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 quarterly period ended March 31, 2007

OR

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

For the transition period from                      to                     

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

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

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

	Large
	Accelerated	Accelerated	Non-accelerated
Registrant	Filer	Filer	Filer
The Southern Company	X
Alabama Power Company			X
Georgia Power Company			X
Gulf Power Company			X
Mississippi Power Company			X
Southern Power Company			X

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

	Description of	Shares Outstanding
Registrant	Common Stock	at March 31, 2007
The Southern Company	Par Value $5 Per Share		751,808,611
Alabama Power Company	Par Value $40 Per Share		14,000,000
Georgia Power Company	Without Par Value		9,261,500
Gulf Power Company	Without Par Value		1,792,717
Mississippi Power Company	Without Par Value		1,121,000
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, and Southern Power Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.

2

INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2007

		Page
		Number
DEFINITIONS			5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION			6
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	The Southern Company and Subsidiary Companies
	Condensed Consolidated Statements of Income		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 Financial Condition and Results of Operations		13
	Alabama Power Company
	Condensed Statements of Income		29
	Condensed Statements of Comprehensive Income		29
	Condensed Statements of Cash Flows		30
	Condensed Balance Sheets		31
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
	Georgia Power Company
	Condensed Statements of Income		44
	Condensed Statements of Comprehensive Income		44
	Condensed Statements of Cash Flows		45
	Condensed Balance Sheets		46
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		48
	Gulf Power Company
	Condensed Statements of Income		60
	Condensed Statements of Comprehensive Income		60
	Condensed Statements of Cash Flows		61
	Condensed Balance Sheets		62
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		64
	Mississippi Power Company
	Condensed Statements of Income		74
	Condensed Statements of Comprehensive Income		74
	Condensed Statements of Cash Flows		75
	Condensed Balance Sheets		76
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		78
	Southern Power Company and Subsidiary Companies
	Condensed Consolidated Statements of Income		89
	Condensed Consolidated Statements of Comprehensive Income		89
	Condensed Consolidated Statements of Cash Flows		90
	Condensed Consolidated Balance Sheets		91
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		93
	Notes to the Condensed Financial Statements		102
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		27
Item 4.	Controls and Procedures		27

3

INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2007

		Page
		Number
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		112
Item 1A.	Risk Factors		112
Item 2.	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	Inapplicable
Item 5.	Other Information	Inapplicable
Item 6.	Exhibits		113
	Signatures		118

4

DEFINITIONS

TERM	MEANING
Alabama Power	Alabama Power Company
ALJ	Administrative law judge
BMA	Bond Market Association
Clean Air Act	Clean Air Act Amendments of 1990
DOE	U.S. Department of Energy
Duke Energy	Duke Energy Corporation
ECO Plan	Environmental Compliance Overview Plan
EPA	U.S. Environmental Protection Agency
ERISA	Employee Retirement Income Security Act of 1974, as amended
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, and Southern Power for the year ended December 31, 2006 and, with respect to Gulf Power, Amendment No. 1 thereto
Georgia Power	Georgia Power Company
Gulf Power	Gulf Power Company
IIC	Intercompany Interchange Contract
IRC	Internal Revenue Code of 1986, as amended
IRS	Internal Revenue Service
KWH	Kilowatt-hour
LIBOR	London Interbank Offered Rate
Mirant	Mirant Corporation
Mississippi Power	Mississippi Power Company
MW	Megawatt
NRC	Nuclear Regulatory Commission
NSR	New Source Review
PEP	Performance Evaluation Plan
Power Pool	The operating arrangement whereby the integrated generating resources of the traditional operating companies and Southern Power are subject to joint commitment and dispatch in order to serve their combined load obligations
PPA	Power Purchase Agreement
PSC	Public Service Commission
Rate CNP	Alabama Power’s certified new plant rate mechanism
Rate ECR	Alabama Power’s energy cost recovery rate mechanism
Rate RSE	Alabama Power’s rate stabilization and equalization rate mechanism
Savannah Electric	Savannah Electric and Power Company (merged into Georgia Power on July 1, 2006)
SCS	Southern Company Services, Inc.
SEC	Securities and Exchange Commission
Southern Company	The Southern Company
Southern Company system	Southern Company, the traditional operating companies, Southern Power, and other subsidiaries
Southern Nuclear	Southern Nuclear Operating Company, Inc.
Southern Power	Southern Power Company
traditional operating companies	Alabama Power, Georgia Power, Gulf Power, and Mississippi Power
wholesale revenues	revenues generated from sales for resale

5

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements include, among other things, statements concerning the strategic goals for the wholesale business, retail sales growth, customer growth, storm damage cost recovery and repairs, fuel cost recovery, environmental regulations and expenditures, access to sources of capital, projections for postretirement benefit trust contributions, synthetic fuel investments, financing activities, completion or termination of construction projects, impacts of adoption of new accounting rules, PPA revenues, and estimated construction and other expenditures. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include:

• the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, 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, FERC matters, IRS audits, and Mirant matters;

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

• variations in demand for electricity, including those relating to weather, the general economy and population, and business growth (and declines);

• 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 the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and storm restoration cost recovery;

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

• fluctuations in the level of oil prices;

• the level of production, if any, by the synthetic fuel operations at Carbontronics Synfuels Investors LP and Alabama Fuel Products, LLC for fiscal year 2007;

• 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 terrorist incidents and the threat of terrorist incidents;

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

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

• catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, pandemic health events such as an avian influenza, or other similar occurrences;

• 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 (including the Form 10-K) filed by the registrants from time to time with the SEC.

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

6

THE SOUTHERN COMPANY AND
SUBSIDIARY COMPANIES

7

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

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Revenues:
Retail revenues	$	2,743,811		$	2,471,413
Wholesale revenues		480,699			414,869
Other electric revenues		121,294			110,990
Other revenues		62,865			65,988
Total operating revenues		3,408,669			3,063,260
Operating Expenses:
Fuel		1,316,519			1,048,545
Purchased power		64,073			104,411
Other operations		565,372			562,452
Maintenance		281,995			283,630
Depreciation and amortization		306,344			298,926
Taxes other than income taxes		183,039			175,003
Total operating expenses		2,717,342			2,472,967
Operating Income		691,327			590,293
Other Income and (Expense):
Allowance for equity funds used during construction		20,174			11,527
Interest income		10,555			6,672
Equity in losses of unconsolidated subsidiaries		(6,735	)		(32,575	)
Leveraged lease income		9,862			18,103
Interest expense, net of amounts capitalized		(194,023	)		(176,375	)
Interest expense to affiliate trusts		(23,827	)		(30,629	)
Preferred and preference dividends of subsidiaries		(10,129	)		(9,015	)
Other income (expense), net		(2,931	)		(8,430	)
Total other income and (expense)		(197,054	)		(220,722	)
Earnings Before Income Taxes		494,273			369,571
Income taxes		155,584			107,964
Consolidated Net Income	$	338,689		$	261,607
Common Stock Data:
Earnings per share-
Basic	$	0.45		$	0.35
Diluted	$	0.45		$	0.35
Average number of basic shares of common stock outstanding (in thousands)		750,259			742,195
Average number of diluted shares of common stock outstanding (in thousands)		755,352			747,039
Cash dividends paid per share of common stock	$	0.3875		$	0.3725

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 Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Activities:
Consolidated net income	$	338,689		$	261,607
Adjustments to reconcile consolidated net income to net cash provided from operating activities —
Depreciation and amortization		363,903			351,946
Deferred income taxes and investment tax credits		53,433			(39,650	)
Allowance for equity funds used during construction		(20,174	)		(11,527	)
Equity in losses of unconsolidated subsidiaries		6,735			32,575
Leveraged lease income		(9,862	)		(18,103	)
Pension, postretirement, and other employee benefits		19,992			18,448
Stock option expense		20,554			19,104
Hedge settlements		(3,923	)		18,006
Other, net		(15,990	)		(2,608	)
Changes in certain current assets and liabilities —
Receivables		161,960			236,127
Fossil fuel stock		(63,438	)		(78,471	)
Materials and supplies		(7,077	)		(11,089	)
Other current assets		(63,751	)		(41,642	)
Accounts payable		(92,238	)		(310,962	)
Accrued taxes		(100,356	)		(9,425	)
Accrued compensation		(325,500	)		(337,600	)
Other current liabilities		(1,107	)		(18,331	)
Net cash provided from operating activities		261,850			58,405
Investing Activities:
Property additions		(742,384	)		(546,261	)
Nuclear decommissioning trust fund purchases		(167,193	)		(172,551	)
Nuclear decommissioning trust fund sales		160,313			165,671
Proceeds from property sales		3,922			150,521
Investment in unconsolidated subsidiaries		(11,423	)		(38,364	)
Cost of removal, net of salvage		(22,870	)		(31,230	)
Other		(8,237	)		(32,696	)
Net cash used for investing activities		(787,872	)		(504,910	)
Financing Activities:
Increase (decrease) in notes payable, net		(299,583	)		433,101
Proceeds —
Long-term debt		1,350,000			800,000
Common stock		167,509			13,875
Redemptions —
Long-term debt		(405,210	)		(322,839	)
Long-term debt to affiliate trusts		—			(67,457	)
Preferred and preference stock		—			(14,569	)
Common stock repurchased		—			(117	)
Payment of common stock dividends		(290,292	)		(276,442	)
Other		(1,759	)		(20,372	)
Net cash provided from financing activities		520,665			545,180
Net Change in Cash and Cash Equivalents		(5,357	)		98,675
Cash and Cash Equivalents at Beginning of Period		166,846			202,111
Cash and Cash Equivalents at End of Period	$	161,489		$	300,786
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $12,259 and $4,942 capitalized for 2007 and 2006, respectively)	$	181,712		$	198,762
Income taxes (net of refunds)	$	(19,257	)	$	919

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 March 31,			At December 31,
Assets	2007			2006
	(in thousands)
Current Assets:
Cash and cash equivalents	$	161,489		$	166,846
Receivables —
Customer accounts receivable		883,716			942,821
Unbilled revenues		264,383			283,275
Under recovered regulatory clause revenues		527,206			516,441
Other accounts and notes receivable		286,491			329,619
Accumulated provision for uncollectible accounts		(30,117	)		(34,901	)
Fossil fuel stock, at average cost		736,970			674,902
Materials and supplies, at average cost		653,734			648,127
Vacation pay		122,709			121,246
Prepaid expenses		227,147			127,908
Other		190,610			242,735
Total current assets		4,024,338			4,019,019
Property, Plant, and Equipment:
In service		45,777,616			45,484,895
Less accumulated depreciation		16,808,693			16,581,886
		28,968,923			28,903,009
Nuclear fuel, at amortized cost		323,727			317,429
Construction work in progress		2,230,033			1,871,538
Total property, plant, and equipment		31,522,683			31,091,976
Other Property and Investments:
Nuclear decommissioning trusts, at fair value		1,086,250			1,057,534
Leveraged leases		955,788			1,138,730
Other		291,153			296,484
Total other property and investments		2,333,191			2,492,748
Deferred Charges and Other Assets:
Deferred charges related to income taxes		916,888			895,446
Prepaid pension costs		1,558,673			1,548,983
Unamortized debt issuance expense		176,515			171,758
Unamortized loss on reacquired debt		287,516			293,016
Deferred under recovered regulatory clause revenues		797,151			845,201
Other regulatory assets		921,549			935,804
Other		566,930			564,498
Total deferred charges and other assets		5,225,222			5,254,706
Total Assets	$	43,105,434		$	42,858,449

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 March 31,			At December 31,
Liabilities and Stockholders’ Equity	2007			2006
	(in thousands)
Current Liabilities:
Securities due within one year	$	1,505,952		$	1,416,898
Notes payable		1,641,217			1,940,801
Accounts payable		983,918			1,081,256
Customer deposits		257,609			248,781
Accrued taxes —
Income taxes		128,526			110,009
Other		215,410			390,716
Accrued interest		205,122			183,918
Accrued vacation pay		151,372			151,113
Accrued compensation		119,777			443,610
Other		286,924			385,858
Total current liabilities		5,495,827			6,352,960
Long-term Debt		12,288,193			10,942,025
Long-term Debt Payable to Affiliated Trusts		1,071,667			1,561,358
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		5,863,088			5,989,063
Deferred credits related to income taxes		287,072			291,474
Accumulated deferred investment tax credits		497,231			503,217
Employee benefit obligations		1,580,291			1,566,591
Asset retirement obligations		1,150,708			1,136,982
Other cost of removal obligations		1,303,503			1,300,461
Other regulatory liabilities		804,844			793,869
Other		536,300			305,255
Total deferred credits and other liabilities		12,023,037			11,886,912
Total Liabilities		30,878,724			30,743,255
Preferred and Preference Stock of Subsidiaries		743,938			744,065
Common Stockholders’ Equity:
Common stock, par value $5 per share —
Authorized — 1 billion shares
Issued — March 31, 2007: 752,163,794 Shares;
— December 31, 2006: 751,863,854 Shares
Treasury — March 31, 2007: 355,183 Shares;
— December 31, 2006: 5,593,691 Shares
Par value		3,760,819			3,759,319
Paid-in capital		1,114,045			1,096,387
Treasury, at cost		(9,509	)		(192,309	)
Retained earnings		6,673,423			6,765,219
Accumulated other comprehensive loss		(56,006	)		(57,487	)
Total Common Stockholders’ Equity		11,482,772			11,371,129
Total Liabilities and Stockholders’ Equity	$	43,105,434		$	42,858,449

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 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Consolidated Net Income	$	338,689		$	261,607
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value of qualifying hedges, net of tax of $(1,567) and $7,130, respectively		(2,468	)		11,392
Reclassification adjustment for amounts included in net income, net of tax of $1,259 and $241, respectively		2,204			290
Marketable securities:
Change in fair value of marketable securities, net of tax of $818 and $1,609, respectively		1,307			2,521
Pension and other post retirement benefit plans:
Reclassification adjustment for amounts included in net income, net of tax of $246 and $-, respectively		438			—
Total other comprehensive income		1,481			14,203
COMPREHENSIVE INCOME	$	340,170		$	275,810

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
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FIRST QUARTER 2007 vs. FIRST QUARTER 2006

OVERVIEW

Discussion of the results of operations is focused on Southern Company’s primary business of electricity sales in the Southeast by the traditional operating companies – Alabama Power, Georgia Power, Gulf Power, and Mississippi Power – 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, and energy-related services. For additional information on these businesses, see BUSINESS – The Southern Company System – “Traditional operating companies,” “Southern Power,” and “Other Business” in Item 1 of the Form 10-K. For information regarding the synthetic fuel investment, see Note (B) to the Condensed Financial Statements under “INCOME TAX MATTERS – Synthetic Fuel Tax Credits” herein.

Southern Company continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, and earnings per share. For additional information on these indicators, see MANAGEMENT’S DISCUSSION AND ANALYSIS – OVERVIEW – “Key Performance Indicators” of Southern Company in Item 7 of the Form 10-K.

RESULTS OF OPERATIONS

Net Income

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$77.1	29.5

Southern Company’s first quarter 2007 earnings were $338.7 million ($0.45 per share) compared to $261.6 million ($0.35 per share) for first quarter 2006. The increase in earnings for the first quarter 2007 when compared to the same period in 2006 resulted primarily from higher revenues due to sustained economic strength and customer growth in the Southern Company service area, higher earnings in the synthetic fuel business, and a retail base rate increase at Alabama Power. The increase to earnings was partially offset by higher interest expense and a decrease in revenues associated with lower market-based rates to large commercial and industrial customers when compared to the same period in 2006.

Retail Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$272.4	11.0

In the first quarter 2007, retail revenues were $2.74 billion compared to $2.47 billion in the same period in 2006. Details of the change to retail revenues follow:

	First Quarter
	2007
	(in millions)		% change
Retail – prior year	$	2,471.4
Change in —
Rates and pricing		32.7		1.3
Sales growth		26.3		1.1
Weather		19.8		0.8
Fuel cost recovery		193.6		7.8
Retail – current year	$	2,743.8		11.0	%

13

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

Revenues associated with changes in rates and pricing increased in the first quarter of 2007 when compared to the same period in 2006 primarily as a result of an increase in retail base rates at Alabama Power, partially offset by a decrease in revenues associated with lower market-based rates to large commercial and industrial customers.

Revenues attributable to changes in sales growth increased in the first quarter of 2007 when compared to the same period in 2006 due to a 3.3% increase in retail KWH sales, resulting from continued customer growth and sustained economic strength in the Southeast. The number of retail customers increased by 1.7% as of March 2007 compared to March 2006.

Revenues resulting from changes in weather increased because of normal weather in the first quarter of 2007 compared to mild weather in the first quarter of 2006.

Fuel revenues increased $193.6 million in the first quarter of 2007 when compared to the same period in 2006. Electric rates for the traditional operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the fuel component of purchased power costs, and do not affect net income.

Wholesale Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$65.8	15.9

In the first quarter 2007, wholesale revenues were $480.7 million compared to $414.9 million in the same period in 2006. The increase was primarily a result of a rise in fuel revenues due to a 13.8% increase in the average unit cost of fuel per net KWH generated. Short-term opportunity sales also contributed to the increase over the same period in 2006 due to favorable weather compared to neighboring territories and a favorable price differential between market prices and Southern Company’s marginal cost. Short-term opportunity sales are made at market-based rates that generally provide a margin above Southern Company’s variable cost to produce the energy.

Other Electric Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$10.3	9.3

In the first quarter 2007, other electric revenues were $121.3 million compared to $111.0 million in the same period in 2006. The increase was primarily a result of an increase in transmission revenues of $6.8 million, an increase in outdoor lighting revenues of $1.5 million, and an increase in customer fees of $1.5 million. Transmission revenues are generally offset by related expenses and do not significantly affect net income.

Fuel and Purchased Power Expenses

First Quarter 2007 vs. First Quarter 2006
	(change in millions)			% change
Fuel	$	268.0			25.6
Purchased power		(40.3	)		(38.6	)
Total fuel and purchased power expenses	$	227.7

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

Fuel and purchased power expenses for the first quarter 2007 were $1.38 billion compared to $1.15 billion for the corresponding period in 2006. The increase in fuel and purchased power expenses was due to a $145.4 million increase in the average cost of fuel and purchased power as well as an $82.3 million increase related to total KWH generated and purchased when compared to the same period in 2006. Details of Southern Company’s cost of generation and purchased power are as follows:

	First Quarter		First Quarter
Average Cost	2007		2006		% change
	(cents per net KWH)
Fuel		2.80		2.46		13.8
Purchased power		3.88		4.85		(20.0	)

Increases in fuel expense at the traditional 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. Fuel expenses incurred under Southern Power’s PPAs are generally the responsibility of the counterparties and do not significantly affect net income.

Allowance for Equity Funds Used During Construction

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$8.6	75.0

In the first quarter 2007, allowance for equity funds used during construction was $20.2 million compared to $11.6 million in the same period in 2006. The increase was a result of additional investment in environmental projects, primarily at Georgia Power.

Equity in Losses of Unconsolidated Subsidiaries

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(25.8)	(79.3)

In the first quarter 2007, equity in losses of unconsolidated subsidiaries was $6.8 million compared to $32.6 million for the same period in 2006. Southern Company made investments in two synthetic fuel production facilities that generate operating losses. These investments also allow Southern Company to claim federal income tax credits that offset these operating losses and make the projects profitable. The decrease in equity in losses of unconsolidated subsidiaries in the first quarter when compared with the same period in 2006 was primarily the result of terminating Southern Company’s membership interest in one of the synthetic fuel entities in 2006 which eliminated the funding obligation and Southern Company’s share of losses for the first quarter 2007. See FUTURE EARNINGS POTENTIAL – “Income Tax Matters – Synthetic Fuel Tax Credits” and Note (B) to the Condensed Financial Statements under “INCOME TAX MATTERS – Synthetic Fuel Tax Credits” herein for further information.

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

Leveraged Lease Income

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(8.2)	(45.5)

Leveraged lease income for the first quarter 2007 was $9.9 million compared to $18.1 million for the corresponding period in 2006. Southern Company has several leveraged lease agreements which relate to international and domestic energy generation, distribution, and transportation assets. Southern Company receives federal income tax deductions for depreciation and amortization, as well as interest on long-term debt related to these investments. The adoption of FASB Staff Position No. FAS 13-2 (FSP 13-2), “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction” resulted in a $6.5 million decrease to leveraged lease pre-tax income in the first quarter of 2007 when compared to the same period in 2006. See FUTURE EARNINGS POTENTIAL – “Income Tax Matters – Leveraged Lease Transactions” and Note (B) to the Condensed Financial Statements under “INCOME TAX MATTERS – Leveraged Lease Transactions” herein for further information.

Interest Expense, Net of Amounts Capitalized

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$17.6	10.0

Interest expense, net of amounts capitalized for the first quarter 2007 was $194.0 million compared to $176.4 million for the corresponding period in 2006. The increase was a result of a $13.6 million increase associated with $1.02 billion in additional debt outstanding at March 31, 2007 compared to March 31, 2006 and a $10.0 million increase associated with an increase in average interest rates on variable rate debt. These increases were partially offset by $7.3 million associated with capitalized interest and allowance for debt funds used during construction. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Financing Activities” of Southern Company in Item 7 of the Form 10-K and herein for additional information.

Interest Expense to Affiliate Trusts

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(6.8)	(22.2)

Interest expense to affiliate trusts for the first quarter 2007 was $23.8 million compared to $30.6 million for the corresponding period in 2006. The decrease was a result of the redemption of long-term debt payable to affiliated trusts in January and December 2006.

Other Income (Expense), Net

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$5.5	65.2

In the first quarter 2007, other income (expense), net was $(2.9) million compared to $(8.4) million for the same period in 2006 primarily as a result of Alabama Power’s recognition of $5.0 million associated with the consent decree entered in the NSR litigation in 2006. See Note 3 to the financial statements of Southern Company under “Environmental Matters – New Source Review Actions” in Item 8 of the Form 10-K and Note (B) to the

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

Condensed Financial Statements under “NEW SOURCE REVIEW LITIGATION” herein for further information.

Income Taxes

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$47.6	44.1

Income taxes for the first quarter 2007 were $155.6 million compared to $108.0 million for the corresponding period in 2006. The increase was due to higher pre-tax earnings and a $23.1 million decrease in synthetic fuel tax credits as a result of terminating the membership interest in one of the synthetic fuel entities in 2006. The increase in income tax expense was partially offset by a $17.3 million reduction to tax credit reserves in the first quarter of 2007 compared to the first quarter 2006 as a result of reduced credits and a lower projected phase-out. See FUTURE EARNINGS POTENTIAL – “Income Tax Matters – Synthetic Fuel Tax Credits” and Note (B) to the Condensed Financial Statements under “INCOME TAX MATTERS – Synthetic Fuel Tax Credits” herein for further information.

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Southern Company’s future earnings potential. The level of Southern Company’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Southern Company’s primary business of selling electricity. These factors include the traditional operating companies’ ability to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. 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. 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 the service area. For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL of Southern Company in Item 7 of the Form 10-K.

Environmental Matters

Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs cannot be fully recovered in rates on a timely basis. See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL – “Environmental Matters” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Environmental Matters” in Item 8 of the Form 10-K for additional information.

New Source Review Litigation

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters – New Source Review Actions” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Environmental Matters – New Source Review Actions” in Item 8 of the Form 10-K for additional information regarding a civil action brought by the EPA alleging that Alabama Power had violated the NSR provisions of the Clean Air Act and related state laws with respect to certain of its coal-fired generating facilities. The plaintiffs’ appeal against Alabama Power was stayed by the U.S. Court of Appeals for the Eleventh Circuit pending the U.S. Supreme Court’s decision in a similar case

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

against Duke Energy. On April 2, 2007, the U.S. Supreme Court issued an opinion in the Duke Energy case. On April 11, 2007, Alabama Power filed a motion to lift the stay and to reset the briefing schedule. The plaintiffs have opposed the motion and have moved to vacate the district court’s decision and remand for further proceedings consistent with the Duke Energy decision. The final resolution of these claims is dependent on these appeals and possible further court action and, therefore, cannot be determined at this time.

Fine Particulate Matter Regulations

See MANAGEMENT’S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL – “Environmental Matters – Environmental Statutes and Regulations – Air Quality” of Southern Company in Item 7 of the Form 10-K for additional information regarding nonattainment designations for the fine particulate matter air quality standard. In March 2007, the EPA finalized its fine particulate matter implementation rule, requiring submittal of state plans for addressing the nonattainment designations by April 2008. The ultimate outcome of this matter cannot be determined at this time.

Plant Wansley Environmental Litigation

See MANAGEMENT’S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL – “Environmental Matters – Plant Wansley Environmental Litigation” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Environmental Matters — Plant Wansley Environmental Litigation” in Item 8 of the Form 10-K for additional information on litigation involving alleged violations of the Clean Air Act at four of the units at Plant Wansley. On March 30, 2007, the parties filed a joint motion seeking entry of a proposed consent decree resolving all remaining issues in the case. If the consent decree is approved as proposed, the resolution of this case will not have a material impact on Southern Company’s financial statements.

FERC and State PSC Matters

Intercompany Interchange Contract

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “FERC Matters – Intercompany Interchange Contract” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “FERC Matters – Intercompany Interchange Contract” in Item 8 of the Form 10-K for information regarding the proceeding initiated by the FERC in May 2005 to examine (1) the provisions of the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the Power Pool is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable.

On April 19, 2007, the FERC approved, with certain modifications, the compliance filing submitted by Southern Company on November 6, 2006. The compliance plan largely involves functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. The implementation of the plan is not expected to have a material impact on Southern Company’s financial statements. However, the ultimate outcome of this matter cannot now be determined.

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

Retail Fuel Cost Recovery

The traditional operating companies each have established fuel cost recovery rates approved by their respective state PSCs. Over the past several years, the traditional operating companies have experienced higher than expected fuel costs for coal, natural gas, and uranium. These higher fuel costs have resulted in under recovered fuel costs included in the balance sheets of approximately $1.3 billion at March 31, 2007. Operating revenues are adjusted for differences in actual recoverable fuel costs and amounts billed in current regulated rates. Accordingly, changes to the billing factors will have no significant effect on Southern Company’s revenues or net income but will affect cash flow. The traditional operating companies will continue to monitor the under recovered fuel cost balance in light of these higher fuel costs. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “PSC Matters - Fuel Cost Recovery” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Alabama Power Retail Regulatory Matters” and “Georgia Power Retail Regulatory Matters” in Item 8 of the Form 10-K for additional information.

Mirant Matters

Mirant was an energy company with businesses that included independent power projects and energy trading and risk management companies in the U.S. and selected other countries. It was a wholly-owned subsidiary of Southern Company until its initial public offering in October 2000. In April 2001, Southern Company completed a spin-off to its shareholders of its remaining ownership, and Mirant became an independent corporate entity. In July 2003, Mirant filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. See Note 3 to the financial statements of Southern Company under “Mirant Matters – Mirant Bankruptcy” in Item 8 of the Form 10-K for information regarding Southern Company’s 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.

Mirant Securities Litigation

See Note 3 to the financial statements of Southern Company under “Mirant Matters – Mirant Securities Litigation” in Item 8 of the Form 10-K for information regarding a class action lawsuit that several Mirant shareholders (plaintiffs) originally filed against Mirant and certain Mirant officers in May 2002. In November 2002, Southern Company, certain former and current senior officers of Southern Company, and 12 underwriters of Mirant’s initial public offering were added as defendants. On March 24, 2006, the plaintiffs filed a motion for reconsideration requesting that the court vacate that portion of its July 14, 2003 order dismissing the plaintiffs’ claims based upon Mirant’s alleged improper energy trading and marketing activities involving the California energy market. On March 6, 2007, the court granted plaintiffs’ motion for reconsideration, reinstated the California energy market claims, and granted in part and denied in part defendants’ motion to compel certain class certification discovery. On March 21, 2007, defendants filed renewed motions to dismiss the California energy claims on grounds originally set forth in their 2003 motions to dismiss, but which were not addressed by the court. The ultimate outcome of this matter cannot be determined at this time.

MC Asset Recovery Litigation

See Note 3 to the financial statements of Southern Company under “Mirant Matters – MC Asset Recovery Litigation” in Item 8 of the Form 10-K for information regarding a suit between MC Asset Recovery, a special purpose subsidiary of Reorganized Mirant, and Southern Company. On March 28, 2007, MC Asset Recovery filed a Fourth Amended Complaint. Among other things, the Fourth Amended Complaint adds a claim under the Federal Debt Collection Procedure Act (FDCPA) to avoid certain transfers from Mirant to Southern Company and withdraws the breach of fiduciary duty claim the court struck as a result of Southern Company’s

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

motion for summary judgment. MC Asset Recovery claims to have standing to assert violations of the FDCPA and to recover property on behalf of the Mirant debtors’ estates. The ultimate outcome of this matter cannot be determined at this time.

Income Tax Matters

Leveraged Lease Transactions

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Income Tax Matters – Leveraged Lease Transactions” of Southern Company in Item 7 and Note 3 to the financial statements of Southern Company under “Income Tax Matters” in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under “INCOME TAX MATTERS – Leveraged Lease Transactions” herein for information regarding IRS challenges to Southern Company’s transactions related to international leveraged leases that could have material impacts on Southern Company’s financial statements. Effective January 1, 2007, Southern Company adopted FSP 13-2, which amends FASB Statement No. 13, “Accounting for Leases” requiring recalculation of the rate of return and the allocation of income whenever the projected timing of the income tax cash flows generated by a leveraged lease is revised with recognition of the resulting gain or loss in the year of the revision. FSP 13-2 also requires that all recognized tax positions in a leveraged lease must be measured in accordance with the criteria in FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” and any changes resulting from FIN 48 must be reflected as a change in important lease assumptions as of the date of adoption. The cumulative effect of initially adopting FSP 13-2 was recorded as an adjustment to beginning retained earnings. For the lease-in-lease-out (LILO) transaction settled with the IRS in February 2005, the cumulative effect of adopting FSP 13-2 was a $17 million reduction in retained earnings. With respect to Southern Company’s sale-in-lease-out (SILO) transactions, the adoption of FSP 13-2 reduced retained earnings by $108 million. The adoption of FSP 13-2 also resulted in a reduction to net income in the first quarter 2007 of approximately $4 million. The adjustments to retained earnings are non-cash charges and will be recognized as income over the remaining terms of the affected leases. Any future changes in the projected or actual income tax cash flows will result in an additional recalculation of the net investment in the leases and will be recorded currently in income. The ultimate impact on Southern Company’s net income will be dependent on the outcome of pending litigation, but could be significant, and potentially material. Southern Company believes these transactions are valid leases for U.S. tax purposes and the related deductions are allowable. Southern Company is continuing to pursue resolution of these matters through administrative appeals and litigation; however, the ultimate outcome of these matters cannot now be determined.

Synthetic Fuel Tax Credits

As discussed in MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Income Tax Matters – Synthetic Fuel Tax Credits” of Southern Company in Item 7 of the Form 10-K, Southern Company has an investment in an entity that produces synthetic fuel and receives tax credits under Section 45K (formerly Section 29) of the IRC. In accordance with Section 45K of the IRC, these tax credits are subject to limitation as the annual average price of oil (as determined by the DOE) increases over a specified, inflation-adjusted dollar amount published in the spring of the subsequent year. Southern Company, along with its partners in this investment, has continued to monitor oil prices. Reserves against tax credits earned in 2007 of $2.8 million have been recorded in the first three months of 2007 due to projected phase-outs of the credits in 2007 as a result of current and projected future oil prices.

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

Construction Projects

Integrated Gasification Combined Cycle (IGCC) Project

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Construction Projects – Integrated Gasification Combined Cycle” of Southern Company in Item 7 of the Form 10-K for information regarding the development by Southern Power and the Orlando Utilities Commission (OUC) of an IGCC project in Orlando, Florida at OUC’s Stanton Energy site. Since the definitive agreements relating to the development of the project were executed in December 2005, the estimated costs of the gasifier portion have increased due primarily to increases in commodity costs and increased market demand for labor. Southern Power had the option under the original agreements to end its participation in the gasifier portion of the project at the end of the project definition phase, which has been completed. On March 29, 2007, Southern Power’s Board of Directors approved the continuation and the completion of the design, engineering, and construction of the gasifier portion of the project. This approval is contingent on the approval of a request for additional funding from the DOE of $58.75 million and OUC’s approval of amended agreements to share the remaining cost increases between Southern Power and OUC. Southern Power and OUC will share 65% and 35% of the estimated cost increase, respectively, under the proposed amended agreements. In April 2007, OUC approved its portion of the cost increase, subject to the DOE’s approval of the additional funding. The ultimate outcome of this matter cannot now be determined.

Nuclear

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Construction Projects – Nuclear” of Southern Company in Item 7 of the Form 10-K for information regarding a development agreement between Southern Nuclear and Duke Energy to evaluate the potential construction of a new two-unit nuclear plant at a jointly owned site in Cherokee County, South Carolina. In March 2007, the Southern Nuclear Board of Directors voted to withdraw from any further development of this project. A notice of withdrawal from the project has been provided to Duke Energy. Adjustments to the carrying value of the related assets were recorded in the first quarter 2007 and were not material to the financial statements. If Duke Energy chooses to continue the project independently, no additional adjustments are anticipated. Management does not expect the final outcome of this matter to have a material adverse effect on Southern Company’s financial statements. However, the ultimate outcome of this matter cannot now be determined.

Other Matters

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 such as opacity and other air quality standards, 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 pending or potential litigation against Southern Company and its subsidiaries cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Southern Company in Item 8 of the Form 10-K, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Southern Company’s financial statements.

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

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

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

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

New Accounting Standards

Income Taxes

On January 1, 2007, Southern Company adopted FIN 48, which requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The provisions of FIN 48 were applied to all tax positions beginning January 1, 2007. The impact on Southern Company’s financial statements was a reduction to beginning 2007 retained earnings of approximately $15 million related to Southern Company’s SILO transactions. See Note (I) to the Condensed Financial Statements herein for details regarding the financial statement impact of the adoption.

Leveraged Leases

Effective January 1, 2007, Southern Company adopted FSP 13-2. The cumulative effect of initially adopting FSP 13-2 was recorded as an adjustment to beginning retained earnings. For the LILO transaction settled with the IRS in February 2005, the cumulative effect of adopting FSP 13-2 was a $17 million reduction in retained earnings. With respect to Southern Company’s SILO transactions, the adoption of FSP 13-2 reduced retained earnings by $108 million. The adoption of FSP 13-2 also resulted in a reduction to net income in the first quarter 2007 of approximately $4 million. The adjustments to retained earnings are non-cash charges and will be recognized as income over the remaining terms of the affected leases. Any future changes in the projected or actual income tax cash flows will result in an additional recalculation of the net investment in the leases and will be recorded currently in income. See FUTURE EARNINGS POTENTIAL — “Income Tax Matters – Leveraged Lease Transactions” and Note (B) to the Condensed Financial Statements under “INCOME TAX MATTERS – Leveraged Lease Transactions” herein for further details about the effect of FSP 13-2.

Fair Value Measurement

The FASB issued FASB Statement No. 157 (SFAS No. 157), “Fair Value Measurements” in September 2006. This standard provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. Southern Company plans to adopt SFAS No. 157 on January 1, 2008 and is currently assessing the impact of this standard.

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

Fair Value Option

In February 2007, the FASB issued FASB Statement No. 159 (SFAS No. 159), “Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115.” This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Southern Company plans to adopt SFAS No. 159 on January 1, 2008 and is currently assessing its impact.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Southern Company’s financial condition remained stable at March 31, 2007. Net cash provided from operating activities totaled $262 million for the first three months of 2007, compared to $58 million for the corresponding period in 2006. The $204 million increase is primarily due to the increase in net income as previously discussed and a reduction in the outflow of cash for accounts payable, primarily related to gas purchases. Gross property additions to utility plant were $770 million in the first three months of 2007.

Significant balance sheet changes for the first three months of the year include an $857 million increase in long-term debt, which was used primarily for the repayment of short-term debt, construction expenditures, and general corporate purposes. Total property, plant, and equipment, net of depreciation, increased $431 million during the first three months of 2007 primarily from the purchase and installation of environmental equipment and transmission and distribution construction.

The market price of Southern Company’s common stock at March 31, 2007 was $36.65 per share (based on the closing price as reported on the New York Stock Exchange) and the book value was $15.27 per share, representing a market-to-book ratio of 240%, compared to $36.86, $15.24, and 242%, respectively, at the end of 2006. The dividend for the first quarter 2007 was $0.3875 per share compared to $0.3725 per share in the first quarter 2006. In April 2007, the dividend was increased to $0.4025 for the dividend payable in June 2007.

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 and preference stock dividends, leases, trust funding requirements, and other purchase commitments. Approximately $1.5 billion will be required by March 31, 2008 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. Equity capital can be provided from any combination of Southern Company’s stock plans, private placements, or public offerings. The amount and timing of additional equity capital to be raised will be contingent on Southern Company’s investment opportunities. Southern Company does not currently anticipate any equity offerings in 2007 outside of its existing stock option plan, the employee savings plan, and the Southern Investment Plan. The traditional 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, term loans, short-term borrowings, and equity contributions from Southern Company. However, the amount, type, and timing of any financings, if needed, will depend upon

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

prevailing market conditions, regulatory approval, and other factors. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Sources of Capital” of Southern Company in Item 7 of the Form 10-K for additional information.

Southern Company’s current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet cash needs as well as scheduled maturities of long-term debt. To meet short-term cash needs and contingencies, Southern Company has substantial cash flow from operating activities and access to capital markets, including commercial paper programs. At March 31, 2007, Southern Company and its subsidiaries had approximately $161.5 million of cash and cash equivalents and approximately $3.3 billion of unused credit arrangements with banks, of which $656 million expire in 2007 and $2.7 billion expire in 2008 and beyond. Of the facilities expiring in 2008 and beyond, $2.4 billion does not expire until 2011. Approximately $79 million of the credit facilities expiring in 2007 allow for the execution of term loans for an additional two-year period, and $343 million contain provisions allowing one-year term loans. See Note 6 to the financial statements of Southern Company under “Bank Credit Arrangements” in Item 8 of the Form 10-K for additional information. The traditional operating companies may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of each of the traditional operating companies. At March 31, 2007, the Southern Company system had outstanding commercial paper of $1.4 billion, bank notes of $150 million, and extendible commercial notes of $44.8 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 does not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change to BBB and Baa2, or BBB- or Baa3 or below. These contracts are primarily for physical electricity purchases and sales. At March 31, 2007, the maximum potential collateral requirements at a BBB and Baa2 rating were approximately $9 million and at a BBB- or Baa3 rating were approximately $246 million. The maximum potential collateral requirements at a rating below BBB- or Baa3 were approximately $658 million. Subsequent to March 31, 2007, certain Southern Company subsidiaries entered into certain contracts for electric capacity and energy. These contracts also contain provisions that could require collateral, but not accelerated payment, in the event of a change in credit rating. Under these contracts, the maximum potential collateral requirement at a rating of BBB- is $33 million. The maximum potential collateral requirement at rating below BBB- is $201 million. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Southern Company’s operating subsidiaries are also party to certain derivative agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for Alabama Power and/or Georgia Power. These agreements are primarily for natural gas and power price risk management activities. At March 31, 2007, Southern Company’s total exposure to these types of agreements was not material.

24

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

Market Price Risk

Southern Company’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2006 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 traditional operating companies have limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. In addition, Southern Power’s exposure to market volatility in commodity fuel prices and prices of electricity is limited because its long-term sales contracts shift substantially all fuel cost responsibility to the purchaser. To mitigate residual risks relative to movements in electricity prices, the traditional operating companies and Southern Power enter into physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, into financial hedge contracts for natural gas purchases. The traditional operating companies have implemented fuel-hedging programs at the instruction of their respective state PSCs.

The fair value of derivative energy contracts at March 31, 2007 was as follows:

	First Quarter
	2007
	Changes
	Fair Value
	(in millions)
Contracts beginning of period	$	(82	)
Contracts realized or settled		28
New contracts at inception		—
Changes in valuation techniques		—
Current period changes (a)		65
Contracts at March 31, 2007	$	11

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

	Source of March 31, 2007
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1			1-3 Years
	(in millions)
Actively quoted	$	11	$	(1	)	$	12
External sources		—		—			—
Models and other methods		—		—			—
Contracts at March 31, 2007	$	11	$	(1	)	$	12

Unrealized gains and losses from mark-to-market adjustments on derivative contracts related to the traditional operating companies’ fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through the traditional operating companies’ fuel cost recovery clauses. In addition, unrealized gains and losses on energy-related derivatives used by Southern Power to hedge anticipated purchases and sales are deferred in other comprehensive income. Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of

25

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

income as incurred. At March 31, 2007, the fair value gain/(loss) of derivative energy contracts was reflected in the financial statements as follows:

	Amounts
	(in millions)
Regulatory liabilities, net	$	11.0
Accumulated other comprehensive income		(0.2	)
Net income		0.1
Total fair value	$	10.9

Unrealized pre-tax gains and losses recognized in income were not material for any period presented.

To reduce Southern Company’s exposure to changes in the value of synthetic fuel tax credits, which are impacted by changes in oil prices, Southern Company has entered into derivative transactions indexed to oil prices. Because these transactions are not designated as hedges, the gains and losses are recognized in the statements of income as incurred. In the first quarter of 2007, the fair value gains recognized in income to mark the transactions to market were $6.4 million.

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 three months of 2007, Southern Company and its subsidiaries issued $1.4 billion of senior notes and issued $168 million of common stock, including treasury stock, through employee and director stock plans. Subsequent to March 31, 2007, Alabama Power issued $250 million of additional senior notes. The proceeds were primarily used to repay short-term indebtedness and to fund ongoing construction projects. See Southern Company’s Condensed Consolidated Statements of Cash Flows herein for further details on financing activities during the first three months of 2007. Southern Company and its subsidiaries also terminated interest rate derivatives related to these transactions at a cost of $3.9 million. These losses were deferred in other comprehensive income and will be amortized to income over a 10-year period. Also during the first three months of 2007, Southern Company and its subsidiaries redeemed $405.2 million in senior notes and other long-term debt. Subsequent to March 31, 2007, an additional $36.1 million in long-term debt was redeemed by Mississippi Power and $169 million of Alabama Power floating rate notes matured. Also subsequent to March 31, 2007, Georgia Power announced the planned redemption in June 2007 of $454 million of notes payable related to trust preferred securities.

During the first three months of 2007, Southern Company and its subsidiaries entered into additional derivative transactions designed to hedge interest rate risk of future debt issuances. The total notional amount of these derivatives was $740 million. Subsequent to March 31, 2007, Georgia Power entered into further derivative transactions designed to mitigate interest rate risk related to planned future debt issuances. The total notional amount of these derivatives was $300 million. See Note (F) to the Condensed Financial Statements herein for further details.

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

26

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, Notes 1 and 6 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Southern Power 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, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, 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 design and operation 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 these 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 information relating to their company (including its consolidated subsidiaries, if any) required to be included in periodic filings with the SEC.

     (b)    Changes in internal controls.

     There have been no changes in Southern Company’s, Alabama Power’s, Georgia Power’s, Gulf Power’s, Mississippi Power’s, 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 first quarter of 2007 that have materially affected or are reasonably likely to materially affect Southern Company’s, Alabama Power’s, Georgia Power’s, Gulf Power’s, Mississippi Power’s, or Southern Power’s internal control over financial reporting.

27

ALABAMA POWER COMPANY

28

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Revenues:
Retail revenues	$	955,773		$	802,209
Wholesale revenues
Non-affiliates		155,122			146,354
Affiliates		42,194			79,315
Other revenues		44,113			44,829
Total operating revenues		1,197,202			1,072,707
Operating Expenses:
Fuel		386,072			341,767
Purchased power —
Non-affiliates		4,638			22,086
Affiliates		72,714			56,665
Other operations		171,403			169,013
Maintenance		118,762			109,500
Depreciation and amortization		115,943			109,862
Taxes other than income taxes		72,718			65,657
Total operating expenses		942,250			874,550
Operating Income		254,952			198,157
Other Income and (Expense):
Allowance for equity funds used during construction		6,586			5,529
Interest income		4,394			4,174
Interest expense, net of amounts capitalized		(63,131	)		(53,219	)
Interest expense to affiliate trusts		(4,059	)		(4,059	)
Other income (expense), net		(2,924	)		(9,005	)
Total other income and (expense)		(59,134	)		(56,580	)
Earnings Before Income Taxes		195,818			141,577
Income taxes		72,702			53,363
Net Income		123,116			88,214
Dividends on Preferred and Preference Stock		8,182			6,072
Net Income After Dividends on Preferred and Preference Stock	$	114,934		$	82,142

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Net Income After Dividends on Preferred and Preference Stock	$	114,934		$	82,142
Other comprehensive income (loss):
Changes in fair value of qualifying hedges, net of tax of $(102) and $1,473, respectively		(168	)		2,423
Reclassification adjustment for amounts included in net income, net of tax of $59 and $(1,006), respectively		96			(1,654	)
COMPREHENSIVE INCOME	$	114,862		$	82,911

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

29

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Activities:
Net income	$	123,116		$	88,214
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		136,060			129,238
Deferred income taxes and investment tax credits, net		(889	)		(43,904	)
Deferred revenues		(2,276	)		(559	)
Allowance for equity funds used during construction		(6,586	)		(5,529	)
Pension, postretirement, and other employee benefits		(2,439	)		(292	)
Stock option expense		3,713			3,583
Tax benefit of stock options		286			111
Hedge settlements		—			18,006
Other, net		6,055			1,271
Changes in certain current assets and liabilities —
Receivables		43,143			111,212
Fossil fuel stock		(21,732	)		(32,192	)
Materials and supplies		(2,288	)		7,161
Other current assets		(45,381	)		(21,978	)
Accounts payable		(94,769	)		(152,217	)
Accrued taxes		93,770			103,107
Accrued compensation		(61,830	)		(66,139	)
Other current liabilities		7,811			25,325
Net cash provided from operating activities		175,764			164,418
Investing Activities:
Property additions		(263,712	)		(228,402	)
Nuclear decommissioning trust fund purchases		(73,062	)		(72,384	)
Nuclear decommissioning trust fund sales		73,062			72,384
Cost of removal, net of salvage		(10,012	)		(11,839	)
Other		(1,863	)		(5,292	)
Net cash used for investing activities		(275,587	)		(245,533	)
Financing Activities:
Decrease in notes payable, net		(44,875	)		(315,278	)
Proceeds —
Common stock issued to parent		70,000			—
Senior notes		200,000			800,000
Gross excess tax benefit of stock options		741			217
Redemptions —
Senior notes		—			(170,000	)
Payment of preferred and preference stock dividends		(6,515	)		(6,070	)
Payment of common stock dividends		(116,250	)		(110,150	)
Other		(2,469	)		(16,505	)
Net cash provided from financing activities		100,632			182,214
Net Change in Cash and Cash Equivalents		809			101,099
Cash and Cash Equivalents at Beginning of Period		15,539			22,472
Cash and Cash Equivalents at End of Period	$	16,348		$	123,571
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $3,346 and $2,423 capitalized for 2007 and 2006, respectively)	$	52,607		$	35,993
Income taxes (net of refunds)	$	(3,250	)	$	(10,989	)

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 March 31,			At December 31,
Assets	2007			2006
	(in thousands)
Current Assets:
Cash and cash equivalents	$	16,348		$	15,539
Receivables —
Customer accounts receivable		307,878			323,202
Unbilled revenues		88,890			90,596
Under recovered regulatory clause revenues		17,583			32,451
Other accounts and notes receivable		44,066			49,708
Affiliated companies		55,461			70,836
Accumulated provision for uncollectible accounts		(9,416	)		(7,091	)
Fossil fuel stock, at average cost		173,051			153,120
Materials and supplies, at average cost		257,739			255,664
Vacation pay		46,415			46,465
Prepaid expenses		112,924			76,265
Other		31,387			66,663
Total current assets		1,142,326			1,173,418
Property, Plant, and Equipment:
In service		16,167,366			15,997,793
Less accumulated provision for depreciation		5,719,366			5,636,475
		10,448,000			10,361,318
Nuclear fuel, at amortized cost		139,202			137,300
Construction work in progress		623,625			562,119
Total property, plant, and equipment		11,210,827			11,060,737
Other Property and Investments:
Equity investments in unconsolidated subsidiaries		48,589			47,486
Nuclear decommissioning trusts, at fair value		525,117			513,521
Other		35,647			35,980
Total other property and investments		609,353			596,987
Deferred Charges and Other Assets:
Deferred charges related to income taxes		373,025			354,225
Prepaid pension costs		731,311			722,287
Deferred under recovered regulatory clause revenues		311,686			301,048
Other regulatory assets		271,155			279,661
Other		157,745			166,927
Total deferred charges and other assets		1,844,922			1,824,148
Total Assets	$	14,807,428		$	14,655,290

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

31

ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At March 31,			At December 31,
Liabilities and Stockholder’s Equity	2007			2006
	(in thousands)
Current Liabilities:
Securities due within one year	$	668,648		$	668,646
Notes payable		74,794			119,670
Accounts payable —
Affiliated		129,618			162,951
Other		202,208			263,506
Customer deposits		62,735			62,978
Accrued taxes —
Income taxes		49,592			3,120
Other		49,795			29,696
Accrued interest		61,421			53,573
Accrued vacation pay		38,645			38,767
Accrued compensation		25,364			87,194
Other		56,581			79,907
Total current liabilities		1,419,401			1,570,008
Long-term Debt		4,038,399			3,838,906
Long-term Debt Payable to Affiliated Trusts		309,279			309,279
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		2,137,888			2,116,575
Deferred credits related to income taxes		97,999			98,941
Accumulated deferred investment tax credits		186,581			188,582
Employee benefit obligations		379,409			375,940
Asset retirement obligations		483,660			476,460
Other cost of removal obligations		601,049			600,278
Other regulatory liabilities		405,268			399,822
Other		30,742			35,805
Total deferred credits and other liabilities		4,322,596			4,292,403
Total Liabilities		10,089,675			10,010,596
Preferred and Preference Stock		612,271			612,407
Common Stockholder’s Equity:
Common stock, par value $40 per share —
Authorized — 25,000,000 shares
Outstanding — March 31, 2007: 14,000,000 shares
— December 31, 2006: 12,250,000 shares		560,000			490,000
Paid-in capital		2,033,544			2,028,963
Retained earnings		1,514,931			1,516,245
Accumulated other comprehensive loss		(2,993	)		(2,921	)
Total common stockholder’s equity		4,105,482			4,032,287
Total Liabilities and Stockholder’s Equity	$	14,807,428		$	14,655,290

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

32

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

FIRST QUARTER 2007 vs. FIRST QUARTER 2006

OVERVIEW

Alabama Power operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Alabama and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of Alabama Power’s primary business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, fuel prices, and restoration following major storms.

Alabama Power continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income. For additional information on these indicators, see MANAGEMENT’S DISCUSSION AND ANALYSIS – OVERVIEW – “Key Performance Indicators” of Alabama Power in Item 7 of the Form 10-K.

RESULTS OF OPERATIONS

Net Income

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$32.8	39.9

Alabama Power’s net income after dividends on preferred and preference stock for the first quarter 2007 was $114.9 million compared to $82.1 million for the corresponding period of 2006. The increase in earnings was primarily due to retail base rate increases resulting from an increase in rates under Rate RSE and Rate CNP for environmental costs (Rate CNP Environmental) that took effect January 1, 2007, as well as favorable weather conditions during the first quarter of 2007. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “PSC Matters – Retail Rate Adjustments” of Alabama Power in Item 7 and Note 3 to the financial statements of Alabama Power under “Retail Regulatory Matters” in Item 8 of the Form 10-K for additional information on Alabama Power’s rates. These increases in revenues were partially offset by increases in maintenance expense related to scheduled work performed on overhead lines and scheduled plant outages, depreciation and amortization expense as a result of additional plant-in-service, and interest expense due to higher interest rates associated with the issuance of new long-term debt that replaced debt which matured in 2006.

Retail Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$153.6	19.1

In the first quarter 2007, retail revenues were $955.8 million compared to $802.2 million in same period in 2006.

33

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

Details of retail revenues are as follows:

	First Quarter
	2007
	(in millions)		% change
Retail – prior year	$	802.2
Change in —
Rates and pricing		54.0		6.7
Sales growth		5.0		0.6
Weather		14.1		1.8
Fuel and other cost recovery		80.5		10.0
Retail – current year	$	955.8		19.1	%

Revenues associated with changes in rates and pricing increased in the first quarter of 2007 when compared to the same period in 2006 primarily due to the Rate RSE and Rate CNP Environmental rate increases effective in January 2007. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “PSC Matters – Retail Rate Adjustments” of Alabama Power in Item 7 and Note 3 to the financial statements of Alabama Power under “Retail Regulatory Matters” in Item 8 of the Form 10-K.

Revenues attributable to changes in sales growth increased in the first quarter of 2007 when compared to the same period in 2006 due to a 0.6% overall increase in retail KWH energy sales, resulting primarily from continued residential and commercial customer and demand growth. The number of retail customers increased by 1.0% as of March 2007 compared to March 2006. This increase was offset by a decrease in KWH energy sales to industrial customers of 3.1% for the first quarter 2007 primarily as a result of decreased sales demand in the primary metals, chemicals, and forest products sectors.

