Power under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation market power. This new interim approach includes a pivotal supplier analysis and a wholesale market share analysis, the results of which provide a rebuttable presumption regarding generation market power. The FERC’s order also sets forth procedures for rebutting these presumptions and addresses mitigation measures for those entities that are found to have market power. In the absence of specific mitigation measures, the order includes several cost-based mitigation measures that would apply by default. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies, including Alabama Power, and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

     On July 8, 2004, the FERC denied Southern Company’s request for rehearing, along with a number of others, and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time.

Transmission

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – “Future Earnings Potential – FERC Matters — Transmission” of Alabama Power in Item 7 of the Form 10-K for information on the FERC’s order related to RTOs and the FERC’s notice of proposed rulemaking regarding open access transmission service and standard electricity market design.

Environmental Rate Filing

On August 2, 2004, Alabama Power made a filing with the Alabama PSC to establish a specific rate mechanism for the recovery of retail costs associated with environmental laws, regulations or other such mandates. If approved, the rate mechanism would begin operation in January 2005 and provide for the recovery of these costs pursuant to a factor that will be calculated annually. It is anticipated that for the first two years of the increase, retail rates would increase under the proposed mechanism by approximately 1% ($33 million) in 2005 and approximately an additional 1% ($30 million) in 2006. Such environmental cost recovery would include operations and maintenance expense, depreciation and a return on invested capital. The outcome of this matter cannot now be determined.

36

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Retail Fuel Cost Recovery

In March 2002, the Alabama PSC issued a consent order establishing the current customer fuel rates, which Alabama Power began collecting in April 2002. In recent months, Alabama Power has experienced higher than expected fuel costs for coal and gas. Those higher fuel costs have increased the under recovered fuel costs included in the Condensed Balance Sheets herein. Alabama Power will continue to monitor the under recovered fuel cost balance in light of these higher fuel costs. See Note 3 to the financial statements of Alabama Power under “Retail Rate Adjustment Procedures” in Item 8 of the Form 10-K for additional information.

Other Matters

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – “Future Earnings Potential – Other Matters” of Alabama Power in Item 7 of the Form 10-K for information on nuclear security measures. Implementation plans for the measures ordered by the NRC to be in effect by October 29, 2004 have been finalized based on current interpretations of the requirements. Alabama Power currently estimates its expenditures related to these security measures to total $9.6 million, of which $9.3 million will be capitalized. These estimates are subject to change in the event additional NRC guidance is provided.

     Alabama Power is subject to certain claims and legal actions arising in the ordinary course of business. In addition, Alabama Power’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury and citizen enforcement of environmental requirements, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such litigation against Alabama Power cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Alabama Power’s financial statements.

     See the Notes to the Condensed Financial Statements herein for discussion of various contingencies and other matters which may affect future earnings potential.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Alabama Power prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Alabama Power in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Alabama Power’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT’S DISCUSSION AND ANALYSIS - ACCOUNTING POLICIES – “Application of Critical Accounting Policies and Estimates” of Alabama Power in Item 7 of the Form 10-K for a complete discussion of Alabama Power’s critical accounting policies and estimates related to Electric Utility Regulation and Contingent Obligations.

37

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

New Accounting Standards

On March 31, 2004, Alabama Power prospectively adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” which requires the primary beneficiary of a variable interest entity to consolidate the related assets and liabilities. The adoption of FASB Interpretation No. 46R had no impact on Alabama Power’s net income. However, as a result of the adoption, Alabama Power deconsolidated certain wholly-owned trusts established to issue preferred securities since Alabama Power does not meet the definition of primary beneficiary established by FASB Interpretation No. 46R. See Note (D) to the Condensed Financial Statements herein for additional information related to the adoption of FASB Interpretation No. 46R.

     In May 2004, the FASB approved Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Act”).” FSP No. 106-2 requires recognition of the impacts of the Medicare Act in the accumulated post-retirement benefit obligation and future cost of service for post-retirement medical plans and may be applied retroactively to the enactment of the Medicare Act in December 2003 or prospectively effective for the third quarter 2004. Alabama Power has elected to apply this treatment prospectively. Pending the finalization of federal regulations governing the subsidy effected in the Medicare Act, Alabama Power does not anticipate a material impact on its financial statements from the adoption of FSP No. 106-2.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Major changes in Alabama Power’s financial condition during the first six months of 2004 included the addition of approximately $376 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operating activities and net proceeds from security issuances of $269 million. See Alabama Power’s Condensed Statements of Cash Flows herein for further details.

Capital Requirements and Contractual Obligations

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Capital Requirements and Contractual Obligations” of Alabama Power in Item 7 of the Form 10-K for a description of Alabama Power’s capital requirements for its construction program, lease obligations, purchase commitments and trust funding requirements. Approximately $525 million will be required by June 30, 2005 for maturities of long-term debt.

Sources of Capital

In addition to the financing activities described below, Alabama Power plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings — if needed — will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See BUSINESS — “Financing Programs” in Item 1 of the Form 10-K for additional information.

     Alabama Power’s current liabilities exceed current assets primarily because of scheduled maturities of long-term debt. To meet short-term cash needs and contingencies, at June 30, 2004 Alabama Power had $28 million of cash and cash equivalents, unused committed lines of credit of approximately $808 million (including $504 million of such lines which are dedicated to funding purchase obligations relating to variable rate pollution control bonds) and an extendible commercial note program. These lines of credit will expire at various times during 2004 ($165 million), 2005 ($418 million) and 2007 ($225 million). Alabama Power

38

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

expects to renew its credit facilities, as needed, prior to expiration. Alabama Power may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of Alabama Power and other Southern Company subsidiaries. Alabama Power has regulatory authority for up to $1 billion of short-term borrowings. At June 30, 2004, Alabama Power had $46 million of commercial paper outstanding. Management believes that the need for working capital can be adequately met by issuing commercial paper or utilizing lines of credit without maintaining large cash balances.

Credit Rating Risk

Alabama Power does not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are contracts that could require collateral – but not accelerated payment – in the event of a credit rating change to below investment grade. These contracts are primarily for physical electricity purchases and sales, fixed price physical gas purchases and agreements covering interest rate swaps. At June 30, 2004, the maximum potential collateral requirements were approximately $27 million. Generally, collateral may be provided for by a Southern Company guaranty, letter of credit or cash.

Market Price Risk

Alabama Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2003 reporting period. In addition, Alabama Power is not aware of any facts or circumstances that would significantly affect such exposures in the near term.

     Due to cost-based rate regulations, Alabama Power has limited exposure to market volatility in interest rates, commodity fuel prices and prices of electricity. To mitigate residual risks relative to movements in electricity prices, Alabama Power enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, similar contracts for gas purchases. Alabama Power has also implemented a retail fuel hedging program at the instruction of the Alabama PSC. The fair value of derivative energy contracts at June 30, 2004 was as follows:

	Second Quarter
	2004			Year-to-Date
	Changes			Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	17,858		$	6,413
Contracts realized or settled		(8,593	)		(11,782	)
New contracts at inception		—			—
Changes in valuation techniques		—			—
Current period changes		2,282			16,916
Contracts at June 30, 2004	$	11,547		$	11,547

39

ALABAMA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

	Source of June 30, 2004
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1		1-3 Years
	(in thousands)
Actively quoted	$	11,547	$	10,715	$	832
External sources		—		—		—
Models and other methods		—		—		—
Contracts at June 30, 2004	$	11,547	$	10,715	$	832

     For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Market Price Risk” of Alabama Power in Item 7 of the Form 10-K and Notes 1 and 6 to the financial statements of Alabama Power under “Financial Instruments” in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein.

Financing Activities

In February 2004, Alabama Power issued 4,000,000 shares ($100 million aggregate stated capital) of 5.30% Class A Preferred Stock, Cumulative, Par Value $1 Per Share (Stated Capital $25 Per Share) and $200 million of Series Z 5.125% Senior Notes due February 15, 2019. The proceeds from these sales were used to repay a portion of Alabama Power’s outstanding short-term indebtedness and for other general corporate purposes, including Alabama Power’s continuous construction program.

     In April 2004, Alabama Power issued $150 million of Series AA 5 5/8% Senior Notes due April 15, 2034 and terminated $150 million of swaps at a gain of $6 million. The proceeds from the sale were used together with other funds to redeem, in May 2004, $200 million in aggregate principal amount of the Series J 6.75% Senior Notes due June 30, 2039. The gain from the terminated swaps was deferred in Other Comprehensive Income and will be amortized to income over the life of the Series AA Senior Notes.

     Subsequent to June 30, 2004, Alabama Power has entered into interest rate hedging transactions related to the anticipated issuance of senior notes totaling approximately $125 million. The notes are expected to be issued in 2005.

     Alabama Power plans to continue, when economically feasible, a program to retire higher-cost debt and replace these obligations with lower-cost capital if market conditions permit.

40

GEORGIA POWER COMPANY

41

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Operating Revenues:
Retail sales	$	1,199,220		$	1,041,604		$	2,237,015		$	2,007,311
Sales for resale —
Non-affiliates		61,597			59,452			127,053			133,438
Affiliates		48,950			46,365			103,092			93,851
Other revenues		43,395			42,672			85,391			81,931
Total operating revenues		1,353,162			1,190,093			2,552,551			2,316,531
Operating Expenses:
Fuel		324,220			271,428			609,434			513,931
Purchased power —
Non-affiliates		97,392			62,052			160,081			134,088
Affiliates		139,319			121,605			274,461			235,448
Other operations		220,799			199,487			419,192			385,477
Maintenance		124,675			107,628			233,143			218,572
Depreciation and amortization		68,542			86,003			136,279			171,745
Taxes other than income taxes		56,488			49,290			112,920			102,465
Total operating expenses		1,031,435			897,493			1,945,510			1,761,726
Operating Income		321,727			292,600			607,041			554,805
Other Income and (Expense):
Allowance for equity funds used during construction		4,700			846			8,047			3,802
Interest income		1,768			14,970			4,120			15,085
Interest expense, net of amounts capitalized		(48,293	)		(47,925	)		(93,943	)		(92,288	)
Interest expense to affiliate trusts		(14,810	)		—			(14,810	)		—
Distributions on mandatorily redeemable preferred securities		—			(14,919	)		(15,839	)		(29,838	)
Other income (expense), net		(5,613	)		9,353			(10,008	)		12,265
Total other income and (expense)		(62,248	)		(37,675	)		(122,433	)		(90,974	)
Earnings Before Income Taxes		259,479			254,925			484,608			463,831
Income taxes		103,597			96,231			184,717			171,699
Net Income		155,882			158,694			299,891			292,132
Dividends on Preferred Stock		167			167			335			335
Net Income After Dividends on Preferred Stock	$	155,715		$	158,527		$	299,556		$	291,797

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2004		2003			2004		2003
	(in thousands)					(in thousands)
Net Income After Dividends on Preferred Stock	$	155,715	$	158,527		$	299,556	$	291,797
Other comprehensive income (loss):
Changes in fair value of qualifying hedges, net of tax of $4,590, $(380), $3,710 and $(1,346), respectively		7,277		(1,015	)		5,882		(2,547	)
Less: Reclassification adjustment for amounts included in net income, net of tax of $558, $79, $1,237 and $79, respectively		884		134			1,961		127
COMPREHENSIVE INCOME	$	163,876	$	157,646		$	307,399	$	289,377

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

42

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months
	Ended June 30,
	2004			2003
	(in thousands)
Operating Activities:
Net income	$	299,891		$	292,132
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		177,927			220,465
Deferred income taxes and investment tax credits, net		127,958			93,581
Pension, postretirement, and other employee benefits		(11,339	)		(17,271	)
Tax benefit of stock options		5,570			9,590
Other, net		(18,859	)		7,115
Changes in certain current assets and liabilities —
Receivables, net		(146,027	)		33,395
Fossil fuel stock		(6,309	)		(22,658	)
Materials and supplies		(2,680	)		(8,000	)
Other current assets		29,779			31,641
Accounts payable		63,354			(72,695	)
Accrued taxes		(78,952	)		16,600
Accrued compensation		(67,828	)		(68,314	)
Other current liabilities		25,648			2,201
Net cash provided from operating activities		398,133			517,782
Investing Activities:
Gross property additions		(672,424	)		(370,727	)
Cost of removal net of salvage		(14,236	)		(10,786	)
Change in construction payables, net of joint owner portion		(23,743	)		(59,455	)
Other		10,899			(2,334	)
Net cash used for investing activities		(699,504	)		(443,302	)
Financing Activities:
Increase (decrease) in notes payable, net		234,749			(17,633	)
Proceeds —
Senior notes		350,000			700,000
Mandatorily redeemable preferred securities		200,000			—
Capital contributions from parent company		223,000			158
Redemptions —
Senior notes		(200,000	)		(465,000	)
Mandatorily redeemable preferred securities		(200,000	)		—
Payment of common stock dividends		(282,750	)		(282,900	)
Other		(12,069	)		(15,179	)
Net cash provided from (used for) financing activities		312,930			(80,554	)
Net Change in Cash and Cash Equivalents		11,559			(6,074	)
Cash and Cash Equivalents at Beginning of Period		8,699			16,873
Cash and Cash Equivalents at End of Period	$	20,258		$	10,799
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $2,804 and $2,852 capitalized for 2004 and 2003, respectively)	$	120,449		$	107,940
Income taxes (net of refunds)	$	35,078		$	(21,958	)

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

43

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Assets	2004			2003
	(in thousands)
Current Assets:
Cash and cash equivalents	$	20,258		$	8,699
Receivables —
Customer accounts receivable		300,311			261,771
Unbilled revenues		167,852			117,327
Under recovered regulatory clause revenues		254,428			151,447
Other accounts and notes receivable		77,475			101,783
Affiliated companies		30,935			52,413
Accumulated provision for uncollectible accounts		(6,025	)		(5,350	)
Fossil fuel stock, at average cost		143,846			137,537
Vacation pay		54,928			50,150
Materials and supplies, at average cost		273,720			271,040
Prepaid expenses		10,850			46,157
Other		11,010			83
Total current assets		1,339,588			1,193,057
Property, Plant, and Equipment:
In service		18,472,477			18,171,862
Less accumulated provision for depreciation		7,068,465			6,898,725
		11,404,012			11,273,137
Nuclear fuel, at amortized cost		116,191			129,056
Construction work in progress		639,952			341,783
Total property, plant, and equipment		12,160,155			11,743,976
Other Property and Investments:
Equity investments in unconsolidated subsidiaries		68,703			38,714
Nuclear decommissioning trusts, at fair value		437,441			423,319
Other		64,891			37,142
Total other property and investments		571,035			499,175
Deferred Charges and Other Assets:
Deferred charges related to income taxes		504,470			509,887
Prepaid pension costs		426,899			405,164
Unamortized debt issuance expense		74,852			75,245
Unamortized loss on reacquired debt		182,286			177,707
Other		160,596			177,817
Total deferred charges and other assets		1,349,103			1,345,820
Total Assets	$	15,419,881		$	14,782,028

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

44

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Liabilities and Stockholder’s Equity	2004			2003
	(in thousands)
Current Liabilities:
Securities due within one year	$	302,401		$	2,304
Notes payable		372,027			137,277
Accounts payable —
Affiliated		154,541			121,928
Other		236,621			238,069
Customer deposits		109,204			103,756
Accrued taxes —
Income taxes		172,250			107,532
Other		104,271			166,892
Accrued interest		71,861			70,844
Accrued vacation pay		42,749			38,206
Accrued compensation		66,176			134,004
Other		129,009			105,234
Total current liabilities		1,761,110			1,226,046
Long-term Debt		3,611,092			3,762,333
Long-term Debt Payable to Affiliated Trusts		969,073			—
Mandatorily Redeemable Preferred Securities		—			940,000
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		2,358,072			2,303,085
Deferred credits related to income taxes		178,986			186,625
Accumulated deferred investment tax credits		306,262			312,506
Employee benefit obligations		306,543			295,788
Asset retirement obligations		490,164			475,585
Other cost of removal obligations		405,433			412,161
Miscellaneous regulatory liabilities		158,333			249,687
Other		66,813			63,432
Total deferred credits and other liabilities		4,270,606			4,298,869
Total Liabilities		10,611,881			10,227,248
Cumulative Preferred Stock		14,569			14,569
Common Stockholder’s Equity:
Common stock, without par value —
Authorized — 15,000,000 shares
Outstanding — 7,761,500 shares		344,250			344,250
Paid-in capital		2,437,069			2,208,498
Premium on preferred stock		40			40
Retained earnings		2,027,103			2,010,297
Accumulated other comprehensive loss		(15,031	)		(22,874	)
Total common stockholder’s equity		4,793,431			4,540,211
Total Liabilities and Stockholder’s Equity	$	15,419,881		$	14,782,028

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

45

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SECOND QUARTER 2004 vs. SECOND QUARTER 2003
AND
YEAR-TO-DATE 2004 vs. YEAR-TO-DATE 2003

RESULTS OF OPERATIONS

Earnings

Georgia Power’s net income after dividends on preferred stock for the second quarter and year-to-date 2004 was $155.7 million and $299.6 million, respectively, compared to $158.5 million and $291.8 million, respectively, for the corresponding periods in 2003. Earnings in the second quarter decreased by $2.8 million, or 1.8%, primarily due to higher non-fuel operating expenses partially offset by higher retail base revenues when compared to the same period in 2003. Earnings for year-to-date 2004 increased $7.8 million, or 2.7%, primarily due to higher retail base revenues partially offset by higher non-fuel operating expenses.

     Significant income statement items appropriate for discussion include the following:

	Increase (Decrease)
	Second Quarter						Year-To-Date
	(in thousands)			%			(in thousands)			%
Retail sales	$	157,616			15.1		$	229,704			11.4
Fuel expense		52,792			19.4			95,503			18.6
Purchased power — non-affiliates		35,340			57.0			25,993			19.4
Purchased power — affiliates		17,714			14.6			39,013			16.6
Other operations		21,312			10.7			33,715			8.7
Maintenance		17,047			15.8			14,571			6.7
Depreciation and amortization		(17,461	)		(20.3	)		(35,466	)		(20.7	)
Allowance for funds used during construction		3,854			N/M			4,245			N/M
Interest income		(13,202	)		(88.2	)		(10,965	)		(72.7	)
Other income (expense), net		(14,966	)		N/M			(22,273	)		N/M

N/M Not meaningful

     Retail sales. Excluding fuel revenues, which generally do not affect net income, retail sales revenue increased by $70.9 million, or 9.7%, in the second quarter 2004 compared to the corresponding period in 2003. In the second quarter 2004, kilowatt-hour energy sales to residential, commercial and industrial customers increased by 13.2%, 6.2% and 3.4%, respectively, when compared to the same period in 2003. Year-to-date 2004 base retail sales revenue increased by $102.8 million, or 7.3%, compared to the corresponding period in 2003. Year-to-date kilowatt-hour energy sales to residential, commercial and industrial customers increased by 9.1%, 5.1% and 2.8%, respectively, when compared to the same period in 2003. These increases in the retail sectors during the second quarter and year-to-date 2004 are mainly due to customer growth of 2%, more favorable weather, and an improving economy when compared to the same periods in 2003.

46

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Fuel expense. During the second quarter and year-to-date 2004, fuel expense was higher due to increases of 14.0% and 14.1%, respectively, in the average cost of fuel and increases of 1.7% and 1.8%, respectively, in generation due to increased retail sales. These expenses do not have a significant impact on earnings since fuel expenses are generally offset by fuel revenues through Georgia Power’s fuel cost recovery clause. See “Future Earnings Potential – FERC and Georgia PSC Matters – Retail Fuel Cost Recovery” herein for additional information.

     Purchased power — non-affiliates. The second quarter and year-to-date 2004 increases in purchased power from non-affiliates are primarily due to fluctuations in off-system energy purchases used to meet off-system sales commitments. These expenses do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Georgia Power’s fuel cost recovery clause.

     Purchased power — affiliates. Purchased power from affiliates increased in the second quarter and year-to-date 2004 when compared to the corresponding periods in 2003 due to a PPA between Georgia Power and Southern Power that began in June 2003. The capacity component of these transactions increased $15.6 million and $25.8 million in the second quarter and year-to-date 2004, respectively, over the same periods in 2003. The energy component of power purchased from affiliated companies within the Southern Company system will vary depending on demand and the availability and cost of generating resources at each company and will have no significant impact on earnings since energy expenses are generally offset by energy revenues through Georgia Power’s fuel cost recovery clause.

     Other operations expense. Other operations expense in the second quarter and year-to-date 2004 was higher when compared to the same periods in 2003 due to increased administrative and general expenses of $8.0 million and $13.8 million, respectively, related to increased employee benefit expenses and $3.2 million in workers compensation expenses for year-to-date 2004.

     Maintenance expense. Maintenance expense was higher in the second quarter and year-to-date 2004 when compared to the same periods in 2003 due to the timing of scheduled generating plant maintenance of $8.7 million and $4.2 million, respectively, and scheduled transmission and distribution maintenance of $10.2 million and $13.2 million, respectively.

     Depreciation and amortization. In the second quarter and year-to-date 2004, depreciation and amortization expense was lower compared to the corresponding periods in 2003. These decreases were caused primarily by lower regulatory charges needed to levelize purchased power capacity costs under the terms of the retail rate order effective January 1, 2002. These decreases were offset by increases in affiliated purchased power costs discussed above. See Note 1 to the financial statements of Georgia Power under “Depreciation and Amortization” in Item 8 of the Form 10-K for additional information.

     Allowance for equity funds used during construction. The second quarter and year-to-date 2004 increases result primarily from the acquisition of the McIntosh combined cycle units 10 and 11 construction project from Southern Power. See “FERC Matters” herein and Note (J) to the Condensed Financial Statements herein for additional information.

     Interest income. The second quarter and year-to-date 2004 decreases result from $14.5 million of interest on a favorable tax settlement received in the second quarter of 2003.

47

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

     Other income (expense), net. The second quarter and year-to-date 2004 decreases in other income (expense), net reflect decreased rental income of $4.0 million and $2.5 million, respectively, as well as the impact of the ESOP contribution in June 2004 of $3.4 million when compared to the same periods in 2003. The year-to-date 2004 decrease in other income (expense), net also reflects a $5.0 million decrease related to the 2003 favorable resolution of a loss contingency.

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors including Georgia Power’s ability to maintain a stable regulatory environment, to achieve energy sales growth while containing costs, and to recover costs related to growing demand and increasingly stricter environmental standards. Growth in energy sales is subject to a number of factors, which include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth in the service area. For additional information relating to these issues, see BUSINESS — The SOUTHERN System — “Risk Factors” in Item 1 and MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential” of Georgia Power in Item 7 of the Form 10-K.

Environmental Matters

New Source Review Actions and Plant Wansley Environmental Litigation

Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs cannot be recovered. For additional information, including information on certain environmental litigation, see MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS - “Future Earnings Potential — Environmental Matters” of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under “New Source Review Actions” and “Plant Wansley Environmental Litigation” in Item 8 of the Form 10-K. As of March 15, 2004, civil penalties under the Clean Air Act were increased prospectively to a maximum of $32,500 per day, per violation. To the extent alleged violations under either the New Source Review litigation or Plant Wansley environmental litigation are deemed to be continuing, this increased civil penalty amount could apply to such violations found to continue after that date.

     On May 3, 2004, the U.S. Supreme Court denied the EPA’s petition to review the Eleventh Circuit Court of Appeals’ decision in the EPA’s similar New Source Review enforcement action against the TVA. The case against Georgia Power had been effectively stayed pending final resolution of the TVA case. With the denial of the EPA’s petition for review, the Court of Appeals’ decision became final. At this time, no party to the case against Georgia Power has sought to reopen the case, which remains administratively closed in the District Court for the Northern District of Georgia.

     On June 10, 2004, the U.S. District Court for the Northern District of Georgia granted Georgia Power’s motion in the Plant Wansley environmental litigation for partial summary judgment regarding emissions offsets. The case has been removed from the court’s trial calendar due to pending motions for summary judgment, and a new trial date has not been scheduled. An adverse outcome in either of these cases could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows and possibly financial condition if such costs are not recovered through regulated rates.

48

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

Global Warming Litigation

On July 21, 2004, attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed a complaint in U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Plaintiffs seek relief under the federal common law or, in the alternative, under state law, of public nuisance. The environmental groups also seek relief under common law private nuisance theories. The plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining an ongoing public nuisance, global warming and (2) permanently enjoining each of the defendants to abate its contribution to the nuisance by capping its emissions of carbon dioxide and then reducing those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. Southern Company has not yet responded to the suits; however, it intends to vigorously defend against these claims. While the outcome cannot be determined at this time, an adverse judgment could result in substantial capital expenditures.

Other Environmental Matters

On April 30, 2004, the EPA published its eight-hour ozone nonattainment designations and a portion of the rules implementing the new eight-hour standard. Areas within Georgia Power’s service area that have been designated as nonattainment under the eight-hour ozone standard include Macon (Georgia) and a 20-county area within metropolitan Atlanta. Under the implementation provisions of the new rule, the EPA announced that the one-hour ozone standard will be revoked on June 15, 2005. Areas classified as “severe” nonattainment areas under the one-hour standard will not be required to impose emissions fees as a result of nonattainment. Georgia Power, therefore, will no longer be subject to imposition of emissions fees if the Atlanta area does not come into attainment with the one-hour standard. The impact of the eight-hour designations and the new standards will depend on the development and implementation of applicable state regulations and therefore cannot be determined at this time.

     In June 2004, the EPA issued its recommendations for areas to be designated “nonattainment” for the fine particle national ambient air quality standard. Areas within Georgia Power’s service area that were included in the EPA’s proposed fine particulate matter designations include 24 counties in the metro-Atlanta area; counties surrounding Macon, Athens and Columbus, Georgia; and counties in Georgia near Chattanooga, Tennessee. Georgia Power owns several plants located within the counties proposed for the nonattainment designations. The EPA plans to make final nonattainment designations for fine particulate matter by the end of 2004.

     On April 21, 2004, the EPA published the final regional nitrogen oxide reduction rules applicable to Georgia. These rules specify that the State of Georgia must submit a revised state implementation plan by April 2005, and affected sources must comply with the reduction requirements by May 1, 2007. The impact of these regulations will depend on the development and approval of Georgia’s state implementation plan and cannot be determined at this time.

49

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

     Additionally, on May 5, 2004, the EPA published proposed amendments to its Regional Haze rules with respect to Best Available Retrofit Technology guidelines and requirements. The impact of these regulations will depend on the development and implementation of the final rules and implementation by the states, and therefore cannot be determined at this time.

FERC and Georgia PSC Matters

Market-Based Rate Authority

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential – FERC Matters – Market-Based Rate Authority” of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation market power. This new interim approach includes a pivotal supplier analysis and a wholesale market share analysis, the results of which provide a rebuttable presumption regarding generation market power. The FERC’s order also sets forth procedures for rebutting these presumptions and addresses mitigation measures for those entities that are found to have market power. In the absence of specific mitigation measures, the order includes several cost-based mitigation measures that would apply by default. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies, including Georgia Power, and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

     On July 8, 2004, the FERC denied Southern Company’s request for rehearing, along with a number of others, and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time.

Transmission

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Transmission” of Georgia Power in Item 7 of the Form 10-K for information on the FERC’s order related to RTOs and the FERC’s notice of proposed rulemaking regarding open access transmission service and standard electricity market design.

Plant McIntosh Construction Project

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATION — “Future Earnings Potential — FERC Matters” of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under “FERC Matters” in Item 8 of the Form 10-K for information regarding PPAs between Southern Power and Savannah Electric and Georgia Power for Plant McIntosh capacity. In April 2003, Southern Power applied for FERC approval of these PPAs. In July 2003, the FERC accepted the PPAs to become effective June 1, 2005, subject to refund and ordered that hearings be held. To ensure the timely completion of

50

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

construction on McIntosh units 10 and 11 and their availability in the summer of 2005 as supply side resources for the retail customers in the State of Georgia, on May 7, 2004, Savannah Electric and Georgia Power requested the Georgia PSC to direct them to acquire the McIntosh construction project. Savannah Electric and Georgia Power proposed to place the units in rate base at a cost approved by the Georgia PSC and to recover the unit operation and maintenance costs as retail service expenses as may be approved by the Georgia PSC. The Georgia PSC issued such an order on May 18, 2004 and the transfer occurred on May 24, 2004. On May 20, 2004, Southern Power filed a request to withdraw the PPAs and to terminate the ongoing FERC proceedings. On August 4, 2004, the FERC issued a notice that it allowed the request to withdraw the PPAs to be accepted and to become effective by operation of law on July 20, 2004. However, the FERC made no determination on what additional steps may need to be taken with respect to testimony provided in the proceedings. The ultimate outcome of this matter cannot now be determined.

     The May 18, 2004 Georgia PSC order also directed Georgia Power and Savannah Electric to file an application within 10 days of completing such purchase to amend the resource certificate granted by the Georgia PSC in 2002 to describe the capacity resource as being the McIntosh units 10 and 11 (as opposed to the McIntosh PPAs), the approximate construction schedule (which is not expected to change) and the proposed rate base treatment. The application was filed on June 3, 2004 and the Georgia PSC will have 180 days to respond. The Georgia PSC is expected to review the application in accordance with its affiliate transaction guidelines, which require a lower of cost or market approach unless otherwise determined by the Georgia PSC. Georgia Power and Savannah Electric have submitted information showing that the book cost of the McIntosh construction project is lower than its market value. However, full recovery of the project costs depends on the outcome of the Georgia PSC’s review. In the event the Georgia PSC does not allow full recovery of the project costs, then part of such costs may have to be written off in accordance with FASB Statement No. 90, “Accounting for Abandonments and Disallowed Plant Costs.” At June 30, 2004, the investment in the McIntosh construction project totaled approximately $353.2 million for Georgia Power. The ultimate outcome of the Georgia PSC’s review cannot now be determined.

Retail Rate Case

On July 1, 2004, Georgia Power filed a request with the Georgia PSC for an approximate 7 percent increase in retail revenues, effective January 1, 2005. The requested increase is based on a future test year ending July 31, 2005 and a proposed retail return on common equity of 12.5 percent. Georgia Power is currently operating under a three-year retail rate order that expires December 31, 2004. Under the terms of the existing order, earnings are evaluated annually against a retail return on common equity range of 10 percent to 12.95 percent. Two-thirds of any earnings above the 12.95 percent return are applied to rate refunds, with the remaining one-third retained by Georgia Power. The order required Georgia Power to file a general rate case by July 1, 2004.

     The increase in retail revenues is being requested to cover the higher costs of purchased power; operating and maintenance expenses; environmental compliance; and continued investment in new generation, transmission and distribution facilities to support growth and ensure reliability. Georgia Power expects the Georgia PSC to issue a final order in this matter during December 2004. The final outcome of this matter cannot now be determined. See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – “Future Earnings Potential – Other Matters” of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under “Retail Rate Orders” in Item 8 of the Form 10-K and Note (I) to the Condensed Financial Statements herein for additional information.

51

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

Retail Fuel Cost Recovery

In August 2003, the Georgia PSC issued an order allowing Georgia Power to increase customer fuel rates to collect existing under recovered fuel costs over the period October 1, 2003 through March 31, 2005. Georgia Power has experienced higher than expected fuel costs since the order was issued. Those higher fuel costs have increased the under recovered fuel costs included in the Condensed Balance Sheets herein. Georgia Power will continue to monitor the under recovered fuel cost balance in light of these higher fuel costs. See Note 3 to the financial statements of Georgia Power under “Fuel Cost Recovery” in Item 8 of the Form 10-K for additional information.

Other Matters

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATION – “Future Earnings Potential – Other Matters” of Georgia Power in Item 7 of the Form 10-K for information on nuclear security measures. Implementation plans for the measures ordered by the NRC to be in effect by October 29, 2004 have been finalized based on current interpretations of the requirements. Georgia Power, based on its ownership interest, currently estimates its expenditures related to these security measures will total $9.3 million, of which 1.3 million will be capitalized. These estimates are subject to change in the event additional NRC guidance is provided.

     Georgia Power is subject to certain claims and legal actions arising in the ordinary course of business. In addition, Georgia Power’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury and citizen enforcement of environmental requirements, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such litigation against Georgia Power cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Georgia Power’s financial statements.

     See the Notes to the Condensed Financial Statements herein for discussion of various contingencies and other matters which may affect future earnings potential.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Georgia Power prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Georgia Power in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Georgia Power’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT’S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES – “Application of Critical Accounting Policies and Estimates” of Georgia Power in Item 7 of the Form 10-K for a complete discussion of Georgia Power’s critical accounting policies and estimates related to Electric Utility Regulation and Contingent Obligations.

52

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

New Accounting Standards

On March 31, 2004, Georgia Power prospectively adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” which requires the primary beneficiary of a variable interest entity to consolidate the related assets and liabilities. The adoption of FASB Interpretation No. 46R had no impact on Georgia Power’s net income. However, as a result of the adoption, Georgia Power deconsolidated certain wholly-owned trusts established to issue preferred securities since Georgia Power does not meet the definition of primary beneficiary established by FASB Interpretation No. 46R. See Note (D) to the Condensed Financial Statements herein for additional information related to the adoption of FASB Interpretation No. 46R.

     In May 2004, the FASB approved Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Act”).” FSP No. 106-2 requires recognition of the impacts of the Medicare Act in the accumulated post-retirement benefit obligation and future cost of service for post-retirement medical plans and may be applied retroactively to the enactment of the Medicare Act in December 2003 or prospectively effective for the third quarter 2004. Georgia Power has elected to apply this treatment prospectively. Pending the finalization of federal regulations governing the subsidy effected in the Medicare Act, Georgia Power does not anticipate a material impact on its financial statements from the adoption of FSP No. 106-2.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Major changes in Georgia Power’s financial condition during the first six months of 2004 included the addition of approximately $672.4 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operating activities, short-term borrowings and equity funds from Southern Company. See Georgia Power’s Condensed Statements of Cash Flows herein for further details.

Capital Requirements and Contractual Obligations

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Capital Requirements and Contractual Obligations” of Georgia Power in Item 7 of the Form 10-K for a description of Georgia Power’s capital requirements for its construction program, lease obligations, purchase commitments and trust funding requirements. Approximately $302 million will be required by June 30, 2005 for redemptions and maturities of long-term debt. The purchase of the McIntosh construction project is expected to temporarily increase short-term borrowings under the commercial paper program. The temporary increase will be replaced with additional long-term debt. The projected construction program will increase by $437.8 million and $27.4 million in 2004 and 2005, respectively, for the Plant McIntosh combined cycle construction project and the projected purchased power commitments will decrease by $133.2 million in 2005-2006, $147.5 million in 2007-2008 and $885.2 million beyond 2008 as a result of the purchase of the construction project.

Sources of Capital

Georgia Power plans to obtain the funds required for construction and other purposes from sources similar to those used in the past, including funds from operations and new security issuances. The amount, type and timing of additional security issuances — if needed — will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See BUSINESS — “Financing Programs” in Item 1 of the Form 10-K for additional information.

53

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

     Georgia Power’s current liabilities exceed current assets because of the continued use of short-term debt as a funding source to meet cash needs, which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, Georgia Power had at June 30, 2004 approximately $20.3 million of cash and cash equivalents and $773 million of unused credit arrangements with banks. Of these facilities, $423 million expire in 2005 and contain provisions allowing two-year term loans executable at expiration; with the remaining $350 million expiring in 2007. The credit arrangements provide liquidity support to Georgia Power’s obligations with respect to variable rate pollution control bonds and commercial paper. Georgia Power expects to renew its credit facilities, as needed, prior to expiration. Georgia Power may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of Georgia Power and other Southern Company subsidiaries. At June 30, 2004, Georgia Power had $372 million of commercial paper outstanding. Management believes that the need for working capital can be adequately met by utilizing commercial paper programs and lines of credit without maintaining large cash balances.

Credit Rating Risk

Georgia Power does not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are contracts that could require collateral — but not accelerated payment — in the event of a credit rating change to below investment grade. These contracts are primarily for physical electricity purchases and sales, fixed-price physical gas purchases and agreements covering interest rate swaps. At June 30, 2004, the maximum potential collateral requirements were approximately $226 million. Generally, collateral may be provided for by a Southern Company guaranty, letter of credit or cash.

Market Price Risk

Georgia Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2003 reporting period. In addition, Georgia Power is not aware of any facts or circumstances that would significantly affect such exposures in the near term.

     Due to cost-based rate regulations, Georgia Power has limited exposure to market volatility in interest rates, commodity fuel prices and prices of electricity. To mitigate residual risks relative to movements in electricity prices, Georgia Power enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, similar contracts for gas purchases. Georgia Power has also implemented a retail fuel hedging program at the instruction of the Georgia PSC. The fair value of derivative energy contracts at June 30, 2004 was as follows:

	Second Quarter
	2004			Year-to-Date
	Changes			Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	10,533		$	3,155
Contracts realized or settled		(4,680	)		(4,778	)
New contracts at inception		—			—
Changes in valuation techniques		—			—
Current period changes		2,102			9,578
Contracts at June 30, 2004	$	7,955		$	7,955

54

GEORGIA POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

	Source of June 30, 2004
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1		1-3 Years
	(in thousands)
Actively quoted	$	7,955	$	6,136	$	1,819
External sources		—		—		—
Models and other methods		—		—		—
Contracts at June 30, 2004	$	7,955	$	6,136	$	1,819

     For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Market Price Risk” of Georgia Power in Item 7 and Notes 1 and 6 to the financial statements of Georgia Power under “Financial Instruments” in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein.

Financing Activities

In January 2004, Georgia Power issued $100 million of Series S 4.00% Senior Notes due January 15, 2011 and $100 million of Series T 5.75% Senior Public Income Notes due January 15, 2044. The proceeds from these sales were used in March 2004 to redeem all of its outstanding Series H 6.70% Senior Insured Quarterly Notes due March 1, 2011 and Series D 6 5/8% Senior Notes due March 31, 2039. In February 2004, Georgia Power issued $150 million of Series U Floating Rate Senior Notes due February 17, 2009. The proceeds of this sale were used for general corporate purposes.

     Further in January 2004, Georgia Power Capital Trust VII, a statutory trust, sold $200 million of its 5 7/8% Trust Preferred Securities, which are guaranteed by Georgia Power. The net proceeds from this issuance were used to redeem the 6.85% Trust Preferred Securities of Georgia Power Capital Trust IV. In connection with this transaction, Georgia Power issued $206 million of its junior subordinated debentures to Georgia Power Capital Trust VII.

     Georgia Power plans to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.

55

GULF POWER COMPANY

56

GULF POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Operating Revenues:
Retail sales	$	191,189		$	175,669		$	356,273		$	335,462
Sales for resale —
Non-affiliates		18,470			17,908			37,958			36,633
Affiliates		21,964			12,414			42,659			22,631
Other revenues		9,547			9,218			19,199			18,321
Total operating revenues		241,170			215,209			456,089			413,047
Operating Expenses:
Fuel		90,778			77,798			169,194			141,065
Purchased power —
Non-affiliates		11,724			3,929			18,157			9,885
Affiliates		7,843			5,079			15,271			17,666
Other operations		36,430			33,426			69,448			63,437
Maintenance		16,773			17,257			32,979			33,837
Depreciation and amortization		20,722			20,324			41,274			40,576
Taxes other than income taxes		17,076			16,728			34,139			33,116
Total operating expenses		201,346			174,541			380,462			339,582
Operating Income		39,824			40,668			75,627			73,465
Other Income and (Expense):
Interest expense, net of amounts capitalized		(8,138	)		(8,252	)		(16,032	)		(16,307	)
Interest expense to affiliate trusts		(1,147	)		—			(1,147	)		—
Distributions on mandatorily redeemable preferred securities		—			(1,894	)		(1,113	)		(3,922	)
Other income (expense), net		(91	)		(256	)		(73	)		(679	)
Total other income and (expense)		(9,376	)		(10,402	)		(18,365	)		(20,908	)
Earnings Before Income Taxes		30,448			30,266			57,262			52,557
Income taxes		11,392			11,427			21,313			19,692
Net Income		19,056			18,839			35,949			32,865
Dividends on Preferred Stock		54			54			108			108
Net Income After Dividends on Preferred Stock	$	19,002		$	18,785		$	35,841		$	32,757

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2004		2003			2004		2003
	(in thousands)					(in thousands)
Net Income After Dividends on Preferred Stock	$	19,002	$	18,785		$	35,841	$	32,757
Other comprehensive income (loss):
Change in fair value of marketable securities, net of tax of $40 and $40, respectively		63		—			63		—
Changes in fair value of qualifying hedges, net of tax of $(1,426) and $(1,426), respectively		—		(2,270	)		—		(2,270	)
Less: Reclassification adjustment for amounts included in net income, net of tax of $31 and $62, respectively		51		—			101		—
COMPREHENSIVE INCOME	$	19,116	$	16,515		$	36,005	$	30,487

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

57

GULF POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months
	Ended June 30,
	2004			2003
	(in thousands)
Operating Activities:
Net income	$	35,949		$	32,865
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		44,278			43,382
Deferred income taxes		4,097			(112	)
Pension, postretirement, and other employee benefits		425			3,808
Tax benefit of stock options		988			1,596
Other, net		(1,880	)		(3,025	)
Changes in certain current assets and liabilities —
Receivables, net		(7,591	)		(7,598	)
Fossil fuel stock		(6,235	)		(2,822	)
Materials and supplies		781			(2,797	)
Other current assets		338			24,945
Accounts payable		6,155			(13,390	)
Accrued taxes		17,684			4,297
Accrued compensation		(3,457	)		(6,323	)
Other current liabilities		6,602			14,065
Net cash provided from operating activities		98,134			88,891
Investing Activities:
Gross property additions		(66,828	)		(40,654	)
Cost of removal net of salvage		(3,935	)		(4,842	)
Investment in property damage fund		(6,700	)		(1,100	)
Other		(1,103	)		(5,552	)
Net cash used for investing activities		(78,566	)		(52,148	)
Financing Activities:
Increase (decrease) in notes payable, net		(32,671	)		23,227
Proceeds —
Pollution control bonds		—			61,625
Senior notes		35,000			65,000
Capital contributions from parent company		25,000			10,016
Redemptions —
Pollution control bonds		—			(61,625	)
Senior notes		—			(45,037	)
Other long-term debt		—			(20,000	)
Mandatorily redeemable preferred securities		—			(40,000	)
Payment of preferred stock dividends		(108	)		(108	)
Payment of common stock dividends		(35,000	)		(35,100	)
Other		(1,509	)		(4,504	)
Net cash used for financing activities		(9,288	)		(46,506	)
Net Change in Cash and Cash Equivalents		10,280			(9,763	)
Cash and Cash Equivalents at Beginning of Period		2,548			13,278
Cash and Cash Equivalents at End of Period	$	12,828		$	3,515
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $385 and $66 capitalized for 2004 and 2003, respectively)	$	15,652		$	18,525
Income taxes (net of refunds)	$	5,008			$(5,393	)

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

58

GULF POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

		At June 30,			At December 31,
Assets		2004			2003
	(in thousands)
Current Assets:
Cash and cash equivalents		$	12,828		$	2,548
Receivables —
Customer accounts receivable			50,852			44,001
Unbilled revenues			39,013			31,548
Under recovered regulatory clause revenues			22,177			21,812
Other accounts and notes receivable			4,166			6,179
Affiliated companies			4,832			9,826
Accumulated provision for uncollectible accounts			(1,030	)		(947	)
Fossil fuel stock, at average cost			41,589			35,354
Vacation pay			5,254			5,254
Materials and supplies, at average cost			35,149			35,930
Prepaid expenses			4,211			6,310
Other			6,248			4,985
Total current assets			225,289			202,800
Property, Plant, and Equipment:
In service			2,338,654			2,306,959
Less accumulated provision for depreciation			843,611			847,519
			1,495,043			1,459,440
Construction work in progress			44,664			49,438
Total property, plant, and equipment			1,539,707			1,508,878
Other Property and Investments			21,708			12,597
Deferred Charges and Other Assets:
Deferred charges related to income taxes			18,468			18,263
Prepaid pension costs			43,604			42,014
Unamortized debt issuance expense			6,830			6,877
Unamortized premium on reacquired debt			18,535			19,389
Other			31,646			28,235
Total deferred charges and other assets			119,083			114,778
Total Assets		$	1,905,787		$	1,839,053

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

59

GULF POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Liabilities and Stockholder’s Equity	2004			2003
	(in thousands)
Current Liabilities:
Securities due within one year	$	50,000		$	50,000
Notes payable		4,995			37,666
Accounts payable —
Affiliated		33,452			26,945
Other		19,959			21,952
Customer deposits		19,150			18,271
Accrued taxes —
Income taxes		16,003			6,405
Other		15,089			8,621
Accrued interest		8,435			8,077
Accrued vacation pay		5,254			5,254
Accrued compensation		9,999			13,456
Other		15,664			9,694
Total current liabilities		198,000			206,341
Long-term Debt		549,969			515,827
Long-term Debt Payable to Affiliated Trusts		72,166			—
Mandatorily Redeemable Preferred Securities		—			70,000
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		183,166			175,685
Deferred credits related to income taxes		25,086			26,545
Accumulated deferred investment tax credits		19,470			20,451
Employee benefit obligations		54,410			52,395
Other cost of removal obligations		156,111			151,229
Miscellaneous regulatory liabilities		29,070			27,903
Other		25,752			27,083
Total deferred credits and other liabilities		493,065			481,291
Total Liabilities		1,313,200			1,273,459
Cumulative Preferred Stock		4,236			4,236
Common Stockholder’s Equity:
Common stock, without par value—
Authorized - 992,717 shares
Outstanding - 992,717 shares		38,060			38,060
Paid-in capital		390,840			364,852
Premium on preferred stock		12			12
Retained earnings		162,049			161,208
Accumulated other comprehensive loss		(2,610	)		(2,774	)
Total common stockholder’s equity		588,351			561,358
Total Liabilities and Stockholder’s Equity	$	1,905,787		$	1,839,053

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

60

GULF POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SECOND QUARTER 2004 vs. SECOND QUARTER 2003
AND
YEAR-TO-DATE 2004 vs. YEAR-TO-DATE 2003

RESULTS OF OPERATIONS

Earnings

Gulf Power’s net income after dividends on preferred stock for the second quarter and year-to-date 2004 was $19.0 million and $35.8 million, respectively, compared to $18.8 million and $32.8 million, respectively, for the corresponding periods in 2003. Earnings in the second quarter and year-to-date 2004 increased by $0.2 million, or 1.2%, and $3.1 million, or 9.4%, respectively, as a result of higher operating revenues that were only partially offset with higher operating expenses.

     Significant income statement items appropriate for discussion include the following:

	Increase (Decrease)
	Second Quarter				Year-To-Date
	(in thousands)		%		(in thousands)			%
Retail sales	$	15,520		8.8	$	20,811			6.2
Sale for resale – affiliates		9,550		76.9		20,028			88.5
Fuel expense		12,980		16.7		28,129			19.9
Purchased power – non-affiliates		7,795		198.4		8,272			83.7
Purchased power – affiliates		2,764		54.4		(2,395	)		(13.6	)
Other operations expense		3,004		9.0		6,011			9.5
Taxes other than income taxes		348		2.1		1,023			3.1
Other income (expense), net		165		64.5		606			89.2

     Retail sales. Excluding the recovery of fuel expense and certain other expenses that do not affect net income, retail sales increased by $0.8 million, or 0.8%, for the second quarter 2004 and by $4.9 million, or 2.5%, year-to-date 2004 when compared to the corresponding periods in 2003. For both of the reporting periods, retail sales revenues were higher than the corresponding periods in 2003 primarily due to an increase in the number of customers and more favorable weather. During the second quarter 2004, retail energy sales to residential and industrial customers decreased by 0.3% and 5.2%, respectively, while energy sales to commercial customers increased by 2.9% as compared to the same period in 2003. For year-to-date 2004 as compared to 2003, retail energy sales to residential and commercial customers increased by 2.3% and 3.2%, respectively, while energy sales to industrial customers decreased by 1.5%. The decreases in industrial sales for the second quarter and year-to-date 2004 are primarily the result of permanent load reductions and customer operational issues, which vary from period to period.

     Sales for resale — affiliates and Purchased power — affiliates. Revenues from sales for resale to affiliates and purchases of energy from affiliates will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Gulf Power’s fuel cost recovery mechanism. The increases in the second quarter and year-to-date 2004 sales for resale to affiliates are due to increased sales of available

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GULF POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

generation to affiliate companies at a higher unit cost resulting from higher fuel prices. The increase in purchased power from affiliates in the second quarter 2004 is primarily due to higher priced peak hour energy purchases that resulted from increased fuel prices. The decrease in purchased power from affiliates for year-to-date 2004 is primarily due to an increase in Gulf Power generation to meet its load requirements.

     Fuel expense. During the second quarter and year-to-date 2004, fuel expense increased from the corresponding periods in 2003 primarily due to a significant increase in the use of gas generation to meet additional demand for energy. Since energy expenses are generally offset by energy revenues through Gulf Power’s fuel cost recovery mechanism, these expenses do not have a material impact on net income.

     Purchased power – non-affiliates. The increases for the second quarter and year-to-date 2004, when compared to the corresponding periods in 2003, are primarily attributed to Gulf Power’s increased purchase of off-system power from merchant generation resources in order to reduce total system energy production costs. Since energy expenses are generally offset by energy revenues, these expenses do not have a significant impact on net income.

     Other operations expense. The increase in other operations expense during the second quarter 2004 is primarily due to a $2.0 million increase in employee benefit expenses and a $1.2 million increase in accrued expenses for uninsured litigation and workers compensation claims. The increase in other operations expense for year-to-date 2004 when compared to the corresponding period in 2003 is primarily due to a $3.4 million increase in employee benefit expenses, a $1.3 million increase in expenses related to marketing conservation programs and a $1.2 million increase in accrued expenses for uninsured litigation and workers compensation claims.

     Taxes other than income taxes. The increases in taxes other than income taxes for the second quarter and year-to-date 2004 are primarily due to increased franchise fees and gross receipts taxes resulting from increased revenues.

     Other income (expense), net. The increases in other income (expense), net for the second quarter and year-to-date 2004 when compared to the same periods in 2003 are primarily due to higher AFUDC related to the environmental controls project at Plant Crist.

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors, including Gulf Power’s ability to maintain a stable regulatory environment, to achieve energy sales growth while containing costs and to recover costs related to growing demand and increasingly stringent environmental standards. Growth in energy sales is subject to a number of factors, which include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth in the service area. For additional information relating to these issues, see BUSINESS — The SOUTHERN System — “Risk Factors” in Item 1 and MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential” of Gulf Power in Item 7 of the Form 10-K.

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GULF POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Environmental Matters

Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs are not fully recovered through Gulf Power’s Environmental Cost Recovery Clause. See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Environmental Matters” in Item 7 of Gulf Power and Note 3 to the financial statements of Gulf Power under “New Source Review Actions” in Item 8 of the Form 10-K. As of March 15, 2004, civil penalties under the Clean Air Act were increased prospectively to a maximum of $32,500 per day, per violation. To the extent alleged violations under the New Source Review litigation are deemed to be continuing, this increased civil penalty amount could apply to such violations found to continue after that date.

     On May 3, 2004, the U.S. Supreme Court denied the EPA’s petition to review the Eleventh Circuit Court of Appeals’ decision in the EPA’s similar New Source Review enforcement action against TVA. With the denial of the EPA’s petition for review, the Court of Appeals’ decision is now final. An adverse outcome in the New Source Review litigation described in Item 8 of the Form 10-K could require substantial capital expenditures and could possibly require substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates.

     On July 21, 2004, attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed a complaint in U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Plaintiffs seek relief under the federal common law or, in the alternative, under state law, of public nuisance. The environmental groups also seek relief under common law private nuisance theories. The plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining an ongoing public nuisance, global warming and (2) permanently enjoining each of the defendants to abate its contribution to the nuisance by capping its emissions of carbon dioxide and then reducing those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. Southern Company has not yet responded to the suits; however, it intends to vigorously defend against these claims. While the outcome cannot be determined at this time, an adverse judgment could result in substantial capital expenditures.

     On May 5, 2004, the EPA published proposed amendments to its Regional Haze rules with respect to Best Available Retrofit Technology guidelines and requirements. The impact of these regulations will depend on the development and implementation of the final rules and implementation by the states, and therefore cannot be determined at this time.

FERC Matters

Market-Based Rate Authority

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Market Based Rate Authority” in Item 7 and Note 3 to the financial statements of Gulf Power under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation

63

GULF POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

market power. This new interim approach includes a pivotal supplier analysis and a wholesale market share analysis, the results of which provide a rebuttable presumption regarding generation market power. The FERC’s order also sets forth procedures for rebutting these presumptions and addresses mitigation measures for those entities that are found to have market power. In the absence of specific mitigation measures, the order includes several cost-based mitigation measures that would apply by default. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies, including Gulf Power, and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

     On July 8, 2004, the FERC denied Southern Company’s request for rehearing, along with a number of others, and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time.

Transmission

See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Transmission” of Gulf Power in Item 7 of the Form 10-K for information on the FERC’s order related to RTOs and notice of proposed rulemaking regarding open access transmission service and standard electricity market design.

Other Matters

Gulf Power is subject to certain claims and legal actions arising in the ordinary course of business. In addition, Gulf Power’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury and citizen enforcement of environmental requirements, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such litigation against Gulf Power cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Gulf Power’s financial statements.

     See the Notes to the Condensed Financial Statements herein for discussion of various contingencies and other matters which may affect future earnings potential.

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GULF POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Gulf Power prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Gulf Power in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Gulf Power’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT’S DISCUSSION AND ANALYSIS — ACCOUNTING POLICIES — “Application of Critical Accounting Policies and Estimates” of Gulf Power in Item 7 of the Form 10-K for a complete discussion of Gulf Power’s critical accounting policies and estimates related to Electric Utility Regulation and Contingent Obligations.

New Accounting Standards

On March 31, 2004, Gulf Power prospectively adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” which requires the primary beneficiary of a variable interest entity to consolidate the related assets and liabilities. The adoption of FASB Interpretation No. 46R had no impact on Gulf Power’s net income. However, as a result of the adoption, Gulf Power deconsolidated certain wholly-owned trusts established to issue preferred securities since Gulf Power does not meet the definition of primary beneficiary established by FASB Interpretation No. 46R. See Note (D) to the Condensed Financial Statements herein for additional information related to the adoption of FASB Interpretation No. 46R.

     In May 2004, the FASB approved Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Act”).” FSP No. 106-2 requires recognition of the impacts of the Medicare Act in the accumulated post-retirement benefit obligation and future cost of service for post-retirement medical plans and may be applied retroactively to the enactment of the Medicare Act in December 2003 or prospectively effective for the third quarter 2004. Gulf Power has elected to apply this treatment prospectively. Pending the finalization of federal regulations governing the subsidy effected in the Medicare Act, Gulf Power does not anticipate a material impact on its financial statements from the adoption of FSP No. 106-2.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Major changes in Gulf Power’s financial condition during the first six months of 2004 included the addition of approximately $70.2 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operating activities. See Gulf Power’s Condensed Statements of Cash Flows herein for further details.

65

GULF POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Capital Requirements and Contractual Obligations

Reference is made to MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Capital Requirements and Contractual Obligations” of Gulf Power in Item 7 of the Form 10-K for a description of Gulf Power’s capital requirements for its construction program, lease obligations, purchase commitments and trust funding requirements.

Sources of Capital

In addition to the financing activities described herein, Gulf Power plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. These sources include cash flows from operating activities and issuances of unsecured debt, trust preferred securities, preferred stock and pollution control bonds issued for Gulf Power’s benefit by public authorities. The amount, type and timing of any future financings, if needed, will depend upon market conditions and regulatory approval. See BUSINESS — “Financing Programs” in Item 1 of the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, Gulf Power has various internal and external sources of liquidity. In addition, Gulf Power has substantial cash flow from operating activities. At June 30, 2004, Gulf Power had approximately $12.8 million of cash and cash equivalents and $56.3 million of unused committed lines of credit with banks. Of these facilities, $10 million expire in 2004 and the remaining $46.3 million expire in 2005. Gulf Power expects to renew its credit facilities, as needed, prior to expiration. The credit arrangements provide liquidity support to Gulf Power’s obligations with respect to variable rate pollution control bonds and commercial paper. Gulf Power may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of Gulf Power and other Southern Company subsidiaries. At June 30, 2004, Gulf Power had $5.0 million of commercial paper outstanding. Management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances.

Credit Rating Risk

Gulf Power does not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade.

Market Price Risk

Gulf Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2003 reporting period. In addition, Gulf Power is not aware of any facts or circumstances that would significantly affect such exposures in the near term.

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GULF POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Due to cost-based rate regulations, Gulf Power has limited exposure to market volatility in interest rates, commodity fuel prices and prices of electricity. To mitigate residual risks relative to movements in electricity prices, Gulf Power enters into fixed price contracts for the purchase of coal supplies, the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, similar contracts for gas purchases. Gulf Power has received approval from the Florida PSC to recover prudently incurred costs related to its fuel hedging program through the fuel cost recovery mechanism. The fair value of derivative energy contracts at June 30, 2004 was as follows:

	Second Quarter
	2004			Year-to-Date
	Changes			Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	5,674		$	2,504
Contracts realized or settled		(2,720	)		(3,799	)
New contracts at inception		—			—
Changes in valuation techniques		—			—
Current period changes		439			4,688
Contracts at June 30, 2004	$	3,393		$	3,393

	Source of June 30, 2004
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1		1-3 Years
	(in thousands)
Actively quoted	$	3,393	$	3,202	$	191
External sources		—		—		—
Models and other methods		—		—		—
Contracts at June 30, 2004	$	3,393	$	3,202	$	191

     See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Market Price Risk” of Gulf Power in Item 7 of the Form 10-K and Notes 1 and 6 to the financial statements of Gulf Power under “Financial Instruments” in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein for further information.

Financing Activities

In April 2004, Gulf Power issued $35 million of Series J 5.875% Senior Notes due April 1, 2044. The proceeds from this issue were used for general corporate purposes, including Gulf Power’s continuous construction program.

     In addition to any financings that may be necessary to meet Gulf Power’s capital requirements and contractual obligations, Gulf Power plans to continue, when economically feasible, a program to retire higher-cost debt and replace these obligations with lower-cost capital if market conditions permit.

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MISSISSIPPI POWER COMPANY

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MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Operating Revenues:
Retail sales	$	151,861		$	134,058		$	280,416		$	248,028
Sales for resale —
Non-affiliates		68,935			59,320			134,735			129,745
Affiliates		8,558			5,665			20,367			11,888
Contract termination		—			62,111			—			62,111
Other revenues		3,431			3,206			6,995			6,474
Total operating revenues		232,785			264,360			442,513			458,246
Operating Expenses:
Fuel		76,365			55,596			152,890			106,720
Purchased power —
Non-affiliates		13,093			4,511			20,048			11,328
Affiliates		22,837			17,755			40,153			38,087
Other operations		39,132			49,743			74,110			84,906
Maintenance		18,144			18,751			33,216			33,011
Depreciation and amortization		5,874			13,902			20,017			26,975
Taxes other than income taxes		14,050			13,716			27,189			27,083
Total operating expenses		189,495			173,974			367,623			328,110
Operating Income		43,290			90,386			74,890			130,136
Other Income and (Expense):
Interest expense		(3,048	)		(3,767	)		(5,851	)		(7,537	)
Interest expense to affiliate trusts		(649	)		—			(649	)		—
Distributions on mandatorily redeemable preferred securities		—			(630	)		(630	)		(1,260	)
Other income (expense), net		(188	)		753			383			765
Total other income and (expense)		(3,885	)		(3,644	)		(6,747	)		(8,032	)
Earnings Before Income Taxes		39,405			86,742			68,143			122,104
Income taxes		15,051			33,179			25,967			46,642
Net Income		24,354			53,563			42,176			75,462
Dividends on Preferred Stock		2,463			504			2,966			1,007
Net Income After Dividends on Preferred Stock	$	21,891		$	53,059		$	39,210		$	74,455

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2004			2003		2004			2003
	(in thousands)					(in thousands)
Net Income After Dividends on Preferred Stock	$	21,891		$	53,059	$	39,210		$	74,455
Other comprehensive income (loss):
Change in fair value of marketable securities, net of tax of $49 and $49, respectively		80			—		80			—
Changes in fair value of qualifying hedges, net of tax of $(926) and $(1,400), respectively		(1,495	)		—		(2,260	)		—
COMPREHENSIVE INCOME	$	20,476		$	53,059	$	37,030		$	74,455

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

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MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months
	Ended June 30,
	2004			2003
	(in thousands)
Operating Activities:
Net income	$	42,176		$	75,462
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		22,227			31,046
Deferred income taxes and investment tax credits, net		19,142			1,623
Pension, postretirement, and other employee benefits		447			779
Tax benefit of stock options		474			1,876
Other, net		(1,324	)		11,897
Changes in certain current assets and liabilities —
Receivables, net		(18,606	)		12,950
Fossil fuel stock		(1,567	)		(6,723	)
Materials and supplies		(864	)		143
Other current assets		(3,157	)		(484	)
Accounts payable		(18,507	)		(40,330	)
Accrued taxes		(14,649	)		14,463
Accrued compensation		(9,546	)		(13,701	)
Other current liabilities		(15,697	)		(2,324	)
Net cash provided from operating activities		549			86,677
Investing Activities:
Gross property additions		(32,023	)		(26,566	)
Cost of removal net of salvage		(3,606	)		(2,268	)
Other		(1,547	)		951
Net cash used for investing activities		(37,176	)		(27,883	)
Financing Activities:
Increase in notes payable, net		44,830			—
Proceeds —
Senior notes		40,000			90,000
Preferred stock		30,000			—
Capital contributions from parent company		—			79
Redemptions —
First mortgage bonds		—			(33,350	)
Pollution control bonds		—			(850	)
Senior notes		(80,000	)		(86,628	)
Preferred stock		(28,388	)		—
Payment of preferred stock dividends		(962	)		(1,007	)
Payment of common stock dividends		(33,100	)		(33,000	)
Other		(931	)		(1,184	)
Net cash used for financing activities		(28,551	)		(65,940	)
Net Change in Cash and Cash Equivalents		(65,178	)		(7,146	)
Cash and Cash Equivalents at Beginning of Period		69,120			62,695
Cash and Cash Equivalents at End of Period	$	3,942		$	55,549
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest	$	5,836		$	10,413
Income taxes (net of refunds)	$	1,615		$	6,073

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

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MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Assets	2004			2003
	(in thousands)
Current Assets:
Cash and cash equivalents	$	3,942		$	69,120
Receivables —
Customer accounts receivable		34,652			30,514
Unbilled revenues		22,776			19,278
Under recovered regulatory clause revenues		21,905			14,607
Other accounts and notes receivable		6,772			8,088
Affiliated companies		16,783			12,160
Accumulated provision for uncollectible accounts		(531	)		(897	)
Fossil fuel stock, at average cost		26,800			25,233
Vacation pay		5,766			5,766
Materials and supplies, at average cost		24,534			23,670
Prepaid income taxes		17,490			27,415
Prepaid expenses		4,437			4,517
Other		6,092			2,857
Total current assets		191,418			242,328
Property, Plant, and Equipment:
In service		1,853,607			1,841,668
Less accumulated provision for depreciation		672,291			672,730
		1,181,316			1,168,938
Construction work in progress		33,029			25,844
Total property, plant, and equipment		1,214,345			1,194,782
Other Property and Investments		3,990			2,750
Deferred Charges and Other Assets:
Deferred charges related to income taxes		11,757			12,125
Prepaid pension costs		18,582			18,167
Unamortized debt issuance expense		6,852			6,993
Unamortized loss on reacquired debt		9,812			10,201
Prepaid rent		13,816			14,758
Other		8,489			16,280
Total deferred charges and other assets		69,308			78,524
Total Assets	$	1,479,061		$	1,518,384

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

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MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Liabilities and Stockholder’s Equity	2004			2003
	(in thousands)
Current Liabilities:
Securities due within one year	$	—		$	80,000
Notes payable		44,830			—
Accounts payable —
Affiliated		22,456			21,259
Other		36,446			55,309
Customer deposits		8,282			11,863
Accrued taxes —
Income taxes		5,822			1,696
Other		24,059			42,834
Accrued interest		3,149			3,223
Accrued vacation pay		5,766			5,766
Accrued compensation		14,286			23,832
Regulatory clauses over recovery		14,204			31,118
Other		9,712			4,867
Total current liabilities		189,012			281,767
Long-term Debt		242,493			202,488
Long-term Debt Payable to Affiliated Trusts		36,082			—
Mandatorily Redeemable Preferred Securities		—			35,000
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		151,106			142,088
Deferred credits related to income taxes		22,510			23,279
Accumulated deferred investment tax credits		19,234			19,841
Employee benefit obligations		53,431			54,830
Plant Daniel lease guarantee obligation, at fair value		13,816			14,758
Plant Daniel capacity		52,046			60,300
Other cost of removal obligations		86,003			80,588
Miscellaneous regulatory liabilities		14,519			11,899
Other		27,564			27,248
Total deferred credits and other liabilities		440,229			434,831
Total Liabilities		907,816			954,086
Cumulative Preferred Stock		33,421			31,809
Common Stockholder’s Equity:
Common stock, without par value —
Authorized - 1,130,000 shares
Outstanding - 1,121,000 shares		37,691			37,691
Paid-in capital		292,990			292,515
Premium on preferred stock		23			326
Retained earnings		210,762			203,419
Accumulated other comprehensive loss		(3,642	)		(1,462	)
Total common stockholder’s equity		537,824			532,489
Total Liabilities and Stockholder’s Equity	$	1,479,061		$	1,518,384

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

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MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SECOND QUARTER 2004 vs. SECOND QUARTER 2003
AND
YEAR-TO-DATE 2004 vs. YEAR-TO-DATE 2003

RESULTS OF OPERATIONS

Earnings

Mississippi Power’s net income after dividends on preferred stock for the second quarter and year-to-date 2004 was $21. 9 million and $39.2 million, respectively, compared to $53.1 million and $74.5 million, respectively, for the corresponding periods of 2003. Earnings in the second quarter and year-to-date 2004 decreased by $31.2 million or 58.8%, and $35.3 million, or 47.4%, respectively, primarily as a result of the 2003 gain of $38 million after tax related to the termination of a PPA with Dynegy. This decrease was partially offset by the net impact of an $11 million decrease in other operations expense related to costs incurred in the second quarter of 2003 to restructure the lease agreement for the combined cycle generating units at Plant Daniel, and an increase of $11.8 million in pretax earnings in the second quarter of 2004 resulting from the impact of the Mississippi PSC’s order approving the inclusion of the Plant Daniel capacity in jurisdictional cost of service. See Note 3 to the financial statements of Mississippi Power under “Contract Termination” and “Retail Regulatory Filing” in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein for additional information.

     Significant income statement items appropriate for discussion include the following:

	Increase (Decrease)
	Second Quarter						Year-To-Date
	(in thousands)			%			(in thousands)			%
Retail sales	$	17,803			13.3		$	32,388			13.1
Sales for resale — non-affiliates		9,615			16.2			4,990			3.8
Sale for resale — affiliates		2,893			51.1			8,479			71.3
Fuel expense		20,769			37.4			46,170			43.3
Purchased power — non-affiliates		8,582			190.2			8,720			77.0
Purchased power — affiliates		5,082			28.6			2,066			5.4
Other operations expense		(10,611	)		(21.3	)		(10,796	)		(12.7	)
Depreciation and amortization		(8,028	)		(57.7	)		(6,958	)		(25.8	)
Interest expense		(719	)		(19.1	)		(1,686	)		(22.4	)
Income taxes		(18,128	)		(54.6	)		(20,675	)		(44.3	)
Dividends on preferred stock		1,959			388.7			1,959			194.5

     Retail sales. Retail sales revenue increased $17.8 million, or 13.3%, in the second quarter 2004 and $32.4 million or 13.1% year-to-date 2004 when compared to the same periods in 2003. The increases in retail sales revenues are primarily as a result of an increase of $18.6 million in the second quarter 2004 and $32.2 million year-to-date 2004 in fuel revenues, which generally do not have an effect on income. Retail sales revenues, excluding fuel revenues, for the second quarter 2004 to residential, commercial and industrial customers decreased 2.4%, 1.3% and 0.4%, respectively, primarily as a result of mild weather when compared to the same period in 2003. Retail sales revenues, excluding fuel revenues, for year-to-date 2004 from residential, commercial and industrial customers remained mostly constant as compared to the same period in 2003.

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MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Sales for resale — non-affiliates. The increase in sales for resale to non-affiliates in the second quarter 2004 as compared to the same period in 2003 is primarily due to the increased fuel revenue from wholesale territorial customers and increased energy sales to non-territorial customers.

     Sales for resale — affiliates and Purchased power — affiliates. Revenues from sales for resale to affiliates, as well as purchases of energy from affiliates, will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These transactions do not have a significant impact on earnings since the energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Mississippi Power’s retail and wholesale fuel cost recovery clauses. The increase in sales for resale to affiliates is primarily a result of Mississippi Power’s more economical generating costs when compared to others. The increase in purchased power from affiliates is primarily due to the increase in the cost of fuel.

     Fuel expense. In the second quarter and year-to-date 2004, fuel expense increased when compared to the same periods in 2003 as a result of 4.2% and 10.1% increases in generation, respectively, and a 42.5% and 50.6% increase in cost of oil and gas, respectively. Since energy expenses are generally offset by energy revenues through Mississippi Power’s retail and wholesale fuel cost recovery clauses, these expenses do not have a significant impact on earnings.

     Purchased power – non-affiliates. The second quarter and year-to-date 2004 increases in purchased power from non-affiliates when compared to the same periods in 2003 are a result of increased purchased power demand as a result of planned outages at generating units for maintenance purposes in 2004.

     Other operations expense. The second quarter and year-to-date 2004 decreases in other operation expense when compared to the same periods in 2003 are a result of approximately $11 million incurred during the second quarter 2003 to restructure the lease agreement for the combined cycle generating units at Plant Daniel. See Note 7 to the financial statements of Mississippi Power under “Operating Leases – Plant Daniel Combined Cycle Generating Units” in Item 8 of the Form 10-K for additional information.

     Depreciation and amortization. The second quarter and year-to-date 2004 decreases in depreciation and amortization expense when compared to the same periods in 2003 are primarily the result of the amortization of a regulatory liability as approved by the Mississippi PSC. The Mississippi PSC issued an interim accounting order in December 2003 directing Mississippi Power to expense and record in 2003 a regulatory liability in the amount of approximately $60 million. Based on the final Mississippi PSC order issued May 25, 2004 that approved this treatment, Mississippi Power recorded during the second quarter a credit to expense in the amount of $8.3 million to amortize the regulatory liability retroactive to January 1, 2004. See Note 3 to the financial statements of Mississippi Power under “Retail Regulatory Filing” in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements and “Future Earnings Potential — FERC and Mississippi PSC Matters – Retail Rate Filing” herein for additional information.

     Interest expense. The decreases in interest expense for the second quarter and year-to-date 2004 as compared to the same periods in 2003 are a result of lower interest rates. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY — “Financing Activities” of Mississippi Power in Item 7 of the Form 10-K and FINANCIAL CONDITION AND LIQUIDITY — “Financing Activities” herein for further information on efforts to reduce interest rates.

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MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Income taxes. The second quarter and year-to-date decreases in income taxes of $18.1 million, or 54.6%, and $20.7 million, or 44.3%, respectively, are a result of the $47.3 million and $53.9 million, respectively, reduction in earnings before income taxes when compared to the same periods in 2003.

     Dividends on preferred stock. The second quarter and year-to-date 2004 increases in dividends on preferred stock are the result of a $2.0 million loss on the redemption of preferred stock recognized in the second quarter of 2004.

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors including Mississippi Power’s ability to maintain a stable regulatory environment, to achieve energy sales growth while containing costs and to recover costs related to growing demand and increasingly stricter environmental standards. Growth in energy sales is subject to a number of factors, which include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand and the rate of economic growth in the service area. For additional information relating to these issues, see BUSINESS — The SOUTHERN System — “Risk Factors” in Item 1 and MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential” in Item 7 of Mississippi Power in the Form 10-K.

Environmental Matters

Mississippi Power’s 2004 ECO Plan filing was approved, as filed, by the Mississippi PSC on March 15, 2004, and resulted in a slight decrease in rates effective April 2004. Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs cannot continue to be recovered. See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential – Environmental Matters” in Item 7 and Note 3 to the financial statements of Mississippi Power under “New Source Review Actions” in Item 8 of the Form 10-K. As of March 15, 2004, civil penalties under the Clean Air Act were increased prospectively to a maximum of $32,500 per day, per violation. To the extent alleged violations under the New Source Review litigation are deemed to be continuing, this increased civil penalty amount could apply to such violations found to continue after that date.

     On May 3, 2004, the U.S. Supreme Court denied the EPA’s petition to review the Eleventh Circuit Court of Appeals’ decision in the EPA’s similar New Source Review action against the TVA. With the denial of the EPA’s petition for review, the Court of Appeals’ decision is now final. An adverse outcome in the New Source Review litigation described in Item 8 of the Form 10-K could require substantial capital expenditures and could possibly require substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates.

     On July 21, 2004, attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed a complaint in U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Plaintiffs seek relief under the federal common law or, in the alternative, under state law, of public nuisance. The environmental groups also seek relief under common law private nuisance theories. The plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining an ongoing public nuisance, global warming and (2) permanently enjoining each of the

75

MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

defendants to abate its contribution to the nuisance by capping its emissions of carbon dioxide and then reducing those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. Southern Company has not yet responded to the suits; however, it intends to vigorously defend against these claims. While the outcome cannot be determined at this time, an adverse judgment could result in substantial capital expenditures.

     On May 5, 2004, the EPA published proposed amendments to its Regional Haze rules with respect to Best Available Retrofit Technology guidelines and requirements. The impact of these regulations will depend on the development and implementation of the final rules and implementation by the states, and therefore cannot be determined at this time.

FERC and Mississippi PSC Matters

Market-Based Rate Authority

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Market-Based Rate Authority” of Mississippi Power in Item 7 and Note 3 to the financial statements of Mississippi Power under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation market power. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies, including Mississippi Power, and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

     On July 8, 2004, the FERC denied Southern Company’s request for rehearing, along with a number of others, and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time. See Note (B) to the Condensed Financial Statements under “FERC Matters” herein for additional information.

Transmission

See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters” of Mississippi Power in Item 7 of the Form 10-K for information on the FERC’s order related to RTOs and the notice of proposed rulemaking regarding open access transmission service and standard electricity market design.

Retail Rate Filing

On December 5, 2003, Mississippi Power filed a request with the Mississippi PSC to reclassify 266 megawatts

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MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

of Plant Daniel Units 3 and 4 generating capacity not currently included in jurisdictional cost of service. As part of Mississippi Power’s proposal to include the additional Plant Daniel capacity in retail rates, the Mississippi PSC issued an interim accounting order in December 2003 directing Mississippi Power to expense and record in 2003 a regulatory liability in the amount of approximately $60 million while the Mississippi PSC fully considered the entire request. On May 25, 2004, the Mississippi PSC issued an order related to this matter. The Mississippi PSC approved Mississippi Power’s request to reclassify the 266 megawatts of Plant Daniel unit 3 and 4 capacity to jurisdictional cost of service effective January 1, 2004, and authorized Mississippi Power to include the related costs and revenue credits in jurisdictional rate base, cost of service and revenue requirement calculations for purposes of retail rate recovery. As directed by the Mississippi PSC, Mississippi Power will amortize the regulatory liability established pursuant to the Mississippi PSC’s interim order in December 2003 as an increase to earnings as follows: $16.5 million in 2004, $25.1 million in 2005, $13.0 million in 2006 and $5.7 million in 2007. The impact of the order on earnings for the period January 1, 2004 through June 30, 2004 is an increase of $7.3 million after tax and is reflected in the second quarter 2004 financial statements of Mississippi Power. See Note 3 to the financial statements of Mississippi Power under “Retail Regulatory Filing” in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein.

     In addition, the Mississippi PSC also approved Mississippi Power’s requested changes to its PEP including the use of a forward-looking test year, with appropriate oversight; annual, rather than semi-annual, filings; and certain changes to the performance indicator mechanisms. Rate changes will be limited to 4% of retail revenues annually under the revised PEP. The Mississippi PSC will review all aspects of PEP in 2007.

Other Matters

Mississippi Power is subject to certain claims and legal actions arising in the ordinary course of business. In addition, Mississippi Power’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury and citizen enforcement of environmental requirements, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such litigation against Mississippi Power cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from any such current proceedings would have a material adverse effect on Mississippi Power’s financial statements.

     See the Notes to the Condensed Financial Statements herein for discussion of various contingencies and other matters which may affect future earnings potential.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Mississippi Power prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Mississippi Power in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Mississippi Power’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT’S DISCUSSION AND ANALYSIS — ACCOUNTING POLICIES – “Application of Critical Accounting Policies and Estimates” of Mississippi Power in Item 7 of the

77

MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Form 10-K for a complete discussion of Mississippi Power’s critical accounting policies and estimates related to Electric Utility Regulation, Contingent Obligations, Plant Daniel Capacity and Plant Daniel Operating Lease. Also see Note (K) to the Condensed Financial Statements herein for additional information related to Plant Daniel capacity.

New Accounting Standards

On March 31, 2004, Mississippi Power prospectively adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” which requires the primary beneficiary of a variable interest entity to consolidate the related assets and liabilities. The adoption of FASB Interpretation No. 46R had no impact on Mississippi Power’s net income. However, as a result of the adoption, Mississippi Power deconsolidated certain wholly-owned trusts established to issue preferred securities since Mississippi Power does not meet the definition of primary beneficiary established by FASB Interpretation No. 46R. See Note (D) to the Condensed Financial Statements herein for additional information related to the adoption of FASB Interpretation No. 46R.

     In May 2004, the FASB approved Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Act”).” FSP No. 106-2 requires recognition of the impacts of the Medicare Act in the accumulated post-retirement benefit obligation and future cost of service for post-retirement medical plans and may be applied retroactively to the enactment of the Medicare Act in December 2003 or prospectively effective for the third quarter 2004. Mississippi Power has elected to apply this treatment prospectively. Pending the finalization of federal regulations governing the subsidy effected in the Medicare Act, Mississippi Power does not anticipate a material impact on its financial statements from the adoption of FSP No. 106-2.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Major changes in Mississippi Power’s financial condition during the first six months of 2004 included the addition of approximately $32 million to utility plant, a reduction in current liabilities of $93 million, an increase of $40 million in long-term debt and a decrease of $65 million in cash. See Mississippi Power’s Condensed Statements of Cash Flows and “Financing Activities” herein for further details.

Capital Requirements and Contractual Obligations

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY – “Capital Requirements and Contractual Obligations” of Mississippi Power in Item 7 in the Form 10-K for a description of Mississippi Power’s capital requirements for its construction program, lease obligations, purchase commitments and trust funding requirements.

Sources of Capital

In addition to the financing activities described herein, Mississippi Power plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings — if needed — will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See BUSINESS — “Financing Programs” in Item 1 of the Form 10-K for additional information.

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MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     To meet short-term cash needs and contingencies, Mississippi Power had at June 30, 2004, approximately $3.9 million of cash and cash equivalents and $100 million of unused committed credit arrangements with banks. Of these facilities, $35 million expire in 2004 and the remaining $65 million expire in 2005. Approximately $37.5 million of these credit arrangements contain provisions allowing two-year term loans executable at the expiration date. Mississippi Power expects to renew its credit facilities, as needed, prior to expiration. The credit arrangements provide liquidity support to Mississippi Power’s obligations with respect to variable rate pollution control bonds and commercial paper. Mississippi Power may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of Mississippi Power and other Southern Company subsidiaries. At June 30, 2004, Mississippi Power had $44.8 million in outstanding notes payable. Management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances.

Off-Balance Sheet Financing Arrangements

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Off-Balance Sheet Financing Arrangements” in Item 7 and Note 7 to the financial statements of Mississippi Power under “Operating Leases” in Item 8 of the Form 10-K for information related to Mississippi Power’s lease of a combined cycle generating facility at Plant Daniel.

Credit Rating Risk

Mississippi Power does not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade.

Market Price Risk

Mississippi Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2003 reporting period. In addition, Mississippi Power is not aware of any facts or circumstances that would significantly affect such exposures in the near term.

     Due to cost-based rate regulation, Mississippi Power has limited exposure to market volatility in interest rates, commodity fuel prices and prices of electricity. To mitigate residual risks relative to movements in electricity prices, Mississippi Power enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market. Mississippi Power has also implemented retail fuel hedging programs at the instruction of the Mississippi PSC and wholesale fuel hedging programs under agreements with wholesale customers. The fair values of derivative, fuel and energy contracts at June 30, 2004 were as follows:

	Second Quarter
	2004			Year-to-Date
	Changes			Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	5,621		$	2,470
Contracts realized or settled		(2,723	)		(3,456	)
New contracts at inception		—			—
Changes in valuation techniques		—			—
Current period changes		(1,732	)		2,152
Contracts at June 30, 2004	$	1,166		$	1,166

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MISSISSIPPI POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

	Source of June 30, 2004
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1		1-3 Years
	(in thousands)
Actively quoted	$	1,166	$	788	$	378
External sources		—		—		—
Models and other methods		—		—		—
Contracts at June 30, 2004	$	1,166	$	788	$	378

     For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND LIQUIDITY – “Market Price Risk” of Mississippi Power in Item 7 and Notes 1 and 6 to the financial statements of Mississippi Power under “Financial Instruments” in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein.

Financing Activities

In March 2004, Mississippi Power issued $40 million of Series F Floating Rate Senior Notes due March 9, 2009. The proceeds from this sale, along with other monies of Mississippi Power, were used to repay at maturity $80 million aggregate principal amount of Mississippi Power’s Series D Floating Rate Senior Notes due March 12, 2004.

     In April 2004, Mississippi Power issued 1,200,000 Depositary Shares ($30 million aggregate stated capital) each representing one-fourth of a share of 5.25% Series Preferred Stock, cumulative, par value $100 per share. The proceeds from this sale were primarily used to redeem various issues of higher cost preferred stock and the remainder was used for general corporate purposes.

     Mississippi Power plans to continue, when economically feasible, a program to retire higher-cost debt and replace these obligations with lower-cost capital if market conditions permit.

80

SAVANNAH ELECTRIC
AND
POWER COMPANY

81

SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Operating Revenues:
Retail sales	$	88,437		$	75,468		$	156,460		$	139,014
Sales for resale —
Non-affiliates		1,294			1,106			2,704			3,032
Affiliates		1,653			912			4,090			3,236
Other revenues		686			757			1,651			1,835
Total operating revenues		92,070			78,243			164,905			147,117
Operating Expenses:
Fuel		14,123			12,594			24,607			24,019
Purchased power —
Non-affiliates		4,387			723			6,729			2,627
Affiliates		27,145			22,080			49,275			41,093
Other operations		15,577			13,882			29,678			26,981
Maintenance		6,905			6,689			13,336			12,599
Depreciation and amortization		5,246			5,088			10,450			10,149
Taxes other than income taxes		3,795			3,652			7,392			7,099
Total operating expenses		77,178			64,708			141,467			124,567
Operating Income		14,892			13,535			23,438			22,550
Other Income and (Expense):
Interest expense, net of amounts capitalized		(2,988	)		(2,473	)		(6,132	)		(5,094	)
Distributions on mandatorily redeemable preferred securities		—			(685	)		(109	)		(1,370	)
Other income (expense), net		(74	)		(361	)		(421	)		(570	)
Total other income and (expense)		(3,062	)		(3,519	)		(6,662	)		(7,034	)
Earnings Before Income Taxes		11,830			10,016			16,776			15,516
Income taxes		4,331			3,720			6,129			5,711
Net Income		7,499			6,296			10,647			9,805
Dividends on Preferred Stock		150			—			150			—
Net Income After Dividends on Preferred Stock	$	7,349		$	6,296		$	10,497		$	9,805

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2004		2003		2004			2003
	(in thousands)				(in thousands)
Net Income After Dividends on Preferred Stock	$	7,349	$	6,296	$	10,497		$	9,805
Other comprehensive income (loss):
Changes in fair value of qualifying hedges, net of tax of $10 and $(10), respectively		18		—		(15	)		—
Less: Reclassification adjustment for amounts included in net income, net of tax of $15 and $30, respectively		23		—		47			—
COMPREHENSIVE INCOME	$	7,390	$	6,296	$	10,529		$	9,805

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

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SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months
	Ended June 30,
	2004			2003
	(in thousands)
Operating Activities:
Net income	$	10,647		$	9,805
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		11,550			11,197
Deferred income taxes and investment tax credits, net		5,716			521
Pension, postretirement, and other employee benefits		3,538			3,203
Tax benefit of stock options		611			860
Other, net		(6,904	)		4,085
Changes in certain current assets and liabilities —
Receivables, net		(13,678	)		(3,986	)
Fossil fuel stock		(486	)		(1,951	)
Materials and supplies		(750	)		(278	)
Other current assets		(1,442	)		2,469
Accounts payable		2,604			(4,261	)
Accrued taxes		2,766			2,044
Accrued compensation		(2,588	)		(3,404	)
Other current liabilities		(1,631	)		(2,285	)
Net cash provided from operating activities		9,953			18,019
Investing Activities:
Gross property additions		(95,854	)		(19,557	)
Other		(1,889	)		272
Net cash used for investing activities		(97,743	)		(19,285	)
Financing Activities:
Increase in notes payable, net		17,586			29,054
Proceeds —
Pollution control bonds		—			13,870
Other long-term debt		10,179			—
Preferred stock		45,000			—
Capital contributions from parent company		31,000			5,000
Redemptions —
Pollution control bonds		—			(13,870	)
Senior notes		—			(20,000	)
Other long-term debt		—			(463	)
Mandatorily redeemable preferred securities		(40,000	)		—
Payment of common stock dividends		(11,600	)		(11,500	)
Other		109			(149	)
Net cash provided from financing activities		52,274			1,942
Net Change in Cash and Cash Equivalents		(35,516	)		676
Cash and Cash Equivalents at Beginning of Period		37,943			3,978
Cash and Cash Equivalents at End of Period	$	2,427		$	4,654
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $409 and $113 capitalized for 2004 and 2003, respectively)	$	5,295		$	5,946
Income taxes (net of refunds)	$	774		$	403

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

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SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Assets	2004			2003
	(in thousands)
Current Assets:
Cash and cash equivalents	$	2,427		$	37,943
Receivables —
Customer accounts receivable		24,514			19,674
Unbilled revenues		15,152			11,288
Under recovered regulatory clause revenues		8,897			—
Other accounts and notes receivable		686			1,138
Affiliated companies		1,553			4,872
Accumulated provision for uncollectible accounts		(793	)		(641	)
Fossil fuel stock, at average cost		9,137			8,652
Materials and supplies, at average cost		9,821			9,070
Prepaid income taxes		23,152			24,419
Prepaid expenses		1,526			1,377
Other		1,914			623
Total current assets		97,986			118,415
Property, Plant, and Equipment:
In service		926,205			912,504
Less accumulated provision for depreciation		411,317			402,394
		514,888			510,110
Construction work in progress		95,854			14,121
Total property, plant, and equipment		610,742			524,231
Other Property and Investments		2,312			2,248
Deferred Charges and Other Assets:
Deferred charges related to income taxes		9,313			9,611
Cash surrender value of life insurance for deferred compensation plans		24,071			23,866
Unamortized debt issuance expense		4,414			5,652
Unamortized loss on reacquired debt		8,298			7,488
Other		16,295			18,410
Total deferred charges and other assets		62,391			65,027
Total Assets	$	773,431		$	709,921

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

84

SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Liabilities and Stockholder’s Equity	2004			2003
	(in thousands)
Current Liabilities:
Securities due within one year	$	954		$	40,910
Notes payable		17,586			—
Accounts payable —
Affiliated		18,044			13,797
Other		10,605			13,147
Customer deposits		7,101			6,922
Accrued taxes —
Income taxes		766			1,172
Other		4,645			1,473
Accrued interest		2,886			2,802
Accrued vacation pay		2,564			2,530
Accrued compensation		3,063			5,652
Other		3,272			5,107
Total current liabilities		71,486			93,512
Long-term Debt		232,628			222,493
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		88,142			83,852
Deferred credits related to income taxes		9,295			9,804
Accumulated deferred investment tax credits		8,293			8,625
Employee benefit obligations		43,371			39,833
Other cost of removal obligations		39,207			36,843
Miscellaneous regulatory liabilities		13,230			12,932
Other		6,944			15,735
Total deferred credits and other liabilities		208,482			207,624
Total Liabilities		512,596			523,629
Non-Cumulative Preferred Stock		45,000			—
Common Stockholder’s Equity:
Common stock, par value $5 per share — Authorized - 16,000,000 shares Outstanding - 10,844,635 shares		54,223			54,223
Paid-in capital		56,027			24,417
Retained earnings		107,757			109,856
Accumulated other comprehensive loss		(2,172	)		(2,204	)
Total common stockholder’s equity		215,835			186,292
Total Liabilities and Stockholder’s Equity	$	773,431		$	709,921

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

85

SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SECOND QUARTER 2004 vs. SECOND QUARTER 2003
AND
YEAR-TO-DATE 2004 vs. YEAR-TO-DATE 2003

RESULTS OF OPERATIONS

Earnings

Savannah Electric’s net income for the second quarter and year-to-date 2004 was $7.3 million and $10.5 million, respectively, compared to $6.3 million and $9.8 million, respectively, for the corresponding periods of 2003. Earnings increased by $1.1 million, or 16.7%, in the second quarter 2004 primarily due to higher operating revenues and other income, net, partially offset by higher operating expenses. Year-to-date 2004 earnings were up by $0.7 million, or 7.1%, as a result of higher operating revenues, also partially offset by higher operating expenses.

     Significant income statement items appropriate for discussion include the following:

	Increase (Decrease)
	Second Quarter				Year-To-Date
	(in thousands)		%		(in thousands)		%
Retail sales	$	12,969		17.2	$	17,446		12.5
Sale for resale — affiliates		741		81.3		854		26.4
Fuel expense		1,529		12.1		588		2.4
Purchased power — non-affiliates		3,664		506.8		4,102		156.1
Purchased power — affiliates		5,065		22.9		8,182		19.9
Other operations expense		1,695		12.2		2,697		10.0
Maintenance expense		216		3.2		737		5.8
Interest expense, net of amounts capitalized		515		20.8		1,038		20.4

     Retail sales. Excluding fuel revenues, which do not affect net income, retail sales revenue increased by $4.5 million, or 10.2%, in the second quarter 2004 and increased by $6.5 million, or 7.9%, year-to-date 2004 when compared to the corresponding periods in 2003. The second quarter 2004 increase in retail sales revenue is mainly attributed to an 11.7% increase in retail kilowatt-hour energy sales. Energy sales to residential and commercial customers were higher by 12.0% and 12.5%, respectively, mainly due to more favorable weather conditions and growth in the number of customers when compared to the same period in 2003. Energy sales to industrial customers increased by 9.3% in the second quarter 2004 compared to the second quarter 2003 primarily due to increased usage by several industrial customers as a result of the improving economy. The year-to-date 2004 increase in retail revenues is primarily a result of more favorable weather conditions and growth in the number of customers. Year-to-date 2004, energy sales to residential and commercial customers were higher by 14.1% and 7.4%, respectively. Energy sales to industrial customers year-to-date 2004 were down 4.4% when compared to the prior year mainly due to the installation of a cogeneration facility by one customer in late 2003.

     Sales for resale — affiliates. Revenues from sales for resale to affiliated companies within the Southern Company system will vary depending on demand and the availability and cost of generating resources at each company. Sales for resale to affiliates increased in the second quarter and year-to-date 2004 primarily due to an increase in demand. These transactions do not have a significant impact on net income.

86

SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Fuel expense. Fuel expense increased in the second quarter and year-to-date 2004 primarily as a result of increased generation to meet demand for energy and increases in the price of fuel. Generation increased 4.8% for second quarter and 3.2% for year-to-date 2004 when compared to the prior year. Fuel costs increased 7.1% for second quarter 2004. Since fuel expenses are generally offset by fuel revenues through Savannah Electric’s fuel cost recovery clause, these expenses do not have a significant impact on net income. See “Future Earnings Potential — FERC and Georgia PSC Matters — Fuel Cost Recovery Rate Filings” and Note (L) to the Condensed Financial Statements herein for additional information.

     Purchased power — non-affiliates. In the second quarter and year-to-date 2004, the increases in purchased power from non-affiliates are primarily due to higher demand and the opportunity to purchase this energy at a cost lower than self-generation or available from affiliates. These transactions do not have a significant impact on earnings, as energy costs are generally recovered through Savannah Electric’s fuel cost recovery clause.

     Purchased power — affiliates. Purchased power from affiliates increased in the second quarter and year-to-date 2004 as compared to the same periods in the prior year primarily due to the availability of system generation at prices below self generation to meet increased sales demand and also as the result of an accounting order approved by the Georgia PSC in December 2002 which allows Savannah Electric to write-down a portion of the approximately $3.8 million annual deferral in Plant Wansley purchased power costs. See Note 3 to the financial statements of Savannah Electric under “Retail Regulatory Matters” in Item 8 of the Form 10-K for additional information. The net impact of these transactions compared to the prior year was a $0.6 million increase to expense for the second quarter and a $0.9 million increase year-to-date. Purchased power from affiliates also includes energy purchases which will vary depending on demand and cost of generation resources at each company and higher energy costs. These energy costs are recovered through the fuel cost recovery clause and have no significant impact on earnings.

     Other operations expense. The increases for the second quarter and year-to-date 2004 as compared to the same periods in the prior year in other operations expense are attributed to an increase in administrative and general expenses primarily relating to accounting and auditing services, legal and employee benefit expenses.

     Maintenance expense. The increases in the second quarter and year-to-date 2004 as compared to the same periods in the prior year are mainly due to an unscheduled coal mill repair at Plant Kraft.

     Interest expense, net of amounts capitalized. The second quarter and year-to-date 2004 increases in this expense as compared to the same period in the prior year are mainly due to an increase in long term debt outstanding. These increases were more than offset by decreases in distributions on mandatorily redeemable preferred securities. These preferred securities were redeemed in January 2004 with proceeds from the issuance of senior notes in late 2003.

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors including Savannah Electric’s ability to maintain a stable regulatory environment, to achieve energy sales growth while containing costs and to recover costs related to growing demand and increasingly stricter environmental standards. Growth in energy sales is subject to a number of factors, which include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand and the rate of economic growth in the service area. For additional information relating to these issues, see BUSINESS — The

87

SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SOUTHERN System — “Risk Factors” in Item 1 and MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential” of Savannah Electric in Item 7 of the Form 10-K.

Environmental Matters

Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs cannot be recovered. See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Environmental Matters” of Savannah Electric in Item 7 and Note 3 to the financial statements of Savannah Electric under “New Source Review Actions” in Item 8 of the Form 10-K. As of March 15, 2004, civil penalties under the Clean Air Act were increased prospectively to a maximum of $32,500 per day, per violation. To the extent alleged violations under either the New Source Review litigation or Plant Wansley environmental litigation are deemed to be continuing, this increased civil penalty amount could apply to such violations found to continue after that date. On May 3, 2004, the U.S. Supreme Court denied the EPA’s petition to review the Eleventh Circuit Court of Appeals’ decision in the EPA’s similar New Source Review enforcement action against the TVA. The case against Savannah Electric has been effectively stayed pending final resolution of the TVA case. With the denial of the EPA’s petition for review, the Court of Appeals’ decision became final. At this time, no party to the case against Savannah Electric has sought to reopen that case, which remains administratively closed in the District Court for the Northern District of Georgia. An adverse outcome in this case could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates.

     On July 21, 2004, attorneys general from eight states, each outside of Southern Company’s service territory, and the corporation counsel for New York City filed a complaint in U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies’ emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Plaintiffs seek relief under the federal common law or, in the alternative, under state law, of public nuisance. The environmental groups also seek relief under common law private nuisance theories. The plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining an ongoing public nuisance, global warming and (2) permanently enjoining each of the defendants to abate its contribution to the nuisance by capping its emissions of carbon dioxide and then reducing those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. Southern Company has not yet responded to the suits; however, it intends to vigorously defend against these claims. While the outcome cannot be determined at this time, an adverse judgment could result in substantial capital expenditures.

     On April 21, 2004, the EPA published the final regional nitrogen oxide reduction rules applicable to the State of Georgia. These rules specify that Georgia must submit a revised state implementation plan by April 2005, and affected sources must comply with the reduction requirements by May 1, 2007. The impact of these regulations will depend on the development and approval of Georgia’s state implementation plan and cannot be determined at this time.

     Additionally, on May 5, 2004, the EPA published proposed amendments to its Regional Haze rules with respect to Best Available Retrofit Technology guidelines and requirements. The impact of these regulations will depend on the development and implementation of the final rules and implementation by the states, and therefore cannot be determined at this time.

88

SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

FERC and Georgia PSC Matters

Market-Based Rate Authority

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Market-Based Rate Authority” in Item 7 and Note 3 to the financial statements of Savannah Electric under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation market power. This new interim approach includes a pivotal supplier analysis and a wholesale market share analysis, the results of which provide a rebuttable presumption regarding generation market power. The FERC’s order also sets forth procedures for rebutting these presumptions and addresses mitigation measures for those entities that are found to have market power. In the absence of specific mitigation measures, the order includes several cost-based mitigation measures that would apply by default. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies, including Savannah Electric, and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

     On July 8, 2004, the FERC denied Southern Company’s request for rehearing, along with a number of others, and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time.

Transmission

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Transmission” of Savannah Electric in Item 7 of the Form 10-K for information on the FERC’s order related to RTOs and the FERC’s notice of proposed rulemaking regarding open access transmission service and standard electricity market design.

Plant McIntosh Construction Project

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters — Southern Power PPAs” of Savannah Electric in Item 7 and Note 3 to the financial statements of Savannah Electric under “FERC Matters” in Item 8 of the Form 10-K for information regarding PPAs between Southern Power and Savannah Electric and Georgia Power for Plant McIntosh capacity. In April 2003, Southern Power applied for FERC approval of these PPAs. In July 2003, the FERC accepted the PPAs to become effective June 1, 2005, subject to refund and ordered that hearings be held. To ensure the timely completion of construction on McIntosh units 10 and 11 and their availability in the summer of 2005 as supply side resources for the retail customers in the State of Georgia, on May 7, 2004, Savannah Electric and Georgia Power requested the Georgia PSC to direct them to acquire the McIntosh construction project. Savannah Electric and Georgia Power proposed to place the units in rate base at a cost approved by the Georgia PSC and to recover the unit operation and maintenance costs as retail service expenses as may be approved by the Georgia PSC. The Georgia PSC issued such an order on May 18, 2004 and the transfer

89

SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

occurred on May 24, 2004. On May 20, 2004, Southern Power filed a request to withdraw the PPAs and to terminate the ongoing FERC proceedings. On August 4, 2004, the FERC issued a notice that it allowed the request to withdraw the PPAs to be accepted and to become effective by operation of law on July 20, 2004. However, the FERC made no determination on what additional steps may need to be taken with respect to testimony provided in the proceedings. The ultimate outcome of this matter cannot now be determined.

     The May 18, 2004 Georgia PSC order also directed Georgia Power and Savannah Electric to file an application within 10 days of completing such purchase to amend the resource certificate granted by the Georgia PSC in 2002 to describe the capacity resource as being the McIntosh units 10 and 11 (as opposed to the McIntosh PPAs), the approximate construction schedule (which is not expected to change) and the proposed rate base treatment. The application was filed on June 3, 2004 and the Georgia PSC will have 180 days to respond. The Georgia PSC is expected to review the application in accordance with its affiliate transaction guidelines, which require a lower of cost or market approach unless otherwise determined by the Georgia PSC. Georgia Power and Savannah Electric have submitted information showing that the book cost of the McIntosh construction project is lower than its market value. However, full recovery of the project costs depends on the outcome of the Georgia PSC’s review. In the event the Georgia PSC does not allow full recovery of the project costs, then part of such costs may have to be written off in accordance with FASB Statement No. 90, “Accounting for Abandonments and Disallowed Plant Costs.” At June 30, 2004, the investment in the McIntosh construction project totaled approximately $69.7 million for Savannah Electric. The ultimate outcome of the Georgia PSC’s review cannot now be determined.

Fuel Cost Recovery Rate Filings

On March 23, 2004, Savannah Electric submitted a request to the Georgia PSC for an accounting order which, if approved by the Georgia PSC, would have allowed for the cost of a coal transloader then under construction to be amortized over twenty-four months through fuel expense and recovered through Savannah Electric’s fuel cost recovery clause. The transloader allows foreign coal to be off-loaded from ships at Savannah Electric’s Plant Kraft dock, and then transferred by rail to Plant McIntosh. On June 24, 2004, the Georgia PSC denied Savannah Electric’s request for this accounting order. Consequently, accumulated project costs of $2.7 million were recorded as construction work in progress in June 2004 and will be depreciated over the project’s estimated useful life of 35 years once placed in service.

     On July 30, 2004, Savannah Electric filed for a fuel cost recovery rate increase with the Georgia PSC. The increase will allow for the recovery of fuel costs based on an estimate of future costs, as well as the collection of the existing under recovery of fuel expenses, over a two-year period. The amount under recovered at June 30, 2004 is approximately $8.9 million and is included in Savannah Electric’s Condensed Balance Sheets herein. The Georgia PSC is expected to rule on this matter by late October 2004. The outcome of the filing cannot be determined at this time.

Retail Rate Case

Savannah Electric anticipates filing a base rate case in late 2004.

Other Matters

Savannah Electric is subject to certain claims and legal actions arising in the ordinary course of business. In addition, Savannah Electric’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury and citizen enforcement of environmental requirements, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged

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SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

exposure to hazardous materials have become more frequent. The ultimate outcome of such litigation against Savannah Electric cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Savannah Electric’s financial statements.

     See the Notes to the Condensed Financial Statements herein for discussion of various contingencies and other matters which may affect future earnings potential.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Savannah Electric prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Savannah Electric in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Savannah Electric’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT’S DISCUSSION AND ANALYSIS — ACCOUNTING POLICIES – “Application of Critical Accounting Policies and Estimates” of Savannah Electric in Item 7 of the Form 10-K for a complete discussion of Savannah Electric’s critical accounting policies and estimates related to Electric Utility Regulation and Contingent Obligations.

New Accounting Standards

On March 31, 2004, Savannah Electric prospectively adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” which requires the primary beneficiary of a variable interest entity to consolidate the related assets and liabilities. See Note 6 to the financial statements of Savannah Electric under “Mandatorily Redeemable Preferred Securities” in Item 8 of the Form 10-K regarding Savannah Electric’s redemption of all outstanding preferred securities in January 2004 and the dissolution of the issuing trust. Therefore, the adoption of Interpretation No. 46R had no impact on Savannah Electric’s financial statements.

     In May 2004, the FASB approved Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Act”).” FSP No. 106-2 requires recognition of the impacts of the Medicare Act in the accumulated post-retirement benefit obligation and future cost of service for post-retirement medical plans and may be applied retroactively to the enactment of the Medicare Act in December 2003 or prospectively effective for the third quarter 2004. Savannah Electric has elected to apply this treatment prospectively. Pending the finalization of federal regulations governing the subsidy effected in the Medicare Act, Savannah Electric does not anticipate a material impact on its financial statements from the adoption of FSP No. 106-2.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Major changes in Savannah Electric’s financial condition during the first six months of 2004 included the addition of approximately $95.9 million to utility plant, which include the Plant McIntosh combined cycle construction project. See Note (J) to the Condensed Financial Statements herein for additional information. The funds for these additions and other capital requirements were derived primarily from operating activities, issuance of securities, capital contributions from Southern Company and short-term debt. See Savannah Electric’s Condensed Statements of Cash Flows herein for further details.

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SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Capital Requirements and Contractual Obligations

Reference is made to MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Capital Requirements and Contractual Obligations” of Savannah Electric in Item 7 of the Form 10-K for a description of Savannah Electric’s capital requirements for its construction program, lease obligations, purchase commitments and trust funding requirements. The projected construction program will increase by $83.1 million and $7.6 million in 2004 and 2005, respectively, for the Plant McIntosh combined cycle construction project and the projected purchased power commitments will decrease by $25.3 million in 2005-2006, $28.2 million in 2007-2008 and $158.0 million beyond 2008 as a result of the purchase of the construction project.