Revenues resulting from changes in weather increased due to normal weather conditions in the first quarter of 2007 compared to mild weather in the first quarter of 2006 which resulted in increased KWH energy sales to residential and commercial customers of 3.5% and 1.2%, respectively.

Fuel and other cost recovery revenues increased in the first quarter of 2007 when compared to the same period in 2006. Electric rates for Alabama Power include provisions to recognize the full recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the replenishment of Alabama Power’s natural disaster reserve. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income.

Wholesale Revenues – Non-Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$8.8	6.0

Wholesale energy sales to non-affiliates will vary depending on the market cost of available energy compared to the cost of Alabama Power and Southern Company system owned generation, demand for energy within the Southern Company service territory, and availability of Southern Company system generation. In the first quarter 2007, revenues from wholesale energy sales to non-affiliates were $155.1 million compared to $146.3 million in the same period in 2006. This increase was primarily due to a 12.5% increase in KWH sales to non-affiliates partially offset by a 5.8% decrease in price.

34

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

Wholesale Revenues – Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(37.1)	(46.8)

Wholesale energy sales to affiliated companies within the Southern Company system vary from period to period depending on demand and the availability and cost of generating resources at each company. These sales are made in accordance with the IIC, as approved by the FERC. In the first quarter 2007, revenues from wholesale energy sales to affiliates were $42.2 million compared to $79.3 million in the same period in 2006. This decrease was primarily due to a 30.7% decrease in KWH sales to affiliates as well as a 23.2% decrease in price. These transactions do not have a significant impact on earnings since the energy is generally sold at marginal cost.

Fuel and Purchased Power Expenses

First Quarter 2007 vs. First Quarter 2006
	(change in millions)			% change
Fuel	$	44.3			13.0
Purchased power-non-affiliates		(17.4	)		(79.0	)
Purchased power-affiliates		16.0			28.3
Total fuel and purchased power expenses	$	42.9

In the first quarter 2007, total fuel and purchased power expenses were $463.4 million compared to $420.5 million in the same period in 2006. The increase was due to a $48.4 million increase related to greater KWHs generated and purchased offset by a $5.5 million decrease in the cost of energy resulting from a decrease in the average cost of purchased power. Details of the individual components follow:

	First Quarter		First Quarter
Average Cost	2007		2006		% change
	(cents per net KWH)
Fuel		2.29		2.21		3.6
Purchased power		4.55		5.46		(16.7	)

In the first quarter 2007, fuel expense was $386.1 million compared to $341.8 million in the same period in 2006. This increase was due to a 4.9% increase in overall generation from Alabama Power-owned facilities and a 2.5% increase in the average cost of coal partially offset by a 12.3% decrease in natural gas prices. These transactions did not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Alabama Power’s energy cost recovery clause.

Energy purchases from non-affiliates will vary depending on market cost of available energy being lower than Southern Company system-generated energy, demand for energy within the system service territory, and availability of Southern Company system generation. In the first quarter 2007, purchased power from non-affiliates was $4.6 million compared to $22.0 million in the same period in 2006. This decrease was primarily due to a 52.1% decrease in the amount of energy purchased and a 51.9% decrease in price. 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.

35

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

Energy purchases from affiliates will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC, as approved by the FERC. In the first quarter 2007, purchased power from affiliates was $72.7 million compared to $56.7 million in the same period in 2006. This increase was due to a 90.3% increase in the amount of energy purchased partially offset by a 20.6% decrease in price. 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.

Maintenance Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$9.3	8.5

In the first quarter 2007, maintenance expense was $118.8 million compared to $109.5 million in the same period in 2006. This increase was primarily due to a $4.3 million increase in distribution expense primarily related to scheduled work performed on overhead lines and a $3.3 million increase in steam power expense associated with scheduled outage maintenance cost at various coal-fired facilities.

Depreciation and Amortization

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$6.1	5.5

For the first quarter 2007, depreciation and amortization was $115.9 million compared to $109.8 million in the same period in 2006. This increase was due to an increase in property, plant, and equipment related to steam power and distribution capital projects when compared to the same period in 2006.

Taxes Other than Income Taxes

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$7.1	10.8

For the first quarter 2007, taxes other than income taxes were $72.7 million compared to $65.6 million in the same period in 2006. This increase was primarily due to increases in state and municipal public utility license taxes which are directly related to retail revenues.

Interest Expense, Net of Amounts Capitalized

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$9.9	18.6

For the first quarter 2007, interest expense, net of amounts capitalized was $63.1 million compared to $53.2 million in the same period in 2006. This increase was mainly due to higher interest rates associated with the issuance of new long-term debt that replaced debt which matured in 2006. For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY –

36

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

“Financing Activities” of Alabama Power in Item 7 of the Form 10-K and FINANCIAL CONDITION AND LIQUIDITY – “Financing Activities” herein.

Other Income (Expense), Net

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$6.1	67.5

Other income (expense), net in the first quarter 2007 was $(2.9) million compared to $(9.0) million in the same period in 2006. This increase in other income was mainly due to the recording of the $5.0 million settlement with the EPA in the NSR litigation in the first quarter of 2006. See FUTURE EARNINGS POTENTIAL – “Environmental Matters – New Source Review Litigation” and Note (B) to the Condensed Financial Statements under NEW SOURCE REVIEW LITIGATION herein for additional information.

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Alabama Power’s future earnings potential. The level of Alabama Power’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Alabama Power’s primary business of selling electricity. These factors include Alabama Power’s ability to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. Future earnings in the near term will depend, in part, upon growth in energy sales, which 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 RISK FACTORS in Item 1A and MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL of Alabama Power 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 fully recovered in rates on a timely basis. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters” of Alabama Power in Item 7 and Note 3 to the financial statements of Alabama Power under “Environmental Matters” in Item 8 of the Form 10-K for additional information.

New Source Review Litigation

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters – New Source Review Actions” of Alabama Power in Item 7 and Note 3 to the financial statements of Alabama Power under “Environmental Matters – New Source Review Actions” in Item 8 of the Form 10-K for additional information regarding a civil action brought by the EPA alleging that Alabama Power had violated the NSR provisions of the Clean Air Act and related state laws with respect to certain of its coal-fired generating facilities. The plaintiffs’ appeal against Alabama Power was stayed by the U.S. Court of Appeals for the Eleventh Circuit pending the U.S. Supreme Court’s decision in a similar case against Duke Energy. On April 2, 2007, the U.S. Supreme Court issued an opinion in the Duke Energy case. On April 11, 2007, Alabama Power filed a motion to lift the stay and to reset the briefing schedule. The plaintiffs have opposed the motion and have moved to vacate the district court’s decision and remand for further proceedings

37

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

consistent with the Duke Energy decision. The final resolution of these claims is dependent on these appeals and possible further court action and, therefore, cannot be determined at this time.

Fine Particulate Matter Regulations

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL – “Environmental Matters - Environmental Statutes and Regulations — Air Quality” of Alabama Power in Item 7 of the Form 10-K for additional information regarding nonattainment designations for the fine particulate matter air quality standard. In March 2007, the EPA finalized its fine particulate matter implementation rule, requiring submittal of state plans for addressing the nonattainment designations by April 2008. The ultimate outcome of this matter cannot be determined at this time.

FERC and Alabama PSC Matters

Intercompany Interchange Contract

See MANAGEMENT’S DISCUSSION AND ANALYSIS– FUTURE EARNINGS POTENTIAL – “FERC Matters – Intercompany Interchange Contract” of Alabama Power in Item 7 and Note 3 to the financial statements of Alabama Power under “FERC Matters – Intercompany Interchange Contract” in Item 8 of the Form 10-K for information regarding the proceeding initiated by the FERC in May 2005 to examine (1) the provisions of the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the Power Pool is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable.

On April 19, 2007, the FERC approved, with certain modifications, the compliance filing submitted by Southern Company on November 6, 2006. The compliance plan largely involves functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. The implementation of the plan is not expected to have a material impact on Alabama Power’s financial statements. However, the ultimate outcome of this matter cannot now be determined.

Retail Fuel Cost Recovery

Alabama Power has established fuel cost recovery rates approved by the Alabama PSC. Alabama Power’s under recovered fuel costs as of March 31, 2007 totaled $312 million as compared to $301 million at December 31, 2006. As a result of Alabama Power’s level of recovery under the Alabama PSC’s most recent fuel recovery order, Alabama Power classified all $312 million of the under recovered regulatory clause revenues as deferred charges and other assets in the Condensed Balance Sheets as of March 31, 2007 herein. Alabama Power increased its fuel billing factor in January 2006 in accordance with Rate ECR with the expectation of fully recovering the under recovered fuel cost balance by the end of 2007. It now appears that the timing of the full recovery will not occur as originally anticipated. Alabama Power, along with the Alabama PSC, will continue to monitor the under recovered fuel cost balance to determine whether an additional adjustment to billing rates is required. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “PSC Matters – Retail Fuel Cost Recovery” of Alabama Power in Item 7 and Note 3 to the financial statements of Alabama Power under “Retail Regulatory Matters – Fuel Cost Recovery” in Item 8 of the Form 10-K for additional information.

38

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

Other Matters

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 such as opacity and other air quality standards, 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 pending or potential litigation against Alabama Power cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Alabama Power in Item 8 of the Form 10-K, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Alabama Power’s financial statements.

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

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

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, Contingent Obligations, and Unbilled Revenues.

New Accounting Standards

Income Taxes

On January 1, 2007, Alabama Power adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The provisions of FIN 48 were applied to all tax positions beginning January 1, 2007. The adoption of FIN 48 did not have a material impact on Alabama Power’s financial statements.

Fair Value Measurement

The FASB issued FASB Statement No. 157 (SFAS No. 157), “Fair Value Measurements” in September 2006. This standard provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. Alabama Power plans to adopt SFAS No. 157 on January 1, 2008 and is currently assessing the impact of this standard.

39

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

Fair Value Option

In February 2007, the FASB issued FASB Statement No. 159 (SFAS No. 159), “Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.” This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Alabama Power plans to adopt SFAS No. 159 on January 1, 2008 and is currently assessing its impact.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Alabama Power’s financial condition remained stable at March 31, 2007. Net cash provided from operating activities totaled $175.7 million for the first quarter of 2007, compared to $164.4 million for the first quarter of 2006. The $11.3 million increase in cash provided from operating activities in the first quarter of 2007 is primarily due to the increase in net income as previously discussed and a decrease in cash outflow for accounts payable, partially offset by an increase in under recovered fuel costs. Property additions to utility plant were $263.7 million in the first three months of 2007 and are included in Alabama Power’s Condensed Balance Sheets herein. These additions were primarily related to construction of transmission and distribution facilities, purchases of nuclear fuel, and installation of equipment to comply with environmental standards.

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, scheduled maturities of long-term debt, as well as the related interest, preferred and preference stock dividends, lease obligations, purchase commitments, and trust funding requirements. Approximately $669 million will be required through March 31, 2008 for maturities of long-term debt.

Sources of Capital

Alabama Power plans to obtain the funds required for construction and other purposes from sources similar to those utilized in the past. Recently, Alabama Power has primarily utilized funds from operating cash flows, short-term debt, external security offerings, and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon regulatory approval, prevailing market conditions, and other factors. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Sources of Capital” of Alabama Power in Item 7 of the Form 10-K for additional information.

Alabama Power’s current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet scheduled maturities of long-term debt as well as cash needs which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, Alabama Power had at March 31, 2007 approximately $16 million of cash and cash equivalents, unused committed lines of credit of approximately $965 million (including $563 million of such lines which are dedicated to funding purchase obligations related to variable rate pollution control bonds), and an extendible commercial note program. Of the unused credit facilities, $365 million will expire at various times in 2007 (of which $198 million allow for one-year term loans). The remaining $600 million of credit facilities expire in 2011. Alabama Power expects to renew its credit facilities, as needed, prior to expiration. See Note 6 to the financial statements of Alabama Power under “Bank Credit Arrangements” in Item 8 of the Form 10-K for additional information. 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

40

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

the benefit of Alabama Power and other Southern Company subsidiaries. Alabama Power has regulatory authority for up to $1.4 billion of short-term borrowings. At March 31, 2007, Alabama Power had $75 million of commercial paper outstanding. There were no extendible commercial notes 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 arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. However, Alabama Power, along with all members of the Power Pool, is party to certain derivative agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for it and/or Georgia Power. These agreements are primarily for natural gas and power price risk management activities. At March 31, 2007, Alabama Power’s total exposure to these types of agreements was not material.

Market Price Risk

Alabama Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2006 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 physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. 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 March 31, 2007 was as follows:

	First Quarter
	2007
	Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	(32,628	)
Contracts realized or settled		12,826
New contracts at inception		—
Changes in valuation techniques		—
Current period changes (a)		19,441
Contracts at March 31, 2007	$	(361	)

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

	Source of March 31, 2007
	Valuation Prices
	Total			Maturity
	Fair Value			Year 1			1-3 Years
	(in thousands)
Actively quoted	$	(281	)	$	(3,829	)	$	3,548
External sources		(80	)		(80	)		—
Models and other methods		—			—			—
Contracts at March 31, 2007	$	(361	)	$	(3,909	)	$	3,548

41

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

Unrealized gains and losses from mark-to-market adjustments on derivative contracts related to Alabama Power’s fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through Alabama Power’s fuel cost recovery clause. Certain other energy related derivatives, designated as hedges, are deferred in other comprehensive income. Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. At March 31, 2007, the fair value gain/(loss) of derivative energy contracts was reflected in the financial statements as follows:

	Amounts
	(in thousands)
Regulatory assets, net	$	(307	)
Accumulated other comprehensive income		(57	)
Net income		3
Total fair value	$	(361	)

Unrealized pre-tax gains and losses on energy contracts recognized in income were not material for any period presented.

For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Market Price Risk” of Alabama Power in Item 7 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 2007, Alabama Power issued $200 million of Series 2007A 5.55% Senior Notes due February 1, 2017. The proceeds were used to repay a portion of Alabama Power’s outstanding short-term indebtedness and for other general corporate purposes, including Alabama Power’s continuing construction activities.

In March 2007, Alabama Power issued 1,750,000 shares of common stock to Southern Company at $40.00 a share ($70 million aggregate purchase price). On May 1, 2007, Alabama Power issued an additional 1,750,000 shares of common stock to Southern Company at $40.00 a share ($70 million aggregate purchase price). The proceeds from both sales were used by Alabama Power for general corporate purposes.

Subsequent to March 31, 2007, Alabama Power issued $250 million of Series 2007B 5.875% Senior Notes due April 1, 2047. The proceeds were used to repay a portion of Alabama Power’s outstanding short-term indebtedness and for other general corporate purposes, including Alabama Power’s continuing construction activities. Also subsequent to March 31, 2007, $169 million in aggregate principal amount of Series W Floating Rate Extendible Senior Notes matured.

In addition to any financings that may be necessary to meet capital requirements and contractual obligations, Alabama 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.

42

GEORGIA POWER COMPANY

43

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Revenues:
Retail revenues	$	1,412,329		$	1,358,523
Wholesale revenues —
Non-affiliates		143,767			134,658
Affiliates		41,788			37,203
Other revenues		59,286			53,637
Total operating revenues		1,657,170			1,584,021
Operating Expenses:
Fuel		593,894			460,724
Purchased power —
Non-affiliates		46,093			58,798
Affiliates		184,542			217,876
Other operations		230,748			235,184
Maintenance		124,442			128,551
Depreciation and amortization		126,149			123,825
Taxes other than income taxes		72,341			71,257
Total operating expenses		1,378,209			1,296,215
Operating Income		278,961			287,806
Other Income and (Expense):
Allowance for equity funds used during construction		13,179			5,981
Interest income		475			325
Interest expense, net of amounts capitalized		(70,587	)		(64,377	)
Interest expense to affiliate trusts		(14,878	)		(14,878	)
Other income (expense), net		(4,216	)		(1,332	)
Total other income and (expense)		(76,027	)		(74,281	)
Earnings Before Income Taxes		202,934			213,525
Income taxes		70,980			79,900
Net Income		131,954			133,625
Dividends on Preferred Stock		689			1,685
Net Income After Dividends on Preferred Stock	$	131,265		$	131,940

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Net Income After Dividends on Preferred Stock	$	131,265		$	131,940
Other comprehensive income (loss):
Change in fair value of marketable securities, net of tax of $42 and $(97), respectively		65			(155	)
Changes in fair value of qualifying hedges, net of tax of $(1,082) and $5,596, respectively		(1,714	)		8,866
Reclassification adjustment for amounts included in net income, net of tax of $(29) and $113, respectively		(46	)		179
COMPREHENSIVE INCOME	$	129,570		$	140,830

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

44

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Activities:
Net income	$	131,954		$	133,625
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		149,339			145,167
Deferred income taxes and investment tax credits		12,709			1,924
Deferred expenses — affiliates		21,524			19,937
Allowance for equity funds used during construction		(13,179	)		(5,981	)
Pension, postretirement, and other employee benefits		5,289			846
Stock option expense		3,911			3,997
Tax benefit of stock options		794			202
Other, net		(12,848	)		1,153
Changes in certain current assets and liabilities —
Receivables		81,442			125,870
Fossil fuel stock		(14,009	)		(50,694	)
Materials and supplies		(2,412	)		(18,240	)
Prepaid income taxes		19,084			61,863
Other current assets		(5,635	)		(20,602	)
Accounts payable		(86,459	)		(229,697	)
Accrued taxes		(124,431	)		(77,501	)
Accrued compensation		(111,026	)		(111,434	)
Other current liabilities		35,473			5,021
Net cash provided from (used for) operating activities		91,520			(14,544	)
Investing Activities:
Property additions		(352,475	)		(215,969	)
Nuclear decommissioning trust fund purchases		(94,131	)		(100,167	)
Nuclear decommissioning trust fund sales		87,251			93,287
Cost of removal, net of salvage		(8,937	)		(6,034	)
Change in construction payables, net of joint owner portion		379			(24,192	)
Other		(11,714	)		444
Net cash used for investing activities		(379,627	)		(252,631	)
Financing Activities:
Increase (decrease) in notes payable, net		(58,951	)		333,852
Proceeds —
Senior notes		250,000			—
Capital contributions from parent company		269,949			261,000
Gross excess tax benefit of stock options		2,208			465
Redemptions —
Senior notes		—			(150,000	)
Capital leases		(1,841	)		—
Preferred stock		—			(14,569	)
Payment of preferred stock dividends		(832	)		(1,362	)
Payment of common stock dividends		(172,475	)		(157,500	)
Other		(3,768	)		151
Net cash provided from financing activities		284,290			272,037
Net Change in Cash and Cash Equivalents		(3,817	)		4,862
Cash and Cash Equivalents at Beginning of Period		16,850			11,138
Cash and Cash Equivalents at End of Period	$	13,033		$	16,000
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $5,251 and $2,512 capitalized for 2007 and 2006, respectively)	$	64,595		$	81,610
Income taxes (net of refunds)	$	6,585		$	(25,786	)

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

45

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At March 31,			At December 31,
Assets	2007			2006
	(in thousands)
Current Assets:
Cash and cash equivalents	$	13,033		$	16,850
Receivables —
Customer accounts receivable		438,277			474,046
Unbilled revenues		117,771			130,585
Under recovered regulatory clause revenues		391,923			353,976
Other accounts and notes receivable		89,285			93,656
Affiliated companies		15,677			21,941
Accumulated provision for uncollectible accounts		(8,929	)		(10,030	)
Fossil fuel stock, at average cost		406,019			392,011
Materials and supplies, at average cost		306,101			304,514
Vacation pay		61,835			61,907
Prepaid expenses		65,514			74,788
Other		32,590			72,041
Total current assets		1,929,096			1,986,285
Property, Plant, and Equipment:
In service		21,375,467			21,279,792
Less accumulated provision for depreciation		8,431,908			8,343,309
		12,943,559			12,936,483
Nuclear fuel, at amortized cost		184,526			180,129
Construction work in progress		1,141,872			923,948
Total property, plant, and equipment		14,269,957			14,040,560
Other Property and Investments:
Equity investments in unconsolidated subsidiaries		73,632			70,879
Nuclear decommissioning trusts, at fair value		561,132			544,013
Other		58,251			58,848
Total other property and investments		693,015			673,740
Deferred Charges and Other Assets:
Deferred charges related to income taxes		513,238			510,531
Prepaid pension costs		695,535			688,671
Deferred under recovered regulatory clause revenues		485,465			544,152
Other regulatory assets		630,741			629,003
Other		224,660			235,788
Total deferred charges and other assets		2,549,639			2,608,145
Total Assets	$	19,441,707		$	19,308,730

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

46

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At March 31,			At December 31,
Liabilities and Stockholder’s Equity	2007			2006
	(in thousands)
Current Liabilities:
Securities due within one year	$	756,605		$	303,906
Notes payable		674,330			733,281
Accounts payable —
Affiliated		164,839			238,093
Other		394,121			402,222
Customer deposits		162,308			155,763
Accrued taxes —
Income taxes		174,402			217,603
Other		121,055			275,098
Dividends payable to parent		172,475			—
Accrued interest		87,768			74,643
Accrued vacation pay		49,485			49,704
Accrued compensation		31,997			141,356
Other		102,263			125,494
Total current liabilities		2,891,648			2,717,163
Long-term Debt		4,489,726			4,242,839
Long-term Debt Payable to Affiliated Trusts		515,465			969,073
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		2,842,780			2,815,724
Deferred credits related to income taxes		154,775			157,297
Accumulated deferred investment tax credits		278,833			282,070
Employee benefit obligations		708,154			698,274
Asset retirement obligations		635,857			626,681
Other cost of removal obligations		434,367			436,137
Other regulatory liabilities		281,244			281,391
Other		146,133			80,839
Total deferred credits and other liabilities		5,482,143			5,378,413
Total Liabilities		13,378,982			13,307,488
Preferred Stock		45,000			44,991
Common Stockholder’s Equity:
Common stock, without par value—
Authorized - 20,000,000 shares
Outstanding - 9,261,500 shares		398,473			398,473
Paid-in capital		3,316,707			3,039,845
Retained earnings		2,316,133			2,529,826
Accumulated other comprehensive loss		(13,588	)		(11,893	)
Total common stockholder’s equity		6,017,725			5,956,251
Total Liabilities and Stockholder’s Equity	$	19,441,707		$	19,308,730

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

47

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

FIRST QUARTER 2007 vs. FIRST QUARTER 2006

OVERVIEW

Georgia Power operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of Georgia Power’s business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand and increasingly stringent environmental standards. These issues are expected to be addressed in a general rate case required to be filed by July 1, 2007. The rate case will determine whether the existing rate plan (2004 Retail Rate Plan) should be continued, modified, or discontinued. In addition, fuel costs rose significantly during 2005 and 2006. Georgia Power received a Georgia PSC order to increase its fuel recovery rate effective March 1, 2007, and continues to work with the Georgia PSC to enable the timely recovery of these costs.

Effective July 1, 2006, Savannah Electric was merged into Georgia Power. Georgia Power has accounted for the merger in a manner similar to a pooling of interests. See MANAGEMENT’S DISCUSSION AND ANALYSIS – OVERVIEW – “Business Activities” of Georgia Power in Item 7 of the Form 10-K for additional information.

Georgia Power continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income. For additional information on these indicators, see MANAGEMENT’S DISCUSSION AND ANALYSIS – OVERVIEW – “Key Performance Indicators” of Georgia Power in Item 7 of the Form 10-K.

RESULTS OF OPERATIONS

Net Income

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(0.7)	(0.5)

Georgia Power’s net income after dividends on preferred stock for the first quarter 2007 was $131.3 million compared to $131.9 million for the corresponding period in 2006. The decrease was primarily attributed to lower base retail revenues and increased interest expense due to additional long-term debt and generally higher short-term interest rates. These factors were partially offset by higher wholesale non-fuel revenues, lower non-fuel operations and maintenance expenses, and a slightly lower effective income tax rate.

Retail Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$53.8	4.0

In the first quarter 2007, retail revenues were $1.41 billion compared to $1.36 billion in the corresponding period in the prior year.

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Details of retail revenues are as follows:

	First Quarter 2007
	(in millions)			% change
Retail – prior year	$	1,358.5
Change in —
Rates and pricing		(27.9	)		(2.1	)
Sales growth		12.1			0.9
Weather		(0.3	)		—
Fuel cost recovery		69.9			5.2
Retail – current year	$	1,412.3			4.0

Revenues associated with changes in rates and pricing decreased in the first quarter 2007 when compared to the corresponding period in 2006 due to lower market-driven rates for sales to large commercial and industrial customers.

Revenues attributable to sales growth increased in the first quarter 2007 when compared to the corresponding period for 2006. This increase was primarily due to a 3.0% increase in total retail KWH energy sales. The KWH increase was due to a 5.5% increase in sales to residential customers resulting from a 3.6% increase in residential customer usage and a 1.8% increase in residential customers.

Revenues attributable to changes in weather decreased slightly in the first quarter 2007 when compared to the corresponding period for 2006.

Fuel cost recovery revenues increased by $69.9 million in the first quarter 2007 when compared to the corresponding period for 2006. Georgia Power electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the fuel component of purchased power costs, and do not affect net income.

Wholesale Revenues– Non-Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$9.1	6.8

Wholesale energy sales to non-affiliates will vary depending on the market cost of available energy compared to the cost of Georgia Power and Southern Company system owned generation, demand for energy within the Southern Company service territory, and availability of Southern Company system generation. In the first quarter 2007, revenue from wholesale – non-affiliates was $143.8 million compared to $134.7 million in the corresponding period in 2006. This increase was a result of a 21.8% increase in KWH sales volume primarily due to a new long-term contract with an electrical membership corporation that went into effect in April 2006.

Wholesale Revenues– Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$4.6	12.3

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Wholesale energy sales to affiliated companies within the Southern Company system will vary depending on demand and the availability and cost of generating resources at each company. These sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost. In the first quarter 2007, revenues from wholesale – affiliates were $41.8 million compared to $37.2 million for the corresponding period in 2006. The increase was a result of a 25% increase in KWH for short-term affiliate sales through the Power Pool due to the comparatively lower incremental cost of Georgia Power-owned generation. Also contributing to the wholesale – affiliate revenue increase was higher wholesale fuel revenues due to the higher cost of fuel.

Other Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$5.7	10.5

In the first quarter 2007, other revenues were $59.3 million compared to $53.6 million for the corresponding period in 2006. This increase was primarily due to increased transmission and outdoor lighting revenues. Transmission revenues increased $4.3 million compared to the same period in the prior year primarily due to a $3.9 million increase in tariff related revenues for transmission service. Outdoor lighting revenues also increased by $1.5 million primarily due to a 6.0% increase in customers.

Fuel and Purchased Power Expenses

First Quarter 2007 vs. First Quarter 2006
	(change in millions)			% change
Fuel	$	133.2			28.9
Purchased power-non-affiliates		(12.7	)		(21.6	)
Purchased power-affiliates		(33.4	)		(15.3	)
Total fuel and purchased power expenses	$	87.1

In the first quarter 2007, total fuel and purchase power expenses were $824.5 million compared to $737.4 million for the corresponding period in 2006. The increase in fuel and purchase power expenses was due to a $63.6 million increase in the average cost of fuel and purchased power as well as a $23.5 million increase due to the KWH volume generated or purchased.

Details of Georgia Power’s cost of generation and purchased power are as follows:

	First Quarter		First Quarter
Average Cost	2007		2006		% change
	(cents per net KWH)
Fuel		2.64		2.33		13.3
Purchased Power		5.95		5.95		—

In the first quarter 2007, fuel expense was $593.9 million compared to $460.7 for the corresponding period in 2006. This increase was the result of a 13.3% increase in the average cost of fuel per net KWH generated primarily due to higher coal prices. 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.

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In the first quarter 2007, purchased power expense — non-affiliates was $46.1 million compared to $58.8 million for the corresponding period in 2006. This decrease was primarily due to a 21.2% decrease in KWH volume purchased compared to the same period in 2006 due to a 4.9% increase in Georgia Power’s self-owned generation. Also contributing to the decrease was a slight decrease of 0.4% in the average cost of purchased power per net KWH compared to the corresponding period in 2006.

In the first quarter 2007, purchased power from affiliates was $184.5 million compared with $217.9 million for the corresponding period in 2006. The decrease was primarily the result of a 1.4% decrease in the average cost of purchased power per net KWH. This was offset by a 6.3% increase in KWH volume purchased compared to the same period in 2006.

Energy purchases from affiliated companies within the Southern Company system will vary depending on demand and the availability and cost of generating resources at each company. These purchases are made in accordance with the IIC, as approved by the FERC. These transactions did not have a significant impact on earnings since the energy purchases are generally offset by energy revenues through Georgia Power’s fuel cost recovery clause.

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.

Other Operations Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(4.5)	(1.9)

In the first quarter 2007, other operations expense was $230.7 million compared with $235.2 million for the corresponding period in 2006. The decrease was primarily related to a $3.6 million decrease in employee benefits and a $0.7 million decrease in uncollectible account expense.

Maintenance Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(4.2)	(3.2)

In the first quarter 2007, maintenance expense was $124.4 million compared with $128.6 million for the corresponding period in 2006. The timing of maintenance outages at Georgia Power’s larger steam units resulted in $3.5 million of the decrease and $0.9 million resulted from the timing of transmission maintenance activities. These decreases were partially offset by a $1.7 million increase in distribution expense related to overhead line maintenance.

Allowance for Equity Funds Used During Construction

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$7.2	120.3

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In the first quarter 2007, the allowance for equity funds used during construction was $13.2 million compared with $6.0 million for the corresponding period in 2006. This increase was primarily related to increases in expenditures related to new and ongoing construction activities.

Interest Expense, Net of Amounts Capitalized

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$6.2	9.6

In the first quarter 2007, interest expense, net of amounts capitalized was $70.6 million compared with $64.4 million for the corresponding period in 2006. This increase was primarily the result of generally higher interest rates on variable rate debt and commercial paper and the issuance of additional long-term debt.

Income Taxes

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(8.9)	(11.2)

In the first quarter 2007, income taxes were $71.0 million compared with $79.9 million for the corresponding period in 2006. This was primarily the result of lower pre-tax net income, as well as a $3.5 million increase in state income tax credits. See Note (H) to the Condensed Financial Statements herein for additional information related to the tax impact of state income tax credits on Georgia Power’s effective tax rate.

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Georgia Power’s future earnings potential. The level of Georgia Power’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Georgia Power’s business of selling electricity. These factors include Georgia Power’s ability to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. Future earnings in the near term will depend, in part, upon growth in energy sales which 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 Georgia Power’s service area. For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL of Georgia Power 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 fully recovered in rates on a timely basis. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters” of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under “Environmental Matters” in Item 8 of the Form 10-K for additional information.

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Fine Particulate Matter Regulations

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters – Environmental Statutes and Regulations — Air Quality” of Georgia Power in Item 7 of the Form 10-K for additional information regarding nonattainment designations for the fine particulate matter air quality standard. In March 2007, the EPA finalized its fine particulate matter implementation rule, requiring submittal of state plans for addressing the nonattainment designations by April 2008. The ultimate outcome of this matter cannot be determined at this time.

Plant Wansley Environmental Litigation

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters – Plant Wansley Environmental Litigation” of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under “Environmental Matters – Plant Wansley Environmental Litigation” in Item 8 of the Form 10-K for additional information on litigation involving alleged violations of the Clean Air Act at four of the units at Plant Wansley. On March 30, 2007, the parties filed a joint motion seeking entry of a proposed consent decree resolving all remaining issues in the case. If the consent decree is approved as proposed, the resolution of this case will not have a material impact on Georgia Power’s financial statements.

FERC and Georgia PSC Matters

Intercompany Interchange Contract

See MANAGEMENT’S DISCUSSION AND ANALYSIS– FUTURE EARNINGS POTENTIAL – “FERC Matters – Intercompany Interchange Contract” of Georgia Power in Item 7 and Note 3 to the financial statements of Georgia Power under “FERC Matters – Intercompany Interchange Contract” in Item 8 of the Form 10-K for information regarding the proceeding initiated by the FERC in May 2005 to examine (1) the provisions of the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the Power Pool is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable.

On April 19, 2007, the FERC approved, with certain modifications, the compliance filing submitted by Southern Company on November 6, 2006. The compliance plan largely involves functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. The implementation of the plan is not expected to have a material impact on Georgia Power’s financial statements. However, the ultimate outcome of this matter cannot now be determined.

Retail Fuel Cost Recovery

As of March 31, 2007, Georgia Power had an under recovered fuel balance of approximately $877.4 million. On February 6, 2007, the Georgia PSC approved an increase in Georgia Power’s total annual billings of approximately $383 million related to fuel cost recovery effective March 1, 2007. The order also requires Georgia Power to file for a new fuel cost recovery rate no later than March 1, 2008. Fuel cost recovery revenues as recorded on the financial statements are adjusted for differences in actual recoverable costs and amounts billed in current regulated rates. Accordingly, any changes in the billing factor will have no significant effect on Georgia Power’s revenues or net income, but will affect cash flow. See MANAGEMENT’S DISCUSSION

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

Retail General Rate Recovery

As of March 31, 2007, work is continuing on the preparation of a rate case to be filed on or before July 1, 2007. The rate case will determine whether the existing 2004 Retail Rate Plan should be continued, modified, or discontinued.

Other Matters

See Note 3 to the financial statements of Georgia Power under “Property Tax Dispute” in Item 8 of the Form 10-K for information on the property tax dispute with Monroe County, Georgia (Monroe County). The administrative appeals and notices of arbitration have been expanded to include tax year 2006. The appeals remain stayed pending the outcome of the related litigation. On March 30, 2007, the Georgia Court of Appeals reversed the trial court and ruled that the Monroe County Board of Tax Assessors (Monroe Board) had exceeded its legal authority and remanded the case for entry of an injunction prohibiting the Monroe Board from collecting taxes based on its independent valuation of Plant Scherer. On April 16, 2007, the Monroe Board filed an appeal to the Georgia Supreme Court. Georgia Power intends to oppose that action. The suit could impact all co-owners. If Georgia Power is successful, the litigation will be concluded. Otherwise, Georgia Power could be subject to total taxes through March 31, 2007 of up to $20 million, plus penalties and interest. The ultimate outcome of this matter cannot currently be determined.

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 such as opacity and other air quality standards, 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 pending or potential litigation against Georgia Power cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Georgia Power in Item 8 of the Form 10-K, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Georgia Power’s financial statements.

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

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

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. Also 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

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complete discussion of Georgia Power’s critical accounting policies and estimates related to Electric Utility Regulation, Contingent Obligations, and Unbilled Revenues.

New Accounting Standards

Income Taxes

On January 1, 2007, Georgia Power adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The provisions of FIN 48 were applied to all tax positions beginning January 1, 2007. The adoption of FIN 48 did not have a material impact on Georgia Power’s financial statements. See Note (I) to the Condensed Financial Statements herein for additional information.

Fair Value Measurement

The FASB issued FASB Statement No. 157 (SFAS No. 157), “Fair Value Measurements” in September 2006. This standard provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. Georgia Power plans to adopt SFAS No. 157 on January 1, 2008 and is currently assessing the impact of this standard.

Fair Value Option

In February 2007, the FASB issued FASB Statement No. 159 (SFAS No. 159), “Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115.” This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Georgia Power plans to adopt SFAS No. 159 on January 1, 2008 and is currently assessing its impact.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Georgia Power’s financial condition remained stable at March 31, 2007. Net cash provided from operating activities increased $106.1 million for the first quarter of 2007 compared to the same period in 2006. The increase in 2007 is primarily the result of $53.8 million of higher retail revenues and $52.5 million less cash used for fuel and materials. In first quarter 2007, gross property additions were $372.3 million. These additions were primarily related to the construction of transmission and distribution facilities, purchases of nuclear fuel, and purchases of equipment to comply with environmental standards. The majority of funds for these additions and other capital requirements were derived primarily from operating activities and capital contributions 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, scheduled maturities of long-term debt, as well as related interest, preferred stock dividends, lease obligations, purchase commitments, and trust funding requirements. Since December 31, 2006, Georgia Power has entered into four additional PPAs totaling approximately 1,863 MW annually. These contracts begin in 2009 and 2010 and are expected to result

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in additional obligations of $1.3 million in 2008-2009, $191.4 million in 2010-2011, and $1.08 billion thereafter. Of the total capacity, approximately 561 MW will expire in 2017, 1,274 MW in 2025, and 28 MW in 2029. These contracts are subject to certification by the Georgia PSC. Two of the contracts are with Southern Power and are also subject to FERC approval. Approximately $756.6 million will be required through March 31, 2008 for redemptions and maturities of long-term debt.

Sources of Capital

Georgia Power plans to obtain the funds required for construction and other purposes from sources similar to those utilized in the past. Recently, Georgia Power has primarily utilized funds from operating cash flows, short-term debt, external security offerings, and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon regulatory approval, prevailing market conditions and other factors. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Sources of Capital” of Georgia Power in Item 7 of the Form 10-K for additional information.

Georgia Power’s current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet scheduled maturities of long-term debt as well as 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 March 31, 2007 approximately $13.0 million of cash and cash equivalents and $902 million of unused credit arrangements with banks. Of the unused credit arrangements, $40 million expire in 2007 and $862 million expire in 2011.

Of the facilities that expire in 2007, all contain provisions allowing two-year term loans executable at expiration. Georgia Power expects to renew its credit facilities, as needed, prior to expiration. See Note 6 to the financial statements of Georgia Power under “Bank Credit Arrangements” in Item 8 of the Form 10-K for additional information. These unused credit arrangements provide liquidity support to Georgia Power’s obligations with respect to variable rate pollution control bonds and commercial paper. 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 March 31, 2007, Georgia Power had approximately $499 million of commercial paper, $25 million of extendible commercial notes, and $150 million of bank loans 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 arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change to BBB- or Baa3 or below. These contracts are primarily for physical electricity purchases and sales. At March 31, 2007, the maximum potential collateral requirements at a BBB- or Baa3 rating were approximately $8 million. The maximum potential collateral requirements at a rating below BBB- or Baa3 were approximately $251 million. Subsequent to March 31, 2007, Georgia Power entered into certain contracts for the purchase of electric capacity and energy. These contracts also contain provisions that could require collateral, but not accelerated payment, in the event of a change in credit rating. Under these contracts, the maximum potential collateral requirement at a rating of BBB- was not material. The maximum potential collateral requirement at rating below BBB- was $137 million. Generally, collateral may be provided for by a Southern Company guaranty, letter of credit, or cash. Georgia Power, along with all members of the Power Pool, is also party to certain derivative agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for it and/or

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Alabama Power. These agreements are primarily for natural gas and power price risk management activities. At March 31, 2007, Georgia Power’s total exposure to these types of agreements was not material.

Market Price Risk

Georgia Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2006 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 physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. Georgia Power continues to manage a fuel hedging program at the instruction of the Georgia PSC.

The fair value of derivative energy contracts at March 31, 2007 was as follows:

	First Quarter 2007
	Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	(38,003	)
Contracts realized or settled		12,498
New contracts at inception		—
Changes in valuation techniques		—
Current period changes (a)		29,276
Contracts at March 31, 2007	$	3,771

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

	Source of March 31, 2007
	Valuation Prices
	Total			Maturity
	Fair Value			Year 1			1-3 Years
	(in thousands)
Actively quoted	$	3,876		$	(1,332	)	$	5,208
External sources		(105	)		(105	)		—
Models and other methods		—			—			—
Contracts at March 31, 2007	$	3,771		$	(1,437	)	$	5,208

Unrealized gains and losses from mark to market adjustments on derivative contracts related to Georgia Power’s fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through Georgia Power’s fuel cost recovery mechanism. Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. At March 31, 2007, the fair value gain/(loss) of all derivative energy contracts was reflected in the financial statements as follows:

	Amounts
	(in thousands)
Regulatory liabilities, net	$	3,767
Accumulated other comprehensive income		—
Net income		4
Total fair value	$	3,771

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Unrealized pre-tax gains and losses on energy contracts recognized in income were not material for any period presented.

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 the first quarter of 2007, Georgia Power issued $250 million of Series 2007A 5.65% Senior Notes due March 1, 2037. The proceeds were used to repay a portion of Georgia Power’s outstanding short-term indebtedness and for other general corporate purposes, including Georgia Power’s continuing construction activities. At the same time, Georgia Power terminated derivative transactions related to the note issuance at a cost of $3.9 million. The loss will be amortized over a 10-year period. Also, in the first three months of 2007, Georgia Power entered into derivative transactions designed to mitigate interest rate risk related to planned future debt issuances. The total notional amount of these derivatives was $575 million. See Note (F) to the Condensed Financial Statements for further details. Subsequent to March 31, 2007, Georgia Power announced the planned redemption on June 21, 2007 of all $454 million of notes payable related to Georgia Power Capital Trust V 7-1/8% Trust Preferred Securities. Also, subsequent to March 31, 2007, Georgia Power entered into further derivative transactions designed to mitigate interest rate risk related to planned future debt issuances. The total notional amount of these derivatives was $300 million.

In addition to any financings that may be necessary to meet capital requirements and contractual obligations, 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.

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GULF POWER COMPANY

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GULF POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Revenues:
Retail revenues	$	219,584		$	179,317
Wholesale revenues —
Non-affiliates		23,400			20,838
Affiliates		40,080			52,608
Other revenues		13,169			10,279
Total operating revenues		296,233			263,042
Operating Expenses:
Fuel		146,474			121,241
Purchased power —
Non-affiliates		1,388			4,796
Affiliates		7,041			6,990
Other operations		46,050			43,490
Maintenance		13,202			14,572
Depreciation and amortization		21,097			21,985
Taxes other than income taxes		20,206			18,889
Total operating expenses		255,458			231,963
Operating Income		40,775			31,079
Other Income and (Expense):
Interest income		1,608			781
Interest expense, net of amounts capitalized		(10,576	)		(9,272	)
Interest expense to affiliate trusts		(577	)		(1,148	)
Other income (expense), net		(171	)		(550	)
Total other income and (expense)		(9,716	)		(10,189	)
Earnings Before Income Taxes		31,059			20,890
Income taxes		11,371			7,663
Net Income		19,688			13,227
Dividends on Preference Stock		825			825
Net Income After Dividends on Preference Stock	$	18,863		$	12,402

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007		2006
	(in thousands)
Net Income After Dividends on Preference Stock	$	18,863	$	12,402
Other comprehensive income (loss):
Changes in fair value of qualifying hedges, net of tax of $559 and $-, respectively		890		—
Reclassification adjustment for amounts included in net income, net of tax of $84 and $31, respectively		133		50
COMPREHENSIVE INCOME	$	19,886	$	12,452

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

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GULF POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Activities:
Net income	$	19,688		$	13,227
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		22,384			23,488
Deferred income taxes		(3,997	)		(6,462	)
Pension, postretirement, and other employee benefits		388			1,358
Stock option expense		721			599
Tax benefit of stock options		105			48
Other, net		(1,159	)		3,222
Changes in certain current assets and liabilities —
Receivables		1,208			26,332
Fossil fuel stock		(17,154	)		(7,852	)
Materials and supplies		(105	)		(153	)
Prepaid income taxes		7,306			295
Property damage cost recovery		5,325			5,116
Other current assets		945			556
Accounts payable		2,078			(3,142	)
Accrued taxes		6,885			10,280
Accrued compensation		(12,345	)		(15,594	)
Other current liabilities		1,089			5,889
Net cash provided from operating activities		33,362			57,207
Investing Activities:
Property additions		(43,526	)		(38,277	)
Cost of removal, net of salvage		(2,755	)		(945	)
Construction payables		(7,287	)		(3,747	)
Other		(80	)		(19	)
Net cash used for investing activities		(53,648	)		(42,988	)
Financing Activities:
Decrease in notes payable, net		(42,232	)		(8,184	)
Proceeds —
Common stock issued to parent		80,000			—
Capital contributions from parent company		—			21,000
Gross excess tax benefit of stock options		218			125
Payment of preference stock dividends		(825	)		(825	)
Payment of common stock dividends		(18,525	)		(17,575	)
Other		(122	)		(602	)
Net cash provided from (used for) financing activities		18,514			(6,061	)
Net Change in Cash and Cash Equivalents		(1,772	)		8,158
Cash and Cash Equivalents at Beginning of Period		7,526			3,847
Cash and Cash Equivalents at End of Period	$	5,754		$	12,005
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $167 and $7 capitalized for 2007 and 2006, respectively)	$	8,826		$	9,261
Income taxes (net of refunds)	$	264		$	2,935

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

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GULF POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At March 31,			At December 31,
Assets	2007			2006
	(in thousands)
Current Assets:
Cash and cash equivalents	$	5,754		$	7,526
Receivables —
Customer accounts receivable		57,995			56,489
Unbilled revenues		35,479			38,287
Under recovered regulatory clause revenues		77,217			79,235
Other accounts and notes receivable		8,998			9,015
Affiliated companies		17,264			15,302
Accumulated provision for uncollectible accounts		(973	)		(1,279	)
Fossil fuel stock, at average cost		93,190			76,036
Materials and supplies, at average cost		35,411			35,306
Property damage cost recovery		29,048			28,771
Other regulatory assets		10,778			15,977
Other		8,388			14,259
Total current assets		378,549			374,924
Property, Plant, and Equipment:
In service		2,581,545			2,574,517
Less accumulated provision for depreciation		913,540			901,564
		1,668,005			1,672,953
Construction work in progress		91,406			62,815
Total property, plant, and equipment		1,759,411			1,735,768
Other Property and Investments		16,558			14,846
Deferred Charges and Other Assets:
Deferred charges related to income taxes		17,169			17,148
Prepaid pension costs		70,278			69,895
Other regulatory assets		102,197			110,077
Other		21,033			17,831
Total deferred charges and other assets		210,677			214,951
Total Assets	$	2,365,195		$	2,340,489

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

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GULF POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)

	At March 31,			At December 31,
Liabilities and Stockholder’s Equity	2007			2006
	(in thousands)
Current Liabilities:
Notes payable	$	78,214		$	120,446
Accounts payable —
Affiliated		50,813			44,375
Other		36,971			49,979
Customer deposits		23,640			21,363
Accrued taxes —
Income taxes		35,602			29,771
Other		14,362			15,033
Accrued interest		8,946			7,645
Accrued compensation		4,587			16,932
Other regulatory liabilities		12,235			9,029
Other		21,716			30,975
Total current liabilities		287,086			345,548
Long-term Debt		654,956			654,860
Long-term Debt Payable to Affiliated Trusts		41,238			41,238
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		236,677			237,862
Accumulated deferred investment tax credits		14,259			14,721
Employee benefit obligations		74,518			73,922
Other cost of removal obligations		167,077			165,410
Other regulatory liabilities		48,443			46,485
Other		70,647			72,533
Total deferred credits and other liabilities		611,621			610,933
Total Liabilities		1,594,901			1,652,579
Preference Stock		53,887			53,887
Common Stockholder’s Equity:
Common stock, without par value—
Authorized — 20,000,000 shares
Outstanding — March 31, 2007: 1,792,717 shares
— December 31, 2006: 992,717 shares		118,060			38,060
Paid-in capital		429,615			428,592
Retained earnings		172,306			171,968
Accumulated other comprehensive loss		(3,574	)		(4,597	)
Total common stockholder’s equity		716,407			634,023
Total Liabilities and Stockholder’s Equity	$	2,365,195		$	2,340,489

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

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

FIRST QUARTER 2007 vs. FIRST QUARTER 2006

OVERVIEW

Gulf Power operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located in northwest Florida and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of Gulf Power’s business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, fuel prices, and storm restoration costs. Appropriately balancing environmental expenditures with customer prices will continue to challenge Gulf Power for the foreseeable future.

Gulf Power continues to focus on several key performance indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income. For additional information on these indicators, see MANAGEMENT’S DISCUSSION AND ANALYSIS – OVERVIEW – “Key Performance Indicators” of Gulf Power in Item 7 of the Form 10-K.

RESULTS OF OPERATIONS

Net Income

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$6.5	52.1

Gulf Power’s net income after dividends on preference stock for the first quarter 2007 was $18.9 million compared to $12.4 million for the corresponding period in 2006. The increase in the first quarter 2007 over the corresponding period in 2006 was primarily due to more favorable weather and increased customer growth.

Retail Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$40.3	22.5

In the first quarter 2007, retail revenues were $219.6 million compared to $179.3 million in the corresponding period in 2006. Details of retail revenues are as follows:

	First Quarter
	2007
	(in millions)		% change
Retail – prior year	$	179.3
Change in —
Rates and pricing		2.7		1.5
Sales growth		4.3		2.4
Weather		3.2		1.8
Fuel cost recovery		30.1		16.8
Retail – current year	$	219.6		22.5

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

Revenues associated with changes in rates and pricing increased in the first quarter 2007 when compared to the same period of 2006 primarily due to cost recovery provisions. These cost recovery provisions include energy conservation costs, purchased power capacity costs, and environmental compliance costs. Annually, Gulf Power petitions for recovery of projected costs including any true-up amount from prior periods, and approved rates are implemented each January. Cost recovery provisions also include revenues related to the recovery of storm damage restoration costs. The recovery provisions generally equal the related expenses and have no material effect on net income. See Note 1 to the financial statements of Gulf Power under “Revenues,” “Property Damage Reserve,” and “Environmental Remediation Cost Recovery” and Note 3 to the financial statements under “Retail Regulatory Matters – Environmental Cost Recovery” and “Storm Damage Cost Recovery” in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales growth increased in the first quarter 2007 when compared to the same period in 2006 due to a 10.2% increase, 7.4% increase, and 4.7% decrease in retail energy sales to residential, commercial, and industrial customers, respectively. Increased energy sales to residential and commercial customers were primarily due to increases in usage and customer additions. Decreased energy sales to industrial customers were primarily due to increased customer cogeneration due to lower cost of natural gas.

Revenues resulting from changes in weather improved because of cooler temperatures in the first quarter of 2007 compared to mild weather in the first quarter of 2006.

The increase in fuel cost recovery is primarily due to recovery provisions for fuel expenses and the energy component of purchased power costs. Annually, Gulf Power petitions for recovery of projected costs including any true-up amount from prior periods, and approved rates are implemented each January. The recovery provisions generally equal the related expenses and have no material effect on net income. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “FERC and Florida PSC Matters – Retail Fuel Cost Recovery” herein and MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “PSC Matters – Fuel Cost Recovery” of Gulf Power in Item 7 and Note 1 to the financial statements of Gulf Power under “Revenues” in Item 8 of the Form 10-K for additional information.

Wholesale Revenues – Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
($12.5)	(23.8)

Wholesale revenues from affiliates will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.

In the first quarter 2007, wholesale revenues from affiliates were $40.1 million compared to $52.6 million in the corresponding period in 2006. The decrease was primarily a result of increased availability of lower cost affiliate generating units.

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

Other Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$2.9	28.1

In the first quarter 2007, other revenues were $13.2 million compared to $10.3 million in the same period in 2006. The increase was primarily a result of other energy services and higher franchise fees, which have no impact on earnings. Franchise fees are generally proportional to sales revenue and are offset by franchise and gross receipt taxes. The increased revenues from other energy services did not have a material impact on earnings since they were offset by associated expenses.

Fuel and Purchased Power Expenses

First Quarter 2007 vs. First Quarter 2006
	(change in millions)			% change
Fuel	$	25.2			20.8
Purchased power-non-affiliates		(3.4	)		(71.1	)
Purchased power-affiliates		0.1			0.7
Total fuel and purchased power expenses	$	21.9

In the first quarter 2007, fuel expense was $146.4 million compared to $121.2 million in the same period in 2006. This increase was due to a $20.6 million increase in the average cost of fuel as well as a $4.6 million increase due to the KWH volume generated. See FUTURE EARNINGS POTENTIAL – “FERC and Florida PSC Matters – Retail Fuel Cost Recovery” herein for additional information. In the first quarter 2007, purchased power from non-affiliates was $1.4 million compared to $4.8 million in the same period in 2006. The decrease was due to a $0.1 million decrease in KWH purchases and a $3.3 million decrease resulting from lower average cost per net KWH. The quarterly change in purchased power affiliates is not material.

	First Quarter		First Quarter
Average Cost	2007		2006		% change
	(cents per net KWH)
Fuel		3.48		2.99		16.4
Purchased power		4.41		6.75		(34.7	)

Since energy expenses are generally offset by revenues through Gulf Power’s fuel cost recovery mechanism, these expenses do not have a significant impact on net income.

Other Operations Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$2.6	5.9

In the first quarter 2007, other operations expense was $46.1 million compared to $43.5 million in the same period in 2006. The increase was primarily due to other energy services and increased environmental compliance costs. The increased expenses from other energy services did not have a material impact on earnings since they were offset by associated revenues. These environmental costs are generally recovered as expended, so there is no significant impact on net income. See Note 3 to the financial statements of Gulf Power

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under “Retail Regulatory Matters – Environmental Cost Recovery” in Item 8 of the Form 10-K and FUTURE EARNINGS POTENTIAL – “Environmental Matters” herein for additional information.

Maintenance Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
($1.4)	(9.4)

For the first quarter 2007, maintenance expense was $13.2 million compared to $14.6 million in the same period in 2006. This decrease was primarily due to a delay in scheduled maintenance.

Income Taxes

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$3.7	48.4

In the first quarter 2007, income tax expense was $11.4 million compared to $7.7 million when compared to the same period in 2006. This increase was primarily as a result of higher earnings before income taxes.