Sources of Capital

Savannah Electric plans to obtain the funds required for construction and other purposes from sources similar to those used in the past including both internal and external funds. The amount, type and timing of any future financings — if needed — will depend upon market conditions and regulatory approval. See BUSINESS — “Financing Programs” in Item 1 of the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, Savannah Electric had at June 30, 2004 approximately $2.4 million of cash and cash equivalents and $50 million of unused committed credit arrangements with banks, of which $31 million expires in 2004, $9 million expires in 2005 and $10 million expires in 2007. Of the unused credit arrangements expiring in 2004 and 2005, $40 million include two year term loan options executable at the expiration date. The credit arrangements provide liquidity support to some of Savannah Electric’s obligations with respect to its variable rate debt and its commercial paper. Savannah Electric expects to renew its credit facilities, as needed, prior to expiration. Savannah Electric may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of Savannah Electric and other Southern Company subsidiaries. At June 30, 2004, Savannah Electric had $10.7 million of commercial paper and $6.9 million of extendible commercial notes outstanding. Management believes that the need for working capital can be adequately met by utilizing lines of credit and access to the financial markets.

Credit Rating Risk

Savannah Electric does not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade.

Market Price Risk

Savannah Electric’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2003 reporting period. In addition, Savannah Electric is not aware of any facts or circumstances that would significantly affect such exposures in the near term.

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SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Due to cost-based rate regulations, Savannah Electric has limited exposure to market volatility in interest rates, commodity fuel prices and prices of electricity. To mitigate residual risks relative to movements in electricity prices, Savannah Electric enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, similar contracts for gas and oil purchases. Savannah Electric has also implemented a retail fuel hedging program at the instruction of the Georgia PSC. The fair value of derivative energy contracts at June 30, 2004 was as follows:

	Second Quarter
	2004			Year-to-Date
	Changes			Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	1,959		$	463
Contracts realized or settled		(781	)		(782	)
New contracts at inception		—			—
Changes in valuation techniques		—			—
Current period changes		405			1,902
Contracts at June 30, 2004	$	1,583		$	1,583

	Source of June 30, 2004
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1		1-3 Years
	(in thousands)
Actively quoted	$	1,583	$	1,341	$	242
External sources		—		—		—
Models and other methods		—		—		—
Contracts at June 30, 2004	$	1,583	$	1,341	$	242

     For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Market Price Risk” of Savannah Electric in Item 7 and Notes 1 and 6 to the financial statements of Savannah Electric under “Financial Instruments” in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein.

Financing Activities

Savannah Electric received contributions to capital from Southern in May 2004 in the amount of $31 million to help finance the purchase of the Plant McIntosh construction project. See Note (J) to the Condensed Financial Statements herein for additional information.

     In June 2004, Savannah Electric issued 1,800,000 shares ($45 million aggregate par value) of 6.00% Series Preferred Stock, Non-Cumulative, Par Value $25 Per Share. The proceeds from this sale were used to repay a portion of its outstanding short-term indebtedness that had been incurred primarily to finance the purchase of the Plant McIntosh construction project.

     Savannah Electric plans to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.

93

SOUTHERN POWER COMPANY

94

SOUTHERN POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Operating Revenues:
Sales for resale —
Non-affiliates	$	73,032		$	68,997		$	159,731		$	119,266
Affiliates		107,218			86,079			194,013			141,369
Contract termination		—			80,000			—			80,000
Other revenues		2,499			3,205			4,610			5,085
Total Operating Revenues		182,749			238,281			358,354			345,720
Operating Expenses:
Fuel		43,998			35,198			74,333			55,236
Purchased power —
Non-affiliates		25,813			16,237			39,418			31,560
Affiliates		28,926			31,670			70,982			49,602
Other operations		13,529			12,327			28,254			18,235
Maintenance		4,407			303			7,419			2,480
Depreciation and amortization		12,796			8,062			25,574			14,606
Taxes other than income taxes		2,718			2,063			5,397			3,363
Total operating expenses		132,187			105,860			251,377			175,082
Operating Income		50,562			132,421			106,977			170,638
Other Income and (Expense):
Interest expense, net of amounts capitalized		(14,323	)		(2,944	)		(26,909	)		(4,343	)
Other income (expense), net		1,271			(174	)		1,764			129
Total other income and (expense)		(13,052	)		(3,118	)		(25,145	)		(4,214	)
Earnings Before Income Taxes		37,510			129,303			81,832			166,424
Income taxes		15,093			50,013			32,230			64,376
Earnings Before Cumulative Effect of Accounting Change		22,417			79,290			49,602			102,048
Cumulative effect of accounting change — less income taxes of $231 thousand		—			—			—			367
Net Income	$	22,417		$	79,290		$	49,602		$	102,415

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2004		2003			2004			2003
	(in thousands)					(in thousands)
Net Income	$	22,417	$	79,290		$	49,602		$	102,415
Other comprehensive income (loss):
Changes in fair value of qualifying hedges, net of tax of $104, $(6,164), $(418) and $(8,564), respectively		166		(10,154	)		(762	)		(13,987	)
Less: Reclassification adjustment for amounts included in net income, net of tax of $886, $(50), $1,873 and $116, respectively		1,414		440			2,983			704
COMPREHENSIVE INCOME	$	23,997	$	69,576		$	51,823		$	89,132

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

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SOUTHERN POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months
	Ended June 30,
	2004			2003
	(in thousands)
Operating Activities:
Net income	$	49,602		$	102,415
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		30,561			13,924
Deferred income taxes and investment tax credits, net		20,281			10,514
Deferred capacity revenues		(14,972	)		(10,159	)
Tax benefit of stock options		100			131
Other, net		483			878
Changes in certain current assets and liabilities —
Receivables, net		(32,912	)		(34,680	)
Fossil fuel stock		2,880			4,678
Materials and supplies		(1,493	)		(324	)
Other current assets		10,480			(7,287	)
Accounts payable		(21,417	)		23,023
Accrued taxes		5,577			46,627
Accrued interest		(291	)		(3,781	)
Net cash provided from operating activities		48,879			145,959
Investing Activities:
Gross property additions		(94,991	)		(231,396	)
Sale of property to affiliates		400,346			—
Change in construction payables, net		(9,463	)		(19,587	)
Other		778			1,079
Net cash provided from (used for) investing activities		296,670			(249,904	)
Financing Activities:
Decrease in notes payable, net — affiliated		—			(4,025	)
Increase (decrease) in notes payable, net		(90,218	)		492,351
Proceeds —
Capital contributions from parent company		—			254
Redemptions —
Other long-term debt		—			(380,163	)
Capital distributions to parent company		(225,000	)		—
Other		1,960			(2,540	)
Net cash provided from (used for) financing activities		(313,258	)		105,877
Net Change in Cash and Cash Equivalents		32,291			1,932
Cash and Cash Equivalents at Beginning of Period		2,798			19,474
Cash and Cash Equivalents at End of Period	$	35,089		$	21,406
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $15,544 and $23,890 capitalized for 2004 and 2003, respectively)	$	19,839		$	—
Income taxes (net of refunds)	$	2,201		$	10,831

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

96

SOUTHERN POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Assets	2004			2003
	(in thousands)
Current Assets:
Cash and cash equivalents	$	35,089		$	2,798
Receivables —
Customer accounts receivable		12,617			10,772
Other accounts receivable		7			270
Accumulated provision for uncollectible accounts		(350	)		(350	)
Affiliated companies		45,460			14,130
Fossil fuel stock, at average cost		2,918			5,798
Materials and supplies, at average cost		9,616			8,123
Prepaid income taxes		2,539			11,222
Prepaid expenses		4,428			2,528
Other		330			1,174
Total current assets		112,654			56,465
Property, Plant, and Equipment:
In service		1,823,448			1,831,139
Less accumulated provision for depreciation		85,617			60,005
		1,737,831			1,771,134
Construction work in progress		200,319			504,097
Total property, plant, and equipment		1,938,150			2,275,231
Deferred Charges and Other Assets:
Unamortized debt issuance expense		16,457			18,315
Accumulated deferred income taxes		1,259			21,911
Prepaid long-term service agreements		31,660			21,728
Prepaid transmission expenses — affiliated		—			12,790
Other		4,077			2,845
Total deferred charges and other assets		53,453			77,589
Total Assets	$	2,104,257		$	2,409,285

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

97

SOUTHERN POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At June 30,			At December 31,
Liabilities and Stockholder’s Equity	2004			2003
	(in thousands)
Current Liabilities:
Securities due within one year	$	200		$	200
Notes payable		24,131			114,347
Accounts payable —
Affiliated		22,556			51,442
Other		4,597			6,591
Accrued taxes other than income taxes		6,866			1,289
Accrued interest		29,722			30,012
Other		349			489
Total current liabilities		88,421			204,370
Long-term Debt		1,149,214			1,149,112
Deferred Credits and Other Liabilities:
Deferred capacity revenues —
Affiliated		14,098			28,799
Other		(15	)		256
Other —
Affiliated		13,999			15,061
Other		140			211
Total deferred credits and other liabilities		28,222			44,327
Total Liabilities		1,265,857			1,397,809
Common Stockholder’s Equity:
Common stock, par value $.01 per share —
Authorized — 1,000,000 shares
Outstanding — 1,000 shares
Paid-in capital		737,413			850,312
Retained earnings		155,228			217,626
Accumulated other comprehensive loss		(54,241	)		(56,462	)
Total common stockholder’s equity		838,400			1,011,476
Total Liabilities and Stockholder’s Equity	$	2,104,257		$	2,409,285

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

98

SOUTHERN POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SECOND QUARTER 2004 vs. SECOND QUARTER 2003
AND
YEAR-TO-DATE 2004 vs. YEAR-TO-DATE 2003

RESULTS OF OPERATIONS

Earnings

Southern Power’s net income for the second quarter and year-to-date 2004 was $22.4 million and $49.6 million, respectively, compared to $79.3 million and $102.4 million for the corresponding periods of 2003. The decreases in second quarter 2004 earnings of $56.9 million, or 71.7%, and $52.8 million, or 51.6%, year-to-date 2004 are primarily attributed to a one-time gain of $50 million recognized in May 2003 upon termination of PPAs with Dynegy, as well as a reduction in the earnings from sales of uncontracted capacity as new PPAs have become effective. PPAs with Alabama Power and Georgia Power for Plants Harris Unit 1 and Franklin Unit 2 that began in June 2003, and with the Stanton joint owners for Stanton Unit A that began in October 2003, increased both affiliated and non-affiliated revenues, while significantly reducing uncontracted capacity. A new PPA with Georgia Power for Plant Harris Unit 2 began in June 2004 and further reduced uncontracted capacity. The previously uncontracted capacity that was available to the market from June 2003 through May 2004 consisted of approximately 800 MWs; 600 MWs from Plant Harris Unit 2 and 200 MW from Plant Franklin Unit 2.

     Significant income statement items appropriate for discussion include the following:

	Increase (Decrease)
	Second Quarter						Year-To-Date
	(in thousands)			%			(in thousands)			%
Sales for resale — non-affiliates	$	4,035			5.8		$	40,465			33.9
Sale for resale — affiliates		21,139			24.6			52,644			37.2
Fuel expense		8,800			25.0			19,097			34.6
Purchased power — non-affiliates.		9,576			59.0			7,858			24.9
Purchased power — affiliates		(2,744	)		(8.7	)		21,380			43.1
Other operations expense		1,202			9.8			10,019			54.9
Depreciation and amortization		4,734			58.7			10,968			75.1
Interest expense, net of amounts capitalized		11,379			N/M			22,566			N/M
Income taxes		(34,920	)		N/M			(32,146	)		N/M

N/M Not meaningful

     Sales for resale — non-affiliates. In the second quarter and year-to-date 2004, revenues from sales for resale to non-affiliates were higher when compared to the corresponding periods in 2003. These increases were primarily due to additional wholesale capacity and energy sales to non-affiliates as a result of commercial operation of Plant Harris Unit 2 in June 2003 and Plant Stanton A in October 2003.

     Sales for resale — affiliates. During the second quarter and year-to-date 2004, sales for resale to affiliates increased primarily due to energy and capacity sales through PPAs with Alabama Power and Georgia Power that commenced in June 2003. A new PPA with Georgia Power for Plant Harris Unit 2 that began in June 2004 also contributed to the increases. Revenues from sales to affiliated companies through the Southern Company system power pool and energy sales under PPAs will vary depending on demand and the availability and cost of generating resources accessible throughout the Southern Company system.

99

SOUTHERN POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Fuel expense. Fuel expense for the second quarter and year-to-date 2004 increased significantly when compared to the same periods in 2003. The second quarter 2004 increase resulted primarily from commercial operation of Plant Harris Unit 2, and natural gas prices that averaged 14% higher than in the same period of 2003. For year-to-date 2004, the increase over the same period in 2003 was 6%. Southern Power’s existing PPAs generally provide that the purchasers are responsible for substantially all of the cost of fuel relating to the energy delivered under such PPAs; therefore, these cost increases do not have a significant impact on net income.

     Purchased power — non-affiliates. The increases in purchased power from non-affiliates during the second quarter and year-to-date 2004 when compared to the same periods in 2003 are primarily due to higher purchase volumes and pricing related to day-ahead peak-hour purchases in 2004. These purchases minimize daily cycling of Southern Power’s generating units or the need to operate those units during off-peak hours when cheaper energy is available from affiliates. These purchases reduce overall costs when long-term maintenance of the units is considered.

     Purchased power — affiliates. The decrease in purchased power from affiliates during the second quarter 2004 compared to the same period in the prior year is due to the availability of power at prices lower than from affiliates. The availability of power at prices lower than Southern Power’s self-generation, which is primarily natural gas-fired, accounted for the year-to-date 2004 increase in purchased power from affiliates when compared to the same period in the prior year. Expenses from purchased power transactions will vary depending on demand, availability and the cost of generating resources accessible throughout the Southern Company system.

     Other operations expense. During the second quarter and year-to-date 2004, other operations expense increased when compared to the same periods in the prior year due mainly to expenses associated with the commercial operation of Plant Franklin Unit 2 and Plant Harris Units 1 and 2, which were all placed into commercial operation in June 2003, and Plant Stanton A, which was placed into commercial operation in October 2003.

     Depreciation and amortization. New generating units placed into service in June and October 2003 are the main drivers for the increases in depreciation and amortization in the second quarter and year-to-date 2004 as compared to the corresponding periods in the prior year.

     Interest expense, net of amounts capitalized. In the second quarter and year-to-date 2004, interest expense, net of amounts capitalized increased when compared to the same periods in 2003 due to an increase in the amount of senior notes outstanding and a lower percentage of interest costs being capitalized as projects have reached completion. In addition, see Note (J) to the Condensed Financial Statements herein for information regarding the transfer of the Plant McIntosh Unit 10 and 11 construction project to Georgia Power and Savannah Electric on May 24, 2004.

     Income taxes. The decreases in income taxes for the second quarter and year-to-date 2004 correspond to the decrease in pre-tax earnings due to the Dynegy settlement recorded in the second quarter of 2003. There were no audit adjustments or settlements related to income taxes through June 30, 2004.

Future Earnings Potential

The results of operations are not necessarily indicative of future earnings. The level of future earnings depends on numerous factors including completion of construction on new generating facilities, regulatory matters including those related to affiliate contracts, energy sales, creditworthiness of customers, total generating

100

SOUTHERN POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

capacity available in the Super Southeast and the remarketing of capacity. Another major factor is federal regulatory policy, which may impact Southern Power’s level of participation in the wholesale energy market. For additional information relating to these issues, see Business – The SOUTHERN System – “Risk Factors” in Item 1 and MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – “Future Earnings Potential” of Southern Power in Item 7 of the Form 10-K.

FERC Matters

Market-Based Rate Authority

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – “Future Earnings Potential – FERC Matters – Market-Based Rate Authority” of Southern Power in Item 7 and Note 3 to the financial statements of Southern Power under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation market power. This new interim approach includes a pivotal supplier analysis and a wholesale market share analysis, the results of which provide a rebuttable presumption regarding generation market power. The FERC’s order also sets forth procedures for rebutting these presumptions and addresses mitigation measures for those entities that are found to have market power. In the absence of specific mitigation measures, the order includes several cost-based mitigation measures that would apply by default. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

     On July 8, 2004, the FERC denied Southern Company’s request for rehearing, along with a number of others, and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time.

Plant McIntosh Construction Project

See Note 3 to the financial statements of Southern Power under “FERC Matters” in Item 8 of the Form 10-K for information regarding PPAs between Southern Power and Georgia Power and Savannah Electric for Plant McIntosh Units 10 and 11 capacity. In April 2003, Southern Power applied for FERC approval of these PPAs. In July 2003, the FERC accepted the PPAs to become effective June 1, 2005, subject to refund, and ordered that hearings be held. To ensure the timely completion of construction on McIntosh units 10 and 11 and their availability in the summer of 2005 as supply side resources for the retail customers in the State of Georgia, on May 7, 2004, Savannah Electric and Georgia Power requested the Georgia PSC to direct them to acquire the McIntosh construction project. Savannah Electric and Georgia Power proposed to place the units in rate base at a cost approved by the Georgia PSC and to recover the unit operation and maintenance costs as retail service expenses as may be approved by the Georgia PSC. The Georgia PSC issued such an order on May 18, 2004 and the transfer occurred on May 24, 2004. On May 20, 2004, Southern Power filed a request to withdraw the PPAs and to terminate the ongoing FERC proceedings. On August 4, 2004, the FERC issued a notice that it allowed the request to withdraw the PPAs to be accepted and to become effective by operation of law on July 20, 2004. However, the FERC made no determination on what additional steps may need to be taken with respect to testimony provided in the proceedings. The ultimate outcome of this matter cannot now be determined.

101

SOUTHERN POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Transmission

See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — FERC Matters” of Southern Company in Item 7 the Form 10-K for information on the FERC’s order related to RTOs and the FERC’s notice of proposed rulemaking regarding open access transmission service and standard electricity market design.

Other Matters

See MANAGEMENT’S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS — “Future Earnings Potential — General” and
“— Power Sales Agreements” of Southern Power in Item 7 of the Form 10-K for additional information on long-term power sales agreements and PPAs. Southern Power’s PPAs with non-affiliated counterparties have provisions that require the posting of collateral or an acceptable substitute guarantee in the event that S&P or Moody’s downgrades the credit ratings of such counterparty to below-investment grade, or, if the counterparty is not rated, fails to maintain a minimum coverage ratio. The PPAs are expected to provide Southern Power with a stable source of revenue during their respective terms.

     In June 2003, Southern Power placed Plant Franklin Unit 2 and Plant Harris Units 1 and 2 into commercial operation. In October 2003, Southern Power placed Plant Stanton A into commercial operation. In June 2004, sales under the PPA with Georgia Power for the remaining 200 MW of uncontracted capacity at Plant Franklin Unit 2 began. Also, in June 2004, sales under the PPA with Georgia Power for Plant Harris Unit 2 began. Sales under PPAs for the other units became effective upon commercial operation. The opportunity for non-affiliate sales from uncontracted capacity has declined significantly since these PPAs became effective.

     Southern Power is also completing limited construction activities on Plant Franklin Unit 3 to preserve the long-term viability of the project but has deferred final completion until the 2008-2011 period. See Note 3 to the financial statements of Southern Power under “Uncontracted Generating Capacity” in Item 8 of the Form 10-K for additional information. The final outcome of these matters cannot now be determined.

     Southern Power is subject to certain claims and legal actions arising in the ordinary course of business. In addition, Southern Power’s business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury and citizen enforcement of environmental requirements, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become more frequent. The ultimate outcome of such litigation against Southern Power cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Southern Power’s financial statements.

     See also the Notes to the Condensed Financial Statements herein for discussion of various contingencies and other matters which may affect future earnings potential.

Environmental Matters

See MANAGEMENT’S DISCUSSION AND ANALYSIS — RESULTS OF OPERATIONS — “Future Earnings Potential — Environmental Matters” of Southern Power in Item 7 of the Form 10-K for information on the development by federal and state environmental regulatory agencies of additional control strategies for emission of air pollution from industrial sources, including electric generating facilities. Compliance costs related to current and future environmental laws and regulations could affect earnings if such costs are not fully recovered.

102

SOUTHERN POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Southern Power prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Southern Power in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on Southern Power’s results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT’S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES – “Application of Critical Accounting Policies and Estimates” of Southern Power in Item 7 of the Form 10-K for a complete discussion of Southern Power’s critical accounting policies and estimates related to Revenue Recognition and Asset Impairments.

FINANCIAL CONDITION AND LIQUIDITY

Overview

The major change in Southern Power’s financial condition during the first six months of 2004 was the sale of the Plant McIntosh Units 10 and 11 combined cycle construction project to Georgia Power and Savannah Electric on May 24, 2004 at book cost of $429 million. See Note (J) to the Condensed Financial Statements herein for additional information. As a result of the sale, Southern Power repaid its note payable to Southern Company of $89 million, declared dividends of $225 million to Southern Company ($113 million from capital surplus and $112 million from retained earnings) and repaid $114 million in commercial paper borrowings. In September 2003, the SEC had approved, under the PUHCA, Southern Power’s payment of dividends in an amount up to $190 million to Southern Company from capital surplus.

Capital Requirements and Contractual Obligations

Reference is made to MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Capital Requirements and Contractual Obligations” of Southern Power in Item 7 of the Form 10-K for a description of Southern Power’s capital requirements for its construction program, maturing debt, purchase commitments and long-term service agreements. The sale of the Plant McIntosh Units 10 and 11 construction project and the suspension of construction activities at Plant Franklin Unit 3 will significantly reduce short-term borrowings under the commercial paper program.

Sources of Capital

In February 2003, Southern Power initiated a commercial paper program to fund a portion of the construction costs of new generating facilities. The amount of commercial paper initially represented approximately 45% of total debt, but proceeds from the sale of the Plant McIntosh Units 10 and 11 construction project were used to repay $24 million of outstanding commercial paper early in the third quarter of 2004. Southern Power’s strategy has been to refinance most of such short-term borrowings with long-term securities following commercial operation of the generating facilities. See Note 6 to the financial statements of Southern Power under “Commercial Paper” in Item 8 of the Form 10-K for additional information.

     To meet liquidity and capital resource requirements, Southern Power had at June 30, 2004 approximately $650 million of an unused committed credit arrangement with banks expiring in 2006. This arrangement also provides liquidity support for Southern Power’s commercial paper program. Amounts drawn under the arrangements may be used to finance acquisition and construction costs related to gas-fired electric generating

103

SOUTHERN POWER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

facilities and for general corporate purposes, subject to borrowing limitations for each generating facility. The arrangements permit Southern Power to fund construction of future generating facilities upon meeting certain requirements. Southern Power expects to renew its credit facility, as needed, prior to expiration.

Credit Rating Risk

Southern Power does not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are contracts that could require collateral — but not accelerated payment — in the event of a credit rating change to below investment grade. These contracts are primarily for physical electricity purchases and sales, fixed-price physical gas purchases and agreements covering interest rate swaps. Generally, collateral may be provided by a Southern Company guaranty, letter of credit or cash. At June 30, 2004, the maximum potential collateral requirements were approximately $177 million.

Market Price Risk

Southern Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2003 reporting period. In addition, Southern Power is not aware of any facts or circumstances that would significantly affect such exposures in the near term.

     Because energy from Southern Power’s generating facilities is primarily sold under long-term PPAs with tolling agreements and provisions shifting substantially all of the responsibility for fuel cost to the purchasers, Southern Power’s exposure to market volatility in commodity fuel prices and prices of electricity is limited. To mitigate residual risks in those areas, Southern Power enters into fixed-price contracts for the sale of electricity. Unrealized gains and losses on electric and gas contracts qualifying as cash flow hedges of anticipated purchases and sales are deferred in Other Comprehensive Income. The fair values of derivative energy contracts at June 30, 2004 were as follows:

	Second Quarter
	2004			Year-to-Date
	Changes			Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	(203	)	$	665
Contracts realized or settled		166			(499	)
New contracts at inception		—			—
Changes in valuation techniques		—			—
Current period changes		(2	)		(205	)
Contracts at June 30, 2004	$	(39	)	$	(39	)

     At June 30, 2004, all of these contracts mature within one year and are based on actively quoted market prices. For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS — FINANCIAL CONDITION AND LIQUIDITY — “Market Price Risk” of Southern Power in Item 7 and Notes 1 and 6 to the financial statements of Southern Power under “Financial Instruments” in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein.

104

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
SOUTHERN POWER COMPANY

INDEX TO APPLICABLE NOTES TO
FINANCIAL STATEMENTS BY REGISTRANT

Registrant	Applicable Notes
Southern Company	A, B, C, D, E, F, G, H, I, J, K, M, N
Alabama Power	A, B, C, D, F, G, M
Georgia Power	A, B, C, D, F, G, I, J
Gulf Power	A, B, C, D, F, G
Mississippi Power	A, B, C, D, F, G, K
Savannah Electric	A, B, C, D, F, G, J, L
Southern Power	A, B, F, J

105

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
SOUTHERN POWER COMPANY

NOTES TO THE CONDENSED FINANCIAL STATEMENTS:

(A)	The condensed financial statements of the registrants included herein have been prepared by each registrant, without audit, pursuant to the rules and regulations of the SEC. In the opinion of each registrant’s management, the information regarding such registrant furnished herein reflects all adjustments necessary to present fairly the results of operations for the periods ended June 30, 2004 and 2003. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States 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. Disclosure which would substantially duplicate the disclosure 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 omitted from this Form 10-Q. Therefore, these condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation. Due to seasonal variations in the demand for energy, operating results for the periods presented do not necessarily indicate operating results for the entire year.
(B)	See Note 3 to the financial statements of each of the registrants in Item 8 and “Legal Proceedings” in Item 3 of the Form 10-K for information relating to various lawsuits and other contingencies.
	NEW SOURCE REVIEW ACTIONS AND PLANT WANSLEY ENVIRONMENTAL LITIGATION
	See Note 3 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric under “New Source Review Actions” and of Southern Company and Georgia Power under “Plant Wansley Environmental Litigation” in Item 8 of the Form 10-K. As of March 15, 2004, civil penalties under the Clean Air Act were increased prospectively to a maximum of $32,500 per day, per violation. To the extent alleged violations under either the New Source Review litigation or Plant Wansley environmental litigation are deemed to be continuing, this increased civil penalty amount could apply to such violations found to continue after that date.
	On May 3, 2004, the U.S. Supreme Court denied the EPA’s petition to review the Eleventh Circuit Court of Appeals’ decision in the EPA’s similar New Source Review enforcement action against the TVA. The cases against Alabama Power, Georgia Power and Savannah Electric have been effectively stayed pending final resolution of the TVA case. With the denial of the EPA’s petition for review, the Court of Appeals’ decision became final. Alabama Power and the EPA jointly notified the District Court for the Northern District of Alabama, where the case against Alabama Power is pending and requested that the stay be lifted. On June 16, 2004, the District Court lifted the stay, placing the case back onto the District Court’s active docket. At this time, no party to the case against Georgia Power and Savannah Electric has sought to reopen that case, which remains administratively closed in the District Court for the Northern District of Georgia. On June 10, 2004, the U.S. District Court for the Northern District of Georgia granted Georgia Power’s motion in the Plant Wansley environmental litigation for partial summary judgment regarding emission offsets. The case has been removed from the court’s trial calendar due to pending motions for summary judgment, and a new trial date has not been scheduled. An

106

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

adverse outcome in any one of these cases could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates.

MIRANT RELATED MATTERS

Southern Company Employee Savings Plan Litigation

On June 30, 2004, an employee of a subsidiary of Southern Company filed a complaint in the United States District Court for the Northern District of Georgia alleging violations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and naming as defendants Southern Company, Southern Company Services, Inc., the Employee Savings Plan Committee, the Pension Fund Investment Review Committee, certain current and former members of those committees, Merrill Lynch Trust Company, FSB and “Unknown Defendants 1-100.” The plaintiff seeks to represent a purported class of individuals who were participants in or beneficiaries of The Southern Company Employee Savings Plan (the “Plan”) at any time since April 2, 2001 whose Plan accounts included investments in Mirant common stock.

The complaint alleges that the defendants breached their fiduciary duties under ERISA by, among other things, failing to investigate whether Mirant stock was an appropriate investment option for the Plan and by failing to inform Plan participants that Mirant stock was not an appropriate investment for their retirement assets based on Mirant’s alleged improper energy trading and accounting practices, mismanagement and dire circumstances. The plaintiff seeks class-wide equitable and monetary relief. Southern Company denies any wrongdoing and intends to defend this action vigorously. The final outcome of this matter cannot now be determined.

Under certain circumstances, Southern Company will be obligated under its Bylaws to indemnify the current and former officers who served as members of the Employee Savings Plan Committee and/or the Pension Fund Investment Review Committee at or since the date of the spin-off and are named as defendants in the lawsuit.

Mirant Bankruptcy

See Note 3 to the financial statements of Southern Company under “Mirant Related Matters — Mirant Bankruptcy” in Item 8 of the Form 10-K. On April 7, 2004, the U.S. Bankruptcy Court judge presiding over Mirant’s proceedings ordered that an examiner be appointed and identified a number of duties for the examiner, including preliminary investigation of potential causes of action against insiders, past or present, of Mirant. On April 13, 2004, the judge approved the appointment of William K. Snyder as examiner. In an April 29, 2004 order, the judge further defined the duties of the examiner, including the investigation of any potential causes of action or any basis for objecting to or subordinating any claim that may be available to Mirant against any past or present insider or any member of a committee appointed in Mirant’s bankruptcy proceeding. As a former shareholder of Mirant, Southern Company could be considered a past insider. On June 14, 2004, Mirant’s bankruptcy counsel notified Southern Company that it is investigating potential claims against Southern Company. The final outcome of these matters cannot now be determined.

See Note 3 to the financial statements of Southern Company under “Mirant Bankruptcy” in Item 8 of the Form 10-K and Note 5 to the financial statements of Southern Company in Item 8 of the Form 10-K for

107

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

information related to potential contingent liabilities as a result of Mirant’s inclusion in the consolidated federal income tax return prior to the spin-off. In connection with the audit of tax years 2000 and 2001, the IRS has preliminarily indicated that they may challenge certain tax deductions arising from Mirant’s operations prior to the spin-off. The ultimate outcome of this matter cannot now be determined.

Mobile Energy Services’ Petition for Bankruptcy

See Note 3 to the financial statements of Southern Company under Mirant Related Matters — “Mobile Energy Services’ Petition for Bankruptcy” in Item 8 of the Form 10-K. On April 29, 2004, Mobile Energy Services Holdings (MESH) sold the electric generating facility. In connection with the sale, the pulp and paper complex owners released Southern Company from its contingent obligations associated with the guarantee of certain potential environmental obligations and with the potential obligation to fund a maintenance reserve account. Southern Company simultaneously released MESH from its indemnification obligations.

FERC MATTERS

See Note 3 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric and Southern Power under “FERC Matters” in Item 8 of the Form 10-K. On April 14, 2004, the FERC issued an order that abandoned the SMA test and adopted a new interim analysis for measuring generation market power. This new interim approach includes a pivotal supplier analysis and a wholesale market share analysis, the results of which provide a rebuttable presumption regarding generation market power. The FERC’s order also sets forth procedures for rebutting these presumptions and addresses mitigation measures for those entities that are found to have market power. In the absence of specific mitigation measures, the order includes several cost-based mitigation measures that would apply by default. The FERC also initiated a new rulemaking proceeding that, among other things, will adopt a final methodology for assessing generation market power. Southern Company, the retail operating companies and Southern Power believe that it may be difficult for a traditional utility company, or an affiliate thereof, with a significant load service obligation and generation to satisfy that obligation, and that is not a member of a large, FERC-approved RTO, to pass all aspects of the market power screens as currently designed. However, each of the companies believes that it has an appropriate basis to rebut the generation market power presumption.

On July 8, 2004, the FERC denied Southern Company’s request for rehearing and reaffirmed the interim tests that it adopted in April. Southern Company will submit the required analyses by August 9, 2004. In the event that the FERC’s default mitigation measures are ultimately applied, Southern Power and the retail operating companies may be required to charge cost-based rates, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time.

INCOME TAX MATTERS

See Note 3 to the financial statements of Southern Company under “Income Tax Issues — Leveraged Lease Transactions” in Item 8 of the Form 10-K. In connection with their current audits of Southern Company’s consolidated federal income tax returns for the 2000 and 2001 tax years, the IRS has indicated that they intend to propose a similar adjustment of $18 million to disallow the tax losses associated with the international leveraged lease transaction originally challenged in their 1996-1999 audits. The IRS has also preliminarily indicated that they may challenge Southern Company’s other three international leveraged lease transactions (so-called SILO or sale-in-lease-out transactions). See

108

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

	Note 1 to the financial statements of Southern Company under “Leveraged Leases” in Item 8 of the Form 10-K for additional details of the deferred taxes related to these transactions. If the IRS is ultimately successful in disallowing the tax deductions related to all four international leveraged lease transactions beginning with the 2000 tax year, Southern Company could be subject to significant additional interest charges. Additionally, although the payment of the actual tax liability would not affect Southern Company’s results of operations, it could have a material impact on cash flow. The ultimate outcome of these matters cannot now be determined.
	GULF POWER PERSONAL INJURY LITIGATION
	See Note 3 to the financial statements of Gulf Power under “Personal Injury Litigation” in Item 8 of the Form 10-K for additional information. This matter was the subject of an appeal to Florida’s First District Court of Appeal. In May 2004, the court affirmed the result of the jury’s verdict without submitting a written opinion, thereby preempting Gulf Power’s right to appeal the case to the Florida Supreme Court. Therefore, in June 2004 Gulf Power paid the judgment amount and accrued interest. As a result of insurance coverage, there was no material impact on Gulf Power’s financial statements.
(C)	See Note 1 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric under “Asset Retirement Obligations and Other Costs of Removal” in Item 8 of the Form 10-K. The following table reflects the details of the Asset Retirement Obligations included in the Condensed Balance Sheets.

	Balance at		Liabilities		Liabilities					Cash Flow		Balance at
	12/31/03		Incurred		Settled			Accretion		Revisions		06/30/04
					(in millions)
Alabama Power	$	359	$	—	$	—		$	12	$	—	$	371
Georgia Power		476		—		(1	)		15		—		490
Gulf Power		4		—		—			—		1		5
Mississippi Power		2		—		—			—		1		3
Savannah Electric		4		—		—			—		—		4
Southern Company	$	845	$	—	$	(1	)	$	27	$	2	$	873

(D) On March 31, 2004, Southern Company and the retail operating companies prospectively adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities,” which requires the primary beneficiary of a variable interest entity to consolidate the related assets and liabilities. The adoption of FASB Interpretation No. 46R had no impact on the net income of Southern Company or the retail operating companies. However, as a result of the adoption, Southern Company and the retail operating companies deconsolidated certain wholly-owned trusts established to issue preferred securities since Southern Company and the retail operating companies do not meet the definition of primary beneficiary established by FASB Interpretation No. 46R. Therefore, the investments in these trusts are reflected as Equity Investments in Unconsolidated Subsidiaries for Alabama Power and Georgia Power and as Other Investments for Southern Company, Gulf Power and Mississippi Power. The related loans from the trusts to Southern Company and the retail operating companies are reflected as Long-term Debt Payable to Affiliated Trusts on the accompanying Balance Sheets.

109

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

This treatment resulted in the following increases in both total assets and total liabilities as of March 31, 2004 (in millions):

Alabama Power	$	9
Georgia Power		29
Gulf Power		2
Mississippi Power		1
Southern Company		60

	In addition, Southern Company consolidated its 85% limited partnership investment in an energy/telecom venture capital fund that was previously accounted for under the equity method. At June 30, 2004, Southern Company’s investment totaled $27.9 million; Southern Company has committed to a maximum investment of $75 million. The assets of the venture capital fund are included in Cash and Other Investments on the accompanying Condensed Balance Sheets.
	In May 2004, the FASB approved Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Act”).” FSP No. 106-2 requires recognition of the impacts of the Medicare Act in the accumulated post-retirement benefit obligation and future cost of service for post-retirement medical plans and may be applied retroactively to the enactment of the Medicare Act in December 2003 or prospectively effective for the third quarter 2004. Southern Company and the retail operating companies have elected to apply this treatment prospectively. Pending the finalization of federal regulations governing the subsidy effected in the Medicare Act, Southern Company and its subsidiaries do not anticipate a material impact on their respective financial statements from the adoption of FSP No. 106-2.
(E)	See Note 1 to the financial statements of Southern Company under “Stock Options” and Note 8 to the financial statements of Southern Company under “Stock Option Plan” in Item 8 of the Form 10-K for information regarding non-qualified employee stock options provided by Southern Company. Southern Company accounts for options granted in accordance with Accounting Principles Board Opinion No. 25; thus, no compensation expense is recognized because the exercise price of all options granted equaled the fair market value on the date of the grant. The estimated fair values of stock options granted during the three-month and six-month periods ending June 30, 2004 and 2003 have been derived using the Black-Scholes stock option pricing model. The following table shows the assumptions and the weighted average fair values of these stock options:

	Three			Three			Six			Six
	Months			Months			Months			Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2004			2003			2004			2003
Interest rate		3.7	%		2.6	%		3.1	%		2.7	%
Average expected life of stock options (in years)		5.0			4.3			5.0			4.3
Expected volatility of common stock		19.6	%		22.7	%		19.7	%		23.6	%
Expected annual dividends on common stock	$	1.40		$	1.37		$	1.40		$	1.37
Weighted average fair value of stock options granted	$	3.41		$	3.51		$	3.29		$	3.59

110

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

The pro forma impact of fair-value accounting for options granted on net income is as follows:

	As Reported		Pro Forma
Three Months Ended June 30, 2004
Net income (in millions)	$	352	$	348
Earnings per share (dollars):
Basic	$	0.48	$	0.47
Diluted	$	0.47	$	0.46
Three Months Ended June 30, 2003
Net income (in millions)	$	432	$	427
Earnings per share (dollars):
Basic	$	0.60	$	0.60
Diluted	$	0.59	$	0.59
Six Months Ended June 30, 2004
Net income (in millions)	$	683	$	674
Earnings per share (dollars):
Basic	$	0.93	$	0.91
Diluted	$	0.92	$	0.90
Six Months Ended June 30, 2003
Net income (in millions)	$	730	$	721
Earnings per share (dollars):
Basic	$	1.01	$	1.00
Diluted	$	1.00	$	0.99

Diluted Earnings Per Share

	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
(in thousands)	June 30, 2004		June 30, 2003		June 30, 2004		June 30, 2003
As Reported Shares		738,185		724,627		737,411		721,785
Effect of options		4,268		5,659		4,509		5,354
Diluted Shares		742,452		730,286		741,920		727,139

(F) See Note 6 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric and Southern Power under “Financial Instruments” in Item 8 of the Form 10-K. At June 30, 2004, the fair value of derivative energy contracts was reflected in the financial statements as follows:

	Southern			Alabama			Georgia		Gulf		Mississippi			Savannah			Southern
	Company			Power			Power		Power		Power			Electric			Power
	Amounts
	(in thousands)
Regulatory liabilities, net	$	29,788		$	12,005		$	7,951	$	3,392	$	4,825		$	1,615		$	—
Other comprehensive income (loss)		(3,129	)		(462	)		—		—		(3,660	)		(32	)		(40	)
Net income		(41	)		4			4		1		1			—			1
Total fair value	$	26,618		$	11,547		$	7,955	$	3,393	$	1,166		$	1,583		$	(39	)

111

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

For the three months and six months ended June 30, 2004 and 2003, the amounts recognized in income for Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric and Southern Power were immaterial.

In addition, approximately $2 million in pre-tax gains will be reclassified from Other Comprehensive Income to Fuel Expense by Southern Company for the twelve month period ended June 30, 2005.

At June 30, 2004, Southern Company had $3.3 billion notional amount of interest rate swaps outstanding with net fair value gains of $48.4 million as follows:

Fair Value Hedges

							Fair Value Gain (Loss)
	Notional	Fixed Rate			Variable Rate	Maturity	June 30, 2004
	Amount	Received			Paid	Date	(in millions)
Southern Company	$400 million		5.3	%	6-month LIBOR (in arrears) less 0.103%	February 2007	$	19.5
Southern Company	$40 million		7.625	%	6-month LIBOR (in arrears) plus 2.9225%	December 2009	$	(0.4	)

Cash Flow Hedges

							Fair Value
			Weighted Average				Gain (Loss)
	Notional	Variable Rate	Fixed Rate			Maturity	June 30, 2004
	Amount	Received	Paid			Date	(in millions)
Variable Rate Securities
Alabama Power	$536 million	BMA Index		2.007	%	January 2007	$	6.7
Alabama Power	$195 million	3-month LIBOR		1.89	%	April 2006	$	3.3
Alabama Power	$250 million	3-month LIBOR		3.9198	%	September 2009	$	5.4
Alabama Power	$220 million	3-month LIBOR		3.4145	%	November 2007	$	3.3
Georgia Power	$250 million	3-month LIBOR plus 0.125%		1.96	%	February 2005	$	0.1
Georgia Power	$50 million	3-month LIBOR plus 0.10%		1.5625	%	January 2005	$	0.1
Georgia Power	$873 million	BMA Index		1.3878	%	December 2004	$	0.5
Georgia Power	$250 million	3-month LIBOR		4.6629	%	February 2015	$	14.0
Georgia Power	$250 million	3-month LIBOR		5.3621	%	September 2014	$	(4.1	)
Savannah Electric	$20 million	3-month LIBOR plus 0.375%		2.055	%	December 2004	$	0.0

112

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

For the twelve month period ended June 30, 2005, the following table reflects the estimated pre-tax losses that will be reclassified from Other Comprehensive Income to Interest Expense.

	(in Millions)
Alabama Power	$	(2.9	)
Georgia Power		(0.3	)
Gulf Power		(0.3	)
Mississippi Power		—
Savannah Electric		(0.1	)
Southern Power		(10.8	)
Southern Company	$	(14.4	)

(G) See Note 2 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric in Item 8 of the Form 10-K. Components of the pension plans’ and postretirement plans’ net periodic costs for the three-month and six-month periods ending June 30, 2004 and 2003 are as follows:

	Southern			Alabama			Georgia			Gulf			Mississippi			Savannah
PENSION PLANS (in millions)	Company			Power			Power			Power			Power			Electric
Three Months Ended June 30, 2004
Service cost	$	32		$	8		$	10		$	1		$	2		$	1
Interest cost		68			18			26			3			3			1
Expected return on plan assets		(113	)		(35	)		(45	)		(5	)		(5	)		(1	)
Recognized net gain		(1	)		(1	)		(1	)		–			–			–
Net amortization		4			1			2			–			–			–
Net cost (income)	$	(10	)	$	(9	)	$	(8	)	$	(1	)	$	–		$	1
Six Months Ended June 30, 2004
Service cost	$	64		$	16		$	20		$	2		$	4		$	2
Interest cost		136			36			52			6			6			2
Expected return on plan assets		(226	)		(70	)		(90	)		(10	)		(10	)		(2	)
Recognized net gain		(2	)		(2	)		(2	)		–			–			–
Net amortization		8			2			4			–			–			–
Net cost (income)	$	(20	)	$	(18	)	$	(16	)	$	(2	)	$	–		$	2
Three Months Ended June 30, 2003
Service cost	$	29		$	7		$	10		$	1		$	1		$	1
Interest cost		65			17			25			3			3			1
Expected return on plan assets		(112	)		(35	)		(45	)		(5	)		(4	)		(1	)
Recognized net gain		(11	)		(3	)		(5	)		–			–			–
Net amortization		4			1			2			–			–			–
Net cost (income)	$	(25	)	$	(13	)	$	(13	)	$	(1	)	$	–		$	1
Six Months Ended June 30, 2003
Service cost	$	58		$	14		$	20		$	2		$	2		$	2
Interest cost		130			34			50			6			6			2
Expected return on plan assets		(224	)		(70	)		(90	)		(10	)		(8	)		(2	)
Recognized net gain		(22	)		(6	)		(10	)		–			–			–
Net amortization		8			2			4			–			–			–
Net cost (income)	$	(50	)	$	(26	)	$	(26	)	$	(2	)	$	–		$	2

113

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

	Southern			Alabama			Georgia			Gulf		Mississippi		Savannah
PENSION PLANS (in millions)	Company			Power			Power			Power		Power		Electric
Three Months Ended June 30, 2004
Service cost	$	7		$	2		$	2		$	–	$	–	$	–
Interest cost		24			6			11			1		1		1
Expected return on plan assets		(12	)		(4	)		(6	)		–		–		–
Net amortization		9			2			5			–		–		–
Net cost (income)	$	28		$	6		$	12		$	1	$	1	$	1
Six Months Ended June 30, 2004
Service cost	$	14		$	4		$	4		$	–	$	–	$	–
Interest cost		48			12			22			2		2		2
Expected return on plan assets		(24	)		(8	)		(12	)		–		–		–
Net amortization		18			4			10			–		–		–
Net cost (income)	$	56		$	12		$	24		$	2	$	2	$	2
Three Months Ended June 30, 2003
Service cost	$	6		$	2		$	2		$	–	$	–	$	–
Interest cost		23			6			10			1		1		1
Expected return on plan assets		(12	)		(4	)		(6	)		–		–		–
Net amortization		8			2			4			–		–		–
Net cost (income)	$	25		$	6		$	10		$	1	$	1	$	1
Six Months Ended June 30, 2003
Service cost	$	12		$	4		$	4		$	–	$	–	$	–
Interest cost		46			12			20			2		2		2
Expected return on plan assets		(24	)		(8	)		(12	)		–		–		–
Net amortization		16			4			8			–		–		–
Net cost (income)	$	50		$	12		$	20		$	2	$	2	$	2

(H)	See Note 1 to Southern Company’s financial statements under “Leveraged Leases” in Item 8 of the Form 10-K. In June 2004, Southern Company completed the purchase from Keyspan Corporation and subsequent leaseback of the Ravenswood Expansion Facility, a 250 megawatt combined cycle gas turbine facility in New York, New York. The cost of the facility was approximately $385 million. Southern Company’s net investment in the leveraged lease is approximately $68 million.
(I)	On July 1, 2004, Georgia Power filed a request with the Georgia PSC for an approximate 7 percent increase in retail revenues, effective January 1, 2005. The requested increase is based on a future test year ending July 31, 2005 and a proposed retail return on common equity of 12.5 percent.
	Georgia Power is currently operating under a three-year retail rate order that expires December 31, 2004. Under the terms of the existing order, earnings are evaluated annually against a retail return on common equity range of 10 percent to 12.95 percent. Two-thirds of any earnings above the 12.95 percent return are applied to rate refunds, with the remaining one-third retained by Georgia Power. The order required Georgia Power to file a general rate case on July 1, 2004. See Note 3 to the financial statements of Southern Company under “Georgia Power Retail Rate Orders” and of Georgia Power under “Retail Rate Orders” in Item 8 of the Form 10-K for additional information. Georgia Power expects the Georgia PSC to issue a final order in this matter during December 2004. The final outcome of this matter cannot now be determined.

114

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(J)	See Note 3 to the financial statements of Georgia Power, Savannah Electric and Southern Power under “FERC Matters” in Item 8 of the Form 10-K for information regarding PPAs between Southern Power and Georgia Power and Savannah Electric for Plant McIntosh capacity.
	In April 2003, Southern Power applied for FERC approval of these PPAs. In July 2003, the FERC accepted the PPAs to become effective June 1, 2005, subject to refund and ordered that hearings be held. To ensure the timely completion of construction on McIntosh units 10 and 11 and their availability in the summer of 2005 as supply side resources for the retail customers in the State of Georgia, on May 7, 2004, Savannah Electric and Georgia Power requested the Georgia PSC to direct them to acquire the McIntosh construction project. Savannah Electric and Georgia Power proposed to place the units in rate base at a cost approved by the Georgia PSC and to recover the unit operation and maintenance costs as retail service expenses as may be approved by the Georgia PSC. The Georgia PSC issued such an order on May 18, 2004 and the transfer occurred on May 24, 2004. On May 20, 2004, Southern Power filed a request to withdraw the PPAs and to terminate the ongoing FERC proceedings. On August 4, 2004, the FERC issued a notice that it allowed the request to withdraw the PPAs to be accepted and to become effective by operation of law on July 20, 2004. However, the FERC made no determination on what additional steps may need to be taken with respect to testimony provided in the proceedings. The ultimate outcome of this matter cannot now be determined.
	The May 18, 2004 Georgia PSC order also directed Georgia Power and Savannah Electric to file an application within 10 days of completing such purchase to amend the resource certificate granted by the Georgia PSC in 2002 to describe the capacity resource as being the McIntosh units 10 and 11 (as opposed to the McIntosh PPAs), the approximate construction schedule (which is not expected to change) and the proposed rate base treatment. The application was filed on June 3, 2004 and the Georgia PSC will have 180 days to respond. The Georgia PSC is expected to review the application in accordance with its affiliate transaction guidelines, which require a lower of cost or market approach unless otherwise determined by the Georgia PSC. Georgia Power and Savannah Electric have submitted information showing that the book cost of the McIntosh construction project is lower than its market value. However, full recovery of the project costs depends on the outcome of the Georgia PSC’s review. In the event the Georgia PSC does not allow full recovery of the project costs, then part of such costs may have to be written off in accordance with FASB Statement No. 90, “Accounting for Abandonments and Disallowed Plant Costs.” At June 30, 2004, the investment in the McIntosh construction project totaled approximately $353.2 million and $69.7 million for Georgia Power and Savannah Electric, respectively. The ultimate outcome of the Georgia PSC’s review cannot now be determined.
(K)	See Note 3 to the financial statements of Southern Company under “Mississippi Power Regulatory Filing” and Mississippi Power under “Retail Regulatory Filing” in Item 8 of the Form 10-K regarding Mississippi Power’s request with the Mississippi PSC to include 266 megawatts of Plant Daniel Units 3 and 4 generating capacity not currently included in jurisdictional cost of service and to modify certain provisions of the PEP used to set Mississippi Power’s retail base rates and the Mississippi PSC’s interim order creating a $60.3 million regulatory liability issued in December 2003. The Mississippi PSC held hearings on these matters in April 2004 and a final decision was issued on May 25, 2004. The Mississippi PSC approved Mississippi Power’s request to reclassify the 266 megawatts of Plant Daniel unit 3 and 4 capacity to jurisdictional cost of service effective January 1, 2004 and authorized Mississippi Power to include the related costs and revenue credits in jurisdictional rate base, cost of service and revenue requirement calculations for purposes of retail rate recovery. Mississippi Power will amortize the regulatory liability established pursuant to the Mississippi PSC’s interim order in December to earnings as follows: $16.5 million in 2004, $25.1 million in 2005, $13.0 million in 2006 and $5.7 million in 2007, resulting in increases to earnings in each of those years.
	In addition, the Mississippi PSC also approved Mississippi Power’s requested changes to PEP, including the use of a forward-looking test year, with appropriate oversight; annual, rather than semi-annual,

115

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

	filings; and certain changes to the performance indicator mechanisms. Rate changes will be limited to 4% of retail revenues annually under the revised PEP. The Mississippi PSC will review all aspects of PEP in 2007.
(L)	On March 23, 2004, Savannah Electric submitted a request to the Georgia PSC for an accounting order which, if approved by the Georgia PSC, would have allowed for the cost of a coal transloader then under construction to be amortized over twenty-four months through fuel expense and recovered through Savannah Electric’s fuel cost recovery clause. The transloader allows foreign coal to be off-loaded from ships at Savannah Electric’s Plant Kraft dock, and then transferred by rail to Plant McIntosh. On June 24, 2004, the Georgia PSC denied Savannah Electric’s request for this accounting order. Consequently, accumulated project costs of $2.7 million were recorded as construction work in progress in June 2004 and will be depreciated over the projects estimated useful life of 35 years once placed in service.
	In a separate action, on July 30, 2004, Savannah Electric filed for a fuel cost recovery rate increase with the Georgia PSC. The increase will allow for the recovery of fuel costs based on an estimate of future costs, as well as the collection of the existing under recovery of fuel expenses, over a two-year period. The amount under recovered at June 30, 2004 is approximately $8.9 million. The Georgia PSC is expected to rule on this matter by late October 2004. The outcome of the filing cannot be determined at this time.
(M)	On August 2, 2004, Alabama Power made a filing with the Alabama PSC to establish a specific rate mechanism for the recovery of retail costs associated with environmental laws, regulations or other such mandates. If approved, the rate mechanism would begin operation in January 2005 and provide for the recovery of these costs pursuant to a factor that will be calculated annually. It is anticipated that for the first two years of the increase, retail rates would increase under the proposed mechanism by approximately 1% ($33 million) in 2005 and approximately an additional 1% ($30 million) in 2006. Such environmental cost recovery would include operation and maintenance expense, depreciation and a return on invested capital. The outcome of this matter cannot now be determined.