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Gulf Power’s future earnings potential. The level of Gulf Power’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Gulf Power’s business of selling electricity. These factors include Gulf Power’s ability to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing environmental and fuel costs. Future earnings in the near term will depend, in part, upon growth in energy sales, which 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 Gulf Power’s service area. For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL of Gulf Power 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 fully recovered in rates on a timely basis. See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL – “Environmental Matters” of Gulf Power in Item 7 and Note 3 to the financial statements of Gulf Power under “Environmental Matters” in Item 8 of the Form 10-K for additional information.

Fine Particulate Matter Regulations

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters – Environmental Statutes and Regulations – Air Quality” of Gulf Power in Item 7 of the Form 10-K for additional information regarding nonattainment designations for the fine particulate matter air quality standard. In March 2007, the EPA finalized its fine particulate matter implementation rule, requiring

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

submittal of state plans for addressing the nonattainment designations by April 2008. The ultimate outcome of this matter cannot be determined at this time.

FERC and Florida PSC Matters

Intercompany Interchange Contract

See MANAGEMENT’S DISCUSSION AND ANALYSIS– FUTURE EARNINGS POTENTIAL – “FERC Matters – Intercompany Interchange Contract” of Gulf Power in Item 7 and Note 3 to the financial statements of Gulf Power under “FERC Matters – Intercompany Interchange Contract” in Item 8 of the Form 10-K for information regarding the proceeding initiated by the FERC in May 2005 to examine (1) the provisions of the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the Power Pool is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable.

On April 19, 2007, the FERC approved, with certain modifications, the compliance filing submitted by Southern Company on November 6, 2006. The compliance plan largely involves functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. The implementation of the plan is not expected to have a material impact on Gulf Power’s financial statements. However, the ultimate outcome of this matter cannot now be determined.

Retail Fuel Cost Recovery

Gulf Power has established fuel cost recovery rates approved by the Florida PSC. In recent years, Gulf Power has experienced higher than expected fuel costs for coal and natural gas. If the projected fuel revenue over or under recovery exceeds 10% of the projected fuel costs for the period, Gulf Power is required to notify the Florida PSC and to indicate if an adjustment to the fuel cost recovery factor is being requested. Under recovered fuel costs at March 31, 2007 totaled $75.6 million, and are included in under recovered regulatory clause revenues on Gulf Power’s Condensed Balance Sheets herein. Fuel cost recovery revenues, as recorded on the financial statements, are adjusted for differences in actual recoverable costs and amounts billed in current regulated rates. Accordingly, any change in the billing factor would have no significant effect on Gulf Power’s revenues or net income, but would affect cash flow. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “PSC Matters – Fuel Cost Recovery” of Gulf Power in Item 7 and Note 1 to the financial statements of Gulf Power under “Revenues” in Item 8 of the Form 10-K for additional information.

Other Matters

See Note 3 to the financial statements of Gulf Power under “Property Tax Dispute” in Item 8 of the Form 10-K for information on the property tax dispute with Monroe County, Georgia (Monroe County). The administrative appeals and notices of arbitration have been expanded to include tax year 2006. The appeals remain stayed pending the outcome of the related litigation. On March 30, 2007, the Georgia Court of Appeals reversed the trial court and ruled that the Monroe County Board of Tax Assessors (Monroe Board) had exceeded its legal authority and remanded the case for entry of an injunction prohibiting the Monroe Board from collecting taxes based on its independent valuation of Plant Scherer. On April 16, 2007, the Monroe Board filed an appeal to the Georgia Supreme Court. Gulf Power and Georgia Power intend to oppose that action. The suit could impact all

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

co-owners. If Gulf Power and Georgia Power are successful, the litigation will be concluded. Otherwise, Gulf Power could be subject to total taxes through March 31, 2007 of up to $4.4 million, plus penalties and interest. In accordance with Gulf Power’s unit power sales contract for Plant Scherer, such property taxes would be recoverable from the customer. The ultimate outcome of this matter cannot currently be determined.

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 such as opacity and other air quality standards, 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 pending or potential litigation against Gulf Power cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Gulf Power in Item 8 of the Form 10-K, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Gulf Power’s financial statements.

See Note (B) to the Condensed Financial Statements herein for discussion of various other contingencies, regulatory matters, and other matters being litigated which may affect future earnings potential.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

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, Contingent Obligations, and Unbilled Revenues.

New Accounting Standards

Income Taxes

On January 1, 2007, Gulf Power adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The provisions of FIN 48 were applied to all tax positions beginning January 1, 2007. The adoption of FIN 48 did not have a material impact on Gulf Power’s financial statements.

Fair Value Measurement

The FASB issued FASB Statement No. 157 (SFAS No. 157), “Fair Value Measurements” in September 2006. This standard provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. Gulf Power plans to adopt SFAS No. 157 on January 1, 2008 and is currently assessing the impact of this standard.

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

Fair Value Option

In February 2007, the FASB issued FASB Statement No. 159 (SFAS No. 159), “Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115.” This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Gulf Power plans to adopt SFAS No. 159 on January 1, 2008 and is currently assessing its impact.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Gulf Power’s financial condition remained stable at March 31, 2007. Net cash provided from operating activities totaled $33.4 million for the first three months of 2007, compared to $57.2 million for the corresponding period in 2006. The $23.8 million decrease in 2007 resulted primarily from a decrease in cash flows from affiliated company and customer account receivables. Gross property additions to utility plant were $41.9 million in the first three months of 2007. Funds for Gulf Power’s property additions were provided by operating activities and other financing activities. See Gulf 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 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, preference stock dividends, purchase commitments, and trust funding requirements. Gulf Power has no maturities or redemptions of long-term debt required by March 31, 2008.

Sources of Capital

Gulf Power plans to obtain the funds required for construction and other purposes from sources similar to those utilized in the past. Recently, Gulf Power has primarily utilized funds from operating cash flows, short-term debt, external security offerings, and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon regulatory approval, prevailing market conditions, and other factors. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Sources of Capital” of Gulf Power in Item 7 of the Form 10-K for additional information.

Gulf Power’s current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet scheduled maturities of long-term debt as well as cash needs which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, Gulf Power had at March 31, 2007 approximately $5.8 million of cash and cash equivalents and $120 million of unused committed lines of credit with banks. All credit agreements expire in 2007 and $100 million contain provisions allowing one-year term loans executable at expiration. Gulf Power expects to renew its credit facilities, as needed, prior to expiration. See Note 6 to the financial statements of Gulf Power under “Bank Credit Arrangements” in Item 8 of the Form 10-K for additional information. These 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 March 31, 2007, Gulf Power had outstanding

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

$78.2 million in commercial paper. 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

Gulf Power does not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change to BBB- or Baa3, or below. Generally, collateral may be provided for by a Southern Company guaranty, letter of credit, or cash. These contracts are primarily for physical electricity purchases and sales. At March 31, 2007, the maximum potential collateral requirements at a BBB- or Baa3 rating were approximately $23 million. The maximum potential collateral requirements at a rating below BBB- or Baa3 were approximately $46 million. Gulf Power, along with all members of the Power Pool, is also party to certain derivative agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for Alabama Power and/or Georgia Power. These agreements are primarily for natural gas and power price risk management activities. At March 31, 2007, Gulf Power’s total exposure to these types of agreements was not material.

Market Price Risk

Gulf Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2006 reporting period. In addition, Gulf 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, 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 physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market. Gulf Power has also implemented a fuel-hedging program with the approval of the Florida PSC.

The fair value of derivative energy contracts at March 31, 2007 was as follows:

	First Quarter
	2007
	Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	(7,186	)
Contracts realized or settled		3,089
New contracts at inception		—
Changes in valuation techniques		—
Current period changes (a)		4,998
Contracts at March 31, 2007	$	901

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

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	Source of March 31, 2007
	Valuation Prices
	Total			Maturity
	Fair Value			Year 1			1-3 Years
				(in thousands)
Actively quoted	$	917		$	(56	)	$	973
External sources		(16	)		(16	)		—
Models and other methods		—			—			—
Contracts at March 31, 2007	$	901		$	(72	)	$	973

Unrealized gains and losses from mark-to-market adjustments on derivative contracts related to Gulf Power’s fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through Gulf Power’s fuel cost recovery clause. Gains and losses on derivative energy contracts that are not designated as hedges are recognized in the statements of income as incurred. At March 31, 2007, the fair value gain/(loss) of derivative energy contracts was reflected in the financial statements as follows:

	Amounts
	(in thousands)
Regulatory liabilities, net	$	900
Accumulated other comprehensive income		—
Net income		1
Total fair value	$	901

Unrealized pre-tax gains and losses recognized in income were not material for any period presented.

For additional information, see MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Market Price Risk” of Gulf Power in Item 7 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.

Financing Activities

Gulf Power did not issue or redeem any long-term debt securities in the first three months of 2007. In January 2007, Gulf Power issued 800,000 shares of common stock to Southern Company at $100 stated value per share ($80 million aggregate purchase price). The proceeds were used to repay a portion of Gulf Power’s short-term indebtedness and for other general corporate purposes. In the first three months of 2007, Gulf Power entered into derivative transactions designed to mitigate interest rate risk related to future planned debt issuances. The total notional amount of these derivatives was $165 million. See Note (F) to the Condensed Financial Statements for further details.

In addition to any financings that may be necessary to meet capital requirements, contractual obligations, and storm-recovery, Gulf 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.

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MISSISSIPPI POWER COMPANY

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MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Revenues:
Retail revenues	$	156,124		$	131,364
Wholesale revenues —
Non-affiliates		77,294			61,322
Affiliates		18,915			11,772
Other revenues		4,493			4,483
Total operating revenues		256,826			208,941
Operating Expenses:
Fuel		121,759			78,263
Purchased power —
Non-affiliates		954			4,702
Affiliates		12,424			19,036
Other operations		43,847			37,277
Maintenance		13,947			14,415
Depreciation and amortization		14,228			12,320
Taxes other than income taxes		12,843			14,200
Total operating expenses		220,002			180,213
Operating Income		36,824			28,728
Other Income and (Expense):
Interest income		575			49
Interest expense		(4,423	)		(4,291	)
Interest expense to affiliate trusts		(649	)		(649	)
Other income (expense), net		(128	)		943
Total other income and (expense)		(4,625	)		(3,948	)
Earnings Before Income Taxes		32,199			24,780
Income taxes		12,130			9,065
Net Income		20,069			15,715
Dividends on Preferred Stock		433			433
Net Income After Dividends on Preferred Stock	$	19,636		$	15,282

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Net Income After Dividends on Preferred Stock	$	19,636		$	15,282
Other comprehensive income (loss):
Changes in fair value of qualifying hedges, net of tax of $(362) and $140, respectively		(584	)		225
COMPREHENSIVE INCOME	$	19,052		$	15,507

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 Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Activities:
Net income	$	20,069		$	15,715
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		16,949			16,680
Deferred income taxes and investment tax credits, net		9,224			10,943
Plant Daniel capacity		(1,415	)		(3,252	)
Pension, postretirement, and other employee benefits		2,680			1,506
Stock option expense		711			743
Tax benefit of stock options		71			25
Other, net		(4,151	)		(8,790	)
Changes in certain current assets and liabilities —
Receivables		11,469			54,402
Fossil fuel stock		(10,693	)		12,561
Materials and supplies		(532	)		460
Prepaid income taxes		18,301			(7,904	)
Other current assets		803			4,140
Hurricane Katrina accounts payable		(1,588	)		(36,088	)
Other accounts payable		(9,578	)		(51,267	)
Accrued taxes		(28,308	)		(31,003	)
Accrued compensation		(17,828	)		(18,661	)
Over recovered regulatory clause revenues		—			(10,797	)
Other current liabilities		459			(6,681	)
Net cash provided from (used for) operating activities		6,643			(57,268	)
Investing Activities:
Property additions		(23,545	)		(52,798	)
Cost of removal, net of salvage		(420	)		(12,229	)
Construction payables		(2,926	)		(10,112	)
Other		(50	)		(37	)
Net cash used for investing activities		(26,941	)		(75,176	)
Financing Activities:
Increase in notes payable, net		35,354			140,974
Proceeds —
Gross excess tax benefit of stock options		178			9
Capital contributions from parent company		(3	)		—
Payment of preferred stock dividends		(433	)		(433	)
Payment of common stock dividends		(16,825	)		(16,300	)
Net cash provided from financing activities		18,271			124,250
Net Change in Cash and Cash Equivalents		(2,027	)		(8,194	)
Cash and Cash Equivalents at Beginning of Period		4,214			14,301
Cash and Cash Equivalents at End of Period	$	2,187		$	6,107
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest	$	5,183		$	7,073
Income taxes (net of refunds)	$	(21,559	)	$	5,824

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 March 31,			At December 31,
Assets	2007			2006
	(in thousands)
Current Assets:
Cash and cash equivalents	$	2,187		$	4,214
Receivables —
Customer accounts receivable		36,215			42,099
Unbilled revenues		22,243			23,807
Under recovered regulatory clause revenues		40,483			50,778
Other accounts and notes receivable		4,381			5,870
Insurance receivable		20,975			20,551
Affiliated companies		31,394			23,696
Accumulated provision for uncollectible accounts		(621	)		(855	)
Fossil fuel stock, at average cost		53,372			42,679
Materials and supplies, at average cost		28,459			27,927
Prepaid income taxes		3,730			22,031
Other regulatory assets		39,980			42,391
Other		11,765			15,091
Total current assets		294,563			320,279
Property, Plant, and Equipment:
In service		2,074,011			2,054,151
Less accumulated provision for depreciation		848,063			836,922
		1,225,948			1,217,229
Construction work in progress		45,678			40,608
Total property, plant, and equipment		1,271,626			1,257,837
Other Property and Investments		4,685			4,636
Deferred Charges and Other Assets:
Deferred charges related to income taxes		9,161			9,280
Prepaid pension costs		36,144			36,424
Other regulatory assets		58,593			61,086
Other		22,240			18,834
Total deferred charges and other assets		126,138			125,624
Total Assets	$	1,697,012		$	1,708,376

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 March 31,		At December 31,
Liabilities and Stockholder’s Equity	2007		2006
	(in thousands)
Current Liabilities:
Securities due within one year	$	36,082	$	—
Notes payable		86,731		51,377
Accounts payable —
Affiliated		26,915		24,615
Other		57,454		73,236
Customer deposits		8,927		8,676
Accrued taxes —
Income taxes		5,911		4,171
Other		16,201		50,346
Accrued interest		1,964		2,332
Accrued compensation		6,130		23,958
Plant Daniel capacity		4,244		5,659
Other regulatory liabilities		14,619		11,386
Other		27,193		28,880
Total current liabilities		292,371		284,636
Long-term Debt		242,553		242,553
Long-term Debt Payable to Affiliated Trusts		—		36,082
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		248,878		236,202
Deferred credits related to income taxes		15,912		16,218
Accumulated deferred investment tax credits		16,136		16,402
Employee benefit obligations		93,854		92,403
Other cost of removal obligations		84,807		82,397
Other regulatory liabilities		24,421		22,559
Other		52,296		56,324
Total deferred credits and other liabilities		536,304		522,505
Total Liabilities		1,071,228		1,085,776
Preferred Stock		32,780		32,780
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		307,975		307,019
Retained earnings		247,323		244,511
Accumulated other comprehensive income		15		599
Total common stockholder’s equity		593,004		589,820
Total Liabilities and Stockholder’s Equity	$	1,697,012	$	1,708,376

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
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FIRST QUARTER 2007 vs. FIRST QUARTER 2006

OVERVIEW

Mississippi Power operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Mississippi and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of Mississippi Power’s business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, fuel prices, and storm restoration following Hurricane Katrina.

Mississippi Power continues to focus on several key performance indicators. In recognition that Mississippi Power’s long-term financial success is dependent upon how well it satisfies its customers’ needs, Mississippi Power’s retail base rate mechanism, PEP, includes performance indicators that directly tie customer service indicators to Mississippi Power’s allowed return. In addition to the PEP performance indicators, Mississippi Power focuses on other performance measures, including broader measures of customer satisfaction, plant availability, system reliability, and net income. For additional information on these indicators, see MANAGEMENT’S DISCUSSION AND ANALYSIS – OVERVIEW – “Key Performance Indicators” of Mississippi Power in Item 7 of the Form 10-K.

RESULTS OF OPERATIONS

Net Income

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$4.3	28.5

Mississippi Power’s net income after dividends on preferred stock for the first quarter 2007 was $19.6 million compared to $15.3 million for the corresponding period in 2006. The increase was primarily a result of a $14.7 million increase in base revenues from customers within Mississippi Power’s service territory, of which $5.2 million is due to a retail base rate increase effective April 1, 2006 and $9.5 million is from sales growth and higher demand compared to the same period in 2006. The increases were partially offset by a $6.6 million increase in other operations expenses and a $1.9 million increase in depreciation and amortization expense due to the amortization of a regulatory liability related to Plant Daniel capacity.

Retail Revenues

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$24.7	18.8

In the first quarter 2007, retail revenues were $156.1 million compared to $131.4 million in the same period in 2006. Details of the change to retail revenues are as follows:

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

	First Quarter
	2007
	(in millions)		% change
Retail – prior year	$	131.4
Change in —
Rates and pricing		3.8		2.9
Sales growth		2.8		2.1
Weather		2.8		2.1
Fuel cost recovery		15.3		11.7
Retail – current year	$	156.1		18.8	%

Revenues associated with changes in rates and pricing increased in the first quarter 2007 when compared to the same period of 2006 due to a base rate increase effective April 1, 2006 and continued recovery following Hurricane Katrina.

Revenues attributable to changes in sales growth increased in the first quarter 2007 when compared to the same period in 2006 due to a 13.2%, 14.6%, and 8.9% increase in KWH sales to residential, commercial, and industrial customers, respectively, primarily due to increase in usage and customer additions resulting from recovery after Hurricane Katrina.

Revenues resulting from changes in weather increased because of normal weather in the first quarter of 2007 compared to mild weather in the first quarter of 2006.

Fuel revenues increased in the first quarter of 2007 when compared to the same period in 2006. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the fuel component of purchased power costs, and do not affect net income.

Wholesale Revenues – Non-Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$16.0	26.0

Revenues from wholesale sales to non-affiliates will vary depending on the market cost of available energy compared to the cost of Mississippi Power and Southern Company system owned generation, demand for energy within the Southern Company service territory, and availability of Southern Company system generation. In the first quarter 2007, wholesale revenues to non-affiliates were $77.3 million compared to $61.3 million in the same period in 2006. The increase was primarily due to increased fuel costs and higher demand by customers within Mississippi Power’s service territory of $11.4 million and increased sales to customers outside Mississippi Power’s service territory of $4.6 million.

Wholesale Revenues – Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$7.1	60.7

Revenues from wholesale sales to affiliates will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC.

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

These transactions do not have a significant impact on earnings since the energy is generally sold at marginal cost. In the first quarter 2007, wholesale revenues to affiliates were $18.9 million compared to $11.8 million in the same period in 2006. The increase was primarily due to a $7.9 million increase in energy revenues, of which a $14.0 million increase was associated with increased sales and a $6.1 million decrease was associated with lower fuel prices. Capacity revenues decreased $0.7 million.

Fuel and Purchased Power Expenses

First Quarter 2007 vs. First Quarter 2006
	(change in millions)			% change
Fuel	$	43.5			55.6
Purchased power-non-affiliates		(3.8	)		(79.7	)
Purchased power-affiliates		(6.6	)		(34.7	)
Total fuel and purchased power expenses	$	33.1

In the first quarter 2007, total fuel and purchased power expenses was $135.1 million compared to $102.0 million in the same period in 2006. The increase in fuel and purchased power expenses was primarily due to a $10.3 million increase in the average cost of fuel and purchased power as well as a $22.8 million increase due to the KWH volume generated or purchased. Details of the individual components follow.

In the first quarter 2007, fuel expense was $121.8 million compared to $78.3 million in the same period in 2006. The increase was primarily due to a $29.1 million increase in generation from Mississippi Power-owned facilities and a $14.4 million increase in the cost of fuel.

Details of Mississippi Power’s cost of generation and purchased power are as follows:

	First Quarter		First Quarter
Average Cost	2007		2006		% change
	(cents per net KWH)
Fuel		3.56		3.14		13.4
Purchased power		3.37		4.38		(23.1	)

In the first quarter 2007, purchased power expense – non-affiliates was $1.0 million compared to $4.7 million in the same period in 2006. The decrease was primarily as the result of a 50.6% decrease in KWH volume purchased due to more of Mississippi Power’s generation being available to meet customer demand and a 58.9% decrease in the average cost of purchased power per KWH.

In the first quarter 2007, purchased power from affiliates was $12.4 million compared to $19.0 million in the same period in 2006. The decrease was primarily due to a 25.0% decrease in the average cost of purchased power per KWH due to decreased fuel costs and a 13.0% decrease in KWH volume purchased due to more of Mississippi Power’s generation being available to meet customer demand.

Energy purchases from affiliated companies within the Southern Company system will vary depending on demand and the availability and cost of generating resources at each company. These purchases are made in accordance with the IIC, as approved by the FERC. These transactions did not have a significant impact on earnings since the energy purchases are generally offset by energy revenues through Mississippi Power’s retail and wholesale fuel cost recovery clauses.

80

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

Other Operations Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$6.6	17.6

In the first quarter 2007, other operations expense was $43.8 million compared to $37.3 million in the same period in 2006. The increase was primarily the result of a $3 million insurance recovery for restoration expense recognized in 2006, a $2.4 million increase in employee benefit expenses which is primarily due to an increase in medical expense, and a $1.1 million increase in production operations expense.

Depreciation and Amortization Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$1.9	15.5

In the first quarter 2007, depreciation and amortization expense was $14.2 million compared to $12.3 million in the same period in 2006. The increase was primarily due to amortization related to a regulatory liability recorded in 2003 in connection with the Mississippi PSC’s accounting order on Plant Daniel capacity. See Note 3 to the financial statements of Mississippi Power under “Retail Regulatory Matters” in Item 8 of the Form 10-K for additional information.

Taxes Other Than Income Taxes

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(1.4)	(9.6)

In the first quarter 2007, taxes other than income taxes were $12.8 million compared to $14.2 million in the same period in 2006. The change was primarily due to a $1.4 million decrease in ad valorem taxes. The retail portion, or approximately 83%, of the decrease in ad valorem taxes is recoverable under Mississippi Power’s ad valorem tax cost recovery clause, and, therefore, does not affect net income.

Total Other Income and (Expense)

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(0.7)	(17.1)

In the first quarter 2007, total other income and (expense) was $(4.6) million compared to $(3.9) million in the same period in 2006. The change was primarily the result of a $0.3 million decrease in interest income related to the recovery mechanism for fuel hedging and energy cost hedging and a $0.4 million decrease in income associated with customer projects.

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

Income Taxes

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$3.1	33.8

In the first quarter 2007, income taxes were $12.1 million compared to $9.1 million in the same period in 2006. The increase was primarily due to the increase in pre-tax income.

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Mississippi Power’s future earnings potential. The level of Mississippi Power’s future earnings depends on numerous factors that affect the opportunities, challenges, and risks of Mississippi Power’s business of selling electricity. These factors include Mississippi Power’s ability to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. Future earnings in the near term will depend, in part, upon growth in energy sales, which 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 Mississippi Power’s service area in the aftermath of Hurricane Katrina. For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL of Mississippi Power 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 fully recovered in rates on a timely basis. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Environmental Matters” of Mississippi Power in Item 7 and Note 3 to the financial statements of Mississippi Power under “Environmental Matters” in Item 8 of the Form 10-K for additional information.

FERC and Mississippi PSC Matters

Intercompany Interchange Contract

See MANAGEMENT’S DISCUSSION AND ANALYSIS– FUTURE EARNINGS POTENTIAL – “FERC Matters – Intercompany Interchange Contract” of Mississippi Power in Item 7 and Note 3 to the financial statements of Mississippi Power under “FERC Matters – Intercompany Interchange Contract” in Item 8 of the Form 10-K for information regarding the proceeding initiated by the FERC in May 2005 to examine (1) the provisions of the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the Power Pool is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable.

On April 19, 2007, the FERC approved, with certain modifications, the compliance filing submitted by Southern Company on November 6, 2006. The compliance plan largely involves functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. The implementation of the plan is not expected to have a material impact on Mississippi Power’s financial statements. However, the ultimate outcome of this matter cannot now be determined.

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

Retail Regulatory Matters

See Note 3 to the financial statements of Mississippi Power under “Retail Regulatory Matters – Environmental Compliance Overview Plan” in Item 8 of the Form 10-K for information on Mississippi Power’s annual environmental filing with the Mississippi PSC. In February 2007, Mississippi Power filed with the Mississippi PSC its annual ECO Plan evaluation for 2007. Mississippi Power requested an 86 cent per 1,000 KWH increase for retail customers. This increase represents approximately $7.5 million in annual revenues for Mississippi Power. On April 13, 2007, the Mississippi PSC approved Mississippi Power’s ECO Plan as filed. The new rates are effective in May 2007.

In April 2007, the Mississippi PSC issued an order allowing Mississippi Power to defer approximately $10.4 million of certain reliability related maintenance costs beginning January 1, 2007 and recover them over a four-year period beginning January 1, 2008. These costs relate to system upgrades and improvements that are now being made as a follow-up to the emergency repairs that were made subsequent to Hurricane Katrina. As of March 31, 2007, Mississippi Power had incurred and deferred approximately $2.1 million of such costs, which are included in Other Regulatory Assets on the Condensed Balance Sheets herein.

Fuel Cost Recovery

Mississippi Power has an established fuel cost recovery factor that is approved by the Mississippi PSC. Over the past several years, Mississippi Power experienced higher than expected fuel costs for coal and gas, which led to an increase in the under recovered fuel costs. Mississippi Power is required to file for an adjustment to the fuel cost recovery factor annually. The last such filing was made in November 2006. The Mississippi PSC approved an increase in the fuel cost recovery factor effective January 2007 in an amount equal to 4.6 % of total retail revenues. At March 31, 2007, the under recovered balance of fuel recorded in Mississippi Power’s Condensed Balance Sheets herein was $40.5 million compared to $50.8 million at December 31, 2006. Mississippi Power’s operating revenues are adjusted for differences in actual recoverable fuel cost and amounts billed in accordance with the currently approved cost recovery rate. Accordingly, changes to the billing factor will have no significant effect on Mississippi Power’s revenues or net income but will affect cash flow. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “PSC Matters – Fuel Cost Recovery” of Mississippi Power in Item 7 of the Form 10-K for additional information.

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 such as opacity and other air quality standards, 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 pending or potential litigation against Mississippi Power cannot be predicted at this time; however, for current proceedings not specifically reported herein or in Note 3 to the financial statements of Mississippi Power in Item 8 of the Form 10-K, management does not anticipate that the liabilities, if any, arising from such current proceedings would have a material adverse effect on Mississippi Power’s financial statements.

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

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

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 Form 10-K for a complete discussion of Mississippi Power’s critical accounting policies and estimates related to Electric Utility Regulation, Contingent Obligations, Unbilled Revenues, and Plant Daniel Operating Lease.

New Accounting Standards

Income Taxes

On January 1, 2007, Mississippi Power adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The provisions of FIN 48 were applied to all tax positions beginning January 1, 2007. The adoption of FIN 48 did not have a material impact on Mississippi Power’s financial statements.

Fair Value Measurement

The FASB issued FASB Statement No. 157 (SFAS No. 157), “Fair Value Measurements” in September 2006. This standard provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. Mississippi Power plans to adopt SFAS No. 157 on January 1, 2008 and is currently assessing the impact of this standard.

Fair Value Option

In February 2007, the FASB issued FASB Statement No. 159 (SFAS No. 159), “Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115.” This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Mississippi Power plans to adopt SFAS No. 159 on January 1, 2008 and is currently assessing its impact.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Mississippi Power’s financial condition remained stable at March 31, 2007. Net cash provided from operating activities totaled $6.6 million for the first three months of 2007, compared to net cash flow used for operating activities of $57.3 million for the same period in 2006. The $63.9 million increase in the first three months of 2007 resulted primarily from fuel and base rate increases in effect in the first quarter of 2007 and cash outflows for restoration costs in the first quarter 2006 due to the impact of Hurricane Katrina.

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

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 of the Form 10-K for a description of Mississippi Power’s capital requirements for its construction program, lease obligations, purchase commitments, preferred stock dividends, and trust funding requirements.

Sources of Capital

Mississippi Power plans to obtain the funds required for construction and other purposes from sources similar to those utilized in the past. Recently, Mississippi Power has primarily utilized funds from operating cash flows, short-term debt, external security offerings, and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon, regulatory approval, prevailing market conditions, and other factors. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Sources of Capital” of Mississippi Power in Item 7 of the Form 10-K for additional information.

Mississippi Power’s current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source to meet scheduled maturities of long-term debt as well as cash needs which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, Mississippi Power had at March 31, 2007 approximately $2.2 million of cash and cash equivalents and $181 million of unused committed credit arrangements with banks. Of these unused facilities, $101 million expire in 2007 and $80 million expire in 2008. Approximately $39 million of these credit arrangements contain provisions allowing two-year term loans executable at expiration and $15 million contain provisions allowing one-year term loans executable at expiration. Subsequent to March 31, 2007, Mississippi Power increased an existing credit agreement by $25 million. Mississippi Power expects to renew its credit facilities, as needed, prior to expiration. See Note 6 to the financial statements of Mississippi Power under “Bank Credit Arrangements” in Item 8 of the Form 10-K for additional information. 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 March 31, 2007, Mississippi Power had $86.7 million in 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.

Off-Balance Sheet Financing Arrangements

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Off-Balance Sheet Financing Arrangements” of Mississippi Power 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 arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change to below BBB- or Baa3. These contracts are primarily for physical electricity purchases and sales. At March 31, 2007, the maximum potential collateral requirements were $4.5 million. Further, Mississippi Power, along with all members of the Power Pool, is party to certain derivative agreements that could require collateral and/or accelerated payment in the

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event of a credit rating change to below investment grade for Alabama Power and/or Georgia Power. These agreements are primarily for natural gas and power price risk management activities. At March 31, 2007, Mississippi Power’s total exposure to these types of agreements was not material.

Market Price Risk

Mississippi Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2006 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 physical 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 value of derivative, fuel, and energy contracts at March 31, 2007 was as follows:

	First Quarter
	2007
	Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	(6,360	)
Contracts realized or settled		1,497
New contracts at inception		—
Changes in valuation techniques		—
Current period changes (a)		11,506
Contracts at March 31, 2007	$	6,643

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

	Source of March 31, 2007
	Valuation Prices
	Total		Maturity
	Fair Value		Year 1		1-3 Years
	(in thousands)
Actively quoted	$	6,616	$	4,286	$	2,330
External sources		27		27		—
Models and other methods		—		—		—
Contracts at March 31, 2007	$	6,643	$	4,313	$	2,330

Unrealized gains and losses from mark-to-market adjustments on derivative contracts related to Mississippi Power’s fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through Mississippi Power’s energy cost management clause. In addition, any unrealized gains and losses on energy-related derivatives used to hedge anticipated purchases and sales are deferred in other comprehensive income. Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. These

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amounts were not material in any period presented. At March 31, 2007, the fair value gain/(loss) of derivative energy contracts was reflected in the financial statements as follows:

	Amounts
	(in thousands)
Regulatory liabilities, net	$	6,591
Accumulated other comprehensive income		24
Net income		28
Total fair value	$	6,643

Unrealized pre-tax gains (losses) recognized in income were not material for any period presented.

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

Mississippi Power did not issue or redeem any long-term securities in the first three months of 2007. Subsequent to March 31, 2007, Mississippi Power redeemed $36.1 million of long-term debt payable to affiliated trusts. In addition to any financings that may be necessary to meet capital requirements, contractual obligations, and storm restoration costs, Mississippi 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.

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AND SUBSIDIARY COMPANIES

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Revenues:
Wholesale revenues —
Non-affiliates	$	81,117		$	51,697
Affiliates		109,502			87,323
Other revenues		1,873			809
Total operating revenues		192,492			139,829
Operating Expenses:
Fuel		27,366			14,259
Purchased power —
Non-affiliates		11,030			13,971
Affiliates		31,287			19,407
Other operations		20,889			17,507
Maintenance		5,298			5,885
Depreciation and amortization		18,394			14,707
Taxes other than income taxes		3,711			3,661
Total operating expenses		117,975			89,397
Operating Income		74,517			50,432
Other Income and (Expense):
Interest expense, net of amounts capitalized		(20,894	)		(20,342	)
Other income (expense), net		(82	)		2,403
Total other income and (expense)		(20,976	)		(17,939	)
Earnings Before Income Taxes		53,541			32,493
Income taxes		21,505			12,593
Net Income	$	32,036		$	19,900

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Net Income	$	32,036		$	19,900
Other comprehensive income (loss):
Changes in fair value of qualifying hedges, net of tax of $(580) and $(79), respectively		(891	)		(122	)
Reclassification adjustment for amounts included in net income, net of tax of $1,156 and $1,112, respectively		2,037			1,732
COMPREHENSIVE INCOME	$	33,182		$	21,510

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Three Months
	Ended March 31,
	2007			2006
	(in thousands)
Operating Activities:
Net income	$	32,036		$	19,900
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization		22,086			18,070
Deferred income taxes and investment tax credits, net		20,953			17,251
Deferred revenues		(27,924	)		(26,672	)
Accumulated deferred billings on construction contract		15,098			5,490
Accumulated deferred costs on construction contract		(4,408	)		—
Other, net		927			(2,010	)
Changes in certain current assets and liabilities —
Receivables		5,399			38,672
Fossil fuel stock		149			(293	)
Materials and supplies		(650	)		(356	)
Other current assets		80			(8,517	)
Accounts payable		(3,065	)		(46,701	)
Accrued taxes		(2,961	)		2,899
Accrued interest		(12,067	)		(15,365	)
Net cash provided from operating activities		45,653			2,368
Investing Activities:
Property additions		(45,852	)		(1,175	)
Change in construction payables, net		5,104			2
Net cash used for investing activities		(40,748	)		(1,173	)
Financing Activities:
Increase in notes payable, net		21,380			231
Payment of common stock dividends		(22,450	)		(19,425	)
Other		(26	)		—
Net cash used for financing activities		(1,096	)		(19,194	)
Net Change in Cash and Cash Equivalents		3,809			(17,999	)
Cash and Cash Equivalents at Beginning of Period		29,929			27,631
Cash and Cash Equivalents at End of Period	$	33,738		$	9,632
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $3,409 and $0 capitalized for 2007 and 2006, respectively)	$	29,293		$	32,260
Income taxes (net of refunds)	$	6,948		$	4,227

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

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	At March 31,		At December 31,
Assets	2007		2006
	(in thousands)
Current Assets:
Cash and cash equivalents	$	33,738	$	29,929
Receivables —
Customer accounts receivable		16,379		16,789
Other accounts receivable		1,182		125
Affiliated companies		21,034		26,215
Fossil fuel stock, at average cost		11,337		11,056
Materials and supplies, at average cost		20,096		19,877
Prepaid service agreements — current		32,542		30,280
Other prepaid expenses		12,671		5,878
Other		512		2,006
Total current assets		149,491		142,155
Property, Plant, and Equipment:
In service		2,437,160		2,434,146
Less accumulated provision for depreciation		238,028		219,654
		2,199,132		2,214,492
Construction work in progress		297,571		260,279
Total property, plant, and equipment		2,496,703		2,474,771
Deferred Charges and Other Assets:
Prepaid long-term service agreements		55,161		51,615
Other—
Affiliated		4,389		4,473
Other		16,461		17,929
Total deferred charges and other assets		76,011		74,017
Total Assets	$	2,722,205	$	2,690,943

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

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	At March 31,			At December 31,
Liabilities and Stockholder’s Equity	2007			2006
	(in thousands)
Current Liabilities:
Securities due within one year	$	1,209		$	1,209
Notes payable		145,132			123,752
Accounts payable —
Affiliated		28,936			33,205
Other		23,032			16,453
Accrued taxes —
Income taxes		—			393
Other		6,354			2,183
Accrued interest		17,781			29,849
Other		2,701			4,840
Total current liabilities		225,145			211,884
Long-term Debt		1,296,909			1,296,845
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes		128,005			106,016
Deferred capacity revenues — Affiliated		10,041			36,313
Other—
Affiliated		8,459			8,958
Other		17,413			5,423
Total deferred credits and other liabilities		163,918			156,710
Total Liabilities		1,685,972			1,665,439
Common Stockholder’s Equity:
Common stock, par value $.01 per share —
Authorized - 1,000,000 shares
Outstanding - 1,000 shares		—			—
Paid-in capital		854,930			854,933
Retained earnings		220,881			211,295
Accumulated other comprehensive loss		(39,578	)		(40,724	)
Total common stockholder’s equity		1,036,233			1,025,504
Total Liabilities and Stockholder’s Equity	$	2,722,205		$	2,690,943

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

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

FIRST QUARTER 2007 vs. FIRST QUARTER 2006

OVERVIEW

Southern Power and its wholly-owned subsidiaries construct, acquire, own, and manage generation assets and sell electricity at market-based prices in the southeastern wholesale market. Southern Power continues to focus on executing its regional strategy in 2007 in the Southeast, one of the fastest growing regions of the country, including potential acquisition and/or expansion opportunities. Southern Power continues to face challenges at the federal regulatory level relative to market power and affiliate transactions. See FUTURE EARNINGS POTENTIAL – “FERC Matters” herein for additional detail.

To evaluate operating results and to ensure Southern Power’s ability to meet its contractual commitments to customers, Southern Power focuses on several key performance indicators. These indicators consist of plant availability, peak season equivalent forced outage rate (EFOR), and net income. Plant availability shows the percentage of time during the year that Southern Power’s generating units are available to be called upon to generate (the higher the better), whereas the EFOR more narrowly defines the hours during peak demand times when Southern Power’s generating units are not available due to forced outages (the lower the better). For additional information on these indicators, see MANAGEMENT’S DISCUSSION AND ANALYSIS – OVERVIEW – “Key Performance Indicators” of Southern Power in Item 7 of the Form 10-K.

RESULTS OF OPERATIONS

Net Income

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$12.1	61.0

Southern Power’s net income for the first quarter 2007 was $32.0 million compared to $19.9 million for the corresponding period of 2006. This increase was primarily the result of increased energy sales from existing resources due to more favorable weather than the corresponding period in 2006. Also contributing to the increase in income were additional sales from the acquisitions of Plant DeSoto in June 2006 and Plant Rowan in September 2006.

Wholesale Revenues – Affiliates and Wholesale Revenues – Non-Affiliates

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$51.6	37.1

Wholesale revenues for the first quarter 2007 were $190.6 million compared to $139.0 million for the corresponding period of 2006. Wholesale energy sales to non-affiliates will vary depending on the energy demand of those customers and their generation capacity, as well as the market cost of available energy compared to the cost of Southern Power. Energy sales 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 to affiliate companies that are not covered by PPAs are made in accordance with the IIC, as approved by the FERC. In the first quarter 2007, wholesale revenues to non-affiliates and affiliates increased when compared to the corresponding period in 2006. Wholesale revenues to non-affiliates increased $29.4 million during the period, primarily due to short-term market energy sales and sales from Plants DeSoto and Rowan. Wholesale revenues to affiliates increased $22.2 million during the

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

period, primarily due to increased demand under existing PPAs with affiliates due to favorable weather within the Southern Company service territory. These increases were partially offset by lower energy revenues due to a decrease in natural gas prices.

See MANAGEMENT’S DISCUSSION AND ANALYSIS — FUTURE EARNINGS POTENTIAL — “Power Sales Agreements” of Southern Power in Item 7 of the Form 10-K and FUTURE EARNINGS POTENTIAL — “Plant Acquisitions” and “Power Sales Agreements” herein for additional information.

Fuel and Purchased Power Expenses

First Quarter 2007 vs. First Quarter 2006
	(change in millions)			% change
Fuel	$	13.1			91.9
Purchased power-non-affiliates		(2.9	)		(21.1	)
Purchased power-affiliates		11.9			61.2
Total fuel and purchased power expenses	$	22.1

In the first quarter 2007, fuel and purchased power expenses were $69.7 million compared to $47.6 million for the corresponding period in 2006. This increase was primarily due to increased generation and purchases in order to meet the higher energy sales, partially offset by a decrease in the average cost of fuel and purchased power.

Other Operations Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$3.4	19.3

In the first quarter 2007, other operations expense was $20.9 million compared to $17.5 million for the corresponding period in 2006. This increase was primarily due to approximately $1.1 million of additional administrative and general expense, $1.5 million of operations expense primarily related to the newly acquired Plants DeSoto and Rowan, and $0.8 million increase in transmission expenses related to a PPA which provides for recovery of substantially all direct transmission costs; therefore, these transmission expenses do not have a significant impact on net income.

Maintenance Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(0.6)	(10.0)

In the first quarter 2007, maintenance expense was $5.3 million compared to $5.9 million for the corresponding period in 2006. This decrease was primarily due to the timing of plant maintenance activities.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
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Depreciation and Amortization Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$3.7	25.1

In the first quarter 2007, depreciation and amortization expense was $18.4 million compared to $14.7 million for the corresponding period in 2006. This increase was primarily a result of additional plant in service relating to Plants DeSoto and Rowan, acquired in June 2006 and September 2006, respectively. These new plants contributed $2.9 million to the first quarter increase. Higher depreciation rates also contributed approximately $0.8 million to the first quarter 2007 expense due to the change in rates adopted in March 2006. See Note 1 to the financial statements of Southern Power under “Depreciation” in Item 8 of the Form 10-K for additional information.

Other Income (Expense), Net

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$(2.5)	(103.4)

In the first quarter 2007, other income (expense), net was $(0.1) million compared to $2.4 million for the corresponding period in 2006. This decrease was primarily due to unrealized mark-to-market gains on derivative positions recognized in the first quarter of 2006.

Income Tax Expense

First Quarter 2007 vs. First Quarter 2006
(change in millions)	% change
$8.9	70.8

In the first quarter 2007, income tax expense was $21.5 million compared to $12.6 million for the corresponding period in 2006. This increase was primarily due to higher earnings before taxes. Other factors include a higher state tax rate due to changes in state tax apportionment rules and new activity in the state of North Carolina related to the newly acquired Plant Rowan.

FUTURE EARNINGS POTENTIAL

The results of operations discussed above are not necessarily indicative of Southern Power’s future earnings potential. Several factors affect the opportunities, challenges, and risks of Southern Power’s competitive wholesale energy business. These factors include the ability to achieve sales growth while containing costs. Another major factor is federal regulatory policy, which may impact Southern Power’s level of participation in this market. The level of future earnings depends on numerous factors, including regulatory matters, especially those related to affiliate contracts, sales, creditworthiness of customers, total generating capacity available in the Southeast, and the successful remarketing of capacity as current contracts expire. For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL of Southern Power in Item 7 of the Form 10-K.

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FERC Matters

Intercompany Interchange Contract

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “FERC Matters – Intercompany Interchange Contract” of Southern Power in Item 7 and Note 3 to the financial statements of Southern Power under “FERC Matters – Intercompany Interchange Contract” in Item 8 of the Form 10-K for information regarding the proceeding initiated by the FERC in May 2005 to examine (1) the provisions of the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the Power Pool is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable.

On April 19, 2007, the FERC approved, with certain modifications, the compliance filing submitted by Southern Company on November 6, 2006. The compliance plan largely involves functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. Southern Power’s cost of implementing the compliance plan, including the modifications, is expected to be approximately $9 million pre-tax per year. However, the ultimate outcome of this matter cannot now be determined.

Integrated Gasification Combined Cycle (IGCC) Project

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Construction Projects – Integrated Gasification Combined Cycle (IGCC)” of Southern Power in Item 7 of the Form 10-K for information regarding the development by Southern Power and the Orlando Utilities Commission (OUC) of an IGCC project in Orlando, Florida at OUC’s Stanton Energy site. Since the definitive agreements relating to the development of the project were executed in December 2005, the estimated costs of the gasifier portion have increased due primarily to increases in commodity costs and increased market demand for labor. Southern Power had the option under the original agreements to end its participation in the gasifier portion of the project at the end of the project definition phase, which has been completed. On March 29, 2007, Southern Power’s Board of Directors approved the continuation and the completion of the design, engineering, and construction of the gasifier portion of the project. This approval is contingent on the approval of a request for additional funding from the DOE of $58.75 million and OUC’s approval of amended agreements to share the remaining cost increases between Southern Power and OUC. Southern Power and OUC will share 65% and 35% of the estimated cost increase, respectively, under the proposed amended agreements. In April 2007, OUC approved its portion of the cost increase, subject to the DOE’s approval of the additional funding. The ultimate outcome of this matter cannot now be determined.

Power Sales Agreements

See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Power Sales Agreements” of Southern Power in Item 7 of the Form 10-K for additional information on long-term 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 the counterparty does not meet certain rating or financial requirements. The PPAs are expected to provide Southern Power with a stable source of revenue during their respective terms.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
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On April 4, 2007, Southern Power entered into two purchased power agreements with Georgia Power. Under the first agreement, Southern Power will provide Georgia Power with a total of 561 megawatts of capacity annually from Plant Wansley Unit 6 for the period from June 2010 through May 2017. Under the second agreement, Southern Power will provide Georgia Power with a total of 292 megawatts of capacity annually from Plant Dahlberg Units 2, 6, 8, and 10 for the period June 2010 through May 2025. The contracts provide for fixed capacity payments and variable energy payments based on actual energy delivered. These contracts are contingent upon approval from the Georgia PSC and the FERC. The final outcome of this matter cannot now be determined.

Other Matters

See MANAGEMENT’S DISCUSSION AND ANALYSIS — 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 with possible additional federal or state legislation or regulations related to global climate change, air quality, or other environmental and health concerns could also affect earnings. While Southern Power’s PPAs generally contain provisions that permit charging the counterparty with some of the new costs incurred as a result of changes in environmental laws and regulations, the full impact of any such regulatory or legislative changes cannot be determined at this time.

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 such as opacity and other air quality standards, 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 potential litigation against Southern Power and its subsidiaries cannot be predicted at this time; however, management does not anticipate that the liabilities, if any, arising from any such proceedings would have a material adverse effect on Southern Power’s financial statements.

See Note (B) to the Condensed Financial Statements herein for discussion of various other contingencies, regulatory matters, and other matters being litigated which may affect future earnings potential.

ACCOUNTING POLICIES

Application of Critical Accounting Policies and Estimates

Southern Power prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements of Southern 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, Asset Impairments, and Acquisition Accounting.

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

New Accounting Standards

Income Taxes

On January 1, 2007, Southern Power adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The provisions of FIN 48 were applied to all tax positions beginning January 1, 2007. The adoption of FIN 48 did not have a material impact on Southern Power’s financial statements.

Fair Value Measurement

The FASB issued FASB Statement No. 157 (SFAS No. 157), “Fair Value Measurements” in September 2006. This standard provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. Southern Power plans to adopt SFAS No. 157 on January 1, 2008 and is currently assessing the impact of this standard.

Fair Value Option

In February 2007, the FASB issued FASB Statement No. 159 (SFAS No. 159), “Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115.” This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Southern Power plans to adopt SFAS No. 159 on January 1, 2008 and is currently assessing its impact.

FINANCIAL CONDITION AND LIQUIDITY

Overview

Southern Power’s financial condition remained stable at March 31, 2007. Net cash provided from operating activities increased $43.3 million in the first quarter of 2007 compared to the same period in 2006. The increase in 2007 is primarily attributable to higher net income, as previously discussed, and a reduction in the outflow of cash for working capital due to a reduction in gas prices. Property additions in the first quarter of 2007 were $45.9 million primarily for ongoing construction activity at Plants Franklin and Oleander. The majority of funds for these additions were provided by cash from operations and the proceeds from the issuance of commercial paper. Southern Power paid dividends to Southern Company of $22.4 million in the first quarter of 2007.

Capital Requirements and Contractual Obligations

See 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 total estimated cost of the gasifier portion of the IGCC project for Southern Power has increased to $212 million. As a result of the increases in commodity costs and an increase in market demand for labor, the capital program of Southern Power is projected to be $257.8 million for 2007, $537.1 million for 2008, and $865.0 million for 2009.

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

These projections include Southern Power’s share of the gasifier portion of the IGCC project cost increase. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – “Integrated Gasification Combined Cycle (IGCC) Project” herein for additional information.

Sources of Capital

Southern Power plans to obtain the funds required for construction and other purposes from sources similar to those utilized in the past. Recently, Southern Power has primarily utilized funds from operating cash flows, short-term debt, external security offerings and equity contributions from Southern Company. However, the amount, type, and timing of any future financings, if needed, will depend upon regulatory approval, prevailing market conditions, and other factors. See MANAGEMENT’S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – “Sources of Capital” of Southern Power in Item 7 of the Form 10-K for additional information.

Southern Power’s current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source as well as cash needs which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, Southern Power had at March 31, 2007 approximately $33.7 million of cash and cash equivalents and a $400 million unused committed credit facility with banks that expires in 2011. Southern Power expects to renew its credit facilities, as needed, prior to expiration. See Note 6 to the financial statements of Southern Power under “Bank Credit Arrangements” in Item 8 of the Form 10-K for additional information. At March 31, 2007, Southern Power had approximately $145.1 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

Southern Power does not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit downgrade. There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change to BBB and Baa2 or to BBB- or Baa3 or below. Generally, collateral may be provided with a Southern Company guaranty, letter of credit, or cash. These contracts are primarily for physical electricity purchases and sales. At March 31, 2007, the maximum potential collateral requirements at a BBB and Baa2 rating were approximately $9 million and at a BBB- or Baa3 rating were approximately $220 million. The maximum potential collateral requirements at a rating below BBB- or Baa3 were approximately $366 million. In addition, through the acquisition of Plant Rowan, Southern Power assumed a PPA with Duke Power Company LLC that could require collateral, but not accelerated payment, in the event of a downgrade to Southern Power’s credit rating to below BBB- or Baa3. The amount of collateral required would depend upon actual losses, if any, resulting from a credit downgrade, limited to Southern Power’s remaining obligations under the PPA. Subsequent to March 31, 2007, Southern Power entered into certain contracts for the sale of electric capacity and energy. These contracts also contain provisions that could require collateral, but not accelerated payment, in the event of a change in credit rating. Under these contracts, the maximum potential collateral requirement at a rating of BBB- is $32 million. The maximum potential collateral requirement at a rating below BBB- is $64 million. Further, Southern Power, along with the other members of the Power Pool, is also party to certain derivative agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for Alabama Power and/or Georgia Power. These agreements are primarily for natural gas and power price risk management activities. At March 31, 2007, Southern Power’s total exposure to these types of agreements was not material.

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

Market Price Risk

Southern Power is exposed to market risks, including changes in interest rates, certain energy-related commodity prices, and, occasionally, currency exchange rates. To manage the volatility attributable to these exposures, Southern Power nets the exposures to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to Southern Power’s policies in areas such as counterparty exposure and hedging practices. Southern Power’s policy is that derivatives are to be used primarily for hedging purposes. Derivative positions are monitored using techniques that include market valuation and sensitivity analysis.

Southern Power’s market risk exposures relative to interest rate changes have not changed materially compared with the December 31, 2006 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 counterparties, 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.

The fair value of changes in derivative energy contracts at March 31, 2007 was as follows:

	First Quarter
	2007
	Changes
	Fair Value
	(in thousands)
Contracts beginning of period	$	1,850
Contracts realized or settled		(1,378	)
New contracts at inception		—
Changes in valuation techniques		—
Current period changes (a)		(504	)
Contracts at March 31, 2007	$	(32	)

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

	Source of March 31, 2007
	Valuation Prices
	Total			Maturity
	Fair Value			Year 1			1-3 Years
	(in thousands)
Actively quoted	$	(267	)	$	(267	)	$	—
External sources		235			235			—
Models and other methods		—			—			—
Contracts at March 31, 2007	$	(32	)	$	(32	)	$	—

Unrealized pre-tax gains and losses on electric contracts used to hedge anticipated sales, and gas contracts used to hedge anticipated purchases and sales, are deferred in other comprehensive income. Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of income as incurred.

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

At March 31, 2007, the fair value gain/(loss) of derivative energy contracts was as follows:

	Amounts
	(in thousands)
Net Income	$	84
Accumulated other comprehensive loss		(116	)
Total fair value	$	(32	)

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.

Financing Activities

Southern Power did not issue or redeem any long-term securities during the three months ended March 31, 2007.