116

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(N) Southern Company’s reportable business segment is the sale of electricity in the Southeast by the retail operating companies and Southern Power. The All Other column includes parent Southern Company, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include investments in synthetic fuels and leveraged lease projects, telecommunications, energy-related services and natural gas marketing. Intersegment revenues are not material. Financial data for business segments and products and services for the periods covered in the Form 10-Q are as follows:

	Electric Utilities
	Retail
	Operating									All		Reconciling
	Companies		Southern Power		Eliminations			Total		Other		Eliminations			Consolidated
	(in millions)
Three Months Ended June 30, 2004:
Operating revenues	$	2,868	$	182	$	(134	)	$	2,916	$	119	$	(26	)	$	3,009
Segment net income (loss)		308		23		–			331		21		–			352
Six Months Ended June 30, 2004:
Operating revenues		5,410		358		(264	)		5,504		292		(55	)		5,741
Segment net income (loss)		580		50		–			630		54		(1	)		683
Total assets at June 30, 2004	$	32,497	$	2,104	$	(97	)	$	34,504	$	1,833	$	(402	)	$	35,935
Three Months Ended June 30, 2003:
Operating revenues	$	2,606	$	239	$	(118	)	$	2,727	$	123	$	(26	)	$	2,824
Segment net income (loss)		344		79		–			423		9		–			432
Six Months Ended June 30, 2003:
Operating revenues		4,972		346		(191	)		5,127		276		(38	)		5,365
Segment net income (loss)		608		102		–			710		20		–			730
Total assets at December 31, 2003	$	31,412	$	2,409	$	(122	)	$	33,699	$	1,671	$	(325	)	$	35,045

Products and Services

			Electric Utilities Revenues
Period	Retail		Wholesale		Other		Total
	(in millions)
Three Months Ended June 30, 2004	$	2,478	$	344	$	94	$	2,916
Three Months Ended June 30, 2003		2,176		324		227		2,727
Six Months Ended June 30, 2004		4,622		695		187		5,504
Six Months Ended June 30, 2003		4,150		658		319		5,127

117

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings.
	See the Notes to the Condensed Financial Statements herein for information regarding certain legal and administrative proceedings in which Southern Company and its reporting subsidiaries are involved.
Item 4.	Submission of Matters to a Vote of Security Holders.
	Southern Company
	Southern Company held its annual meeting of shareholders on May 26, 2004. Each nominee for director of Southern Company received the requisite plurality of votes for election. The vote tabulation was as follows:

Nominees	Shares For		Shares Withhold Vote
Daniel P. Amos		561,096,823		9,213,597
Dorrit J. Bern		559,474,911		10,835,509
Francis S. Blake		559,207,630		11,102,790
Thomas F. Chapman		561,058,059		9,252,361
H. Allen Franklin		557,021,653		13,288,767
Bruce S. Gordon		560,732,936		9,577,484
Donald M. James		529,323,267		40,987,153
Zack T. Pate		559,607,842		10,702,578
J. Neal Purcell		559,547,359		10,763,061
David M. Ratcliffe		559,718,258		10,592,162
Gerald J. St. Pé		560,734,357		9,576,063

In addition, at the annual meeting, shareholders were asked to vote for the ratification of the appointment of auditors. The vote tabulation was 556,104,768 shares for, 8,549,577 shares against and 5,656,066 shares abstaining. As a result of this vote the audit appointment was ratified. Shareholders were also entitled to vote on the Outside Directors Stock Plan. The vote tabulation was 375,820,740 shares for, 37,899,402 shares against and 11,935,860 shares abstaining. As a result of this vote, the Outside Directors Stock Plan was approved.

Alabama Power

Alabama Power held its annual meeting of common shareholders and preferred shareholders on April 23, 2004, and the following persons were elected to serve as directors of Alabama Power:

Whit Armstrong	Wallace D. Malone, Jr.
David J. Cooper, Sr.	Charles D. McCrary
H. Allen Franklin	Malcolm Portera
R. Kent Henslee	Robert D. Powers
John D. Johns	C. Dowd Ritter
Carl E. Jones, Jr.	James H. Sanford
Patricia M. King	John C. Webb, IV
James K. Lowder	James W. Wright

118

Item 4.	Submission of Matters to a Vote of Security Holders. (Continued)
	All 7,750,000 of the outstanding shares of Alabama Power’s common stock are owned by Southern Company and were voted in favor of the nominees for directors. None of the shares of preferred stock or Class A preferred stock were voted.
	Georgia Power
	Georgia Power held its annual meeting of common shareholders and preferred shareholders on May 19, 2004 and the following persons were elected to serve as directors of Georgia Power:

Juanita P. Baranco	D. Gary Thompson
Robert L. Brown, Jr.	Richard W. Ussery
Anna R. Cablik	William Jerry Vereen
Michael D. Garrett	Carl Ware
David M. Ratcliffe	E. Jenner Wood, III

All of the 7,761,500 outstanding shares of Georgia Power’s common stock are owned by Southern Company and were voted in favor of the nominees for directors. None of the shares of preferred stock were voted.

Gulf Power

Gulf Power held its annual meeting of common shareholders and preferred shareholders on May 19, 2004 and the following persons were elected to serve as directors of Gulf Power:

C. LeDon Anchors	William A. Pullum
William C. Cramer, Jr.	Winston E. Scott
Fred C. Donovan, Sr.	Susan N. Story

All of the 992,717 outstanding shares of Gulf Power’s common stock are owned by Southern Company and were voted in favor of the nominees for directors. None of the shares of preferred stock were voted.

Mississippi Power

Mississippi Power held its annual meeting of common shareholders and preferred shareholders on May 19, 2004 and the following persons were elected to serve as directors of Mississippi Power:

Tommy E. Dulaney	George A. Schloegel
Linda T. Howard	Philip J. Terrell
Robert C. Khayat	Anthony J. Topazi
Aubrey K. Lucas	N. Eugene Warr

All of the 1,121,000 outstanding shares of Mississippi Power’s common stock are owned by Southern Company and were voted in favor of the nominees for directors. None of the shares of preferred stock were voted.

119

Item 4.	Submission of Matters to a Vote of Security Holders. (Continued)
	Savannah Electric
	By written consent, in lieu of the annual meeting of stockholders of Savannah Electric, effective May 5, 2004, the following persons were elected to serve as directors of Savannah Electric:

Gus H. Bell, III	Anthony R. James
Archie H. Davis	Robert B. Miller, III
Walter D. Gnann	Arnold M. Tenenbaum

All of the 10,844,635 outstanding shares of Savannah Electric’s common stock are owned by Southern Company and were voted in favor of the nominees for directors.

Southern Power

By written consent, in lieu of the annual meeting of stockholders of Southern Power, effective April 1, 2004, the number of directors constituting the board of directors was set at six and the following persons were elected to serve as directors of Southern Power:

W. Paul Bowers	Michael D. Garrett
H. Allen Franklin	Charles D. McCrary
Thomas A. Fanning	David M. Ratcliffe

All of the 1,000 outstanding shares of Southern Power’s common stock are owned by Southern Company and were voted in favor of the nominees for directors.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits.

(10)	Material Contracts
	Southern Company
	(a)1	-	Southern Company Deferred Compensation Plan as amended and restated effective January 1, 2004.
	(a)2	-	Outside Directors Stock Plan for The Southern Company and its Subsidiaries, effective May 26, 2004.
	(a)3	-	Amended and Restated Change in Control Agreement between The Southern Company, Southern Company Services, Inc. and David M. Ratcliffe, effective June 1, 2004.
	(a)4	-	Amended and Restated Change in Control Agreement between The Southern Company, Southern Company Services, Inc. and Thomas A. Fanning, effective June 1, 2004.
	(a)5	-	Amended and Restated Change in Control Agreement between The Southern Company, Alabama Power Company and Charles D. McCrary, effective June 1, 2004.
	(a)6	-	Amended and Restated Change in Control Agreement between The Southern Company, Georgia Power Company and Michael D. Garrett, effective June 1, 2004.

120

Item 6.	Exhibits and Reports on Form 8-K.
(10)	Material Contracts (continued)
	(a)7	-	Amended and Restated Change in Control Agreement between The Southern Company, Southern Nuclear and William G. Hairston, III, effective June 1, 2004.
	Alabama Power
	(b)1	-	Southern Company Deferred Compensation Plan as amended and restated effective January 1, 2004. (See Exhibit 10(a)1 herein)
	(b)2	-	Outside Directors Stock Plan for The Southern Company and its Subsidiaries, effective May 26, 2004. (See Exhibit 10(a)2 herein)
	(b)3	-	Amended and Restated Change in Control Agreement between The Southern Company, Alabama Power Company and Charles D. McCrary, effective June 1, 2004. (See Exhibit 10(a)5 herein)
	(b)4	-	Amended and Restated Change in Control Agreement between The Southern Company, Alabama Power Company and C. Alan Martin, effective June 1, 2004.
	Georgia Power
	(c)1	-	Southern Company Deferred Compensation Plan as amended and restated effective January 1, 2004. (See Exhibit 10(a)1 herein)
	(c)2	-	Outside Directors Stock Plan for The Southern Company and its Subsidiaries, effective May 26, 2004. (See Exhibit 10(a)2 herein)
	(c)3	-	Amended and Restated Change in Control Agreement between The Southern Company, Georgia Power Company and Michael D. Garrett, effective June 1, 2004. (See Exhibit 10(a)6 herein)
	Gulf Power
	(d)1	-	Southern Company Deferred Compensation Plan as amended and restated effective January 1, 2004. (See Exhibit 10(a)1 herein)
	(d)2	-	Outside Directors Stock Plan for The Southern Company and its Subsidiaries, effective May 26, 2004. (See Exhibit 10(a)2 herein)
	Mississippi Power
	(e)1	-	Southern Company Deferred Compensation Plan as amended and restated effective January 1, 2004. (See Exhibit 10(a)1 herein)
	(e)2	-	Outside Directors Stock Plan for The Southern Company and its Subsidiaries, effective May 26, 2004. (See Exhibit 10(a)2 herein)

121

Item 6.	Exhibits and Reports on Form 8-K.
(10)	Material Contracts (continued)
	Savannah Electric
	(f)1	-	Southern Company Deferred Compensation Plan as amended and restated effective January 1, 2004. (See Exhibit 10(a)1 herein)
	(f)2	-	Outside Directors Stock Plan for The Southern Company and its Subsidiaries, effective May 26, 2004. (See Exhibit 10(a)2 herein)
(24)	Power of Attorney and Resolutions
	Southern Company
	(a)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2003, File No. 1-3526 as Exhibit 24(a) and incorporated herein by reference.)
	Alabama Power
	(b)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2003, File No. 1-3164 as Exhibit 24(b) and incorporated herein by reference.)
	Georgia Power
	(c)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2003, File No. 1-6468 as Exhibit 24(c) and incorporated herein by reference.)
	Gulf Power
	(d)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2003, File No. 0-2429 as Exhibit 24(d) and incorporated herein by reference.)
	Mississippi Power
	(e)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2003, File No. 001-11229 as Exhibit 24(e) and incorporated herein by reference.)
	Savannah Electric
	(f)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2003, File No. 1-5072 as Exhibit 24(f) and incorporated herein by reference.)

122

Item 6.	Exhibits and Reports on Form 8-K.
(24)	Power of Attorney and Resolutions (continued)
	Southern Power
	(g)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2003, File No. 333-98553 as Exhibit 24(g) and incorporated herein by reference.)
(31)	Section 302 Certifications
	Southern Company
	(a)1	-	Certificate of Southern Company’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
	(a)2	-	Certificate of Southern Company’s Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
	Alabama Power
	(b)1	-	Certificate of Alabama Power’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
	(b)2	-	Certificate of Alabama Power’s Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
	Georgia Power
	(c)1	-	Certificate of Georgia Power’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
	(c)2	-	Certificate of Georgia Power’s Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
	Gulf Power
	(d)1	-	Certificate of Gulf Power’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

123

Item 6.		Exhibits and Reports on Form 8-K.
(a)	Exhibits. (Continued)
		(d)2	-	Certificate of Gulf Power’s Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
		Mississippi Power
		(e)1	-	Certificate of Mississippi Power’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
		(e)2	-	Certificate of Mississippi Power’s Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
		Savannah Electric
		(f)1	-	Certificate of Savannah Electric’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
		(f)2	-	Certificate of Savannah Electric’s Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
		Southern Power
		(g)1	-	Certificate of Southern Power’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
		(g)2	-	Certificate of Southern Power’s Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
(32)		Section 906 Certifications
		Southern Company
		(a)	-	Certificate of Southern Company’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
		Alabama Power
		(b)	-	Certificate of Alabama Power’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
		Georgia Power
		(c)	-	Certificate of Georgia Power’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
		Gulf Power
		(d)	-	Certificate of Gulf Power’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

124

Item 6.		Exhibits and Reports on Form 8-K.
(a)	Exhibits. (Continued)
		Mississippi Power
		(e)	-	Certificate of Mississippi Power’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
		Savannah Electric
		(f)	-	Certificate of Savannah Electric’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
		Southern Power
		(g)	-	Certificate of Southern Power’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K.

The registrants collectively and separately furnished Current Reports on Form 8-K dated April 28, 2004:

Item reported:	Item 12
Financial statements filed:	None

Southern Company filed Current Reports on Form 8-K dated May 7, 2004, May 18, 2004, May 25, 2004 and June 30, 2004:

Items reported:	Items 5
Financial statements filed:	None

Southern Company filed an Amendment to a Current Report dated May 25, 2004 on Form 8-K/A filed July 14, 2004:

Items reported:	Items 5
Financial statements filed:	None

Alabama Power filed Current Reports on Form 8-K dated April 7, 2004 (two reports):

Items reported:	Items 5 and 7
Financial statements filed:	None

Georgia Power filed Current Reports on Form 8-K dated May 7, 2004 and May 18, 2004:

Items reported:	Items 5
Financial statements filed:	None

Gulf Power filed a Current Report on Form 8-K dated April 6, 2004:

Items reported:	Items 5 and 7
Financial statements filed:	None

125

Item 6. Exhibits and Reports on Form 8-K.

     (b) Reports on Form 8-K. (continued)

Mississippi Power filed Current Reports on Form 8-K dated March 3, 2004 (two reports), and May 25, 2004:

Item reported:	Items 5 and 7
Financial statements filed:	None

Mississippi Power filed an Amendment to a Current Report dated May 25, 2004 on Form 8-K/A filed July 14, 2004:

Items reported:	Items 5
Financial statements filed:	None

Savannah Electric filed Current Reports on Form 8-K dated May 7, 2004, May 18, 2004, and May 27, 2004:

Items reported:	Items 5 and 7
Financial statements filed:	None

Southern Power filed Current Reports on Form 8-K dated May 7, 2004 and May 18, 2004:

Items reported:	Items 5
Financial statements filed:	None

126

THE SOUTHERN COMPANY

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	THE SOUTHERN COMPANY
By	David M. Ratcliffe
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
By	Thomas A. Fanning
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: August 5, 2004

127

ALABAMA POWER COMPANY

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	ALABAMA POWER COMPANY
By	Charles D. McCrary
	President and Chief Executive Officer
	(Principal Executive Officer)
By	William B. Hutchins, III
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: August 5, 2004

128

GEORGIA POWER COMPANY

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	GEORGIA POWER COMPANY
By	Michael D. Garrett
	President and Chief Executive Officer
	(Principal Executive Officer)
By	C.B. Harreld
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: August 5, 2004

129

GULF POWER COMPANY

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	GULF POWER COMPANY
By	Susan N. Story
	President and Chief Executive Officer
	(Principal Executive Officer)
By	Ronnie R. Labrato
	Vice President, Chief Financial Officer and Comptroller
	(Principal Financial and Accounting Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: August 5, 2004

130

MISSISSIPPI POWER COMPANY

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	MISSISSIPPI POWER COMPANY
By	Anthony J. Topazi
	President and Chief Executive Officer
	(Principal Executive Officer)
By	Michael W. Southern
	Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: August 5, 2004

131

SAVANNAH ELECTRIC AND POWER COMPANY

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	SAVANNAH ELECTRIC AND POWER COMPANY
By	A.R. James
	President and Chief Executive Officer
	(Principal Executive Officer)
By	Kirby R. Willis
	Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: August 5, 2004

132

SOUTHERN POWER COMPANY

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	SOUTHERN POWER COMPANY
By	William P. Bowers
	President and Chief Executive Officer
	(Principal Executive Officer)
By	Cliff S. Thrasher
	Senior Vice President, Comptroller and Chief Financial Officer
	(Principal Financial and Accounting Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: August 5, 2004

133

EX-10.A.1

                                                                  Exhibit 10(a)1


















                                SOUTHERN COMPANY
                           DEFERRED COMPENSATION PLAN














                   Amended and Restated as of January 1, 2004






                                SOUTHERN COMPANY
                           DEFERRED COMPENSATION PLAN


                                TABLE OF CONTENTS



ARTICLE I             Purpose and Adoption of Plan                       1


ARTICLE II            Definitions                                        1


ARTICLE III           Administration of Plan                             6


ARTICLE IV            Eligibility                                        9


ARTICLE V             Deferral Election                                 11


ARTICLE VI            Participants' Accounts                            13


ARTICLE VII           Account Distribution                              17


ARTICLE VIII          Miscellaneous Provisions                          20









                                SOUTHERN COMPANY
                           DEFERRED COMPENSATION PLAN


                                   ARTICLE I
                          Purpose and Adoption of Plan

1.1 Adoption: Southern Company Services, Inc. and the other Employing Companies
established the Deferred Compensation Plan for The Southern Electric System
effective October 1, 1988. The Plan has been amended from time to time including
this amendment and restatement effective January 1, 2004. Except as otherwise
provided herein, the terms of the Plan as in effect prior to the effective date
of this Plan shall continue to be applicable to deferrals made pursuant to the
Plan prior to January 1, 2004.

1.2 Purpose: This Southern Company Deferred Compensation Plan is designed to
permit a select group of management or highly compensated employees to elect to
defer a portion of their regular compensation during each payroll period and to
defer all or a portion of certain short-term and long-term incentive payments
until their death, disability, retirement, or other termination of employment
with an Employing Company. The Plan shall be an unfunded deferred compensation
arrangement whose benefits shall be paid solely from the general assets of the
Employing Companies.

                                   ARTICLE II
                                   Definitions

         For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:

2.1 "Account" shall mean the account or accounts established and maintained by
an Employing Company to reflect the interest of a Participant in the Plan
resulting from a Participant's deferral of Compensation and/or Incentive Pay, or
transfer of Transferred Amounts, and adjustments thereto to reflect income,
gains, losses, and other credits or charges. Charges to Participant's Accounts
for distributions shall be posted as of the date the Account is valued for
distribution.

2.2 "Board of Directors" shall mean the Board of Directors of the Company.

2.3 "Change in Control Benefit Plan Determination Policy" shall mean the Change
in Control Benefit Plan Determination Policy, as approved by the Southern Board,
as it may be amended from time to time in accordance with the provisions
therein.

2.4 "Closing Price" shall mean the closing price on any trading day of a share
of the Common Stock and/or Mirant Share based on consolidated trading as defined
by the Consolidated Tape Association and reported as part of the consolidated
trading prices of New York Stock Exchange listed securities.

2.5 "Committee" shall mean the committee referred to in Section 3.1 hereof.

2.6 "Common Stock" shall mean the common stock of Southern.

2.7 "Company" shall mean Southern Company Services, Inc.

2.8 "Compensation" shall mean the rate of an Employee's base wages or salary
paid by any Employing Company to an Employee, including amounts contributed by
an Employing Company to the Employee Savings Plan as Elective Employer
Contributions, as said term is defined in the Employee Savings Plan, pursuant to
the Employee's exercise of his or her deferral option made in accordance with
Section 401(k) of the Internal Revenue Code, amounts contributed by an Employing
Company to the Employee Savings Plan as catch-up contributions pursuant to the
Employee's exercise of his deferral option made thereunder in accordance with
the requirements of Section 414(v) of the Internal Revenue Code, and amounts
contributed by an Employing Company to The Southern Company Flexible Benefits
Plan on behalf of the Employee pursuant to his or her salary reduction election
under such plan; but disregarding overtime and any reimbursements to an Employee
paid by any Employing Company including, but not limited to, reimbursements for
such items as moving expenses, automobile expenses, tax preparation expenses,
travel and entertainment expenses, and health and life insurance premiums.

2.9 "Deferral Election" shall mean the Participant's election to defer a portion
of his or her Compensation and/or Incentive Pay pursuant to Article V hereof.

2.10 "Distribution Election" shall mean the election under Article VII hereof,
pursuant to which a Participant elects the distribution of the balance of his or
her Account to be made in either a lump-sum or in up to ten (10) annual
installments following the Participant's death, disability, retirement, or other
termination of Employment with an Employing Company.

2.11 "Effective Date" of this amendment and restatement shall mean January 1,
2004.

2.12 "Employee" shall mean any person who is currently employed by an Employing
Company.

2.13 "Employee Savings Plan" shall mean The Southern Company Employee Savings
Plan, as amended from time to time.

2.14 "Employee Stock Ownership Plan" shall mean The Southern Company Employee
Stock Ownership Plan, as amended from time to time.

2.15 "Employing Company" shall mean the Company, or any affiliate or subsidiary
(direct or indirect) of The Southern Company, which the Board of Directors may
from time to time determine to bring under the Plan and which shall adopt the
Plan, and any successor of any of them. The Employing Companies are set forth in
Appendix A of the Plan, as may be amended from time to time.

2.16 "Enrollment Date" shall mean January 1 of each Plan Year, and such other
dates as may be determined from time to time by the Committee.

2.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

2.18 "Incentive Pay" shall mean such long-term or short-term incentive pay as
the Committee shall permit to be deferred under this Plan for any Plan Year.

2.19 "Investment Election" shall mean the Participant's election to have his or
her deferred Compensation or Incentive Pay invested pursuant to Section 6.3,
Section 6.4, or Section 6.5 hereof.

2.20 "Mirant Plan" shall mean the Mirant Corporation Deferred Compensation Plan
for Directors and Select Employees.

2.21 "Mirant Shares" shall mean the deemed investment in Mirant common stock
described in Section 6.4(d).

2.22 "Mirant Stock Option" shall mean the deemed Mirant common stock investment
option described in Section 6.4(d).

2.23 "Non-adopting Company" shall mean any subsidiary or affiliate of Southern
which is not an Employing Company.

2.24 "Participant" shall mean an Employee or former employee of an Employing
Company who is eligible to and defers Compensation and/or Incentive Pay under
the Plan or who was so eligible and had an unpaid Account balance upon his or
her death, disability, retirement, or other termination of employment with an
Employing Company.

2.25 "Pension Plan" shall mean The Southern Company Pension Plan, as amended
from time to time.

2.26 "Plan" shall mean the Southern Company Deferred Compensation Plan, amended
and restated as of January 1, 2004, as further amended from time to time.

2.27 "Plan Year" shall mean the calendar year.

2.28 "Retirement Income" shall have the same meaning as set forth in the Pension
Plan.

2.29 "Southern" shall mean Southern Company, its successors and assigns.

2.30 "Southern Board" shall mean the board of directors of Southern.

2.31 "Transferred Amount" shall mean an amount equal to the value of a
Participant's accounts under the Mirant Plan which has been transferred to and
credited under the Plan pursuant to Section 6.2 herein in connection with the
Participant's transfer of employment from Mirant Corporation or any of its
subsidiaries to an Employing Company, excluding Mirant Corporation and its
subsidiaries.

2.32 "Trust" shall mean the Southern Company Deferred Compensation Trust.

2.33 "Trustee" shall mean the entity designated as such in the Trust.

2.34 "Valuation Date" shall mean each trading day of the New York Stock
Exchange, or any successor national exchange on which the Common Stock and/or
Mirant Shares are traded and with respect to which a Closing Price may be
determined.

         Where the context requires, the definitions of all terms set forth in
the Pension Plan, the Employee Savings Plan, and the Employee Stock Ownership
Plan shall apply with equal force and effect for purposes of interpretation and
administration of the Plan, unless said terms are otherwise specifically defined
in the Plan. Words in the masculine gender shall include the feminine and neuter
genders, words in the singular shall include the plural, and words in the plural
shall include the singular.

                                  ARTICLE III

                             Administration of Plan

3.1 The general administration of the Plan shall be placed in the Committee. The
Committee shall consist of the Vice President, Human Resources of Southern, the
Vice President, System Compensation and Benefits of Southern Company Services,
Inc., and the Comptroller of Southern. Any member may resign or may be removed
by the Board of Directors and new members may be appointed by the Board of
Directors at such time or times as the Board of Directors in its discretion
shall determine. The Committee shall be chaired by the Vice President, Human
Resources of Southern and may select a Secretary (who may, but need not, be a
member of the Committee) to keep its records or to assist it in the discharge of
its duties. A majority of the members of the Committee shall constitute a quorum
for the transaction of business at any meeting. Any determination or action of
the Committee may be made or taken by a majority of the members present at any
meeting thereof, or without a meeting by resolution or written memorandum
concurred in by a majority of the members.

3.2 No member of the Committee shall receive any compensation from the Plan for
his or her service.

3.3 (a) The Committee shall administer the Plan in accordance with its terms and
shall have all powers necessary to carry out the provisions of the Plan as may
be more particularly set forth herein. The Committee shall interpret the Plan
and shall determine all questions arising in the administration, interpretation,
and application of the Plan. Any such determination by the Committee shall be
conclusive and binding on all persons. The Committee shall be the Plan's agent
for service of process.

(b) If a claim for benefits under the Plan is denied, in whole or in part, the
Committee will provide a written notice of the denial within a reasonable period
of time, but not later than 90 days after the claim is received. If special
circumstances require more time to process the claim, the Committee will issue a
written explanation of the special circumstances prior to the end of the 90 day
period and a decision will be made as soon as possible, but not later than 180
days after the claim is received.

     The written notice of claim denial will include:

     o    Specific reasons why the claim was denied;

     o    Specific references to applicable provisions of the Plan document or
          other relevant records or papers on which the denial is based, and
          information about where a Participant or his or her beneficiary may
          see them;

     o    A description of any additional material or information needed to
          process the claim, and an explanation of why such material or
          information is necessary;

     o    An explanation of the claims review procedure, including the time
          limits applicable to such procedure, as well as a statement notifying
          the Participant or his or her beneficiary of their right to file suit
          if the claim for benefits is denied, in whole or in part, on review.

         Upon request, a Participant or his or her beneficiary will be provided
without charge, reasonable access to, and copies of, all non-confidential
documents that are relevant to any denial of benefits. A claimant has 60 days
from the day he or she receives the original denial to request a review. Such
request must be made in writing and sent to the Committee. The request should
state the reasons why the claim should be reviewed and may also include evidence
or documentation to support the claimant's position.

         The Committee will reconsider the claimant's claim, taking into account
all evidence, documentation, and other information related to the claim and
submitted on the claimant's behalf, regardless of whether such information was
submitted or considered in the initial denial of the claim. The Committee will
make a decision within 60 days. If special circumstances require more time for
this process, the claimant will receive written explanation of the special
circumstances prior to the end of the initial 60 day period and a decision will
be sent as soon as possible, but not later than 120 days after the Committee
receives the request.

         No legal action to recover benefits or enforce or clarify rights under
a Plan can be commenced until the Participant or his or her beneficiary has
first exhausted the claims and review procedures provided under the Plan.

3.4 The Committee may adopt such regulations as it deems desirable for the
conduct of its affairs and may appoint such accountants, counsel, actuaries,
specialists, and other persons as it deems necessary or desirable in connection
with the administration of this Plan.

3.5 The Committee shall be reimbursed by the Employing Companies for all
reasonable expenses incurred by it in the fulfillment of its duties, including,
but not limited to, fees of accountants, counsel, actuaries, and other
specialists, and other costs of administering the Plan.

3.6 (a) The Committee is responsible for the daily administration of the Plan
and may appoint other persons or entities to perform any of its fiduciary
functions. The Committee and any such appointee may employ advisors and other
persons necessary or convenient to help the Committee carry out its duties,
including its fiduciary duties. The Committee shall review the work and
performance of each such appointee, and shall have the right to remove any such
appointee from his or her position. Any person, group of persons, or entity may
serve in more than one fiduciary capacity.

         (b) The Committee shall maintain accurate and detailed records and
accounts of Participants and of their rights under the Plan and of all receipts,
disbursements, transfers, and other transactions concerning the Plan. Such
accounts, books, and records relating thereto shall be open at all reasonable
times to inspection and audit by the Board of Directors and by any persons
designated thereby.

         (c) The Committee shall take all steps necessary to ensure that the
Plan complies with the law at all times. These steps shall include such items as
the preparation and filing of all documents and forms required by any
governmental agency; maintaining of adequate Participants' records; recording
and transmission of all notices required to be given to Participants and their
beneficiaries; the receipt and dissemination, if required, of all reports and
information received from an Employing Company; securing of such fidelity bonds
as may be required by law; and doing such other acts necessary for the proper
administration of the Plan. The Committee shall keep a record of all of its
proceedings and acts, and shall keep all such books of account, records, and
other data as may be necessary for proper administration of the Plan. The
Committee shall notify the Employing Companies upon their request of any action
taken by the Committee, and when required, shall notify any other interested
person or persons.

                                   ARTICLE IV
                                   Eligibility

4.1 Any Employee who is determined eligible to participate in accordance with
Section 4.2 of the Plan and whose base compensation and salary grade level
equals or exceeds such minimum threshold as may be established by the Committee
from time to time may elect to participate in the Plan beginning on any
Enrollment Date by electing to have his or her Compensation and/or Incentive Pay
reduced and such amounts contributed to the Plan in accordance with Article V
hereof, and directing the investment of such contributions in accordance with
Article VI hereof. An Employee who is eligible to participate and elects to
defer Compensation and/or Incentive Pay shall be a Participant in the Plan. The
Committee shall be authorized to establish the minimum base compensation and the
salary grade level required for eligibility to participate in the Plan, to be
effective as of the first day of the next succeeding Plan Year. Notwithstanding
the foregoing, any Employee eligible to participate in any similar deferred
compensation plan maintained by an Employing Company or maintained by a
Non-adopting Company shall be ineligible to defer Compensation or Incentive Pay
under this Plan, unless the Committee in its sole discretion shall determine
otherwise.

4.2 The Committee shall determine which Employees are eligible to participate in
the Plan. Additionally, the Committee shall be authorized to modify the minimum
base compensation and the salary grade threshold described in Section 4.1 of the
Plan and to rescind the eligibility of any Participant to continue deferrals if
this is necessary or advisable to ensure that the Plan is maintained primarily
for the purpose of providing deferred compensation to a select group of
management or highly compensated employees, as such terms are defined by the
Employee Retirement Income Security Act of 1974, as amended. A Participant whose
eligibility is rescinded or who loses eligibility for any reason shall not be
eligible to defer Compensation or Incentive Pay until eligibility is restored in
accordance with the guidelines established by the Committee.

4.3 The Committee shall have the authority to permit, if it deems appropriate,
separate Deferral Elections under Article V hereof, Investment Elections under
Article VI hereof, and Distribution Elections under Article VII hereof for
Compensation and/or Incentive Pay, respectively.

4.4 Notwithstanding the foregoing provisions of this Article IV, an Employee who
has Transferred Amounts transferred to and credited under the Plan pursuant to
Section 6.2 herein shall be a Participant in the Plan. However, an Employee who
becomes a Participant under this Section 4.4 who is not determined eligible
under Section 4.2 shall be a non-active Participant and shall be ineligible to
actively defer Compensation and/or Incentive Pay under this Plan unless such
Employee is later determined to be eligible under Section 4.2 or the Committee
in its sole discretion determines otherwise. As of the Effective Date, the Plan
shall not accept new Transferred Amounts.

                                   ARTICLE V
                                Deferral Election

5.1 A Participant may elect to defer payment of a portion of his or her
Compensation otherwise payable to him by his or her Employing Company during
each payroll period of the next succeeding Plan Year by any whole percentage not
to exceed fifty percent (50%) of his or her Compensation, or such greater or
lesser amount as shall be determined by the Committee from time to time. A
Participant may also elect to defer payment of up to one hundred percent (100%),
by whole percentages, of any Incentive Pay otherwise payable to him or her by
his or her Employing Company. The Company shall have the authority to withhold
any mandatory taxes from Compensation and/or Incentive Pay at any time as
required by law.

5.2 The Deferral Election shall be made in a manner prescribed by the Committee
and shall state as follows: (a) That the Participant wishes to make an election
to defer the receipt of a portion of his or her Compensation and/or all or a
portion of his or her Incentive Pay; (b) The whole percentage of his or her
Compensation and/or Incentive Pay which the Participant elects to defer; and (c)
The Distribution Election under Article VII hereof.

5.3 The Deferral Election of a Participant shall be made by the Participant in a
manner prescribed by the Committee and delivered by the date established by the
Committee and shall be effective on the first day of the Plan Year immediately
following the date of the Deferral Election. A Deferral Election with respect to
the deferral of future Compensation and/or Incentive Pay shall be an annual
election for each Plan Year unless otherwise modified or revoked as provided in
Section 5.4. The termination of a Participant's participation in the Plan shall
not affect the Participant's Compensation or Incentive Pay previously deferred
under the Plan, which shall be invested and distributed in accordance with the
Participant's elections and the terms and conditions of the Plan. Such
terminated Participant shall become an inactive Participant with respect to
eligibility to make future deferrals under this Plan.

5.4 Notwithstanding the provisions of Section 5.3 of the Plan, the Committee, in
its sole discretion upon written application by a Participant, may authorize the
suspension of a Participant's Deferral Election in the event of an unforeseen
emergency or hardship of the Participant. A Deferral Election suspension will be
on account of hardship if it is necessary in light of immediate and heavy
financial needs of the Participant which cannot reasonably be met from the
Participant's other financial resources. For this purpose, any amounts held in
the Participant's accounts in the Employee Savings Plan and the Employee Stock
Ownership Plan shall not be deemed to be reasonably available. Any Deferral
Election suspension made as prescribed by the Committee shall become effective
as of the first payroll period beginning thirty (30) days after receipt of the
Participant's suspension application, or as soon as practicable after the
receipt of such application. Such Deferral Election suspension shall be
effective for the remainder of the Plan Year of application.

                                   ARTICLE VI
                             Participants' Accounts

6.1 Upon the Committee's receipt of a Participant's valid Deferral Election
under Article V hereof, beginning as of the Enrollment Date, the designated
portion of Compensation and/or Incentive Pay shall be credited to the
Participant's Account as of the date of each such deferral in accordance with
the provisions of this Article VI.

6.2  Subject  to  Section  4.4,  Transferred  Amounts  shall  be  credited  to a
Participant's  Account as soon as  administratively  practicable  following  the
Participant's  transfer of employment.  Any  Transferred  Amounts  credited to a
Participant's  Account which were invested at the prime  interest rate under the
Mirant Plan shall be invested  pursuant to Section 6.3 herein.  Any  Transferred
Amounts  credited  to a  Participant's  Account  which were  invested  in Mirant
Corporation  phantom stock under the Mirant Plan shall be invested in the Mirant
Stock Option  investment  pursuant to the terms of Section  6.4(d)  herein,  and
prior to the opening of the final window  period  described  in Section  6.4(d),
such  Transferred  Amounts may be  transferred  out of the Mirant  Stock  Option
investment during other window periods  established by the Committee pursuant to
Section  6.5  herein.  Upon  a  Participant's  termination  of  employment,  the
Transferred Amounts and accumulated  investment return held in the Participant's
Account  shall  be  distributed  to  the  Participant  in  accordance  with  the
Participant's Distribution Election and the provisions of Article VII.

6.3 On the last business day of each month, the Account of each Participant
electing in a manner prescribed by the Committee to invest his or her deferred
Compensation and/or Incentive Pay for a Plan Year in accordance with this
Section 6.3 or transferring a Transferred Amount to this Plan in accordance with
Section 6.2 for investment pursuant to this Section 6.3 shall be credited by the
Employing Company with a deemed amount equal to the monthly equivalent of the
per annum prime rate of interest as published by the Wall Street Journal as the
base rate on corporate loans posted as of the last business day of each month by
at least seventy five (75%) percent of the United States' largest banks,
compounded monthly on any Account balance so invested until such balance is
fully distributed.

6.4 The designated portion of the Account of each Participant electing in a
manner prescribed by the Committee to invest his or her deferred Compensation
and/or Incentive Pay for a Plan Year in accordance with this Section 6.4 shall
be credited on the effective date of investment with the deemed number of shares
(including fractional shares) of Common Stock which could have been purchased on
such date with the dollar amount of such deferral, based upon the Common Stock's
Closing Price on the Valuation Date immediately preceding the date of
investment. As of the date on which occurs the payment of dividends on the
Common Stock, if any, there shall be credited with respect to the deemed number
of shares of Common Stock in the Participant's Account on such date such
additional deemed shares (including fractional shares) of Common Stock as
follows:

     (a) In the case of cash dividends, such additional deemed shares as could
be purchased at the Closing Price on the Valuation Date immediately preceding
the dividend payment date with the dividends which would have been payable on
the deemed number of shares previously credited to the Participant's Account;

     (b) In the case of dividends payable in property other than cash or Common
Stock, such additional deemed shares as could be purchased at the Closing Price
on the Valuation Date immediately preceding the dividend payment date with the
fair market value of the property which would have been payable on the deemed
number of shares previously credited to the Participant's Account; or

     (c) In the case of dividends payable in Common Stock, such additional
deemed shares as would have been payable on the deemed number of shares
previously credited to the Participant's Account; or

     (d) In the case of a deemed distribution of Mirant Corporation ("Mirant")
common stock as a result of a spin-off of Mirant from the Southern Company or
the transfer of Transferred Amounts which were invested in Mirant phantom stock
under the Mirant Plan pursuant to Section 6.2 herein (collectively, "Mirant
Shares"), the Mirant Shares shall be valued and invested in Mirant Shares in the
same manner as if Mirant Shares were Common Stock under this Section 6.4. This
investment under the Plan shall be the "Mirant Stock Option." As of the date on
which occurs the payment of dividends on Mirant Shares, if any, such dividends
shall also be credited on the Mirant Shares in the same manner as dividends are
credited on Common Stock. The Mirant Shares shall be retained in a Mirant Stock
Option investment for a limited period established by the Committee. The
Participant will be given the opportunity to transfer the Mirant Shares into
another investment option during a specific window period or periods for such
Mirant Shares established by the Committee pursuant to Section 6.5. Once the
period(s) described in the preceding sentence close, the Committee shall
transfer the Mirant Shares into Common Stock at a time and in a manner
designated by the Committee.

6.5 (a) The Investment Election by a Participant with respect to deferrals into
and earnings on his or her Account shall be made in a manner prescribed by the
Committee. Such Investment Elections shall be delivered in accordance with such
instructions and shall be effective on the first day of such succeeding Plan
Year. Such Investment Elections shall be irrevocable for the Plan Year in which
they apply.

     (b) The Participant may transfer in accordance with procedures prescribed
by the Committee all or a portion of his Account between investment options
during a window period which may be designated by the Committee. Any such
transfer shall constitute an Investment Election as to the amount transferred
and shall be effective immediately upon transfer. The length and timing of each
window period, the procedures for transfer and the valuation of transferred
Accounts or portions of Accounts shall be determined by the Committee.

6.6 The Committee shall issue a report at least annually to each Participant
holding an Account, setting forth at least the following: (a) with respect to
amounts invested under Section 6.3 hereof, as of the last day of the Plan Year,
the Account Balance, the dollar amount of deferrals, and earnings thereon, and
(b) with respect to amounts invested under Section 6.4 hereof, the Closing Price
of shares of Common Stock and/or Mirant Shares credited to each Participant's
Account as of the Valuation Date on or immediately preceding the last day of the
Plan Year, the total number of deemed shares of Common Stock and/or Mirant
Shares (and fractions thereof), and the total value of the Participant's deemed
investment in Common Stock and/or Mirant Shares as of such Valuation Date.

                                  ARTICLE VII
                              Account Distribution

7.1 (a) When a Participant retires or terminates his or her employment with an
Employing Company, he or she shall be entitled to receive in cash an amount
equal to the dollar amount of any deferrals, Transferred Amounts, and any
amounts in lieu of interest thereon credited to his or her Account under Section
6.3 hereof, and the dollar value of the product of the Closing Price multiplied
by the number of deemed shares of Common Stock and/or Mirant Shares (and
fractions thereof) credited to his or her Account in accordance Section 6.4
hereof, determined as of the date the Account is valued for distribution. Such
amounts shall be paid in accordance with the Participant's most recent
Distribution Election effective in accordance with Section 7.4. No portion of a
Participant's Account shall be distributed in Common Stock.

         (b) The transfer by a Participant between subsidiaries or affiliates of
Southern shall not be deemed to be a termination of employment with an Employing
Company for purposes of the Plan.

7.2 In the event that a Participant's most recent Distribution Election
effective in accordance with Section 7.4 is to receive a lump-sum distribution
of his or her Account, the dollar amount determined under Section 7.1 hereof
shall be paid to the Participant not later than sixty (60) days following the
date on which the Participant's termination of employment occurs, or as soon as
reasonably practicable thereafter.

7.3 In the event that a Participant's most recent Distribution Election
effective in accordance with Section 7.4 is to receive the distribution of his
or her Account in annual installments, the first payment shall be made not later
than sixty (60) days following the date on which the Participant's termination
of employment occurs, or as soon as reasonably practicable thereafter, and shall
be in an amount equal to the dollar balance in the Participant's Account
determined under Section 7.1 hereof, divided by the number of annual
installments elected. Subsequent annual installments shall be in an amount equal
to the dollar value of the Participant's Account determined under Section 7.1
hereof divided by the number of the remaining annual payments, and shall be paid
as soon as practicable following each anniversary of the initial payment date
until the balance of the Participant's Account is paid in full.

7.4 The Participants' initial Distribution Elections may not be revoked and
shall govern the distribution of the Participants' Accounts. Notwithstanding the
foregoing, and except as otherwise provided herein, the Committee may, in its
sole discretion, upon application by a Participant, accept an amended
Distribution Election from a Participant provided the election is made not later
than the 366th day prior to a distribution of such Participant's Account in
accordance with the terms of the Plan; provided further, however, that any
Participant who is required to file reports pursuant to Section 16(a) of the
Securities and Exchange Act of 1934, as amended, with respect to equity
securities of Southern shall not be permitted to amend his or her Distribution
Election during any time period for which such Participant is required to file
any such reports with respect to the portion of his or her Account invested in
accordance with the provisions of Section 6.3 of the Plan, unless the Committee
in its sole discretion shall determine otherwise.

7.5 Upon the death of a Participant prior to the complete distribution of his or
her Account, the unpaid Account balance shall be paid in the sole discretion of
the Committee (a) in a lump-sum to the Participant's designated beneficiary
within sixty (60) days following the date on which the Committee is provided
evidence of the Participant's death (or as soon as reasonably practicable
thereafter) or (b) in accordance with the Distribution Election made by such
Participant. In the event a beneficiary designation is not on file or the
designated beneficiary is deceased or cannot be located, payment will be made to
the Participant's estate.

7.6 Beneficiary designations may be changed by the Participants at any time
without the consent of any prior beneficiary.

7.7 Upon the total disability of a Participant, as determined by the Social
Security Administration, prior to the complete distribution of his or her
Account, the unpaid balance of his or her Account shall be paid in the sole
discretion of the Committee (a) in a lump-sum to the Participant or his or her
legal representative within sixty (60) days following the date on which the
Committee receives notification of the determination of disability by the Social
Security Administration (or as soon as reasonable practicable thereafter) or (b)
in accordance with the Participant's Deferral Election.

7.8 Upon application made by a Participant, his or her designated beneficiary,
or an authorized legal representative, the Committee may in its sole discretion
determine to accelerate payments or, in the event of death or total disability
(as determined by Social Security Administration), may extend or otherwise make
payments in a manner different from the manner in which such payment would
otherwise be made under the Participant's Deferral Election in the absence of
such determination.

7.9 In the event a Participant who is employed on or after January 1, 1999 with
an "Employing Company" (as defined in the Change in Control Benefit Plan
Determination Policy) disputes the calculation of his Account or payment of
amounts due under the terms of this Plan, such Participant has recourse against
the Company, the Employing Company by which Participant is employed, if
different, the Plan, and the Trust for the payment of benefits to the extent the
Trust so provides.

7.10 The provisions of the Change in Control Benefit Plan Determination Policy
are incorporated herein by reference to determine the occurrence of a change in
control or preliminary change in control of Southern or an Employing Company,
the benefits to be provided hereunder, and the funding of the Trust in the event
of such a change in control. Any modifications to the Change in Control Benefit
Plan Determination Policy are likewise incorporated herein.

                                  ARTICLE VIII
                            Miscellaneous Provisions

8.1 Neither the Participant, his or her beneficiary, nor his or her legal
representative shall have any rights to commute, sell, assign, transfer, or
otherwise convey the right to receive any payments hereunder, which payments and
the rights thereto are expressly declared to be non-assignable and
nontransferable. Any attempt to assign or transfer the right to payments of this
Plan shall be void and have no effect.

8.2 Except as expressly limited under the terms of the Trust, an Employing
Company maintaining an Account for the benefit of a Participant shall neither
reserve nor specifically set aside funds for the payment of its obligations
under the Plan. In any event, such obligations shall be paid or deemed to be
paid solely from the general assets of the Employing Companies. Participants
shall only have the status of a general, unsecured creditor of the Employing
Company(ies). Notwithstanding that a Participant shall be entitled to receive
the balance of his or her Account under the Plan, the assets from which such
amount may be paid shall at all times be subject to the claims of the creditors
of the Participants' Employing Companies.

8.3 Except for the provisions of Section 7.10 hereof, which may not be amended
following a "Southern Change in Control" or "Subsidiary Change in Control" (as
defined in the Change in Control Benefit Plan Determination Policy), the Plan
may be amended, modified, or terminated by the Board of Directors in its sole
discretion at any time and from time to time; provided, however, that no such
amendment, modification, or termination shall impair any rights to any amounts
which have been earned or deferred under the Plan prior to such amendment,
modification, or termination. Payment in full in cash of the amount credited to
a Participant's Account as of the date of any amendment, modification, or
termination of the Plan shall not be deemed to be an impairment of the
Participant's rights under the Plan. The Plan may also be amended or modified by
the Committee if such amendment or modification does not involve a substantial
increase in cost to any Employing Company.

8.4 It is expressly understood and agreed that the payments made in accordance
with the Plan are in addition to any other benefits or compensation to which a
Participant may be entitled or for which he or she may be eligible, whether
funded or unfunded, by reason of his or her employment with any Employing
Company.

8.5 There shall be deducted from each payment under the Plan the amount of any
tax required by any governmental authority to be withheld and paid over by an
Employing Company to such governmental authority for the account of the person
entitled to such distribution.

8.6 Any Compensation or Incentive Pay deferred by a Participant while employed
by an Employing Company and any Transferred Amounts shall not be considered
"compensation," as the term is defined in the Employee Savings Plan, the
Employee Stock Ownership Plan, or the Pension Plan. Distributions from a
Participant's Account shall not be considered wages, salaries, or compensation
under any other employee benefit plan.

8.7 No provision of this Plan shall be construed to affect in any manner the
existing rights of an Employing Company to suspend, terminate, alter, modify,
whether or not for cause, the employment relationship of the Participant and his
or her Employing Company.

8.8 This Plan, and all rights under it, shall be governed by and construed in
accordance with the laws of the State of Georgia.

         IN WITNESS WHEREOF, the amended and restated Plan has been executed by
duly authorized officers of Southern Company Services, Inc. pursuant to
resolutions of the Committee, this 1st day of June, 2004.

                                    SOUTHERN COMPANY SERVICES, INC.

                                    By: /s/Ellen N. Lindemann

                                    Its: Senior Vice President, Human Resources

     Attest:

By:  /s/Sam H. Dabbs, Jr.

Its: Assistant Secretary






                                   APPENDIX A


                              THE SOUTHERN COMPANY
                           DEFERRED COMPENSATION PLAN


                    EMPLOYING COMPANIES AS OF JANUARY 1, 2004


                              Alabama Power Company
                              Georgia Power Company
                               Gulf Power Company
                            Mississippi Power Company
                       Savannah Electric and Power Company
                     Southern Communications Services, Inc.
                     Southern Company Energy Solutions, Inc.
                         Southern Company Services, Inc.
                    Southern Nuclear Operating Company, Inc.

EX-10.A.2

                                                                  Exhibit 10(a)2

                        OUTSIDE DIRECTORS STOCK PLAN FOR
                   THE SOUTHERN COMPANY AND ITS SUBSIDIARIES


                             Effective May 26, 2004






                        OUTSIDE DIRECTORS STOCK PLAN FOR
                    THE SOUTHERN COMPANY AND ITS SUBSIDIARIES


                                    Preamble


         Prior to the Effective Date (defined herein) of this Outside Directors
Stock Plan for The Southern Company and Its Subsidiaries (the "Plan"), Directors
(defined herein) participated in The Southern Company Outside Directors Stock
Plan ("Southern Stock Plan") and the Outside Directors Stock Plan for
Subsidiaries of the Southern Company ("Subsidiaries Stock Plan"). The purpose of
this Plan is to update the stock compensation provisions to be in compliance
with New York Stock Exchange rules and to merge the Southern Stock Plan and the
Subsidiaries Stock Plan into this successor Plan in order to consolidate the
statement of these compensation related obligations to Directors. Grants of
stock to Directors prior to the Effective Date are governed by the terms of the
Southern Stock Plan and the Subsidiaries Stock Plan, as applicable.

         The Company has reserved 1,000,000 (one million) authorized and
registered shares of Stock (defined herein) that may be granted to Directors
under the terms of this Plan. Additionally, any unissued shares of Stock
previously authorized and registered for issuance under the Southern Stock Plan
and Subsidiaries Stock Plan as of May 26, 2004 shall be transferred to the Plan,
added to the reserved Stock and available for issuance to Participants under the
Plan. This Plan shall expire on the tenth (10th) anniversary of the Effective
Date.

                    ARTICLE I - PURPOSE AND ADOPTION OF PLAN

         1.1 Adoption. The Southern Company hereby adopts the Outside Directors
Stock Plan for The Southern Company and Its Subsidiaries, effective May 26, 2004
subject to (a) the approval of the adoption by the Board of Directors of The
Southern Company of the Outside Directors Stock Plan for The Southern Company
and Its Subsidiaries by the shareholders of the Company at the annual meeting
thereof to be held on May 26, 2004, and (b) the Company's receipt of the
requisite approval of the issuance of the Stock pursuant to the Plan by the
Securities and Exchange Commission under the Public Utility Holding Company Act
of 1935, as amended, and the rules thereunder.

         1.2 Purpose. The Plan is designed to more closely align the interests
of Directors with the interests of the shareholders of the Company through
ownership of Stock.

                            ARTICLE II - DEFINITIONS

         2.1 "Affiliated Employer" shall mean any corporation which is a member
of the controlled group of corporations of which the Company is the common
parent corporation.

         2.2 "Board of Directors" shall mean either the Southern Board or a
System Company Board, as applicable to a Director.

         2.3 "Commission" shall mean the Securities and Exchange Commission.

         2.4 "Company" shall mean The Southern Company.

         2.5 "Director" shall mean any person who is not an active employee of
the Company or a System Company and who either serves on the Southern Board or a
System Company Board.

         2.6 "Effective Date" shall mean May 26, 2004.

         2.7 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         2.8 "Market Value" shall mean the following:

         (a) With respect to Stock that is issued by the Company, the average of
the high and low prices of the Stock, as published in the Wall Street Journal in
its report of New York Stock Exchange composite transactions, on the date one
day prior to the date of distribution as set forth in Section 4.3(a) of the Plan
(or the average of the high and low sale prices on the trading day immediately
preceding such determination date if the Stock is not traded on the date one day
prior to the date of distribution).

         (b) With respect to Stock that is purchased on the open market, the
actual purchase price paid for such Stock on the date of purchase. 2.9
"Participant" shall mean each Director who meets the requirements of Section 3.1
of the Plan.

         2.10 "Plan" shall mean the Outside Directors Stock Plan for The
Southern Company and Its Subsidiaries, as amended from time to time.

         2.11 "Plan Administrator" shall mean the Governance Committee of the
Southern Board.

         2.12 "Plan Year" shall mean the calendar year.

         2.13 "Retainer Fee" shall mean the annual rate of the fees paid to a
Director as determined by the Board of Directors from time-to-time, but
excluding reimbursements for expenses and any fees or compensation for (a)
attendance at the meetings of the Board of Directors or any committee, (b)
service on a committee, and (c) service at the request of the Board of Directors
or a committee.

         2.14 "Stock" shall mean the Company's common stock, par value $5.00 per
share.

         2.15 "Southern Board" shall mean the Board of Directors of The Southern
Company.

         2.16 "System Company" shall mean any Affiliated Employer of the Company
which the Southern Board may from time to time determine to bring under the Plan
and which shall adopt the Plan, and any successor of any of them. The System
Companies that have adopted the Plan are listed in Schedule A, attached hereto,
as such Schedule may be amended from time to time.

         2.17 "System Company Board" shall mean the Board of Directors of a
System Company.

         The masculine pronoun shall be construed to include the feminine
pronoun and the singular shall include the plural, where the context so
requires.

                           ARTICLE III - ELIGIBILITY

3.1      Eligibility Requirements.

         (a) Except as provided in Subsections (b) and (c) below, each Director
shall become a Participant in the Plan on the first date such Director serves on
the Board of Directors.

         (b) For purposes of the 2004 Plan Year, a Director who is serving on a
Board of Directors as of the Effective Date shall become a Participant in the
Plan on the Effective Date, subject to (1) approval of the Plan by the
shareholders of the Company at the annual meeting thereof to be held on May 26,
2004, and (2) the Company's receipt of the requisite approval of the Plan by the
Commission under the Public Utility Holding Company Act of 1935, as amended, and
the rules thereunder.

              ARTICLE IV - FORM AND TIME OF BENEFIT DISTRIBUTIONS


         4.1 Stock Grant. Each Participant shall receive a portion of his annual
Retainer Fee in Stock, with the remainder of such annual Retainer Fee and
meeting attendance fees to be payable, in increments elected by the Director in
accordance with Section 4.2 below, in cash or in Stock. The portion of the
annual Retainer Fee required to be paid in Stock pursuant to this Section 4.1
may be denominated as dollars and/or shares and shall be stated in Schedule B,
attached hereto, as such Schedule shall be amended from time to time.

         4.2 Election to Determine Percentage or Amount of Compensation to be
Paid in Stock. Each Participant shall have an opportunity to elect to have the
non-Stock portion of his Retainer Fee paid in cash or Stock of the Company, or a
combination thereof. Each Participant also shall have an opportunity to elect to
have a portion of his meeting attendance fees payable in Stock. Such elections
shall be made at the time specified by the Plan Administrator on a form provided
to the Participant by the Plan Administrator. Nothing contained in this Section
4.2 shall be interpreted in such a manner as would disqualify the Plan from
treatment as a "formula plan" under Rule 16b-3, as promulgated by the Commission
under the Exchange Act, as that rule may be amended from time to time.

         4.3 Amount and Date of Payment for Stock Compensation.

         (a) For any Plan Year in which a Director is a Participant for the full
Plan Year, any Stock compensation due a Participant pursuant to Sections 4.1 and
4.2 above shall be payable on a quarterly basis. The amount of Stock to be
distributed to a Participant shall initially be determined by first dividing the
Participant's required and elected dollar amount of Stock compensation by four
(4) and then dividing such quarterly quotient by the Market Value of the Stock.
Subsequent distributions shall be based on such quarterly quotient divided by
the Market Value of the Stock.

         (b) Notwithstanding the foregoing, for purposes of the 2004 Plan Year,
for Participants who are serving as Directors as of the Effective Date, no Stock
distributions shall be made under the Plan prior to receipt of the requisite
approval described in Section 1.1; provided, however, that once the requisite
approval of the Plan is received, the Stock distribution shall be made on the
first quarterly date following such approval in accordance with Article IV.

         4.4 Deferral of Retainer. The portion of the Retainer Fee required to
be paid in Stock pursuant to Section 4.1 shall be deferred in accordance with
the terms of the deferred compensation plan maintained by the Company or
Subsidiary Company for its Directors. Directors also shall have the option to
defer in such plan pursuant to its terms that portion of the Retainer Fee not
required to be paid in Stock and meeting attendance fees.

         4.5 Death Benefits. No grants of Stock shall be made to any beneficiary
of a Participant following a Participant's death.

                       ARTICLE V - ADMINISTRATION OF PLAN

         5.1 Administrator. The general administration of the Plan shall be the
responsibility of the Plan Administrator.

         5.2 Powers. The Plan Administrator shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan more particularly set forth herein. It shall interpret
the Plan and shall have the discretion to determine all questions arising in the
administration, interpretation and application of the Plan, including any
ambiguities contained herein or any questions of fact. Any such determination by
it shall be conclusive and binding on all persons. It may adopt such regulations
as it deems desirable for the conduct of its affairs. It may appoint such
accountants, counsel, actuaries, specialists and other persons as it deems
necessary or desirable in connection with the administration of this Plan, and
shall be the agent for the service of process.

         5.3 Duties of the Plan Administrator.

         (a) The Plan Administrator is responsible for the daily administration
of the Plan. It may appoint other persons or entities to perform any of its
fiduciary functions. The Plan Administrator and any such appointee may employ
advisors and other persons necessary or convenient to help it carry out its
duties, including its fiduciary duties. The Plan Administrator shall have the
right to remove any such appointee from his position. Any person, group of
persons or entity may serve in more than one fiduciary capacity.

         (b) The Plan Administrator shall maintain accurate and detailed records
and accounts of Participants and of their rights under the Plan and of all
receipts, disbursements, transfers and other transactions concerning the Plan.
Such accounts, books and records relating thereto shall be open at all
reasonable times to inspection and audit by persons designated by the Board of
Directors.

         (c) The Plan Administrator shall take all steps necessary to ensure
that the Plan complies with the law at all times. These steps shall include such
items as the preparation and filing of all documents and forms required by any
governmental agency; maintaining of adequate Participants' records; recording
and transmission of all notices required to be given to Participants; the
receipt and dissemination, if required, of all reports and information received
relating to the Plan; securing of such fidelity bonds as may be required by law;
and doing such other acts necessary for the proper administration of the Plan.
The Plan Administrator shall keep a record of all of its proceedings and acts,
and shall keep all such books of account, records and other data as may be
necessary for proper administration of the Plan.

         5.4 Indemnification. The System Companies and the Company shall
indemnify the Plan Administrator against any and all claims, losses, damages,
expenses and liability arising from any action or failure to act, except when
the same is finally judicially determined to be due to gross negligence or
willful misconduct. The System Companies and the Company may purchase at their
own expense sufficient liability insurance for the Plan Administrator to cover
any and all claims, losses, damages and expenses arising from any action or
failure to act in connection with the execution of the duties as Plan
Administrator.

                           ARTICLE VI - MISCELLANEOUS

         6.1 Assignment. Neither the Participant nor his legal representative
shall have any rights to sell, assign, transfer or otherwise convey the right to
receive the payment of any benefit due hereunder, which payment and the right
thereto are expressly declared to be nonassignable and nontransferable. Any
attempt to assign or transfer the right to payment under the Plan shall be null
and void and of no effect.

         6.2 Amendment and Termination. The Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time by the
Southern Board or by the Governance Committee with the approval of the Southern
Board, upon execution of a duly authorized written document; provided, however,
that, without the approval of the shareholders of the Company entitled to vote
thereon, no amendment may be made which would, absent such shareholder approval,
disqualify the Plan for coverage under Rule 16b-3, as promulgated by the
Commission under the Exchange Act, as that rule may be amended from time to
time; and provided further that the Plan may not be amended more than once every
six (6) months unless such amendment is made in order to comply with changes to
either the Internal Revenue Code of 1986, as amended, or the Employee Retirement
Income Security Act of 1974, as amended, and the rules thereunder.
Notwithstanding the foregoing, no such amendment or termination shall impair any
rights to payments to which a Participant may be entitled prior to the effective
date of such amendment or termination.

         6.3 No Guarantee of Continued or Future Service on a Board of
Directors. Participation hereunder shall not be construed as creating a right in
any Director to continued service or future service on the Board of Directors.
Participation hereunder does not constitute an employment contract between any
Director and any System Company or the Company as the case may be.

         6.4 Construction. This Plan shall be construed in accordance with and
governed by the laws of the State of Georgia, to the extent such laws are not
otherwise superseded by the laws of the United States.

            [The remainder of this page is left intentionally blank.]





         IN WITNESS WHEREOF, the Southern Board, through its duly authorized
officers, has adopted this Outside Directors Stock Plan for The Southern Company
and Its Subsidiaries this 16th day of February, 2004, to be effective as
provided herein.

                                         THE SOUTHERN COMPANY:

(CORPORATE SEAL)
                                         By: /s/Tommy Chisholm
                                         Its: Secretary and Assistant Treasurer

Attest:

By: /s/Patricia L. Roberts
Its: Assistant Secretary





                        OUTSIDE DIRECTORS STOCK PLAN FOR
                    THE SOUTHERN COMPANY AND ITS SUBSIDIARIES

                                   SCHEDULE A


         The System Companies as of May 26, 2004 are:

Southern Company
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company





                        OUTSIDE DIRECTORS STOCK PLAN FOR
                    THE SOUTHERN COMPANY AND ITS SUBSIDIARIES

                                   SCHEDULE B

                                As of __________


The portion of a Participant's Retainer Fee required to be distributed in common
stock of The Southern Company shall be determined in accordance with the
following schedule:

                          Company                      Dollar Amount of Required
                                                           Stock Distribution

Southern Company
          o   Pre-1997 Appointed Directors                      $10,000.00
          o   Post-1996 Appointed Directors                     $19,000.00

- --------------------------------------------------------------------------------


                Company                               Shares Distributed
Southern Company                                    250 shares per quarter
Alabama Power Company                               130 shares per quarter
Georgia Power Company                               130 shares per quarter
Gulf Power Company                                   85 shares per quarter
Mississippi Power Company                            85 shares per quarter
Savannah Electric and Power Company                  85 shares per quarter

EX-10.A.3

                                                                  Exhibit 10(a)3

                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

         THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement")
made and entered into by and between The Southern Company ("Southern"), Southern
Company Services, Inc. (the "Company") and Mr. David M. Ratcliffe ("Mr.
Ratcliffe") (hereinafter collectively referred to as the "Parties") is effective
June 1, 2004. This Agreement amends and restates the Amended and Restated Change
in Control Agreement entered into by Mr. Ratcliffe, Southern and Georgia Power
Company, effective July 10, 2000.

                                   WITNESSETH:

         WHEREAS, Mr. Ratcliffe is the President and Chief Executive Officer of
the Company;

         WHEREAS, the Company wishes to provide to Mr. Ratcliffe certain
severance benefits under certain circumstances following a change in control (as
defined herein) of Southern or the Company;

         NOW, THEREFORE, in consideration of the premises, and the agreements of
the Parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

         1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

                  (a) "Annual Compensation" shall mean Mr. Ratcliffe's highest
         annual base salary rate for the twelve (12) month period immediately
         preceding the date of the Change in Control plus target bonus.





                  (b) "Beneficial Ownership" shall mean beneficial ownership
         within the meaning of Rule 13d-3 promulgated under the Exchange Act.

                  (c) "Board" shall mean the board of directors of the Company.

                  (d) "Business Combination" shall mean a reorganization, merger
         or consolidation of Southern or sale or other disposition of all or
         substantially all of the assets of Southern.

                  (e) "Change in Control" shall mean any of the following:

                           (i) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 20% or more of Southern's Voting
                  Securities; provided, however, that for purposes of this
                  Paragraph l.(e)(i), the following acquisitions of Southern's
                  Voting Securities shall not constitute a Change in Control:

                                    (A) any acquisition directly from Southern;

                                    (B) any acquisition by Southern;

                                    (C) any acquisition by any employee benefit
                           plan (or related trust) sponsored or maintained by
                           Southern or any Southern Subsidiary;

                                    (D) any acquisition by a qualified pension
                           plan or publicly held mutual fund;

                                    (E) any acquisition by a Group composed
                           exclusively of employees of Southern, or any Southern
                           Subsidiary;

                                    (F) any acquisition by Mr. Ratcliffe or any
                           Group of which Mr. Ratcliffe is a party; or

                                    (G) any Business Combination which would not
                           otherwise constitute a change in control because of
                           the application of clauses (A), (B) and (C) of
                           Paragraph 1(e )(iii);

                           (ii) A change in the composition of the Southern
                  Board whereby individuals who constitute the Incumbent Board
                  cease for any reason to constitute at least a majority of the
                  Southern Board;

                           (iii) Consummation of a Business Combination,
                  provided, however, that such a Business Combination shall not
                  constitute a Change in Control if all three (3) of the
                  following conditions are met:

                                    (A) all or substantially all of the
                           individuals and entities who held Beneficial
                           Ownership, respectively, of Southern's Voting
                           Securities immediately prior to such Business
                           Combination beneficially own, directly or indirectly,
                           65% or more of the combined voting power of the
                           Voting Securities of the corporation surviving or
                           resulting from such Business Combination, (including,
                           without limitation, a corporation which as a result
                           of such transaction holds Beneficial Ownership of all
                           or substantially all of Southern's Voting Securities
                           or all or substantially all of Southern's assets)
                           (such surviving or resulting corporation to be
                           referred to as "Surviving Company"), in substantially
                           the same proportions as their ownership, immediately
                           prior to such Business Combination, of Southern's
                           Voting Securities;





                                    (B) no Person (excluding any corporation
                           resulting from such Business Combination, any
                           employee benefit plan (or related trust) of Southern,
                           any Southern Subsidiary or Surviving Company, Mr.
                           Ratcliffe, any Group of which Mr. Ratcliffe is a
                           party, any Group composed exclusively of Company
                           employees, any qualified pension plan (or related
                           trust) or any publicly held mutual fund) holds
                           Beneficial Ownership, directly or indirectly, of 20%
                           or more of the combined voting power of the then
                           outstanding Voting Securities of Surviving Company
                           except to the extent that such ownership existed
                           prior to the Business Combination; and

                                    (C) at least a majority of the members of
                           the board of directors of Surviving Company were
                           members of the Incumbent Board at the earlier of the
                           date of execution of the initial agreement, or of the
                           action of the Southern Board, providing for such
                           Business Combination.

                           (iv) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 50% or more of the combined voting
                  power of the then outstanding Voting Securities of the
                  Company; provided, however, that for purposes of this
                  Paragraph l.(e)(iv), any acquisition by Mr. Ratcliffe, any
                  Group composed exclusively of employees of the Company, any
                  Group of which Mr. Ratcliffe is a party, any qualified pension
                  plan (or related trust), any publicly held mutual fund, any
                  employee benefit plan (or related trust) sponsored or
                  maintained by Southern or any Southern Subsidiary shall not
                  constitute a Change in Control;





                           (v) Consummation of a reorganization, merger or
                  consolidation of the Company (an "Employing Company Business
                  Combination"), in each case, unless, following such Employing
                  Company Business Combination, Southern Controls the
                  corporation or other entity surviving or resulting from such
                  Employing Company Business Combination; or

                           (vi) Consummation of the sale or other disposition of
                  all or substantially all of the assets of the Company to a
                  corporation or other entity which Southern does not Control.
                  Notwithstanding the foregoing, in no event shall "Change in
                  Control" mean an initial public offering or a spin-off of the
                  Company.

                  (f) "COBRA Coverage" shall mean any continuation coverage to
         which Mr. Ratcliffe or his dependents may be entitled pursuant to Code
         Section 4980B.

                  (g) "Code" shall mean the Internal Revenue Code of 1986, as
         amended.

                  (h) "Company" shall mean The Southern Company, its successors
         and assigns.

         (i) "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
governmental agencies.

         (j) "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.

         (k) "Effective Date" shall mean the date of execution of this
Agreement.

         (l) "Employee Outplacement Program" shall mean the program established
by the Company from time to time for the purpose of assisting participants
covered by the plan in finding employment outside of the Company which provides
for the following services:

                  (i) self-assessment, career decision and goal setting;

                  (ii) job market research and job sources;

                  (iii) networking and interviewing skills;

                  (iv) planning and implementation strategy;

                  (v) resume writing, job hunting methods and salary
         negotiation; and

                  (vi) office support and job search resources.

         (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         (n) "Good Reason" shall mean, without Mr. Ratcliffe's express written
consent, after written notice to the Board, and after a thirty (30) day
opportunity for the Board to cure, the continuing occurrence of any of the
following events:

                  (i) Inconsistent Duties. A meaningful and detrimental
         alteration in Mr. Ratcliffe's position or in the nature or status of
         his responsibilities from those in effect immediately prior to the
         Change in Control;

                  (ii) Reduced Salary. A reduction of five percent (5%) or more
         by the Company in either of the following: (i) Mr. Ratcliffe's annual
         base salary rate as in effect immediately prior to the Change in
         Control (except for a less than ten percent (10%), across-the-board
         annual base salary rate reduction similarly affecting at least
         ninety-five percent (95%) of the Executive Employees of the Company);
         or (ii) the sum of Mr. Ratcliffe's annual base salary rate plus target
         bonus under the PPP (except for a less than ten percent (10%),
         across-the-board reduction of annual base salary rate plus target bonus
         under the PPP similarly affecting at least ninety-five percent (95%) of
         the Executive Employees of the Company);

                  (iii) Pension and Compensation Plans. The failure by the
         Company to continue in effect any pension or compensation plan or
         agreement in which Mr. Ratcliffe participates or is a party as of the
         date of the Change in Control or the elimination of Mr. Ratcliffe's
         participation therein, (except for across-the-board plan changes or
         terminations similarly affecting at least ninety-five percent (95%) of
         the Executive Employees of the Company). For purposes of this Paragraph
         l.(n), a "pension plan or agreement" shall mean any written arrangement
         executed by an authorized officer of the Company which provides for
         payments upon retirement; and a "compensation plan or arrangement"
         shall mean any written arrangement executed by an authorized officer of
         the Company which provides for periodic, non-discretionary compensatory
         payments in the nature of bonuses.

                  (iv) Relocation. A change in Mr. Ratcliffe's work location to
         a location more than fifty (50) miles from the office where Mr.
         Ratcliffe is located at the time of the Change in Control, unless such
         new work location is within fifty (50)




         miles from Mr. Ratcliffe's principal place of residence at the time of
         the Change in Control. The acceptance, if any, by Mr. Ratcliffe of
         employment by the Company at a work location which is outside the fifty
         mile radius set forth in this Paragraph l.(n)(iv) shall not be a waiver
         of Mr. Ratcliffe's right to refuse subsequent transfer by the Company
         to a location which is more than fifty (50) miles from Mr. Ratcliffe's
         principal place of residence at the time of the Change in Control, and
         such subsequent unconsented transfer shall be "Good Reason" under this
         Agreement; or

                  (v) Benefits and Perquisites. The taking of any action by the
         Company which would directly or indirectly materially reduce the
         benefits enjoyed by Mr. Ratcliffe under the Company's retirement, life
         insurance, medical, health and accident, disability, deferred
         compensation or savings plans in which Mr. Ratcliffe was participating
         immediately prior to the Change in Control; or the failure by the
         Company to provide Mr. Ratcliffe with the number of paid vacation days
         to which Mr. Ratcliffe is entitled on the basis of years of service
         with the Company in accordance with the Company's normal vacation
         policy in effect immediately prior to the Change in Control (except for
         across-the-board plan or vacation policy changes or plan terminations
         similarly affecting at least ninety-five percent (95%) of the Executive
         Employees of the Company).

                  (vi) For purposes of this Paragraph l.(n), the term "Executive
         Employee" shall mean those employees of the Company of Grade Level 10
         or above.

         (o) "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act.

         (p) "Group Health Plan" shall mean the group health plan covering Mr.
Ratcliffe, as such plan may be amended from time to time.

         (q) "Group Life Insurance Plan" shall mean the group life insurance
program covering Mr. Ratcliffe, as such plan may be amended from time to time.

         (r) "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of October 19, 1998 plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern's shareholders was approved by a vote of at least 75% of the directors
then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to
October 19, 1998 whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.

         (s) "Month of Service" shall mean any calendar month during which Mr.
Ratcliffe has worked at least one (1) hour or was on approved leave of absence
while in the employ of the Company or any affiliate or subsidiary of Southern.





         (t) "Omnibus Plan" shall mean the Southern Company Omnibus Incentive
Compensation Plan, and the Design and Administrative Specifications duly adopted
thereunder, as in effect on the day before the date of a Change in Control.

         (u) "Pension Plan" shall mean The Southern Company Pension Plan, as
such plan may be amended from time to time.

         (v) "Performance Dividend Program" shall mean the Performance Dividend
Program under the Omnibus Plan or any replacement thereto, as such plans may be
amended from time to time.

         (w) "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of Act.

         (x) "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as such plans may be
amended from time to time.

         (y) "Southern" shall mean The Southern Company, its successors and
assigns.

         (z) "Southern Board" shall mean the board of directors of Southern.

         (aa) "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern.

         (bb) "Termination for Cause" or "Cause" shall mean the termination of
Mr. Ratcliffe's employment by the Company upon the occurrence of any of the
following:

                  (i) The willful and continued failure by Mr. Ratcliffe
         substantially to perform his duties with the Company (other than any
         such failure resulting from Mr. Ratcliffe's Total Disability or from
         Mr. Ratcliffe's retirement or any such actual or anticipated failure
         resulting from termination by Mr. Ratcliffe for Good Reason) after a
         written demand for substantial performance is delivered to him by the
         Southern Board, which demand specifically identifies the manner in
         which the Southern Board believes that he has not substantially
         performed his duties; or

                  (ii) The willful engaging by Mr. Ratcliffe in conduct that is
         demonstrably and materially injurious to the Company, monetarily or
         otherwise, including, but not limited to any of the following:

                           (A) any willful act involving fraud or dishonesty in
                  the course of Mr. Ratcliffe's employment by the Company;

                           (B) the willful carrying out of any activity or the
                  making of any statement which would materially prejudice or
                  impair the good name and standing of the Company, Southern or
                  any Southern Subsidiary or would bring the Company, Southern
                  or any Southern Subsidiary into contempt, ridicule or would
                  reasonably shock or offend any community in which the Company,
                  Southern or such Southern Subsidiary is located;

                           (C) attendance at work in a state of intoxication or
                  otherwise being found in possession at his workplace of any
                  prohibited drug or substance, possession of which would amount
                  to a criminal offense;

                           (D) violation of the Company's policies on drug and
                  alcohol usage, fitness for duty requirements or similar
                  policies as may exist from time to time as adopted by the
                  Company's safety officer;

                           (E) assault or other act of violence against any
                  person during the course of employment; or

                           (F) indictment of any felony or any misdemeanor
                  involving moral turpitude.

                           No act or failure to act by Mr. Ratcliffe shall be
                  deemed "willful" unless done, or omitted to be done, by Mr.
                  Ratcliffe not in good faith and without reasonable belief that
                  his action or omission was in the best interest of the
                  Company.

                           Notwithstanding the foregoing, Mr. Ratcliffe shall
                  not be deemed to have been terminated for Cause unless and
                  until there shall have been delivered to him a copy of a
                  resolution duly adopted by the affirmative vote of not less
                  than three quarters of the entire membership of the Southern
                  Board at a meeting of the Southern Board called and held for
                  such purpose (after reasonable notice to Mr. Ratcliffe and an
                  opportunity for him, together with counsel, to be heard before
                  the Southern Board), finding that, in the good faith opinion
                  of the Southern Board, Mr. Ratcliffe was guilty of conduct set
                  forth above in clause (i) or (ii) of this Paragraph l.(bb) and
                  specifying the particulars thereof in detail.

         (cc) "Termination Date" shall mean the date on which Mr. Ratcliffe's
employment with the Company is terminated; provided, however, that solely for
purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective
date of his retirement pursuant to the terms of the Pension Plan.

         (dd) "Total Disability" shall mean Mr. Ratcliffe's total disability
within the meaning of the Pension Plan.

         (ee) "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.

         (ff) "Waiver and Release" shall mean the Waiver and Release attached
hereto as Exhibit A.

         (gg) "Year of Service" shall mean Mr. Ratcliffe's Months of Service
divided by twelve (12) rounded to the nearest whole year, rounding up if the
remaining number of months is seven (7) or greater and rounding down if the
remaining number of months is less than seven (7). If Mr. Ratcliffe has a break
in his service with the Company, he will receive credit under this Agreement for
service prior to the break in service only if the break in service is less than
five years.

         2. Severance Benefits.

         (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a),
if Mr. Ratcliffe's employment is involuntarily terminated by the Company at any
time during the two year period following a Change in Control for reasons other
than Cause, or if Mr. Ratcliffe voluntarily terminates his employment with the
Company for Good Reason at any time during the two year period following a
Change in Control, Mr. Ratcliffe shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective Waiver
and Release. Notwithstanding anything to the contrary herein, Mr. Ratcliffe
shall not be eligible to receive benefits under this Agreement if Mr. Ratcliffe:

                  (i) voluntarily terminates his employment with the Company for
         other than Good Reason;

                  (ii) has his employment terminated by the Company for Cause;

                  (iii) accepts the transfer of his employment to Southern, any
         Southern Subsidiary or any employer that succeeds to all or
         substantially all of the assets of the Company, Southern or any
         Southern Subsidiary;

                  (iv) refuses an offer of continued employment with the
         Company, any Southern Subsidiary, or any employer that succeeds to all
         or substantially all of the assets of the Company, Southern, or any
         Southern Subsidiary under circumstances where such refusal would not
         amount to Good Reason for voluntary termination of employment; or

                  (v) elects to receive the benefits of any other voluntary or
         involuntary severance or separation program, plan or agreement
         maintained by the Company in lieu of benefits under this Agreement;
         provided however, that the receipt of benefits under the terms of any
         retention plan or agreement shall not be deemed to be the receipt of
         severance or separation benefits for purposes of this Agreement.

         (b) Severance Benefits. If Mr. Ratcliffe meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance
benefit in an amount equal to three times his Annual Compensation (the
"Severance Amount"). If any portion of the Severance Amount constitutes an
"excess parachute payment" (as such term is defined under Code Section 280G
("Excess Parachute Payment")), the Company shall pay to Mr. Ratcliffe an
additional amount calculated by determining the amount of tax under Code Section
4999 that he otherwise would have paid on any Excess Parachute Payment with
respect to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section the hospital insurance tax under Code
Section 31O1(b) ("HI Tax") and federal and state income tax measured at the
highest marginal rates ("Income Tax") and subtracting such result from the
number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up
shall be paid unless the Severance Amount plus all other "parachute payments" to
Mr. Ratcliffe under Code Section 280G exceeds three (3) times Mr. Ratcliffe's
"base amount" (as such term is defined under Code Section 280G ("Base Amount"))
by ten percent (10%) or more; provided further, that if no 280G Gross-up is
paid, the Severance Amount shall be capped at three (3) times Mr. Ratcliffe's
Base Amount, less all other "parachute payments" (as such term is defined under
Code Section 280G) received by Mr. Ratcliffe, less one dollar (the "Capped
Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax
and Excise Tax.

         For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of tax, e.g.,
Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax department of the
independent public accounting firm then responsible for preparing Southern's
consolidated federal income tax return, and such calculations or determinations
shall be binding upon the parties hereto.

         (c) Welfare Benefits. If Mr. Ratcliffe meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive
retiree medical and life insurance benefits provided to certain retirees
pursuant to the terms of the Pension Plan,




the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to
the benefits set forth in this Paragraph 2.( c).

                  (i) Mr. Ratcliffe shall be eligible to participate in the
         Company's Group Health Plan, upon payment of both the Company's and his
         monthly premium under such plan, for a period of six (6) months for
         each of Mr. Ratcliffe's Years of Service, not to exceed five (5) years.
         If Mr. Ratcliffe elects to receive this extended medical coverage, he
         shall also be entitled to elect coverage under the Group Health Plan
         for his dependents who were participating in the Group Health Plan on
         Mr. Ratcliffe's Termination Date (and for such other dependents as may
         be entitled to coverage under the provisions of the Health Insurance
         Portability and Accountability Act of 1996) for the duration of Mr.
         Ratcliffe's extended medical coverage under this Paragraph 2.(c)(i) to
         the extent such dependents remain eligible for dependent coverage under
         the terms of the Group Health Plan.

                           (A) The extended medical coverage afforded to Mr.
                  Ratcliffe pursuant to Paragraph 2. (c)(i), as well as the
                  premiums to be paid by Mr. Ratcliffe in connection with such
                  coverage shall be determined in accordance with the terms of
                  the Group Health Plan and shall be subject to any changes in
                  the terms and conditions of the Group Health Plan as well as
                  any future increases in premiums under the Group Health Plan.
                  The premiums to be paid by Mr. Ratcliffe in connection with
                  this extended coverage shall be due on the first day of each
                  month; provided, however,




                  that if he fails to pay his premium within thirty (30) days of
                  its due date, such extended coverage shall be terminated.

                           (B) Any Group Health Plan coverage provided under
                  Paragraph 2.(c)(i) shall be a part of and not in addition to
                  any COBRA Coverage which Mr. Ratcliffe or his dependents may
                  elect. In the event that Mr. Ratcliffe or his dependents
                  become eligible to be covered, by virtue of re-employment or
                  otherwise, by any employer-sponsored group health plan or is
                  eligible for coverage under any government-sponsored health
                  plan during the above period, coverage under the Company's
                  Group Health Plan available to Mr. Ratcliffe or his dependents
                  by virtue of the provisions of Paragraph 2.(c)(i) shall
                  terminate, except as may otherwise be required by law, and
                  shall not be renewed.

                  (ii) Mr. Ratcliffe shall be entitled to receive cash in an
         amount equal to the Company's and Mr. Ratcliffe's cost of premiums for
         three (3) years of coverage under the Group Health Plan and Group Life
         Insurance Plan in accordance with the terms of such plans as of the
         date of the Change in Control.

         (d) Incentive Plans. If Mr. Ratcliffe meets the eligibility
requirements of Paragraph 2. (a) hereof he shall be entitled to the following
benefits under the Omnibus Plan:

                  (i) Stock Options.

                           (A) Any of Mr. Ratcliffe's Options and Stock
                  Appreciation Rights under the Omnibus Plan (the defined terms
                  of which are incorporated in this Paragraph 2.(d)(i) by
                  reference) which are outstanding as of the Termination Date
                  and which are not then exercisable and vested, shall become
                  fully exercisable and vested to the full extent of the
                  original grant; provided, that in the case of a Stock
                  Appreciation Right, if Mr. Ratcliffe is subject to Section
                  16(b) of the Exchange Act, such Stock Appreciation Right shall
                  not become fully vested and exercisable at such time if such
                  actions would result in liability to Mr. Ratcliffe under
                  Section 16(b) of the Exchange Act, provided further, that any
                  such actions not taken as a result of the rules under Section
                  16(b) of the Exchange Act shall be effected as of the first
                  date that such activity would no longer result in liability
                  under Section 16(b) of the Exchange Act.

                           (B) The restrictions and deferral limitations
                  applicable to any of Mr. Ratcliffe's Restricted Stock and
                  Restricted Stock Units as of the Termination Date shall lapse,
                  and such Restricted Stock and Restricted Stock Units shall
                  become free of all restrictions and limitations and become
                  fully vested and transferable to the full extent of the
                  original grant.

                  (ii) Performance Pay Program. Provided Mr. Ratcliffe is not
         entitled to a Cash-Based Award under the PPP, (the defined terms of
         which are incorporated in this Paragraph 2.(d)(ii) by reference), if
         the PPP is in place through Mr. Ratcliffe's Termination Date and to the
         extent Mr. Ratcliffe is entitled to participate therein, Mr. Ratcliffe
         shall be entitled to receive cash in an amount equal to a prorated
         payout of his Cash-Based Awards under the PPP for the performance
         period in which the Termination Date shall have occurred, at target
         performance under the PPP and prorated by the number of months which
         have passed since the beginning of the performance period until the
         Termination Date.

                  (iii) Performance Dividend Program. Provided Mr. Ratcliffe is
         not entitled to a Cash-Based Award under the Performance Dividend
         Program (the defined terms of which are incorporated in this Paragraph
         2.(d)(iii) by reference), if the Performance Dividend Program is in
         place through Mr. Ratcliffe's Termination Date and to the extent Mr.
         Ratcliffe is entitled to participate therein, Mr. Ratcliffe shall be
         entitled to receive cash for each such Cash-Based Award under the
         Performance Dividend Program held by Mr. Ratcliffe on his Termination
         Date, based on actual performance under the Performance Dividend
         Program determined as of the most recently completed calendar quarter
         of the performance period in which the Termination Date shall have
         occurred, and the annual dividend declared prior to the Termination
         Date.

                  (iv) Other Short Term Incentives Under the Omnibus Plan.
         Provided Mr. Ratcliffe is not entitled to a Performance Unit/Share
         award under the Omnibus Plan (the defined terms of which are
         incorporated in this Paragraph 2.(d)(iv) by reference), Mr. Ratcliffe
         shall be entitled to receive cash in an amount equal to a prorated
         payout of the value of his Performance Units and/or Performance Shares
         for the performance period in which the Termination Date shall have
         occurred, at target performance and prorated by the number of months
         which have passed since the beginning of the performance period until
         the Termination Date.

                  (v) Other Short Term Incentive Plans. The provisions of this
         Paragraph 2.(d)(v) shall apply if and to the extent that Mr. Ratcliffe
         is a participant in any other "short term compensation plan" not
         otherwise previously referred to in this Paragraph 2.(d). Provided Mr.
         Ratcliffe is not otherwise entitled to a plan payout under any change
         of control provisions of such plans, if the "short term compensation
         plan" is in place as of the Termination Date and to the extent Mr.
         Ratcliffe is entitled to participate therein, Mr. Ratcliffe shall
         receive cash in an amount equal to his award under the Company's "short
         term incentive plan" for the annual performance period in which the
         Termination Date shall have occurred, at Mr. Ratcliffe's target
         performance level and prorated by the number of months which have
         passed since the beginning of the annual performance period until his
         Termination Date. For purposes of this Paragraph 2.(d)(v) the term
         "short term incentive compensation plan" shall mean any incentive
         compensation plan or arrangement adopted in writing by the Company
         which provides for annual, recurring compensatory bonuses based upon
         articulated performance criteria. (e) Payment of Benefits. Any amounts
         due under this Agreement shall be paid in one (1) lump sum payment as
         soon as administratively practicable following the later of: (i) Mr.
         Ratcliffe's Termination Date, or (ii) upon Mr. Ratcliffe's tender of an
         effective Waiver and Release to the Company in the form of Exhibit A
         attached hereto and the expiration of any applicable revocation period
         for such waiver. In the event of a dispute with respect to liability or
         amount of any benefit due hereunder, an effective Waiver and Release
         shall be tendered at the time of final resolution of any such dispute
         when payment is tendered by the Company.

         (f) Benefits in the Event of Death. In the event of Mr. Ratcliffe's
death prior to the payment of all amounts due under this Agreement, Mr.
Ratcliffe's estate shall be entitled to receive as due any amounts not yet paid
under this Agreement upon the tender by the executor or administrator of the
estate of an effective Waiver and Release.

         (g) Legal Fees. In the event of a dispute between Mr. Ratcliffe and the
Company with regard to any amounts due hereunder, if any material issue in such
dispute is finally resolved in Mr. Ratcliffe's favor, the Company shall
reimburse Mr. Ratcliffe's legal fees incurred with respect to all issues in such
dispute in an amount not to exceed fifty thousand dollars ($50,000).

         (h) Employee Outplacement Services. Mr. Ratcliffe shall be eligible to
participate in the Employee Outplacement Program, which program shall not be
less than six (6) months duration measured from Mr. Ratcliffe's Termination
Date.

         (i) Non-qualified Retirement and Deferred Compensation Plans. The
Parties agree that subsequent to a Change in Control, any claims by Mr.
Ratcliffe for benefits under any of the Company's non-qualified retirement or
deferred compensation plans shall be resolved through binding arbitration in
accordance with the provisions and procedures set forth in Paragraph 5 hereof
and if any material issue in such dispute is finally resolved in Mr. Ratcliffe's
favor, the Company shall reimburse Mr. Ratcliffe's legal fees in the manner
provided in Paragraph 2.(g) hereof.

         3. Transfer of Employment. In the event that Mr. Ratcliffe's employment
by the Company is terminated during the two year period following a Change in
Control and Mr. Ratcliffe accepts employment by Southern, a Southern Subsidiary,
or any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.

         4. No Mitigation. If Mr. Ratcliffe is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Ratcliffe hereunder shall not be reduced or suspended if Mr. Ratcliffe accepts
such subsequent employment.

         5. Arbitration.

         (a) Any dispute, controversy or claim arising out of or relating to the
Company's obligations to pay severance benefits under this Agreement, or the
breach thereof, shall be settled and resolved solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. The arbitration shall
be the sole and exclusive forum for resolution of any such claim for severance
benefits and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes, claims or
controversies arising out of or relating to Mr. Ratcliffe's employment by the
Company or the termination thereof.




         (b) Arbitration shall be initiated by serving a written notice of
demand for arbitration to Mr. Ratcliffe, in the case of the Company, or to the
Southern Board, in the case of Mr. Ratcliffe.

         (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators
shall apply the law of the State of Georgia, to the extent not preempted by
federal law, excluding any law which would require the application of the law of
another state.

         (d) The parties shall appoint arbitrators within fifteen (15) business
days following service of the demand for arbitration. The number of arbitrators
shall be three. One arbitrator shall be appointed by Mr. Ratcliffe, one
arbitrator shall be appointed by the Company, and the two arbitrators shall
appoint a third. If the arbitrators cannot agree on a third arbitrator within
thirty (30) business days after the service of demand for arbitration, the third
arbitrator shall be selected by the AAA.

         (e) The arbitration filing fee shall be paid by Mr. Ratcliffe. All
other costs of arbitration shall be borne equally by Mr. Ratcliffe and the
Company, provided, however, that the Company shall reimburse such fees and costs
in the event any material issue in such dispute is finally resolved in Mr.
Ratcliffe's favor and Mr. Ratcliffe is reimbursed legal fees under Paragraph
2.(g) hereof.

         (f) The parties agree that they will faithfully observe the rules that
govern any arbitration between them, they will abide by and perform any award
rendered by the arbitrators in any such arbitration, including any award of
injunctive relief, and a judgment of a court having jurisdiction may be entered
upon an award.

         (g) The parties agree that nothing in this Paragraph 5 is intended to
preclude upon application of either party any court having jurisdiction from
issuing and enforcing in any lawful manner such temporary restraining orders,
preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Agreement; regardless of whether an arbitration proceeding under this Paragraph
5 has begun. The parties further agree that nothing herein shall prevent any
court from entering and enforcing in any lawful manner such judgments for
permanent equitable relief as may be necessary to prevent harm to a party's
interests or as otherwise may be appropriate following the issuance of arbitral
awards pursuant to this Paragraph 5.

         6. Miscellaneous.

         (a) Funding of Benefits. Unless the Board in its discretion shall
determine otherwise, the benefits payable to Mr. Ratcliffe under this Agreement
shall not be funded in any manner and shall be paid by the Company out of its
general assets, which assets are subject to the claims of the Company's
creditors.

         (b) Withholding. There shall be deducted from the payment of any
benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Mr. Ratcliffe.

         (c) Assignment. Mr. Ratcliffe shall have no rights to sell, assign,
transfer, encumber, or otherwise convey the right to receive the payment of any
benefit due hereunder, which payment and the rights thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to do so shall be
null and void and of no effect.

         (d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.

         (e) Construction. This Agreement shall be construed in accordance with
and governed by the laws of the State of Georgia, to the extent not preempted by
federal law, disregarding any provision of law which would require the
application of the law of another state.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 14th day of June, 2004.


                                             THE SOUTHERN COMPANY



                                             By:      /s/Ellen N. Lindemann


                                             SOUTHERN COMPANY SERVICES, INC.


                                             By:      /s/Ellen N. Lindemann


                                             MR. RATCLIFFE


                                             /s/David M. Ratcliffe
                                             David M. Ratcliffe







                                    Exhibit A
                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         The attached Waiver and Release is to be given to Mr. David M.
Ratcliffe upon the occurrence of an event that triggers eligibility for
severance benefits under the Change in Control Agreement, as described in
Paragraph 2(a) of such agreement.









                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         I, David M. Ratcliffe, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Savannah Electric and Power
Company (collectively, the "Company") if I had not elected to sign this Waiver.

         I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.

         In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communications Services, Inc., Southern Company Energy Solutions, LLC,
Southern Company Services, Inc., Southern Nuclear Operating Company, Inc. and
other direct or indirect subsidiaries of The Southern Company and their past,
present and future officers, directors, employees, agents and attorneys. Nothing
in this Waiver shall be construed to release claims or causes of action under
the Age Discrimination in Employment Act or the Energy Reorganization Act of
1974, as amended, which arise out of events occurring after the execution date
of this Waiver.

         In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.

         In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.






         In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.

         I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.

         I understand that by signing this Waiver I am giving up rights I may
have.

         IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ________, in the year ____.

                                                     ---------------------------
                                                     David M. Ratcliffe

Sworn to and subscribed to me this

___day of _________, ____

- --------------------------
Notary Public

My Commission Expires:

- ---------------------------
(Notary Seal)

         Acknowledged and Accepted by the Company, as defined in the Waiver.

By:
         -----------------------------------
Date:
         -----------------------------------

EX-10.A.4

                                                                  Exhibit 10(a)4


                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

         THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement")
made and entered into by and between The Southern Company ("Southern"), Southern
Company Services, Inc. (the "Company") and Mr. Thomas A. Fanning ("Mr. Fanning")
(hereinafter collectively referred to as the "Parties") is effective June 1,
2004. This Agreement amends and restates the Change in Control Agreement entered
into by Mr. Fanning, Southern and Gulf Power Company, effective May 17, 2002.

                                   WITNESSETH:

         WHEREAS, Mr. Fanning is the Executive Vice President and Chief
Financial Officer of the Company;

         WHEREAS, the Company wishes to provide to Mr. Fanning certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;

         NOW, THEREFORE, in consideration of the premises, and the agreements of
the Parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

         1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:






                  (a) "Annual Compensation" shall mean Mr. Fanning's highest
         annual base salary rate for the twelve (12) month period immediately
         preceding the date of the Change in Control plus target bonus.

                  (b) "Beneficial Ownership" shall mean beneficial ownership
         within the meaning of Rule 13d-3 promulgated under the Exchange Act.

                  (c) "Board" shall mean the board of directors of the Company.

                  (d) "Business Combination" shall mean a reorganization, merger
         or consolidation of Southern or sale or other disposition of all or
         substantially all of the assets of Southern.

                  (e) "Change in Control" shall mean any of the following:

                           (i) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 20% or more of Southern's Voting
                  Securities; provided, however, that for purposes of this
                  Paragraph l.(e)(i), the following acquisitions of Southern's
                  Voting Securities shall not constitute a Change in Control:

                                    (A) any acquisition directly from Southern;

                                    (B) any acquisition by Southern;

                                    (C) any acquisition by any employee benefit
                           plan (or related trust) sponsored or maintained by
                           Southern or any Southern Subsidiary;

                                    (D) any acquisition by a qualified pension
                           plan or publicly held mutual fund;

                                    (E) any acquisition by a Group composed
                           exclusively of employees of Southern, or any Southern
                           Subsidiary;

                                    (F) any acquisition by Mr. Fanning or any
                           Group of which Mr. Fanning is a party; or

                                    (G) any Business Combination which would not
                           otherwise constitute a change in control because of
                           the application of clauses (A), (B) and (C) of
                           Paragraph 1(e )(iii);

                           (ii) A change in the composition of the Southern
                  Board whereby individuals who constitute the Incumbent Board
                  cease for any reason to constitute at least a majority of the
                  Southern Board;

                           (iii) Consummation of a Business Combination,
                  provided, however, that such a Business Combination shall not
                  constitute a Change in Control if all three (3) of the
                  following conditions are met:

                                    (A) all or substantially all of the
                           individuals and entities who held Beneficial
                           Ownership, respectively, of Southern's Voting
                           Securities immediately prior to such Business
                           Combination beneficially own, directly or indirectly,
                           65% or more of the combined voting power of the
                           Voting Securities of the corporation surviving or
                           resulting from such Business Combination, (including,
                           without limitation, a corporation which as a result
                           of such transaction holds Beneficial Ownership of all
                           or substantially all of Southern's Voting Securities
                           or all or substantially all of Southern's assets)
                           (such surviving or resulting corporation to be
                           referred to as "Surviving Company"), in substantially
                           the same proportions as their





                           ownership, immediately prior to such Business
                           Combination, of Southern's Voting Securities;

                                    (B) no Person (excluding any corporation
                           resulting from such Business Combination, any
                           employee benefit plan (or related trust) of Southern,
                           any Southern Subsidiary or Surviving Company, Mr.
                           Fanning, any Group of which Mr. Fanning is a party,
                           any Group composed exclusively of Company employees,
                           any qualified pension plan (or related trust) or any
                           publicly held mutual fund) holds Beneficial
                           Ownership, directly or indirectly, of 20% or more of
                           the combined voting power of the then outstanding
                           Voting Securities of Surviving Company except to the
                           extent that such ownership existed prior to the
                           Business Combination; and

                                    (C) at least a majority of the members of
                           the board of directors of Surviving Company were
                           members of the Incumbent Board at the earlier of the
                           date of execution of the initial agreement, or of the
                           action of the Southern Board, providing for such
                           Business Combination.

                  (iv) The Consummation of an acquisition by any Person of
         Beneficial Ownership of 50% or more of the combined voting power of the
         then outstanding Voting Securities of the Company; provided, however,
         that for purposes of this Paragraph l.(e)(iv), any acquisition by Mr.
         Fanning, any Group composed exclusively of employees of the Company,
         any Group of which Mr. Fanning is a party, any qualified pension plan
         (or related trust), any publicly held mutual fund, any employee benefit
         plan (or related trust) sponsored or maintained by Southern or any
         Southern Subsidiary shall not constitute a Change in Control;




                  (v) Consummation of a reorganization, merger or consolidation
         of the Company (an "Employing Company Business Combination"), in each
         case, unless, following such Employing Company Business Combination,
         Southern Controls the corporation or other entity surviving or
         resulting from such Employing Company Business Combination; or

                  (vi) Consummation of the sale or other disposition of all or
         substantially all of the assets of the Company to a corporation or
         other entity which Southern does not Control.

                  Notwithstanding the foregoing, in no event shall "Change in
         Control" mean an initial public offering or a spin-off of the Company.

         (f) "COBRA Coverage" shall mean any continuation coverage to which Mr.
Fanning or his dependents may be entitled pursuant to Code Section 4980B.

         (g) "Code" shall mean the Internal Revenue Code of 1986, as amended.

         (h) "Company" shall mean The Southern Company, its successors and
assigns.

         (i) "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
governmental agencies.

         (j) "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.

         (k) "Effective Date" shall mean the date of execution of this
Agreement.

         (l) "Employee Outplacement Program" shall mean the program established
by the Company from time to time for the purpose of assisting participants
covered by the plan in finding employment outside of the Company which provides
for the following services:

                  (i) self-assessment, career decision and goal setting;

                  (ii) job market research and job sources;

                  (iii) networking and interviewing skills;

                  (iv) planning and implementation strategy;

                  (v) resume writing, job hunting methods and salary
         negotiation; and

                  (vi) office support and job search resources.

         (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         (n) "Good Reason" shall mean, without Mr. Fanning's express written
consent, after written notice to the Board, and after a thirty (30) day
opportunity for the Board to cure, the continuing occurrence of any of the
following events:

                  (i) Inconsistent Duties. A meaningful and detrimental
         alteration in Mr. Fanning's position or in the nature or status of his
         responsibilities from those in effect immediately prior to the Change
         in Control;

                  (ii) Reduced Salary. A reduction of five percent (5%) or more
         by the Company in either of the following: (i) Mr. Fanning's annual
         base salary rate as in effect immediately prior to the Change in
         Control (except for a less than ten percent (10%), across-the-board
         annual base salary rate reduction similarly affecting at least
         ninety-five percent (95%) of the Executive Employees of the Company);
         or (ii) the sum of Mr. Fanning's annual base salary rate plus target
         bonus under the PPP (except for a less than ten percent (10%),
         across-the-board reduction of annual base salary rate plus target bonus
         under the PPP similarly affecting at least ninety-five percent (95%) of
         the Executive Employees of the Company);

                  (iii) Pension and Compensation Plans. The failure by the
         Company to continue in effect any pension or compensation plan or
         agreement in which Mr. Fanning participates or is a party as of the
         date of the Change in Control or the elimination of Mr. Fanning's
         participation therein, (except for across-the-board plan changes or
         terminations similarly affecting at least ninety-five percent (95%) of
         the Executive Employees of the Company). For purposes of this Paragraph
         l.(n), a "pension plan or agreement" shall mean any written arrangement
         executed by an authorized officer of the Company which provides for
         payments upon retirement; and a "compensation plan or arrangement"
         shall mean any written arrangement executed by an authorized officer of
         the Company which provides for periodic, non-discretionary compensatory
         payments in the nature of bonuses.

                  (iv) Relocation. A change in Mr. Fanning's work location to a
         location more than fifty (50) miles from the office where Mr. Fanning
         is located at the time of the Change in Control, unless such new work
         location is within fifty (50)




         miles from Mr. Fanning's principal place of residence at the time of
         the Change in Control. The acceptance, if any, by Mr. Fanning of
         employment by the Company at a work location which is outside the fifty
         mile radius set forth in this Paragraph l.(n)(iv) shall not be a waiver
         of Mr. Fanning's right to refuse subsequent transfer by the Company to
         a location which is more than fifty (50) miles from Mr. Fanning's
         principal place of residence at the time of the Change in Control, and
         such subsequent unconsented transfer shall be "Good Reason" under this
         Agreement; or

                  (v) Benefits and Perquisites. The taking of any action by the
         Company which would directly or indirectly materially reduce the
         benefits enjoyed by Mr. Fanning under the Company's retirement, life
         insurance, medical, health and accident, disability, deferred
         compensation or savings plans in which Mr. Fanning was participating
         immediately prior to the Change in Control; or the failure by the
         Company to provide Mr. Fanning with the number of paid vacation days to
         which Mr. Fanning is entitled on the basis of years of service with the
         Company in accordance with the Company's normal vacation policy in
         effect immediately prior to the Change in Control (except for
         across-the-board plan or vacation policy changes or plan terminations
         similarly affecting at least ninety-five percent (95%) of the Executive
         Employees of the Company).

                  (vi) For purposes of this Paragraph l.(n), the term "Executive
         Employee" shall mean those employees of the Company of Grade Level 10
         or above.

         (o) "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act.

         (p) "Group Health Plan" shall mean the group health plan covering Mr.
Fanning, as such plan may be amended from time to time.

         (q) "Group Life Insurance Plan" shall mean the group life insurance
program covering Mr. Fanning, as such plan may be amended from time to time.

         (r) "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of October 19, 1998 plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern's shareholders was approved by a vote of at least 75% of the directors
then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to
October 19, 1998 whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.

         (s) "Month of Service" shall mean any calendar month during which Mr.
Fanning has worked at least one (1) hour or was on approved leave of absence
while in the employ of the Company or any affiliate or subsidiary of Southern.




         (t) "Omnibus Plan" shall mean the Southern Company Omnibus Incentive
Compensation Plan, and the Design and Administrative Specifications duly adopted
thereunder, as in effect on the day before the date of a Change in Control.

         (u) "Pension Plan" shall mean The Southern Company Pension Plan, as
such plan may be amended from time to time.

         (v) "Performance Dividend Program" shall mean the Performance Dividend
Program under the Omnibus Plan or any replacement thereto, as such plans may be
amended from time to time.

         (w) "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of Act.

         (x) "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as such plans may be
amended from time to time.

         (y) "Southern" shall mean The Southern Company, its successors and
assigns.

         (z) "Southern Board" shall mean the board of directors of Southern.

         (aa) "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern.