101

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
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

INDEX TO APPLICABLE NOTES TO
FINANCIAL STATEMENTS BY REGISTRANT

Registrant	Applicable Notes
Southern Company	A, B, C, E, F, G, H, I
Alabama Power	A, B, F, G, I
Georgia Power	A, B, F, G, H, I
Gulf Power	A, B, F, G, I
Mississippi Power	A, B, D, F, G, I
Southern Power	A, B, F, I

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS:

(A)	INTRODUCTION
	The condensed quarterly financial statements of the registrants included herein have been prepared by each registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets as of December 31, 2006 have been derived from the audited financial statements of each registrant. In the opinion of each registrant’s management, the information regarding such registrant furnished herein reflects all adjustments necessary to present fairly the results of operations for the periods ended March 31, 2007 and 2006. Certain information and footnote disclosures normally included in annual 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 latest 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 Quarterly Report on 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)	CONTINGENCIES AND REGULATORY MATTERS
	See Note 3 to the financial statements of Southern Company, the traditional operating companies, and Southern Power in Item 8 of the Form 10-K for information relating to various lawsuits and other contingencies.
	NEW SOURCE REVIEW LITIGATION
	See Note 3 to the financial statements of Southern Company and Alabama Power under “Environmental Matters – New Source Review Actions” in Item 8 of the Form 10-K for additional information regarding civil actions brought by the EPA alleging that Alabama Power and Georgia Power had violated the NSR provisions of the Clean Air Act and related state laws with respect to certain of their respective coal-fired generating facilities. The plaintiffs’ appeal against Alabama Power was stayed by the U.S. Court of Appeals for the Eleventh Circuit pending the U.S. Supreme Court’s decision in a similar case against Duke Energy. On April 2, 2007, the U.S. Supreme Court issued an opinion in the Duke Energy case. On April 11, 2007, Alabama Power filed a motion to lift the stay and to reset the briefing schedule. The plaintiffs have opposed the motion and have moved to vacate the district court’s decision and remand for further proceedings consistent with the Duke Energy decision. The final resolution of these claims is dependent on these appeals and possible further court action and, therefore, cannot be determined at this time.
	PLANT WANSLEY ENVIRONMENTAL LITIGATION
	See MANAGEMENT’S DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL – “Environmental Matters – Plant Wansley Environmental Litigation” of Southern Company and Georgia Power in Item 7 and Note 3 to the financial statements of Southern Company and Georgia Power under “Environmental Matters - Plant Wansley Environmental Litigation” in Item 8 of the Form 10-K for

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

additional information on litigation involving alleged violations of the Clean Air Act at four of the units at Plant Wansley. On March 30, 2007, the parties filed a joint motion seeking entry of a proposed consent decree resolving all remaining issues in the case. If the consent decree is approved as proposed, the resolution of this case will not have a material impact on the financial statements of Georgia Power or Southern Company.

MIRANT MATTERS

Mirant was an energy company with businesses that included independent power projects and energy trading and risk management companies in the U.S. and selected other countries. It was a wholly-owned subsidiary of Southern Company until its initial public offering in October 2000. In April 2001, Southern Company completed a spin-off to its shareholders of its remaining ownership, and Mirant became an independent corporate entity. In July 2003, Mirant filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. See Note 3 to the financial statements of Southern Company under “Mirant Matters – Mirant Bankruptcy” in Item 8 of the Form 10-K for information regarding Southern Company’s 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.

Mirant Securities Litigation

See Note 3 to the financial statements of Southern Company under “Mirant Matters – Mirant Securities Litigation” in Item 8 of the Form 10-K for information regarding a class action lawsuit that several Mirant shareholders (plaintiffs) originally filed against Mirant and certain Mirant officers in May 2002. In November 2002, Southern Company, certain former and current senior officers of Southern Company, and 12 underwriters of Mirant’s initial public offering were added as defendants. On March 24, 2006, the plaintiffs filed a motion for reconsideration requesting that the court vacate that portion of its July 14, 2003 order dismissing the plaintiffs’ claims based upon Mirant’s alleged improper energy trading and marketing activities involving the California energy market. On March 6, 2007, the court granted plaintiffs’ motion for reconsideration, reinstated the California energy market claims, and granted in part and denied in part defendants’ motion to compel certain class certification discovery. On March 21, 2007, defendants filed renewed motions to dismiss the California energy claims on grounds originally set forth in their 2003 motions to dismiss, but which were not addressed by the court. The ultimate outcome of this matter cannot be determined at this time.

MC Asset Recovery Litigation

See Note 3 to the financial statements of Southern Company under “Mirant Matters – MC Asset Recovery Litigation” in Item 8 of the Form 10-K for information regarding a suit between MC Asset Recovery, a special purpose subsidiary of Reorganized Mirant, and Southern Company. On March 28, 2007, MC Asset Recovery filed a Fourth Amended Complaint. Among other things, the Fourth Amended Complaint adds a claim under the Federal Debt Collection Procedure Act (FDCPA) to avoid certain transfers from Mirant to Southern Company and withdraws the breach of fiduciary duty claim the court struck as a result of Southern Company’s motion for summary judgment. MC Asset Recovery claims to have standing to assert violations of the FDCPA and to recover property on behalf of the Mirant debtors’ estates. The ultimate outcome of this matter cannot be determined at this time.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

FERC MATTERS

Intercompany Interchange Contract

See Note 3 to the financial statements of Southern Company, the traditional operating companies and Southern Power under “FERC Matters – Intercompany Interchange Contract” in Item 8 of the Form 10-K for information regarding the proceeding initiated by the FERC in May 2005 to examine (1) the provisions of the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and SCS, as agent, under the terms of which the Power Pool is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERC’s standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company’s code of conduct defining Southern Power as a “system company” rather than a “marketing affiliate” is just and reasonable.

On April 19, 2007, the FERC approved, with certain modifications, the compliance filing submitted by Southern Company on November 6, 2006. The compliance plan largely involves functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. The implementation of the plan is not expected to have a material impact on the financial statements of Southern Company or the traditional operating companies. Southern Power’s cost of implementing the compliance plan, including the modifications, is expected to be approximately $9 million pre-tax per year. However, the ultimate outcome of this matter cannot now be determined.

INCOME TAX MATTERS

Leveraged Lease Transactions

See Note 3 to the financial statements of Southern Company under “Income Tax Matters” in Item 8 of the Form 10-K. The IRS challenged Southern Company’s deductions related to three international lease transactions (so-called SILO or sale-in-lease-out transactions), in connection with its audits of Southern Company’s 2000 through 2003 tax returns. In the third quarter 2006, Southern Company paid the full amount of the disputed tax and the applicable interest on the SILO issue for tax years 2000 - 2001 and filed a claim for refund which has now been denied by the IRS. The disputed tax amount is $79 million and the related interest is approximately $24 million for these tax years. This payment, and the subsequent IRS disallowance of the refund claim, closed the issue with the IRS and Southern Company has initiated litigation in the U.S. District Court for the Northern District of Georgia for a complete refund of tax and interest paid for the 2000 - 2001 tax years. The estimated amount of disputed tax and interest for tax years 2002 and 2003 is approximately $83 million and $15 million, respectively. The tax and interest for these tax years was paid to the IRS in the fourth quarter 2006. Southern Company has accounted for both payments in 2006 as deposits. For tax years 2000 through 2006, Southern Company has claimed $284 million in tax benefits related to these SILO transactions challenged by the IRS.

Effective January 1, 2007, Southern Company adopted both FASB Interpretation No. 48 (FIN 48), “Accounting for the Uncertainty in Income Taxes” and FASB Staff Position No. FAS 13-2 (FSP 13-2), “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction.” FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. FSP 13-2 amends FASB Statement No. 13, “Accounting for Leases” requiring recalculation of the rate of return and the allocation of income whenever the projected timing of the income tax cash flows generated by a leveraged lease is revised with recognition of the resulting gain or loss in the year of the revision. FSP 13-2 also requires that all recognized tax positions in a leveraged lease must be measured in accordance with the criteria in FIN 48 and any changes resulting from FIN 48 must be reflected as a change in an important lease assumption as of the date of adoption. In

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

adopting these standards, Southern Company concluded that a portion of the SILO tax benefits were uncertain tax positions, as defined in FIN 48. Accordingly, Southern Company also concluded that there was a change in the projected income tax cash flows and, as required by FSP 13-2, recalculated the rate of return and allocation of income under the LILO and SILO transactions.

The cumulative effect of the initial adoption of FIN 48 and FSP 13-2 was recorded as an adjustment to beginning retained earnings. For the lease-in-lease-out (LILO) transaction settled with the IRS in February 2005, the cumulative effect of adopting FSP 13-2 was a $17 million reduction in beginning retained earnings. With respect to Southern Company’s SILO transactions, the adoption of FSP 13-2 reduced beginning retained earnings by $108 million and the adoption of FIN 48 reduced beginning retained earnings by an additional $15 million. The adoption of FSP 13-2 also resulted in a reduction to net income in the first quarter 2007 of approximately $4 million. The adjustments to retained earnings are non-cash charges and those related to FSP 13-2 will be recognized as income over the remaining terms of the affected leases. Any future changes in the projected or actual income tax cash flows will result in an additional recalculation of the net investment in the leases and will be recorded currently in income. The ultimate impact on Southern Company’s net income will be dependent on the outcome of pending litigation, but could be significant, and potentially material. Southern Company believes these transactions are valid leases for U.S. tax purposes and the related deductions are allowable. Southern Company is continuing to pursue resolution of these matters through administrative appeals or litigation; however, the ultimate outcome of these matters cannot now be determined.

Synthetic Fuel Tax Credits

Southern Company has an investment in an entity that produces synthetic fuel and receives tax credits under Section 45K (formerly Section 29) of the IRC. In accordance with Section 45K of the IRC, these tax credits are subject to limitation as the annual average price of oil (as determined by the DOE) increases over a specified, inflation-adjusted dollar amount published in the spring of the subsequent year. Southern Company, along with its partners in this investment, has continued to monitor oil prices. Reserves against tax credits earned in 2007 of $2.8 million have been recorded in the first three months of 2007 due to projected phase-outs of the credits in 2007 as a result of current and projected future oil prices.

PROPERTY TAX DISPUTE

See Note 3 to the financial statements of Georgia Power and Gulf Power under “Property Tax Dispute” in Item 8 of the Form 10-K for information on the property tax dispute with Monroe County, Georgia (Monroe County). The administrative appeals and notices of arbitration have been expanded to include tax year 2006. The appeals remain stayed pending the outcome of the related litigation. On March 30, 2007, the Georgia Court of Appeals reversed the trial court and ruled that the Monroe Board had exceeded its legal authority and remanded the case for entry of an injunction prohibiting the Monroe Board from collecting taxes based on its independent valuation of Plant Scherer. On April 16, 2007, the Monroe Board filed an appeal to the Georgia Supreme Court. Georgia Power and Gulf Power intend to oppose that action. The suit could impact all co-owners. If Georgia Power and Gulf Power are successful, the litigation will be concluded. Otherwise, Georgia Power and Gulf Power could be subject to total taxes through March 31, 2007 of up to $20.0 million and $4.4 million, respectively, plus penalties and interest. In accordance with Gulf Power’s unit power sales contract for Plant Scherer, such property taxes would be recoverable from the customer. The ultimate outcome of this matter cannot currently be determined.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(C)

SEGMENT AND RELATED INFORMATION

Southern Company’s reportable business segment is the sale of electricity in the Southeast by the traditional 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, and energy-related services. Southern Power’s revenues from sales to the traditional operating companies were $110 million and $87 million for the three months ended March 31, 2007 and March 31, 2006, respectively. All other intersegment revenues are not material. Financial data for business segments and products and services are as follows:

	Electric Utilities
	Traditional
	Operating									All
	Companies		Southern Power		Eliminations			Total		Other		Eliminations			Consolidated
	(in millions)
Three Months Ended March  31, 2007:
Operating revenues	$	3,294	$	192	$	(140	)	$	3,346	$	101	$	(38	)	$	3,409
Segment net income (loss)		284		32		—			316		24		(1	)		339
Total assets at March 31, 2007	$	39,107	$	2,722	$	(73	)	$	41,756	$	1,993	$	(644	)	$	43,105

	Electric Utilities
	Traditional
	Operating									All
	Companies		Southern Power		Eliminations			Total		Other		Eliminations			Consolidated
	(in millions)
Three Months Ended March  31, 2006:
Operating revenues	$	2,964	$	140	$	(107	)	$	2,997	$	104	$	(38	)	$	3,063
Segment net income (loss)		239		20		—			259		1		2			262
Total assets at December 31, 2006	$	38,825	$	2,691	$	(110	)	$	41,406	$	1,933	$	(481	)	$	42,858

Products and Services

	Electric Utilities Revenues
Period	Retail		Wholesale		Other		Total
	(in millions)
Three Months Ended March 31, 2007	$	2,744	$	481	$	121	$	3,346
Three Months Ended March 31, 2006		2,471		415		111		2,997

(D)	MISSISSIPPI POWER RETAIL REGULATORY MATTERS
	See Note 3 to the financial statements of Mississippi Power under “Retail Regulatory Matters – Environmental Compliance Overview Plan” in Item 8 of the Form 10-K for information on Mississippi Power’s annual environmental filing with the Mississippi PSC. In February 2007, Mississippi Power filed with the Mississippi PSC its annual ECO Plan evaluation for 2007. Mississippi Power requested an 86 cent per 1,000 KWH increase for retail customers. This increase represents approximately $7.5 million in annual revenues for Mississippi Power. On April 13, 2007, the Mississippi PSC approved Mississippi Power’s ECO Plan as filed. The new rates are effective in May 2007.
	In April 2007, the Mississippi PSC issued an order allowing Mississippi Power to defer approximately $10.4 million of certain reliability related maintenance costs beginning January 1, 2007 and recover them over a four-year period beginning January 1, 2008. These costs relate to system upgrades and improvements that are now being made as a follow-up to the emergency repairs that were made subsequent to Hurricane Katrina. As of March 31, 2007, Mississippi Power had incurred and deferred approximately $2.1 million of such costs, which are included in Other Regulatory Assets on the Condensed Balance Sheets herein.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(E)

COMMON STOCK

For Southern Company, the only difference in computing basic and diluted earnings per share is attributable to exercised options and outstanding options under the stock option plan. See Note 8 to the financial statements of Southern Company in Item 8 of the Form 10-K for further information on the stock option plan. The effect of the stock options was determined using the treasury stock method. Shares used to compute diluted earnings per share are as follows (in thousands):

	Three Months		Three Months
	Ended		Ended
	March 31,		March 31,
	2007		2006
As reported shares		750,259		742,195
Effect of options		5,093		4,844
Diluted shares		755,352		747,039

(F)	FINANCIAL INSTRUMENTS
	See Note 6 to the financial statements of Southern Company, the traditional operating companies, and Southern Power under “Financial Instruments” in Item 8 of the Form 10-K. At March 31, 2007, the fair value gain/(loss) of derivative energy contracts was reflected in the financial statements as follows (in millions):

	Southern			Alabama			Georgia		Gulf		Mississippi		Southern
	Company			Power			Power		Power		Power		Power
Regulatory (assets)/ liabilities, net	$	11.0		$	(0.3	)	$	3.8	$	0.9	$	6.6	$	—
Accumulated other comprehensive income (loss)		(0.2	)		(0.1	)		—		—		—		(0.1	)
Net income (loss)		0.1			—			—		—		—		0.1
Total fair value	$	10.9		$	(0.4	)	$	3.8	$	0.9	$	6.6	$	—

For the three months ended March 31, 2007, the unrealized gain/loss recognized in income for derivative energy contracts that are not hedges was immaterial for all registrants. For the three months ended March 31, 2006, the unrealized gain recognized in income was $2.2 million for Southern Power and was immaterial for the other registrants.

The amounts reclassified from other comprehensive income to fuel expense for the three-month period ending March 31, 2007 and 2006 were immaterial for each registrant. Additionally, no material ineffectiveness has been recorded in net income for the three months ended March 31, 2007 and 2006. The amounts expected to be reclassified from other comprehensive income to revenue for the next twelve-month period to March 31, 2008 is also immaterial for each registrant.

During 2006 and January 2007, Southern Company entered into derivative transactions to reduce its exposure to a potential phase-out of certain income tax credits related to synthetic fuel production in 2007. In accordance with Section 45K of the IRC, these tax credits are subject to limitation as the annual average price of oil increases. At March 31, 2007, the fair value of all derivative transactions related to synthetic fuel production was a $26.5 million net asset. For the three months ended March 31, 2007, the fair value gain recognized in income to mark the transactions to market was $6.4 million. In April 2007, Southern Company entered into further derivative transactions to offset remaining exposure to a potential phase out of tax credits in 2007. Southern Company received a net premium of $4.4 million under these transactions.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

     At March 31, 2007, Southern Company had $2.0 billion notional amount of interest rate derivatives outstanding with net fair value losses of $0.5 million as follows:

     Cash Flow Hedges

			Weighted				Fair Value
		Variable	Average			Hedge	Gain (Loss)
	Notional	Rate	Fixed Rate			Maturity	March 31, 2007
	Amount	Received	Paid			Date	(in millions)
Alabama Power*	$100 million	3-month LIBOR		6.15	%	November 2017	$	(1.6	)
Alabama Power*	$100 million	3-month LIBOR		6.15	%	December 2017		(1.7	)
Georgia Power*	$300 million	3-month LIBOR		5.75	%	July 2037		1.1
Georgia Power**	$400 million	Floating		3.85	%	December 2007	—
Georgia Power	$150 million	3-month LIBOR		5.25	%	June 2017		(0.9	)
Georgia Power	$100 million	3-month LIBOR		5.10	%	December 2017		0.7
Georgia Power	$225 million	3-month LIBOR		5.26	%	March 2018		(1.1	)
Georgia Power	$100 million	3-month LIBOR		5.12	%	June 2018		0.7
Georgia Power	$300 million	1-month LIBOR		2.68	%	June 2007		0.7
Georgia Power	$14 million	BMA Index		2.50	%	December 2007		0.1
Gulf Power	$85 million	3-month LIBOR		5.07	%	July 2017		0.7
Gulf Power	$80 million	3-month LIBOR		5.10	%	July 2018		0.8

*	Interest rate collar showing rate cap
**	Interest rate collar with variable rate based on one-month LIBOR (showing rate cap)

The amounts reclassified from other comprehensive income to interest expense for the three-month period ending March 31, 2007 and 2006 was a loss of $3.5 million and $0.6 million, respectively, for Southern Company. No material ineffectiveness has been recorded in net income for any of the periods reported.

For the next twelve-month period ending March 31, 2008, the following table reflects the estimated pre-tax gains/(losses) that will be reclassified from other comprehensive income to interest expense (in millions):

Southern Company	$	(17.5	)
Alabama Power		(0.9	)
Georgia Power		(2.2	)
Gulf Power		(0.8	)
Southern Power		(13.6	)

109

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

(G)	RETIREMENT BENEFITS
	See Note 2 to the financial statements of Southern Company, Alabama Power, Georgia Power, Gulf Power, and Mississippi Power in Item 8 of the Form 10-K. Components of the pension plans’ and postretirement plans’ net periodic costs for the three-month periods ended March 31, 2007 and 2006 are as follows (in millions):

	Southern			Alabama			Georgia			Gulf			Mississippi
PENSION PLANS	Company			Power			Power			Power			Power
Three Months Ended March 31, 2007
Service cost	$	37		$	9		$	13		$	2		$	2
Interest cost		81			21			31			4			4
Expected return on plan assets		(120	)		(37	)		(49	)		(6	)		(5	)
Recognized net (gain)/loss		10			3			4			—			—
Net amortization		2			—			1			—			—
Net cost (income)	$	10		$	(4	)	$	—		$	—		$	1
Three Months Ended March 31, 2006
Service cost	$	38		$	9		$	13		$	2		$	2
Interest cost		75			19			30			3			3
Expected return on plan assets		(114	)		(35	)		(46	)		(5	)		(4	)
Recognized net (gain)/loss		4			1			1			—			—
Net amortization		7			2			2			—			—
Net cost (income)	$	10		$	(4	)	$	—		$	—		$	1

	Southern			Alabama			Georgia			Gulf		Mississippi
POSTRETIREMENT PLANS	Company			Power			Power			Power		Power
Three Months Ended March 31, 2007
Service cost	$	7		$	2		$	3		$	—	$	—
Interest cost		27			7			12			1		1
Expected return on plan assets		(13	)		(5	)		(7	)		—		—
Net amortization		10			3			5			—		1
Net cost (income)	$	31		$	7		$	13		$	1	$	2
Three Months Ended March 31, 2006
Service cost	$	7		$	2		$	3		$	—	$	—
Interest cost		25			6			11			1		1
Expected return on plan assets		(12	)		(4	)		(6	)		—		—
Net amortization		11			3			5			—		—
— -
Net cost (income)	$	31		$	7		$	13		$	1	$	1

(H)

EFFECTIVE TAX RATES

See Note 5 to the financial statements of Southern Company and Georgia Power in Item 8 of the Form 10-K for information on each company’s effective income tax rate. Southern Company has recorded synthetic fuel tax credits as of the three months ended March 31, 2007 that are $23.1 million less than the synthetic fuel tax credits recorded for the same period in 2006, which resulted in an increase in income tax expense. The increase in income tax expense was partially offset by a $17.3 million reduction to tax credit reserves in the first quarter of 2007 compared to the first quarter 2006. See Note (B) herein for additional information regarding the production of synthetic fuel tax credits in 2007. The impact of the reduction in synthetic fuel tax credits and these reserves is an increase in Southern Company’s effective tax rate for the three months ended March 31, 2007 as compared to the same period in 2006.

110

NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)

	Georgia Power recorded certain state income tax credits that resulted in a lower effective income tax rate for the first quarter ended March 31, 2007 when compared to the same period in 2006. In September 2006, Georgia Power filed its 2005 income tax returns, which included certain other state income tax credits. Georgia Power has also filed similar claims for the years 2001 through 2004. The Georgia Department of Revenue is currently reviewing these claims. If approved as filed, such claims could have a significant, and possibly material, effect on Georgia Power’s net income. The ultimate outcome of this matter cannot now be determined.
(I)	ADOPTION OF FIN 48
	On January 1, 2007, Southern Company, the traditional operating companies, and Southern Power adopted FIN 48, which requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. Prior to adoption of FIN 48, Southern Company had unrecognized tax benefits of approximately $65 million, which included approximately $62 million for Georgia Power. As of adoption, an additional $146 million of unrecognized tax benefits were recorded, which resulted in a total balance of $211 million. The $146 million is associated with a tax timing difference which was recorded by reclassifying a deferred tax liability to an unrecognized tax benefit. Of the total $211 million unrecognized tax benefits, $65 million would impact Southern Company’s effective tax rate if recognized, which includes $62 million for Georgia Power. For the first three months of 2007, the total amount of unrecognized tax benefits increased by $7 million, resulting in a balance of $218 million as of March 31, 2007.
	Southern Company classifies interest on tax uncertainties as interest expense. The net amount of interest accrued as of adoption was $24 million. The impact of adopting FIN 48 on Southern Company’s financial statements was a reduction to beginning 2007 retained earnings of approximately $15 million. The other registrants’ retained earnings balances were not impacted by the adoption of FIN 48. Net interest accrued for the three months ended March 31, 2007 was $0.2 million.
	Southern Company files a consolidated federal income tax return. The IRS has audited and closed all tax returns prior to 2004. Southern Company also files income tax returns in various states. The audits for these returns have either been concluded, or the statute of limitations has expired, for years prior to 2002.
	Southern Company does not anticipate that the total unrecognized tax benefits will significantly change due to settlement of audits or litigation, or the expiration of statute of limitations prior to March 31, 2008. See Note (B) herein for additional information regarding the implementation of FIN 48.

111

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 1A. Risk Factors.

See RISK FACTORS in Item 1A of the Form 10-K for a discussion of the risk factors of Southern Company and the subsidiary registrants. There have been no material changes to these risk factors from those previously disclosed in the Form 10-K.

112

Item 6. Exhibits.

(4) Instruments Describing Rights of Security Holders, Including Indentures

Southern Company

(a)1	Second Supplemental Indenture to the Senior Note Indenture dated as of March 28, 2007, providing for the issuance of the Series 2007B Senior Notes. (Designated in Form 8-K dated March 20, 2007, File No. 1-3526, as Exhibit 4.2.)
Alabama Power
(b)1	Thirty-Eighth Supplemental Indenture to Senior Note Indenture dated as of April 18, 2007, providing for the issuance of the Series 2007B Senior Notes. (Designated in Form 8-K dated April 4, 2007, File No. 1-3164, as Exhibit 4.2.)
Georgia Power
(c)1	Twenty-Eighth Supplemental Indenture to Senior Note Indenture dated as of March 13, 2007, providing for the issuance of the Series 2007A Senior Notes. (Designated in Form 8-K dated March 6, 2007, File No. 1-6468, as Exhibit 4.2.)
(10) Material Contracts
Southern Company
(a)1	Amended and Restated Change in Control Agreement dated November 16, 2006 between Southern Company, SCS and David M. Ratcliffe. *
(a)2	Amended and Restated Change in Control Agreement dated November 16, 2006 between Southern Company, SCS and Thomas A. Fanning. *
(a)3	Amended and Restated Change in Control Agreement dated November 16, 2006 between Southern Company, Georgia Power and Michael D. Garrett. *
(a)4	Amended and Restated Change in Control Agreement dated November 16, 2006 between Southern Company, SCS and William Paul Bowers. *
(a)5	Amended and Restated Change in Control Agreement dated November 16, 2006 between Southern Company, Alabama Power and Charles D. McCrary. *
(a)6	The Southern Company Supplemental Benefit Plan, Amended and Restated Effective as of January 1, 2005. (Designated in Form 8-K dated March 30, 2007, File No. 1-3526, as Exhibit 10.1.)
(a)7	The Southern Company Supplemental Executive Retirement Plan, Amended and Restated Effective as of January 1, 2005. (Designated in Form 8-K dated March 30, 2007, File No. 1-3526, as Exhibit 10.2)
(a)8	Amended and Restated Southern Company Change in Control Benefits Protection Plan, effective February 28, 2007.

113

Item 6. Exhibits. (continued)

Alabama Power
(b)1	Amended and Restated Change in Control Agreement dated November 16, 2006 between Southern Company, Alabama Power and Charles D. McCrary. See Exhibit 10(a)5 herein. *
(b)2	The Southern Company Supplemental Benefit Plan, Amended and Restated Effective as of January 1, 2005. Exhibit 10(a)6 herein.
(b)3	The Southern Company Supplemental Executive Retirement Plan, Amended and Restated Effective as of January 1, 2005. See Exhibit 10(a)7 herein.
(b)4	Amended and Restated Southern Company Change in Control Benefits Protection Plan, effective February 28, 2007. See Exhibit 10(a)8 herein.
(b)5	Intercompany Interchange Contract as revised effective May 1, 2007, among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power and SCS.
Georgia Power
(c)1	Amended and Restated Change in Control Agreement dated November 16, 2006 between Southern Company, Georgia Power and Michael D. Garrett. See Exhibit 10(a)3 herein. *
(c)2	The Southern Company Supplemental Benefit Plan, Amended and Restated Effective as of January 1, 2005. Exhibit 10(a)6 herein.
(c)3	The Southern Company Supplemental Executive Retirement Plan, Amended and Restated Effective as of January 1, 2005. See Exhibit 10(a)7 herein.
(c)4	Amended and Restated Southern Company Change in Control Benefits Protection Plan, effective February 28, 2007. See Exhibit 10(a)8 herein.
(c)5	Intercompany Interchange Contract as revised effective May 1, 2007, among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power and SCS. See Exhibit 10(b)5 herein.
Gulf Power
(d)1	The Southern Company Supplemental Benefit Plan, Amended and Restated Effective as of January 1, 2005. Exhibit 10(a)6 herein.
(d)2	The Southern Company Supplemental Executive Retirement Plan, Amended and Restated Effective as of January 1, 2005. See Exhibit 10(a)7 herein.
(d)3	Amended and Restated Southern Company Change in Control Benefits Protection Plan, effective February 28, 2007. See Exhibit 10(a)8 herein.
(d)4	Intercompany Interchange Contract as revised effective May 1, 2007, among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power and SCS. See Exhibit 10(b)5 herein.

114

Item 6. Exhibits. (continued)

Mississippi Power
(e)1		The Southern Company Supplemental Benefit Plan, Amended and Restated Effective as of January 1, 2005. Exhibit 10(a)6 herein.
(e)2		The Southern Company Supplemental Executive Retirement Plan, Amended and Restated Effective as of January 1, 2005. See Exhibit 10(a)7 herein.
(e)3		Amended and Restated Southern Company Change in Control Benefits Protection Plan, effective February 28, 2007. See Exhibit 10(a)8 herein.
(e)4		Intercompany Interchange Contract as revised effective May 1, 2007, among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power and SCS. See Exhibit 10(b)5 herein.
Southern Power
(f)1		Intercompany Interchange Contract as revised effective May 1, 2007, among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power and SCS. See Exhibit 10(b)5 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, 2006, 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, 2006, 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, 2006, 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, 2006, 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, 2006, File No. 001-11229 as Exhibit 24(e) and incorporated herein by reference.)

115

Item 6. Exhibits. (continued)

Southern Power
(f)1	-	Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2006, File No. 333-98553 as Exhibit 24(f) 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.
(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.

116

Item 6. Exhibits. (continued)

Southern Power
(f)1	-	Certificate of Southern Power’s Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
(f)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.
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.
Southern Power
(f)	-	Certificate of Southern Power’s Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

* Reflects the correction of an error in the agreement as originally filed.

117

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, President and Chief Executive Officer
	(Principal Executive Officer)
By	Thomas A. Fanning
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: May 7, 2007

118

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	Art P. Beattie
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: May 7, 2007

119

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	Cliff S. Thrasher
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: May 7, 2007

120

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 and Chief Financial Officer
	(Principal Financial Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: May 7, 2007

121

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	Frances V. Turnage
	Vice President, Treasurer and Chief Financial Officer
	(Principal Financial Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: May 7, 2007

122

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	Ronnie L. Bates
	President and Chief Executive Officer
	(Principal Executive Officer)
By	Michael W. Southern
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)
By	/s/ Wayne Boston
	(Wayne Boston, Attorney-in-fact)

Date: May 7, 2007

123

EX-10.A.1

                                                                  Exhibit 10(a)1


                              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
November 16, 2006. This Agreement amends and restates the Amended and Restated
Change in Control Agreement entered into by Mr. Ratcliffe, Southern and the
Company, effective June 1, 2004.

                                   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


                            ARTICLE I - DEFINITIONS.

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

     1.1 "Annual Compensation" shall mean Mr. Ratcliffe's Base Salary plus
Target Bonus under the Company's Short Term Bonus Plan.

     1.2 "Base Salary" shall mean Mr. Ratcliffe's highest annual base salary
rate during the twelve (12) month period immediately preceding the date the
Change in Control is Consummated.

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

     1.4 "Benefit Index" shall mean the Hewitt Associates' Benefit Index(r), or
if such index is no longer available, cannot be used, or if pursuant to Section
1.5 hereof another Benefits Consultant has been chosen by the Compensation
Committee, such other comparable index utilized by the Benefits Consultant.

     1.5 "Benefits Consultant" shall mean Hewitt Associates or such other
nationally recognized employee benefits consulting firm as shall be designated
in writing by the Compensation Committee upon the occurrence of a Preliminary
Change in Control that would result in a Subsidiary Change in Control.

     1.6 "Board of Directors" shall mean the board of directors of the Company.

     1.7 "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.

                                       2


     1.8 "Change in Control" shall mean,

          (a) with respect to Southern, the occurrence of 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 Section 1.8(a)(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 an employee of Southern or a Southern
               Subsidiary, or Group composed exclusively of such employees; or

                    (F) any Business Combination which would not otherwise
               constitute a Change in Control because of the application of
               clauses (A), (B) or (C) of Section 1.8(a)(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; or

                                       3


               (iii) The Consummation of a Business Combination, unless,
          following such Business Combination, all of the following three
          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 hold
               Beneficial Ownership, directly or indirectly, of 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 Business Combination 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 qualified pension plan,
               publicly held mutual fund, Group composed exclusively of
               Employees or employee benefit plan (or related trust) of
               Southern, any Southern Subsidiary or Surviving Company) 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

                                       4


                    (C) at least a majority of the members of the board of
               directors of Surviving Company were members of the Incumbent
               Board on the date of the Preliminary Change in Control.

          (b) with respect to the Company, the occurrence of any of the
     following:

               (i) 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 Section 1.8(b)(i), any acquisition
          by Mr. Ratcliffe, any other employee of Southern or a Southern
          Subsidiary, or Group composed entirely of such employees, any
          qualified pension plan, any publicly held mutual fund or any employee
          benefit plan (or related trust) sponsored or maintained by Southern or
          any Southern Subsidiary shall not constitute a Change in Control;

               (ii) The Consummation of a reorganization, merger or
          consolidation of the Company ("Company Business Combination"), in each
          case, unless, following such Company Business Combination, Southern or
          a Southern Subsidiary Controls the corporation surviving or resulting
          from such Company Business Combination; or

               (iii) The Consummation of the sale or other disposition of all or
          substantially all of the assets of the Company to an entity which
          Southern or a Southern Subsidiary does not Control ("Subsidiary Change
          in Control").

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

                                       5


     1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.

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

     1.12 "Company" shall mean Southern Company Services, Inc., its successors
and assigns.

     1.13 "Compensation Committee" shall mean the Compensation and Management
Succession Committee of the Southern Board.

     1.14 "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.

     1.15 "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.

     1.16 "Economic Equivalent" or "Economic Equivalence" shall have the meaning
set forth in Section 1.23(f) hereof.

                                       6


     1.17 "Employee Outplacement Program" shall mean the program established by
the Company from time to time for the purpose of assisting employees in finding
employment outside of the Company which provides for the following services:

          (a) self assessment, career decision and goal setting;

          (b) job market research and job sources;

          (c) networking and interviewing skills;

          (d) planning and implementation strategy;

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

          (f) office support and job search resources.

     1.18 "Company" shall mean Southern Company Services, Inc., its successors
and assigns.

     1.19 "Company Business Combination" shall have the meaning set forth in
Section 1.8(b)(ii) hereof.

     1.20 "Equity Based Bonus Plan" shall mean a plan or arrangement that
provides for the grant to participants of stock options, restricted stock, stock
appreciation rights, phantom stock, phantom stock appreciation rights or any
other similar rights the terms of which provide a participant with the potential
to receive the benefit of any increase in value of the underlying equity or
notional amount (e.g., number of phantom shares) from the date of grant through
a subsequent date.

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

     1.22 "Executive Employee" shall mean those employees of the Company of
Grade Level 10 or above.

                                       7


     1.23 "Good Reason" shall mean, without Mr. Ratcliffe's express written
consent, after written notice to the Company, and after a thirty (30) day
opportunity for the Company to cure, the continuing occurrence of any of the
events described in Subsections (a)(i), (b)(i), (c)(i), (d)(i) or (d)(ii) of
this Section 1.23. In the case of Mr. Ratcliffe claiming benefits under this
Agreement upon a Subsidiary Change in Control, the foregoing notice and
opportunity to cure will be satisfied if Mr. Ratcliffe provides to the
Compensation Committee a copy of his written offer of employment by the
acquiring company within thirty (30) days of such offer along with a written
explanation describing how the terms of such offer satisfy the requirements of
Subsections (a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) of this Section 1.23. The
Compensation Committee shall make a determination of whether such written offer
of employment satisfies the requirements of Sections 1.23(a)(ii), (b)(ii),
(c)(ii), (d)(iii) or (e) hereof upon consultation with the Benefits Consultant
and shall notify Mr. Ratcliffe of its decision within thirty (30) days of
receipt of Mr. Ratcliffe's written offer of employment. Any dispute regarding
the Compensation Committee's decision shall be resolved in accordance with
Article III hereof.

          (a) Inconsistent Duties.

               (i) Change in Control. 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) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Ratcliffe is offered
          employment with the acquiring employer with a job title, duties and
          status which are materially and detrimentally lower than Mr.


                                       8


          Ratcliffe's job title, duties and status in effect at the Company as
          of the date the offer of employment is received.

          (b) Reduced Compensation.

               (i) Change in Control. A reduction of five percent (5%) or more
          by the Company in any of the following amounts of compensation
          expressed in subparagraphs (A), (B) or (C) hereof, except for a less
          than ten percent (10%), across-the-board reduction in such
          compensation amounts similarly affecting ninety-five percent (95%) or
          more of the Executive Employees eligible for such compensation:

                    (A) Mr. Ratcliffe's Base Salary;

                    (B) the sum of Mr. Ratcliffe's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan, as in effect on the
               day immediately preceding the day the Change in Control is
               Consummated; or

                    (C) the sum of Mr. Ratcliffe's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan and Long Term Bonus
               Plan plus the Target Bonus under the Company's Equity Based Bonus
               Plan, each of which as in effect on the day immediately preceding
               the day the Change in Control is Consummated.

               (ii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Ratcliffe is offered
          Base Salary, Target Bonus under the acquiring company's Short Term
          Bonus Plan and Long Term Bonus Plan and Target Bonus under the


                                       9


          acquiring company's Equity Based Bonus Plan that, in the aggregate, is
          less than ninety percent (95%) of Mr. Ratcliffe's Base Salary plus
          Target Bonus under the Company's Short Term Bonus Plan and Long Term
          Bonus Plan, plus Target Bonus under the Company's Equity Based Bonus
          Plan, each of which as in effect on the day the offer of employment is
          received;

          (c) Relocation.

               (i) Company. A change in Mr. Ratcliffe's work location to a
          location more than fifty (50) miles from the facility where Mr.
          Ratcliffe was located on the day immediately preceding the day the
          Change in Control is Consummated, unless such new work location is
          within fifty (50) miles of Mr. Ratcliffe's principal place of
          residence on the day immediately preceding the day the Change in
          Control is Consummated. 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 Section 1.23(c) 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 on the day immediately
          preceding the day the Change in Control is Consummated, and such
          subsequent nonconsensual transfer shall be "Good Reason" under this
          Agreement;

               (ii) Subsidiary Change in Control. In the case of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Ratcliffe's work
          location under the terms of the offer of employment from the acquiring
          employer is more than fifty (50) miles from Mr. Ratcliffe's work
          location at the Company as of the date the offer of employment by the
          acquiring employer is received.

                                       10


          (d) Benefits and Perquisites.

               (i) Change in Control - Retirement and Welfare Benefits. The
          taking of any action by the Company that would directly or indirectly
          cause a Material Reduction in the Retirement and Welfare Benefits to
          which Mr. Ratcliffe is entitled under the Company's Retirement and
          Welfare Benefit plans in which Mr. Ratcliffe was participating on the
          day immediately preceding the day the Change in Control is
          Consummated.

               (ii) Vacation and Paid Time Off. The failure by the Company to
          provide Mr. Ratcliffe with the number of paid vacation days or, if
          applicable, paid time off 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 or the paid time off program
          (whichever applicable) in effect on the day immediately preceding the
          day the Change in Control is Consummated (except for across-the-board
          vacation policy or paid time off program changes or policy or program
          terminations similarly affecting at least ninety-five percent (95%) of
          all Executive Employees of the Company).

               (iii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Ratcliffe is offered
          a package of Retirement and Welfare Benefits by the acquiring employer
          that is not Economically Equivalent, as determined under Sections
          1.23(f) and (g) hereof.

          (e) Adoption of Severance Agreement. In the event of a Subsidiary
     Change in Control, Good Reason shall exist if the offer of employment by


                                       11


     the acquiring employer does not include an agreement to enter into a
     severance agreement substantially in the form of Exhibit B attached hereto.

          (f) Economic Equivalence. For purposes of Section 1.23(d)(iii) above,
     an acquiring employer's package of Retirement and Welfare Benefits shall be
     considered Economically Equivalent if, in the written opinion of the
     Benefits Consultant, the anticipated, employer-provided value of what Mr.
     Ratcliffe is expected to derive from the acquiring employer's Retirement
     and Welfare Benefits is equal to or greater than ninety percent (90%) of
     such value Mr. Ratcliffe would have derived from the Company's Retirement
     and Welfare Benefits using the Benefit Index.

          (g) Benefit Index Guidelines. For purposes of Section 1.23(f) above,
     the following guidelines shall be followed by the Company, the acquiring
     employer and the Benefits Consultant in the performance of the Benefit
     Index calculations:

               (i) Upon a Preliminary Change in Control that if Consummated
          would result in a Subsidiary Change in Control, the Company and the
          acquiring employer shall provide to the Benefits Consultant the
          applicable benefit plan provisions for the plan year in which the
          Subsidiary Change in Control is anticipated to occur. Plan provisions
          for the immediately preceding plan year may be provided if the
          Benefits Consultant determines that there have been no changes to such
          plans that would materially affect the determination of Economic
          Equivalence. If the acquiring employer's relevant plan provisions have
          not previously been included in the Benefits Consultant's Benefit
          Index database, the acquiring employer shall provide to the Benefits
          Consultant such plan information as the Benefits Consultant shall


                                       12


          request in writing as soon as practicable following such request. The
          Compensation Committees shall take such action as is reasonably
          required to facilitate the transfer of such information from the
          acquiring employer to the Benefits Consultant.

               (ii) The standard Benefit Index assumptions for the plan year
          from which the plan provisions are taken shall be used.

               (iii) The Company shall provide to the Benefit Consultant actual
          data for its Employees.

               (iv) The determination of whether or not the acquiring employer's
          Retirement and Welfare Benefits are Economically Equivalent to the
          Retirement and Welfare Benefits provided to Mr. Ratcliffe by the
          Company shall be determined on an aggregate basis. All assessments
          shall consider all benefits in total and no individual-by-individual,
          plan-by-plan determination of Economic Equivalence shall be made.

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

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

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

     1.27 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of February 23, 2006, 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


                                       13


February 23, 2006 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.

     1.28 "Long Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of more than twelve months.

     1.29 "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 other Southern Subsidiary.

     1.30 "Material Reduction" shall mean (i) any change in a retirement plan or
arrangement that has the effect of reducing the present value of the projected
benefits to be provided to Mr. Ratcliffe by five percent (5%) or more, (ii) any
five percent (5%) or more reduction in medical, health and accident and
disability benefits as a percentage of premiums or premium equivalents in
accordance with the Company's prior practice as measured over a period of the
three previous plan years from the date the Change in Control is Consummated, or
(iii) any five percent (5%) or more reduction in employer matching funds as a
percentage of employee contributions in accordance with the Company's prior
practice measured over a period of the previous three plan years from the date
the Change in Control is Consummated.

                                       14


     1.31 "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 date a Change in Control is Consummated.

     1.32 "Pension Plan" shall mean The Southern Company Pension Plan or any
successor thereto, as in effect on the date a Change in Control is Consummated.

     1.33 "Performance Dividend Program" or "PDP" shall mean the Performance
Dividend Program under the Omnibus Plan or any replacement thereto, as in effect
on the date a Change in Control is Consummated.

     1.34 "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as in effect on the
date a Change in Control is Consummated.

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

     1.36 "Preliminary Change in Control" shall mean the occurrence of any of
the following as administratively determined by the Southern Committee.

          (a) Southern or the Company has entered into a written agreement, such
     as, but not limited to, a letter of intent, which, if Consummated, would
     result in a Change in Control;

          (b) Southern, the Company or any Person publicly announces an
     intention to take or to consider taking actions which, if Consummated,
     would result in a Change of Control under circumstances where the
     Consummation of the announced action or intended action is legally and
     financially possible;

                                       15


          (c) Any Person achieves the Beneficial Ownership of fifteen percent
     (15%) or more of the Common Stock; or

          (d) The Southern Board or the Board of Directors has declared that a
     Preliminary Change of Control has occurred.

     1.37 "Retirement and Welfare Benefits" shall mean benefits provided by the
following types of plans and arrangements: pension plans, defined contribution
plans (matched savings, profit sharing, money purchase, ESOP, and similar plans
and arrangements), plans providing for death benefits while employed or retired
(life insurance, survivor income, and similar plans and arrangements), plans
providing for short-term disability benefits (including accident and sick time),
plans providing for long-term disability benefits, plans providing health-care
benefits (including reimbursements during active employment or retirement
related to expenses for medical, vision, hearing, dental, and similar plans and
arrangements).

     1.38 "Separation Date" shall mean the date on which Mr. Ratcliffe's
employment with the Company is terminated; provided, however, that solely for
purposes of Section 2.2(c) hereof, if, upon termination of employment with the
Company, Mr. Ratcliffe is deemed to have retired pursuant to the provisions of
Section 2.3 hereof, Mr. Ratcliffe's Separation Date shall be the effective date
of his retirement pursuant to the terms of the Pension Plan.

     1.39 "Short Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of twelve months or less.

     1.40 "Southern" shall mean The Southern Company, its successors and
assigns.

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

                                       16


     1.42 "Southern Committee" shall mean the committee comprised of the
Chairman of the Southern Board, the Chief Financial Officer of Southern and the
General Counsel of Southern.

     1.43 "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern or another Southern Subsidiary.

     1.44 "Subsidiary Change in Control" shall have the meaning set forth in
Section 1.8(b)(iii) hereof.

     1.45 "Target Bonus" shall mean the amount of incentive compensation
expressed as either a percent of salary or pay, an expected dollar amount, the
number of awards granted or such other quantifiable measure to determine the
amount to be paid or awards granted under the terms of the respective Short Term
Bonus Plan, Long Term Bonus Plan or Equity Based Bonus Plan, as used by the
Company or respective acquiring employer to measure the market competitiveness
of its employee compensation programs.

     1.46 "Termination for Cause" or "Cause" shall mean Mr. Ratcliffe's
termination of employment with the Company upon the occurrence of any of the
following:

          (a) The willful and continued failure by Mr. Ratcliffe to
     substantially 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 Mr. Ratcliffe has not substantially performed his duties; or

                                       17


          (b) 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:

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

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

               (iii) attendance by Mr. Ratcliffe 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;

               (iv) 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;

               (v) assault or other act of violence by Mr. Ratcliffe against any
          person during the course of employment; or

               (vi) Mr. Ratcliffe's indictment for any felony or any misdemeanor
          involving moral turpitude.

                                       18


     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 the majority
of the Southern Board at a meeting 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 in
Section 1.46(a) or (b) hereof and specifying the particulars thereof in detail.

     1.47 "Total Disability" shall mean total disability under the terms of the
Pension Plan.

     1.48 "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.

     1.49 "Waiver and Release" shall mean the Waiver and Release substantially
in the form of Exhibit A attached hereto.

     1.50 "Year of Service" shall mean an Employee'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 an Employee has a break in his
service with his Employing Company, he will receive credit under this Plan for
the service prior to the break in service only if the break in service was less
than five years and his service prior to the break exceeds the length of the
break in service.


                                       19


                        ARTICLE II - SEVERANCE BENEFITS

     2.1 Eligibility.

          (a) Except as otherwise provided herein, if Mr. Ratcliffe's employment
     is involuntarily terminated by the Company at any time during the two year
     period following a Change in Control of Southern or the Company 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 of Southern or the Company, he shall be
     entitled to receive the benefits described in Section 2.2 hereof, subject
     to the terms and conditions described in this Article II.

          (b) Limits on Eligibility. Notwithstanding anything to the contrary
     herein, Mr. Ratcliffe shall not be eligible to receive benefits under this
     Plan if Mr. Ratcliffe :

               (i) is not actively at work on his Separation Date, unless Mr.
          Ratcliffe is capable of returning to work within twelve (12) weeks of
          the beginning of any leave of absence from work;

               (ii) voluntarily terminates his employment with the Company for
          other than Good Reason;

               (iii) has his employment terminated by the Company for Cause;

               (iv) accepts the transfer of his employment to Southern, any
          Southern Subsidiary or any employer that acquires all or substantially
          all of the assets of Southern;

                                       20


               (v) accepts the transfer of his employment to any employer (or
          its affiliate) that acquires all or substantially all of the assets of
          a Southern Subsidiary or the Company and becomes an employee of any
          such employer (or its affiliate) following such acquisition (provided,
          however, that if Mr. Ratcliffe would otherwise have been entitled to
          severance benefits under this Agreement but for this Section
          2.1(b)(v), Mr. Ratcliffe shall be eligible for benefits under this
          Agreement except for those outplacement, severance and welfare
          benefits described in Sections 2.2(a), (b) and (c) hereof);

               (vi) is involuntarily separated from service with the Company
          after refusing an offer of employment by Southern or a Southern
          Subsidiary, under circumstances where the terms of such offer would
          not have amounted to Good Reason for voluntary termination of
          employment from the Company by comparing each item of compensation and
          benefits of such offer of employment as set forth in Section
          1.23(a)(i), (b)(i), (c)(i), (d)(i) and (d)(ii) above, with such items
          of compensation and benefits to which he is entitled at the Company as
          of the day immediately preceding the day of such offer of employment;

               (vii) refuses an offer of employment by an acquiring employer in
          a Subsidiary Change in Control under circumstances where such offer
          does not provide Good Reason under the requirements of Section
          1.23(a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) hereof.

               (viii) elects to receive the benefits of any other voluntary or
          involuntary severance, separation or outplacement program, plan or
          agreement maintained by the Company in lieu of benefits under this


                                       21


          Agreement; provided however, that the receipt of benefits under any
          retention plan or agreement shall not be deemed to be the receipt of
          benefits under any severance, separation or outplacement program for
          purposes of this Agreement.

     2.2 Severance Benefits. Upon the Company's receipt of an effective Waiver
and Release, Mr. Ratcliffe shall be entitled to receive the following severance
benefits:

          (a) 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
     Separation Date.

          (b) Severance Amount. Mr. Ratcliffe shall be paid in cash 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 3101(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


                                       22


     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 Section 2.2(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 a nationally recognized
     firm specializing in federal income taxes as selected by the Compensation
     Committee, and such calculations or determinations shall be binding upon
     Mr. Ratcliffe, Southern and the Company.

          (c) Welfare Benefit.

               (i) Except as provided in Section 2.3 hereof, Mr. Ratcliffe shall
          be eligible to participate in the Company's Group Health Plan for a
          period of six (6) months for each of Mr. Ratcliffe's Years of Service,
          not to exceed a period of five (5) years, beginning on the first day
          of the first month following Mr. Ratcliffe's Separation Date unless
          otherwise specifically provided under such plan, upon Mr. Ratcliffe's
          payment of both the Company's and Mr. Ratcliffe's premium under such
          plan. Mr. Ratcliffe shall also be entitled to elect coverage under the
          Group Health Plan for his dependents who are participating in the
          Group Health Plan on Mr. Ratcliffe's Separation Date (and for such
          other dependents as may be entitled to coverage under the provisions


                                       23


          of the Health Insurance Portability and Accountability Act of 1996)
          for the duration of Mr. Ratcliffe's extended medical coverage under
          this Section 2.2(c) to the extent such dependents remain eligible for
          dependent coverage under the terms of the Group Health Plan.

               (ii) The extended medical coverage afforded to Mr. Ratcliffe
          pursuant to this Section 2.2(c) 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 Mr. Ratcliffe fails to pay his
          premium within thirty (30) days of its due date, his extended coverage
          shall be terminated.

               (iii) Any Group Health Plan coverage provided under this Section
          2.2(c) shall be a part of and not in addition to any COBRA Coverage
          which Mr. Ratcliffe or his dependent may elect. In the event that Mr.
          Ratcliffe or his dependent becomes 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 dependent by virtue of
          the provisions of this Article II shall terminate, except as may
          otherwise be required by law, and shall not be renewed. It shall be
          the duty of Mr. Ratcliffe to inform the Company of his eligibility to
          participate in any such health plan.



                                       24


               (iv) Except as otherwise provided in Section 2.3 hereof,
          regardless of whether Mr. Ratcliffe elects the extended coverage
          described in Section 2.2(c) hereof, the Company shall pay to Mr.
          Ratcliffe a cash 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, as such Plans were in
          effect as of the date of the Change in Control.

          (d) Stock Option Vesting. The provisions of this Section 2.2(d) shall
     apply to any equity based awards under the Omnibus Plan, the defined terms
     of which are incorporated in this Section 2.2(d) by reference.

               (i) Any of Mr. Ratcliffe's Options and Stock Appreciation Rights
          outstanding as of the Separation Date which are not then exercisable
          and vested, shall become fully exercisable and vested; 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.

               (ii) The restrictions and deferral limitations applicable to any
          of Mr. Ratcliffe's Restricted Stock and Restricted Stock Units as of


                                       25


          the Separation 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.

          (e) Performance Pay Program. The provisions of this Section 2.2(e)
     shall apply to the Performance Pay Program under the Omnibus Plan, the
     defined terms of which are incorporated in this Section 2.2(e) by
     reference. Provided Mr. Ratcliffe is not entitled to a Cash-Based Award
     under the PPP, if the PPP is in place as of Mr. Ratcliffe's Separation 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 Award under the PPP for the performance
     period in which the Separation 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 Separation
     Date.

          (f) Performance Dividend Program. The provisions of this Section
     2.2(f) shall apply to the Performance Dividend Program, the defined terms
     of which are incorporated in this Section 2.2(f) by reference. Provided Mr.
     Ratcliffe is not entitled to a Cash-Based Award under the PDP, if the PDP
     is in place through Mr. Ratcliffe's Separation 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 PDP held
     as of such date based on a payout percentage of the greater of 50% or
     actual performance under the PDP for the performance period in which the
     Separation Date shall have occurred, and the sum of the quarterly dividends
     declared on the Common Stock in the performance year of and prior to the
     Separation Date. For purposes of this Section 2.2(f), payout of each
     Cash-Based Award under the PDP shall be based upon the performance


                                       26


     measurement period that would otherwise have ended on December 31st of the
     year in which Mr. Ratcliffe's Separation Date occurs, all other remaining
     PPP performance measurement periods shall terminate with respect to Mr.
     Ratcliffe and no payment to Mr. Ratcliffe shall be made with respect
     thereto.

          (g) Other Short Term Incentives Under the Omnibus Plan. The provisions
     of this Section 2.2(g) shall apply to Performance Unit or Performance Share
     awards under the Omnibus Plan. Provided Mr. Ratcliffe is not otherwise
     entitled to a Performance Unit/Share award under the Omnibus Plan, 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 Separation 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
     Separation Date.