         (bb) "Termination for Cause" or "Cause" shall mean the termination of
Mr. Fanning's employment by the Company upon the occurrence of any of the
following:

                  (i) The willful and continued failure by Mr. Fanning
         substantially to perform his duties with the Company (other than any
         such failure resulting from Mr. Fanning's Total Disability or from Mr.
         Fanning's retirement or any such actual or anticipated failure
         resulting from termination by Mr. Fanning for Good Reason) after a
         written demand for substantial performance is delivered to him by the
         Southern Board, which demand specifically identifies the manner in
         which the Southern Board believes that he has not substantially
         performed his duties; or

                  (ii) The willful engaging by Mr. Fanning in conduct that is
         demonstrably and materially injurious to the Company, monetarily or
         otherwise, including, but not limited to any of the following:

                           (A) any willful act involving fraud or dishonesty in
                  the course of Mr. Fanning's employment by the Company;

                           (B) the willful carrying out of any activity or the
                  making of any statement which would materially prejudice or
                  impair the good name and standing of the Company, Southern or
                  any Southern Subsidiary or would bring the Company, Southern
                  or any Southern Subsidiary into contempt, ridicule or would
                  reasonably shock or offend any community in which the Company,
                  Southern or such Southern Subsidiary is located;

                           (C) attendance at work in a state of intoxication or
                  otherwise being found in possession at his workplace of any
                  prohibited drug or substance, possession of which would amount
                  to a criminal offense;

                           (D) violation of the Company's policies on drug and
                  alcohol usage, fitness for duty requirements or similar
                  policies as may exist from time to time as adopted by the
                  Company's safety officer;

                           (E) assault or other act of violence against any
                  person during the course of employment; or

                           (F) indictment of any felony or any misdemeanor
                  involving moral turpitude.

                           No act or failure to act by Mr. Fanning shall be
                  deemed "willful" unless done, or omitted to be done, by Mr.
                  Fanning not in good faith and without reasonable belief that
                  his action or omission was in the best interest of the
                  Company.

                           Notwithstanding the foregoing, Mr. Fanning shall not
                  be deemed to have been terminated for Cause unless and until
                  there shall have been delivered to him a copy of a resolution
                  duly adopted by the affirmative vote of not less than three
                  quarters of the entire membership of the Southern Board at a
                  meeting of the Southern Board called and held for such purpose
                  (after reasonable notice to Mr. Fanning and an opportunity for
                  him, together with counsel, to be heard before the Southern
                  Board), finding that, in the good faith opinion of the
                  Southern Board, Mr. Fanning was guilty of conduct set forth
                  above in clause (i) or (ii) of this Paragraph l.(bb) and
                  specifying the particulars thereof in detail.

         (cc) "Termination Date" shall mean the date on which Mr. Fanning's
employment with the Company is terminated; provided, however, that solely for
purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective
date of his retirement pursuant to the terms of the Pension Plan.

         (dd) "Total Disability" shall mean Mr. Fanning's total disability
within the meaning of the Pension Plan.

         (ee) "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.

         (ff) "Waiver and Release" shall mean the Waiver and Release attached
hereto as Exhibit A.

         (gg) "Year of Service" shall mean Mr. Fanning's Months of Service
divided by twelve (12) rounded to the nearest whole year, rounding up if the
remaining number of months is seven (7) or greater and rounding down if the
remaining number of months is less than seven (7). If Mr. Fanning has a break in
his service with the Company, he will receive credit under this Agreement for
service prior to the break in service only if the break in service is less than
five years.

         2. Severance Benefits.

         (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a),
if Mr. Fanning's employment is involuntarily terminated by the Company at any
time during the two year period following a Change in Control for reasons other
than Cause, or if Mr. Fanning voluntarily terminates his employment with the
Company for Good Reason at any time during the two year period following a
Change in Control, Mr. Fanning shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective Waiver
and Release. Notwithstanding anything to the contrary herein, Mr. Fanning shall
not be eligible to receive benefits under this Agreement if Mr. Fanning:

                  (i) voluntarily terminates his employment with the Company for
         other than Good Reason;

                  (ii) has his employment terminated by the Company for Cause;

                  (iii) accepts the transfer of his employment to Southern, any
         Southern Subsidiary or any employer that succeeds to all or
         substantially all of the assets of the Company, Southern or any
         Southern Subsidiary;

                  (iv) refuses an offer of continued employment with the
         Company, any Southern Subsidiary, or any employer that succeeds to all
         or substantially all of the assets of the Company, Southern, or any
         Southern Subsidiary under circumstances where such refusal would not
         amount to Good Reason for voluntary termination of employment; or

                  (v) elects to receive the benefits of any other voluntary or
         involuntary severance or separation program, plan or agreement
         maintained by the Company in lieu of benefits under this Agreement;
         provided however, that the receipt of benefits under the terms of any
         retention plan or agreement shall not be deemed to be the receipt of
         severance or separation benefits for purposes of this Agreement.

         (b) Severance Benefits. If Mr. Fanning meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance
benefit in an amount equal to three times his Annual Compensation (the
"Severance Amount"). If any portion of the Severance Amount constitutes an
"excess parachute payment" (as such term is defined under Code Section 280G
("Excess Parachute Payment")), the Company shall pay to Mr. Fanning an
additional amount calculated by determining the amount of tax under Code Section
4999 that he otherwise would have paid on any Excess Parachute Payment with
respect to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section the hospital insurance tax under Code
Section 31O1(b) ("HI Tax") and federal and state income tax measured at the
highest marginal rates ("Income Tax") and subtracting such result from the
number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up
shall be paid unless the Severance Amount plus all other "parachute payments" to
Mr. Fanning under Code Section 280G exceeds three (3) times Mr. Fanning's "base
amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten
percent (10%) or more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr. Fanning's Base Amount,
less all other "parachute payments" (as such term is defined under Code Section
280G) received by Mr. Fanning, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would
have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax.

         For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of tax, e.g.,
Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax department of the
independent public accounting firm then responsible for preparing Southern's
consolidated federal income tax return, and such calculations or determinations
shall be binding upon the parties hereto.

         (c) Welfare Benefits. If Mr. Fanning meets the eligibility requirements
of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree
medical and life insurance benefits provided to certain retirees pursuant to the
terms of the Pension Plan,




the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to
the benefits set forth in this Paragraph 2.( c).

                  (i) Mr. Fanning shall be eligible to participate in the
         Company's Group Health Plan, upon payment of both the Company's and his
         monthly premium under such plan, for a period of six (6) months for
         each of Mr. Fanning's Years of Service, not to exceed five (5) years.
         If Mr. Fanning elects to receive this extended medical coverage, he
         shall also be entitled to elect coverage under the Group Health Plan
         for his dependents who were participating in the Group Health Plan on
         Mr. Fanning's Termination Date (and for such other dependents as may be
         entitled to coverage under the provisions of the Health Insurance
         Portability and Accountability Act of 1996) for the duration of Mr.
         Fanning's extended medical coverage under this Paragraph 2.(c)(i) to
         the extent such dependents remain eligible for dependent coverage under
         the terms of the Group Health Plan.

                           (A) The extended medical coverage afforded to Mr.
                  Fanning pursuant to Paragraph 2. (c)(i), as well as the
                  premiums to be paid by Mr. Fanning in connection with such
                  coverage shall be determined in accordance with the terms of
                  the Group Health Plan and shall be subject to any changes in
                  the terms and conditions of the Group Health Plan as well as
                  any future increases in premiums under the Group Health Plan.
                  The premiums to be paid by Mr. Fanning in connection with this
                  extended coverage shall be due on the first day of each month;
                  provided, however, that if he fails to pay his premium within
                  thirty (30) days of its due date, such extended coverage shall
                  be terminated.

                           (B) Any Group Health Plan coverage provided under
                  Paragraph 2.(c)(i) shall be a part of and not in addition to
                  any COBRA Coverage which Mr. Fanning or his dependents may
                  elect. In the event that Mr. Fanning or his dependents become
                  eligible to be covered, by virtue of re-employment or
                  otherwise, by any employer-sponsored group health plan or is
                  eligible for coverage under any government-sponsored health
                  plan during the above period, coverage under the Company's
                  Group Health Plan available to Mr. Fanning or his dependents
                  by virtue of the provisions of Paragraph 2.(c)(i) shall
                  terminate, except as may otherwise be required by law, and
                  shall not be renewed.

                  (ii) Mr. Fanning shall be entitled to receive cash in an
         amount equal to the Company's and Mr. Fanning's cost of premiums for
         three (3) years of coverage under the Group Health Plan and Group Life
         Insurance Plan in accordance with the terms of such plans as of the
         date of the Change in Control.

         (d) Incentive Plans. If Mr. Fanning meets the eligibility requirements
of Paragraph 2. (a) hereof he shall be entitled to the following benefits under
the Omnibus Plan:

                  (i) Stock Options.

                           (A) Any of Mr. Fanning's Options and Stock
                  Appreciation Rights under the Omnibus Plan (the defined terms
                  of which are incorporated in this Paragraph 2.(d)(i) by
                  reference) which are outstanding as of the Termination Date
                  and which are not then exercisable and vested, shall become
                  fully exercisable and vested to the full extent of the
                  original grant; provided, that in the case of a Stock
                  Appreciation Right, if Mr. Fanning is subject to Section 16(b)
                  of the Exchange Act, such Stock Appreciation Right shall not
                  become fully vested and exercisable at such time if such
                  actions would result in liability to Mr. Fanning under Section
                  16(b) of the Exchange Act, provided further, that any such
                  actions not taken as a result of the rules under Section 16(b)
                  of the Exchange Act shall be effected as of the first date
                  that such activity would no longer result in liability under
                  Section 16(b) of the Exchange Act.

                           (B) The restrictions and deferral limitations
                  applicable to any of Mr. Fanning's Restricted Stock and
                  Restricted Stock Units as of the Termination Date shall lapse,
                  and such Restricted Stock and Restricted Stock Units shall
                  become free of all restrictions and limitations and become
                  fully vested and transferable to the full extent of the
                  original grant.

                  (ii) Performance Pay Program. Provided Mr. Fanning is not
         entitled to a Cash-Based Award under the PPP, (the defined terms of
         which are incorporated in this Paragraph 2.(d)(ii) by reference), if
         the PPP is in place through Mr. Fanning's Termination Date and to the
         extent Mr. Fanning is entitled to participate therein, Mr. Fanning
         shall be entitled to receive cash in an amount equal to a prorated
         payout of his Cash-Based Awards under the PPP for the performance
         period in which the Termination Date shall have occurred, at target
         performance under the PPP and prorated by the number of months which
         have passed since the beginning of the performance period until the
         Termination Date.

                  (iii) Performance Dividend Program. Provided Mr. Fanning is
         not entitled to a Cash-Based Award under the Performance Dividend
         Program (the defined terms of which are incorporated in this Paragraph
         2.(d)(iii) by reference), if the Performance Dividend Program is in
         place through Mr. Fanning's Termination Date and to the extent Mr.
         Fanning is entitled to participate therein, Mr. Fanning shall be
         entitled to receive cash for each such Cash-Based Award under the
         Performance Dividend Program held by Mr. Fanning on his Termination
         Date, based on actual performance under the Performance Dividend
         Program determined as of the most recently completed calendar quarter
         of the performance period in which the Termination Date shall have
         occurred, and the annual dividend declared prior to the Termination
         Date.

                  (iv) Other Short Term Incentives Under the Omnibus Plan.
         Provided Mr. Fanning is not entitled to a Performance Unit/Share award
         under the Omnibus Plan (the defined terms of which are incorporated in
         this Paragraph 2.(d)(iv) by reference), Mr. Fanning shall be entitled
         to receive cash in an amount equal to a prorated payout of the value of
         his Performance Units and/or Performance Shares for the performance
         period in which the Termination Date shall have occurred, at target
         performance and prorated by the number of months which have passed
         since the beginning of the performance period until the Termination
         Date.



                  (v) Other Short Term Incentive Plans. The provisions of this
         Paragraph 2.(d)(v) shall apply if and to the extent that Mr. Fanning is
         a participant in any other "short term compensation plan" not otherwise
         previously referred to in this Paragraph 2.(d). Provided Mr. Fanning is
         not otherwise entitled to a plan payout under any change of control
         provisions of such plans, if the "short term compensation plan" is in
         place as of the Termination Date and to the extent Mr. Fanning is
         entitled to participate therein, Mr. Fanning shall receive cash in an
         amount equal to his award under the Company's "short term incentive
         plan" for the annual performance period in which the Termination Date
         shall have occurred, at Mr. Fanning's target performance level and
         prorated by the number of months which have passed since the beginning
         of the annual performance period until his Termination Date. For
         purposes of this Paragraph 2.(d)(v) the term "short term incentive
         compensation plan" shall mean any incentive compensation plan or
         arrangement adopted in writing by the Company which provides for
         annual, recurring compensatory bonuses based upon articulated
         performance criteria.

         (e) Payment of Benefits. Any amounts due under this Agreement shall be
paid in one (1) lump sum payment as soon as administratively practicable
following the later of: (i) Mr. Fanning's Termination Date, or (ii) upon Mr.
Fanning's tender of an effective Waiver and Release to the Company in the form
of Exhibit A attached hereto and the expiration of any applicable revocation
period for such waiver. In the event of a dispute with respect to liability or
amount of any benefit due hereunder, an effective Waiver and Release shall be
tendered at the time of final resolution of any such dispute when payment is
tendered by the Company.

         (f) Benefits in the Event of Death. In the event of Mr. Fanning's death
prior to the payment of all amounts due under this Agreement, Mr. Fanning's
estate shall be entitled to receive as due any amounts not yet paid under this
Agreement upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

         (g) Legal Fees. In the event of a dispute between Mr. Fanning and the
Company with regard to any amounts due hereunder, if any material issue in such
dispute is finally resolved in Mr. Fanning's favor, the Company shall reimburse
Mr. Fanning's legal fees incurred with respect to all issues in such dispute in
an amount not to exceed fifty thousand dollars ($50,000).

         (h) Employee Outplacement Services. Mr. Fanning shall be eligible to
participate in the Employee Outplacement Program, which program shall not be
less than six (6) months duration measured from Mr. Fanning's Termination Date.

         (i) Non-qualified Retirement and Deferred Compensation Plans. The
Parties agree that subsequent to a Change in Control, any claims by Mr. Fanning
for benefits under any of the Company's non-qualified retirement or deferred
compensation plans shall be resolved through binding arbitration in accordance
with the provisions and procedures set forth in Paragraph 5 hereof and if any
material issue in such dispute is finally resolved in Mr. Fanning's favor, the
Company shall reimburse Mr. Fanning's legal fees in the manner provided in
Paragraph 2.(g) hereof.

         3. Transfer of Employment. In the event that Mr. Fanning's employment
by the Company is terminated during the two year period following a Change in
Control and Mr. Fanning accepts employment by Southern, a Southern Subsidiary,
or any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.

         4. No Mitigation. If Mr. Fanning is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Fanning hereunder shall not be reduced or suspended if Mr. Fanning accepts such
subsequent employment.

         5. Arbitration.

         (a) Any dispute, controversy or claim arising out of or relating to the
Company's obligations to pay severance benefits under this Agreement, or the
breach thereof, shall be settled and resolved solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. The arbitration shall
be the sole and exclusive forum for resolution of any such claim for severance
benefits and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes, claims or
controversies arising out of or relating to Mr. Fanning's employment by the
Company or the termination thereof.




         (b) Arbitration shall be initiated by serving a written notice of
demand for arbitration to Mr. Fanning, in the case of the Company, or to the
Southern Board, in the case of Mr. Fanning.

         (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators
shall apply the law of the State of Georgia, to the extent not preempted by
federal law, excluding any law which would require the application of the law of
another state.

         (d) The parties shall appoint arbitrators within fifteen (15) business
days following service of the demand for arbitration. The number of arbitrators
shall be three. One arbitrator shall be appointed by Mr. Fanning, one arbitrator
shall be appointed by the Company, and the two arbitrators shall appoint a
third. If the arbitrators cannot agree on a third arbitrator within thirty (30)
business days after the service of demand for arbitration, the third arbitrator
shall be selected by the AAA.

         (e) The arbitration filing fee shall be paid by Mr. Fanning. All other
costs of arbitration shall be borne equally by Mr. Fanning and the Company,
provided, however, that the Company shall reimburse such fees and costs in the
event any material issue in such dispute is finally resolved in Mr. Fanning's
favor and Mr. Fanning is reimbursed legal fees under Paragraph 2.(g) hereof.

         (f) The parties agree that they will faithfully observe the rules that
govern any arbitration between them, they will abide by and perform any award
rendered by the arbitrators in any such arbitration, including any award of
injunctive relief, and a judgment of a court having jurisdiction may be entered
upon an award.

         (g) The parties agree that nothing in this Paragraph 5 is intended to
preclude upon application of either party any court having jurisdiction from
issuing and enforcing in any lawful manner such temporary restraining orders,
preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Agreement; regardless of whether an arbitration proceeding under this Paragraph
5 has begun. The parties further agree that nothing herein shall prevent any
court from entering and enforcing in any lawful manner such judgments for
permanent equitable relief as may be necessary to prevent harm to a party's
interests or as otherwise may be appropriate following the issuance of arbitral
awards pursuant to this Paragraph 5.

         6. Miscellaneous.

         (a) Funding of Benefits. Unless the Board in its discretion shall
determine otherwise, the benefits payable to Mr. Fanning under this Agreement
shall not be funded in any manner and shall be paid by the Company out of its
general assets, which assets are subject to the claims of the Company's
creditors.

         (b) Withholding. There shall be deducted from the payment of any
benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Mr. Fanning.

         (c) Assignment. Mr. Fanning shall have no rights to sell, assign,
transfer, encumber, or otherwise convey the right to receive the payment of any
benefit due hereunder, which payment and the rights thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to do so shall be
null and void and of no effect.

         (d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.

         (e) Construction. This Agreement shall be construed in accordance with
and governed by the laws of the State of Georgia, to the extent not preempted by
federal law, disregarding any provision of law which would require the
application of the law of another state.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 14th day of June, 2004.


                                   THE SOUTHERN COMPANY



                          By:      /s/Ellen N. Lindemann


                                   SOUTHERN COMPANY SERVICES, INC.


                          By:      /s/Ellen N. Lindemann


                                   MR. FANNING


                                   /s/Thomas A. Fanning
                                   Thomas A. Fanning










                                    Exhibit A
                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         The attached Waiver and Release is to be given to Mr. Thomas A. Fanning
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.







                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         I, Thomas A. Fanning, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Savannah Electric and Power
Company (collectively, the "Company") if I had not elected to sign this Waiver.

         I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.

         In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communications Services, Inc., Southern Company Energy Solutions, LLC,
Southern Company Services, Inc., Southern Nuclear Operating Company, Inc. and
other direct or indirect subsidiaries of The Southern Company and their past,
present and future officers, directors, employees, agents and attorneys. Nothing
in this Waiver shall be construed to release claims or causes of action under
the Age Discrimination in Employment Act or the Energy Reorganization Act of
1974, as amended, which arise out of events occurring after the execution date
of this Waiver.

         In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.

         In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.




         In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.

         I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.

         I understand that by signing this Waiver I am giving up rights I may
have.

         IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ________, in the year ____.

                                                     ---------------------------
                                                     Thomas A. Fanning

Sworn to and subscribed to me this

___day of _________, ____

- --------------------------
Notary Public

My Commission Expires:

- ---------------------------
(Notary Seal)

         Acknowledged and Accepted by the Company, as defined in the Waiver.

By:
         -----------------------------------
Date:
         -----------------------------------

EX-10.A.5

                                                                  Exhibit 10(a)5


                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

         THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement")
made and entered into by and between The Southern Company ("Southern"), Alabama
Power Company (the "Company") and Mr. Charles Douglas McCrary ("Mr. McCrary")
(hereinafter collectively referred to as the "Parties") is effective June 1,
2004. This Agreement amends and restates the Amended and Restated Change in
Control Agreement entered into by Southern, Southern Company Services, Inc. and
Mr. McCrary effective July 10, 2000.

                                   WITNESSETH:

         WHEREAS, Mr. McCrary is the President and Chief Executive Officer of
the Company;

         WHEREAS, the Company wishes to provide to Mr. McCrary certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;

         NOW, THEREFORE, in consideration of the premises, and the agreements of
the Parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

         1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

                  (a) "Annual Compensation" shall mean Mr. McCrary's highest
         annual base salary rate for the twelve (12) month period immediately
         preceding the date of the Change in Control plus target bonus.





                  (b) "Beneficial Ownership" shall mean beneficial ownership
         within the meaning of Rule 13d-3 promulgated under the Exchange Act.

                  (c) "Board" shall mean the board of directors of the Company.

                  (d) "Business Combination" shall mean a reorganization, merger
         or consolidation of Southern or sale or other disposition of all or
         substantially all of the assets of Southern.

                  (e) "Change in Control" shall mean any of the following:

                           (i) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 20% or more of Southern's Voting
                  Securities; provided, however, that for purposes of this
                  Paragraph l.(e)(i), the following acquisitions of Southern's
                  Voting Securities shall not constitute a Change in Control:

                                    (A) any acquisition directly from Southern;

                                    (B) any acquisition by Southern;

                                    (C) any acquisition by any employee benefit
                           plan (or related trust) sponsored or maintained by
                           Southern or any Southern Subsidiary;

                                    (D) any acquisition by a qualified pension
                           plan or publicly held mutual fund;

                                    (E) any acquisition by a Group composed
                           exclusively of employees of Southern, or any Southern
                           Subsidiary;

                                    (F) any acquisition by Mr. McCrary or any
                           Group of which Mr. McCrary is a party; or

                                    (G) any Business Combination which would not
                           otherwise constitute a change in control because of
                           the application of clauses (A), (B) and (C) of
                           Paragraph 1(e )(iii);

                           (ii) A change in the composition of the Southern
                  Board whereby individuals who constitute the Incumbent Board
                  cease for any reason to constitute at least a majority of the
                  Southern Board;

                           (iii) Consummation of a Business Combination,
                  provided, however, that such a Business Combination shall not
                  constitute a Change in Control if all three (3) of the
                  following conditions are met:

                                    (A) all or substantially all of the
                           individuals and entities who held Beneficial
                           Ownership, respectively, of Southern's Voting
                           Securities immediately prior to such Business
                           Combination beneficially own, directly or indirectly,
                           65% or more of the combined voting power of the
                           Voting Securities of the corporation surviving or
                           resulting from such Business Combination, (including,
                           without limitation, a corporation which as a result
                           of such transaction holds Beneficial Ownership of all
                           or substantially all of Southern's Voting Securities
                           or all or substantially all of Southern's assets)
                           (such surviving or resulting corporation to be
                           referred to as "Surviving Company"), in substantially
                           the same proportions as their ownership, immediately
                           prior to such Business Combination, of Southern's
                           Voting Securities;

                                    (B) no Person (excluding any corporation
                           resulting from such Business Combination, any
                           employee benefit plan (or related trust) of Southern,
                           any Southern Subsidiary or Surviving Company, Mr.
                           McCrary, any Group of which Mr. McCrary is a party,
                           any Group composed exclusively of Company employees,
                           any qualified pension plan (or related trust) or any
                           publicly held mutual fund) holds Beneficial
                           Ownership, directly or indirectly, of 20% or more of
                           the combined voting power of the then outstanding
                           Voting Securities of Surviving Company except to the
                           extent that such ownership existed prior to the
                           Business Combination; and

                                    (C) at least a majority of the members of
                           the board of directors of Surviving Company were
                           members of the Incumbent Board at the earlier of the
                           date of execution of the initial agreement, or of the
                           action of the Southern Board, providing for such
                           Business Combination.

                           (iv) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 50% or more of the combined voting
                  power of the then outstanding Voting Securities of the
                  Company; provided, however, that for purposes of this
                  Paragraph l.(e)(iv), any acquisition by Mr. McCrary, any Group
                  composed exclusively of employees of the Company, any Group of
                  which Mr. McCrary is a party, any qualified pension plan (or
                  related trust), any publicly held mutual fund, any employee
                  benefit plan (or related trust) sponsored or maintained by
                  Southern or any Southern Subsidiary shall not constitute a
                  Change in Control;

                           (v) Consummation of a reorganization, merger or
                  consolidation of the Company (an "Employing Company Business
                  Combination"), in each case, unless, following such Employing
                  Company Business Combination, Southern Controls the
                  corporation or other entity surviving or resulting from such
                  Employing Company Business Combination; or

                           (vi) Consummation of the sale or other disposition of
                  all or substantially all of the assets of the Company to a
                  corporation or other entity which Southern does not Control.

         Notwithstanding the foregoing, in no event shall "Change in Control"
mean an initial public offering or a spin-off of the Company.

                  (f) "COBRA Coverage" shall mean any continuation coverage to
         which Mr. McCrary or his dependents may be entitled pursuant to Code
         Section 4980B.

                  (g) "Code" shall mean the Internal Revenue Code of 1986, as
         amended.

                  (h) "Company" shall mean Alabama Company, its successors and
         assigns.

                  (i) "Consummation" shall mean the completion of the final act
         necessary to complete a transaction as a matter of law, including, but
         not limited to, any required approvals by the corporation's
         shareholders and board of directors, the transfer of legal and
         beneficial title to securities or assets and the final approval of the
         transaction by any applicable domestic or foreign governments or
         governmental agencies.

                  (j) "Control" shall mean, in the case of a corporation,
         Beneficial Ownership of more than 50% of the combined voting power of
         the corporation's Voting Securities, or in the case of any other
         entity, Beneficial Ownership of more than 50% of such entity's voting
         equity interests.

                  (k) "Effective Date" shall mean the date of execution of this
         Agreement.

                  (l) "Employee Outplacement Program" shall mean the program
         established by the Company from time to time for the purpose of
         assisting participants covered by the plan in finding employment
         outside of the Company which provides for the following services:

                           (i) self-assessment, career decision and goal
                  setting;

                           (ii) job market research and job sources; (iii)
                  networking and interviewing skills;

                           (iv) planning and implementation strategy;

                           (v) resume writing, job hunting methods and salary
                  negotiation; and

                           (vi) office support and job search resources.

                  (m) "Exchange Act" shall mean the Securities Exchange Act of
         1934, as amended.

                  (n) "Good Reason" shall mean, without Mr. McCrary's express
         written consent, after written notice to the Board, and after a thirty
         (30) day opportunity for the Board to cure, the continuing occurrence
         of any of the following events:

                           (i) Inconsistent Duties. A meaningful and detrimental
                  alteration in Mr. McCrary's position or in the nature or
                  status of his responsibilities from those in effect
                  immediately prior to the Change in Control;

                           (ii) Reduced Salary. A reduction of five percent (5%)
                  or more by the Company in either of the following: (i) Mr.
                  McCrary's annual base salary rate as in effect immediately
                  prior to the Change in Control (except for a less than ten
                  percent (10%), across-the-board annual base salary rate
                  reduction similarly affecting at least ninety-five percent
                  (95%) of the Executive Employees of the Company); or (ii) the
                  sum of Mr. McCrary's annual base salary rate plus target bonus
                  under the PPP (except for a less than ten percent (10%),
                  across-the-board reduction of annual base salary rate plus
                  target bonus under the PPP similarly affecting at least
                  ninety-five percent (95%) of the Executive Employees of the
                  Company);

                           (iii) Pension and Compensation Plans. The failure by
                  the Company to continue in effect any pension or compensation
                  plan or agreement in which Mr. McCrary participates or is a
                  party as of the date of the Change in Control or the
                  elimination of Mr. McCrary's participation therein, (except
                  for across-the-board plan changes or terminations similarly
                  affecting at least ninety-five percent (95%) of the Executive
                  Employees of the Company). For purposes of this Paragraph
                  l.(n), a "pension plan or agreement" shall mean any written
                  arrangement executed by an authorized officer of the Company
                  which provides for payments upon retirement; and a
                  "compensation plan or arrangement" shall mean any written
                  arrangement executed by an authorized officer of the Company
                  which provides for periodic, non-discretionary compensatory
                  payments in the nature of bonuses.

                           (iv) Relocation. A change in Mr. McCrary's work
                  location to a location more than fifty (50) miles from the
                  office where Mr. McCrary is located at the time of the Change
                  in Control, unless such new work location is within fifty (50)
                  miles from Mr. McCrary's principal place of residence at the
                  time of the Change in Control. The acceptance, if any, by Mr.
                  McCrary of employment by the Company at a work location which
                  is outside the fifty mile radius set forth in this Paragraph
                  l.(n)(iv) shall not be a waiver of Mr. McCrary's right to
                  refuse subsequent transfer by the Company to a location which
                  is more than fifty (50) miles from Mr. McCrary's principal
                  place of residence at the time of the Change in Control, and
                  such subsequent unconsented transfer shall be "Good Reason"
                  under this Agreement; or

                           (v) Benefits and Perquisites. The taking of any
                  action by the Company which would directly or indirectly
                  materially reduce the benefits enjoyed by Mr. McCrary under
                  the Company's retirement, life insurance, medical, health and
                  accident, disability, deferred compensation or savings plans
                  in which Mr. McCrary was participating immediately prior to
                  the Change in Control; or the failure by the Company to
                  provide Mr. McCrary with the number of paid vacation days to
                  which Mr. McCrary is entitled on the basis of years of service
                  with the Company in accordance with the Company's normal
                  vacation policy in effect immediately prior to the Change in
                  Control (except for across-the-board plan or vacation policy
                  changes or plan terminations similarly affecting at least
                  ninety-five percent (95%) of the Executive Employees of the
                  Company).

                           (vi) For purposes of this Paragraph l.(n), the term
                  "Executive Employee" shall mean those employees of the Company
                  of Grade Level 10 or above.

                  (o) "Group" shall have the meaning set forth in Section 14(d)
         of the Exchange Act.

                  (p) "Group Health Plan" shall mean the group health plan
         covering Mr. McCrary, as such plan may be amended from time to time.

                  (q) "Group Life Insurance Plan" shall mean the group life
         insurance program covering Mr. McCrary, as such plan may be amended
         from time to time.

                  (r) "Incumbent Board" shall mean those individuals who
         constitute the Southern Board as of October 19, 1998 plus any
         individual who shall become a director subsequent to such date whose
         election or nomination for election by Southern's shareholders was
         approved by a vote of at least 75% of the directors then comprising the
         Incumbent Board. Notwithstanding the foregoing, no individual who shall
         become a director of the Southern Board subsequent to October 19, 1998
         whose initial assumption of office occurs as a result of an actual or
         threatened election contest (within the meaning of Rule 14a-11 of the
         Regulations promulgated under the Exchange Act) with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Southern Board shall be a member of the Incumbent Board.

                  (s) "Month of Service" shall mean any calendar month during
         which Mr. McCrary has worked at least one (1) hour or was on approved
         leave of absence while in the employ of the Company or any affiliate or
         subsidiary of Southern.




                  (t) "Omnibus Plan" shall mean the Southern Company Omnibus
         Incentive Compensation Plan, and the Design and Administrative
         Specifications duly adopted thereunder, as in effect on the day before
         the date of a Change in Control.

                  (u) "Pension Plan" shall mean The Southern Company Pension
         Plan, as such plan may be amended from time to time.

                  (v) "Performance Dividend Program" shall mean the Performance
         Dividend Program under the Omnibus Plan or any replacement thereto, as
         such plans may be amended from time to time.

                  (w) "Person" shall mean any individual, entity or group within
         the meaning of Section 13(d)(3) or 14(d)(2) of Act.

                  (x) "Performance Pay Program" or "PPP" shall mean the
         Performance Pay Program under the Omnibus Plan or any replacement
         thereto, as such plans may be amended from time to time.

                  (y) "Southern" shall mean The Southern Company, its successors
         and assigns.

                  (z) "Southern Board" shall mean the board of directors of
         Southern.

                  (aa) "Southern Subsidiary" shall mean any corporation or other
         entity Controlled by Southern.

                  (bb) "Termination for Cause" or "Cause" shall mean the
         termination of Mr. McCrary's employment by the Company upon the
         occurrence of any of the following:

                           (i) The willful and continued failure by Mr. McCrary
                  substantially to perform his duties with the Company (other
                  than any such failure resulting from Mr. McCrary's Total
                  Disability or from Mr. McCrary's retirement or any such actual
                  or anticipated failure resulting from termination by Mr.
                  McCrary for Good Reason) after a written demand for
                  substantial performance is delivered to him by the Southern
                  Board, which demand specifically identifies the manner in
                  which the Southern Board believes that he has not
                  substantially performed his duties; or

                           (ii) The willful engaging by Mr. McCrary in conduct
                  that is demonstrably and materially injurious to the Company,
                  monetarily or otherwise, including, but not limited to any of
                  the following:

                                    (A) any willful act involving fraud or
                           dishonesty in the course of Mr. McCrary's employment
                           by the Company;

                                    (B) the willful carrying out of any activity
                           or the making of any statement which would materially
                           prejudice or impair the good name and standing of the
                           Company, Southern or any Southern Subsidiary or would
                           bring the Company, Southern or any Southern
                           Subsidiary into contempt, ridicule or would
                           reasonably shock or offend any community in which the
                           Company, Southern or such Southern Subsidiary is
                           located;

                                    (C) attendance at work in a state of
                           intoxication or otherwise being found in possession
                           at his workplace of any prohibited drug or substance,
                           possession of which would amount to a criminal
                           offense;

                                    (D) violation of the Company's policies on
                           drug and alcohol usage, fitness for duty requirements
                           or similar policies as may exist from time to time as
                           adopted by the Company's safety officer;

                                    (E) assault or other act of violence against
                           any person during the course of employment; or

                                    (F) indictment of any felony or any
                           misdemeanor involving moral turpitude.

         No act or failure to act by Mr. McCrary shall be deemed "willful"
unless done, or omitted to be done, by Mr. McCrary not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.

         Notwithstanding the foregoing, Mr. McCrary shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three quarters of the entire membership of the Southern Board at a meeting of
the Southern Board called and held for such purpose (after reasonable notice to
Mr. McCrary and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. McCrary was guilty of conduct set forth above in clause (i)
or (ii) of this Paragraph l.(bb) and specifying the particulars thereof in
detail.

                  (cc) "Termination Date" shall mean the date on which Mr.
         McCrary's employment with the Company is terminated; provided, however,
         that solely for purposes of Paragraph 2.(c) hereof, the Termination
         Date shall be the effective date of his retirement pursuant to the
         terms of the Pension Plan.

                  (dd) "Total Disability" shall mean Mr. McCrary's total
         disability within the meaning of the Pension Plan.

                  (ee) "Voting Securities" shall mean the outstanding voting
         securities of a corporation entitling the holder thereof to vote
         generally in the election of such corporation's directors.

                  (ff) "Waiver and Release" shall mean the Waiver and Release
         attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr.
         McCrary's Months of Service divided by twelve (12) rounded to the
         nearest whole year, rounding up if the remaining number of months is
         seven (7) or greater and rounding down if the remaining number of
         months is less than seven (7). If Mr. McCrary has a break in his
         service with the Company, he will receive credit under this Agreement
         for service prior to the break in service only if the break in service
         is less than five years.

         2. Severance Benefits.

         (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a),
if Mr. McCrary's employment is involuntarily terminated by the Company at any
time during the two year period following a Change in Control for reasons other
than Cause, or if Mr. McCrary voluntarily terminates his employment with the
Company for Good Reason at any time during the two year period following a
Change in Control, Mr. McCrary shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective Waiver
and Release. Notwithstanding anything to the contrary herein, Mr. McCrary shall
not be eligible to receive benefits under this Agreement if Mr. McCrary:

                  (i) voluntarily terminates his employment with the Company for
         other than Good Reason;

                  (ii) has his employment terminated by the Company for Cause;

                  (iii) accepts the transfer of his employment to Southern, any
         Southern Subsidiary or any employer that succeeds to all or
         substantially all of the assets of the Company, Southern or any
         Southern Subsidiary;

                  (iv) refuses an offer of continued employment with the
         Company, any Southern Subsidiary, or any employer that succeeds to all
         or substantially all of the assets of the Company, Southern, or any
         Southern Subsidiary under circumstances where such refusal would not
         amount to Good Reason for voluntary termination of employment; or

                  (v) elects to receive the benefits of any other voluntary or
         involuntary severance or separation program, plan or agreement
         maintained by the Company in lieu of benefits under this Agreement;
         provided however, that the receipt of benefits under the terms of any
         retention plan or agreement shall not be deemed to be the receipt of
         severance or separation benefits for purposes of this Agreement.

         (b) Severance Benefits. If Mr. McCrary meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance
benefit in an amount equal to three times his Annual Compensation (the
"Severance Amount"). If any portion of the Severance Amount constitutes an
"excess parachute payment" (as such term is defined under Code Section 280G
("Excess Parachute Payment")), the Company shall pay to Mr. McCrary an
additional amount calculated by determining the amount of tax under Code Section
4999 that he otherwise would have paid on any Excess Parachute Payment with
respect to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section the hospital insurance tax under Code
Section 31O1(b) ("HI Tax") and federal and state income tax measured at the
highest marginal rates ("Income Tax") and subtracting such result from the
number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up
shall be paid unless the Severance Amount plus all other "parachute payments" to
Mr. McCrary under Code Section 280G exceeds three (3) times Mr. McCrary's "base
amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten
percent (10%) or more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr. McCrary's Base Amount,
less all other "parachute payments" (as such term is defined under Code Section
280G) received by Mr. McCrary, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would
have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax.

         For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of tax, e.g.,
Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax department of the
independent public accounting firm then responsible for preparing Southern's
consolidated federal income tax return, and such calculations or determinations
shall be binding upon the parties hereto.

         (c) Welfare Benefits. If Mr. McCrary meets the eligibility requirements
of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree
medical and life insurance benefits provided to certain retirees pursuant to the
terms of the Pension Plan,




the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to
the benefits set forth in this Paragraph 2.( c).

                  (i) Mr. McCrary shall be eligible to participate in the
         Company's Group Health Plan, upon payment of both the Company's and his
         monthly premium under such plan, for a period of six (6) months for
         each of Mr. McCrary's Years of Service, not to exceed five (5) years.
         If Mr. McCrary elects to receive this extended medical coverage, he
         shall also be entitled to elect coverage under the Group Health Plan
         for his dependents who were participating in the Group Health Plan on
         Mr. McCrary's Termination Date (and for such other dependents as may be
         entitled to coverage under the provisions of the Health Insurance
         Portability and Accountability Act of 1996) for the duration of Mr.
         McCrary's extended medical coverage under this Paragraph 2.(c)(i) to
         the extent such dependents remain eligible for dependent coverage under
         the terms of the Group Health Plan.

                           (A) The extended medical coverage afforded to Mr.
                  McCrary pursuant to Paragraph 2. (c)(i), as well as the
                  premiums to be paid by Mr. McCrary in connection with such
                  coverage shall be determined in accordance with the terms of
                  the Group Health Plan and shall be subject to any changes in
                  the terms and conditions of the Group Health Plan as well as
                  any future increases in premiums under the Group Health Plan.
                  The premiums to be paid by Mr. McCrary in connection with this
                  extended coverage shall be due on the first day of each month;
                  provided, however,




                  that if he fails to pay his premium within thirty (30) days of
                  its due date, such extended coverage shall be terminated.

                           (B) Any Group Health Plan coverage provided under
                  Paragraph 2.(c)(i) shall be a part of and not in addition to
                  any COBRA Coverage which Mr. McCrary or his dependents may
                  elect. In the event that Mr. McCrary or his dependents become
                  eligible to be covered, by virtue of re-employment or
                  otherwise, by any employer-sponsored group health plan or is
                  eligible for coverage under any government-sponsored health
                  plan during the above period, coverage under the Company's
                  Group Health Plan available to Mr. McCrary or his dependents
                  by virtue of the provisions of Paragraph 2.

                  (c)(i) shall terminate, except as may otherwise be required by
         law, and shall not be renewed. (ii) Mr. McCrary shall be entitled to
         receive cash in an amount equal to the Company's and Mr. McCrary's cost
         of premiums for three (3) years of coverage under the Group Health Plan
         and Group Life Insurance Plan in accordance with the terms of such
         plans as of the date of the Change in Control.

                  (d) Incentive Plans. If Mr. McCrary meets the eligibility
         requirements of Paragraph 2. (a) hereof he shall be entitled to the
         following benefits under the Omnibus Plan:

                  (i) Stock Options.

                           (A) Any of Mr. McCrary's Options and Stock
                  Appreciation Rights under the Omnibus Plan (the defined terms
                  of which are incorporated in this Paragraph 2.(d)(i) by
                  reference) which are outstanding as of the Termination Date
                  and which are not then exercisable and vested, shall become
                  fully exercisable and vested to the full extent of the
                  original grant; provided, that in the case of a Stock
                  Appreciation Right, if Mr. McCrary is subject to Section 16(b)
                  of the Exchange Act, such Stock Appreciation Right shall not
                  become fully vested and exercisable at such time if such
                  actions would result in liability to Mr. McCrary under Section
                  16(b) of the Exchange Act, provided further, that any such
                  actions not taken as a result of the rules under Section 16(b)
                  of the Exchange Act shall be effected as of the first date
                  that such activity would no longer result in liability under
                  Section 16(b) of the Exchange Act.

                           (B) The restrictions and deferral limitations
                  applicable to any of Mr. McCrary's Restricted Stock and
                  Restricted Stock Units as of the Termination Date shall lapse,
                  and such Restricted Stock and Restricted Stock Units shall
                  become free of all restrictions and limitations and become
                  fully vested and transferable to the full extent of the
                  original grant.

                  (ii) Performance Pay Program. Provided Mr. McCrary is not
         entitled to a Cash-Based Award under the PPP, (the defined terms of
         which are incorporated in this Paragraph 2.(d)(ii) by reference), if
         the PPP is in place through Mr. McCrary's Termination Date and to the
         extent Mr. McCrary is entitled to participate therein, Mr. McCrary
         shall be entitled to receive cash in an amount equal to a prorated
         payout of his Cash-Based Awards under the PPP for the performance
         period in which the Termination Date shall have occurred, at target
         performance under the PPP and prorated by the number of months which
         have passed since the beginning of the performance period until the
         Termination Date.

                  (iii) Performance Dividend Program. Provided Mr. McCrary is
         not entitled to a Cash-Based Award under the Performance Dividend
         Program (the defined terms of which are incorporated in this Paragraph
         2.(d)(iii) by reference), if the Performance Dividend Program is in
         place through Mr. McCrary's Termination Date and to the extent Mr.
         McCrary is entitled to participate therein, Mr. McCrary shall be
         entitled to receive cash for each such Cash-Based Award under the
         Performance Dividend Program held by Mr. McCrary on his Termination
         Date, based on actual performance under the Performance Dividend
         Program determined as of the most recently completed calendar quarter
         of the performance period in which the Termination Date shall have
         occurred, and the annual dividend declared prior to the Termination
         Date.

                  (iv) Other Short Term Incentives Under the Omnibus Plan.
         Provided Mr. McCrary is not entitled to a Performance Unit/Share award
         under the Omnibus Plan (the defined terms of which are incorporated in
         this Paragraph 2.(d)(iv) by reference), Mr. McCrary shall be entitled
         to receive cash in an amount equal to a prorated payout of the value of
         his Performance Units and/or Performance Shares for the performance
         period in which the Termination Date shall have occurred, at target
         performance and prorated by the number of months





         which have passed since the beginning of the performance period until
         the Termination Date.

                  (v) Other Short Term Incentive Plans. The provisions of this
         Paragraph 2.(d)(v) shall apply if and to the extent that Mr. McCrary is
         a participant in any other "short term compensation plan" not otherwise
         previously referred to in this Paragraph 2.(d). Provided Mr. McCrary is
         not otherwise entitled to a plan payout under any change of control
         provisions of such plans, if the "short term compensation plan" is in
         place as of the Termination Date and to the extent Mr. McCrary is
         entitled to participate therein, Mr. McCrary shall receive cash in an
         amount equal to his award under the Company's "short term incentive
         plan" for the annual performance period in which the Termination Date
         shall have occurred, at Mr. McCrary's target performance level and
         prorated by the number of months which have passed since the beginning
         of the annual performance period until his Termination Date. For
         purposes of this Paragraph 2.(d)(v) the term "short term incentive
         compensation plan" shall mean any incentive compensation plan or
         arrangement adopted in writing by the Company which provides for
         annual, recurring compensatory bonuses based upon articulated
         performance criteria.

         (e) Payment of Benefits. Any amounts due under this Agreement shall be
paid in one (1) lump sum payment as soon as administratively practicable
following the later of: (i) Mr. McCrary's Termination Date, or (ii) upon Mr.
McCrary's tender of an effective Waiver and Release to the Company in the form
of Exhibit A attached hereto and the expiration of any applicable revocation
period for such waiver. In the event of a dispute with respect to liability or
amount of any benefit due hereunder, an effective Waiver and Release shall be
tendered at the time of final resolution of any such dispute when payment is
tendered by the Company.

         (f) Benefits in the Event of Death. In the event of Mr. McCrary's death
prior to the payment of all amounts due under this Agreement, Mr. McCrary's
estate shall be entitled to receive as due any amounts not yet paid under this
Agreement upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

         (g) Legal Fees. In the event of a dispute between Mr. McCrary and the
Company with regard to any amounts due hereunder, if any material issue in such
dispute is finally resolved in Mr. McCrary's favor, the Company shall reimburse
Mr. McCrary's legal fees incurred with respect to all issues in such dispute in
an amount not to exceed fifty thousand dollars ($50,000).

         (h) Employee Outplacement Services. Mr. McCrary shall be eligible to
participate in the Employee Outplacement Program, which program shall not be
less than six (6) months duration measured from Mr. McCrary's Termination Date.

         (i) Non-qualified Retirement and Deferred Compensation Plans. The
Parties agree that subsequent to a Change in Control, any claims by Mr. McCrary
for benefits under any of the Company's non-qualified retirement or deferred
compensation plans shall be resolved through binding arbitration in accordance
with the provisions and procedures set forth in Paragraph 5 hereof and if any
material issue in such dispute is finally resolved in Mr. McCrary's favor, the
Company shall reimburse Mr. McCrary's legal fees in the manner provided in
Paragraph 2.(g) hereof.

         3. Transfer of Employment. In the event that Mr. McCrary's employment
by the Company is terminated during the two year period following a Change in
Control and Mr. McCrary accepts employment by Southern, a Southern Subsidiary,
or any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.

         4. No Mitigation. If Mr. McCrary is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
McCrary hereunder shall not be reduced or suspended if Mr. McCrary accepts such
subsequent employment.

         5. Arbitration.

         (a) Any dispute, controversy or claim arising out of or relating to the
Company's obligations to pay severance benefits under this Agreement, or the
breach thereof, shall be settled and resolved solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. The arbitration shall
be the sole and exclusive forum for resolution of any such claim for severance
benefits and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes, claims or
controversies arising out of or relating to Mr. McCrary's employment by the
Company or the termination thereof.




         (b) Arbitration shall be initiated by serving a written notice of
demand for arbitration to Mr. McCrary, in the case of the Company, or to the
Southern Board, in the case of Mr. McCrary.

         (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators
shall apply the law of the State of Georgia, to the extent not preempted by
federal law, excluding any law which would require the application of the law of
another state.

         (d) The parties shall appoint arbitrators within fifteen (15) business
days following service of the demand for arbitration. The number of arbitrators
shall be three. One arbitrator shall be appointed by Mr. McCrary, one arbitrator
shall be appointed by the Company, and the two arbitrators shall appoint a
third. If the arbitrators cannot agree on a third arbitrator within thirty (30)
business days after the service of demand for arbitration, the third arbitrator
shall be selected by the AAA.

         (e) The arbitration filing fee shall be paid by Mr. McCrary. All other
costs of arbitration shall be borne equally by Mr. McCrary and the Company,
provided, however, that the Company shall reimburse such fees and costs in the
event any material issue in such dispute is finally resolved in Mr. McCrary's
favor and Mr. McCrary is reimbursed legal fees under Paragraph 2.(g) hereof.

         (f) The parties agree that they will faithfully observe the rules that
govern any arbitration between them, they will abide by and perform any award
rendered by the arbitrators in any such arbitration, including any award of
injunctive relief, and a judgment of a court having jurisdiction may be entered
upon an award.

         (g) The parties agree that nothing in this Paragraph 5 is intended to
preclude upon application of either party any court having jurisdiction from
issuing and enforcing in any lawful manner such temporary restraining orders,
preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Agreement; regardless of whether an arbitration proceeding under this Paragraph
5 has begun. The parties further agree that nothing herein shall prevent any
court from entering and enforcing in any lawful manner such judgments for
permanent equitable relief as may be necessary to prevent harm to a party's
interests or as otherwise may be appropriate following the issuance of arbitral
awards pursuant to this Paragraph 5.

         6. Miscellaneous.

         (a) Funding of Benefits. Unless the Board in its discretion shall
determine otherwise, the benefits payable to Mr. McCrary under this Agreement
shall not be funded in any manner and shall be paid by the Company out of its
general assets, which assets are subject to the claims of the Company's
creditors.

         (b) Withholding. There shall be deducted from the payment of any
benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Mr. McCrary.

         (c) Assignment. Mr. McCrary shall have no rights to sell, assign,
transfer, encumber, or otherwise convey the right to receive the payment of any
benefit due hereunder, which payment and the rights thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to do so shall be
null and void and of no effect.

         (d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.

         (e) Construction. This Agreement shall be construed in accordance with
and governed by the laws of the State of Georgia, to the extent not preempted by
federal law, disregarding any provision of law which would require the
application of the law of another state.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 17th day of June, 2004.


                                                  THE SOUTHERN COMPANY



                                                  By:      /s/Ellen N. Lindemann


                                                  ALABAMA POWER COMPANY


                                                  By:      /s/Ellen N. Lindemann


                                                  MR. MCCRARY


                                                  /s/Charles D. McCrary
                                                  Charles Douglas McCrary







                                    Exhibit A

                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         The attached Waiver and Release is to be given to Mr. Charles Douglas
McCrary upon the occurrence of an event that triggers eligibility for severance
benefits under the Change in Control Agreement, as described in Paragraph 2(a)
of such agreement.











                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         I, Charles Douglas McCrary, understand that I am entitled to receive
the severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Alabama Power Company
(collectively, the "Company") if I had not elected to sign this Waiver.

         I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.

         In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communications Services, Inc., Southern Company Energy Solutions, LLC,
Southern Company Services, Inc., Southern Nuclear Operating Company, Inc. and
other direct or indirect subsidiaries of The Southern Company and their past,
present and future officers, directors, employees, agents and attorneys. Nothing
in this Waiver shall be construed to release claims or causes of action under
the Age Discrimination in Employment Act or the Energy Reorganization Act of
1974, as amended, which arise out of events occurring after the execution date
of this Waiver.

         In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.

         In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.





         In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.

         I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.

         I understand that by signing this Waiver I am giving up rights I may
have.

         IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ________, in the year ____.

                                                     ---------------------------
                                                     Charles Douglas McCrary

Sworn to and subscribed to me this

___day of _________, ____

- --------------------------
Notary Public

My Commission Expires:

- ---------------------------
(Notary Seal)

         Acknowledged and Accepted by the Company, as defined in the Waiver.

By:
         -----------------------------------
Date:
         -----------------------------------

EX-10.A.6

                                                                   Exhbit 10(a)6

                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

         THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement")
made and entered into by and between The Southern Company ("Southern"), Georgia
Power Company (the "Company") and Mr. Michael D. Garrett ("Mr. Garrett")
(hereinafter collectively referred to as the "Parties") is effective June 1,
2004. This Agreement amends and restates the Change in Control Agreement entered
into by Mr. Garrett, Southern and Mississippi Power Company, effective May 1,
2001.
                                   WITNESSETH:

         WHEREAS, Mr. Garrett is the President and Chief Executive Officer of
the Company;

         WHEREAS, the Company wishes to provide to Mr. Garrett certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;

         NOW, THEREFORE, in consideration of the premises, and the agreements of
the Parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

         1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

                  (a) "Annual Compensation" shall mean Mr. Garrett's highest
         annual base salary rate for the twelve (12) month period immediately
         preceding the date of the Change in Control plus target bonus.





                  (b) "Beneficial Ownership" shall mean beneficial ownership
         within the meaning of Rule 13d-3 promulgated under the Exchange Act.

                  (c) "Board" shall mean the board of directors of the Company.

                  (d) "Business Combination" shall mean a reorganization, merger
         or consolidation of Southern or sale or other disposition of all or
         substantially all of the assets of Southern.

                  (e) "Change in Control" shall mean any of the following:

                           (i) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 20% or more of Southern's Voting
                  Securities; provided, however, that for purposes of this
                  Paragraph l.(e)(i), the following acquisitions of Southern's
                  Voting Securities shall not constitute a Change in Control:

                                    (A) any acquisition directly from Southern;

                                    (B) any acquisition by Southern;

                                    (C) any acquisition by any employee benefit
                           plan (or related trust) sponsored or maintained by
                           Southern or any Southern Subsidiary;

                                    (D) any acquisition by a qualified pension
                           plan or publicly held mutual fund;

                                    (E) any acquisition by a Group composed
                           exclusively of employees of Southern, or any Southern
                           Subsidiary;

                                    (F) any acquisition by Mr. Garrett or any
                           Group of which Mr. Garrett is a party; or

                                    (G) any Business Combination which would not
                           otherwise constitute a change in control because of
                           the application of clauses (A), (B) and (C) of
                           Paragraph 1(e )(iii);

                           (ii) A change in the composition of the Southern
                  Board whereby individuals who constitute the Incumbent Board
                  cease for any reason to constitute at least a majority of the
                  Southern Board;

                           (iii) Consummation of a Business Combination,
                  provided, however, that such a Business Combination shall not
                  constitute a Change in Control if all three (3) of the
                  following conditions are met:

                                    (A) all or substantially all of the
                           individuals and entities who held Beneficial
                           Ownership, respectively, of Southern's Voting
                           Securities immediately prior to such Business
                           Combination beneficially own, directly or indirectly,
                           65% or more of the combined voting power of the
                           Voting Securities of the corporation surviving or
                           resulting from such Business Combination, (including,
                           without limitation, a corporation which as a result
                           of such transaction holds Beneficial Ownership of all
                           or substantially all of Southern's Voting Securities
                           or all or substantially all of Southern's assets)
                           (such surviving or resulting corporation to be
                           referred to as "Surviving Company"), in substantially
                           the same proportions as their ownership, immediately
                           prior to such Business Combination, of Southern's
                           Voting Securities;




                                    (B) no Person (excluding any corporation
                           resulting from such Business Combination, any
                           employee benefit plan (or related trust) of Southern,
                           any Southern Subsidiary or Surviving Company, Mr.
                           Garrett, any Group of which Mr. Garrett is a party,
                           any Group composed exclusively of Company employees,
                           any qualified pension plan (or related trust) or any
                           publicly held mutual fund) holds Beneficial
                           Ownership, directly or indirectly, of 20% or more of
                           the combined voting power of the then outstanding
                           Voting Securities of Surviving Company except to the
                           extent that such ownership existed prior to the
                           Business Combination; and

                                    (C) at least a majority of the members of
                           the board of directors of Surviving Company were
                           members of the Incumbent Board at the earlier of the
                           date of execution of the initial agreement, or of the
                           action of the Southern Board, providing for such
                           Business Combination.

                           (iv) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 50% or more of the combined voting
                  power of the then outstanding Voting Securities of the
                  Company; provided, however, that for purposes of this
                  Paragraph l.(e)(iv), any acquisition by Mr. Garrett, any Group
                  composed exclusively of employees of the Company, any Group of
                  which Mr. Garrett is a party, any qualified pension plan (or
                  related trust), any publicly held mutual fund, any employee
                  benefit plan (or related trust) sponsored or maintained by
                  Southern or any Southern Subsidiary shall not constitute a
                  Change in Control;





                           (v) Consummation of a reorganization, merger or
                  consolidation of the Company (an "Employing Company Business
                  Combination"), in each case, unless, following such Employing
                  Company Business Combination, Southern Controls the
                  corporation or other entity surviving or resulting from such
                  Employing Company Business Combination; or

                           (vi) Consummation of the sale or other disposition of
                  all or substantially all of the assets of the Company to a
                  corporation or other entity which Southern does not Control.
                  Notwithstanding the foregoing, in no event shall "Change in
                  Control" mean an initial public offering or a spin-off of the
                  Company.

                  (f) "COBRA Coverage" shall mean any continuation coverage to
         which Mr. Garrett or his dependents may be entitled pursuant to Code
         Section 4980B.

                  (g) "Code" shall mean the Internal Revenue Code of 1986, as
         amended.

                  (h) "Company" shall mean Georgia Power Company, its successors
         and assigns.

                  (i) "Consummation" shall mean the completion of the final act
         necessary to complete a transaction as a matter of law, including, but
         not limited to, any required approvals by the corporation's
         shareholders and board of directors, the transfer of legal and
         beneficial title to securities or assets and the final approval of the
         transaction by any applicable domestic or foreign governments or
         governmental agencies.

                  (j) "Control" shall mean, in the case of a corporation,
         Beneficial Ownership of more than 50% of the combined voting power of
         the corporation's Voting Securities, or in the case of any other
         entity, Beneficial Ownership of more than 50% of such entity's voting
         equity interests.

                  (k) "Effective Date" shall mean the date of execution of this
         Agreement.

                  (l) "Employee Outplacement Program" shall mean the program
         established by the Company from time to time for the purpose of
         assisting participants covered by the plan in finding employment
         outside of the Company which provides for the following services:

                           (i) self-assessment, career decision and goal
                  setting;

                           (ii) job market research and job sources;

                           (iii) networking and interviewing skills;

                           (iv) planning and implementation strategy;

                           (v) resume writing, job hunting methods and salary
                  negotiation; and

                           (vi) office support and job search resources.

                  (m) "Exchange Act" shall mean the Securities Exchange Act of
         1934, as amended.

                  (n) "Good Reason" shall mean, without Mr. Garrett's express
         written consent, after written notice to the Board, and after a thirty
         (30) day opportunity for the Board to cure, the continuing occurrence
         of any of the following events:

                           (i) Inconsistent Duties. A meaningful and detrimental
                  alteration in Mr. Garrett's position or in the nature or
                  status of his responsibilities from those in effect
                  immediately prior to the Change in Control;

                           (ii) Reduced Salary. A reduction of five percent (5%)
                  or more by the Company in either of the following: (i) Mr.
                  Garrett's annual base salary rate as in effect immediately
                  prior to the Change in Control (except for a less than ten
                  percent (10%), across-the-board annual base salary rate
                  reduction similarly affecting at least ninety-five percent
                  (95%) of the Executive Employees of the Company); or (ii) the
                  sum of Mr. Garrett's annual base salary rate plus target bonus
                  under the PPP (except for a less than ten percent (10%),
                  across-the-board reduction of annual base salary rate plus
                  target bonus under the PPP similarly affecting at least
                  ninety-five percent (95%) of the Executive Employees of the
                  Company);

                           (iii) Pension and Compensation Plans. The failure by
                  the Company to continue in effect any pension or compensation
                  plan or agreement in which Mr. Garrett participates or is a
                  party as of the date of the Change in Control or the
                  elimination of Mr. Garrett's participation therein, (except
                  for across-the-board plan changes or terminations similarly
                  affecting at least ninety-five percent (95%) of the Executive
                  Employees of the Company). For purposes of this Paragraph
                  l.(n), a "pension plan or agreement" shall mean any written
                  arrangement executed by an authorized officer of the Company
                  which provides for payments upon retirement; and a
                  "compensation plan or arrangement" shall mean any written
                  arrangement executed by an authorized officer of the Company
                  which provides for periodic, non-discretionary compensatory
                  payments in the nature of bonuses.

                           (iv) Relocation. A change in Mr. Garrett's work
                  location to a location more than fifty (50) miles from the
                  office where Mr. Garrett is located at the time of the Change
                  in Control, unless such new work location is within fifty (50)





                  miles from Mr. Garrett's principal place of residence at the
                  time of the Change in Control. The acceptance, if any, by Mr.
                  Garrett of employment by the Company at a work location which
                  is outside the fifty mile radius set forth in this Paragraph
                  l.(n)(iv) shall not be a waiver of Mr. Garrett's right to
                  refuse subsequent transfer by the Company to a location which
                  is more than fifty (50) miles from Mr. Garrett's principal
                  place of residence at the time of the Change in Control, and
                  such subsequent unconsented transfer shall be "Good Reason"
                  under this Agreement; or

                           (v) Benefits and Perquisites. The taking of any
                  action by the Company which would directly or indirectly
                  materially reduce the benefits enjoyed by Mr. Garrett under
                  the Company's retirement, life insurance, medical, health and
                  accident, disability, deferred compensation or savings plans
                  in which Mr. Garrett was participating immediately prior to
                  the Change in Control; or the failure by the Company to
                  provide Mr. Garrett with the number of paid vacation days to
                  which Mr. Garrett is entitled on the basis of years of service
                  with the Company in accordance with the Company's normal
                  vacation policy in effect immediately prior to the Change in
                  Control (except for across-the-board plan or vacation policy
                  changes or plan terminations similarly affecting at least
                  ninety-five percent (95%) of the Executive Employees of the
                  Company).

                           (vi) For purposes of this Paragraph l.(n), the term
                  "Executive Employee" shall mean those employees of the Company
                  of Grade Level 10 or above.

                  (o) "Group" shall have the meaning set forth in Section 14(d)
         of the Exchange Act.

                  (p) "Group Health Plan" shall mean the group health plan
         covering Mr. Garrett, as such plan may be amended from time to time.

                  (q) "Group Life Insurance Plan" shall mean the group life
         insurance program covering Mr. Garrett, as such plan may be amended
         from time to time.

                  (r) "Incumbent Board" shall mean those individuals who
         constitute the Southern Board as of October 19, 1998 plus any
         individual who shall become a director subsequent to such date whose
         election or nomination for election by Southern's shareholders was
         approved by a vote of at least 75% of the directors then comprising the
         Incumbent Board. Notwithstanding the foregoing, no individual who shall
         become a director of the Southern Board subsequent to October 19, 1998
         whose initial assumption of office occurs as a result of an actual or
         threatened election contest (within the meaning of Rule 14a-11 of the
         Regulations promulgated under the Exchange Act) with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Southern Board shall be a member of the Incumbent Board.

                  (s) "Month of Service" shall mean any calendar month during
         which Mr. Garrett has worked at least one (1) hour or was on approved
         leave of absence while in the employ of the Company or any affiliate or
         subsidiary of Southern.




                  (t) "Omnibus Plan" shall mean the Southern Company Omnibus
         Incentive Compensation Plan, and the Design and Administrative
         Specifications duly adopted thereunder, as in effect on the day before
         the date of a Change in Control.

                  (u) "Pension Plan" shall mean The Southern Company Pension
         Plan, as such plan may be amended from time to time.

                  (v) "Performance Dividend Program" shall mean the Performance
         Dividend Program under the Omnibus Plan or any replacement thereto, as
         such plans may be amended from time to time.

                  (w) "Person" shall mean any individual, entity or group within
         the meaning of Section 13(d)(3) or 14(d)(2) of Act.

                  (x) "Performance Pay Program" or "PPP" shall mean the
         Performance Pay Program under the Omnibus Plan or any replacement
         thereto, as such plans may be amended from time to time.

                  (y) "Southern" shall mean The Southern Company, its successors
         and assigns.

                  (z) "Southern Board" shall mean the board of directors of
         Southern.

                  (aa) "Southern Subsidiary" shall mean any corporation or other
         entity Controlled by Southern. (bb) "Termination for Cause" or "Cause"
         shall mean the termination of Mr. Garrett's employment by the Company
         upon the occurrence of any of the following:

                           (i) The willful and continued failure by Mr. Garrett
                  substantially to perform his duties with the Company (other
                  than any such failure resulting from Mr. Garrett's Total
                  Disability or from Mr. Garrett's retirement or any such actual
                  or anticipated failure resulting from termination by Mr.
                  Garrett for Good Reason) after a written demand for
                  substantial performance is delivered to him by the Southern
                  Board, which demand specifically identifies the manner in
                  which the Southern Board believes that he has not
                  substantially performed his duties; or

                           (ii) The willful engaging by Mr. Garrett in conduct
                  that is demonstrably and materially injurious to the Company,
                  monetarily or otherwise, including, but not limited to any of
                  the following:

                                    (A) any willful act involving fraud or
                           dishonesty in the course of Mr. Garrett's employment
                           by the Company;

                                    (B) the willful carrying out of any activity
                           or the making of any statement which would materially
                           prejudice or impair the good name and standing of the
                           Company, Southern or any Southern Subsidiary or would
                           bring the Company, Southern or any Southern
                           Subsidiary into contempt, ridicule or would
                           reasonably shock or offend any community in which the
                           Company, Southern or such Southern Subsidiary is
                           located;

                                    (C) attendance at work in a state of
                           intoxication or otherwise being found in possession
                           at his workplace of any prohibited drug or substance,
                           possession of which would amount to a criminal
                           offense;

                                    (D) violation of the Company's policies on
                           drug and alcohol usage, fitness for duty requirements
                           or similar policies as may exist from time to time as
                           adopted by the Company's safety officer;

                                    (E) assault or other act of violence against
                           any person during the course of employment; or

                                    (F) indictment of any felony or any
                           misdemeanor involving moral turpitude.

         No act or failure to act by Mr. Garrett shall be deemed "willful"
unless done, or omitted to be done, by Mr. Garrett not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.

         Notwithstanding the foregoing, Mr. Garrett shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three quarters of the entire membership of the Southern Board at a meeting of
the Southern Board called and held for such purpose (after reasonable notice to
Mr. Garrett and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Garrett was guilty of conduct set forth above in clause (i)
or (ii) of this Paragraph l.(bb) and specifying the particulars thereof in
detail.

                  (cc) "Termination Date" shall mean the date on which Mr.
         Garrett's employment with the Company is terminated; provided, however,
         that solely for purposes of Paragraph 2.(c) hereof, the Termination
         Date shall be the effective date of his retirement pursuant to the
         terms of the Pension Plan.

                  (dd) "Total Disability" shall mean Mr. Garrett's total
         disability within the meaning of the Pension Plan.

                  (ee) "Voting Securities" shall mean the outstanding voting
         securities of a corporation entitling the holder thereof to vote
         generally in the election of such corporation's directors.

                  (ff) "Waiver and Release" shall mean the Waiver and Release
         attached hereto as Exhibit A.

                  (gg) "Year of Service" shall mean Mr. Garrett's Months of
         Service divided by twelve (12) rounded to the nearest whole year,
         rounding up if the remaining number of months is seven (7) or greater
         and rounding down if the remaining number of months is less than seven
         (7). If Mr. Garrett has a break in his service with the Company, he
         will receive credit under this Agreement for service prior to the break
         in service only if the break in service is less than five years.

         2. Severance Benefits.

         (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a),
if Mr. Garrett's employment is involuntarily terminated by the Company at any
time during the two year period following a Change in Control for reasons other
than Cause, or if Mr. Garrett voluntarily terminates his employment with the
Company for Good Reason at any time during the two year period following a
Change in Control, Mr. Garrett shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective Waiver
and Release. Notwithstanding anything to the contrary herein, Mr. Garrett shall
not be eligible to receive benefits under this Agreement if Mr. Garrett:

                  (i) voluntarily terminates his employment with the Company for
         other than Good Reason;

                  (ii) has his employment terminated by the Company for Cause;

                  (iii) accepts the transfer of his employment to Southern, any
         Southern Subsidiary or any employer that succeeds to all or
         substantially all of the assets of the Company, Southern or any
         Southern Subsidiary;

                  (iv) refuses an offer of continued employment with the
         Company, any Southern Subsidiary, or any employer that succeeds to all
         or substantially all of the assets of the Company, Southern, or any
         Southern Subsidiary under circumstances where such refusal would not
         amount to Good Reason for voluntary termination of employment; or

                  (v) elects to receive the benefits of any other voluntary or
         involuntary severance or separation program, plan or agreement
         maintained by the Company in lieu of benefits under this Agreement;
         provided however, that the receipt of benefits under the terms of any
         retention plan or agreement shall not be deemed to be the receipt of
         severance or separation benefits for purposes of this Agreement.

         (b) Severance Benefits. If Mr. Garrett meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance
benefit in an amount equal to three times his Annual Compensation (the
"Severance Amount"). If any portion of the Severance Amount constitutes an
"excess parachute payment" (as such term is defined under Code Section 280G
("Excess Parachute Payment")), the Company shall pay to Mr. Garrett an
additional amount calculated by determining the amount of tax under Code Section
4999 that he otherwise would have paid on any Excess Parachute Payment with
respect to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section the hospital insurance tax under Code
Section 31O1(b) ("HI Tax") and federal and state income tax measured at the
highest marginal rates ("Income Tax") and subtracting such result from the
number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up
shall be paid unless the Severance Amount plus all other "parachute payments" to
Mr. Garrett under Code Section 280G exceeds three (3) times Mr. Garrett's "base
amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten
percent (10%) or more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr. Garrett's Base Amount,
less all other "parachute payments" (as such term is defined under Code Section
280G) received by Mr. Garrett, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would
have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax.

         For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of tax, e.g.,
Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax department of the
independent public accounting firm then responsible for preparing Southern's
consolidated federal income tax return, and such calculations or determinations
shall be binding upon the parties hereto.

         (c) Welfare Benefits. If Mr. Garrett meets the eligibility requirements
of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree
medical and life insurance benefits provided to certain retirees pursuant to the
terms of the Pension Plan,





the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to
the benefits set forth in this Paragraph 2.( c).

                  (i) Mr. Garrett shall be eligible to participate in the
         Company's Group Health Plan, upon payment of both the Company's and his
         monthly premium under such plan, for a period of six (6) months for
         each of Mr. Garrett's Years of Service, not to exceed five (5) years.
         If Mr. Garrett elects to receive this extended medical coverage, he
         shall also be entitled to elect coverage under the Group Health Plan
         for his dependents who were participating in the Group Health Plan on
         Mr. Garrett's Termination Date (and for such other dependents as may be
         entitled to coverage under the provisions of the Health Insurance
         Portability and Accountability Act of 1996) for the duration of Mr.
         Garrett's extended medical coverage under this Paragraph 2.(c)(i) to
         the extent such dependents remain eligible for dependent coverage under
         the terms of the Group Health Plan.

                           (A) The extended medical coverage afforded to Mr.
                  Garrett pursuant to Paragraph 2. (c)(i), as well as the
                  premiums to be paid by Mr. Garrett in connection with such
                  coverage shall be determined in accordance with the terms of
                  the Group Health Plan and shall be subject to any changes in
                  the terms and conditions of the Group Health Plan as well as
                  any future increases in premiums under the Group Health Plan.
                  The premiums to be paid by Mr. Garrett in connection with this
                  extended coverage shall be due on the first day of each month;
                  provided, however,




                  that if he fails to pay his premium within thirty (30) days of
                  its due date, such extended coverage shall be terminated.

                           (B) Any Group Health Plan coverage provided under
                  Paragraph 2.(c)(i) shall be a part of and not in addition to
                  any COBRA Coverage which Mr. Garrett or his dependents may
                  elect. In the event that Mr. Garrett or his dependents become
                  eligible to be covered, by virtue of re-employment or
                  otherwise, by any employer-sponsored group health plan or is
                  eligible for coverage under any government-sponsored health
                  plan during the above period, coverage under the Company's
                  Group Health Plan available to Mr. Garrett or his dependents
                  by virtue of the provisions of Paragraph 2.(c)(i) shall
                  terminate, except as may otherwise be required by law, and
                  shall not be renewed.

                  (ii) Mr. Garrett shall be entitled to receive cash in an
         amount equal to the Company's and Mr. Garrett's cost of premiums for
         three (3) years of coverage under the Group Health Plan and Group Life
         Insurance Plan in accordance with the terms of such plans as of the
         date of the Change in Control.

         (d) Incentive Plans. If Mr. Garrett meets the eligibility requirements
of Paragraph 2. (a) hereof he shall be entitled to the following benefits under
the Omnibus Plan:

                           (i) Stock Options.

                                    (A) Any of Mr. Garrett's Options and Stock
                           Appreciation Rights under the Omnibus Plan (the
                           defined terms of which are incorporated in this
                           Paragraph 2.(d)(i) by reference) which are
                           outstanding as of the Termination Date and which are
                           not then exercisable and vested, shall become fully
                           exercisable and vested to the full extent of the
                           original grant; provided, that in the case of a Stock
                           Appreciation Right, if Mr. Garrett is subject to
                           Section 16(b) of the Exchange Act, such Stock
                           Appreciation Right shall not become fully vested and
                           exercisable at such time if such actions would result
                           in liability to Mr. Garrett under Section 16(b) of
                           the Exchange Act, provided further, that any such
                           actions not taken as a result of the rules under
                           Section 16(b) of the Exchange Act shall be effected
                           as of the first date that such activity would no
                           longer result in liability under Section 16(b) of the
                           Exchange Act.

                                    (B) The restrictions and deferral
                           limitations applicable to any of Mr. Garrett's
                           Restricted Stock and Restricted Stock Units as of the
                           Termination Date shall lapse, and such Restricted
                           Stock and Restricted Stock Units shall become free of
                           all restrictions and limitations and become fully
                           vested and transferable to the full extent of the
                           original grant.

                           (ii) Performance Pay Program. Provided Mr. Garrett is
                  not entitled to a Cash-Based Award under the PPP, (the defined
                  terms of which are incorporated in this Paragraph 2.(d)(ii) by
                  reference), if the PPP is in place through Mr. Garrett's
                  Termination Date and to the extent Mr. Garrett is entitled to
                  participate therein, Mr. Garrett shall be entitled to receive
                  cash in an amount equal to a prorated payout of his Cash-Based
                  Awards under the PPP for the performance period in which the
                  Termination Date shall have occurred, at target performance
                  under the PPP and prorated by the number of months which have
                  passed since the beginning of the performance period until the
                  Termination Date.

                           (iii) Performance Dividend Program. Provided Mr.
                  Garrett is not entitled to a Cash-Based Award under the
                  Performance Dividend Program (the defined terms of which are
                  incorporated in this Paragraph 2.(d)(iii) by reference), if
                  the Performance Dividend Program is in place through Mr.
                  Garrett's Termination Date and to the extent Mr. Garrett is
                  entitled to participate therein, Mr. Garrett shall be entitled
                  to receive cash for each such Cash-Based Award under the
                  Performance Dividend Program held by Mr. Garrett on his
                  Termination Date, based on actual performance under the
                  Performance Dividend Program determined as of the most
                  recently completed calendar quarter of the performance period
                  in which the Termination Date shall have occurred, and the
                  annual dividend declared prior to the Termination Date.

                           (iv) Other Short Term Incentives Under the Omnibus
                  Plan. Provided Mr. Garrett is not entitled to a Performance
                  Unit/Share award under the Omnibus Plan (the defined terms of
                  which are incorporated in this Paragraph 2.(d)(iv) by
                  reference), Mr. Garrett shall be entitled to receive cash in
                  an amount equal to a prorated payout of the value of his
                  Performance Units and/or Performance Shares for the
                  performance period in which the Termination Date shall have
                  occurred, at target performance and prorated by the number of
                  months which have passed since the beginning of the
                  performance period until the Termination Date.

                           (v) Other Short Term Incentive Plans. The provisions
                  of this Paragraph 2.(d)(v) shall apply if and to the extent
                  that Mr. Garrett is a participant in any other "short term
                  compensation plan" not otherwise previously referred to in
                  this Paragraph 2.(d). Provided Mr. Garrett is not otherwise
                  entitled to a plan payout under any change of control
                  provisions of such plans, if the "short term compensation
                  plan" is in place as of the Termination Date and to the extent
                  Mr. Garrett is entitled to participate therein, Mr. Garrett
                  shall receive cash in an amount equal to his award under the
                  Company's "short term incentive plan" for the annual
                  performance period in which the Termination Date shall have
                  occurred, at Mr. Garrett's target performance level and
                  prorated by the number of months which have passed since the
                  beginning of the annual performance period until his
                  Termination Date. For purposes of this Paragraph 2.(d)(v) the
                  term "short term incentive compensation plan" shall mean any
                  incentive compensation plan or arrangement adopted in writing
                  by the Company which provides for annual, recurring
                  compensatory bonuses based upon articulated performance
                  criteria.

                  (e) Payment of Benefits. Any amounts due under this Agreement
         shall be paid in one (1) lump sum payment as soon as administratively
         practicable following the later of: (i) Mr. Garrett's Termination Date,
         or (ii) upon Mr. Garrett's tender of an effective Waiver and Release to
         the Company in the form of Exhibit A attached hereto and the expiration
         of any applicable revocation period for such waiver. In the event of a
         dispute with respect to liability or amount of any benefit due
         hereunder, an effective Waiver and Release shall be tendered at the
         time of final resolution of any such dispute when payment is tendered
         by the Company.

                  (f) Benefits in the Event of Death. In the event of Mr.
         Garrett's death prior to the payment of all amounts due under this
         Agreement, Mr. Garrett's estate shall be entitled to receive as due any
         amounts not yet paid under this Agreement upon the tender by the
         executor or administrator of the estate of an effective Waiver and
         Release.

                  (g) Legal Fees. In the event of a dispute between Mr. Garrett
         and the Company with regard to any amounts due hereunder, if any
         material issue in such dispute is finally resolved in Mr. Garrett's
         favor, the Company shall reimburse Mr. Garrett's legal fees incurred
         with respect to all issues in such dispute in an amount not to exceed
         fifty thousand dollars ($50,000).

                  (h) Employee Outplacement Services. Mr. Garrett shall be
         eligible to participate in the Employee Outplacement Program, which
         program shall not be less than six (6) months duration measured from
         Mr. Garrett's Termination Date.

                  (i) Non-qualified Retirement and Deferred Compensation Plans.
         The Parties agree that subsequent to a Change in Control, any claims by
         Mr. Garrett for benefits under any of the Company's non-qualified
         retirement or deferred compensation plans shall be resolved through
         binding arbitration in accordance with the provisions and procedures
         set forth in Paragraph 5 hereof and if any material issue in such
         dispute is finally resolved in Mr. Garrett's favor, the Company shall
         reimburse Mr. Garrett's legal fees in the manner provided in Paragraph
         2.(g) hereof.

         3. Transfer of Employment. In the event that Mr. Garrett's employment
by the Company is terminated during the two year period following a Change in
Control and Mr. Garrett accepts employment by Southern, a Southern Subsidiary,
or any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.

         4. No Mitigation. If Mr. Garrett is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Garrett hereunder shall not be reduced or suspended if Mr. Garrett accepts such
subsequent employment.

         5. Arbitration.

                  (a) Any dispute, controversy or claim arising out of or
         relating to the Company's obligations to pay severance benefits under
         this Agreement, or the breach thereof, shall be settled and resolved
         solely by arbitration in accordance with the Commercial Arbitration
         Rules of the American Arbitration Association ("AAA") except as
         otherwise provided herein. The arbitration shall be the sole and
         exclusive forum for resolution of any such claim for severance benefits
         and the arbitrators' award shall be final and binding. The provisions
         of this Paragraph 5 are not intended to apply to any other disputes,
         claims or controversies arising out of or relating to Mr. Garrett's
         employment by the Company or the termination thereof.



                  (b) Arbitration shall be initiated by serving a written notice
         of demand for arbitration to Mr. Garrett, in the case of the Company,
         or to the Southern Board, in the case of Mr. Garrett.

                  (c) The arbitration shall be held in Atlanta, Georgia. The
         arbitrators shall apply the law of the State of Georgia, to the extent
         not preempted by federal law, excluding any law which would require the
         application of the law of another state.

                  (d) The parties shall appoint arbitrators within fifteen (15)
         business days following service of the demand for arbitration. The
         number of arbitrators shall be three. One arbitrator shall be appointed
         by Mr. Garrett, one arbitrator shall be appointed by the Company, and
         the two arbitrators shall appoint a third. If the arbitrators cannot
         agree on a third arbitrator within thirty (30) business days after the
         service of demand for arbitration, the third arbitrator shall be
         selected by the AAA.

                  (e) The arbitration filing fee shall be paid by Mr. Garrett.
         All other costs of arbitration shall be borne equally by Mr. Garrett
         and the Company, provided, however, that the Company shall reimburse
         such fees and costs in the event any material issue in such dispute is
         finally resolved in Mr. Garrett's favor and Mr. Garrett is reimbursed
         legal fees under Paragraph 2.(g) hereof.

                  (f) The parties agree that they will faithfully observe the
         rules that govern any arbitration between them, they will abide by and
         perform any award rendered by the arbitrators in any such arbitration,
         including any award of injunctive relief, and a judgment of a court
         having jurisdiction may be entered upon an award.

                  (g) The parties agree that nothing in this Paragraph 5 is
         intended to preclude upon application of either party any court having
         jurisdiction from issuing and enforcing in any lawful manner such
         temporary restraining orders, preliminary injunctions, and other
         interim measures of relief as may be necessary to prevent harm to a
         party's interests or as otherwise may be appropriate pending the
         conclusion of arbitration proceedings pursuant to this Agreement;
         regardless of whether an arbitration proceeding under this Paragraph 5
         has begun. The parties further agree that nothing herein shall prevent
         any court from entering and enforcing in any lawful manner such
         judgments for permanent equitable relief as may be necessary to prevent
         harm to a party's interests or as otherwise may be appropriate
         following the issuance of arbitral awards pursuant to this Paragraph 5.

         6. Miscellaneous.

                  (a) Funding of Benefits. Unless the Board in its discretion
         shall determine otherwise, the benefits payable to Mr. Garrett under
         this Agreement shall not be funded in any manner and shall be paid by
         the Company out of its general assets, which assets are subject to the
         claims of the Company's creditors.

                  (b) Withholding. There shall be deducted from the payment of
         any benefit due under this Agreement the amount of any tax required by
         any governmental authority to be withheld and paid over by the Company
         to such governmental authority for the account of Mr. Garrett.

                  (c) Assignment. Mr. Garrett shall have no rights to sell,
         assign, transfer, encumber, or otherwise convey the right to receive
         the payment of any benefit due hereunder, which payment and the rights
         thereto are expressly declared to be nonassignable and nontransferable.
         Any attempt to do so shall be null and void and of no effect.

                  (d) Amendment and Termination. The Agreement may be amended or
         terminated only by a writing executed by the parties.

                  (e) Construction. This Agreement shall be construed in
         accordance with and governed by the laws of the State of Georgia, to
         the extent not preempted by federal law, disregarding any provision of
         law which would require the application of the law of another state.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 14th day of June, 2004.


                                          THE SOUTHERN COMPANY



                                 By:      /s/Ellen N. Lindemann


                                          GEORGIA POWER COMPANY


                                 By:      /s/Ellen N. Lindemann


                                          MR. GARRETT


                                          /s/Michael D. Garrett
                                          Michael D. Garrett









                                    Exhibit A
                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         The attached Waiver and Release is to be given to Mr. Michael D.
Garrett upon the occurrence of an event that triggers eligibility for severance
benefits under the Change in Control Agreement, as described in Paragraph 2(a)
of such agreement.















                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         I, Michael D. Garrett, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Savannah Electric and Power
Company (collectively, the "Company") if I had not elected to sign this Waiver.

         I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.

         In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communications Services, Inc., Southern Company Energy Solutions, LLC,
Georgia Power Company, Southern Nuclear Operating Company, Inc. and other direct
or indirect subsidiaries of The Southern Company and their past, present and
future officers, directors, employees, agents and attorneys. Nothing in this
Waiver shall be construed to release claims or causes of action under the Age
Discrimination in Employment Act or the Energy Reorganization Act of 1974, as
amended, which arise out of events occurring after the execution date of this
Waiver.

         In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.

         In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.






         In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.

         I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.

         I understand that by signing this Waiver I am giving up rights I may
have.

         IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ________, in the year ____.





                           ---------------------------
                               Michael D. Garrett



Sworn to and subscribed to me this

___day of _________, ____

- --------------------------
Notary Public

My Commission Expires:

- ---------------------------
(Notary Seal)

       Acknowledged and Accepted by the Company, as defined in the Waiver.

By:
         -----------------------------------
Date:
         -----------------------------------

EX-10.A.7

                                                                  Exhibit 10(a)7

                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

         THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement")
made and entered into by and between The Southern Company ("Southern"), Southern
Nuclear Operating Company, Inc. (the "Company") and Mr. William G. Hairston, III
("Mr. Hairston") (hereinafter collectively referred to as the "Parties") is
effective June 1, 2004. This Agreement amends and restates the Amended and
Restated Change in Control Agreement entered into by the Parties, effective July
10, 2000.

                                   WITNESSETH:

         WHEREAS, Mr. Hairston is the President and Chief Executive Officer of
the Company;

         WHEREAS, the Company wishes to provide to Mr. Hairston certain
severance benefits under certain circumstances following a change in control (as
defined herein) of Southern or the Company;

         NOW, THEREFORE, in consideration of the premises, and the agreements of
the Parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

         1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

                  (a) "Annual Compensation" shall mean Mr. Hairston's highest
         annual base salary rate for the twelve (12) month period immediately
         preceding the date of the Change in Control plus target bonus.





                  (b) "Beneficial Ownership" shall mean beneficial ownership
         within the meaning of Rule 13d-3 promulgated under the Exchange Act.

                  (c) "Board" shall mean the board of directors of the Company.

                  (d) "Business Combination" shall mean a reorganization, merger
         or consolidation of Southern or sale or other disposition of all or
         substantially all of the assets of Southern.

                  (e) "Change in Control" shall mean any of the following:

                           (i) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 20% or more of Southern's Voting
                  Securities; provided, however, that for purposes of this
                  Paragraph l.(e)(i), the following acquisitions of Southern's
                  Voting Securities shall not constitute a Change in Control:

                                    (A) any acquisition directly from Southern;

                                    (B) any acquisition by Southern;

                                    (C) any acquisition by any employee benefit
                           plan (or related trust) sponsored or maintained by
                           Southern or any Southern Subsidiary;

                                    (D) any acquisition by a qualified pension
                           plan or publicly held mutual fund;

                                    (E) any acquisition by a Group composed
                           exclusively of employees of Southern, or any Southern
                           Subsidiary;

                                    (F) any acquisition by Mr. Hairston or any
                           Group of which Mr. Hairston is a party; or

                                    (G) any Business Combination which would not
                           otherwise constitute a change in control because of
                           the application of clauses (A), (B) and (C) of
                           Paragraph 1(e )(iii);

                           (ii) A change in the composition of the Southern
                  Board whereby individuals who constitute the Incumbent Board
                  cease for any reason to constitute at least a majority of the
                  Southern Board;

                           (iii) Consummation of a Business Combination,
                  provided, however, that such a Business Combination shall not
                  constitute a Change in Control if all three (3) of the
                  following conditions are met:

                                    (A) all or substantially all of the
                           individuals and entities who held Beneficial
                           Ownership, respectively, of Southern's Voting
                           Securities immediately prior to such Business
                           Combination beneficially own, directly or indirectly,
                           65% or more of the combined voting power of the
                           Voting Securities of the corporation surviving or
                           resulting from such Business Combination, (including,
                           without limitation, a corporation which as a result
                           of such transaction holds Beneficial Ownership of all
                           or substantially all of Southern's Voting Securities
                           or all or substantially all of Southern's assets)
                           (such surviving or resulting corporation to be
                           referred to as "Surviving Company"), in substantially
                           the same proportions as their ownership, immediately
                           prior to such Business Combination, of Southern's
                           Voting Securities;





                                    (B) no Person (excluding any corporation
                           resulting from such Business Combination, any
                           employee benefit plan (or related trust) of Southern,
                           any Southern Subsidiary or Surviving Company, Mr.
                           Hairston, any Group of which Mr. Hairston is a party,
                           any Group composed exclusively of Company employees,
                           any qualified pension plan (or related trust) or any
                           publicly held mutual fund) holds Beneficial
                           Ownership, directly or indirectly, of 20% or more of
                           the combined voting power of the then outstanding
                           Voting Securities of Surviving Company except to the
                           extent that such ownership existed prior to the
                           Business Combination; and

                                    (C) at least a majority of the members of
                           the board of directors of Surviving Company were
                           members of the Incumbent Board at the earlier of the
                           date of execution of the initial agreement, or of the
                           action of the Southern Board, providing for such
                           Business Combination.

                           (iv) The Consummation of an acquisition by any Person
                  of Beneficial Ownership of 50% or more of the combined voting
                  power of the then outstanding Voting Securities of the
                  Company; provided, however, that for purposes of this
                  Paragraph l.(e)(iv), any acquisition by Mr. Hairston, any
                  Group composed exclusively of employees of the Company, any
                  Group of which Mr. Hairston is a party, any qualified pension
                  plan (or related trust), any publicly held mutual fund, any
                  employee benefit plan (or related trust) sponsored or
                  maintained by Southern or any Southern Subsidiary shall not
                  constitute a Change in Control;





                           (v) Consummation of a reorganization, merger or
                  consolidation of the Company (an "Employing Company Business
                  Combination"), in each case, unless, following such Employing
                  Company Business Combination, Southern Controls the
                  corporation or other entity surviving or resulting from such
                  Employing Company Business Combination; or

                           (vi) Consummation of the sale or other disposition of
                  all or substantially all of the assets of the Company to a
                  corporation or other entity which Southern does not Control.

                           Notwithstanding the foregoing, in no event shall
                  "Change in Control" mean an initial public offering or a
                  spin-off of the Company.

                  (f) "COBRA Coverage" shall mean any continuation coverage to
         which Mr. Hairston or his dependents may be entitled pursuant to Code
         Section 4980B.

                  (g) "Code" shall mean the Internal Revenue Code of 1986, as
         amended.

                  (h) "Company" shall mean Southern Nuclear Operating Company,
         its successors and assigns.

                  (i) "Consummation" shall mean the completion of the final act
         necessary to complete a transaction as a matter of law, including, but
         not limited to, any required approvals by the corporation's
         shareholders and board of directors, the transfer of legal and
         beneficial title to securities or assets and the final approval of the
         transaction by any applicable domestic or foreign governments or
         governmental agencies.

                  (j) "Control" shall mean, in the case of a corporation,
         Beneficial Ownership of more than 50% of the combined voting power of
         the corporation's Voting Securities, or in the case of any other
         entity, Beneficial Ownership of more than 50% of such entity's voting
         equity interests.

                  (k) "Effective Date" shall mean the date of execution of this
         Agreement.

                  (l) "Employee Outplacement Program" shall mean the program
         established by the Company from time to time for the purpose of
         assisting participants covered by the plan in finding employment
         outside of the Company which provides for the following services:

                           (i) self-assessment, career decision and goal
                  setting;

                           (ii) job market research and job sources;

                           (iii) networking and interviewing skills;

                           (iv) planning and implementation strategy;

                           (v) resume writing, job hunting methods and salary
                  negotiation; and

                           (vi) office support and job search resources.

                  (m) "Exchange Act" shall mean the Securities Exchange Act of
         1934, as amended.

                  (n) "Good Reason" shall mean, without Mr. Hairston's express
         written consent, after written notice to the Board, and after a thirty
         (30) day opportunity for the Board to cure, the continuing occurrence
         of any of the following events:

                           (i) Inconsistent Duties. A meaningful and detrimental
                  alteration in Mr. Hairston's position or in the nature or
                  status of his responsibilities from those in effect
                  immediately prior to the Change in Control;

                           (ii) Reduced Salary. A reduction of five percent (5%)
                  or more by the Company in either of the following: (i) Mr.
                  Hairston's annual base salary rate as in effect immediately
                  prior to the Change in Control (except for a less than ten
                  percent (10%), across-the-board annual base salary rate
                  reduction similarly affecting at least ninety-five percent
                  (95%) of the Executive Employees of the Company); or (ii) the
                  sum of Mr. Hairston's annual base salary rate plus target
                  bonus under the PPP (except for a less than ten percent (10%),
                  across-the-board reduction of annual base salary rate plus
                  target bonus under the PPP similarly affecting at least
                  ninety-five percent (95%) of the Executive Employees of the
                  Company);

                           (iii) Pension and Compensation Plans. The failure by
                  the Company to continue in effect any pension or compensation
                  plan or agreement in which Mr. Hairston participates or is a
                  party as of the date of the Change in Control or the
                  elimination of Mr. Hairston's participation therein, (except
                  for across-the-board plan changes or terminations similarly
                  affecting at least ninety-five percent (95%) of the Executive
                  Employees of the Company). For purposes of this Paragraph
                  l.(n), a "pension plan or agreement" shall mean any written
                  arrangement executed by an authorized officer of the Company
                  which provides for payments upon retirement; and a
                  "compensation plan or arrangement" shall mean any written
                  arrangement executed by an authorized officer of the Company
                  which provides for periodic, non-discretionary compensatory
                  payments in the nature of bonuses.

                           (iv) Relocation. A change in Mr. Hairston's work
                  location to a location more than fifty (50) miles from the
                  office where Mr. Hairston is located at the time of the Change
                  in Control, unless such new work location is within fifty (50)




                  miles from Mr. Hairston's principal place of residence at the
                  time of the Change in Control. The acceptance, if any, by Mr.
                  Hairston of employment by the Company at a work location which
                  is outside the fifty mile radius set forth in this Paragraph
                  l.(n)(iv) shall not be a waiver of Mr. Hairston's right to
                  refuse subsequent transfer by the Company to a location which
                  is more than fifty (50) miles from Mr. Hairston's principal
                  place of residence at the time of the Change in Control, and
                  such subsequent unconsented transfer shall be "Good Reason"
                  under this Agreement; or

                           (v) Benefits and Perquisites. The taking of any
                  action by the Company which would directly or indirectly
                  materially reduce the benefits enjoyed by Mr. Hairston under
                  the Company's retirement, life insurance, medical, health and
                  accident, disability, deferred compensation or savings plans
                  in which Mr. Hairston was participating immediately prior to
                  the Change in Control; or the failure by the Company to
                  provide Mr. Hairston with the number of paid vacation days to
                  which Mr. Hairston is entitled on the basis of years of
                  service with the Company in accordance with the Company's
                  normal vacation policy in effect immediately prior to the
                  Change in Control (except for across-the-board plan or
                  vacation policy changes or plan terminations similarly
                  affecting at least ninety-five percent (95%) of the Executive
                  Employees of the Company).

                           (vi) For purposes of this Paragraph l.(n), the term
                  "Executive Employee" shall mean those employees of the Company
                  of Grade Level 10 or above.

                  (o) "Group" shall have the meaning set forth in Section 14(d)
         of the Exchange Act.

                  (p) "Group Health Plan" shall mean the group health plan
         covering Mr. Hairston, as such plan may be amended from time to time.

                  (q) "Group Life Insurance Plan" shall mean the group life
         insurance program covering Mr. Hairston, as such plan may be amended
         from time to time.

                  (r) "Incumbent Board" shall mean those individuals who
         constitute the Southern Board as of October 19, 1998 plus any
         individual who shall become a director subsequent to such date whose
         election or nomination for election by Southern's shareholders was
         approved by a vote of at least 75% of the directors then comprising the
         Incumbent Board. Notwithstanding the foregoing, no individual who shall
         become a director of the Southern Board subsequent to October 19, 1998
         whose initial assumption of office occurs as a result of an actual or
         threatened election contest (within the meaning of Rule 14a-11 of the
         Regulations promulgated under the Exchange Act) with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Southern Board shall be a member of the Incumbent Board.

                  (s) "Month of Service" shall mean any calendar month during
         which Mr. Hairston has worked at least one (1) hour or was on approved
         leave of absence while in the employ of the Company or any affiliate or
         subsidiary of Southern.




                  (t) "Omnibus Plan" shall mean the Southern Company Omnibus
         Incentive Compensation Plan, and the Design and Administrative
         Specifications duly adopted thereunder, as in effect on the day before
         the date of a Change in Control.

                  (u) "Pension Plan" shall mean The Southern Company Pension
         Plan, as such plan may be amended from time to time.

                  (v) "Performance Dividend Program" shall mean the Performance
         Dividend Program under the Omnibus Plan or any replacement thereto, as
         such plans may be amended from time to time.

                  (w) "Person" shall mean any individual, entity or group within
         the meaning of Section 13(d)(3) or 14(d)(2) of Act.

                  (x) "Performance Pay Program" or "PPP" shall mean the
         Performance Pay Program under the Omnibus Plan or any replacement
         thereto, as such plans may be amended from time to time.

                  (y) "Southern" shall mean The Southern Company, its successors
         and assigns.

                  (z) "Southern Board" shall mean the board of directors of
         Southern.

                  (aa) "Southern Subsidiary" shall mean any corporation or other
         entity Controlled by Southern.

                  (bb) "Termination for Cause" or "Cause" shall mean the
         termination of Mr. Hairston's employment by the Company upon the
         occurrence of any of the following:

                           (i) The willful and continued failure by Mr. Hairston
                  substantially to perform his duties with the Company (other
                  than any such failure resulting from Mr. Hairston's Total
                  Disability or from Mr. Hairston's retirement or any such
                  actual or anticipated failure resulting from termination by
                  Mr. Hairston for Good Reason) after a written demand for
                  substantial performance is delivered to him by the Southern
                  Board, which demand specifically identifies the manner in
                  which the Southern Board believes that he has not
                  substantially performed his duties; or

                           (ii) The willful engaging by Mr. Hairston in conduct
                  that is demonstrably and materially injurious to the Company,
                  monetarily or otherwise, including, but not limited to any of
                  the following:

                                    (A) any willful act involving fraud or
                           dishonesty in the course of Mr. Hairston's employment
                           by the Company;

                                    (B) the willful carrying out of any activity
                           or the making of any statement which would materially
                           prejudice or impair the good name and standing of the
                           Company, Southern or any Southern Subsidiary or would
                           bring the Company, Southern or any Southern
                           Subsidiary into contempt, ridicule or would
                           reasonably shock or offend any community in which the
                           Company, Southern or such Southern Subsidiary is
                           located;

                                    (C) attendance at work in a state of
                           intoxication or otherwise being found in possession
                           at his workplace of any prohibited drug or substance,
                           possession of which would amount to a criminal
                           offense;

                                    (D) violation of the Company's policies on
                           drug and alcohol usage, fitness for duty requirements
                           or similar policies as may exist from time to time as
                           adopted by the Company's safety officer;

                                    (E) assault or other act of violence against
                           any person during the course of employment; or

                                    (F) indictment of any felony or any
                           misdemeanor involving moral turpitude.

         No act or failure to act by Mr. Hairston shall be deemed "willful"
unless done, or omitted to be done, by Mr. Hairston not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company.

         Notwithstanding the foregoing, Mr. Hairston shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three quarters of the entire membership of the Southern Board at a meeting of
the Southern Board called and held for such purpose (after reasonable notice to
Mr. Hairston and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Hairston was guilty of conduct set forth above in clause (i)
or (ii) of this Paragraph l.(bb) and specifying the particulars thereof in
detail.

                  (cc) "Termination Date" shall mean the date on which Mr.
         Hairston's employment with the Company is terminated; provided,
         however, that solely for purposes of Paragraph 2.(c) hereof, the
         Termination Date shall be the effective date of his retirement pursuant
         to the terms of the Pension Plan.

                  (dd) "Total Disability" shall mean Mr. Hairston's total
         disability within the meaning of the Pension Plan.

                  (ee) "Voting Securities" shall mean the outstanding voting
         securities of a corporation entitling the holder thereof to vote
         generally in the election of such corporation's directors.

                  (ff) "Waiver and Release" shall mean the Waiver and Release
         attached hereto as Exhibit A.

                  (gg) "Year of Service" shall mean Mr. Hairston's Months of
         Service divided by twelve (12) rounded to the nearest whole year,
         rounding up if the remaining number of months is seven (7) or greater
         and rounding down if the remaining number of months is less than seven
         (7). If Mr. Hairston has a break in his service with the Company, he
         will receive credit under this Agreement for service prior to the break
         in service only if the break in service is less than five years.

         2. Severance Benefits.

         (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a),
if Mr. Hairston's employment is involuntarily terminated by the Company at any
time during the two year period following a Change in Control for reasons other
than Cause, or if Mr. Hairston voluntarily terminates his employment with the
Company for Good Reason at any time during the two year period following a
Change in Control, Mr. Hairston shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective Waiver
and Release. Notwithstanding anything to the contrary herein, Mr. Hairston shall
not be eligible to receive benefits under this Agreement if Mr. Hairston:

                  (i) voluntarily terminates his employment with the Company for
         other than Good Reason;

                  (ii) has his employment terminated by the Company for Cause;

                  (iii) accepts the transfer of his employment to Southern, any
         Southern Subsidiary or any employer that succeeds to all or
         substantially all of the assets of the Company, Southern or any
         Southern Subsidiary;

                  (iv) refuses an offer of continued employment with the
         Company, any Southern Subsidiary, or any employer that succeeds to all
         or substantially all of the assets of the Company, Southern, or any
         Southern Subsidiary under circumstances where such refusal would not
         amount to Good Reason for voluntary termination of employment; or

                  (v) elects to receive the benefits of any other voluntary or
         involuntary severance or separation program, plan or agreement
         maintained by the Company in lieu of benefits under this Agreement;
         provided however, that the receipt of benefits under the terms of any
         retention plan or agreement shall not be deemed to be the receipt of
         severance or separation benefits for purposes of this Agreement. (b)
         Severance Benefits. If Mr. Hairston meets the eligibility requirements
         of Paragraph 2.(a) hereof, he shall be entitled to a cash severance
         benefit in an amount equal to three times his Annual Compensation (the
         "Severance Amount"). If any portion of the Severance Amount constitutes
         an "excess parachute payment" (as such term is defined under Code
         Section 280G ("Excess Parachute Payment")), the Company shall pay to
         Mr. Hairston an additional amount calculated by determining the amount
         of tax under Code Section 4999 that he otherwise would have paid on any
         Excess Parachute Payment with respect to the Change in Control and
         dividing such amount by a decimal determined by adding the tax rate
         under Code Section 4999 ("Excise Tax"), the hospital insurance tax
         under Code Section the hospital insurance tax under Code Section
         31O1(b) ("HI Tax") and federal and state income tax measured at the
         highest marginal rates ("Income Tax") and subtracting such result from
         the number one (1) (the "280G Gross-up"); provided, however, that no
         280G Gross-up shall be paid unless the Severance Amount plus all other
         "parachute payments" to Mr. Hairston under Code Section 280G exceeds
         three (3) times Mr. Hairston's "base amount" (as such term is defined
         under Code Section 280G ("Base Amount")) by ten percent (10%) or more;
         provided further, that if no 280G Gross-up is paid, the Severance
         Amount shall be capped at three (3) times Mr. Hairston's Base Amount,
         less all other "parachute payments" (as such term is defined under Code
         Section 280G) received by Mr. Hairston, less one dollar (the "Capped
         Amount"), if the Capped Amount, reduced by HI Tax and Income Tax,
         exceeds what otherwise would have been the Severance Amount, reduced by
         HI Tax, Income Tax and Excise Tax.

         For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of tax, e.g.,
Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax department of the
independent public accounting firm then responsible for preparing Southern's
consolidated federal income tax return, and such calculations or determinations
shall be binding upon the parties hereto.

         (c) Welfare Benefits. If Mr. Hairston meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive
retiree medical and life insurance benefits provided to certain retirees
pursuant to the terms of the Pension Plan,




the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to
the benefits set forth in this Paragraph 2.( c).

                  (i) Mr. Hairston shall be eligible to participate in the
         Company's Group Health Plan, upon payment of both the Company's and his
         monthly premium under such plan, for a period of six (6) months for
         each of Mr. Hairston's Years of Service, not to exceed five (5) years.
         If Mr. Hairston elects to receive this extended medical coverage, he
         shall also be entitled to elect coverage under the Group Health Plan
         for his dependents who were participating in the Group Health Plan on
         Mr. Hairston's Termination Date (and for such other dependents as may
         be entitled to coverage under the provisions of the Health Insurance
         Portability and Accountability Act of 1996) for the duration of Mr.
         Hairston's extended medical coverage under this Paragraph 2.(c)(i) to
         the extent such dependents remain eligible for dependent coverage under
         the terms of the Group Health Plan.

                           (A) The extended medical coverage afforded to Mr.
                  Hairston pursuant to Paragraph 2. (c)(i), as well as the
                  premiums to be paid by Mr. Hairston in connection with such
                  coverage shall be determined in accordance with the terms of
                  the Group Health Plan and shall be subject to any changes in
                  the terms and conditions of the Group Health Plan as well as
                  any future increases in premiums under the Group Health Plan.
                  The premiums to be paid by Mr. Hairston in connection with
                  this extended coverage shall be due on the first day of each
                  month; provided, however,





                  that if he fails to pay his premium within thirty (30) days of
                  its due date, such extended coverage shall be terminated.