          (h) Other Short-Term Incentive Plans. The provisions of this Section
     2.2(h) shall apply to Mr. Ratcliffe to the extent that he, as of the date
     of the Change in Control, is a participant in any other "short term
     incentive compensation plan" not otherwise previously referred to in this
     Section 2.2. Provided Mr. Ratcliffe is not otherwise entitled to a plan
     payout under any change in control provisions of such plans, if the "short
     term incentive compensation plan" is in place through Mr. Ratcliffe's
     Separation 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 his award under the Company's "short term incentive compensation plan"
     for the annual performance period in which the Separation 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


                                       27


     performance period until the Separation Date. For purposes of this Section
     2.2(h), 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 to
     participants based upon articulated performance criteria, and which have
     been identified by the Compensation Committee and listed on Exhibit B
     hereto, which may be amended from time to time to reflect plan additions,
     terminations and amendments.

          (i) Pro rata Calculation. For purposes of calculating any pro rata
     Cash-Based Awards under Section 2.2(e), (f), (g) and (h) hereof, a month
     shall not be considered if the determining event occurs on or before the
     14th day of the month, and a month shall be considered if the determining
     event occurs on or after the 15th day of the month.

          (j) No Duplicate Benefits. Notwithstanding anything in this Section
     2.2 to the contrary, in the event that Mr. Ratcliffe has received or is
     entitled to receive a Cash-Based Award under the PPP or the PDP as
     determined under the provisions of the Southern Company Change in Control
     Benefits Protection Plan (the "BPP") for the Performance Period which
     includes Mr. Ratcliffe's Separation Date, then the amount of any such
     Cash-Based Award under this Plan shall be reduced dollar-for-dollar by any
     such amount received or to be received under the BPP.

     2.3 Coordination with Retiree Medical and Life Insurance Coverage.
Notwithstanding anything to the contrary above, if Mr. Ratcliffe is otherwise
eligible to retire pursuant to the terms of the Pension Plan, he shall be deemed
to have retired for purposes of all employee benefit plans sponsored by the
Company of which Mr. Ratcliffe is a participant. If Mr. Ratcliffe is deemed to
have retired in accordance with the preceding sentence, he shall not be eligible


                                       28


to receive the benefits described in Section 2.2(c) hereof if, upon his
Separation Date, Mr. Ratcliffe becomes eligible to receive the retiree medical
and life insurance coverage provided to certain retirees pursuant to the terms
of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan.

     2.4 Payment of Benefits.

          (a) Except as otherwise provided in Section 2.4(b) hereof, the total
     amount payable under this Article II shall be paid to Mr. Ratcliffe in one
     (1) lump sum payment within two (2) payroll periods of the later of the
     following to occur: (a) Mr. Ratcliffe's Separation Date, or (b) the tender
     to the Company by Mr. Ratcliffe of an effective Waiver and Release 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.

          (b) Notwithstanding anything to the contrary in Section 2.4(a) above,
     if the Compensation Committee determines that it is necessary to delay any
     payment under this Article II in order to avoid any tax liability pursuant
     to Code Section 409A(a)(1), such payment shall be delayed for the period
     set forth in Section 409A(a)(2)(B)(i) and such delayed payment shall bear a
     reasonable rate of interest as determined by the Compensation Committee.

     2.5 Benefits in the Event of Death. In the event of Mr. Ratcliffe's death
prior to the payment of all benefits due under this Article II, Mr. Ratcliffe's
estate shall be entitled to receive as due any amounts not yet paid under this
Article II upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

                                       29


     2.6 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).

     2.7 No Mitigation. Mr. Ratcliffe shall have no duty or obligation to seek
other employment following his Separation Date and, except as otherwise provided
in Subsection 2.1(b) hereof, the amounts due Mr. Ratcliffe hereunder shall not
be reduced or suspended if he accepts such subsequent employment.

     2.8 Non-qualified Retirement and Deferred Compensation Plans. 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 procedures and
provisions set forth in Article III 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 Section 2.6
hereof.

                           ARTICLE III - ARBITRATION

     3.1 General. 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 Article III are not intended to apply to any other disputes, claims or


                                       30


controversies arising out of or relating to Mr. Ratcliffe's employment by the
Company or the termination thereof.

     3.2 Demand for Arbitration. 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 Compensation Committee, in the case of Mr. Ratcliffe.

     3.3 Law and Venue. The arbitrators shall apply the laws of the State of
Georgia, except to the extent pre-empted by federal law, excluding any law which
would require the use of the law of another state. The arbitration shall be held
in Atlanta, Georgia.

     3.4 Appointment of Arbitrators. Arbitrators shall be appointed 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.

     3.5 Costs. 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 Section 2.6
hereof.

     3.6 Interim and Injunctive Relief. Nothing in this Article III 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


                                       31


necessary to prevent harm to either party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Article III and nothing herein is intended to 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
Article III.

                      ARTICLE IV - TRANSFER OF EMPLOYMENT

     4.1 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 or a another Southern
Subsidiary, the Company shall assign this Agreement to Southern or such Southern
Subsidiary, Southern shall accept such assignment or cause such Southern
Subsidiary to accept such assignment, and such assignee shall become the
"Company" for all purposes hereunder.

                           ARTICLE V - MISCELLANEOUS

     5.1 Funding of Benefits. Unless the Board of Directors in its discretion
determines otherwise, the amounts payable to Mr. Ratcliffe under the 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.

     5.2 Withholding. There shall be deducted from the payment of any amount 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.

                                       32


     5.3 Assignment. Neither Mr. Ratcliffe nor his beneficiaries shall have any
rights to sell, assign, transfer, encumber, or otherwise convey the right to
receive the payment of any amount 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.

     5.4 Interpretation. This Agreement is intended to comply with the
provisions of Code Section 409A and the Treasury Regulations promulgated
thereunder in order to avoid any additional tax under Section 409A(a)(1). In the
event it is necessary to interpret the provisions of this Agreement for purposes
of its operation, such interpretation shall, to the extent possible, be
consistent with such intent.

     5.5 Amendment and Termination. The Agreement may be amended or terminated
only by a writing executed by the parties.


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 1st day of May, 2007.

                                       THE SOUTHERN COMPANY


                                       By:      /s/Patricia L. Roberts

                                       SOUTHERN COMPANY SERVICES, INC.


                                       By:      /s/Patricia L. Roberts

                                       MR. RATCLIFFE


                                       /s/David M. Ratcliffe
                                       David M. Ratcliffe


                                       33



                                    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 Section 2.2 of such
Agreement.



                                     1 of 5



                           CHANGE IN CONTROL AGREEMENT

                               Waiver and Release

         I, David M. Ratcliffe, understand that I am entitled to receive the
severance benefits described in Article II 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 Southern Company Services,
Inc. (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 receiving the severance and welfare benefits under
Article II of the Agreement, I hereby voluntarily and irrevocably waive,
release, dismiss with prejudice, and withdraw all claims, complaints, suits or
demands of any kind whatsoever (whether known or unknown) which I ever had, may
have, or now have against The Southern Company, Southern Company Services, Inc.,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Communications
Services, Inc. d/b/a Southern LINC, Southern Company Energy Solutions, L.L.C.,
Southern Nuclear Operating Company, Inc., Southern Telecom, Inc., Southern
Company Management Development, Inc., and other current or former subsidiaries
or affiliates of The Southern Company and their past, present and future
officers, directors, employees, agents, insurers and attorneys (collectively,
the "Releasees"), arising from or relating to (directly or indirectly) my
employment or the termination of my employment or other events occurred as of
the date of execution of this Agreement, including but not limited to:

                  (a) claims for violations of Title VII of the Civil Rights Act
         of 1964, the Age Discrimination in Employment Act, the Fair Labor
         Standards Act, the Civil Rights Act of 1991, the Americans With
         Disabilities Act, the Equal Pay Act, the Family and Medical Leave Act,
         42 U.S.C. ss. 1981, the National Labor Relations Act, the Labor
         Management Relations Act, Executive Order 11246, Executive Order 11141,
         the Rehabilitation Act of 1973, the Sarbanes-Oxley Act of 2002 or the
         Employee Retirement Income Security Act;

                  (b) claims for violations of any other federal or state
         statute or regulation or local ordinance;

                  (c) claims for lost or unpaid wages, compensation, or
         benefits, defamation, intentional or negligent infliction of emotional
         distress, assault, battery, wrongful or constructive discharge,
         negligent hiring, retention or supervision, fraud, misrepresentation,
         conversion, tortious interference, breach of contract, or breach of
         fiduciary duty;

                                     2 of 5


                  (d) claims to benefits under any bonus, severance, workforce
         reduction, early retirement, outplacement, or any other similar type
         plan sponsored by the Company (except for those plans listed below); or

                  (e) any other claims under state law arising in tort or
         contract.

         In signing this Agreement, I am not releasing any claims that may arise
under the terms of this Agreement or which may arise out of events occurring
after the date I execute this Agreement.

         I am also not releasing claims to benefits that I am already entitled
to receive under The Southern Company Pension Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Employee Savings Plan, The
Southern Company Omnibus Incentive Compensation Plan, The Southern Company
Change in Control Benefits Protection Plan or under any workers' compensation
laws. 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.

         Nothing in this Agreement shall prohibit me from engaging in protected
activities under applicable law (including protected activities described in
Section 211 of the Energy Reorganization Act) or from communicating, either
voluntarily or otherwise, with any governmental agency concerning any potential
violation of the law.

         I understand and agree for a period of two (2) years after the date I
execute this Agreement, I will regard and treat as strictly confidential all
valuable, non-public, competitively sensitive data and information relating to
the Releasees' business that is not generally known by or readily available to
Releasees' competitors and I will not for any reason, either directly or
indirectly, use, sell, lend, lease, distribute, license, transfer, assign, show,
disclose, disseminate, reproduce, copy, or otherwise communicate any such
information to any third party for my own benefit or for any purpose, other than
in accordance with the express, written instructions of the Company or
Releasees.

         I further understand and agree that I will regard and treat as strictly
confidential all trade secrets of Releasees for as long as such items remain
trade secrets under applicable law and I will not for any reason, either
directly or indirectly, use, sell, lend, lease, distribute, license, transfer,
assign, show, disclose, disseminate, reproduce, copy, or otherwise communicate
any such trade secrets to any third party for my own benefit or for any purpose,
other than in accordance with the express, written instructions of the Company
or Releasees.

         I further agree to keep confidential and not disclose the terms of this
Agreement, including, but not limited to, the benefits under the Agreement,
except to my spouse, attorneys or financial advisors (who must be informed of
and agree to be bound by the confidentiality provisions contained in this
Agreement before I disclose any information to them about this Agreement), or
where such disclosure is required by law.

                                     3 of 5


         I agree to return to the Company prior to my last day of employment all
property of the Company, including but not limited to data, lists, information,
memoranda, documents, identification cards, credit cards, parking cards, keys,
computers, fax machines, beepers, phones, and files (including copies thereof).

         I understand and agree that I will not seek re-employment as an
employee, leased employee or independent contractor with the Company or any
Southern Company subsidiary or affiliate during the twenty-four (24) month
period beginning immediately following my execution of this Agreement.

         I have carefully read this agreement and I fully understand all of the
provisions of this Waiver.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver (including my attorney, accountant
or tax advisor). Prior to signing this Waiver, I have been given the opportunity
and sufficient time to seek such advice.

         I have had the opportunity to review and consider this Waiver for a
period of at least twenty-one (21) days before signing it.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign this Waiver. In order to revoke this
Waiver, I must deliver written notification of such revocation to the
Compensation Committee. 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. Revocation of this
Waiver will not alter or change the termination of my employment by the Company.

         In signing this Waiver, I am not relying on any representation or
statement (written or oral) not specifically set forth in this Waiver, the
Agreement or by the company or any of its representatives with regard to the
subject matter, basis, or effect of this Waiver or otherwise.

         I was not coerced, threatened, or otherwise forced to sign this Waiver.
I am voluntarily signing and delivering this Waiver of my own free will.


                                     4 of 5


I understand that by signing this Waiver I am giving up rights i may have. I
understand I do not have to sign this Waiver.

     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.

By:
         -----------------------------------
Date:
         -----------------------------------



                                     5 of 5

EX-10.A.2

                                                                  Exhibit 10(a)2
                              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 November
16, 2006. This Agreement amends and restates the Amended and Restated Change in
Control Agreement entered into by Mr. Fanning, Southern and the Company,
effective June 1, 2004.

                                  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


                            ARTICLE I - DEFINITIONS.

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

     1.1 "Annual Compensation" shall mean Mr. Fanning's Base Salary plus Target
Bonus under the Company's Short Term Bonus Plan.

     1.2 "Base Salary" shall mean Mr. Fanning's highest annual base salary rate
during the twelve (12) month period immediately preceding the date the Change in
Control is Consummated.

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

     1.4 "Benefit Index" shall mean the Hewitt Associates' Benefit Index(r), or
if such index is no longer available, cannot be used, or if pursuant to Section
1.5 hereof another Benefits Consultant has been chosen by the Compensation
Committee, such other comparable index utilized by the Benefits Consultant.

     1.5 "Benefits Consultant" shall mean Hewitt Associates or such other
nationally recognized employee benefits consulting firm as shall be designated
in writing by the Compensation Committee upon the occurrence of a Preliminary
Change in Control that would result in a Subsidiary Change in Control.

     1.6 "Board of Directors" shall mean the board of directors of the Company.

     1.7 "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.

                                       2


     1.8 "Change in Control" shall mean,

          (a) with respect to Southern, the occurrence of 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 Section 1.8(a)(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 an employee of Southern or a Southern
               Subsidiary, or Group composed exclusively of such employees; or

                    (F) any Business Combination which would not otherwise
               constitute a Change in Control because of the application of
               clauses (A), (B) or (C) of Section 1.8(a)(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; or

                                       3


               (iii) The Consummation of a Business Combination, unless,
          following such Business Combination, all of the following three
          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 hold
               Beneficial Ownership, directly or indirectly, of 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 Business Combination 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 qualified pension plan,
               publicly held mutual fund, Group composed exclusively of
               Employees or employee benefit plan (or related trust) of
               Southern, any Southern Subsidiary or Surviving Company) 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

                                       4


                    (C) at least a majority of the members of the board of
               directors of Surviving Company were members of the Incumbent
               Board on the date of the Preliminary Change in Control.

          (b) with respect to the Company, the occurrence of any of the
     following:

               (i) 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 Section 1.8(b)(i), any acquisition
          by Mr. Fanning, any other employee of Southern or a Southern
          Subsidiary, or Group composed entirely of such employees, any
          qualified pension plan, any publicly held mutual fund or any employee
          benefit plan (or related trust) sponsored or maintained by Southern or
          any Southern Subsidiary shall not constitute a Change in Control;

               (ii) The Consummation of a reorganization, merger or
          consolidation of the Company ("Company Business Combination"), in each
          case, unless, following such Company Business Combination, Southern or
          a Southern Subsidiary Controls the corporation surviving or resulting
          from such Company Business Combination; or

               (iii) The Consummation of the sale or other disposition of all or
          substantially all of the assets of the Company to an entity which
          Southern or a Southern Subsidiary does not Control ("Subsidiary Change
          in Control").

     1.9 "COBRA Coverage" shall mean any continuation coverage to which Mr.
Fanning or his dependents may be entitled pursuant to Code Section 4980B.

                                       5


     1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.

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

     1.12 "Company" shall mean Southern Company Services, Inc., its successors
and assigns.

     1.13 "Compensation Committee" shall mean the Compensation and Management
Succession Committee of the Southern Board.

     1.14 "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.

     1.15 "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.

     1.16 "Economic Equivalent" or "Economic Equivalence" shall have the meaning
set forth in Section 1.23(f) hereof.

                                       6


     1.17 "Employee Outplacement Program" shall mean the program established by
the Company from time to time for the purpose of assisting employees in finding
employment outside of the Company which provides for the following services:

          (a) self assessment, career decision and goal setting;

          (b) job market research and job sources;

          (c) networking and interviewing skills;

          (d) planning and implementation strategy;

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

          (f) office support and job search resources.

     1.18 "Company" shall mean Southern Company Services, Inc., its successors
and assigns.

     1.19 "Company Business Combination" shall have the meaning set forth in
Section 1.8(b)(ii) hereof.

     1.20 "Equity Based Bonus Plan" shall mean a plan or arrangement that
provides for the grant to participants of stock options, restricted stock, stock
appreciation rights, phantom stock, phantom stock appreciation rights or any
other similar rights the terms of which provide a participant with the potential
to receive the benefit of any increase in value of the underlying equity or
notional amount (e.g., number of phantom shares) from the date of grant through
a subsequent date.

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

     1.22 "Executive Employee" shall mean those employees of the Company of
Grade Level 10 or above.

                                       7


     1.23 "Good Reason" shall mean, without Mr. Fanning's express written
consent, after written notice to the Company, and after a thirty (30) day
opportunity for the Company to cure, the continuing occurrence of any of the
events described in Subsections (a)(i), (b)(i), (c)(i), (d)(i) or (d)(ii) of
this Section 1.23. In the case of Mr. Fanning claiming benefits under this
Agreement upon a Subsidiary Change in Control, the foregoing notice and
opportunity to cure will be satisfied if Mr. Fanning provides to the
Compensation Committee a copy of his written offer of employment by the
acquiring company within thirty (30) days of such offer along with a written
explanation describing how the terms of such offer satisfy the requirements of
Subsections (a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) of this Section 1.23. The
Compensation Committee shall make a determination of whether such written offer
of employment satisfies the requirements of Sections 1.23(a)(ii), (b)(ii),
(c)(ii), (d)(iii) or (e) hereof upon consultation with the Benefits Consultant
and shall notify Mr. Fanning of its decision within thirty (30) days of receipt
of Mr. Fanning's written offer of employment. Any dispute regarding the
Compensation Committee's decision shall be resolved in accordance with Article
III hereof.

          (a) Inconsistent Duties.

               (i) Change in Control. 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) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Fanning is offered
          employment with the acquiring employer with a job title, duties and
          status which are materially and detrimentally lower than Mr. Fanning's


                                       8


          job title, duties and status in effect at the Company as of the date
          the offer of employment is received.

          (b) Reduced Compensation.

               (i) Change in Control. A reduction of five percent (5%) or more
          by the Company in any of the following amounts of compensation
          expressed in subparagraphs (A), (B) or (C) hereof, except for a less
          than ten percent (10%), across-the-board reduction in such
          compensation amounts similarly affecting ninety-five percent (95%) or
          more of the Executive Employees eligible for such compensation:

                    (A) Mr. Fanning's Base Salary;

                    (B) the sum of Mr. Fanning's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan, as in effect on the
               day immediately preceding the day the Change in Control is
               Consummated; or

                    (C) the sum of Mr. Fanning's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan and Long Term Bonus
               Plan plus the Target Bonus under the Company's Equity Based Bonus
               Plan, each of which as in effect on the day immediately preceding
               the day the Change in Control is Consummated.

               (ii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Fanning is offered
          Base Salary, Target Bonus under the acquiring company's Short Term
          Bonus Plan and Long Term Bonus Plan and Target Bonus under the


                                       9


          acquiring company's Equity Based Bonus Plan that, in the aggregate, is
          less than ninety percent (95%) of Mr. Fanning's Base Salary plus
          Target Bonus under the Company's Short Term Bonus Plan and Long Term
          Bonus Plan, plus Target Bonus under the Company's Equity Based Bonus
          Plan, each of which as in effect on the day the offer of employment is
          received;

          (c) Relocation.

               (i) Company. A change in Mr. Fanning's work location to a
          location more than fifty (50) miles from the facility where Mr.
          Fanning was located on the day immediately preceding the day the
          Change in Control is Consummated, unless such new work location is
          within fifty (50) miles of Mr. Fanning's principal place of residence
          on the day immediately preceding the day the Change in Control is
          Consummated. 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 Section 1.23(c) 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 on the day immediately preceding the day
          the Change in Control is Consummated, and such subsequent
          nonconsensual transfer shall be "Good Reason" under this Agreement;

               (ii) Subsidiary Change in Control. In the case of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Fanning's work
          location under the terms of the offer of employment from the acquiring
          employer is more than fifty (50) miles from Mr. Fanning's work
          location at the Company as of the date the offer of employment by the
          acquiring employer is received.

                                       10


          (d) Benefits and Perquisites.

               (i) Change in Control - Retirement and Welfare Benefits. The
          taking of any action by the Company that would directly or indirectly
          cause a Material Reduction in the Retirement and Welfare Benefits to
          which Mr. Fanning is entitled under the Company's Retirement and
          Welfare Benefit plans in which Mr. Fanning was participating on the
          day immediately preceding the day the Change in Control is
          Consummated.

               (ii) Vacation and Paid Time Off. The failure by the Company to
          provide Mr. Fanning with the number of paid vacation days or, if
          applicable, paid time off 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 or the paid time off program
          (whichever applicable) in effect on the day immediately preceding the
          day the Change in Control is Consummated (except for across-the-board
          vacation policy or paid time off program changes or policy or program
          terminations similarly affecting at least ninety-five percent (95%) of
          all Executive Employees of the Company).

               (iii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Fanning is offered a
          package of Retirement and Welfare Benefits by the acquiring employer
          that is not Economically Equivalent, as determined under Sections
          1.23(f) and (g) hereof.

          (e) Adoption of Severance Agreement. In the event of a Subsidiary
     Change in Control, Good Reason shall exist if the offer of employment by
     the acquiring employer does not include an agreement to enter into a


                                       11


     severance agreement substantially in the form of Exhibit B attached hereto.

          (f) Economic Equivalence. For purposes of Section 1.23(d)(iii) above,
     an acquiring employer's package of Retirement and Welfare Benefits shall be
     considered Economically Equivalent if, in the written opinion of the
     Benefits Consultant, the anticipated, employer-provided value of what Mr.
     Fanning is expected to derive from the acquiring employer's Retirement and
     Welfare Benefits is equal to or greater than ninety percent (90%) of such
     value Mr. Fanning would have derived from the Company's Retirement and
     Welfare Benefits using the Benefit Index.

          (g) Benefit Index Guidelines. For purposes of Section 1.23(f) above,
     the following guidelines shall be followed by the Company, the acquiring
     employer and the Benefits Consultant in the performance of the Benefit
     Index calculations:

               (i) Upon a Preliminary Change in Control that if Consummated
          would result in a Subsidiary Change in Control, the Company and the
          acquiring employer shall provide to the Benefits Consultant the
          applicable benefit plan provisions for the plan year in which the
          Subsidiary Change in Control is anticipated to occur. Plan provisions
          for the immediately preceding plan year may be provided if the
          Benefits Consultant determines that there have been no changes to such
          plans that would materially affect the determination of Economic
          Equivalence. If the acquiring employer's relevant plan provisions have
          not previously been included in the Benefits Consultant's Benefit
          Index database, the acquiring employer shall provide to the Benefits


                                       12


          Consultant such plan information as the Benefits Consultant shall
          request in writing as soon as practicable following such request. The
          Compensation Committees shall take such action as is reasonably
          required to facilitate the transfer of such information from the
          acquiring employer to the Benefits Consultant.

               (ii) The standard Benefit Index assumptions for the plan year
          from which the plan provisions are taken shall be used.

               (iii) The Company shall provide to the Benefit Consultant actual
          data for its Employees.

               (iv) The determination of whether or not the acquiring employer's
          Retirement and Welfare Benefits are Economically Equivalent to the
          Retirement and Welfare Benefits provided to Mr. Fanning by the Company
          shall be determined on an aggregate basis. All assessments shall
          consider all benefits in total and no individual-by-individual,
          plan-by-plan determination of Economic Equivalence shall be made.

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

     1.25 "Group Health Plan" shall mean the group health plan covering Mr.
Fanning, as such plan may be amended from time to time.

     1.26 "Group Life Insurance Plan" shall mean the group life insurance plan
covering Mr. Fanning, as such plan may be amended from time to time.

     1.27 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of February 23, 2006, 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


                                       13


individual who shall become a director of the Southern Board subsequent to
February 23, 2006 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.

     1.28 "Long Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of more than twelve months.

     1.29 "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 other Southern Subsidiary.

     1.30 "Material Reduction" shall mean (i) any change in a retirement plan or
arrangement that has the effect of reducing the present value of the projected
benefits to be provided to Mr. Fanning by five percent (5%) or more, (ii) any
five percent (5%) or more reduction in medical, health and accident and
disability benefits as a percentage of premiums or premium equivalents in
accordance with the Company's prior practice as measured over a period of the
three previous plan years from the date the Change in Control is Consummated, or
(iii) any five percent (5%) or more reduction in employer matching funds as a
percentage of employee contributions in accordance with the Company's prior
practice measured over a period of the previous three plan years from the date
the Change in Control is Consummated.

                                       14


     1.31 "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 date a Change in Control is Consummated.

     1.32 "Pension Plan" shall mean The Southern Company Pension Plan or any
successor thereto, as in effect on the date a Change in Control is Consummated.

     1.33 "Performance Dividend Program" or "PDP" shall mean the Performance
Dividend Program under the Omnibus Plan or any replacement thereto, as in effect
on the date a Change in Control is Consummated.

     1.34 "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as in effect on the
date a Change in Control is Consummated.

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

     1.36 "Preliminary Change in Control" shall mean the occurrence of any of
the following as administratively determined by the Southern Committee.

          (a) Southern or the Company has entered into a written agreement, such
     as, but not limited to, a letter of intent, which, if Consummated, would
     result in a Change in Control;

          (b) Southern, the Company or any Person publicly announces an
     intention to take or to consider taking actions which, if Consummated,
     would result in a Change of Control under circumstances where the
     Consummation of the announced action or intended action is legally and
     financially possible;

                                       15


          (c) Any Person achieves the Beneficial Ownership of fifteen percent
     (15%) or more of the Common Stock; or

          (d) The Southern Board or the Board of Directors has declared that a
     Preliminary Change of Control has occurred.

     1.37 "Retirement and Welfare Benefits" shall mean benefits provided by the
following types of plans and arrangements: pension plans, defined contribution
plans (matched savings, profit sharing, money purchase, ESOP, and similar plans
and arrangements), plans providing for death benefits while employed or retired
(life insurance, survivor income, and similar plans and arrangements), plans
providing for short-term disability benefits (including accident and sick time),
plans providing for long-term disability benefits, plans providing health-care
benefits (including reimbursements during active employment or retirement
related to expenses for medical, vision, hearing, dental, and similar plans and
arrangements).

     1.38 "Separation Date" shall mean the date on which Mr. Fanning's
employment with the Company is terminated; provided, however, that solely for
purposes of Section 2.2(c) hereof, if, upon termination of employment with the
Company, Mr. Fanning is deemed to have retired pursuant to the provisions of
Section 2.3 hereof, Mr. Fanning's Separation Date shall be the effective date of
his retirement pursuant to the terms of the Pension Plan.

     1.39 "Short Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of twelve months or less.

     1.40 "Southern" shall mean The Southern Company, its successors and
assigns.

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

                                       16


     1.42 "Southern Committee" shall mean the committee comprised of the
Chairman of the Southern Board, the Chief Financial Officer of Southern and the
General Counsel of Southern.

     1.43 "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern or another Southern Subsidiary.

     1.44 "Subsidiary Change in Control" shall have the meaning set forth in
Section 1.8(b)(iii) hereof.

     1.45 "Target Bonus" shall mean the amount of incentive compensation
expressed as either a percent of salary or pay, an expected dollar amount, the
number of awards granted or such other quantifiable measure to determine the
amount to be paid or awards granted under the terms of the respective Short Term
Bonus Plan, Long Term Bonus Plan or Equity Based Bonus Plan, as used by the
Company or respective acquiring employer to measure the market competitiveness
of its employee compensation programs.

     1.46 "Termination for Cause" or "Cause" shall mean Mr. Fanning's
termination of employment with the Company upon the occurrence of any of the
following:

          (a) The willful and continued failure by Mr. Fanning to substantially
     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 Mr. Fanning has
     not substantially performed his duties; or

                                       17


          (b) 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:

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

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

               (iii) attendance by Mr. Fanning 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;

               (iv) 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;

               (v) assault or other act of violence by Mr. Fanning against any
          person during the course of employment; or

               (vi) Mr. Fanning's indictment for any felony or any misdemeanor
          involving moral turpitude.

                                       18


     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 the majority of the
Southern Board at a meeting 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 in Section 1.46(a)
or (b) hereof and specifying the particulars thereof in detail.

     1.47 "Total Disability" shall mean total disability under the terms of the
Pension Plan.

     1.48 "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.

     1.49 "Waiver and Release" shall mean the Waiver and Release substantially
in the form of Exhibit A attached hereto.

     1.50 "Year of Service" shall mean an Employee'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 an Employee has a break in his
service with his Employing Company, he will receive credit under this Plan for
the service prior to the break in service only if the break in service was less
than five years and his service prior to the break exceeds the length of the
break in service.

                                       19



                        ARTICLE II - SEVERANCE BENEFITS

     2.1 Eligibility.

          (a) Except as otherwise provided herein, if Mr. Fanning's employment
     is involuntarily terminated by the Company at any time during the two year
     period following a Change in Control of Southern or the Company 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 of Southern or the Company, he shall be
     entitled to receive the benefits described in Section 2.2 hereof, subject
     to the terms and conditions described in this Article II.

          (b) Limits on Eligibility. Notwithstanding anything to the contrary
     herein, Mr. Fanning shall not be eligible to receive benefits under this
     Plan if Mr. Fanning :

               (i) is not actively at work on his Separation Date, unless Mr.
          Fanning is capable of returning to work within twelve (12) weeks of
          the beginning of any leave of absence from work;

               (ii) voluntarily terminates his employment with the Company for
          other than Good Reason;

               (iii) has his employment terminated by the Company for Cause;

               (iv) accepts the transfer of his employment to Southern, any
          Southern Subsidiary or any employer that acquires all or substantially
          all of the assets of Southern;

                                       20


               (v) accepts the transfer of his employment to any employer (or
          its affiliate) that acquires all or substantially all of the assets of
          a Southern Subsidiary or the Company and becomes an employee of any
          such employer (or its affiliate) following such acquisition (provided,
          however, that if Mr. Fanning would otherwise have been entitled to
          severance benefits under this Agreement but for this Section
          2.1(b)(v), Mr. Fanning shall be eligible for benefits under this
          Agreement except for those outplacement, severance and welfare
          benefits described in Sections 2.2(a), (b) and (c) hereof);

               (vi) is involuntarily separated from service with the Company
          after refusing an offer of employment by Southern or a Southern
          Subsidiary, under circumstances where the terms of such offer would
          not have amounted to Good Reason for voluntary termination of
          employment from the Company by comparing each item of compensation and
          benefits of such offer of employment as set forth in Section
          1.23(a)(i), (b)(i), (c)(i), (d)(i) and (d)(ii) above, with such items
          of compensation and benefits to which he is entitled at the Company as
          of the day immediately preceding the day of such offer of employment;

               (vii) refuses an offer of employment by an acquiring employer in
          a Subsidiary Change in Control under circumstances where such offer
          does not provide Good Reason under the requirements of Section
          1.23(a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) hereof.

               (viii) elects to receive the benefits of any other voluntary or
          involuntary severance, separation or outplacement program, plan or
          agreement maintained by the Company in lieu of benefits under this


                                       21


          Agreement; provided however, that the receipt of benefits under any
          retention plan or agreement shall not be deemed to be the receipt of
          benefits under any severance, separation or outplacement program for
          purposes of this Agreement.

     2.2 Severance Benefits. Upon the Company's receipt of an effective Waiver
and Release, Mr. Fanning shall be entitled to receive the following severance
benefits:

          (a) 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 Separation
     Date.

          (b) Severance Amount. Mr. Fanning shall be paid in cash 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 3101(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


                                       22


     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 Section 2.2(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 a nationally recognized
     firm specializing in federal income taxes as selected by the Compensation
     Committee, and such calculations or determinations shall be binding upon
     Mr. Fanning, Southern and the Company.

          (c) Welfare Benefit.

               (i) Except as provided in Section 2.3 hereof, Mr. Fanning shall
          be eligible to participate in the Company's Group Health Plan for a
          period of six (6) months for each of Mr. Fanning's Years of Service,
          not to exceed a period of five (5) years, beginning on the first day
          of the first month following Mr. Fanning's Separation Date unless
          otherwise specifically provided under such plan, upon Mr. Fanning's
          payment of both the Company's and Mr. Fanning's premium under such
          plan. Mr. Fanning shall also be entitled to elect coverage under the
          Group Health Plan for his dependents who are participating in the
          Group Health Plan on Mr. Fanning's Separation Date (and for such other
          dependents as may be entitled to coverage under the provisions of the


                                       23


          Health Insurance Portability and Accountability Act of 1996) for the
          duration of Mr. Fanning's extended medical coverage under this Section
          2.2(c) to the extent such dependents remain eligible for dependent
          coverage under the terms of the Group Health Plan.

               (ii) The extended medical coverage afforded to Mr. Fanning
          pursuant to this Section 2.2(c) 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 Mr. Fanning fails to pay his premium within
          thirty (30) days of its due date, his extended coverage shall be
          terminated.

               (iii) Any Group Health Plan coverage provided under this Section
          2.2(c) shall be a part of and not in addition to any COBRA Coverage
          which Mr. Fanning or his dependent may elect. In the event that Mr.
          Fanning or his dependent becomes 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 dependent by virtue of the
          provisions of this Article II shall terminate, except as may otherwise
          be required by law, and shall not be renewed. It shall be the duty of
          Mr. Fanning to inform the Company of his eligibility to participate in
          any such health plan.

                                       24


               (iv) Except as otherwise provided in Section 2.3 hereof,
          regardless of whether Mr. Fanning elects the extended coverage
          described in Section 2.2(c) hereof, the Company shall pay to Mr.
          Fanning a cash 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, as such Plans were in effect as of the
          date of the Change in Control.

          (d) Stock Option Vesting. The provisions of this Section 2.2(d) shall
     apply to any equity based awards under the Omnibus Plan, the defined terms
     of which are incorporated in this Section 2.2(d) by reference.

               (i) Any of Mr. Fanning's Options and Stock Appreciation Rights
          outstanding as of the Separation Date which are not then exercisable
          and vested, shall become fully exercisable and vested; 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.

               (ii) The restrictions and deferral limitations applicable to any
          of Mr. Fanning's Restricted Stock and Restricted Stock Units as of the
          Separation Date shall lapse, and such Restricted Stock and Restricted


                                       25


          Stock Units shall become free of all restrictions and limitations and
          become fully vested and transferable.

               (e) Performance Pay Program. The provisions of this Section
          2.2(e) shall apply to the Performance Pay Program under the Omnibus
          Plan, the defined terms of which are incorporated in this Section
          2.2(e) by reference. Provided Mr. Fanning is not entitled to a
          Cash-Based Award under the PPP, if the PPP is in place as of Mr.
          Fanning's Separation 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 Award under the
          PPP for the performance period in which the Separation 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 Separation Date.

               (f) Performance Dividend Program. The provisions of this Section
          2.2(f) shall apply to the Performance Dividend Program, the defined
          terms of which are incorporated in this Section 2.2(f) by reference.
          Provided Mr. Fanning is not entitled to a Cash-Based Award under the
          PDP, if the PDP is in place through Mr. Fanning's Separation 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 PDP held as of such date based on a payout percentage
          of the greater of 50% or actual performance under the PDP for the
          performance period in which the Separation Date shall have occurred,
          and the sum of the quarterly dividends declared on the Common Stock in
          the performance year of and prior to the Separation Date. For purposes
          of this Section 2.2(f), payout of each Cash-Based Award under the PDP
          shall be based upon the performance measurement period that would


                                       26


          otherwise have ended on December 31st of the year in which Mr.
          Fanning's Separation Date occurs, all other remaining PPP performance
          measurement periods shall terminate with respect to Mr. Fanning and no
          payment to Mr. Fanning shall be made with respect thereto.

               (g) Other Short Term Incentives Under the Omnibus Plan. The
          provisions of this Section 2.2(g) shall apply to Performance Unit or
          Performance Share awards under the Omnibus Plan. Provided Mr. Fanning
          is not otherwise entitled to a Performance Unit/Share award under the
          Omnibus Plan, 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 Separation 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 Separation Date.

               (h) Other Short-Term Incentive Plans. The provisions of this
          Section 2.2(h) shall apply to Mr. Fanning to the extent that he, as of
          the date of the Change in Control, is a participant in any other
          "short term incentive compensation plan" not otherwise previously
          referred to in this Section 2.2. Provided Mr. Fanning is not otherwise
          entitled to a plan payout under any change in control provisions of
          such plans, if the "short term incentive compensation plan" is in
          place through Mr. Fanning's Separation 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 his award under the
          Company's "short term incentive compensation plan" for the annual
          performance period in which the Separation 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 the Separation Date. For purposes of this


                                       27


          Section 2.2(h), 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 to participants based upon articulated
          performance criteria, and which have been identified by the
          Compensation Committee and listed on Exhibit B hereto, which may be
          amended from time to time to reflect plan additions, terminations and
          amendments.

               (i) Pro rata Calculation. For purposes of calculating any pro
          rata Cash-Based Awards under Section 2.2(e), (f), (g) and (h) hereof,
          a month shall not be considered if the determining event occurs on or
          before the 14th day of the month, and a month shall be considered if
          the determining event occurs on or after the 15th day of the month.

               (j) No Duplicate Benefits. Notwithstanding anything in this
          Section 2.2 to the contrary, in the event that Mr. Fanning has
          received or is entitled to receive a Cash-Based Award under the PPP or
          the PDP as determined under the provisions of the Southern Company
          Change in Control Benefits Protection Plan (the "BPP") for the
          Performance Period which includes Mr. Fanning's Separation Date, then
          the amount of any such Cash-Based Award under this Plan shall be
          reduced dollar-for-dollar by any such amount received or to be
          received under the BPP.

     2.3 Coordination with Retiree Medical and Life Insurance Coverage.
Notwithstanding anything to the contrary above, if Mr. Fanning is otherwise
eligible to retire pursuant to the terms of the Pension Plan, he shall be deemed
to have retired for purposes of all employee benefit plans sponsored by the
Company of which Mr. Fanning is a participant. If Mr. Fanning is deemed to have
retired in accordance with the preceding sentence, he shall not be eligible to


                                       28


receive the benefits described in Section 2.2(c) hereof if, upon his Separation
Date, Mr. Fanning becomes eligible to receive the retiree medical and life
insurance coverage provided to certain retirees pursuant to the terms of the
Pension Plan, the Group Health Plan and the Group Life Insurance Plan.

     2.4 Payment of Benefits.

          (a) Except as otherwise provided in Section 2.4(b) hereof, the total
     amount payable under this Article II shall be paid to Mr. Fanning in one
     (1) lump sum payment within two (2) payroll periods of the later of the
     following to occur: (a) Mr. Fanning's Separation Date, or (b) the tender to
     the Company by Mr. Fanning of an effective Waiver and Release 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.

          (b) Notwithstanding anything to the contrary in Section 2.4(a) above,
     if the Compensation Committee determines that it is necessary to delay any
     payment under this Article II in order to avoid any tax liability pursuant
     to Code Section 409A(a)(1), such payment shall be delayed for the period
     set forth in Section 409A(a)(2)(B)(i) and such delayed payment shall bear a
     reasonable rate of interest as determined by the Compensation Committee.

     2.5 Benefits in the Event of Death. In the event of Mr. Fanning's death
prior to the payment of all benefits due under this Article II, Mr. Fanning's
estate shall be entitled to receive as due any amounts not yet paid under this
Article II upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

                                       29


     2.6 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).

     2.7 No Mitigation. Mr. Fanning shall have no duty or obligation to seek
other employment following his Separation Date and, except as otherwise provided
in Subsection 2.1(b) hereof, the amounts due Mr. Fanning hereunder shall not be
reduced or suspended if he accepts such subsequent employment.

     2.8 Non-qualified Retirement and Deferred Compensation Plans. 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 procedures and
provisions set forth in Article III 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 Section 2.6 hereof.

                           ARTICLE III - ARBITRATION

     3.1 General. 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 Article III are not intended to apply to any other disputes, claims or


                                       30


controversies arising out of or relating to Mr. Fanning's employment by the
Company or the termination thereof.

     3.2 Demand for Arbitration. 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 Compensation Committee, in the case of Mr. Fanning.

     3.3 Law and Venue. The arbitrators shall apply the laws of the State of
Georgia, except to the extent pre-empted by federal law, excluding any law which
would require the use of the law of another state. The arbitration shall be held
in Atlanta, Georgia.

     3.4 Appointment of Arbitrators. Arbitrators shall be appointed 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.

     3.5 Costs. 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 Section 2.6
hereof.

     3.6 Interim and Injunctive Relief. Nothing in this Article III 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


                                       31


necessary to prevent harm to either party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Article III and nothing herein is intended to 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
Article III.

                      ARTICLE IV - TRANSFER OF EMPLOYMENT

     4.1 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 or a another Southern
Subsidiary, the Company shall assign this Agreement to Southern or such Southern
Subsidiary, Southern shall accept such assignment or cause such Southern
Subsidiary to accept such assignment, and such assignee shall become the
"Company" for all purposes hereunder.

                           ARTICLE V - MISCELLANEOUS

     5.1 Funding of Benefits. Unless the Board of Directors in its discretion
determines otherwise, the amounts payable to Mr. Fanning under the 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.

     5.2 Withholding. There shall be deducted from the payment of any amount 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.

                                       32


     5.3 Assignment. Neither Mr. Fanning nor his beneficiaries shall have any
rights to sell, assign, transfer, encumber, or otherwise convey the right to
receive the payment of any amount 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.

     5.4 Interpretation. This Agreement is intended to comply with the
provisions of Code Section 409A and the Treasury Regulations promulgated
thereunder in order to avoid any additional tax under Section 409A(a)(1). In the
event it is necessary to interpret the provisions of this Agreement for purposes
of its operation, such interpretation shall, to the extent possible, be
consistent with such intent.

     5.5 Amendment and Termination. The Agreement may be amended or terminated
only by a writing executed by the parties.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
1st day of May, 2007.

                                    THE SOUTHERN COMPANY


                                    By:      /s/David M. Ratcliffe

                                    SOUTHERN COMPANY SERVICES, INC.


                                    By:      /s/Robert A. Bell

                                    MR. FANNING


                                    /s/Thomas A. Fanning
                                    Thomas A. Fanning



                                       33



                                    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 Section 2.2 of such
Agreement.






                                     1 of 5



                           CHANGE IN CONTROL AGREEMENT

                               Waiver and Release

         I, Thomas A. Fanning, understand that I am entitled to receive the
severance benefits described in Article II 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 Southern Company Services,
Inc. (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 receiving the severance and welfare benefits under
Article II of the Agreement, I hereby voluntarily and irrevocably waive,
release, dismiss with prejudice, and withdraw all claims, complaints, suits or
demands of any kind whatsoever (whether known or unknown) which I ever had, may
have, or now have against The Southern Company, Southern Company Services, Inc.,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Communications
Services, Inc. d/b/a Southern LINC, Southern Company Energy Solutions, L.L.C.,
Southern Nuclear Operating Company, Inc., Southern Telecom, Inc., Southern
Company Management Development, Inc., and other current or former subsidiaries
or affiliates of The Southern Company and their past, present and future
officers, directors, employees, agents, insurers and attorneys (collectively,
the "Releasees"), arising from or relating to (directly or indirectly) my
employment or the termination of my employment or other events occurred as of
the date of execution of this Agreement, including but not limited to:

                  (a) claims for violations of Title VII of the Civil Rights Act
         of 1964, the Age Discrimination in Employment Act, the Fair Labor
         Standards Act, the Civil Rights Act of 1991, the Americans With
         Disabilities Act, the Equal Pay Act, the Family and Medical Leave Act,
         42 U.S.C. ss. 1981, the National Labor Relations Act, the Labor
         Management Relations Act, Executive Order 11246, Executive Order 11141,
         the Rehabilitation Act of 1973, the Sarbanes-Oxley Act of 2002 or the
         Employee Retirement Income Security Act;

                  (b) claims for violations of any other federal or state
         statute or regulation or local ordinance;

                  (c) claims for lost or unpaid wages, compensation, or
         benefits, defamation, intentional or negligent infliction of emotional
         distress, assault, battery, wrongful or constructive discharge,
         negligent hiring, retention or supervision, fraud, misrepresentation,
         conversion, tortious interference, breach of contract, or breach of
         fiduciary duty;

                                     2 of 5


                  (d) claims to benefits under any bonus, severance, workforce
         reduction, early retirement, outplacement, or any other similar type
         plan sponsored by the Company (except for those plans listed below); or

                  (e) any other claims under state law arising in tort or
         contract.

         In signing this Agreement, I am not releasing any claims that may arise
under the terms of this Agreement or which may arise out of events occurring
after the date I execute this Agreement.

         I am also not releasing claims to benefits that I am already entitled
to receive under The Southern Company Pension Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Employee Savings Plan, The
Southern Company Omnibus Incentive Compensation Plan, The Southern Company
Change in Control Benefits Protection Plan or under any workers' compensation
laws. 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.

         Nothing in this Agreement shall prohibit me from engaging in protected
activities under applicable law (including protected activities described in
Section 211 of the Energy Reorganization Act) or from communicating, either
voluntarily or otherwise, with any governmental agency concerning any potential
violation of the law.

         I understand and agree for a period of two (2) years after the date I
execute this Agreement, I will regard and treat as strictly confidential all
valuable, non-public, competitively sensitive data and information relating to
the Releasees' business that is not generally known by or readily available to
Releasees' competitors and I will not for any reason, either directly or
indirectly, use, sell, lend, lease, distribute, license, transfer, assign, show,
disclose, disseminate, reproduce, copy, or otherwise communicate any such
information to any third party for my own benefit or for any purpose, other than
in accordance with the express, written instructions of the Company or
Releasees.

         I further understand and agree that I will regard and treat as strictly
confidential all trade secrets of Releasees for as long as such items remain
trade secrets under applicable law and I will not for any reason, either
directly or indirectly, use, sell, lend, lease, distribute, license, transfer,
assign, show, disclose, disseminate, reproduce, copy, or otherwise communicate
any such trade secrets to any third party for my own benefit or for any purpose,
other than in accordance with the express, written instructions of the Company
or Releasees.

         I further agree to keep confidential and not disclose the terms of this
Agreement, including, but not limited to, the benefits under the Agreement,
except to my spouse, attorneys or financial advisors (who must be informed of
and agree to be bound by the confidentiality provisions contained in this
Agreement before I disclose any information to them about this Agreement), or
where such disclosure is required by law.

                                     3 of 5


         I agree to return to the Company prior to my last day of employment all
property of the Company, including but not limited to data, lists, information,
memoranda, documents, identification cards, credit cards, parking cards, keys,
computers, fax machines, beepers, phones, and files (including copies thereof).

         I understand and agree that I will not seek re-employment as an
employee, leased employee or independent contractor with the Company or any
Southern Company subsidiary or affiliate during the twenty-four (24) month
period beginning immediately following my execution of this Agreement.

         I have carefully read this agreement and I fully understand all of the
provisions of this Waiver.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver (including my attorney, accountant
or tax advisor). Prior to signing this Waiver, I have been given the opportunity
and sufficient time to seek such advice.

         I have had the opportunity to review and consider this Waiver for a
period of at least twenty-one (21) days before signing it.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign this Waiver. In order to revoke this
Waiver, I must deliver written notification of such revocation to the
Compensation Committee. 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. Revocation of this
Waiver will not alter or change the termination of my employment by the Company.

         In signing this Waiver, I am not relying on any representation or
statement (written or oral) not specifically set forth in this Waiver, the
Agreement or by the company or any of its representatives with regard to the
subject matter, basis, or effect of this Waiver or otherwise.

         I was not coerced, threatened, or otherwise forced to sign this Waiver.
I am voluntarily signing and delivering this Waiver of my own free will.


                                     4 of 5




I understand that by signing this Waiver I am giving up rights I may have. I
understand I do not have to sign this Waiver.

     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.

By:
         -----------------------------------
Date:
         -----------------------------------





                                     5 of 5

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"), Georgia Power
Company (the "Company") and Mr. Michael D. Garrett ("Mr. Garrett ") (hereinafter
collectively referred to as the "Parties") is effective November 16, 2006. This
Agreement amends and restates the Amended and Restated Change in Control
Agreement entered into by Mr. Garrett, Southern and the Company, effective June
1, 2004.

                                   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


                            ARTICLE I - DEFINITIONS.

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

     1.1 "Annual Compensation" shall mean Mr. Garrett's Base Salary plus Target
Bonus under the Company's Short Term Bonus Plan.

     1.2 "Base Salary" shall mean Mr. Garrett's highest annual base salary rate
during the twelve (12) month period immediately preceding the date the Change in
Control is Consummated.

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

     1.4 "Benefit Index" shall mean the Hewitt Associates' Benefit Index(r), or
if such index is no longer available, cannot be used, or if pursuant to Section
1.5 hereof another Benefits Consultant has been chosen by the Compensation
Committee, such other comparable index utilized by the Benefits Consultant.

     1.5 "Benefits Consultant" shall mean Hewitt Associates or such other
nationally recognized employee benefits consulting firm as shall be designated
in writing by the Compensation Committee upon the occurrence of a Preliminary
Change in Control that would result in a Subsidiary Change in Control.

     1.6 "Board of Directors" shall mean the board of directors of the Company.

     1.7 "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.

                                       2


     1.8 "Change in Control" shall mean,

          (a) with respect to Southern, the occurrence of 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 Section 1.8(a)(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 an employee of Southern or a Southern
               Subsidiary, or Group composed exclusively of such employees; or

                    (F) any Business Combination which would not otherwise
               constitute a Change in Control because of the application of
               clauses (A), (B) or (C) of Section 1.8(a)(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; or

                                       3


               (iii) The Consummation of a Business Combination, unless,
          following such Business Combination, all of the following three
          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 hold
               Beneficial Ownership, directly or indirectly, of 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 Business Combination 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 qualified pension plan,
               publicly held mutual fund, Group composed exclusively of
               Employees or employee benefit plan (or related trust) of
               Southern, any Southern Subsidiary or Surviving Company) 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

                                       4


                    (C) at least a majority of the members of the board of
               directors of Surviving Company were members of the Incumbent
               Board on the date of the Preliminary Change in Control.

          (b) with respect to the Company, the occurrence of any of the
     following:

               (i) 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 Section 1.8(b)(i), any acquisition
          by Mr. Garrett, any other employee of Southern or a Southern
          Subsidiary, or Group composed entirely of such employees, any
          qualified pension plan, any publicly held mutual fund or any employee
          benefit plan (or related trust) sponsored or maintained by Southern or
          any Southern Subsidiary shall not constitute a Change in Control;

               (ii) The Consummation of a reorganization, merger or
          consolidation of the Company ("Company Business Combination"), in each
          case, unless, following such Company Business Combination, Southern or
          a Southern Subsidiary Controls the corporation surviving or resulting
          from such Company Business Combination; or

               (iii) The Consummation of the sale or other disposition of all or
          substantially all of the assets of the Company to an entity which
          Southern or a Southern Subsidiary does not Control ("Subsidiary Change
          in Control").

     1.9 "COBRA Coverage" shall mean any continuation coverage to which Mr.
Garrett or his dependents may be entitled pursuant to Code Section 4980B.

                                       5


     1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.

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

     1.12 "Company" shall mean Georgia Power Company, its successors and
assigns.

     1.13 "Compensation Committee" shall mean the Compensation and Management
Succession Committee of the Southern Board.

     1.14 "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.

     1.15 "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.

     1.16 "Economic Equivalent" or "Economic Equivalence" shall have the meaning
set forth in Section 1.23(f) hereof.

                                       6


     1.17 "Employee Outplacement Program" shall mean the program established by
the Company from time to time for the purpose of assisting employees in finding
employment outside of the Company which provides for the following services:

          (a) self assessment, career decision and goal setting;

          (b) job market research and job sources;

          (c) networking and interviewing skills;

          (d) planning and implementation strategy;

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

          (f) office support and job search resources.

     1.18 "Company" shall mean Georgia Power Company, its successors and
assigns.

     1.19 "Company Business Combination" shall have the meaning set forth in
Section 1.8(b)(ii) hereof.

     1.20 "Equity Based Bonus Plan" shall mean a plan or arrangement that
provides for the grant to participants of stock options, restricted stock, stock
appreciation rights, phantom stock, phantom stock appreciation rights or any
other similar rights the terms of which provide a participant with the potential
to receive the benefit of any increase in value of the underlying equity or
notional amount (e.g., number of phantom shares) from the date of grant through
a subsequent date.

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

     1.22 "Executive Employee" shall mean those employees of the Company of
Grade Level 10 or above.

                                       7


     1.23 "Good Reason" shall mean, without Mr. Garrett's express written
consent, after written notice to the Company, and after a thirty (30) day
opportunity for the Company to cure, the continuing occurrence of any of the
events described in Subsections (a)(i), (b)(i), (c)(i), (d)(i) or (d)(ii) of
this Section 1.23. In the case of Mr. Garrett claiming benefits under this
Agreement upon a Subsidiary Change in Control, the foregoing notice and
opportunity to cure will be satisfied if Mr. Garrett provides to the
Compensation Committee a copy of his written offer of employment by the
acquiring company within thirty (30) days of such offer along with a written
explanation describing how the terms of such offer satisfy the requirements of
Subsections (a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) of this Section 1.23. The
Compensation Committee shall make a determination of whether such written offer
of employment satisfies the requirements of Sections 1.23(a)(ii), (b)(ii),
(c)(ii), (d)(iii) or (e) hereof upon consultation with the Benefits Consultant
and shall notify Mr. Garrett of its decision within thirty (30) days of receipt
of Mr. Garrett's written offer of employment. Any dispute regarding the
Compensation Committee's decision shall be resolved in accordance with Article
III hereof.

          (a) Inconsistent Duties.

               (i) Change in Control. 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) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Garrett is offered
          employment with the acquiring employer with a job title, duties and
          status which are materially and detrimentally lower than Mr. Garrett's


                                       8


          job title, duties and status in effect at the Company as of the date
          the offer of employment is received.

          (b) Reduced Compensation.

               (i) Change in Control. A reduction of five percent (5%) or more
          by the Company in any of the following amounts of compensation
          expressed in subparagraphs (A), (B) or (C) hereof, except for a less
          than ten percent (10%), across-the-board reduction in such
          compensation amounts similarly affecting ninety-five percent (95%) or
          more of the Executive Employees eligible for such compensation:

                    (A) Mr. Garrett's Base Salary;

                    (B) the sum of Mr. Garrett's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan, as in effect on the
               day immediately preceding the day the Change in Control is
               Consummated; or

                    (C) the sum of Mr. Garrett's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan and Long Term Bonus
               Plan plus the Target Bonus under the Company's Equity Based Bonus
               Plan, each of which as in effect on the day immediately preceding
               the day the Change in Control is Consummated.

               (ii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Garrett is offered
          Base Salary, Target Bonus under the acquiring company's Short Term
          Bonus Plan and Long Term Bonus Plan and Target Bonus under the
          acquiring company's Equity Based Bonus Plan that, in the aggregate, is


                                       9


          less than ninety percent (95%) of Mr. Garrett's Base Salary plus
          Target Bonus under the Company's Short Term Bonus Plan and Long Term
          Bonus Plan, plus Target Bonus under the Company's Equity Based Bonus
          Plan, each of which as in effect on the day the offer of employment is
          received;

          (c) Relocation.

               (i) Company. A change in Mr. Garrett's work location to a
          location more than fifty (50) miles from the facility where Mr.
          Garrett was located on the day immediately preceding the day the
          Change in Control is Consummated, unless such new work location is
          within fifty (50) miles of Mr. Garrett's principal place of residence
          on the day immediately preceding the day the Change in Control is
          Consummated. 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 Section 1.23(c) 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 on the day immediately preceding the day
          the Change in Control is Consummated, and such subsequent
          nonconsensual transfer shall be "Good Reason" under this Agreement;

               (ii) Subsidiary Change in Control. In the case of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Garrett's work
          location under the terms of the offer of employment from the acquiring
          employer is more than fifty (50) miles from Mr. Garrett's work
          location at the Company as of the date the offer of employment by the
          acquiring employer is received.

                                       10


          (d) Benefits and Perquisites.

               (i) Change in Control - Retirement and Welfare Benefits. The
          taking of any action by the Company that would directly or indirectly
          cause a Material Reduction in the Retirement and Welfare Benefits to
          which Mr. Garrett is entitled under the Company's Retirement and
          Welfare Benefit plans in which Mr. Garrett was participating on the
          day immediately preceding the day the Change in Control is
          Consummated.

               (ii) Vacation and Paid Time Off. The failure by the Company to
          provide Mr. Garrett with the number of paid vacation days or, if
          applicable, paid time off 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 or the paid time off program
          (whichever applicable) in effect on the day immediately preceding the
          day the Change in Control is Consummated (except for across-the-board
          vacation policy or paid time off program changes or policy or program
          terminations similarly affecting at least ninety-five percent (95%) of
          all Executive Employees of the Company).

               (iii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Garrett is offered a
          package of Retirement and Welfare Benefits by the acquiring employer
          that is not Economically Equivalent, as determined under Sections
          1.23(f) and (g) hereof.

          (e) Adoption of Severance Agreement. In the event of a Subsidiary
     Change in Control, Good Reason shall exist if the offer of employment by
     the acquiring employer does not include an agreement to enter into a


                                       11


     severance agreement substantially in the form of Exhibit B attached hereto.

          (f) Economic Equivalence. For purposes of Section 1.23(d)(iii) above,
     an acquiring employer's package of Retirement and Welfare Benefits shall be
     considered Economically Equivalent if, in the written opinion of the
     Benefits Consultant, the anticipated, employer-provided value of what Mr.
     Garrett is expected to derive from the acquiring employer's Retirement and
     Welfare Benefits is equal to or greater than ninety percent (90%) of such
     value Mr. Garrett would have derived from the Company's Retirement and
     Welfare Benefits using the Benefit Index.

          (g) Benefit Index Guidelines. For purposes of Section 1.23(f) above,
     the following guidelines shall be followed by the Company, the acquiring
     employer and the Benefits Consultant in the performance of the Benefit
     Index calculations:

               (i) Upon a Preliminary Change in Control that if Consummated
          would result in a Subsidiary Change in Control, the Company and the
          acquiring employer shall provide to the Benefits Consultant the
          applicable benefit plan provisions for the plan year in which the
          Subsidiary Change in Control is anticipated to occur. Plan provisions
          for the immediately preceding plan year may be provided if the
          Benefits Consultant determines that there have been no changes to such
          plans that would materially affect the determination of Economic
          Equivalence. If the acquiring employer's relevant plan provisions have
          not previously been included in the Benefits Consultant's Benefit
          Index database, the acquiring employer shall provide to the Benefits
          Consultant such plan information as the Benefits Consultant shall


                                       12


          request in writing as soon as practicable following such request. The
          Compensation Committees shall take such action as is reasonably
          required to facilitate the transfer of such information from the
          acquiring employer to the Benefits Consultant.

               (ii) The standard Benefit Index assumptions for the plan year
          from which the plan provisions are taken shall be used.

               (iii) The Company shall provide to the Benefit Consultant actual
          data for its Employees.

               (iv) The determination of whether or not the acquiring employer's
          Retirement and Welfare Benefits are Economically Equivalent to the
          Retirement and Welfare Benefits provided to Mr. Garrett by the Company
          shall be determined on an aggregate basis. All assessments shall
          consider all benefits in total and no individual-by-individual,
          plan-by-plan determination of Economic Equivalence shall be made.

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

     1.25 "Group Health Plan" shall mean the group health plan covering Mr.
Garrett, as such plan may be amended from time to time.

     1.26 "Group Life Insurance Plan" shall mean the group life insurance plan
covering Mr. Garrett, as such plan may be amended from time to time.

     1.27 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of February 23, 2006, 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


                                       13


individual who shall become a director of the Southern Board subsequent to
February 23, 2006 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.

     1.28 "Long Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of more than twelve months.

     1.29 "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 other Southern Subsidiary.

     1.30 "Material Reduction" shall mean (i) any change in a retirement plan or
arrangement that has the effect of reducing the present value of the projected
benefits to be provided to Mr. Garrett by five percent (5%) or more, (ii) any
five percent (5%) or more reduction in medical, health and accident and
disability benefits as a percentage of premiums or premium equivalents in
accordance with the Company's prior practice as measured over a period of the
three previous plan years from the date the Change in Control is Consummated, or
(iii) any five percent (5%) or more reduction in employer matching funds as a
percentage of employee contributions in accordance with the Company's prior
practice measured over a period of the previous three plan years from the date
the Change in Control is Consummated.

                                       14


     1.31 "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 date a Change in Control is Consummated.

     1.32 "Pension Plan" shall mean The Southern Company Pension Plan or any
successor thereto, as in effect on the date a Change in Control is Consummated.

     1.33 "Performance Dividend Program" or "PDP" shall mean the Performance
Dividend Program under the Omnibus Plan or any replacement thereto, as in effect
on the date a Change in Control is Consummated.

     1.34 "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as in effect on the
date a Change in Control is Consummated.

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

     1.36 "Preliminary Change in Control" shall mean the occurrence of any of
the following as administratively determined by the Southern Committee.

          (a) Southern or the Company has entered into a written agreement, such
     as, but not limited to, a letter of intent, which, if Consummated, would
     result in a Change in Control;

          (b) Southern, the Company or any Person publicly announces an
     intention to take or to consider taking actions which, if Consummated,
     would result in a Change of Control under circumstances where the
     Consummation of the announced action or intended action is legally and
     financially possible;

                                       15


          (c) Any Person achieves the Beneficial Ownership of fifteen percent
     (15%) or more of the Common Stock; or

          (d) The Southern Board or the Board of Directors has declared that a
     Preliminary Change of Control has occurred.

     1.37 "Retirement and Welfare Benefits" shall mean benefits provided by the
following types of plans and arrangements: pension plans, defined contribution
plans (matched savings, profit sharing, money purchase, ESOP, and similar plans
and arrangements), plans providing for death benefits while employed or retired
(life insurance, survivor income, and similar plans and arrangements), plans
providing for short-term disability benefits (including accident and sick time),
plans providing for long-term disability benefits, plans providing health-care
benefits (including reimbursements during active employment or retirement
related to expenses for medical, vision, hearing, dental, and similar plans and
arrangements).

     1.38 "Separation Date" shall mean the date on which Mr. Garrett's
employment with the Company is terminated; provided, however, that solely for
purposes of Section 2.2(c) hereof, if, upon termination of employment with the
Company, Mr. Garrett is deemed to have retired pursuant to the provisions of
Section 2.3 hereof, Mr. Garrett's Separation Date shall be the effective date of
his retirement pursuant to the terms of the Pension Plan.

     1.39 "Short Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of twelve months or less.

     1.40 "Southern" shall mean The Southern Company, its successors and
assigns.

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

                                       16


     1.42 "Southern Committee" shall mean the committee comprised of the
Chairman of the Southern Board, the Chief Financial Officer of Southern and the
General Counsel of Southern.

     1.43 "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern or another Southern Subsidiary.

     1.44 "Subsidiary Change in Control" shall have the meaning set forth in
Section 1.8(b)(iii) hereof.

     1.45 "Target Bonus" shall mean the amount of incentive compensation
expressed as either a percent of salary or pay, an expected dollar amount, the
number of awards granted or such other quantifiable measure to determine the
amount to be paid or awards granted under the terms of the respective Short Term
Bonus Plan, Long Term Bonus Plan or Equity Based Bonus Plan, as used by the
Company or respective acquiring employer to measure the market competitiveness
of its employee compensation programs.

     1.46 "Termination for Cause" or "Cause" shall mean Mr. Garrett's
termination of employment with the Company upon the occurrence of any of the
following:

          (a) The willful and continued failure by Mr. Garrett to substantially
     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 Mr. Garrett has
     not substantially performed his duties; or

                                       17


          (b) 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:

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

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

               (iii) attendance by Mr. Garrett 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;

               (iv) 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;

               (v) assault or other act of violence by Mr. Garrett against any
          person during the course of employment; or

               (vi) Mr. Garrett's indictment for any felony or any misdemeanor
          involving moral turpitude.

                                       18


               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 the majority of the Southern Board at a meeting
          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 in
          Section 1.46(a) or (b) hereof and specifying the particulars thereof
          in detail.

     1.47 "Total Disability" shall mean total disability under the terms of the
Pension Plan.

     1.48 "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.

     1.49 "Waiver and Release" shall mean the Waiver and Release substantially
in the form of Exhibit A attached hereto.

     1.50 "Year of Service" shall mean an Employee'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 an Employee has a break in his
service with his Employing Company, he will receive credit under this Plan for
the service prior to the break in service only if the break in service was less
than five years and his service prior to the break exceeds the length of the
break in service.


                                       19


                        ARTICLE II - SEVERANCE BENEFITS

     2.1 Eligibility.

          (a) Except as otherwise provided herein, if Mr. Garrett's employment
     is involuntarily terminated by the Company at any time during the two year
     period following a Change in Control of Southern or the Company 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 of Southern or the Company, he shall be
     entitled to receive the benefits described in Section 2.2 hereof, subject
     to the terms and conditions described in this Article II.

          (b) Limits on Eligibility. Notwithstanding anything to the contrary
     herein, Mr. Garrett shall not be eligible to receive benefits under this
     Plan if Mr. Garrett :

               (i) is not actively at work on his Separation Date, unless Mr.
          Garrett is capable of returning to work within twelve (12) weeks of
          the beginning of any leave of absence from work;

               (ii) voluntarily terminates his employment with the Company for
          other than Good Reason;

               (iii) has his employment terminated by the Company for Cause;

               (iv) accepts the transfer of his employment to Southern, any
          Southern Subsidiary or any employer that acquires all or substantially
          all of the assets of Southern;

                                       20


               (v) accepts the transfer of his employment to any employer (or
          its affiliate) that acquires all or substantially all of the assets of
          a Southern Subsidiary or the Company and becomes an employee of any
          such employer (or its affiliate) following such acquisition (provided,
          however, that if Mr. Garrett would otherwise have been entitled to
          severance benefits under this Agreement but for this Section
          2.1(b)(v), Mr. Garrett shall be eligible for benefits under this
          Agreement except for those outplacement, severance and welfare
          benefits described in Sections 2.2(a), (b) and (c) hereof);

               (vi) is involuntarily separated from service with the Company
          after refusing an offer of employment by Southern or a Southern
          Subsidiary, under circumstances where the terms of such offer would
          not have amounted to Good Reason for voluntary termination of
          employment from the Company by comparing each item of compensation and
          benefits of such offer of employment as set forth in Section
          1.23(a)(i), (b)(i), (c)(i), (d)(i) and (d)(ii) above, with such items
          of compensation and benefits to which he is entitled at the Company as
          of the day immediately preceding the day of such offer of employment;

               (vii) refuses an offer of employment by an acquiring employer in
          a Subsidiary Change in Control under circumstances where such offer
          does not provide Good Reason under the requirements of Section
          1.23(a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) hereof.

               (viii) elects to receive the benefits of any other voluntary or
          involuntary severance, separation or outplacement program, plan or
          agreement maintained by the Company in lieu of benefits under this


                                       21


          Agreement; provided however, that the receipt of benefits under any
          retention plan or agreement shall not be deemed to be the receipt of
          benefits under any severance, separation or outplacement program for
          purposes of this Agreement.

     2.2 Severance Benefits. Upon the Company's receipt of an effective Waiver
and Release, Mr. Garrett shall be entitled to receive the following severance
benefits:

          (a) 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 Separation
     Date.

          (b) Severance Amount. Mr. Garrett shall be paid in cash 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 3101(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


                                       22


     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 Section 2.2(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 a nationally recognized
     firm specializing in federal income taxes as selected by the Compensation
     Committee, and such calculations or determinations shall be binding upon
     Mr. Garrett, Southern and the Company.

          (c) Welfare Benefit.

               (i) Except as provided in Section 2.3 hereof, Mr. Garrett shall
          be eligible to participate in the Company's Group Health Plan for a
          period of six (6) months for each of Mr. Garrett's Years of Service,
          not to exceed a period of five (5) years, beginning on the first day
          of the first month following Mr. Garrett's Separation Date unless
          otherwise specifically provided under such plan, upon Mr. Garrett's
          payment of both the Company's and Mr. Garrett's premium under such
          plan. Mr. Garrett shall also be entitled to elect coverage under the
          Group Health Plan for his dependents who are participating in the
          Group Health Plan on Mr. Garrett's Separation Date (and for such other
          dependents as may be entitled to coverage under the provisions of the


                                       23


          Health Insurance Portability and Accountability Act of 1996) for the
          duration of Mr. Garrett's extended medical coverage under this Section
          2.2(c) to the extent such dependents remain eligible for dependent
          coverage under the terms of the Group Health Plan.

               (ii) The extended medical coverage afforded to Mr. Garrett
          pursuant to this Section 2.2(c) 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 Mr. Garrett fails to pay his premium within
          thirty (30) days of its due date, his extended coverage shall be
          terminated.

               (iii) Any Group Health Plan coverage provided under this Section
          2.2(c) shall be a part of and not in addition to any COBRA Coverage
          which Mr. Garrett or his dependent may elect. In the event that Mr.
          Garrett or his dependent becomes 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 dependent by virtue of the
          provisions of this Article II shall terminate, except as may otherwise
          be required by law, and shall not be renewed. It shall be the duty of
          Mr. Garrett to inform the Company of his eligibility to participate in
          any such health plan.

                                       24


               (iv) Except as otherwise provided in Section 2.3 hereof,
          regardless of whether Mr. Garrett elects the extended coverage
          described in Section 2.2(c) hereof, the Company shall pay to Mr.
          Garrett a cash 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, as such Plans were in effect as of the
          date of the Change in Control.

          (d) Stock Option Vesting. The provisions of this Section 2.2(d) shall
     apply to any equity based awards under the Omnibus Plan, the defined terms
     of which are incorporated in this Section 2.2(d) by reference.

               (i) Any of Mr. Garrett's Options and Stock Appreciation Rights
          outstanding as of the Separation Date which are not then exercisable
          and vested, shall become fully exercisable and vested; 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.

               (ii) The restrictions and deferral limitations applicable to any
          of Mr. Garrett's Restricted Stock and Restricted Stock Units as of the
          Separation Date shall lapse, and such Restricted Stock and Restricted


                                       25


          Stock Units shall become free of all restrictions and limitations and
          become fully vested and transferable.

          (e) Performance Pay Program. The provisions of this Section 2.2(e)
     shall apply to the Performance Pay Program under the Omnibus Plan, the
     defined terms of which are incorporated in this Section 2.2(e) by
     reference. Provided Mr. Garrett is not entitled to a Cash-Based Award under
     the PPP, if the PPP is in place as of Mr. Garrett's Separation 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 Award under the PPP for the performance period in which
     the Separation 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 Separation Date.

          (f) Performance Dividend Program. The provisions of this Section
     2.2(f) shall apply to the Performance Dividend Program, the defined terms
     of which are incorporated in this Section 2.2(f) by reference. Provided Mr.
     Garrett is not entitled to a Cash-Based Award under the PDP, if the PDP is
     in place through Mr. Garrett's Separation 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 PDP held as of
     such date based on a payout percentage of the greater of 50% or actual
     performance under the PDP for the performance period in which the
     Separation Date shall have occurred, and the sum of the quarterly dividends
     declared on the Common Stock in the performance year of and prior to the
     Separation Date. For purposes of this Section 2.2(f), payout of each
     Cash-Based Award under the PDP shall be based upon the performance
     measurement period that would otherwise have ended on December 31st of the


                                       26


     year in which Mr. Garrett's Separation Date occurs, all other remaining PPP
     performance measurement periods shall terminate with respect to Mr. Garrett
     and no payment to Mr. Garrett shall be made with respect thereto.

          (g) Other Short Term Incentives Under the Omnibus Plan. The provisions
     of this Section 2.2(g) shall apply to Performance Unit or Performance Share
     awards under the Omnibus Plan. Provided Mr. Garrett is not otherwise
     entitled to a Performance Unit/Share award under the Omnibus Plan, 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 Separation 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 Separation Date.

          (h) Other Short-Term Incentive Plans. The provisions of this Section
     2.2(h) shall apply to Mr. Garrett to the extent that he, as of the date of
     the Change in Control, is a participant in any other "short term incentive
     compensation plan" not otherwise previously referred to in this Section
     2.2. Provided Mr. Garrett is not otherwise entitled to a plan payout under
     any change in control provisions of such plans, if the "short term
     incentive compensation plan" is in place through Mr. Garrett's Separation
     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 his award
     under the Company's "short term incentive compensation plan" for the annual
     performance period in which the Separation 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


                                       27


     until the Separation Date. For purposes of this Section 2.2(h), 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 to participants based
     upon articulated performance criteria, and which have been identified by
     the Compensation Committee and listed on Exhibit B hereto, which may be
     amended from time to time to reflect plan additions, terminations and
     amendments.

          (i) Pro rata Calculation. For purposes of calculating any pro rata
     Cash-Based Awards under Section 2.2(e), (f), (g) and (h) hereof, a month
     shall not be considered if the determining event occurs on or before the
     14th day of the month, and a month shall be considered if the determining
     event occurs on or after the 15th day of the month.

          (j) No Duplicate Benefits. Notwithstanding anything in this Section
     2.2 to the contrary, in the event that Mr. Garrett has received or is
     entitled to receive a Cash-Based Award under the PPP or the PDP as
     determined under the provisions of the Southern Company Change in Control
     Benefits Protection Plan (the "BPP") for the Performance Period which
     includes Mr. Garrett's Separation Date, then the amount of any such
     Cash-Based Award under this Plan shall be reduced dollar-for-dollar by any
     such amount received or to be received under the BPP.

     2.3 Coordination with Retiree Medical and Life Insurance Coverage.
Notwithstanding anything to the contrary above, if Mr. Garrett is otherwise
eligible to retire pursuant to the terms of the Pension Plan, he shall be deemed
to have retired for purposes of all employee benefit plans sponsored by the
Company of which Mr. Garrett is a participant. If Mr. Garrett is deemed to have
retired in accordance with the preceding sentence, he shall not be eligible to
receive the benefits described in Section 2.2(c) hereof if, upon his Separation


                                       28


Date, Mr. Garrett becomes eligible to receive the retiree medical and life
insurance coverage provided to certain retirees pursuant to the terms of the
Pension Plan, the Group Health Plan and the Group Life Insurance Plan.

     2.4 Payment of Benefits.

          (a) Except as otherwise provided in Section 2.4(b) hereof, the total
     amount payable under this Article II shall be paid to Mr. Garrett in one
     (1) lump sum payment within two (2) payroll periods of the later of the
     following to occur: (a) Mr. Garrett's Separation Date, or (b) the tender to
     the Company by Mr. Garrett of an effective Waiver and Release 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.

          (b) Notwithstanding anything to the contrary in Section 2.4(a) above,
     if the Compensation Committee determines that it is necessary to delay any
     payment under this Article II in order to avoid any tax liability pursuant
     to Code Section 409A(a)(1), such payment shall be delayed for the period
     set forth in Section 409A(a)(2)(B)(i) and such delayed payment shall bear a
     reasonable rate of interest as determined by the Compensation Committee.

     2.5 Benefits in the Event of Death. In the event of Mr. Garrett's death
prior to the payment of all benefits due under this Article II, Mr. Garrett's
estate shall be entitled to receive as due any amounts not yet paid under this
Article II upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

                                       29


     2.6 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).

     2.7 No Mitigation. Mr. Garrett shall have no duty or obligation to seek
other employment following his Separation Date and, except as otherwise provided
in Subsection 2.1(b) hereof, the amounts due Mr. Garrett hereunder shall not be
reduced or suspended if he accepts such subsequent employment.

     2.8 Non-qualified Retirement and Deferred Compensation Plans. 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 procedures and
provisions set forth in Article III 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 Section 2.6 hereof.

                            ARTICLE III - ARBITRATION

     3.1 General. 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


                                       30


of this Article III 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.

     3.2 Demand for Arbitration. 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 Compensation Committee, in the case of Mr. Garrett.

     3.3 Law and Venue. The arbitrators shall apply the laws of the State of
Georgia, except to the extent pre-empted by federal law, excluding any law which
would require the use of the law of another state. The arbitration shall be held
in Atlanta, Georgia.

     3.4 Appointment of Arbitrators. Arbitrators shall be appointed 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.

     3.5 Costs. 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 Section 2.6
hereof.

     3.6 Interim and Injunctive Relief. Nothing in this Article III 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


                                       31


necessary to prevent harm to either party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Article III and nothing herein is intended to 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
Article III.

                      ARTICLE IV - TRANSFER OF EMPLOYMENT

     4.1 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 or a another Southern
Subsidiary, the Company shall assign this Agreement to Southern or such Southern
Subsidiary, Southern shall accept such assignment or cause such Southern
Subsidiary to accept such assignment, and such assignee shall become the
"Company" for all purposes hereunder.

                           ARTICLE V - MISCELLANEOUS

     5.1 Funding of Benefits. Unless the Board of Directors in its discretion
determines otherwise, the amounts payable to Mr. Garrett under the 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.

     5.2 Withholding. There shall be deducted from the payment of any amount 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.

                                       32


     5.3 Assignment. Neither Mr. Garrett nor his beneficiaries shall have any
rights to sell, assign, transfer, encumber, or otherwise convey the right to
receive the payment of any amount 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.

     5.4 Interpretation. This Agreement is intended to comply with the
provisions of Code Section 409A and the Treasury Regulations promulgated
thereunder in order to avoid any additional tax under Section 409A(a)(1). In the
event it is necessary to interpret the provisions of this Agreement for purposes
of its operation, such interpretation shall, to the extent possible, be
consistent with such intent.

     5.5 Amendment and Termination. The Agreement may be amended or terminated
only by a writing executed by the parties.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
1st day of May, 2007.

                                   THE SOUTHERN COMPANY


                                   By:      /s/David M. Ratcliffe

                                   GEORGIA POWER COMPANY


                                   By:      /s/Robert A. Bell

                                   MR. GARRETT


                                   /s/Michael D. Garrett
                                   Michael D. Garrett


                                       33


                                    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 Section 2.2 of
such Agreement.






                                     1 of 5


                           CHANGE IN CONTROL AGREEMENT

                               Waiver and Release

         I, Michael D. Garrett, understand that I am entitled to receive the
severance benefits described in Article II 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 Georgia 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 receiving the severance and welfare benefits under
Article II of the Agreement, I hereby voluntarily and irrevocably waive,
release, dismiss with prejudice, and withdraw all claims, complaints, suits or
demands of any kind whatsoever (whether known or unknown) which I ever had, may
have, or now have against The Southern Company, Southern Company Services, Inc.,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Communications
Services, Inc. d/b/a Southern LINC, Southern Company Energy Solutions, L.L.C.,
Southern Nuclear Operating Company, Inc., Southern Telecom, Inc., Southern
Company Management Development, Inc., and other current or former subsidiaries
or affiliates of The Southern Company and their past, present and future
officers, directors, employees, agents, insurers and attorneys (collectively,
the "Releasees"), arising from or relating to (directly or indirectly) my
employment or the termination of my employment or other events occurred as of
the date of execution of this Agreement, including but not limited to:

                  (a) claims for violations of Title VII of the Civil Rights Act
         of 1964, the Age Discrimination in Employment Act, the Fair Labor
         Standards Act, the Civil Rights Act of 1991, the Americans With
         Disabilities Act, the Equal Pay Act, the Family and Medical Leave Act,
         42 U.S.C. ss. 1981, the National Labor Relations Act, the Labor
         Management Relations Act, Executive Order 11246, Executive Order 11141,
         the Rehabilitation Act of 1973, the Sarbanes-Oxley Act of 2002 or the
         Employee Retirement Income Security Act;

                  (b) claims for violations of any other federal or state
         statute or regulation or local ordinance;

                  (c) claims for lost or unpaid wages, compensation, or
         benefits, defamation, intentional or negligent infliction of emotional
         distress, assault, battery, wrongful or constructive discharge,
         negligent hiring, retention or supervision, fraud, misrepresentation,
         conversion, tortious interference, breach of contract, or breach of
         fiduciary duty;

                                     2 of 5


                  (d) claims to benefits under any bonus, severance, workforce
         reduction, early retirement, outplacement, or any other similar type
         plan sponsored by the Company (except for those plans listed below); or

                  (e) any other claims under state law arising in tort or
         contract.

         In signing this Agreement, I am not releasing any claims that may arise
under the terms of this Agreement or which may arise out of events occurring
after the date I execute this Agreement.

         I am also not releasing claims to benefits that I am already entitled
to receive under The Southern Company Pension Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Employee Savings Plan, The
Southern Company Omnibus Incentive Compensation Plan, The Southern Company
Change in Control Benefits Protection Plan or under any workers' compensation
laws. 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.

         Nothing in this Agreement shall prohibit me from engaging in protected
activities under applicable law (including protected activities described in
Section 211 of the Energy Reorganization Act) or from communicating, either
voluntarily or otherwise, with any governmental agency concerning any potential
violation of the law.

         I understand and agree for a period of two (2) years after the date I
execute this Agreement, I will regard and treat as strictly confidential all
valuable, non-public, competitively sensitive data and information relating to
the Releasees' business that is not generally known by or readily available to
Releasees' competitors and I will not for any reason, either directly or
indirectly, use, sell, lend, lease, distribute, license, transfer, assign, show,
disclose, disseminate, reproduce, copy, or otherwise communicate any such
information to any third party for my own benefit or for any purpose, other than
in accordance with the express, written instructions of the Company or
Releasees.

         I further understand and agree that I will regard and treat as strictly
confidential all trade secrets of Releasees for as long as such items remain
trade secrets under applicable law and I will not for any reason, either
directly or indirectly, use, sell, lend, lease, distribute, license, transfer,
assign, show, disclose, disseminate, reproduce, copy, or otherwise communicate
any such trade secrets to any third party for my own benefit or for any purpose,
other than in accordance with the express, written instructions of the Company
or Releasees.

         I further agree to keep confidential and not disclose the terms of this
Agreement, including, but not limited to, the benefits under the Agreement,
except to my spouse, attorneys or financial advisors (who must be informed of
and agree to be bound by the confidentiality provisions contained in this
Agreement before I disclose any information to them about this Agreement), or
where such disclosure is required by law.

                                     3 of 5


         I agree to return to the Company prior to my last day of employment all
property of the Company, including but not limited to data, lists, information,
memoranda, documents, identification cards, credit cards, parking cards, keys,
computers, fax machines, beepers, phones, and files (including copies thereof).

         I understand and agree that I will not seek re-employment as an
employee, leased employee or independent contractor with the Company or any
Southern Company subsidiary or affiliate during the twenty-four (24) month
period beginning immediately following my execution of this Agreement.

         I have carefully read this agreement and I fully understand all of the
provisions of this Waiver.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver (including my attorney, accountant
or tax advisor). Prior to signing this Waiver, I have been given the opportunity
and sufficient time to seek such advice.

         I have had the opportunity to review and consider this Waiver for a
period of at least twenty-one (21) days before signing it.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign this Waiver. In order to revoke this
Waiver, I must deliver written notification of such revocation to the
Compensation Committee. 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. Revocation of this
Waiver will not alter or change the termination of my employment by the Company.

         In signing this Waiver, I am not relying on any representation or
statement (written or oral) not specifically set forth in this Waiver, the
Agreement or by the company or any of its representatives with regard to the
subject matter, basis, or effect of this Waiver or otherwise.

         I was not coerced, threatened, or otherwise forced to sign this Waiver.
I am voluntarily signing and delivering this Waiver of my own free will.


                                     4 of 5




I understand that by signing this Waiver I am giving up rights I may have. I
understand I do not have to sign this Waiver.

     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.

By:
         -----------------------------------
Date:
         -----------------------------------





                                     5 of 5

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. William Paul Bowers ("Mr.
Bowers") (hereinafter collectively referred to as the "Parties") is effective
November 16, 2006. This Agreement amends and restates the Change in Control
Agreement entered into by Mr. Bowers, Southern and Southern Company Services,
effective June 1, 2004.

                                   WITNESSETH:

     WHEREAS, Mr. Bowers is Executive Vice President of the Company;

     WHEREAS, the Company wishes to provide to Mr. Bowers 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



                            ARTICLE I - DEFINITIONS.

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

     1.1 "Annual Compensation" shall mean Mr. Bowers' Base Salary plus Target
Bonus under the Company's Short Term Bonus Plan.

     1.2 "Base Salary" shall mean Mr. Bowers' highest annual base salary rate
during the twelve (12) month period immediately preceding the date the Change in
Control is Consummated.

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

     1.4 "Benefit Index" shall mean the Hewitt Associates' Benefit Index(r), or
if such index is no longer available, cannot be used, or if pursuant to Section
1.5 hereof another Benefits Consultant has been chosen by the Compensation
Committee, such other comparable index utilized by the Benefits Consultant.

     1.5 "Benefits Consultant" shall mean Hewitt Associates or such other
nationally recognized employee benefits consulting firm as shall be designated
in writing by the Compensation Committee upon the occurrence of a Preliminary
Change in Control that would result in a Subsidiary Change in Control.

     1.6 "Board of Directors" shall mean the board of directors of the Company.

     1.7 "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.

                                       2


     1.8 "Change in Control" shall mean,

          (a) with respect to Southern, the occurrence of 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 Section 1.8(a)(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 an employee of Southern or a Southern
               Subsidiary, or Group composed exclusively of such employees; or

                    (F) any Business Combination which would not otherwise
               constitute a Change in Control because of the application of
               clauses (A), (B) or (C) of Section 1.8(a)(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; or

                                       3


               (iii) The Consummation of a Business Combination, unless,
          following such Business Combination, all of the following three
          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 hold
               Beneficial Ownership, directly or indirectly, of 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 Business Combination 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 qualified pension plan,
               publicly held mutual fund, Group composed exclusively of
               Employees or employee benefit plan (or related trust) of
               Southern, any Southern Subsidiary or Surviving Company) 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

                                       4


                    (C) at least a majority of the members of the board of
               directors of Surviving Company were members of the Incumbent
               Board on the date of the Preliminary Change in Control.

          (b) with respect to the Company, the occurrence of any of the
     following:

               (i) 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 Section 1.8(b)(i), any acquisition
          by Mr. Bowers, any other employee of Southern or a Southern
          Subsidiary, or Group composed entirely of such employees, any
          qualified pension plan, any publicly held mutual fund or any employee
          benefit plan (or related trust) sponsored or maintained by Southern or
          any Southern Subsidiary shall not constitute a Change in Control;

               (ii) The Consummation of a reorganization, merger or
          consolidation of the Company ("Company Business Combination"), in each
          case, unless, following such Company Business Combination, Southern or
          a Southern Subsidiary Controls the corporation surviving or resulting
          from such Company Business Combination; or

               (iii) The Consummation of the sale or other disposition of all or
          substantially all of the assets of the Company to an entity which
          Southern or a Southern Subsidiary does not Control ("Subsidiary Change
          in Control").

     1.9 "COBRA Coverage" shall mean any continuation coverage to which Mr.
Bowers or his dependents may be entitled pursuant to Code Section 4980B.

                                       5


     1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.

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

     1.12 "Company" shall mean Southern Company Services, Inc., its successors
and assigns.

     1.13 "Compensation Committee" shall mean the Compensation and Management
Succession Committee of the Southern Board.

     1.14 "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.

     1.15 "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.

     1.16 "Economic Equivalent" or "Economic Equivalence" shall have the meaning
set forth in Section 1.23(f) hereof.

                                       6


     1.17 "Employee Outplacement Program" shall mean the program established by
the Company from time to time for the purpose of assisting employees in finding
employment outside of the Company which provides for the following services:

          (a) self assessment, career decision and goal setting;

          (b) job market research and job sources;

          (c) networking and interviewing skills;

          (d) planning and implementation strategy;

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

          (f) office support and job search resources.

     1.18 "Company" shall mean Southern Company Services, Inc., its successors
and assigns.

     1.19 "Company Business Combination" shall have the meaning set forth in
Section 1.8(b)(ii) hereof.

     1.20 "Equity Based Bonus Plan" shall mean a plan or arrangement that
provides for the grant to participants of stock options, restricted stock, stock
appreciation rights, phantom stock, phantom stock appreciation rights or any
other similar rights the terms of which provide a participant with the potential
to receive the benefit of any increase in value of the underlying equity or
notional amount (e.g., number of phantom shares) from the date of grant through
a subsequent date.

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

     1.22 "Executive Employee" shall mean those employees of the Company of
Grade Level 10 or above.

                                       7


     1.23 "Good Reason" shall mean, without Mr. Bowers' express written consent,
after written notice to the Company, and after a thirty (30) day opportunity for
the Company to cure, the continuing occurrence of any of the events described in
Subsections (a)(i), (b)(i), (c)(i), (d)(i) or (d)(ii) of this Section 1.23. In
the case of Mr. Bowers claiming benefits under this Agreement upon a Subsidiary
Change in Control, the foregoing notice and opportunity to cure will be
satisfied if Mr. Bowers provides to the Compensation Committee a copy of his
written offer of employment by the acquiring company within thirty (30) days of
such offer along with a written explanation describing how the terms of such
offer satisfy the requirements of Subsections (a)(ii), (b)(ii), (c)(ii),
(d)(iii) or (e) of this Section 1.23. The Compensation Committee shall make a
determination of whether such written offer of employment satisfies the
requirements of Sections 1.23(a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) hereof
upon consultation with the Benefits Consultant and shall notify Mr. Bowers of
its decision within thirty (30) days of receipt of Mr. Bowers' written offer of
employment. Any dispute regarding the Compensation Committee's decision shall be
resolved in accordance with Article III hereof.

          (a) Inconsistent Duties.

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

               (ii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Bowers is offered
          employment with the acquiring employer with a job title, duties and
          status which are materially and detrimentally lower than Mr. Bowers'


                                       8


          job title, duties and status in effect at the Company as of the date
          the offer of employment is received.

          (b) Reduced Compensation.

               (i) Change in Control. A reduction of five percent (5%) or more
          by the Company in any of the following amounts of compensation
          expressed in subparagraphs (A), (B) or (C) hereof, except for a less
          than ten percent (10%), across-the-board reduction in such
          compensation amounts similarly affecting ninety-five percent (95%) or
          more of the Executive Employees eligible for such compensation:

                    (A) Mr. Bowers' Base Salary;


                    (B) the sum of Mr. Bowers' Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan, as in effect on the
               day immediately preceding the day the Change in Control is
               Consummated; or

                    (C) the sum of Mr. Bowers' Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan and Long Term Bonus
               Plan plus the Target Bonus under the Company's Equity Based Bonus
               Plan, each of which as in effect on the day immediately preceding
               the day the Change in Control is Consummated.

               (ii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Bowers is offered
          Base Salary, Target Bonus under the acquiring company's Short Term
          Bonus Plan and Long Term Bonus Plan and Target Bonus under the
          acquiring company's Equity Based Bonus Plan that, in the aggregate, is
          less than ninety percent (95%) of Mr. Bowers' Base Salary plus Target
          Bonus under the Company's Short Term Bonus Plan and Long Term Bonus
          Plan, plus Target Bonus under the Company's Equity Based Bonus Plan,


                                       9


          each of which as in effect on the day the offer of employment is
          received;

          (c) Relocation.

               (i) Company. A change in Mr. Bowers' work location to a location
          more than fifty (50) miles from the facility where Mr. Bowers was
          located on the day immediately preceding the day the Change in Control
          is Consummated, unless such new work location is within fifty (50)
          miles of Mr. Bowers' principal place of residence on the day
          immediately preceding the day the Change in Control is Consummated.
          The acceptance, if any, by Mr. Bowers of employment by the Company at
          a work location which is outside the fifty mile radius set forth in
          this Section 1.23(c) shall not be a waiver of Mr. Bowers' right to
          refuse subsequent transfer by the Company to a location which is more
          than fifty (50) miles from Mr. Bowers' principal place of residence on
          the day immediately preceding the day the Change in Control is
          Consummated, and such subsequent nonconsensual transfer shall be "Good
          Reason" under this Agreement;

               (ii) Subsidiary Change in Control. In the case of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Bowers' work
          location under the terms of the offer of employment from the acquiring
          employer is more than fifty (50) miles from Mr. Bowers' work location
          at the Company as of the date the offer of employment by the acquiring
          employer is received.

                                       10


          (d) Benefits and Perquisites.

               (i) Change in Control - Retirement and Welfare Benefits. The
          taking of any action by the Company that would directly or indirectly
          cause a Material Reduction in the Retirement and Welfare Benefits to
          which Mr. Bowers is entitled under the Company's Retirement and
          Welfare Benefit plans in which Mr. Bowers was participating on the day
          immediately preceding the day the Change in Control is Consummated.

               (ii) Vacation and Paid Time Off. The failure by the Company to
          provide Mr. Bowers with the number of paid vacation days or, if
          applicable, paid time off days to which Mr. Bowers is entitled on the
          basis of years of service with the Company in accordance with the
          Company's normal vacation policy or the paid time off program
          (whichever applicable) in effect on the day immediately preceding the
          day the Change in Control is Consummated (except for across-the-board
          vacation policy or paid time off program changes or policy or program
          terminations similarly affecting at least ninety-five percent (95%) of
          all Executive Employees of the Company).

               (iii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. Bowers is offered a
          package of Retirement and Welfare Benefits by the acquiring employer
          that is not Economically Equivalent, as determined under Sections
          1.23(f) and (g) hereof.

          (e) Adoption of Severance Agreement. In the event of a Subsidiary
     Change in Control, Good Reason shall exist if the offer of employment by
     the acquiring employer does not include an agreement to enter into a


                                       11


     severance agreement substantially in the form of Exhibit B attached hereto.

          (f) Economic Equivalence. For purposes of Section 1.23(d)(iii) above,
     an acquiring employer's package of Retirement and Welfare Benefits shall be
     considered Economically Equivalent if, in the written opinion of the
     Benefits Consultant, the anticipated, employer-provided value of what Mr.
     Bowers is expected to derive from the acquiring employer's Retirement and
     Welfare Benefits is equal to or greater than ninety percent (90%) of such
     value Mr. Bowers would have derived from the Company's Retirement and
     Welfare Benefits using the Benefit Index.

          (g) Benefit Index Guidelines. For purposes of Section 1.23(f) above,
     the following guidelines shall be followed by the Company, the acquiring
     employer and the Benefits Consultant in the performance of the Benefit
     Index calculations:

               (i) Upon a Preliminary Change in Control that if Consummated
          would result in a Subsidiary Change in Control, the Company and the
          acquiring employer shall provide to the Benefits Consultant the
          applicable benefit plan provisions for the plan year in which the
          Subsidiary Change in Control is anticipated to occur. Plan provisions
          for the immediately preceding plan year may be provided if the
          Benefits Consultant determines that there have been no changes to such
          plans that would materially affect the determination of Economic
          Equivalence. If the acquiring employer's relevant plan provisions have
          not previously been included in the Benefits Consultant's Benefit
          Index database, the acquiring employer shall provide to the Benefits
          Consultant such plan information as the Benefits Consultant shall


                                       12


          request in writing as soon as practicable following such request. The
          Compensation Committees shall take such action as is reasonably
          required to facilitate the transfer of such information from the
          acquiring employer to the Benefits Consultant.

               (ii) The standard Benefit Index assumptions for the plan year
          from which the plan provisions are taken shall be used.

               (iii) The Company shall provide to the Benefit Consultant actual
          data for its Employees.

               (iv) The determination of whether or not the acquiring employer's
          Retirement and Welfare Benefits are Economically Equivalent to the
          Retirement and Welfare Benefits provided to Mr. Bowers by the Company
          shall be determined on an aggregate basis. All assessments shall
          consider all benefits in total and no individual-by-individual,
          plan-by-plan determination of Economic Equivalence shall be made.

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

     1.25 "Group Health Plan" shall mean the group health plan covering Mr.
Bowers, as such plan may be amended from time to time.

     1.26 "Group Life Insurance Plan" shall mean the group life insurance plan
covering Mr. Bowers, as such plan may be amended from time to time.

     1.27 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of February 23, 2006, 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


                                       13


individual who shall become a director of the Southern Board subsequent to
February 23, 2006 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.

     1.28 "Long Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of more than twelve months.

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

     1.30 "Material Reduction" shall mean (i) any change in a retirement plan or
arrangement that has the effect of reducing the present value of the projected
benefits to be provided to Mr. Bowers by five percent (5%) or more, (ii) any
five percent (5%) or more reduction in medical, health and accident and
disability benefits as a percentage of premiums or premium equivalents in
accordance with the Company's prior practice as measured over a period of the
three previous plan years from the date the Change in Control is Consummated, or
(iii) any five percent (5%) or more reduction in employer matching funds as a
percentage of employee contributions in accordance with the Company's prior
practice measured over a period of the previous three plan years from the date
the Change in Control is Consummated.

                                       14


     1.31 "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 date a Change in Control is Consummated.

     1.32 "Pension Plan" shall mean The Southern Company Pension Plan or any
successor thereto, as in effect on the date a Change in Control is Consummated.

     1.33 "Performance Dividend Program" or "PDP" shall mean the Performance
Dividend Program under the Omnibus Plan or any replacement thereto, as in effect
on the date a Change in Control is Consummated.

     1.34 "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as in effect on the
date a Change in Control is Consummated.

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

     1.36 "Preliminary Change in Control" shall mean the occurrence of any of
the following as administratively determined by the Southern Committee.

          (a) Southern or the Company has entered into a written agreement, such
     as, but not limited to, a letter of intent, which, if Consummated, would
     result in a Change in Control;

          (b) Southern, the Company or any Person publicly announces an
     intention to take or to consider taking actions which, if Consummated,
     would result in a Change of Control under circumstances where the
     Consummation of the announced action or intended action is legally and
     financially possible;

                                       15


          (c) Any Person achieves the Beneficial Ownership of fifteen percent
     (15%) or more of the Common Stock; or

          (d) The Southern Board or the Board of Directors has declared that a
     Preliminary Change of Control has occurred.

     1.37 "Retirement and Welfare Benefits" shall mean benefits provided by the
following types of plans and arrangements: pension plans, defined contribution
plans (matched savings, profit sharing, money purchase, ESOP, and similar plans
and arrangements), plans providing for death benefits while employed or retired
(life insurance, survivor income, and similar plans and arrangements), plans
providing for short-term disability benefits (including accident and sick time),
plans providing for long-term disability benefits, plans providing health-care
benefits (including reimbursements during active employment or retirement
related to expenses for medical, vision, hearing, dental, and similar plans and
arrangements).

     1.38 "Separation Date" shall mean the date on which Mr. Bowers' employment
with the Company is terminated; provided, however, that solely for purposes of
Section 2.2(c) hereof, if, upon termination of employment with the Company, Mr.
Bowers is deemed to have retired pursuant to the provisions of Section 2.3
hereof, Mr. Bowers' Separation Date shall be the effective date of his
retirement pursuant to the terms of the Pension Plan.

     1.39 "Short Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of twelve months or less.

     1.40 "Southern" shall mean The Southern Company, its successors and
assigns.

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

                                       16


     1.42 "Southern Committee" shall mean the committee comprised of the
Chairman of the Southern Board, the Chief Financial Officer of Southern and the
General Counsel of Southern.

     1.43 "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern or another Southern Subsidiary.

     1.44 "Subsidiary Change in Control" shall have the meaning set forth in
Section 1.8(b)(iii) hereof.

     1.45 "Target Bonus" shall mean the amount of incentive compensation
expressed as either a percent of salary or pay, an expected dollar amount, the
number of awards granted or such other quantifiable measure to determine the
amount to be paid or awards granted under the terms of the respective Short Term
Bonus Plan, Long Term Bonus Plan or Equity Based Bonus Plan, as used by the
Company or respective acquiring employer to measure the market competitiveness
of its employee compensation programs.

     1.46 "Termination for Cause" or "Cause" shall mean Mr. Bowers' termination
of employment with the Company upon the occurrence of any of the following:

          (a) The willful and continued failure by Mr. Bowers to substantially
     perform his duties with the Company (other than any such failure resulting
     from Mr. Bowers' Total Disability or from Mr. Bowers' retirement or any
     such actual or anticipated failure resulting from termination by Mr. Bowers
     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 Mr. Bowers has
     not substantially performed his duties; or

                                       17


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

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

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

               (iii) attendance by Mr. Bowers 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;

               (iv) 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;

               (v) assault or other act of violence by Mr. Bowers against any
          person during the course of employment; or

               (vi) Mr. Bowers' indictment for any felony or any misdemeanor
          involving moral turpitude.

                                       18


               No act or failure to act by Mr. Bowers shall be deemed "willful"
          unless done, or omitted to be done, by Mr. Bowers 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. Bowers 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 the majority of the Southern Board at a meeting
          called and held for such purpose (after reasonable notice to Mr.
          Bowers 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. Bowers was guilty of conduct set forth in
          Section 1.46(a) or (b) hereof and specifying the particulars thereof
          in detail.

     1.47 "Total Disability" shall mean total disability under the terms of the
Pension Plan.

     1.48 "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.

     1.49 "Waiver and Release" shall mean the Waiver and Release substantially
in the form of Exhibit A attached hereto.

     1.50 "Year of Service" shall mean an Employee'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 an Employee has a break in his
service with his Employing Company, he will receive credit under this Plan for
the service prior to the break in service only if the break in service was less
than five years and his service prior to the break exceeds the length of the
break in service.

                                       19



                        ARTICLE II - SEVERANCE BENEFITS

     2.1 Eligibility.

          (a) Except as otherwise provided herein, if Mr. Bowers' employment is
     involuntarily terminated by the Company at any time during the two year
     period following a Change in Control of Southern or the Company for reasons
     other than Cause or if Mr. Bowers voluntarily terminates his employment
     with the Company for Good Reason at any time during the two year period
     following a Change in Control of Southern or the Company, he shall be
     entitled to receive the benefits described in Section 2.2 hereof, subject
     to the terms and conditions described in this Article II.

          (b) Limits on Eligibility. Notwithstanding anything to the contrary
     herein, Mr. Bowers shall not be eligible to receive benefits under this
     Plan if Mr. Bowers :

               (i) is not actively at work on his Separation Date, unless Mr.
          Bowers is capable of returning to work within twelve (12) weeks of the
          beginning of any leave of absence from work;

               (ii) voluntarily terminates his employment with the Company for
          other than Good Reason;

               (iii) has his employment terminated by the Company for Cause;

               (iv) accepts the transfer of his employment to Southern, any
          Southern Subsidiary or any employer that acquires all or substantially
          all of the assets of Southern;

                                       20


               (v) accepts the transfer of his employment to any employer (or
          its affiliate) that acquires all or substantially all of the assets of
          a Southern Subsidiary or the Company and becomes an employee of any
          such employer (or its affiliate) following such acquisition (provided,
          however, that if Mr. Bowers would otherwise have been entitled to
          severance benefits under this Agreement but for this Section
          2.1(b)(v), Mr. Bowers shall be eligible for benefits under this
          Agreement except for those outplacement, severance and welfare
          benefits described in Sections 2.2(a), (b) and (c) hereof);

               (vi) is involuntarily separated from service with the Company
          after refusing an offer of employment by Southern or a Southern
          Subsidiary, under circumstances where the terms of such offer would
          not have amounted to Good Reason for voluntary termination of
          employment from the Company by comparing each item of compensation and
          benefits of such offer of employment as set forth in Section
          1.23(a)(i), (b)(i), (c)(i), (d)(i) and (d)(ii) above, with such items
          of compensation and benefits to which he is entitled at the Company as
          of the day immediately preceding the day of such offer of employment;

               (vii) refuses an offer of employment by an acquiring employer in
          a Subsidiary Change in Control under circumstances where such offer
          does not provide Good Reason under the requirements of Section
          1.23(a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) hereof.

               (viii) elects to receive the benefits of any other voluntary or
          involuntary severance, separation or outplacement program, plan or
          agreement maintained by the Company in lieu of benefits under this


                                       21


          Agreement; provided however, that the receipt of benefits under any
          retention plan or agreement shall not be deemed to be the receipt of
          benefits under any severance, separation or outplacement program for
          purposes of this Agreement.

     2.2 Severance Benefits. Upon the Company's receipt of an effective Waiver
and Release, Mr. Bowers shall be entitled to receive the following severance
benefits:

          (a) Employee Outplacement Services. Mr. Bowers shall be eligible to
     participate in the Employee Outplacement Program, which program shall not
     be less than six (6) months duration measured from Mr. Bowers' Separation
     Date.

          (b) Severance Amount. Mr. Bowers shall be paid in cash 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. Bowers 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 3101(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. Bowers under Code Section
     280G exceeds three (3) times Mr. Bowers' "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. Bowers' Base Amount, less all


                                       22


     other "parachute payments" (as such term is defined under Code Section
     280G) received by Mr. Bowers, 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 Section 2.2(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 a nationally recognized
     firm specializing in federal income taxes as selected by the Compensation
     Committee, and such calculations or determinations shall be binding upon
     Mr. Bowers, Southern and the Company.

          (c) Welfare Benefit.

               (i) Except as provided in Section 2.3 hereof, Mr. Bowers shall be
          eligible to participate in the Company's Group Health Plan for a
          period of six (6) months for each of Mr. Bowers' Years of Service, not
          to exceed a period of five (5) years, beginning on the first day of
          the first month following Mr. Bowers' Separation Date unless otherwise
          specifically provided under such plan, upon Mr. Bowers' payment of
          both the Company's and Mr. Bowers' premium under such plan. Mr. Bowers
          shall also be entitled to elect coverage under the Group Health Plan
          for his dependents who are participating in the Group Health Plan on
          Mr. Bowers' Separation Date (and for such other dependents as may be


                                       23


          entitled to coverage under the provisions of the Health Insurance
          Portability and Accountability Act of 1996) for the duration of Mr.
          Bowers' extended medical coverage under this Section 2.2(c) to the
          extent such dependents remain eligible for dependent coverage under
          the terms of the Group Health Plan.

               (ii) The extended medical coverage afforded to Mr. Bowers
          pursuant to this Section 2.2(c) as well as the premiums to be paid by
          Mr. Bowers 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. Bowers in connection with
          this extended coverage shall be due on the first day of each month;
          provided, however, that if Mr. Bowers fails to pay his premium within
          thirty (30) days of its due date, his extended coverage shall be
          terminated.