                           (B) Any Group Health Plan coverage provided under
                  Paragraph 2.(c)(i) shall be a part of and not in addition to
                  any COBRA Coverage which Mr. Hairston or his dependents may
                  elect. In the event that Mr. Hairston or his dependents become
                  eligible to be covered, by virtue of re-employment or
                  otherwise, by any employer-sponsored group health plan or is
                  eligible for coverage under any government-sponsored health
                  plan during the above period, coverage under the Company's
                  Group Health Plan available to Mr. Hairston or his dependents
                  by virtue of the provisions of Paragraph 2.(c)(i) shall
                  terminate, except as may otherwise be required by law, and
                  shall not be renewed.

                  (ii) Mr. Hairston shall be entitled to receive cash in an
         amount equal to the Company's and Mr. Hairston's cost of premiums for
         three (3) years of coverage under the Group Health Plan and Group Life
         Insurance Plan in accordance with the terms of such plans as of the
         date of the Change in Control. (d) Incentive Plans. If Mr. Hairston
         meets the eligibility requirements of Paragraph 2. (a) hereof he shall
         be entitled to the following benefits under the Omnibus Plan:

                           (i) Stock Options.

                                    (A) Any of Mr. Hairston's Options and Stock
                           Appreciation Rights under the Omnibus Plan (the
                           defined terms of which are incorporated in this
                           Paragraph 2.(d)(i) by reference) which are
                           outstanding as of the Termination Date and which are
                           not then exercisable and vested, shall become fully
                           exercisable and vested to the full extent of the
                           original grant; provided, that in the case of a Stock
                           Appreciation Right, if Mr. Hairston is subject to
                           Section 16(b) of the Exchange Act, such Stock
                           Appreciation Right shall not become fully vested and
                           exercisable at such time if such actions would result
                           in liability to Mr. Hairston under Section 16(b) of
                           the Exchange Act, provided further, that any such
                           actions not taken as a result of the rules under
                           Section 16(b) of the Exchange Act shall be effected
                           as of the first date that such activity would no
                           longer result in liability under Section 16(b) of the
                           Exchange Act.

                                    (B) The restrictions and deferral
                           limitations applicable to any of Mr. Hairston's
                           Restricted Stock and Restricted Stock Units as of the
                           Termination Date shall lapse, and such Restricted
                           Stock and Restricted Stock Units shall become free of
                           all restrictions and limitations and become fully
                           vested and transferable to the full extent of the
                           original grant.

                           (ii) Performance Pay Program. Provided Mr. Hairston
                  is not entitled to a Cash-Based Award under the PPP, (the
                  defined terms of which are incorporated in this Paragraph
                  2.(d)(ii) by reference), if the PPP is in place through Mr.
                  Hairston's Termination Date and to the extent Mr. Hairston is
                  entitled to participate therein, Mr. Hairston shall be
                  entitled to receive cash in an amount equal to a prorated
                  payout of his Cash-Based Awards under the PPP for the
                  performance period in which the Termination Date shall have
                  occurred, at target performance under the PPP and prorated by
                  the number of months which have passed since the beginning of
                  the performance period until the Termination Date.

                           (iii) Performance Dividend Program. Provided Mr.
                  Hairston is not entitled to a Cash-Based Award under the
                  Performance Dividend Program (the defined terms of which are
                  incorporated in this Paragraph 2.(d)(iii) by reference), if
                  the Performance Dividend Program is in place through Mr.
                  Hairston's Termination Date and to the extent Mr. Hairston is
                  entitled to participate therein, Mr. Hairston shall be
                  entitled to receive cash for each such Cash-Based Award under
                  the Performance Dividend Program held by Mr. Hairston on his
                  Termination Date, based on actual performance under the
                  Performance Dividend Program determined as of the most
                  recently completed calendar quarter of the performance period
                  in which the Termination Date shall have occurred, and the
                  annual dividend declared prior to the Termination Date.

                           (iv) Other Short Term Incentives Under the Omnibus
                  Plan. Provided Mr. Hairston is not entitled to a Performance
                  Unit/Share award under the Omnibus Plan (the defined terms of
                  which are incorporated in this Paragraph 2.(d)(iv) by
                  reference), Mr. Hairston shall be entitled to receive cash in
                  an amount equal to a prorated payout of the value of his
                  Performance Units and/or Performance Shares for the
                  performance period in which the Termination Date shall have
                  occurred, at target performance and prorated by the number of
                  months




                  which have passed since the beginning of the performance
                  period until the Termination Date.

                           (v) Other Short Term Incentive Plans. The provisions
                  of this Paragraph 2.(d)(v) shall apply if and to the extent
                  that Mr. Hairston is a participant in any other "short term
                  compensation plan" not otherwise previously referred to in
                  this Paragraph 2.(d). Provided Mr. Hairston is not otherwise
                  entitled to a plan payout under any change of control
                  provisions of such plans, if the "short term compensation
                  plan" is in place as of the Termination Date and to the extent
                  Mr. Hairston is entitled to participate therein, Mr. Hairston
                  shall receive cash in an amount equal to his award under the
                  Company's "short term incentive plan" for the annual
                  performance period in which the Termination Date shall have
                  occurred, at Mr. Hairston's target performance level and
                  prorated by the number of months which have passed since the
                  beginning of the annual performance period until his
                  Termination Date. For purposes of this Paragraph 2.(d)(v) the
                  term "short term incentive compensation plan" shall mean any
                  incentive compensation plan or arrangement adopted in writing
                  by the Company which provides for annual, recurring
                  compensatory bonuses based upon articulated performance
                  criteria.

         (e) Payment of Benefits. Any amounts due under this Agreement shall be
paid in one (1) lump sum payment as soon as administratively practicable
following the later of: (i) Mr. Hairston's Termination Date, or (ii) upon Mr.
Hairston's tender of an effective Waiver and Release to the Company in the form
of Exhibit A attached hereto and the expiration of any applicable revocation
period for such waiver. In the event of a dispute with respect to liability or
amount of any benefit due hereunder, an effective Waiver and Release shall be
tendered at the time of final resolution of any such dispute when payment is
tendered by the Company.

         (f) Benefits in the Event of Death. In the event of Mr. Hairston's
death prior to the payment of all amounts due under this Agreement, Mr.
Hairston's estate shall be entitled to receive as due any amounts not yet paid
under this Agreement upon the tender by the executor or administrator of the
estate of an effective Waiver and Release.

         (g) Legal Fees. In the event of a dispute between Mr. Hairston and the
Company with regard to any amounts due hereunder, if any material issue in such
dispute is finally resolved in Mr. Hairston's favor, the Company shall reimburse
Mr. Hairston's legal fees incurred with respect to all issues in such dispute in
an amount not to exceed fifty thousand dollars ($50,000).

         (h) Employee Outplacement Services. Mr. Hairston shall be eligible to
participate in the Employee Outplacement Program, which program shall not be
less than six (6) months duration measured from Mr. Hairston's Termination Date.

         (i) Non-qualified Retirement and Deferred Compensation Plans. The
Parties agree that subsequent to a Change in Control, any claims by Mr. Hairston
for benefits under any of the Company's non-qualified retirement or deferred
compensation plans shall be resolved through binding arbitration in accordance
with the provisions and procedures set forth in Paragraph 5 hereof and if any
material issue in such dispute is finally resolved in Mr. Hairston's favor, the
Company shall reimburse Mr. Hairston's legal fees in the manner provided in
Paragraph 2.(g) hereof.

         3. Transfer of Employment. In the event that Mr. Hairston's employment
by the Company is terminated during the two year period following a Change in
Control and Mr. Hairston accepts employment by Southern, a Southern Subsidiary,
or any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.

         4. No Mitigation. If Mr. Hairston is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Hairston hereunder shall not be reduced or suspended if Mr. Hairston accepts
such subsequent employment.

         5. Arbitration.

         (a) Any dispute, controversy or claim arising out of or relating to the
Company's obligations to pay severance benefits under this Agreement, or the
breach thereof, shall be settled and resolved solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. The arbitration shall
be the sole and exclusive forum for resolution of any such claim for severance
benefits and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes, claims or
controversies arising out of or relating to Mr. Hairston's employment by the
Company or the termination thereof.




         (b) Arbitration shall be initiated by serving a written notice of
demand for arbitration to Mr. Hairston, in the case of the Company, or to the
Southern Board, in the case of Mr. Hairston.

         (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators
shall apply the law of the State of Georgia, to the extent not preempted by
federal law, excluding any law which would require the application of the law of
another state.

         (d) The parties shall appoint arbitrators within fifteen (15) business
days following service of the demand for arbitration. The number of arbitrators
shall be three. One arbitrator shall be appointed by Mr. Hairston, one
arbitrator shall be appointed by the Company, and the two arbitrators shall
appoint a third. If the arbitrators cannot agree on a third arbitrator within
thirty (30) business days after the service of demand for arbitration, the third
arbitrator shall be selected by the AAA.

         (e) The arbitration filing fee shall be paid by Mr. Hairston. All other
costs of arbitration shall be borne equally by Mr. Hairston and the Company,
provided, however, that the Company shall reimburse such fees and costs in the
event any material issue in such dispute is finally resolved in Mr. Hairston's
favor and Mr. Hairston is reimbursed legal fees under Paragraph 2.(g) hereof.

         (f) The parties agree that they will faithfully observe the rules that
govern any arbitration between them, they will abide by and perform any award
rendered by the arbitrators in any such arbitration, including any award of
injunctive relief, and a judgment of a court having jurisdiction may be entered
upon an award.

         (g) The parties agree that nothing in this Paragraph 5 is intended to
preclude upon application of either party any court having jurisdiction from
issuing and enforcing in any lawful manner such temporary restraining orders,
preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Agreement; regardless of whether an arbitration proceeding under this Paragraph
5 has begun. The parties further agree that nothing herein shall prevent any
court from entering and enforcing in any lawful manner such judgments for
permanent equitable relief as may be necessary to prevent harm to a party's
interests or as otherwise may be appropriate following the issuance of arbitral
awards pursuant to this Paragraph 5.

         6. Miscellaneous.

         (a) Funding of Benefits. Unless the Board in its discretion shall
determine otherwise, the benefits payable to Mr. Hairston under this Agreement
shall not be funded in any manner and shall be paid by the Company out of its
general assets, which assets are subject to the claims of the Company's
creditors.

         (b) Withholding. There shall be deducted from the payment of any
benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Mr. Hairston.

         (c) Assignment. Mr. Hairston shall have no rights to sell, assign,
transfer, encumber, or otherwise convey the right to receive the payment of any
benefit due hereunder, which payment and the rights thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to do so shall be
null and void and of no effect.

         (d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.

         (e) Construction. This Agreement shall be construed in accordance with
and governed by the laws of the State of Georgia, to the extent not preempted by
federal law, disregarding any provision of law which would require the
application of the law of another state.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 15th day of June, 2004.


                             THE SOUTHERN COMPANY



                             By:     /s/ Ellen N. Lindemann


                             SOUTHERN NUCLEAR OPERATING COMPANY, INC.


                             By:     /s/Ellen N. Lindemann


                              MR. HAIRSTON


                              /s/William G. Hairston, III
                              William G. Hairston, III





                                    Exhibit A

                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         The attached Waiver and Release is to be given to Mr. William G.
Hairston, III upon the occurrence of an event that triggers eligibility for
severance benefits under the Change in Control Agreement, as described in
Paragraph 2(a) of such agreement.













                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         I, William G. Hairston, III, understand that I am entitled to receive
the severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Savannah Electric and Power
Company (collectively, the "Company") if I had not elected to sign this Waiver.

         I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.

         In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communications Services, Inc., Southern Company Energy Solutions, LLC,
Southern Company Services, Inc., Southern Nuclear Operating Company, Inc. and
other direct or indirect subsidiaries of The Southern Company and their past,
present and future officers, directors, employees, agents and attorneys. Nothing
in this Waiver shall be construed to release claims or causes of action under
the Age Discrimination in Employment Act or the Energy Reorganization Act of
1974, as amended, which arise out of events occurring after the execution date
of this Waiver.

         In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.

         In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.






         In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.

         I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.

         I understand that by signing this Waiver I am giving up rights I may
have.

         IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ________, in the year ____.



                                                     ---------------------------
                                                     William G. Hairston, III

Sworn to and subscribed to me this

___day of _________, ____

- --------------------------
Notary Public

My Commission Expires:

- ---------------------------
(Notary Seal)

         Acknowledged and Accepted by the Company, as defined in the Waiver.

By:
         -----------------------------------
Date:
         -----------------------------------

EX-10.B.4

                                                                  Exhibit 10(b)4


                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

         THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement")
made and entered into by and between The Southern Company ("Southern"), Alabama
Power Company (the "Company") and Mr. C. Alan Martin ("Mr. Martin") (hereinafter
collectively referred to as the "Parties") is effective June 1, 2004. This
Agreement amends and restates the Amended and Restated Change in Control
Agreement entered into by the Parties, effective July 10, 2000.

                                   WITNESSETH:

         WHEREAS, Mr. Martin is the Executive Vice President of the Company;

         WHEREAS, the Company wishes to provide to Mr. Martin certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;

         NOW, THEREFORE, in consideration of the premises, and the agreements of
the Parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

         1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

         (a) "Annual Compensation" shall mean Mr. Martin's highest annual base
salary rate for the twelve (12) month period immediately preceding the date of
the Change in Control plus target bonus.





         (b) "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.

         (c) "Board" shall mean the board of directors of the Company.

         (d) "Business Combination" shall mean a reorganization, merger or
consolidation of Southern or sale or other disposition of all or substantially
all of the assets of Southern.

         (e) "Change in Control" shall mean any of the following:

                  (i) The Consummation of an acquisition by any Person of
         Beneficial Ownership of 20% or more of Southern's Voting Securities;
         provided, however, that for purposes of this Paragraph l.(e)(i), the
         following acquisitions of Southern's Voting Securities shall not
         constitute a Change in Control:

                           (A) any acquisition directly from Southern;

                           (B) any acquisition by Southern;

                           (C) any acquisition by any employee benefit plan (or
                  related trust) sponsored or maintained by Southern or any
                  Southern Subsidiary;

                           (D) any acquisition by a qualified pension plan or
                  publicly held mutual fund;

                           (E) any acquisition by a Group composed exclusively
                  of employees of Southern, or any Southern Subsidiary;

                           (F) any acquisition by Mr. Martin or any Group of
                  which Mr. Martin is a party; or




                           (G) any Business Combination which would not
                  otherwise constitute a change in control because of the
                  application of clauses (A), (B) and (C) of Paragraph
                  1(e)(iii);

                  (ii) A change in the composition of the Southern Board whereby
         individuals who constitute the Incumbent Board cease for any reason to
         constitute at least a majority of the Southern Board;

                  (iii) Consummation of a Business Combination, provided,
         however, that such a Business Combination shall not constitute a Change
         in Control if all three (3) of the following conditions are met:

                           (A) all or substantially all of the individuals and
                  entities who held Beneficial Ownership, respectively, of
                  Southern's Voting Securities immediately prior to such
                  Business Combination beneficially own, directly or indirectly,
                  65% or more of the combined voting power of the Voting
                  Securities of the corporation surviving or resulting from such
                  Business Combination, (including, without limitation, a
                  corporation which as a result of such transaction holds
                  Beneficial Ownership of all or substantially all of Southern's
                  Voting Securities or all or substantially all of Southern's
                  assets) (such surviving or resulting corporation to be
                  referred to as "Surviving Company"), in substantially the same
                  proportions as their ownership, immediately prior to such
                  Business Combination, of Southern's Voting Securities;





                           (B) no Person (excluding any corporation resulting
                  from such Business Combination, any employee benefit plan (or
                  related trust) of Southern, any Southern Subsidiary or
                  Surviving Company, Mr. Martin, any Group of which Mr. Martin
                  is a party, any Group composed exclusively of Company
                  employees, any qualified pension plan (or related trust) or
                  any publicly held mutual fund) holds Beneficial Ownership,
                  directly or indirectly, of 20% or more of the combined voting
                  power of the then outstanding Voting Securities of Surviving
                  Company except to the extent that such ownership existed prior
                  to the Business Combination; and

                           (C) at least a majority of the members of the board
                  of directors of Surviving Company were members of the
                  Incumbent Board at the earlier of the date of execution of the
                  initial agreement, or of the action of the Southern Board,
                  providing for such Business Combination.

                  (iv) The Consummation of an acquisition by any Person of
         Beneficial Ownership of 50% or more of the combined voting power of the
         then outstanding Voting Securities of the Company; provided, however,
         that for purposes of this Paragraph l.(e)(iv), any acquisition by Mr.
         Martin, any Group composed exclusively of employees of the Company, any
         Group of which Mr. Martin is a party, any qualified pension plan (or
         related trust), any publicly held mutual fund, any employee benefit
         plan (or related trust) sponsored or maintained by Southern or any
         Southern Subsidiary shall not constitute a Change in Control;





                  (v) Consummation of a reorganization, merger or consolidation
         of the Company (an "Employing Company Business Combination"), in each
         case, unless, following such Employing Company Business Combination,
         Southern Controls the corporation or other entity surviving or
         resulting from such Employing Company Business Combination; or

                  (vi) Consummation of the sale or other disposition of all or
         substantially all of the assets of the Company to a corporation or
         other entity which Southern does not Control.

         Notwithstanding the foregoing, in no event shall "Change in Control"
mean an initial public offering or a spin-off of the Company.

         (f) "COBRA Coverage" shall mean any continuation coverage to which Mr.
Martin or his dependents may be entitled pursuant to Code Section 4980B.

         (g) "Code" shall mean the Internal Revenue Code of 1986, as amended.

         (h) "Company" shall mean Savannah Electric and Power Company, its
successors and assigns.

         (i) "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
governmental agencies.

         (j) "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.

         (k) "Effective Date" shall mean the date of execution of this
Agreement.

         (l) "Employee Outplacement Program" shall mean the program established
by the Company from time to time for the purpose of assisting participants
covered by the plan in finding employment outside of the Company which provides
for the following services:

                  (i) self-assessment, career decision and goal setting; (ii)
         job market research and job sources; (iii) networking and interviewing
         skills; (iv) planning and implementation strategy; (v) resume writing,
         job hunting methods and salary negotiation; and (vi) office support and
         job search resources.

         (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         (n) "Good Reason" shall mean, without Mr. Martin's express written
consent, after written notice to the Board, and after a thirty (30) day
opportunity for the Board to cure, the continuing occurrence of any of the
following events:

                  (i) Inconsistent Duties. A meaningful and detrimental
         alteration in Mr. Martin's position or in the nature or status of his
         responsibilities from those in effect immediately prior to the Change
         in Control;

                  (ii) Reduced Salary. A reduction of five percent (5%) or more
         by the Company in either of the following: (i) Mr. Martin's annual base
         salary rate as in effect immediately prior to the Change in Control
         (except for a less than ten percent (10%), across-the-board annual base
         salary rate reduction similarly affecting at least ninety-five percent
         (95%) of the Executive Employees of the Company); or (ii) the sum of
         Mr. Martin's annual base salary rate plus target bonus under the PPP
         (except for a less than ten percent (10%), across-the-board reduction
         of annual base salary rate plus target bonus under the PPP similarly
         affecting at least ninety-five percent (95%) of the Executive Employees
         of the Company);

                  (iii) Pension and Compensation Plans. The failure by the
         Company to continue in effect any pension or compensation plan or
         agreement in which Mr. Martin participates or is a party as of the date
         of the Change in Control or the elimination of Mr. Martin's
         participation therein, (except for across-the-board plan changes or
         terminations similarly affecting at least ninety-five percent (95%) of
         the Executive Employees of the Company). For purposes of this Paragraph
         l.(n), a "pension plan or agreement" shall mean any written arrangement
         executed by an authorized officer of the Company which provides for
         payments upon retirement; and a "compensation plan or arrangement"
         shall mean any written arrangement executed by an authorized officer of
         the Company which provides for periodic, non-discretionary compensatory
         payments in the nature of bonuses.

                  (iv) Relocation. A change in Mr. Martin's work location to a
         location more than fifty (50) miles from the office where Mr. Martin is
         located at the time of the Change in Control, unless such new work
         location is within fifty (50) miles




         from Mr. Martin's principal place of residence at the time of the
         Change in Control. The acceptance, if any, by Mr. Martin of employment
         by the Company at a work location which is outside the fifty mile
         radius set forth in this Paragraph l.(n)(iv) shall not be a waiver of
         Mr. Martin's right to refuse subsequent transfer by the Company to a
         location which is more than fifty (50) miles from Mr. Martin's
         principal place of residence at the time of the Change in Control, and
         such subsequent unconsented transfer shall be "Good Reason" under this
         Agreement; or

                  (v) Benefits and Perquisites. The taking of any action by the
         Company which would directly or indirectly materially reduce the
         benefits enjoyed by Mr. Martin under the Company's retirement, life
         insurance, medical, health and accident, disability, deferred
         compensation or savings plans in which Mr. Martin was participating
         immediately prior to the Change in Control; or the failure by the
         Company to provide Mr. Martin with the number of paid vacation days to
         which Mr. Martin is entitled on the basis of years of service with the
         Company in accordance with the Company's normal vacation policy in
         effect immediately prior to the Change in Control (except for
         across-the-board plan or vacation policy changes or plan terminations
         similarly affecting at least ninety-five percent (95%) of the Executive
         Employees of the Company).

                  (vi) For purposes of this Paragraph l.(n), the term "Executive
         Employee" shall mean those employees of the Company of Grade Level 10
         or above.

         (o) "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act.

         (p) "Group Health Plan" shall mean the group health plan covering Mr.
Martin, as such plan may be amended from time to time.

         (q) "Group Life Insurance Plan" shall mean the group life insurance
program covering Mr. Martin, as such plan may be amended from time to time.

         (r) "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of October 19, 1998 plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern's shareholders was approved by a vote of at least 75% of the directors
then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to
October 19, 1998 whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.

         (s) "Month of Service" shall mean any calendar month during which Mr.
Martin has worked at least one (1) hour or was on approved leave of absence
while in the employ of the Company or any affiliate or subsidiary of Southern.





         (t) "Omnibus Plan" shall mean the Southern Company Omnibus Incentive
Compensation Plan, and the Design and Administrative Specifications duly adopted
thereunder, as in effect on the day before the date of a Change in Control.

         (u) "Pension Plan" shall mean The Southern Company Pension Plan, as
such plan may be amended from time to time.

         (v) "Performance Dividend Program" shall mean the Performance Dividend
Program under the Omnibus Plan or any replacement thereto, as such plans may be
amended from time to time.

         (w) "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of Act.

         (x) "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as such plans may be
amended from time to time.

         (y) "Southern" shall mean The Southern Company, its successors and
assigns.

         (z) "Southern Board" shall mean the board of directors of Southern.

         (aa) "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern.

         (bb) "Termination for Cause" or "Cause" shall mean the termination of
Mr. Martin's employment by the Company upon the occurrence of any of the
following:

                  (i) The willful and continued failure by Mr. Martin
         substantially to perform his duties with the Company (other than any
         such failure resulting from Mr. Martin's Total Disability or from Mr.
         Martin's retirement or any such actual or anticipated failure resulting
         from termination by Mr. Martin for Good Reason) after a written demand
         for substantial performance is delivered to him by the Southern Board,
         which demand specifically identifies the manner in which the Southern
         Board believes that he has not substantially performed his duties; or

                  (ii) The willful engaging by Mr. Martin in conduct that is
         demonstrably and materially injurious to the Company, monetarily or
         otherwise, including, but not limited to any of the following:

                           (A) any willful act involving fraud or dishonesty in
                  the course of Mr. Martin's employment by the Company;

                           (B) the willful carrying out of any activity or the
                  making of any statement which would materially prejudice or
                  impair the good name and standing of the Company, Southern or
                  any Southern Subsidiary or would bring the Company, Southern
                  or any Southern Subsidiary into contempt, ridicule or would
                  reasonably shock or offend any community in which the Company,
                  Southern or such Southern Subsidiary is located;

                           (C) attendance at work in a state of intoxication or
                  otherwise being found in possession at his workplace of any
                  prohibited drug or substance, possession of which would amount
                  to a criminal offense;

                           (D) violation of the Company's policies on drug and
                  alcohol usage, fitness for duty requirements or similar
                  policies as may exist from time to time as adopted by the
                  Company's safety officer;

                           (E) assault or other act of violence against any
                  person during the course of employment; or

                           (F) indictment of any felony or any misdemeanor
                  involving moral turpitude.

                           No act or failure to act by Mr. Martin shall be
                  deemed "willful" unless done, or omitted to be done, by Mr.
                  Martin not in good faith and without reasonable belief that
                  his action or omission was in the best interest of the
                  Company.

                           Notwithstanding the foregoing, Mr. Martin shall not
                  be deemed to have been terminated for Cause unless and until
                  there shall have been delivered to him a copy of a resolution
                  duly adopted by the affirmative vote of not less than three
                  quarters of the entire membership of the Southern Board at a
                  meeting of the Southern Board called and held for such purpose
                  (after reasonable notice to Mr. Martin and an opportunity for
                  him, together with counsel, to be heard before the Southern
                  Board), finding that, in the good faith opinion of the
                  Southern Board, Mr. Martin was guilty of conduct set forth
                  above in clause (i) or (ii) of this Paragraph l.(bb) and
                  specifying the particulars thereof in detail.

         (cc) "Termination Date" shall mean the date on which Mr. Martin's
employment with the Company is terminated; provided, however, that solely for
purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective
date of his retirement pursuant to the terms of the Pension Plan.

         (dd) "Total Disability" shall mean Mr. Martin's total disability within
the meaning of the Pension Plan.

         (ee) "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.

         (ff) "Waiver and Release" shall mean the Waiver and Release attached
hereto as Exhibit A.

         (gg) "Year of Service" shall mean Mr. Martin's Months of Service
divided by twelve (12) rounded to the nearest whole year, rounding up if the
remaining number of months is seven (7) or greater and rounding down if the
remaining number of months is less than seven (7). If Mr. Martin has a break in
his service with the Company, he will receive credit under this Agreement for
service prior to the break in service only if the break in service is less than
five years.

         2. Severance Benefits.

         (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a),
if Mr. Martin's employment is involuntarily terminated by the Company at any
time during the two year period following a Change in Control for reasons other
than Cause, or if Mr. Martin voluntarily terminates his employment with the
Company for Good Reason at any time during the two year period following a
Change in Control, Mr. Martin shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective Waiver
and Release. Notwithstanding anything to the contrary herein, Mr. Martin shall
not be eligible to receive benefits under this Agreement if Mr. Martin:

                  (i) voluntarily terminates his employment with the Company for
         other than Good Reason;

                  (ii) has his employment terminated by the Company for Cause;

                  (iii) accepts the transfer of his employment to Southern, any
         Southern Subsidiary or any employer that succeeds to all or
         substantially all of the assets of the Company, Southern or any
         Southern Subsidiary;

                  (iv) refuses an offer of continued employment with the
         Company, any Southern Subsidiary, or any employer that succeeds to all
         or substantially all of the assets of the Company, Southern, or any
         Southern Subsidiary under circumstances where such refusal would not
         amount to Good Reason for voluntary termination of employment; or

                  (v) elects to receive the benefits of any other voluntary or
         involuntary severance or separation program, plan or agreement
         maintained by the Company in lieu of benefits under this Agreement;
         provided however, that the receipt of benefits under the terms of any
         retention plan or agreement shall not be deemed to be the receipt of
         severance or separation benefits for purposes of this Agreement.

         (b) Severance Benefits. If Mr. Martin meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance
benefit in an amount equal to three times his Annual Compensation (the
"Severance Amount"). If any portion of the Severance Amount constitutes an
"excess parachute payment" (as such term is defined under Code Section 280G
("Excess Parachute Payment")), the Company shall pay to Mr. Martin an additional
amount calculated by determining the amount of tax under Code Section 4999 that
he otherwise would have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal determined by adding the
tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax
under Code Section the hospital insurance tax under Code Section 31O1(b) ("HI
Tax") and federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the "280G
Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the
Severance Amount plus all other "parachute payments" to Mr. Martin under Code
Section 280G exceeds three (3) times Mr. Martin's "base amount" (as such term is
defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more;
provided further, that if no 280G Gross-up is paid, the Severance Amount shall
be capped at three (3) times Mr. Martin's Base Amount, less all other "parachute
payments" (as such term is defined under Code Section 280G) received by Mr.
Martin, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by
HI Tax and Income Tax, exceeds what otherwise would have been the Severance
Amount, reduced by HI Tax, Income Tax and Excise Tax.

         For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of tax, e.g.,
Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax department of the
independent public accounting firm then responsible for preparing Southern's
consolidated federal income tax return, and such calculations or determinations
shall be binding upon the parties hereto.

         (c) Welfare Benefits. If Mr. Martin meets the eligibility requirements
of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree
medical and life insurance benefits provided to certain retirees pursuant to the
terms of the Pension Plan,





the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to
the benefits set forth in this Paragraph 2.( c).

                  (i) Mr. Martin shall be eligible to participate in the
         Company's Group Health Plan, upon payment of both the Company's and his
         monthly premium under such plan, for a period of six (6) months for
         each of Mr. Martin's Years of Service, not to exceed five (5) years. If
         Mr. Martin elects to receive this extended medical coverage, he shall
         also be entitled to elect coverage under the Group Health Plan for his
         dependents who were participating in the Group Health Plan on Mr.
         Martin's Termination Date (and for such other dependents as may be
         entitled to coverage under the provisions of the Health Insurance
         Portability and Accountability Act of 1996) for the duration of Mr.
         Martin's extended medical coverage under this Paragraph 2.(c)(i) to the
         extent such dependents remain eligible for dependent coverage under the
         terms of the Group Health Plan.

                           (A) The extended medical coverage afforded to Mr.
                  Martin pursuant to Paragraph 2. (c)(i), as well as the
                  premiums to be paid by Mr. Martin in connection with such
                  coverage shall be determined in accordance with the terms of
                  the Group Health Plan and shall be subject to any changes in
                  the terms and conditions of the Group Health Plan as well as
                  any future increases in premiums under the Group Health Plan.
                  The premiums to be paid by Mr. Martin in connection with this
                  extended coverage shall be due on the first day of each month;
                  provided, however,




                  that if he fails to pay his premium within thirty (30) days of
                  its due date, such extended coverage shall be terminated.

                           (B) Any Group Health Plan coverage provided under
                  Paragraph 2.(c)(i) shall be a part of and not in addition to
                  any COBRA Coverage which Mr. Martin or his dependents may
                  elect. In the event that Mr. Martin or his dependents become
                  eligible to be covered, by virtue of re-employment or
                  otherwise, by any employer-sponsored group health plan or is
                  eligible for coverage under any government-sponsored health
                  plan during the above period, coverage under the Company's
                  Group Health Plan available to Mr. Martin or his dependents by
                  virtue of the provisions of Paragraph 2.(c)(i) shall
                  terminate, except as may otherwise be required by law, and
                  shall not be renewed. (ii) Mr. Martin shall be entitled to
                  receive cash in an amount equal to the Company's and Mr.
                  Martin's cost of premiums for three (3) years of coverage
                  under the Group Health Plan and Group Life Insurance Plan in
                  accordance with the terms of such plans as of the date of the
                  Change in Control.

         (d) Incentive Plans. If Mr. Martin meets the eligibility requirements
of Paragraph 2. (a) hereof he shall be entitled to the following benefits under
the Omnibus Plan:

                  (i) Stock Options.

                           (A) Any of Mr. Martin's Options and Stock
                  Appreciation Rights under the Omnibus Plan (the defined terms
                  of which are incorporated in Paragraph 2.(d)(i) by reference)
                  which are outstanding as of the Termination Date and which are
                  not then exercisable and vested, shall become fully
                  exercisable and vested to the full extent of the original
                  grant; provided, that in the case of a Stock Appreciation
                  Right, if Mr. Martin is subject to Section 16(b) of the
                  Exchange Act, such Stock Appreciation Right shall not become
                  fully vested and exercisable at such time if such actions
                  would result in liability to Mr. Martin under Section 16(b) of
                  the Exchange Act, provided further, that any such actions not
                  taken as a result of the rules under Section 16(b) of the
                  Exchange Act shall be effected as of the first date that such
                  activity would no longer result in liability under Section
                  16(b) of the Exchange Act.

                           (B) The restrictions and deferral limitations
                  applicable to any of Mr. Martin's Restricted Stock and
                  Restricted Stock Units as of the Termination Date shall lapse,
                  and such Restricted Stock and Restricted Stock Units shall
                  become free of all restrictions and limitations and become
                  fully vested and transferable to the full extent of the
                  original grant.

                  (ii) Performance Pay Program. Provided Mr. Martin is not
         entitled to a Cash-Based Award under the PPP, (the defined terms of
         which are incorporated in this Paragraph 2.(d)(ii) by reference), if
         the PPP is in place through Mr. Martin's Termination Date and to the
         extent Mr. Martin is entitled to participate therein, Mr. Martin shall
         be entitled to receive cash in an amount equal to a prorated payout of
         his Cash-Based Awards under the PPP for the performance period in which
         the Termination Date shall have occurred, at target performance under
         the PPP and prorated by the number of months which have passed since
         the beginning of the performance period until the Termination Date.

                  (iii) Performance Dividend Program. Provided Mr. Martin is not
         entitled to a Cash-Based Award under the Performance Dividend Program
         (the defined terms of which are incorporated in this Paragraph
         2.(d)(iii) by reference), if the Performance Dividend Program is in
         place through Mr. Martin's Termination Date and to the extent Mr.
         Martin is entitled to participate therein, Mr. Martin shall be entitled
         to receive cash for each such Cash-Based Award under the Performance
         Dividend Program held by Mr. Martin on his Termination Date, based on
         actual performance under the Performance Dividend Program determined as
         of the most recently completed calendar quarter of the performance
         period in which the Termination Date shall have occurred, and the
         annual dividend declared prior to the Termination Date.

                  (iv) Other Short Term Incentives Under the Omnibus Plan.
         Provided Mr. Martin is not entitled to a Performance Unit/Share award
         under the Omnibus Plan (the defined terms of which are incorporated in
         this Paragraph 2.(d)(iv) by reference), Mr. Martin shall be entitled to
         receive cash in an amount equal to a prorated payout of the value of
         his Performance Units and/or Performance Shares for the performance
         period in which the Termination Date shall have occurred, at target
         performance and prorated by the number of months which have passed
         since the beginning of the performance period until the Termination
         Date.




                  (v) Other Short Term Incentive Plans. The provisions of this
         Paragraph 2.(d)(v) shall apply if and to the extent that Mr. Martin is
         a participant in any other "short term compensation plan" not otherwise
         previously referred to in this Paragraph 2.(d). Provided Mr. Martin is
         not otherwise entitled to a plan payout under any change of control
         provisions of such plans, if the "short term compensation plan" is in
         place as of the Termination Date and to the extent Mr. Martin is
         entitled to participate therein, Mr. Martin shall receive cash in an
         amount equal to his award under the Company's "short term incentive
         plan" for the annual performance period in which the Termination Date
         shall have occurred, at Mr. Martin's target performance level and
         prorated by the number of months which have passed since the beginning
         of the annual performance period until his Termination Date. For
         purposes of this Paragraph 2.(d)(v) the term "short term incentive
         compensation plan" shall mean any incentive compensation plan or
         arrangement adopted in writing by the Company which provides for
         annual, recurring compensatory bonuses based upon articulated
         performance criteria.

         (e) Payment of Benefits. Any amounts due under this Agreement shall be
paid in one (1) lump sum payment as soon as administratively practicable
following the later of: (i) Mr. Martin's Termination Date, or (ii) upon Mr.
Martin's tender of an effective Waiver and Release to the Company in the form of
Exhibit A attached hereto and the expiration of any applicable revocation period
for such waiver. In the event of a dispute with respect to liability or amount
of any benefit due hereunder, an effective Waiver and Release shall be tendered
at the time of final resolution of any such dispute when payment is tendered by
the Company.

         (f) Benefits in the Event of Death. In the event of Mr. Martin's death
prior to the payment of all amounts due under this Agreement, Mr. Martin's
estate shall be entitled to receive as due any amounts not yet paid under this
Agreement upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

         (g) Legal Fees. In the event of a dispute between Mr. Martin and the
Company with regard to any amounts due hereunder, if any material issue in such
dispute is finally resolved in Mr. Martin's favor, the Company shall reimburse
Mr. Martin's legal fees incurred with respect to all issues in such dispute in
an amount not to exceed fifty thousand dollars ($50,000).

         (h) Employee Outplacement Services. Mr. Martin shall be eligible to
participate in the Employee Outplacement Program, which program shall not be
less than six (6) months duration measured from Mr. Martin's Termination Date.

         (i) Non-qualified Retirement and Deferred Compensation Plans. The
Parties agree that subsequent to a Change in Control, any claims by Mr. Martin
for benefits under any of the Company's non-qualified retirement or deferred
compensation plans shall be resolved through binding arbitration in accordance
with the provisions and procedures set forth in Paragraph 5 hereof and if any
material issue in such dispute is finally resolved in Mr. Martin's favor, the
Company shall reimburse Mr. Martin's legal fees in the manner provided in
Paragraph 2.(g) hereof.

         3. Transfer of Employment. In the event that Mr. Martin's employment by
the Company is terminated during the two year period following a Change in
Control and Mr. Martin accepts employment by Southern, a Southern Subsidiary, or
any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.

         4. No Mitigation. If Mr. Martin is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Martin
hereunder shall not be reduced or suspended if Mr. Martin accepts such
subsequent employment.

         5. Arbitration.

         (a) Any dispute, controversy or claim arising out of or relating to the
Company's obligations to pay severance benefits under this Agreement, or the
breach thereof, shall be settled and resolved solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. The arbitration shall
be the sole and exclusive forum for resolution of any such claim for severance
benefits and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes, claims or
controversies arising out of or relating to Mr. Martin's employment by the
Company or the termination thereof.




         (b) Arbitration shall be initiated by serving a written notice of
demand for arbitration to Mr. Martin, in the case of the Company, or to the
Southern Board, in the case of Mr. Martin.

         (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators
shall apply the law of the State of Georgia, to the extent not preempted by
federal law, excluding any law which would require the application of the law of
another state.

         (d) The parties shall appoint arbitrators within fifteen (15) business
days following service of the demand for arbitration. The number of arbitrators
shall be three. One arbitrator shall be appointed by Mr. Martin, one arbitrator
shall be appointed by the Company, and the two arbitrators shall appoint a
third. If the arbitrators cannot agree on a third arbitrator within thirty (30)
business days after the service of demand for arbitration, the third arbitrator
shall be selected by the AAA.

         (e) The arbitration filing fee shall be paid by Mr. Martin. All other
costs of arbitration shall be borne equally by Mr. Martin and the Company,
provided, however, that the Company shall reimburse such fees and costs in the
event any material issue in such dispute is finally resolved in Mr. Martin's
favor and Mr. Martin is reimbursed legal fees under Paragraph 2.(g) hereof.

         (f) The parties agree that they will faithfully observe the rules that
govern any arbitration between them, they will abide by and perform any award
rendered by the arbitrators in any such arbitration, including any award of
injunctive relief, and a judgment of a court having jurisdiction may be entered
upon an award.

         (g) The parties agree that nothing in this Paragraph 5 is intended to
preclude upon application of either party any court having jurisdiction from
issuing and enforcing in any lawful manner such temporary restraining orders,
preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Agreement; regardless of whether an arbitration proceeding under this Paragraph
5 has begun. The parties further agree that nothing herein shall prevent any
court from entering and enforcing in any lawful manner such judgments for
permanent equitable relief as may be necessary to prevent harm to a party's
interests or as otherwise may be appropriate following the issuance of arbitral
awards pursuant to this Paragraph 5.

         6. Miscellaneous.

         (a) Funding of Benefits. Unless the Board in its discretion shall
determine otherwise, the benefits payable to Mr. Martin under this Agreement
shall not be funded in any manner and shall be paid by the Company out of its
general assets, which assets are subject to the claims of the Company's
creditors.

         (b) Withholding. There shall be deducted from the payment of any
benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Mr. Martin.

         (c) Assignment. Mr. Martin shall have no rights to sell, assign,
transfer, encumber, or otherwise convey the right to receive the payment of any
benefit due hereunder, which payment and the rights thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to do so shall be
null and void and of no effect.

         (d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.

         (e) Construction. This Agreement shall be construed in accordance with
and governed by the laws of the State of Georgia, to the extent not preempted by
federal law, disregarding any provision of law which would require the
application of the law of another state.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 23rd day of June, 2004.


                                              THE SOUTHERN COMPANY



                                              By:      /s/Ellen N. Lindemann


                                              ALABAMA POWER COMPANY


                                              By:      /s/Ellen N. Lindemann


                                              MR. MARTIN


                                              /s/C. Alan Martin
                                              C. Alan Martin








                                    Exhibit A

                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         The attached Waiver and Release is to be given to Mr. C. Alan Martin
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.











                           CHANGE IN CONTROL AGREEMENT
                               Waiver and Release

         I, C. Alan Martin, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Savannah Electric and Power
Company (collectively, the "Company") if I had not elected to sign this Waiver.

         I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.

         In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communications Services, Inc., Southern Company Energy Solutions, LLC,
Southern Company Services, Inc., Southern Nuclear Operating Company, Inc. and
other direct or indirect subsidiaries of The Southern Company and their past,
present and future officers, directors, employees, agents and attorneys. Nothing
in this Waiver shall be construed to release claims or causes of action under
the Age Discrimination in Employment Act or the Energy Reorganization Act of
1974, as amended, which arise out of events occurring after the execution date
of this Waiver.

         In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.

         In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.





         In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.

         I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.

         I understand that by signing this Waiver I am giving up rights I may
have.

         IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ________, in the year ____.

                                              ---------------------------
                                                     C. Alan Martin

Sworn to and subscribed to me this

___day of _________, ____

- --------------------------
Notary Public

My Commission Expires:

- ---------------------------
(Notary Seal)

         Acknowledged and Accepted by the Company, as defined in the Waiver.

By:
         -----------------------------------
Date:
         -----------------------------------

EX-31.A.1

                                                                  Exhibit 31(a)1


                              THE SOUTHERN COMPANY

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, David M. Ratcliffe, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of The Southern
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.


Date:  August 5, 2004


                              /s/David M. Ratcliffe
                               David M. Ratcliffe
                      Chairman and Chief Executive Officer

EX-31.A.2

                                                                  Exhibit 31(a)2


                              THE SOUTHERN COMPANY

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, Thomas A. Fanning, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of The Southern
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                              /s/Thomas A. Fanning
                                Thomas A. Fanning
         Executive Vice President, Chief Financial Officer and Treasurer

EX-31.B.1

                                                                  Exhibit 31(b)1

                              ALABAMA POWER COMPANY

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, Charles D. McCrary, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Alabama Power
     Company;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

     (b) Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     (c) Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter (the registrant's fourth fiscal quarter in
         the case of an annual report) that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.

Date:  August 5, 2004


                              /s/Charles D. McCrary
                               Charles D. McCrary
                      President and Chief Executive Officer

EX-31.B.2

                                                                  Exhibit 31(b)2

                              ALABAMA POWER COMPANY

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, William B. Hutchins, III, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Alabama Power
     Company;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     (b)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a)  All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date:  August 5, 2004


                           /s/William B. Hutchins, III
                            William B. Hutchins, III
         Executive Vice President, Chief Financial Officer and Treasurer

EX-31.C.1

                                                                  Exhibit 31(c)1
                              GEORGIA POWER COMPANY

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, Michael D. Garrett, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Georgia Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004

                              /s/Michael D. Garrett
                               Michael D. Garrett
                      President and Chief Executive Officer

EX-31.C.2

                                                                  Exhibit 31(c)2
                              GEORGIA POWER COMPANY

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, C. B. Harreld, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Georgia Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004

                                /s/C. B. Harreld
                                  C. B. Harreld
         Executive Vice President, Chief Financial Officer and Treasurer

EX-31.D.1

                                                                  Exhibit 31(d)1


                               GULF POWER COMPANY

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, Susan N. Story, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Gulf Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                                /s/Susan N. Story
                                 Susan N. Story
                      President and Chief Executive Officer

EX-31.D.2

                                                                  Exhibit 31(d)2
                               GULF POWER COMPANY

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, Ronnie R. Labrato, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Gulf Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                              /s/Ronnie R. Labrato
                                Ronnie R. Labrato
             Vice President, Chief Financial Officer and Comptroller

EX-31.E.1

                                                                  Exhibit 31(e)1

                            MISSISSIPPI POWER COMPANY

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, Anthony J. Topazi, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Mississippi Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                              /s/Anthony J. Topazi
                                Anthony J. Topazi
                      President and Chief Executive Officer

EX-31.E.2

                                                                  Exhibit 31(e)2


                            MISSISSIPPI POWER COMPANY

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, Michael W. Southern, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Mississippi Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004

                             /s/Michael W. Southern
                               Michael W. Southern
              Vice President, Treasurer and Chief Financial Officer

EX-31.F.1

                                                                  Exhibit 31(f)1

                       SAVANNAH ELECTRIC AND POWER COMPANY

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, A. R. James, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Savannah Electric
         and Power Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                                 /s/A. R. James
                                   A. R. James
                      President and Chief Executive Officer

EX-31.F.2

                                                                  Exhibit 31(f)2

                       SAVANNAH ELECTRIC AND POWER COMPANY

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, Kirby R. Willis, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Savannah Electric
         and Power Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                               /s/Kirby R. Willis
                                 Kirby R. Willis
              Vice President, Chief Financial Officer and Treasurer

EX-31.G.1

                                                                  Exhibit 31(g)1

                             SOUTHERN POWER COMPANY

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, William P. Bowers, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Southern Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                             /s/William Paul Bowers
                                William P. Bowers
                      President and Chief Executive Officer

EX-31.G.2

                                                                  Exhibit 31(g)2


                             SOUTHERN POWER COMPANY

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, Cliff S. Thrasher, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Southern Power
         Company;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:  August 5, 2004


                              /s/Cliff S. Thrasher
                                Cliff S. Thrasher
         Senior Vice President, Comptroller and Chief Financial Officer

EX-32.A

                                                                   Exhibit 32(a)

                                 CERTIFICATION

                             18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


In connection with the accompanying Quarterly Report on Form 10-Q of The
Southern Company for the quarter ended June 30, 2004, we, the undersigned,
hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to the best of our individual
knowledge and belief, that:

(1)      such Quarterly Report on Form 10-Q of The Southern Company for the
         quarter ended June 30, 2004, which this statement accompanies, fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934; and

(2)      the information contained in such Quarterly Report on Form 10-Q of The
         Southern Company for the quarter ended June 30, 2004, fairly presents,
         in all material respects, the financial condition and results of
         operations of The Southern Company.



                                               /s/David M. Ratcliffe
                                                David M. Ratcliffe
                                       Chairman and Chief Executive Officer



                                               /s/Thomas A. Fanning
                                                 Thomas A. Fanning
                                             Executive Vice President,
                                       Chief Financial Officer and Treasurer

Date:  August 5, 2004

EX-32.B

                                                                   Exhibit 32(b)
                                 CERTIFICATION

                             18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


In connection with the accompanying Quarterly Report on Form 10-Q of Alabama
Power Company for the quarter ended June 30, 2004, we, the undersigned, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, to the best of our individual knowledge and
belief, that:

     (1)  such Quarterly Report on Form 10-Q of Alabama Power Company for the
          quarter ended June 30, 2004, which this statement accompanies, fully
          complies with the requirements of Section 13(a) or 15(d) of the
          Securities Exchange Act of 1934; and

     (2)  the information contained in such Quarterly Report on Form 10-Q of
          Alabama Power Company for the quarter ended June 30, 2004, fairly
          presents, in all material respects, the financial condition and
          results of operations of Alabama Power Company.



                                                 /s/Charles D. McCrary
                                                  Charles D. McCrary
                                         President and Chief Executive Officer



                                              /s/William B. Hutchins, III
                                               William B. Hutchins, III
                                               Executive Vice President,
                                         Chief Financial Officer and Treasurer

Date:  August 5, 2004

EX-32.C

                                                                   Exhibit 32(c)


                                 CERTIFICATION

                             18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


In connection with the accompanying Quarterly Report on Form 10-Q of Georgia
Power Company for the quarter ended June 30, 2004, we, the undersigned, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, to the best of our individual knowledge and
belief, that:

         (1)      such Quarterly Report on Form 10-Q of Georgia Power Company
                  for the quarter ended June 30, 2004, which this statement
                  accompanies, fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      the information contained in such Quarterly Report on Form
                  10-Q of Georgia Power Company for the quarter ended June 30,
                  2004, fairly presents, in all material respects, the financial
                  condition and results of operations of Georgia Power Company.



                                               /s/Michael D. Garrett
                                                Michael D. Garrett
                                       President and Chief Executive Officer


                                                /s/C. B. Harreld
                                                  C. B. Harreld
                                            Executive Vice President,
                                      Chief Financial Officer and Treasurer

Date:  August 5, 2004

EX-32.D

                                                                   Exhibit 32(d)

                                 CERTIFICATION

                             18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


In connection with the accompanying Quarterly Report on Form 10-Q of Gulf Power
Company for the quarter ended June 30, 2004, we, the undersigned, hereby certify
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, to the best of our individual knowledge and belief,
that:

(1)      such Quarterly Report on Form 10-Q of Gulf Power Company for the
         quarter ended June 30, 2004, which this statement accompanies, fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934; and

(2)      the information contained in such Quarterly Report on Form 10-Q of Gulf
         Power Company for the quarter ended June 30, 2004, fairly presents, in
         all material respects, the financial condition and results of
         operations of Gulf Power Company.



                                               /s/Susan N. Story
                                                Susan N. Story
                                     President and Chief Executive Officer



                                             /s/Ronnie R. Labrato
                                               Ronnie R. Labrato
                                    Vice President, Chief Financial Officer
                                                and Comptroller

Date:  August 5, 2004

EX-32.E

                                                                   Exhibit 32(e)

                                 CERTIFICATION

                             18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


In connection with the accompanying Quarterly Report on Form 10-Q of Mississippi
Power Company for the quarter ended June 30, 2004, we, the undersigned, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, to the best of our individual knowledge and
belief, that:

(1)      such Quarterly Report on Form 10-Q of Mississippi Power Company for the
         quarter ended June 30, 2004, which this statement accompanies, fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934; and

(2)      the information contained in such Quarterly Report on Form 10-Q of
         Mississippi Power Company for the quarter ended June 30, 2004, fairly
         presents, in all material respects, the financial condition and results
         of operations of Mississippi Power Company.



                                                   /s/Anthony J. Topazi
                                                     Anthony J. Topazi
                                           President and Chief Executive Officer



                                                  /s/Michael W. Southern
                                                    Michael W. Southern
                                               Vice President, Treasurer and
                                                  Chief Financial Officer

Date:  August 5, 2004

EX-32.F

                                                                   Exhibit 32(f)

                                 CERTIFICATION

                             18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


In connection with the accompanying Quarterly Report on Form 10-Q of Savannah
Electric and Power Company for the quarter ended June 30, 2004, we, the
undersigned, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of our
individual knowledge and belief, that:

(1)      such Quarterly Report on Form 10-Q of Savannah Electric and Power
         Company for the quarter ended June 30, 2004, which this statement
         accompanies, fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

(2)      the information contained in such Quarterly Report on Form 10-Q of
         Savannah Electric and Power Company for the quarter ended June 30,
         2004, fairly presents, in all material respects, the financial
         condition and results of operations of Savannah Electric and Power
         Company.




                                                     /s/A. R. James
                                                      A. R. James
                                          President and Chief Executive Officer



                                                   /s/Kirby R. Willis
                                                    Kirby R. Willis
                                        Vice President, Chief Financial Officer
                                                    and Treasurer

Date:  August 5, 2004

EX-32.G

                                                                   Exhibit 32(g)

                                 CERTIFICATION

                             18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


In connection with the accompanying Quarterly Report on Form 10-Q of Southern
Power Company for the quarter ended June 30, 2004, we, the undersigned, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, to the best of our individual knowledge and
belief, that:

(1)      such Quarterly Report on Form 10-Q of Southern Power Company for the
         quarter ended June 30, 2004, which this statement accompanies, fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934; and

(2)      the information contained in such Quarterly Report on Form 10-Q of
         Southern Power Company for the quarter ended June 30, 2004, fairly
         presents, in all material respects, the financial condition and results
         of operations of Southern Power Company.



                                              /s/William Paul Bowers
                                                 William P. Bowers
                                       President and Chief Executive Officer



                                               /s/Cliff S. Thrasher
                                                 Cliff S. Thrasher
                                      Senior Vice President, Comptroller and
                                              Chief Financial Officer

Date:  August 5, 2004