               (iii) Any Group Health Plan coverage provided under this Section
          2.2(c) shall be a part of and not in addition to any COBRA Coverage
          which Mr. Bowers or his dependent may elect. In the event that Mr.
          Bowers or his dependent becomes 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. Bowers or his dependent by virtue of the
          provisions of this Article II shall terminate, except as may otherwise
          be required by law, and shall not be renewed. It shall be the duty of
          Mr. Bowers to inform the Company of his eligibility to participate in
          any such health plan.

                                       24


               (iv) Except as otherwise provided in Section 2.3 hereof,
          regardless of whether Mr. Bowers elects the extended coverage
          described in Section 2.2(c) hereof, the Company shall pay to Mr.
          Bowers a cash amount equal to the Company's and Mr. Bowers' cost of
          premiums for three (3) years of coverage under the Group Health Plan
          and Group Life Insurance Plan, as such Plans were in effect as of the
          date of the Change in Control.

          (d) Stock Option Vesting. The provisions of this Section 2.2(d) shall
     apply to any equity based awards under the Omnibus Plan, the defined terms
     of which are incorporated in this Section 2.2(d) by reference.

               (i) Any of Mr. Bowers' Options and Stock Appreciation Rights
          outstanding as of the Separation Date which are not then exercisable
          and vested, shall become fully exercisable and vested; provided, that
          in the case of a Stock Appreciation Right, if Mr. Bowers 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. Bowers 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.

               (ii) The restrictions and deferral limitations applicable to any
          of Mr. Bowers' Restricted Stock and Restricted Stock Units as of the


                                       25


          Separation 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.

               (e) Performance Pay Program. The provisions of this Section
          2.2(e) shall apply to the Performance Pay Program under the Omnibus
          Plan, the defined terms of which are incorporated in this Section
          2.2(e) by reference. Provided Mr. Bowers is not entitled to a
          Cash-Based Award under the PPP, if the PPP is in place as of Mr.
          Bowers' Separation Date and to the extent Mr. Bowers is entitled to
          participate therein, Mr. Bowers shall be entitled to receive cash in
          an amount equal to a prorated payout of his Cash-Based Award under the
          PPP for the performance period in which the Separation 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 Separation Date.

               (f) Performance Dividend Program. The provisions of this Section
          2.2(f) shall apply to the Performance Dividend Program, the defined
          terms of which are incorporated in this Section 2.2(f) by reference.
          Provided Mr. Bowers is not entitled to a Cash-Based Award under the
          PDP, if the PDP is in place through Mr. Bowers' Separation Date and to
          the extent Mr. Bowers is entitled to participate therein, Mr. Bowers
          shall be entitled to receive cash for each such Cash-Based Award under
          the PDP held as of such date based on a payout percentage of the
          greater of 50% or actual performance under the PDP for the performance
          period in which the Separation Date shall have occurred, and the sum
          of the quarterly dividends declared on the Common Stock in the
          performance year of and prior to the Separation Date. For purposes of
          this Section 2.2(f), payout of each Cash-Based Award under the PDP
          shall be based upon the performance measurement period that would


                                       26


          otherwise have ended on December 31st of the year in which Mr. Bowers'
          Separation Date occurs, all other remaining PPP performance
          measurement periods shall terminate with respect to Mr. Bowers and no
          payment to Mr. Bowers shall be made with respect thereto.

               (g) Other Short Term Incentives Under the Omnibus Plan. The
          provisions of this Section 2.2(g) shall apply to Performance Unit or
          Performance Share awards under the Omnibus Plan. Provided Mr. Bowers
          is not otherwise entitled to a Performance Unit/Share award under the
          Omnibus Plan, Mr. Bowers 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 Separation 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 Separation Date.

               (h) Other Short-Term Incentive Plans. The provisions of this
          Section 2.2(h) shall apply to Mr. Bowers to the extent that he, as of
          the date of the Change in Control, is a participant in any other
          "short term incentive compensation plan" not otherwise previously
          referred to in this Section 2.2. Provided Mr. Bowers is not otherwise
          entitled to a plan payout under any change in control provisions of
          such plans, if the "short term incentive compensation plan" is in
          place through Mr. Bowers' Separation Date and to the extent Mr. Bowers
          is entitled to participate therein, Mr. Bowers shall be entitled to
          receive cash in an amount equal to his award under the Company's
          "short term incentive compensation plan" for the annual performance
          period in which the Separation Date shall have occurred, at Mr.
          Bowers' target performance level and prorated by the number of months
          which have passed since the beginning of the annual performance period


                                       27


          until the Separation Date. For purposes of this Section 2.2(h), 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 to
          participants based upon articulated performance criteria, and which
          have been identified by the Compensation Committee and listed on
          Exhibit B hereto, which may be amended from time to time to reflect
          plan additions, terminations and amendments.

               (i) Pro rata Calculation. For purposes of calculating any pro
          rata Cash-Based Awards under Section 2.2(e), (f), (g) and (h) hereof,
          a month shall not be considered if the determining event occurs on or
          before the 14th day of the month, and a month shall be considered if
          the determining event occurs on or after the 15th day of the month.

               (j) No Duplicate Benefits. Notwithstanding anything in this
          Section 2.2 to the contrary, in the event that Mr. Bowers has received
          or is entitled to receive a Cash-Based Award under the PPP or the PDP
          as determined under the provisions of the Southern Company Change in
          Control Benefits Protection Plan (the "BPP") for the Performance
          Period which includes Mr. Bowers' Separation Date, then the amount of
          any such Cash-Based Award under this Plan shall be reduced
          dollar-for-dollar by any such amount received or to be received under
          the BPP.

     2.3 Coordination with Retiree Medical and Life Insurance Coverage.
Notwithstanding anything to the contrary above, if Mr. Bowers is otherwise
eligible to retire pursuant to the terms of the Pension Plan, he shall be deemed
to have retired for purposes of all employee benefit plans sponsored by the
Company of which Mr. Bowers is a participant. If Mr. Bowers is deemed to have
retired in accordance with the preceding sentence, he shall not be eligible to
receive the benefits described in Section 2.2(c) hereof if, upon his Separation


                                       28


Date, Mr. Bowers becomes eligible to receive the retiree medical and life
insurance coverage provided to certain retirees pursuant to the terms of the
Pension Plan, the Group Health Plan and the Group Life Insurance Plan.

     2.4 Payment of Benefits.

          (a) Except as otherwise provided in Section 2.4(b) hereof, the total
     amount payable under this Article II shall be paid to Mr. Bowers in one (1)
     lump sum payment within two (2) payroll periods of the later of the
     following to occur: (a) Mr. Bowers' Separation Date, or (b) the tender to
     the Company by Mr. Bowers of an effective Waiver and Release 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.

          (b) Notwithstanding anything to the contrary in Section 2.4(a) above,
     if the Compensation Committee determines that it is necessary to delay any
     payment under this Article II in order to avoid any tax liability pursuant
     to Code Section 409A(a)(1), such payment shall be delayed for the period
     set forth in Section 409A(a)(2)(B)(i) and such delayed payment shall bear a
     reasonable rate of interest as determined by the Compensation Committee.

     2.5 Benefits in the Event of Death. In the event of Mr. Bowers' death prior
to the payment of all benefits due under this Article II, Mr. Bowers' estate
shall be entitled to receive as due any amounts not yet paid under this Article
II upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

                                       29


     2.6 Legal Fees. In the event of a dispute between Mr. Bowers and the
Company with regard to any amounts due hereunder, if any material issue in such
dispute is finally resolved in Mr. Bowers' favor, the Company shall reimburse
Mr. Bowers' legal fees incurred with respect to all issues in such dispute in an
amount not to exceed fifty thousand dollars ($50,000).

     2.7 No Mitigation. Mr. Bowers shall have no duty or obligation to seek
other employment following his Separation Date and, except as otherwise provided
in Subsection 2.1(b) hereof, the amounts due Mr. Bowers hereunder shall not be
reduced or suspended if he accepts such subsequent employment.

     2.8 Non-qualified Retirement and Deferred Compensation Plans. Subsequent to
a Change in Control, any claims by Mr. Bowers 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 procedures and
provisions set forth in Article III hereof and if any material issue in such
dispute is finally resolved in Mr. Bowers' favor, the Company shall reimburse
Mr. Bowers' legal fees in the manner provided in Section 2.6 hereof.

                           ARTICLE III - ARBITRATION

     3.1 General. 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 Article III are not intended to apply to any other disputes, claims or


                                       30


controversies arising out of or relating to Mr. Bowers' employment by the
Company or the termination thereof.

     3.2 Demand for Arbitration. Arbitration shall be initiated by serving a
written notice of demand for arbitration to Mr. Bowers, in the case of the
Company, or to the Compensation Committee, in the case of Mr. Bowers.

     3.3 Law and Venue. The arbitrators shall apply the laws of the State of
Georgia, except to the extent pre-empted by federal law, excluding any law which
would require the use of the law of another state. The arbitration shall be held
in Atlanta, Georgia.

     3.4 Appointment of Arbitrators. Arbitrators shall be appointed 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.
Bowers, 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.

     3.5 Costs. The arbitration filing fee shall be paid by Mr. Bowers. All
other costs of arbitration shall be borne equally by Mr. Bowers 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. Bowers'
favor and Mr. Bowers is reimbursed legal fees under Section 2.6 hereof.

     3.6 Interim and Injunctive Relief. Nothing in this Article III 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


                                       31


necessary to prevent harm to either party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Article III and nothing herein is intended to 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
Article III.

                      ARTICLE IV - TRANSFER OF EMPLOYMENT

     4.1 Transfer of Employment. In the event that Mr. Bowers' employment by the
Company is terminated during the two year period following a Change in Control
and Mr. Bowers accepts employment by Southern or a another Southern Subsidiary,
the Company shall assign this Agreement to Southern or such Southern Subsidiary,
Southern shall accept such assignment or cause such Southern Subsidiary to
accept such assignment, and such assignee shall become the "Company" for all
purposes hereunder.

                           ARTICLE V - MISCELLANEOUS

     5.1 Funding of Benefits. Unless the Board of Directors in its discretion
determines otherwise, the amounts payable to Mr. Bowers under the 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.

     5.2 Withholding. There shall be deducted from the payment of any amount 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. Bowers.

                                       32


     5.3 Assignment. Neither Mr. Bowers nor his beneficiaries shall have any
rights to sell, assign, transfer, encumber, or otherwise convey the right to
receive the payment of any amount 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.

     5.4 Interpretation. This Agreement is intended to comply with the
provisions of Code Section 409A and the Treasury Regulations promulgated
thereunder in order to avoid any additional tax under Section 409A(a)(1). In the
event it is necessary to interpret the provisions of this Agreement for purposes
of its operation, such interpretation shall, to the extent possible, be
consistent with such intent.

     5.5 Amendment and Termination. The Agreement may be amended or terminated
only by a writing executed by the parties.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
1st day of May, 2007.

                                    THE SOUTHERN COMPANY


                                    By:      /s/David M. Ratcliffe

                                    SOUTHERN COMPANY SERVICES, INC.


                                    By:      /s/Robert A.Bell

                                    MR. BOWERS


                                    /s/William Paul Bowers
                                    William Paul Bowers

                                       33


                                    Exhibit A

                           CHANGE IN CONTROL AGREEMENT

                               Waiver and Release

     The attached Waiver and Release is to be given to Mr. William Paul Bowers
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Section 2.2 of such
Agreement.








                                     1 of 5



                           CHANGE IN CONTROL AGREEMENT

                               Waiver and Release

         I, William Paul Bowers, understand that I am entitled to receive the
severance benefits described in Article II 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 Southern Company Services,
Inc. (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 receiving the severance and welfare benefits under
Article II of the Agreement, I hereby voluntarily and irrevocably waive,
release, dismiss with prejudice, and withdraw all claims, complaints, suits or
demands of any kind whatsoever (whether known or unknown) which I ever had, may
have, or now have against The Southern Company, Southern Company Services, Inc.,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Communications
Services, Inc. d/b/a Southern LINC, Southern Company Energy Solutions, L.L.C.,
Southern Nuclear Operating Company, Inc., Southern Telecom, Inc., Southern
Company Management Development, Inc., and other current or former subsidiaries
or affiliates of The Southern Company and their past, present and future
officers, directors, employees, agents, insurers and attorneys (collectively,
the "Releasees"), arising from or relating to (directly or indirectly) my
employment or the termination of my employment or other events occurred as of
the date of execution of this Agreement, including but not limited to:

                  (a) claims for violations of Title VII of the Civil Rights Act
         of 1964, the Age Discrimination in Employment Act, the Fair Labor
         Standards Act, the Civil Rights Act of 1991, the Americans With
         Disabilities Act, the Equal Pay Act, the Family and Medical Leave Act,
         42 U.S.C. ss. 1981, the National Labor Relations Act, the Labor
         Management Relations Act, Executive Order 11246, Executive Order 11141,
         the Rehabilitation Act of 1973, the Sarbanes-Oxley Act of 2002 or the
         Employee Retirement Income Security Act;

                  (b) claims for violations of any other federal or state
         statute or regulation or local ordinance;

                  (c) claims for lost or unpaid wages, compensation, or
         benefits, defamation, intentional or negligent infliction of emotional
         distress, assault, battery, wrongful or constructive discharge,
         negligent hiring, retention or supervision, fraud, misrepresentation,
         conversion, tortious interference, breach of contract, or breach of
         fiduciary duty;

                                     2 of 5


                  (d) claims to benefits under any bonus, severance, workforce
         reduction, early retirement, outplacement, or any other similar type
         plan sponsored by the Company (except for those plans listed below); or

                  (e) any other claims under state law arising in tort or
         contract.

         In signing this Agreement, I am not releasing any claims that may arise
under the terms of this Agreement or which may arise out of events occurring
after the date I execute this Agreement.

         I am also not releasing claims to benefits that I am already entitled
to receive under The Southern Company Pension Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Employee Savings Plan, The
Southern Company Omnibus Incentive Compensation Plan, The Southern Company
Change in Control Benefits Protection Plan or under any workers' compensation
laws. 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.

         Nothing in this Agreement shall prohibit me from engaging in protected
activities under applicable law (including protected activities described in
Section 211 of the Energy Reorganization Act) or from communicating, either
voluntarily or otherwise, with any governmental agency concerning any potential
violation of the law.

         I understand and agree for a period of two (2) years after the date I
execute this Agreement, I will regard and treat as strictly confidential all
valuable, non-public, competitively sensitive data and information relating to
the Releasees' business that is not generally known by or readily available to
Releasees' competitors and I will not for any reason, either directly or
indirectly, use, sell, lend, lease, distribute, license, transfer, assign, show,
disclose, disseminate, reproduce, copy, or otherwise communicate any such
information to any third party for my own benefit or for any purpose, other than
in accordance with the express, written instructions of the Company or
Releasees.

         I further understand and agree that I will regard and treat as strictly
confidential all trade secrets of Releasees for as long as such items remain
trade secrets under applicable law and I will not for any reason, either
directly or indirectly, use, sell, lend, lease, distribute, license, transfer,
assign, show, disclose, disseminate, reproduce, copy, or otherwise communicate
any such trade secrets to any third party for my own benefit or for any purpose,
other than in accordance with the express, written instructions of the Company
or Releasees.

         I further agree to keep confidential and not disclose the terms of this
Agreement, including, but not limited to, the benefits under the Agreement,
except to my spouse, attorneys or financial advisors (who must be informed of
and agree to be bound by the confidentiality provisions contained in this
Agreement before I disclose any information to them about this Agreement), or
where such disclosure is required by law.

                                     3 of 5


         I agree to return to the Company prior to my last day of employment all
property of the Company, including but not limited to data, lists, information,
memoranda, documents, identification cards, credit cards, parking cards, keys,
computers, fax machines, beepers, phones, and files (including copies thereof).

         I understand and agree that I will not seek re-employment as an
employee, leased employee or independent contractor with the Company or any
Southern Company subsidiary or affiliate during the twenty-four (24) month
period beginning immediately following my execution of this Agreement.

         I have carefully read this agreement and I fully understand all of the
provisions of this Waiver.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver (including my attorney, accountant
or tax advisor). Prior to signing this Waiver, I have been given the opportunity
and sufficient time to seek such advice.

         I have had the opportunity to review and consider this Waiver for a
period of at least twenty-one (21) days before signing it.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign this Waiver. In order to revoke this
Waiver, I must deliver written notification of such revocation to the
Compensation Committee. 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. Revocation of this
Waiver will not alter or change the termination of my employment by the Company.

         In signing this Waiver, I am not relying on any representation or
statement (written or oral) not specifically set forth in this Waiver, the
Agreement or by the company or any of its representatives with regard to the
subject matter, basis, or effect of this Waiver or otherwise.

         I was not coerced, threatened, or otherwise forced to sign this Waiver.
I am voluntarily signing and delivering this Waiver of my own free will.


                                     4 of 5



I understand that by signing this Waiver I am giving up rights I may have. I
understand I do not have to sign this Waiver.

     IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____
day of ________________, in the year _____.

                                                     ---------------------------
                                                     William Paul Bowers

Sworn to and subscribed to me this

___day of _________, ____

- --------------------------
Notary Public

My Commission Expires:

- ---------------------------
(Notary Seal)

         Acknowledged and Accepted by the Company.

By:
         -----------------------------------
Date:
         -----------------------------------



                                     5 of 5

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 November
16, 2006. This Agreement amends and restates the Amended and Restated Change in
Control Agreement entered into by Mr. McCrary, Southern and the Company,
effective June 1, 2004.

                                   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



                            ARTICLE I - DEFINITIONS.

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

     1.1 "Annual Compensation" shall mean Mr. McCrary's Base Salary plus Target
Bonus under the Company's Short Term Bonus Plan.

     1.2 "Base Salary" shall mean Mr. McCrary's highest annual base salary rate
during the twelve (12) month period immediately preceding the date the Change in
Control is Consummated.

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

     1.4 "Benefit Index" shall mean the Hewitt Associates' Benefit Index(r), or
if such index is no longer available, cannot be used, or if pursuant to Section
1.5 hereof another Benefits Consultant has been chosen by the Compensation
Committee, such other comparable index utilized by the Benefits Consultant.

     1.5 "Benefits Consultant" shall mean Hewitt Associates or such other
nationally recognized employee benefits consulting firm as shall be designated
in writing by the Compensation Committee upon the occurrence of a Preliminary
Change in Control that would result in a Subsidiary Change in Control.

     1.6 "Board of Directors" shall mean the board of directors of the Company.

     1.7 "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.

                                       2





1.8        "Change in Control" shall mean,

     (a) with respect to Southern, the occurrence of 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 Section 1.8(a)(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 an employee of Southern or a Southern
          Subsidiary, or Group composed exclusively of such employees; or

               (F) any Business Combination which would not otherwise constitute
          a Change in Control because of the application of clauses (A), (B) or
          (C) of Section 1.8(a)(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; or

                                       3


          (iii) The Consummation of a Business Combination, unless, following
     such Business Combination, all of the following three 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 hold
          Beneficial Ownership, directly or indirectly, of 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 Business
          Combination 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 qualified pension plan, publicly
          held mutual fund, Group composed exclusively of Employees or employee
          benefit plan (or related trust) of Southern, any Southern Subsidiary
          or Surviving Company) 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

                                       4


               (C) at least a majority of the members of the board of directors
          of Surviving Company were members of the Incumbent Board on the date
          of the Preliminary Change in Control.

     (b) with respect to the Company, the occurrence of any of the following:

          (i) 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 Section 1.8(b)(i), any acquisition by Mr. McCrary, any
     other employee of Southern or a Southern Subsidiary, or Group composed
     entirely of such employees, any qualified pension plan, any publicly held
     mutual fund or any employee benefit plan (or related trust) sponsored or
     maintained by Southern or any Southern Subsidiary shall not constitute a
     Change in Control;

          (ii) The Consummation of a reorganization, merger or consolidation of
     the Company ("Company Business Combination"), in each case, unless,
     following such Company Business Combination, Southern or a Southern
     Subsidiary Controls the corporation surviving or resulting from such
     Company Business Combination; or

          (iii) The Consummation of the sale or other disposition of all or
     substantially all of the assets of the Company to an entity which Southern
     or a Southern Subsidiary does not Control ("Subsidiary Change in Control").

     1.9 "COBRA Coverage" shall mean any continuation coverage to which Mr.
McCrary or his dependents may be entitled pursuant to Code Section 4980B.

                                       5


     1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.

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

     1.12 "Company" shall mean Alabama Power Company, its successors and
assigns.

     1.13 "Compensation Committee" shall mean the Compensation and Management
Succession Committee of the Southern Board.

     1.14 "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.

     1.15 "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.

     1.16 "Economic Equivalent" or "Economic Equivalence" shall have the meaning
set forth in Section 1.23(f) hereof.



                                       6




     1.17 "Employee Outplacement Program" shall mean the program established by
the Company from time to time for the purpose of assisting employees in finding
employment outside of the Company which provides for the following services:

          (a) self assessment, career decision and goal setting;

          (b) job market research and job sources;

          (c) networking and interviewing skills;

          (d) planning and implementation strategy;

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

          (f) office support and job search resources.

     1.18 "Company" shall mean Alabama Power Company, its successors and
assigns.

     1.19 "Company Business Combination" shall have the meaning set forth in
Section 1.8(b)(ii) hereof.

     1.20 "Equity Based Bonus Plan" shall mean a plan or arrangement that
provides for the grant to participants of stock options, restricted stock, stock
appreciation rights, phantom stock, phantom stock appreciation rights or any
other similar rights the terms of which provide a participant with the potential
to receive the benefit of any increase in value of the underlying equity or
notional amount (e.g., number of phantom shares) from the date of grant through
a subsequent date.

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

     1.22 "Executive Employee" shall mean those employees of the Company of
Grade Level 10 or above.

                                       7


     1.23 "Good Reason" shall mean, without Mr. McCrary's express written
consent, after written notice to the Company, and after a thirty (30) day
opportunity for the Company to cure, the continuing occurrence of any of the
events described in Subsections (a)(i), (b)(i), (c)(i), (d)(i) or (d)(ii) of
this Section 1.23. In the case of Mr. McCrary claiming benefits under this
Agreement upon a Subsidiary Change in Control, the foregoing notice and
opportunity to cure will be satisfied if Mr. McCrary provides to the
Compensation Committee a copy of his written offer of employment by the
acquiring company within thirty (30) days of such offer along with a written
explanation describing how the terms of such offer satisfy the requirements of
Subsections (a)(ii), (b)(ii), (c)(ii), (d)(iii) or (e) of this Section 1.23. The
Compensation Committee shall make a determination of whether such written offer
of employment satisfies the requirements of Sections 1.23(a)(ii), (b)(ii),
(c)(ii), (d)(iii) or (e) hereof upon consultation with the Benefits Consultant
and shall notify Mr. McCrary of its decision within thirty (30) days of receipt
of Mr. McCrary's written offer of employment. Any dispute regarding the
Compensation Committee's decision shall be resolved in accordance with Article
III hereof.

          (a) Inconsistent Duties.

               (i) Change in Control. 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) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. McCrary is offered
          employment with the acquiring employer with a job title, duties and
          status which are materially and detrimentally lower than Mr. McCrary's


                                       8


          job title, duties and status in effect at the Company as of the date
          the offer of employment is received.

          (b) Reduced Compensation.

               (i) Change in Control. A reduction of five percent (5%) or more
          by the Company in any of the following amounts of compensation
          expressed in subparagraphs (A), (B) or (C) hereof, except for a less
          than ten percent (10%), across-the-board reduction in such
          compensation amounts similarly affecting ninety-five percent (95%) or
          more of the Executive Employees eligible for such compensation:

                    (A) Mr. McCrary's Base Salary;

                    (B) the sum of Mr. McCrary's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan, as in effect on the
               day immediately preceding the day the Change in Control is
               Consummated; or

                    (C) the sum of Mr. McCrary's Base Salary plus Target Bonus
               under the Company's Short Term Bonus Plan and Long Term Bonus
               Plan plus the Target Bonus under the Company's Equity Based Bonus
               Plan, each of which as in effect on the day immediately preceding
               the day the Change in Control is Consummated.

               (ii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. McCrary is offered
          Base Salary, Target Bonus under the acquiring company's Short Term
          Bonus Plan and Long Term Bonus Plan and Target Bonus under the


                                       9


          acquiring company's Equity Based Bonus Plan that, in the aggregate, is
          less than ninety percent (95%) of Mr. McCrary's Base Salary plus
          Target Bonus under the Company's Short Term Bonus Plan and Long Term
          Bonus Plan, plus Target Bonus under the Company's Equity Based Bonus
          Plan, each of which as in effect on the day the offer of employment is
          received;

          (c) Relocation.

               (i) Company. A change in Mr. McCrary's work location to a
          location more than fifty (50) miles from the facility where Mr.
          McCrary was located on the day immediately preceding the day the
          Change in Control is Consummated, unless such new work location is
          within fifty (50) miles of Mr. McCrary's principal place of residence
          on the day immediately preceding the day the Change in Control is
          Consummated. 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 Section 1.23(c) 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 on the day immediately preceding the day
          the Change in Control is Consummated, and such subsequent
          nonconsensual transfer shall be "Good Reason" under this Agreement;

               (ii) Subsidiary Change in Control. In the case of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. McCrary's work
          location under the terms of the offer of employment from the acquiring
          employer is more than fifty (50) miles from Mr. McCrary's work
          location at the Company as of the date the offer of employment by the
          acquiring employer is received.

                                       10


          (D) Benefits and Perquisites.

               (i) Change in Control - Retirement and Welfare Benefits. The
          taking of any action by the Company that would directly or indirectly
          cause a Material Reduction in the Retirement and Welfare Benefits to
          which Mr. McCrary is entitled under the Company's Retirement and
          Welfare Benefit plans in which Mr. McCrary was participating on the
          day immediately preceding the day the Change in Control is
          Consummated.

               (ii) Vacation and Paid Time Off. The failure by the Company to
          provide Mr. McCrary with the number of paid vacation days or, if
          applicable, paid time off 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 or the paid time off program
          (whichever applicable) in effect on the day immediately preceding the
          day the Change in Control is Consummated (except for across-the-board
          vacation policy or paid time off program changes or policy or program
          terminations similarly affecting at least ninety-five percent (95%) of
          all Executive Employees of the Company).

               (iii) Subsidiary Change in Control. In the event of a Subsidiary
          Change in Control, Good Reason shall exist if Mr. McCrary is offered a
          package of Retirement and Welfare Benefits by the acquiring employer
          that is not Economically Equivalent, as determined under Sections
          1.23(f) and (g) hereof.

          (e) Adoption of Severance Agreement. In the event of a Subsidiary
     Change in Control, Good Reason shall exist if the offer of employment by


                                       11


     the acquiring employer does not include an agreement to enter into a
     severance agreement substantially in the form of Exhibit B attached hereto.

          (f) Economic Equivalence. For purposes of Section 1.23(d)(iii) above,
     an acquiring employer's package of Retirement and Welfare Benefits shall be
     considered Economically Equivalent if, in the written opinion of the
     Benefits Consultant, the anticipated, employer-provided value of what Mr.
     McCrary is expected to derive from the acquiring employer's Retirement and
     Welfare Benefits is equal to or greater than ninety percent (90%) of such
     value Mr. McCrary would have derived from the Company's Retirement and
     Welfare Benefits using the Benefit Index.

          (g) Benefit Index Guidelines. For purposes of Section 1.23(f) above,
     the following guidelines shall be followed by the Company, the acquiring
     employer and the Benefits Consultant in the performance of the Benefit
     Index calculations:

               (i) Upon a Preliminary Change in Control that if Consummated
          would result in a Subsidiary Change in Control, the Company and the
          acquiring employer shall provide to the Benefits Consultant the
          applicable benefit plan provisions for the plan year in which the
          Subsidiary Change in Control is anticipated to occur. Plan provisions
          for the immediately preceding plan year may be provided if the
          Benefits Consultant determines that there have been no changes to such
          plans that would materially affect the determination of Economic
          Equivalence. If the acquiring employer's relevant plan provisions have
          not previously been included in the Benefits Consultant's Benefit
          Index database, the acquiring employer shall provide to the Benefits


                                       12


          Consultant such plan information as the Benefits Consultant shall
          request in writing as soon as practicable following such request. The
          Compensation Committees shall take such action as is reasonably
          required to facilitate the transfer of such information from the
          acquiring employer to the Benefits Consultant.

               (ii) The standard Benefit Index assumptions for the plan year
          from which the plan provisions are taken shall be used.

               (iii) The Company shall provide to the Benefit Consultant actual
          data for its Employees.

               (iv) The determination of whether or not the acquiring employer's
          Retirement and Welfare Benefits are Economically Equivalent to the
          Retirement and Welfare Benefits provided to Mr. McCrary by the Company
          shall be determined on an aggregate basis. All assessments shall
          consider all benefits in total and no individual-by-individual,
          plan-by-plan determination of Economic Equivalence shall be made.

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

     1.25 "Group Health Plan" shall mean the group health plan covering Mr.
McCrary, as such plan may be amended from time to time.

     1.26 "Group Life Insurance Plan" shall mean the group life insurance plan
covering Mr. McCrary, as such plan may be amended from time to time.

     1.27 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of February 23, 2006, 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


                                       13


then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to
February 23, 2006 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.

     1.28 "Long Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of more than twelve months.

     1.29 "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 other Southern Subsidiary.

     1.30 "Material Reduction" shall mean (i) any change in a retirement plan or
arrangement that has the effect of reducing the present value of the projected
benefits to be provided to Mr. McCrary by five percent (5%) or more, (ii) any
five percent (5%) or more reduction in medical, health and accident and
disability benefits as a percentage of premiums or premium equivalents in
accordance with the Company's prior practice as measured over a period of the
three previous plan years from the date the Change in Control is Consummated, or
(iii) any five percent (5%) or more reduction in employer matching funds as a
percentage of employee contributions in accordance with the Company's prior
practice measured over a period of the previous three plan years from the date
the Change in Control is Consummated.

                                       14


     1.31 "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 date a Change in Control is Consummated.

     1.32 "Pension Plan" shall mean The Southern Company Pension Plan or any
successor thereto, as in effect on the date a Change in Control is Consummated.

     1.33 "Performance Dividend Program" or "PDP" shall mean the Performance
Dividend Program under the Omnibus Plan or any replacement thereto, as in effect
on the date a Change in Control is Consummated.

     1.34 "Performance Pay Program" or "PPP" shall mean the Performance Pay
Program under the Omnibus Plan or any replacement thereto, as in effect on the
date a Change in Control is Consummated.

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

     1.36 "Preliminary Change in Control" shall mean the occurrence of any of
the following as administratively determined by the Southern Committee.

          (a) Southern or the Company has entered into a written agreement, such
     as, but not limited to, a letter of intent, which, if Consummated, would
     result in a Change in Control;

          (b) Southern, the Company or any Person publicly announces an
     intention to take or to consider taking actions which, if Consummated,
     would result in a Change of Control under circumstances where the
     Consummation of the announced action or intended action is legally and
     financially possible;

                                       15


          (c) Any Person achieves the Beneficial Ownership of fifteen percent
     (15%) or more of the Common Stock; or

          (d) The Southern Board or the Board of Directors has declared that a
     Preliminary Change of Control has occurred.

     1.37 "Retirement and Welfare Benefits" shall mean benefits provided by the
following types of plans and arrangements: pension plans, defined contribution
plans (matched savings, profit sharing, money purchase, ESOP, and similar plans
and arrangements), plans providing for death benefits while employed or retired
(life insurance, survivor income, and similar plans and arrangements), plans
providing for short-term disability benefits (including accident and sick time),
plans providing for long-term disability benefits, plans providing health-care
benefits (including reimbursements during active employment or retirement
related to expenses for medical, vision, hearing, dental, and similar plans and
arrangements).

     1.38 "Separation Date" shall mean the date on which Mr. McCrary's
employment with the Company is terminated; provided, however, that solely for
purposes of Section 2.2(c) hereof, if, upon termination of employment with the
Company, Mr. McCrary is deemed to have retired pursuant to the provisions of
Section 2.3 hereof, Mr. McCrary's Separation Date shall be the effective date of
his retirement pursuant to the terms of the Pension Plan.

     1.39 "Short Term Bonus Plan" shall mean any bonus type plan or arrangement
designed to provide incentive based compensation to participants upon the
achievement of objective or subjective goals that measure performance over a
period of twelve months or less.

     1.40 "Southern" shall mean The Southern Company, its successors and
assigns.

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

                                       16


     1.42 "Southern Committee" shall mean the committee comprised of the
Chairman of the Southern Board, the Chief Financial Officer of Southern and the
General Counsel of Southern.

     1.43 "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern or another Southern Subsidiary.

     1.44 "Subsidiary Change in Control" shall have the meaning set forth in
Section 1.8(b)(iii) hereof.

     1.45 "Target Bonus" shall mean the amount of incentive compensation
expressed as either a percent of salary or pay, an expected dollar amount, the
number of awards granted or such other quantifiable measure to determine the
amount to be paid or awards granted under the terms of the respective Short Term
Bonus Plan, Long Term Bonus Plan or Equity Based Bonus Plan, as used by the
Company or respective acquiring employer to measure the market competitiveness
of its employee compensation programs.

     1.46 "Termination for Cause" or "Cause" shall mean Mr. McCrary's
termination of employment with the Company upon the occurrence of any of the
following:

          (a) The willful and continued failure by Mr. McCrary to substantially
     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 Mr. McCrary has
     not substantially performed his duties; or

                                       17


          (b) 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:

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

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

               (iii) attendance by Mr. McCrary 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;

               (iv) 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;

               (v) assault or other act of violence by Mr. McCrary against any
          person during the course of employment; or

               (vi) Mr. McCrary's indictment for any felony or any misdemeanor
          involving moral turpitude.

                                       18


     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 the majority of the
Southern Board at a meeting 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 in Section 1.46(a)
or (b) hereof and specifying the particulars thereof in detail.

     1.47 "Total Disability" shall mean total disability under the terms of the
Pension Plan.

     1.48 "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.

     1.49 "Waiver and Release" shall mean the Waiver and Release substantially
in the form of Exhibit A attached hereto.

     1.50 "Year of Service" shall mean an Employee'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 an Employee has a break in his
service with his Employing Company, he will receive credit under this Plan for
the service prior to the break in service only if the break in service was less
than five years and his service prior to the break exceeds the length of the
break in service.

                                       19



                        ARTICLE II - SEVERANCE BENEFITS

     2.1 Eligibility.

     (a) Except as otherwise provided herein, if Mr. McCrary's employment is
involuntarily terminated by the Company at any time during the two year period
following a Change in Control of Southern or the Company 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 of Southern or the Company, he shall be entitled to receive the benefits
described in Section 2.2 hereof, subject to the terms and conditions described
in this Article II.

     (b) Limits on Eligibility. Notwithstanding anything to the contrary herein,
Mr. McCrary shall not be eligible to receive benefits under this Plan if Mr.
McCrary :

          (i) is not actively at work on his Separation Date, unless Mr. McCrary
     is capable of returning to work within twelve (12) weeks of the beginning
     of any leave of absence from work;

          (ii) voluntarily terminates his employment with the Company for other
     than Good Reason;

          (iii) has his employment terminated by the Company for Cause;

          (iv) accepts the transfer of his employment to Southern, any Southern
     Subsidiary or any employer that acquires all or substantially all of the
     assets of Southern;

                                       20


          (v) accepts the transfer of his employment to any employer (or its
     affiliate) that acquires all or substantially all of the assets of a
     Southern Subsidiary or the Company and becomes an employee of any such
     employer (or its affiliate) following such acquisition (provided, however,
     that if Mr. McCrary would otherwise have been entitled to severance
     benefits under this Agreement but for this Section 2.1(b)(v), Mr. McCrary
     shall be eligible for benefits under this Agreement except for those
     outplacement, severance and welfare benefits described in Sections 2.2(a),
     (b) and (c) hereof);

          (vi) is involuntarily separated from service with the Company after
     refusing an offer of employment by Southern or a Southern Subsidiary, under
     circumstances where the terms of such offer would not have amounted to Good
     Reason for voluntary termination of employment from the Company by
     comparing each item of compensation and benefits of such offer of
     employment as set forth in Section 1.23(a)(i), (b)(i), (c)(i), (d)(i) and
     (d)(ii) above, with such items of compensation and benefits to which he is
     entitled at the Company as of the day immediately preceding the day of such
     offer of employment;

          (vii) refuses an offer of employment by an acquiring employer in a
     Subsidiary Change in Control under circumstances where such offer does not
     provide Good Reason under the requirements of Section 1.23(a)(ii), (b)(ii),
     (c)(ii), (d)(iii) or (e) hereof.

          (viii) elects to receive the benefits of any other voluntary or
     involuntary severance, separation or outplacement program, plan or


                                       21


     agreement maintained by the Company in lieu of benefits under this
     Agreement; provided however, that the receipt of benefits under any
     retention plan or agreement shall not be deemed to be the receipt of
     benefits under any severance, separation or outplacement program for
     purposes of this Agreement.

     2.2 Severance Benefits. Upon the Company's receipt of an effective Waiver
and Release, Mr. McCrary shall be entitled to receive the following severance
benefits:

          (a) 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 Separation
     Date.

          (b) Severance Amount. Mr. McCrary shall be paid in cash 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 3101(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


                                       22


     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 Section 2.2(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 a nationally recognized
     firm specializing in federal income taxes as selected by the Compensation
     Committee, and such calculations or determinations shall be binding upon
     Mr. McCrary, Southern and the Company.

          (c) Welfare Benefit.

               (i) Except as provided in Section 2.3 hereof, Mr. McCrary shall
          be eligible to participate in the Company's Group Health Plan for a
          period of six (6) months for each of Mr. McCrary's Years of Service,
          not to exceed a period of five (5) years, beginning on the first day
          of the first month following Mr. McCrary's Separation Date unless
          otherwise specifically provided under such plan, upon Mr. McCrary's
          payment of both the Company's and Mr. McCrary's premium under such
          plan. Mr. McCrary shall also be entitled to elect coverage under the
          Group Health Plan for his dependents who are participating in the
          Group Health Plan on Mr. McCrary's Separation Date (and for such other
          dependents as may be entitled to coverage under the provisions of the


                                       23


          Health Insurance Portability and Accountability Act of 1996) for the
          duration of Mr. McCrary's extended medical coverage under this Section
          2.2(c) to the extent such dependents remain eligible for dependent
          coverage under the terms of the Group Health Plan.

               (ii) The extended medical coverage afforded to Mr. McCrary
          pursuant to this Section 2.2(c) 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 Mr. McCrary fails to pay his premium within
          thirty (30) days of its due date, his extended coverage shall be
          terminated.

               (iii) Any Group Health Plan coverage provided under this Section
          2.2(c) shall be a part of and not in addition to any COBRA Coverage
          which Mr. McCrary or his dependent may elect. In the event that Mr.
          McCrary or his dependent becomes 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 dependent by virtue of the
          provisions of this Article II shall terminate, except as may otherwise
          be required by law, and shall not be renewed. It shall be the duty of
          Mr. McCrary to inform the Company of his eligibility to participate in
          any such health plan.

                                       24


               (iv) Except as otherwise provided in Section 2.3 hereof,
          regardless of whether Mr. McCrary elects the extended coverage
          described in Section 2.2(c) hereof, the Company shall pay to Mr.
          McCrary a cash 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, as such Plans were in effect as of the
          date of the Change in Control.

          (d) Stock Option Vesting. The provisions of this Section 2.2(d) shall
     apply to any equity based awards under the Omnibus Plan, the defined terms
     of which are incorporated in this Section 2.2(d) by reference.

               (i) Any of Mr. McCrary's Options and Stock Appreciation Rights
          outstanding as of the Separation Date which are not then exercisable
          and vested, shall become fully exercisable and vested; 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.

               (ii) The restrictions and deferral limitations applicable to any
          of Mr. McCrary's Restricted Stock and Restricted Stock Units as of the


                                       25


          Separation 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.

          (e) Performance Pay Program. The provisions of this Section 2.2(e)
     shall apply to the Performance Pay Program under the Omnibus Plan, the
     defined terms of which are incorporated in this Section 2.2(e) by
     reference. Provided Mr. McCrary is not entitled to a Cash-Based Award under
     the PPP, if the PPP is in place as of Mr. McCrary's Separation 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 Award under the PPP for the performance period in which
     the Separation 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 Separation Date.

          (f) Performance Dividend Program. The provisions of this Section
     2.2(f) shall apply to the Performance Dividend Program, the defined terms
     of which are incorporated in this Section 2.2(f) by reference. Provided Mr.
     McCrary is not entitled to a Cash-Based Award under the PDP, if the PDP is
     in place through Mr. McCrary's Separation 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 PDP held as of
     such date based on a payout percentage of the greater of 50% or actual
     performance under the PDP for the performance period in which the
     Separation Date shall have occurred, and the sum of the quarterly dividends
     declared on the Common Stock in the performance year of and prior to the
     Separation Date. For purposes of this Section 2.2(f), payout of each
     Cash-Based Award under the PDP shall be based upon the performance


                                       26


     measurement period that would otherwise have ended on December 31st of the
     year in which Mr. McCrary's Separation Date occurs, all other remaining PPP
     performance measurement periods shall terminate with respect to Mr. McCrary
     and no payment to Mr. McCrary shall be made with respect thereto.

          (g) Other Short Term Incentives Under the Omnibus Plan. The provisions
     of this Section 2.2(g) shall apply to Performance Unit or Performance Share
     awards under the Omnibus Plan. Provided Mr. McCrary is not otherwise
     entitled to a Performance Unit/Share award under the Omnibus Plan, 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 Separation 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 Separation Date.

          (h) Other Short-Term Incentive Plans. The provisions of this Section
     2.2(h) shall apply to Mr. McCrary to the extent that he, as of the date of
     the Change in Control, is a participant in any other "short term incentive
     compensation plan" not otherwise previously referred to in this Section
     2.2. Provided Mr. McCrary is not otherwise entitled to a plan payout under
     any change in control provisions of such plans, if the "short term
     incentive compensation plan" is in place through Mr. McCrary's Separation
     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 his award
     under the Company's "short term incentive compensation plan" for the annual
     performance period in which the Separation 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


                                       27


     until the Separation Date. For purposes of this Section 2.2(h), 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 to participants based
     upon articulated performance criteria, and which have been identified by
     the Compensation Committee and listed on Exhibit B hereto, which may be
     amended from time to time to reflect plan additions, terminations and
     amendments.

          (i) Pro rata Calculation. For purposes of calculating any pro rata
     Cash-Based Awards under Section 2.2(e), (f), (g) and (h) hereof, a month
     shall not be considered if the determining event occurs on or before the
     14th day of the month, and a month shall be considered if the determining
     event occurs on or after the 15th day of the month.

          (j) No Duplicate Benefits. Notwithstanding anything in this Section
     2.2 to the contrary, in the event that Mr. McCrary has received or is
     entitled to receive a Cash-Based Award under the PPP or the PDP as
     determined under the provisions of the Southern Company Change in Control
     Benefits Protection Plan (the "BPP") for the Performance Period which
     includes Mr. McCrary's Separation Date, then the amount of any such
     Cash-Based Award under this Plan shall be reduced dollar-for-dollar by any
     such amount received or to be received under the BPP.

     2.3 Coordination with Retiree Medical and Life Insurance Coverage.
Notwithstanding anything to the contrary above, if Mr. McCrary is otherwise
eligible to retire pursuant to the terms of the Pension Plan, he shall be deemed
to have retired for purposes of all employee benefit plans sponsored by the
Company of which Mr. McCrary is a participant. If Mr. McCrary is deemed to have
retired in accordance with the preceding sentence, he shall not be eligible to
receive the benefits described in Section 2.2(c) hereof if, upon his Separation


                                       28


Date, Mr. McCrary becomes eligible to receive the retiree medical and life
insurance coverage provided to certain retirees pursuant to the terms of the
Pension Plan, the Group Health Plan and the Group Life Insurance Plan.

     2.4 Payment of Benefits.

          (a) Except as otherwise provided in Section 2.4(b) hereof, the total
     amount payable under this Article II shall be paid to Mr. McCrary in one
     (1) lump sum payment within two (2) payroll periods of the later of the
     following to occur: (a) Mr. McCrary's Separation Date, or (b) the tender to
     the Company by Mr. McCrary of an effective Waiver and Release 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.

          (b) Notwithstanding anything to the contrary in Section 2.4(a) above,
     if the Compensation Committee determines that it is necessary to delay any
     payment under this Article II in order to avoid any tax liability pursuant
     to Code Section 409A(a)(1), such payment shall be delayed for the period
     set forth in Section 409A(a)(2)(B)(i) and such delayed payment shall bear a
     reasonable rate of interest as determined by the Compensation Committee.

     2.5 Benefits in the Event of Death. In the event of Mr. McCrary's death
prior to the payment of all benefits due under this Article II, Mr. McCrary's
estate shall be entitled to receive as due any amounts not yet paid under this
Article II upon the tender by the executor or administrator of the estate of an
effective Waiver and Release.

                                       29


     2.6 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).

     2.7 No Mitigation. Mr. McCrary shall have no duty or obligation to seek
other employment following his Separation Date and, except as otherwise provided
in Subsection 2.1(b) hereof, the amounts due Mr. McCrary hereunder shall not be
reduced or suspended if he accepts such subsequent employment.

     2.8 Non-qualified Retirement and Deferred Compensation Plans. 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 procedures and
provisions set forth in Article III 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 Section 2.6 hereof.

                            ARTICLE III - ARBITRATION

     3.1 General. 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 Article III are not intended to apply to any other disputes, claims or


                                       30


controversies arising out of or relating to Mr. McCrary's employment by the
Company or the termination thereof.

     3.2 Demand for Arbitration. 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 Compensation Committee, in the case of Mr. McCrary.

     3.3 Law and Venue. The arbitrators shall apply the laws of the State of
Georgia, except to the extent pre-empted by federal law, excluding any law which
would require the use of the law of another state. The arbitration shall be held
in Atlanta, Georgia.

     3.4 Appointment of Arbitrators. Arbitrators shall be appointed 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.

     3.5 Costs. 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 Section 2.6
hereof.

     3.6 Interim and Injunctive Relief. Nothing in this Article III is intended
to preclude, upon application of either party, any court having jurisdiction
from issuing and enforcing in any lawful manner such temporary restraining


                                       31


orders, preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to either party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant to this
Article III and nothing herein is intended to 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
Article III.

                       ARTICLE IV - TRANSFER OF EMPLOYMENT

     4.1 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 or a another Southern
Subsidiary, the Company shall assign this Agreement to Southern or such Southern
Subsidiary, Southern shall accept such assignment or cause such Southern
Subsidiary to accept such assignment, and such assignee shall become the
"Company" for all purposes hereunder.

                           ARTICLE V - MISCELLANEOUS

     5.1 Funding of Benefits. Unless the Board of Directors in its discretion
determines otherwise, the amounts payable to Mr. McCrary under the 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.

     5.2 Withholding. There shall be deducted from the payment of any amount 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.

                                       32


     5.3 Assignment. Neither Mr. McCrary nor his beneficiaries shall have any
rights to sell, assign, transfer, encumber, or otherwise convey the right to
receive the payment of any amount 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.

     5.4 Interpretation. This Agreement is intended to comply with the
provisions of Code Section 409A and the Treasury Regulations promulgated
thereunder in order to avoid any additional tax under Section 409A(a)(1). In the
event it is necessary to interpret the provisions of this Agreement for purposes
of its operation, such interpretation shall, to the extent possible, be
consistent with such intent.

     5.5 Amendment and Termination. The Agreement may be amended or terminated
only by a writing executed by the parties.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
1st day of May, 2007.

                                             THE SOUTHERN COMPANY


                                             By:  /s/David M. Ratcliffe

                                             ALABAMA POWER COMPANY


                                             By:  /s/Robert A. Bell

                                             MR. MCCRARY


                                             /s/C. McCrary
                                             Charles Douglas
                                             McCrary



                                       33



                                    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 Section 2.2 of
such Agreement.


                                     1 of 5





                           CHANGE IN CONTROL AGREEMENT

                               Waiver and Release

         I, Charles Douglas McCrary, understand that I am entitled to receive
the severance benefits described in Article II 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 receiving the severance and welfare benefits under
Article II of the Agreement, I hereby voluntarily and irrevocably waive,
release, dismiss with prejudice, and withdraw all claims, complaints, suits or
demands of any kind whatsoever (whether known or unknown) which I ever had, may
have, or now have against The Southern Company, Southern Company Services, Inc.,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Communications
Services, Inc. d/b/a Southern LINC, Southern Company Energy Solutions, L.L.C.,
Southern Nuclear Operating Company, Inc., Southern Telecom, Inc., Southern
Company Management Development, Inc., and other current or former subsidiaries
or affiliates of The Southern Company and their past, present and future
officers, directors, employees, agents, insurers and attorneys (collectively,
the "Releasees"), arising from or relating to (directly or indirectly) my
employment or the termination of my employment or other events occurred as of
the date of execution of this Agreement, including but not limited to:

                  (a) claims for violations of Title VII of the Civil Rights Act
         of 1964, the Age Discrimination in Employment Act, the Fair Labor
         Standards Act, the Civil Rights Act of 1991, the Americans With
         Disabilities Act, the Equal Pay Act, the Family and Medical Leave Act,
         42 U.S.C. ss. 1981, the National Labor Relations Act, the Labor
         Management Relations Act, Executive Order 11246, Executive Order 11141,
         the Rehabilitation Act of 1973, the Sarbanes-Oxley Act of 2002 or the
         Employee Retirement Income Security Act;

                  (b) claims for violations of any other federal or state
         statute or regulation or local ordinance;

                  (c) claims for lost or unpaid wages, compensation, or
         benefits, defamation, intentional or negligent infliction of emotional
         distress, assault, battery, wrongful or constructive discharge,
         negligent hiring, retention or supervision, fraud, misrepresentation,
         conversion, tortious interference, breach of contract, or breach of
         fiduciary duty;

                                     2 of 5


                  (d) claims to benefits under any bonus, severance, workforce
         reduction, early retirement, outplacement, or any other similar type
         plan sponsored by the Company (except for those plans listed below); or

                  (e) any other claims under state law arising in tort or
         contract.

         In signing this Agreement, I am not releasing any claims that may arise
under the terms of this Agreement or which may arise out of events occurring
after the date I execute this Agreement.

         I am also not releasing claims to benefits that I am already entitled
to receive under The Southern Company Pension Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Employee Savings Plan, The
Southern Company Omnibus Incentive Compensation Plan, The Southern Company
Change in Control Benefits Protection Plan or under any workers' compensation
laws. 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.

         Nothing in this Agreement shall prohibit me from engaging in protected
activities under applicable law (including protected activities described in
Section 211 of the Energy Reorganization Act) or from communicating, either
voluntarily or otherwise, with any governmental agency concerning any potential
violation of the law.

         I understand and agree for a period of two (2) years after the date I
execute this Agreement, I will regard and treat as strictly confidential all
valuable, non-public, competitively sensitive data and information relating to
the Releasees' business that is not generally known by or readily available to
Releasees' competitors and I will not for any reason, either directly or
indirectly, use, sell, lend, lease, distribute, license, transfer, assign, show,
disclose, disseminate, reproduce, copy, or otherwise communicate any such
information to any third party for my own benefit or for any purpose, other than
in accordance with the express, written instructions of the Company or
Releasees.

         I further understand and agree that I will regard and treat as strictly
confidential all trade secrets of Releasees for as long as such items remain
trade secrets under applicable law and I will not for any reason, either
directly or indirectly, use, sell, lend, lease, distribute, license, transfer,
assign, show, disclose, disseminate, reproduce, copy, or otherwise communicate
any such trade secrets to any third party for my own benefit or for any purpose,
other than in accordance with the express, written instructions of the Company
or Releasees.

         I further agree to keep confidential and not disclose the terms of this
Agreement, including, but not limited to, the benefits under the Agreement,
except to my spouse, attorneys or financial advisors (who must be informed of
and agree to be bound by the confidentiality provisions contained in this
Agreement before I disclose any information to them about this Agreement), or
where such disclosure is required by law.

                                     3 of 5


         I agree to return to the Company prior to my last day of employment all
property of the Company, including but not limited to data, lists, information,
memoranda, documents, identification cards, credit cards, parking cards, keys,
computers, fax machines, beepers, phones, and files (including copies thereof).

         I understand and agree that I will not seek re-employment as an
employee, leased employee or independent contractor with the Company or any
Southern Company subsidiary or affiliate during the twenty-four (24) month
period beginning immediately following my execution of this Agreement.

         I have carefully read this agreement and I fully understand all of the
provisions of this Waiver.

         I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver (including my attorney, accountant
or tax advisor). Prior to signing this Waiver, I have been given the opportunity
and sufficient time to seek such advice.

         I have had the opportunity to review and consider this Waiver for a
period of at least twenty-one (21) days before signing it.

         I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign this Waiver. In order to revoke this
Waiver, I must deliver written notification of such revocation to the
Compensation Committee. 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. Revocation of this
Waiver will not alter or change the termination of my employment by the Company.

         In signing this Waiver, I am not relying on any representation or
statement (written or oral) not specifically set forth in this Waiver, the
Agreement or by the company or any of its representatives with regard to the
subject matter, basis, or effect of this Waiver or otherwise.

         I was not coerced, threatened, or otherwise forced to sign this Waiver.
I am voluntarily signing and delivering this Waiver of my own free will.



                                     4 of 5



I understand that by signing this Waiver I am giving up rights I may have. I
understand I do not have to sign this Waiver.

     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.

By:
         -----------------------------------
Date:
         -----------------------------------



                                     5 of 5

EX-10.A.8

                                                                 Exhibit 10(a)8








                                SOUTHERN COMPANY
                                CHANGE IN CONTROL
                            BENEFITS PROTECTION PLAN




                          AN AMENDMENT AND RESTATEMENT














                              Troutman Sanders LLP
                        Bank of America Plaza, Suite 5200
                           600 Peachtree Street, N.E.
                             Atlanta, Georgia 30308








                                SOUTHERN COMPANY
                                CHANGE IN CONTROL

                            BENEFITS PROTECTION PLAN

                              AMENDED AND RESTATED


                    ARTICLE I - PURPOSE AND ADOPTION OF PLAN

     1.1 Adoption of Plan. Southern Company Services, Inc. hereby adopts this
Amended and Restated Southern Company Change in Control Benefits Protection Plan
effective this 28 day of February, 2007. The Plan is an amendment and
restatement of the Plan which was originally effective November 16, 2006.

     1.2 Purpose. The Plan defines the events that constitute a Southern Change
in Control and a Subsidiary Change in Control, protects the benefits to be
provided to employees of the Employing Companies under certain incentive-based
compensation plans and arrangements upon such a Change in Control and creates a
protocol for transferring funds from the Employing Companies to the Southern
Company Deferred Compensation Trust as a reserve for the payment of deferred
compensation and non-qualified retirement benefits following certain change in
control events involving Southern Company and certain of its subsidiaries.


                            ARTICLE II - DEFINITIONS


     2.1 "Administrative Committee" shall mean the Board of Directors.

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

     2.3 "Board of Directors" shall mean the board of directors of the Company.

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

     2.5 "Change in Control" shall mean a Southern Change in Control or a
Subsidiary Change in Control, as applicable.

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

     2.7 "Company" shall mean Southern Company Services, Inc., its successors
and assigns.

     2.8 "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
agencies.

                                       2


     2.9 "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.

     2.10 "DCP" shall have the meaning set forth in Section 6.1 hereof.

     2.11 "Employee" shall mean an employee of an Employing Company as of the
date of a Southern Change in Control.

     2.12 "Employing Company" shall mean Southern Company, the Company, or any
other corporation or other entity Controlled by Southern Company, directly or
indirectly, which the Compensation and Management Succession Committee of the
Southern Company Board of Directors has authorized to participate in the Plan
and which has thereafter adopted the Plan, and any successor of any of them.

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

     2.14 "Funding Change in Control" shall mean any of the following:

          (a) The Consummation of an acquisition by any Person of Beneficial
     Ownership of 35% or more of Southern Company's Voting Securities; provided,
     however, that for purposes of this subsection (a), the following
     acquisitions of Southern Company's Voting Securities shall not constitute a
     Change in Control:

               (i) any acquisition directly from Southern Company;

               (ii) any acquisition by Southern Company;

               (iii) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by Southern Company or any corporation
          controlled by Southern Company;

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

               (v) any acquisition by an employee of Southern Company or its
          subsidiary or affiliate, or Group composed exclusively of such
          employees; or

               (vi) any Business Combination which would not otherwise
          constitute a Funding Change in Control because of the application of
          clauses (i), (ii) and (iii) of this Section 2.14(a);

          (b) 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;

          (c) The Consummation of a Business Combination, unless, following such
     Business Combination, all of the following three conditions are met:

                                       3


               (i) all or substantially all of the individuals and entities who
          held Beneficial Ownership, respectively, of Southern Company's Voting
          Securities immediately prior to such Business Combination beneficially
          own, directly or indirectly, 50% 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 Company's Voting
          Securities or all or substantially all of Southern Company'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
          Company's Voting Securities;

               (ii) no Person (excluding any corporation resulting from such
          Business Combination, any qualified pension plan, publicly held mutual
          fund, Group composed exclusively of employees or employee benefit plan
          (or related trust) of Southern Company, its subsidiaries or Surviving
          Company) holds Beneficial Ownership, directly or indirectly, of 35% 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

               (iii) 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.

          (d) 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 a Funding Subsidiary; provided, however,
     that for purposes of this Subsection 2.14(d), any acquisition by an
     employee of Southern Company or its subsidiary or affiliate, or Group
     composed entirely of such employees, any qualified pension plan, publicly
     held mutual fund or any employee benefit plan (or related trust) sponsored
     or maintained by Southern Company or any corporation Controlled by Southern
     Company shall not constitute a Funding Change in Control;

          (e) The Consummation of a reorganization, merger or consolidation of a
     Funding Subsidiary (a "Funding Subsidiary Business Combination"), in each
     case, unless, following such Funding Subsidiary Business Combination,
     Southern Company Controls the corporation surviving or resulting from such
     Funding Subsidiary Business Combination, or

          (f) The Consummation of the sale or other disposition of all or
     substantially all of the assets of a Funding Subsidiary to an entity that
     Southern Company does not Control.

     2.15 "Funding Event" shall mean the occurrence of any of the following
events as administratively determined by the Southern Committee:

                                       4


          (a) Southern Company or a Funding Subsidiary has entered into a
     written agreement, such as, but not limited to, a letter of intent, which,
     if Consummated, would result in a Funding Change in Control;

          (b) Southern Company, a Funding Subsidiary or any other Person
     publicly announces an intention to take or to consider taking actions
     which, if Consummated, would result in a Funding Change in Control under
     circumstances where the Consummation of the announced action or intended
     action is legally and financially possible;

          (c) Any Person acquires Beneficial Ownership of fifteen percent (15%)
     or more of the Common Stock; or

          (d) The Southern Board or the board of directors of a Funding
     Subsidiary elects to otherwise fund the Trust in accordance with the
     provisions of ARTICLE IV, V, and VI hereof.

     2.16 "Funding Subsidiary" shall mean Alabama Power Company, Georgia Power
Company, Gulf Power Company and Mississippi Power Company, and any successor of
any of them, provided such companies are Employing Companies, and any other
Employing Company that the Southern Committee in its sole discretion shall
designate in writing as a Funding Subsidiary.

     2.17 "Funding Subsidiary Business Combination" shall have the meaning set
forth in Section 2.14(e) hereof.

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

     2.19 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of February 23, 2006, plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern Company'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
February 23, 2006, 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.

     2.20 "Omnibus Plan" shall mean the Southern Company Omnibus Incentive
Compensation Plan, including the Incentive Programs: Design and Administrative
Specifications as approved by the Compensation and Management Succession
Committee of the Southern Board, any Program thereunder, and any successor
thereto.

     2.21 "Operating Committee" shall mean the committee appointed by the
Administrative Committee to conduct the day to day administration of the Plan.

                                       5


     2.22 "Participant" shall mean (i) in the case of a Funding Change in
Control involving Southern Company under Section 2.14(a), (b) or (c) hereof, an
employee of an Employing Company who, as of the date of the Funding Change in
Control, has a non-forfeitable right to Retirement Income under the Pension
Plan, or (ii) in the case of a Funding Change in Control involving a Funding
Subsidiary under Section 2.14(d), (e) or (f) hereof, an employee of such Funding
Subsidiary who, on the date of such Funding Change in Control, has a
non-forfeitable right to Retirement Income under the Pension Plan.

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

     2.24 "Plan" shall mean this Southern Company Change in Control Benefits
Protection Plan. The Plan amends and restates the Southern Company Change in
Control Benefit Plan Determination Policy.

     2.25 "Plan Termination" shall mean the termination of the Omnibus Plan (or
any Program thereunder) by Southern Company or an Employing Company following a
Southern Change in Control unless an equitable arrangement (embodied in an
ongoing substitute or replacement plan or program) has been made with respect to
the Omnibus Plan or Program in connection with the Change in Control. For
purposes of this Plan, an ongoing substitute or alternative plan or program
shall be considered an "equitable arrangement" if a nationally recognized
compensation consulting firm chosen by the Operating Committee opines in writing
that the post-Change in Control plan or program is an equitable substitute or
replacement of the Omnibus Plan or Program that was terminated.

     2.26 "Preliminary Change in Control" shall mean the occurrence of any of
the following as administratively determined by the Southern Committee:

          (a) Southern Company or an Employing Company has entered into a
     written agreement, such as, but not limited to, a letter of intent, which,
     if Consummated, would result in a Change in Control;

          (b) Southern Company, an Employing Company or any other Person
     publicly announces an intention to take or to consider taking actions
     which, if Consummated, would result in a Change in Control under
     circumstances where the Consummation of the announced action or intended
     action is legally and financially possible; or

          (c) Any Person acquires Beneficial Ownership of fifteen percent (15%)
     or more of the Common Stock.

     2.27 "SBP" shall have the meaning set forth in Section 4.1 hereof.

     2.28 "SERP" shall have the meaning set forth in Section 5.1 hereof.

     2.29 "Southern Board" shall mean the board of directors of Southern
Company.

     2.30 "Southern Change in Control" shall mean any of the following:

                                       6


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

               (i) any acquisition directly from Southern Company;

               (ii) any acquisition by Southern Company;

               (iii) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by Southern Company or any corporation
          controlled by Southern Company;

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

               (v) any acquisition by an employee of Southern Company or its
          subsidiary or affiliate, or Group composed exclusively of such
          employees; or

               (vi) any Business Combination which would not otherwise
          constitute a Change in Control because of the application of clauses
          (i), (ii) and (iii) of this Section 2.30(a);


          (b) 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; or

          (c) Consummation of a Business Combination, unless, following such
     Business Combination, all of the following three conditions are met:


          (i) all or substantially all of the individuals and entities who held
     Beneficial Ownership, respectively, of Southern Company'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 Surviving Company in substantially the same proportions as
     their ownership, immediately prior to such Business Combination, of
     Southern Company's Voting Securities;

          (ii) no Person (excluding any corporation resulting from such Business
     Combination, any qualified pension plan, publicly held mutual fund, Group
     composed exclusively of employees or employee benefit plan (or related
     trust) of Southern Company, its subsidiaries or Surviving Company) 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


          (iii) 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.


                                       7


     2.31 "Southern Committee" shall mean the committee comprised of the
Chairman of the Southern Board, the Chief Financial Officer of Southern Company
and the General Counsel of Southern Company.

     2.32 "Southern Company" shall mean The Southern Company, its successors and
assigns.

     2.33 "Southern Termination" shall mean the following:

          (a) The Consummation of a reorganization, merger or consolidation of
     Southern Company under circumstances where either (i) Southern Company is
     not the Surviving Company or (ii) Southern Company's Voting Securities are
     no longer publicly traded;

          (b) The Consummation of a sale or other disposition of all or
     substantially all of Southern Company's assets; or

          (c) The Consummation of an acquisition by any Person of Beneficial
     Ownership of all of Southern Company's Voting Securities such that Southern
     Company's Voting Securities are no longer publicly traded.

     2.34 "Subsidiary Change in Control" shall mean any of the following:

          (a) 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 an Employing Company; provided, however,
     that for purposes of this Subsection 2.34, any acquisition by an employee
     of Southern Company or its subsidiary or affiliate, or Group composed
     entirely of such employees, any qualified pension plan, publicly held
     mutual fund or any employee benefit plan (or related trust) sponsored or
     maintained by Southern Company or any corporation Controlled by Southern
     Company shall not constitute a Change in Control;

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

          (c) Consummation of the sale or other disposition of all or
     substantially all of the assets of an Employing Company to an entity which
     Southern Company does not Control.

     2.35 "Subsidiary Employee" shall mean an employee of an Employing Company
that has undergone a Subsidiary Change in Control who does not become an
employee of another Employing Company immediately following such Subsidiary


                                       8


Change in Control. The Operating Committee may in its sole discretion deem one
or more employees of any corporation or entity Controlled by Southern Company,
directly or indirectly, to be employed by an Employing Company for purposes of
being covered as a Subsidiary Employee under this Plan. Such action shall be in
writing and shall cause such an employee to be a Subsidiary Employee entitled to
benefits under this Plan only in the event of a Subsidiary Change in Control of
his deemed Employing Company, not his actual employer (which may or may not be
an Employing Company).

     2.36 "Surviving Company" shall have the meaning set forth in Section
2.14(c)(i) hereof.

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

     2.38 "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.

                           ARTICLE III - OMNIBUS PLAN

                          CHANGE IN CONTROL PROVISIONS

     3.1 Application. The provisions of this Article III apply to benefits
payable under the Southern Company Omnibus Incentive Compensation Plan (the
"Omnibus Plan") notwithstanding any provision in the Omnibus Plan to the
contrary. The meaning of capitalized terms not defined herein is determined
under the Omnibus Plan.

     3.2 Stock-Based Awards. The provisions of this Section 3.2 apply to
stock-based awards granted under the Omnibus Plan.

          (a) Southern Change in Control. In the event of a Southern Change in
     Control which is not also a Southern Termination:

               (i) Any Options and Stock Appreciation Rights held as of the date
          of the Southern Change in Control shall remain subject to such
          restrictions and vesting schedules in accordance with the terms of the
          grant.

               (ii) The restrictions and deferral limitations applicable to any
          Restricted Stock and Restricted Stock Units shall continue in
          accordance with the terms of the grant.

               (iii) The restrictions, deferral limitations and other conditions
          applicable to any other Awards shall continue in accordance with the
          terms of the grant.

          (b) Subsidiary Change in Control. In the event of a Subsidiary Change
     in Control:

                                       9


               (i) Any Options and Stock Appreciation Rights held by a
          Subsidiary Employee which are outstanding as of the date such
          Subsidiary Change in Control is determined to have occurred, and which
          are not then exercisable and vested, shall become fully exercisable
          and vested; provided, that in the case of a Subsidiary Employee
          holding a Stock Appreciation Right who is actually subject to Section
          16(b) of the Exchange Act, such Stock Appreciation Right shall not
          become fully vested and exercisable unless it shall have been
          outstanding for at least six months as of the date such Subsidiary
          Change in Control is determined to have occurred.

               (ii) The restrictions and deferral limitations applicable to any
          Restricted Stock and Restricted Stock Units held by a Subsidiary
          Employee shall lapse, and such Restricted Stock and Restricted Stock
          Units shall become free of all restrictions and limitations and become
          fully vested and transferable.

          (c) Southern Termination. In the event of a Southern Termination:

               (i) Any Options and Stock Appreciation Rights which are
          outstanding as of the date such Southern Termination is determined to
          have occurred, and which are not then exercisable and vested, shall
          become fully exercisable and vested; provided, that in the case of an
          Employee holding a Stock Appreciation Right who 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 the Employee under Section 16(b), provided
          further, that any such actions not taken as a result of the rules
          under Section 16(b) shall be effected as of the first date that such
          activity would no longer result in liability under such section.

               (ii) The restrictions and deferral limitations applicable to any
          Restricted Stock and Restricted Stock Units held by Employees shall
          lapse, and such Restricted Stock and Restricted Stock Units shall
          become free of all restrictions and limitations and become fully
          vested and transferable.

               (iii) The restrictions, deferral limitations and other conditions
          applicable to any other Awards held by Employees shall lapse, and such
          other Awards shall become free of all restrictions, limitations or
          conditions and become fully vested and transferable.

               (iv) Any Options, Stock Appreciation Rights, Restricted Stock or
          Restricted Stock Units which are outstanding as of the date such
          Southern Termination is determined to have occurred, shall be
          converted into or replaced by options, stock appreciation rights,
          restricted stock or restricted stock units, as the case may be, in the
          Surviving Company, or the corporation which has acquired all of
          Southern Company's Common Stock or assets. In the event of such
          conversion or replacement, the terms of the replacement options or
          stock appreciation rights shall preserve with respect to each Option
          and each SAR the spread between the Fair Market Value of the shares
          subject to the Options or SARs and the Option Price or Base Value, as
          the case may be, as determined immediately prior to the Southern
          Termination. Similarly, the terms of replacement restricted stock or
          restricted stock units shall preserve the Fair Market Value of each
          share of Restricted Stock or Restricted Stock Unit as determined


                                       10


          immediately prior to the Southern Termination. No replacement option,
          stock appreciation right, share of restricted stock or restricted
          stock unit received shall be subject to any terms which are less
          favorable than those which existed with respect to the original
          Option, SAR or share of Restricted Stock or Restricted Unit
          immediately prior to the Southern Termination.

               (v) In the event that it is not possible to effect the conversion
          set forth in Section 3.2(c)(iv) hereof, any and all outstanding
          Options, Stock Appreciation Rights, Restricted Stock and Restricted
          Stock Units as of the date of the Southern Termination which are not
          so converted shall be terminated and the affected Employees shall
          receive within thirty (30) days of the Southern Termination cash equal
          to the difference between the Option Price and Fair Market Value, in
          the case of Options, the Base Value and Fair Market Value, in the case
          of SARs and equal to the Fair Market Value, in the case of Restricted
          Stock and Restricted Stock Units. For purposes of this Section
          3.2(c)(v), Fair Market Value shall be determined as of the day prior
          to the date of the Southern Termination.


     3.3 Application. The provisions of this Sections 3.3 apply to benefits
payable under the Performance Pay Program under the Omnibus Plan (the "PPP").

          (a) Southern Change in Control. In the event of a Southern Change in
     Control, if there is no Plan Termination with respect to the PPP, payout of
     Cash-Based Awards under the PPP to Employees for the performance period in
     which the Southern Change in Control shall have occurred shall be the
     greater of actual or target performance under the PPP.

          (b) Plan Termination. In the event of a Plan Termination with respect
     to the PPP within two (2) years following a Southern Change in Control,
     each Employee who is an employee on the date of such Plan Termination shall
     be entitled to receive within thirty (30) days of the Plan Termination,
     cash in an amount equal to a pro-rated payout of his Cash-Based Award under
     the PPP for the performance period in which the Plan Termination 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 date of the Plan Termination.

          (c) Subsidiary Change in Control. In the event of a Subsidiary Change
     in Control, each Subsidiary Employee on the date of such Change in Control
     shall be entitled to receive within thirty (30) days of the Subsidiary
     Change in Control, cash in an amount equal to a prorated payout of his
     Cash-Based Award under the PPP for the performance period in which the
     Subsidiary Change in Control shall have occurred, at target performance
     under the PPP and prorated by the number of months which have passed since


                                       11


     the beginning of the performance period until the date of the Subsidiary
     Change in Control.

          (d) Southern Termination. In the event of a Southern Termination, each
     Employee on the date of such Southern Termination shall be entitled to
     receive within thirty (30) days of the Southern Termination, cash in an
     amount equal to a prorated payout of his Cash-Based Award under the PPP for
     the performance period in which the Southern Termination 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 date of the Southern Termination. The PPP shall terminate
     immediately following the payments provided for in this Section 3.3(d).

          (e) Pro rata Calculation. For purposes of calculating any pro rata
     Cash-Based Awards under this Section 3.3, a month shall not be considered
     if the determining event occurs on or before the 14th day of the month, and
     a month shall be considered if the determining event occurs on or after the
     15th day of the month.

     3.4 Application. The provisions of this Section 3.4 apply to benefits
payable under the Performance Dividend Program under the Omnibus Plan (the
"PDP").

          (a) Southern Change in Control. In the event of a Southern Change in
     Control, if there is no Plan Termination with respect to the PDP, payout of
     Cash-Based Awards under the PDP to Employees for the performance period in
     which the Southern Change in Control shall have occurred shall be based on
     a payout percentage of the greater of 50% or actual performance under the
     PDP for such performance period.

          (b) Plan Termination. In the event of a Plan Termination with respect
     to the PDP within two (2) years following a Southern Change in Control,
     each Employee who is an employee on the date of such Plan Termination shall
     be entitled to receive within thirty (30) days of the Plan Termination,
     cash for each Cash-Based Award under the PDP held as of such date, based on
     a payout percentage of the greater of 50% or actual performance under the
     PDP determined as of the date of the Plan Termination, and the sum of the
     quarterly dividends on the Common Stock declared during the calendar year
     of and prior to the date of the Plan Termination. For purposes of this
     Section 3.4(b), payout of each Cash-Based Award under the PDP shall be
     based upon the performance measurement period that would otherwise have
     ended on December 31st of the year in which the Plan Termination occurs,
     all other remaining PPP performance measurement periods shall terminate and
     no payment shall be made with respect thereto.

          (c) Subsidiary Change in Control. In the event of a Subsidiary Change
     in Control, each Subsidiary Employee on the date of such Change in Control
     shall be entitled to receive within thirty (30) days of the Subsidiary
     Change in Control, cash for each Cash-Based Award under the PDP held as of
     such date, based on a payout percentage of the greater of 50% or actual
     performance determined as of the date on which the Subsidiary Change in
     Control shall have occurred, and the sum of the quarterly dividends on the
     Common Stock declared during the calendar year of and prior to the date of
     the Subsidiary Change in Control. For purposes of this Section 3.4(c),


                                       12


     payout of each Cash-Based Award under the PDP shall be based upon the
     performance measurement period that would otherwise have ended on December
     31st of the year in which the Subsidiary Change in Control occurs, all
     other remaining PPP performance measurement periods shall terminate and no
     payment to such Subsidiary Employee shall be made with respect thereto.

          (d) Southern Termination. In the event of a Southern Termination, each
     Employee who is an employee on the date of such Southern Termination shall
     be entitled to receive within thirty (30) days of the Southern Termination,
     cash for each Cash-Based Award under the PDP held as of such date, based on
     a payout percentage of the greater of 50% or actual performance determined
     as of the date on which the Southern Termination shall have occurred, and
     the sum of the quarterly dividends on the Common Stock declared during the
     year of and prior to the date of the Southern Termination. For purposes of
     this Section 3.4(d), payout of each Cash-Based Award under the PDP shall be
     based upon the performance measurement period that would otherwise have
     ended on December 31st of the year in which the Southern Termination
     occurs, the PPP and all other remaining PPP performance measurement periods
     shall terminate and no further payment shall be made with respect thereto.

     3.5 Other Incentives. The provisions of this Section 3.5 shall apply to any
Employee or Subsidiary Employee who, as of the date of the respective Change in
Control, is entitled to a Performance Unit or Performance Share award under the
Omnibus Plan (other than those described in Section 3.2 hereof), or any cash or
stock-based award under any other plan or program sponsored by an Employing
Company. If and to the extent an Employee or Subsidiary Employee has received a
stock-based award under the Omnibus Plan (other than those described in Section
3.2 hereof) or any other plan or program sponsored by his Employing Company, in
the event of a Southern Change in Control, a Subsidiary Change in Control and/or
a Southern Termination, such award shall be subject to the provisions of this
Plan, and any restrictions, limitations and deferral limitations shall lapse if
and to the extent provided under Section 3.2 hereof for similar Awards granted
under the Omnibus Plan. If and to the extent an Employee or Subsidiary Employee
is entitled to a cash-based award under the Omnibus Plan (other than PPP or PDP)
or any other plan or program sponsored by his Employing Company, in the event of
a Southern Change in Control, a Subsidiary Change in Control and/or a Southern
Termination, such award shall be subject to the provisions of this Plan, and,
provided such Employee or Subsidiary Employee is not otherwise entitled to a
payout under any change in control provision of such plan or program, such award
shall be payable in a similar manner as set forth in Sections 3.3 and 3.4 hereof
with respect to PPP and PDP (e.g., if prorated, the award is paid at target, if
the award is for a full performance period, the award is paid at the greater of
actual or target if administratively practicable, if not, at target) as
determined by the Operating Committee on a good faith basis.



                     ARTICLE IV - SUPPLEMENTAL BENEFIT PLAN

                 CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS

     4.1 Application. Upon a Funding Change in Control, the provisions of this
Article IV shall apply to the funding, calculation and payment of accrued


                                       13


benefits under The Southern Company Supplemental Benefit Plan (the "SBP")
notwithstanding any provision in the SBP to the contrary. The meaning of any
capitalized terms not defined herein shall be as defined under the SBP.

     4.2 Funding of the Trust. The Trust has been established to hold assets of
the Employing Companies under certain circumstances as a reserve for the
discharge of the Employing Companies' obligations under the SBP and certain
other plans and arrangements. Upon a Funding Event involving a Funding Change in
Control under Section 2.14(a), (b) or (c) hereof, all Employing Companies shall
be obligated to immediately contribute such amounts to the Trust as may be
necessary to fully fund each Employing Company's obligations to pay the
aggregate Pension Benefits and Non-Pension Benefits to be accrued under the SBP
as of the date of the Funding Change in Control, the aggregate accrued Pension
Benefit to be determined under Section 4.4 hereof, in accordance with the
procedures set forth in Section 4.3 hereof. Upon a Funding Event involving a
Funding Subsidiary under Section 2.14(d), (e) and (f) hereof, such Funding
Subsidiary shall be obligated to immediately contribute such amounts to the
Trust as may be necessary to fully fund such Funding Subsidiary's obligations to
pay the aggregate Pension Benefits and Non-Pension Benefits to be accrued under
the SBP as of the date of the Funding Change in Control, the aggregate accrued
Pension Benefit to be determined under Section 4.4 hereof, in accordance with
the procedures set forth in Section 4.3 hereof. Under the terms of the Trust
agreement, all assets held in the Trust remain subject only to the claims of the
Employing Companies' general creditors whose claims against the Employing
Companies are not satisfied because of the Employing Companies' bankruptcy or
insolvency (as those terms are defined in the Trust). No Participant has any
preferred claim on, or beneficial ownership interest in, any assets of the Trust
before the assets are paid to the Participant and all rights created under the
Trust, as under the SBP, are unsecured contractual claims of the Participant
against his Employing Company.

     4.3 Calculation of Trust Contribution. As soon as practicable following a
Funding Event, the affected Employing Companies shall contribute funds to the
Trust based upon the funding strategy adopted by the Operating Committee with
the assistance of an appointed actuary in such amounts as shall be necessary to
fulfill the Employing Companies' obligations pursuant to this Article IV and the
terms of the Trust agreement. The dollar amount necessary to satisfy each
Employing Company's obligations under this Article IV shall be estimated and
paid to the Trust as soon as practicable following a Funding Event and shall be
recalculated and trued- up immediately following the respective Funding Change
in Control. In the event of a dispute after a Funding Event between a
Participant and an Employing Company over such actuary's determination of the
dollar amount necessary to appropriately fund the Trust under the terms of this
Article IV, the respective Employing Company(ies) and any complaining
Participant(s) shall refer such dispute to an independent, third-party actuarial
consultant, chosen by mutual agreement of the Employing Company and such
Participant. If the Employing Company and the Participant cannot agree on an
independent, third-party actuarial consultant, the actuarial consultant shall be
chosen by lot from an equal number of actuaries submitted by the affected
Employing Companies and the Trustee (not to exceed four (4) each). Any such
referral shall only occur once in total and the determination by the third-party
actuarial consultant shall be final and binding upon both parties. The Employing
Companies shall be responsible for all of the fees and expenses of the
independent actuarial consultant.

                                       14


     4.4 Pension Benefit Upon a Funding Change in Control. As of the date of a
Funding Change in Control, the accrued Pension Benefit of each Participant shall
be calculated based on such Participant's Earnings and Accredited Service on
such date, regardless of whether such Participant is retirement eligible on such
date. Each Participant shall be entitled to receive the amount of his accrued
Pension Benefit based on such Participant's Earnings and Accredited Service as
of the date of a Funding Change in Control adjusted to take into account
appropriate early reduction factors, if any, based on the Participant's
commencement of benefits. Such accrued Pension Benefit shall be paid in lump sum
as soon as practicable following such Participant's termination of employment or
retirement. Any Participants' Pension Benefits accrued under the SBP subsequent
to the date of a Funding Change in Control shall be calculated and distributed
pursuant to the terms of the SBP, without regard to this Article IV.

     4.5 Non-Pension Benefit Distribution Election upon a Funding Change in
Control. In the event of a Funding Change in Control, notwithstanding anything
to the contrary in the SBP, the Non-Pension Benefit of a Participant shall be
paid out in a lump sum as soon as practicable following such Participant's
termination of employment or retirement if such Participant makes such an
election pursuant to those procedures established by the Operating Committee in
its sole and absolute discretion. If no such election is made, a Participant
shall receive payment of his Non-Pension Benefit Account solely in accordance
with Article V of the SBP.


               ARTICLE V - SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                 CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS

     5.1 Application. Upon a Funding Change in Control, the provisions of this
Article V shall apply to the funding, calculation and payment of accrued
benefits under The Southern Company Supplemental Executive Retirement Plan (the
"SERP") notwithstanding any provision in the SERP to the contrary. The meaning
of any capitalized terms not defined herein shall be as defined under the SERP.

     5.2 Funding of the Trust. The Trust has been established to hold assets of
the Employing Companies under certain circumstances as a reserve for the
discharge of the Employing Companies' obligations under the SERP and certain
other plans and arrangements. Upon a Funding Event involving a Funding Change in
Control under Section 2.14(a), (b) or (c) hereof, all Employing Companies shall
be obligated to immediately contribute such amounts to the Trust as may be
necessary to fully fund each Employing Company's obligations to pay the
aggregate benefits to be accrued under the SERP as of the date of the Funding
Change in Control, as determined under Section 5.4 hereof, in accordance with
the procedures set forth in Section 5.3 hereof. Upon a Funding Event involving a
Funding Subsidiary under Section 2.14(d), (e) and (f) hereof, such Funding
Subsidiary shall be obligated to immediately contribute such amounts to the
Trust as may be necessary to fully fund such Funding Subsidiary's obligations to
pay the aggregate benefits to be accrued under the SERP as of the date of such
Funding Change in Control. Under the terms of the Trust agreement, all assets
held in the Trust remain subject only to the claims of the Employing Companies'
general creditors whose claims against the Employing Companies are not satisfied
because of the Employing Companies' bankruptcy or insolvency (as those terms are
defined in the Trust). No Participant has any preferred claim on, or beneficial


                                       15


ownership interest in, any assets of the Trust before the assets are paid to the
Participant and all rights created under the Trust, as under the SERP, are
unsecured contractual claims of the Participant against his Employing Company.

     5.3 Calculation of Trust Contribution. As soon as practicable following a
Funding Event, the affected Employing Companies shall contribute funds to the
Trust based upon the funding strategy adopted by the Operating Committee with
the assistance of an appointed actuary in such amounts as shall be necessary to
fulfill the Employing Companies' obligations pursuant to this Article V and the
terms of the Trust agreement. The dollar amount necessary to satisfy each
Employing Company's obligations under this Article V shall be estimated and paid
to the Trust as soon as practicable following a Funding Event and shall be
recalculated and trued- up immediately following the respective Funding Change
in Control. In the event of a dispute after a Funding Event between a
Participant and an Employing Company over such actuary's determination of the
dollar amount necessary to appropriately fund the Trust under this Article V,
the respective Employing Company(ies) and any complaining Participant(s) shall
refer such dispute to an independent, third-party actuarial consultant, chosen
by mutual agreement of the Employing Company and such Participant. If the
Employing Company and the Participant cannot agree on an independent,
third-party actuarial consultant, the actuarial consultant shall be chosen by
lot from an equal number of actuaries submitted by the affected Employing
Companies and the Trustee (not to exceed four (4) each). Any such referral shall
only occur once in total and the determination by the third-party actuarial
consultant shall be final and binding upon both parties. The Employing Companies
shall be responsible for all of the fees and expenses of the independent
actuarial consultant.

     5.4 SERP Benefit Upon a Funding Change in Control. As of the date of a
Funding Change in Control, the accrued SERP Benefit of each Participant shall be
calculated based on such Participant's Earnings and Accredited Service on such
date, regardless of whether such Participant is retirement eligible on such
date. Each such Participant shall be entitled to receive the amount of his SERP
Benefit based on such Participant's Earnings and Accredited Service as of the
date of a Funding Change in Control adjusted to take into account appropriate
early reduction factors, if any, based on the Participant's commencement of
benefits. Such accrued SERP Benefit shall be paid in lump sum as soon as
practicable following such Participant's termination of employment or
retirement. Any Participants' SERP Benefits accrued under the SERP subsequent to
the date of a Funding Change in Control shall be calculated and distributed
pursuant to the terms of the SERP without regard to this Article V.


                     ARTICLE VI - DEFERRED COMPENSATION PLAN

                 CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS

     6.1 Application. Upon a Funding Change in Control, the provisions of this
Article VI shall apply to the funding, calculation and payment of benefits under
the Southern Company Deferred Compensation Plan (the "DCP") notwithstanding any
provision in the DCP to the contrary. The meaning of any capitalized terms not
defined herein shall be as defined under the DCP. For purposes of this Article
VI, the term "Participant" shall have the meaning set forth in Article II of the
DCP without regard to Section 2.21 hereof.



                                       16


     6.2 Funding of the Trust. The Trust has been established to hold assets of
the Employing Companies under certain circumstances as a reserve for the
discharge of the Employing Companies' obligations under the DCP and certain
other plans and arrangements. Upon a Funding Event involving a Funding Change in
Control under Section 2.14(a), (b) or (c) hereof, all Employing Companies shall
be obligated to immediately contribute such amounts to the Trust as may be
necessary to fully fund each Employing Company's obligations to pay the
aggregate benefits to be accrued under the DCP as of the date of the Funding
Change in Control in accordance with the procedures set forth in Section 6.3
hereof. Upon a Funding Event involving a Funding Subsidiary under Section
2.14(d), (e) and (f) hereof, such Funding Subsidiary shall be obligated to
immediately contribute such amounts to the Trust as may be necessary to fully
fund such Funding Subsidiary's obligations to pay the aggregate benefits to be
accrued under the DCP as of the date of the Funding Change in Control in
accordance with the procedures set forth in Section 6.3 hereof. Under the terms
of the Trust agreement, all assets held in the Trust remain subject only to the
claims of the Employing Companies' general creditors whose claims against the
Employing Companies are not satisfied because of the Employing Companies'
bankruptcy or insolvency (as those terms are defined in the Trust). No
Participant has any preferred claim on, or beneficial ownership interest in, any
assets of the Trust before the assets are paid to the Participant and all rights
created under the Trust, as under the DCP, are unsecured contractual claims of
the Participant against his Employing Company.

     6.3 Calculation of Trust Contribution. As soon as practicable following a
Funding Event, the affected Employing Companies shall contribute funds to the
Trust based upon the funding strategy adopted by the Operating Committee with
the assistance of an appointed actuary in such amounts as shall be necessary to
fulfill the Employing Companies' obligations pursuant to this Article VI and the
terms of the Trust. The dollar amount necessary to satisfy each Employing
Company's obligations under this Article VI shall be estimated and paid to the
Trust as soon as practicable following a Funding Event and shall be recalculated
and trued- up immediately following the respective Funding Change in Control. In
the event of a dispute following a Funding Event between a Participant and an
Employing Company over such actuary's determination of the dollar amount
necessary to appropriately fund the Trust under this Article VI, the respective
Employing Company(ies) and any complaining Participant(s) shall refer such
dispute to an independent, third-party actuarial consultant, chosen by mutual
agreement of the Employing Company and such Participant. If the Employing
Company and the Participant cannot agree on an independent, third-party
actuarial consultant, the actuarial consultant shall be chosen by lot from an
equal number of actuaries submitted by the Employing Company and the Trustee
(not to exceed four (4) each). Any such referral shall only occur once in total
and the determination by the third-party actuarial consultant shall be final and
binding upon both parties. The Employing Companies shall be responsible for all
of the fees and expenses of the independent actuarial consultant.

     6.4 Payment of DCP Account. In the event of a Funding Change in Control,
notwithstanding anything to the contrary in the DCP, a Participant's Account
under the DCP shall be paid out in a lump sum as soon as practicable following
such Participant's termination of employment or retirement if such Participant
makes such an election pursuant to those procedures established by the Operating
Committee in its sole and absolute discretion. If no such election is made, a
Participant shall receive payment of his DCP Account solely in accordance with
Article VII of the DCP.


                                       17



                          ARTICLE VII - ADMINISTRATION


     7.1 Administrative Committee. The Administrative Committee shall appoint
the members of the Operating Committee and shall designate a Chairman thereof.
The Operating Committee shall be responsible for the general administration of
the Plan.

     7.2 Duties of the Operating Committee.

          (a) The Operating Committee shall be responsible for the daily
     administration of the Plan and may appoint other persons or entities to
     perform or assist in the performance of any of its fiduciary duties,
     subject to its review and approval. The Operating Committee shall have the
     right to remove any such appointee from his position without cause upon
     notice. Any person, group of persons, or entity may serve in more than one
     fiduciary capacity.

          (b) The Operating Committee shall maintain permanent 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 Company and any persons
     designated thereby.

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

     7.3 Powers. The Operating 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 more particularly set forth herein. The Operating Committee shall
have the discretionary authority to interpret the Plan (including any
ambiguities herein) and to determine all questions arising in the
administration, interpretation, and application of the Plan. The Operating
Committee shall adopt such procedures and regulations necessary or desirable for
the discharge of its duties hereunder and may appoint such accountants, counsel,
actuaries, specialists, and other agents as it deems necessary or desirable in
connection with the administration of this Plan. The Operating Committee shall
be the legal appointed agent for the service of process.

     7.4 Compensation of the Operating Committee. The Operating Committee shall
not receive any compensation from the Plan for its services.

                                       18


     7.5 Payment of Expenses. The Operating Committee shall be reimbursed by the
Employing Companies for its reasonable expenses incurred in the discharge of its
duties. Such expenses shall include any expenses incident to its duties,
including, but not limited to, fees of accountants, counsel, actuaries, and
other specialists, and other costs of administering the Plan.

     7.6 Indemnification. Each Employing Company shall indemnify the Operating
Committee against any and all claims, losses, damages, expenses, and liability
arising from its actions or omissions, except when the same is finally
adjudicated to be the result of gross negligence or willful misconduct. The
Employing Companies may purchase at their own expense sufficient liability
insurance for the Operating Committee to cover any and all claims, losses,
damages, and expenses arising from any action or omission in connection with the
execution of the duties as the Operating Committee.


                          ARTICLE VIII - MISCELLANEOUS


     8.1 Amendment and Termination The Plan may be amended or terminated at any
time by the Board of Directors, provided, however, that no such amendment or
termination of the Plan shall be effective if such amendment or termination is
made or is effective within a period that is (a) six (6) months before, or at
any time after, a Preliminary Change in Control and (b) prior to (x) the earlier
of such time as the Southern Committee shall have determined that the event that
gave rise to such Preliminary Change in Control shall not be Consummated or (y)
two years following the respective Change in Control, unless such amendment or
termination during such period has the effect of increasing benefits to
Participants under the Plan, is determined by the Board of Directors to be
immaterial, or applies solely to individuals who, in the case of a Subsidiary
Change in Control, were not employees of the Employing Company undergoing the
Subsidiary Change in Control on the date of the respective Preliminary Change in
Control, or, in the case of a Southern Change in Control, are not Employees on
the date of the respective Southern Change in Control. Following a Change in
Control, nothing in this Section 8.1 shall prevent the Board of Directors from
amending or terminating the Plan as to any subsequent Change in Control provided
that no such amendment or termination shall impair any rights or reduce any
benefits previously accrued under the Plan as a result of a previous Change in
Control.

     8.2 Additional Rights. Nothing in the Plan shall interfere with or limit in
any way the right of the Employing Companies to terminate any employee's
employment at any time, or confer upon any employee any right to continue in the
employ of the Employing Companies.



                                       19



IN WITNESS WHEREOF, this Southern Company Change in Control Benefits Protection
Plan has been executed by duly authorized officers of Southern Company Services,
Inc. pursuant to resolutions of the Board of Directors of Southern Company
Services, Inc. as of the date first above written.


                                         SOUTHERN COMPANY SERVICES, INC.




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



                                       20

EX-10.B.5

Exhibit 10(b)5

Southern Company Services, Inc. Original Sheet No. 1

Second Revised Rate Schedule FERC Number 138

SOUTHERN COMPANY SYSTEM

INTERCOMPANY INTERCHANGE CONTRACT

ARTICLE I - RECITALS

Section 1.1: This contract is made and entered into this 1^st day of May, 2007, by and between Alabama Power Company, a corporation organized and existing under the laws of the State of Alabama with its principal office in Birmingham, Alabama; Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia with its principal office in Atlanta, Georgia; Gulf Power Company, a corporation organized and existing under the laws of the State of Florida with its principal office in Pensacola, Florida; Mississippi Power Company, a corporation organized and existing under the laws of the State of Mississippi with its principal office in Gulfport, Mississippi; and Southern Power Company, a corporation organized and existing under the laws of the State of Delaware with its principal office in Birmingham, Alabama, all such companies being hereinafter collectively referred to as the “OPERATING COMPANIES” and Southern Company Services, Inc., a subsidiary service company (“AGENT” or “SCS”).

W I T N E S S E T H:

Section 1.2: WHEREAS, the common stock of the OPERATING COMPANIES is owned by The Southern Company, a public utility holding company; and

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 2

Second Revised Rate Schedule FERC Number 138

Section 1.3: WHEREAS, the OPERATING COMPANIES can be operated as an integrated electric utility system; and

Section 1.4: WHEREAS, the OPERATING COMPANIES have so operated their respective electric generating facilities and conducted their system operations (generally referred to as the “Pool”) pursuant to and in accordance with the provisions of an interchange contract among themselves, the most recent of which being The Southern Company System Intercompany Interchange Contract dated February 17, 2000,as modified effective July 1, 2006 to reflect an intra-corporate reorganization (“the 2000 Contract”); and

Section 1.5: WHEREAS, the OPERATING COMPANIES desire to replace the 2000 Contract with an amended and restated contract; and

Section 1.6: WHEREAS, all of the OPERATING COMPANIES will continue to share in all of the benefits and burdens of this IIC, including complying with operating, dispatch and reserve requirements, participating in opportunity sales transactions, and bearing responsibility for their portion of purchases.

Section 1.7: NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter stated, the OPERATING COMPANIES agree and contract as follows:

ARTICLE II - TERM OF CONTRACT

Section 2.1: This contract will be referred to as the Southern Company System Intercompany Interchange Contract (“IIC”). The IIC shall become effective as provided in Section 2.2 hereof, and

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 3

Second Revised Rate Schedule FERC Number 138

shall continue in effect from year to year thereafter subject to termination as provided hereinafter. When this IIC has become effective, it shall supersede and replace the 2000 Contract, and references to a section of such superseded intercompany interchange contract in other agreements of the OPERATING COMPANIES shall be taken to mean reference to the section of substantially like import in this IIC.

Section 2.2: This IIC is submitted as part of a filing in compliance with the orders of Federal Energy Regulatory Commission (“Commission” or “FERC”) in Southern Company Services, Inc., Docket Nos. EL05-102, et al., 117 FERC ¶ 61,021 (2006) and Southern Company Services, Inc., Docket Nos. EL05-102, et al., 119 FERC ¶ 61,065 (2007). It is therefore the intention of the OPERATING COMPANIES that this IIC shall become effective on the first day of the month following the issuance of a final order by the Commission accepting that compliance filing (including this IIC) in its entirety without change or modification. Absent such acceptance, this IIC shall be null and void and the 2000 Contract shall remain in effect as if this IIC had never been filed.

Section 2.3: This IIC may be terminated at any time by mutual agreement of the OPERATING COMPANIES or may be terminated at any time by any OPERATING COMPANY by its giving to each of the other OPERATING COMPANIES and the AGENT written notice of its election to so terminate its participation in this IIC at least five (5) years prior to the date of termination. This IIC shall continue in full force and effect as to each OPERATING COMPANY until terminated as hereinabove provided.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 4

Second Revised Rate Schedule FERC Number 138

ARTICLE III - PRINCIPAL OBJECTIVES OF

INTERCOMPANY INTERCHANGE CONTRACT

Section 3.1: The purpose of this IIC is to provide the contractual basis for the continued operation of the electric facilities of the OPERATING COMPANIES in such a manner as to achieve the maximum possible economies consistent with the highest practicable reliability of service, with the reasonable utilization of natural resources and effect on the environment, and to provide a basis for equitably sharing among the OPERATING COMPANIES the costs associated with the operation of facilities that are used for the mutual benefit of all the OPERATING COMPANIES.

Section 3.2: It is recognized that reliability of service and economy of operation require that the energy supply to the system be controlled by means of centralized economic dispatch and that this will require adequate communication facilities and the provision of economic dispatch computer facilities and automatic controls of generation.

Section 3.3: It is recognized that the IIC provides for the retention of lowest cost energy resources by each OPERATING COMPANY for its own customers. Energy in excess of that necessary to meet each OPERATING COMPANY’s requirements is delivered to the Pool as Interchange Energy and may include: (i) energy generated from plants other than conventional hydro or nuclear; and (ii) purchased energy.

Section 3.4: It is recognized that, under this IIC, each OPERATING COMPANY will share in the benefits and pay its share of the costs of coordinated operations as agreed upon in accordance with

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 5

Second Revised Rate Schedule FERC Number 138

the terms hereof. All costs and revenues associated with wholesale transactions under this IIC will be shared among all OPERATING COMPANIES on a comparable basis through the application of the governing procedures and methodologies to all such OPERATING COMPANIES.

Section 3.5: It is recognized by the OPERATING COMPANIES that coordinated electric operation contemplates minimum cost of power supply upon the interconnected system, consistent with service requirements and other operating limitations. Benefits of integrated operation accruing to the respective OPERATING COMPANIES are predicated upon cooperative efforts toward this objective and are so reflected in all IIC determinations.

Section 3.6: This IIC is applicable only to the transactions described herein, as specifically set forth in ARTICLE VII – INTERCHANGE CAPACITY TRANSACTIONS BETWEEN THE OPERATING COMPANIES, ARTICLE VIII – INTERCHANGE ENERGY TRANSACTIONS BETWEEN THE OPERATING COMPANIES, and ARTICLE IX – PROVISION FOR OTHER INTERCHANGE TRANSACTIONS. Otherwise, sales between the OPERATING COMPANIES (including, but not limited to, sales from Southern Power Company to the other OPERATING COMPANIES or sales from the other OPERATING COMPANIES to Southern Power Company) require an appropriate filing under Section 205 of the Federal Power Act and acceptance thereof by the Commission.

ARTICLE IV - ESTABLISHMENT OF OPERATING COMMITTEE

AND DESIGNATION OF AGENT

Section 4.1 – Establishment of Operating Committee: A designated representative from each of the

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 6

Second Revised Rate Schedule FERC Number 138

OPERATING COMPANIES, together with a designated representative of the AGENT who shall act as chairman, shall form and constitute an Operating Committee to meet as needed to determine the methods of operation hereunder.

Section 4.2 – Duties of Operating Committee: The Operating Committee’s areas of responsibility include such matters as developing the concepts, terms and conditions of this IIC; providing guidance and direction to the AGENT regarding economic power system operations and the costs associated therewith; reviewing and recommending generation expansion plans for approval by the respective OPERATING COMPANIES pursuant to Section 4.3; and addressing other power system matters that relate to the overall coordinated operation of the Southern electric system. Each OPERATING COMPANY representative has one vote and all decisions must be unanimous.

Section 4.3 – Review and Recommendation of Generation Expansion Plans: The Southern Power Company representative on the Operating Committee will not participate in reviewing and recommending generation expansion plans of the other OPERATING COMPANIES or the system, nor will the Southern Power Company representative have access to materials developed in conjunction with the formulation of such generation expansion plans. Notwithstanding Section 4.2 above, the Southern Power Company representative shall not be eligible to vote with respect to these expansion plans. Moreover, Southern Power Company will not receive market information from the other OPERATING COMPANIES through its participation in the Operating Committee.

Section 4.4 – Transmission Information: The Operating Committee does not have any duties or responsibilities with respect to transmission-related activities (including transmission reliability) and,

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 7

Second Revised Rate Schedule FERC Number 138

consistent with the Standards of Conduct, will not receive non-public transmission information. The IIC (including Operating Committee membership) is not to serve as a means whereby non-public transmission information is shared in a manner contrary to the Commission’s Standards of Conduct. Further, Southern Power Company is to be treated as an Energy Affiliate under the Commission’s Standards of Conduct and therefore cannot receive any non-public transmission information.

Section 4.5 – Operating Committee Discretion: Certain provisions of the Manual afford a degree of latitude to the Operating Committee with regard to decisions that it is authorized to make thereunder. When such discretion is exercised, the AGENT will summarize the decision in an informational filing to be submitted to the Commission within ten (10) business days.

Section 4.6 – Designation of AGENT: SCS, as a party to this IIC, is designated as AGENT of the OPERATING COMPANIES for purposes of this IIC. In addition, SCS may serve as AGENT and represent the OPERATING COMPANIES, or any of them, in all things to be done in the execution of and operation under existing contracts with nonaffiliated utilities or entities (hereinafter referred to as “OTHERS”), or contracts supplemental thereto.

Section 4.7 – Duties of AGENT: The AGENT is responsible for all administrative and coordination functions in order to effectuate the terms and conditions of this IIC. From time to time, the OPERATING COMPANIES, or any of them, may also have contracts with OTHERS that provide for the purchase and/or sale of capacity and/or energy by the OPERATING COMPANIES. The AGENT will make the payments associated with purchases under these contracts and under any other contracts or arrangements under which it acts as agent for the OPERATING COMPANIES. Each

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 8

Second Revised Rate Schedule FERC Number 138

OPERATING COMPANY will reimburse the AGENT for its portion of such total payments in accordance with the arrangement in effect with respect to the particular contract. Similarly, the AGENT will collect the payments due for sales under these contracts (and under any other contracts or arrangements under which it acts as agent) and will distribute such payments among the OPERATING COMPANIES in accordance with the arrangement in effect with respect to the particular contract.

Section 4.8 – Term of Agency: The provisions of this IIC providing for authority for the AGENT to act on behalf of the OPERATING COMPANIES, or any of them, shall be deemed to refer, insofar as applicable, to all contracts under which the AGENT acts as agent for the OPERATING COMPANIES and, notwithstanding anything to the contrary in ARTICLE II hereof, this IIC shall continue in effect insofar as it pertains to other contracts under which the AGENT acts as agent for the OPERATING COMPANIES during the life of any such contracts. The OPERATING COMPANIES may, however, designate a new agent to act hereunder by giving thirty (30) days written notice thereof to the AGENT, whereupon such new agent shall be the AGENT hereunder.

ARTICLE V - OPERATION AND MAINTENANCE OF

ELECTRIC GENERATING FACILITIES

Section 5.1: The OPERATING COMPANIES agree to maintain their respective electric generating facilities in good operating condition and to operate such facilities in coordination with those of the other OPERATING COMPANIES as an integrated electric system in accordance with determinations made from time to time by the Operating Committee in order that an adequate power supply shall be available to meet the requirements of the customers of the respective parties hereto at

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 9

Second Revised Rate Schedule FERC Number 138

the lowest cost consistent with a high degree of service reliability.

Section 5.2: With respect to its participation in this IIC, Southern Power Company may have access to information regarding the operation of its own plants or other generation resources (such as those acquired by contract) that it has committed to the Pool (“Pool resources”), but it may not otherwise have access to information regarding the operation of Pool resources of the other OPERATING COMPANIES.

ARTICLE VI - INCORPORATION OF THE ALLOCATION METHODOLOGY

AND PERIODIC RATE COMPUTATION MANUAL

Section 6.1 – Incorporation of Manual: The mechanics and methods for determining the charges for reserve sharing capacity and for energy purchased and sold between the OPERATING COMPANIES, the monthly capability requirement determinations, and the monthly billings and payments between the OPERATING COMPANIES are described in detail in the Allocation Methodology and Periodic Rate Computation Manual (“Manual”) attached hereto and incorporated herein by reference. The Manual also supplies more detailed explanation of provisions of this IIC and is necessary to effectuate its intent.

Section 6.2 – Purpose of Manual: The Manual contains a description of the methodology and procedure used to calculate the charges provided for in this IIC. The OPERATING COMPANIES recognize that the costs underlying these charges will change during the term of this IIC for reasons such as changes in loads, investment and expenses, as well as the addition of electric generating resources. Thus, in order for the OPERATING COMPANIES to share equitably in the costs

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 10

Second Revised Rate Schedule FERC Number 138

associated with this IIC, it will be necessary to revise or update, on a periodic basis, the cost, expense, load and investment figures utilized in the derivation of the charges hereunder. The Manual will serve as a formula rate allowing for periodic revision of the charges to reflect changes in the underlying cost components.

Section 6.3 – Revision of Charges and Regulatory Filings: The Manual provides that charges derived by application of the formula rate will be shown on Informational Schedules. Since the charges under this IIC will be computed in accordance with the formula rate method and procedures established in the Manual, these submissions will not be initial rates or changes in rates that would require a filing and suspension under the Federal Power Act and the applicable Rules and Regulations of the Commission. On or before November 1 of each year, the Informational Schedules will be submitted to the Commission for informational purposes to show the application of the formula rate and the resulting charges. Work papers will also be included showing a detailed application of the formula rate contained in the Manual.

Section 6.4 – Revision of Manual: If the Operating Committee determines that revisions to the formula rate are appropriate or necessary, it will direct the AGENT to file the revised Manual with the Commission in order to obtain timely approval or acceptance thereof.

ARTICLE VII - INTERCHANGE CAPACITY

TRANSACTIONS BETWEEN THE OPERATING COMPANIES

Section 7.1 – Provision for Sharing of Temporary Surpluses or Deficits of Capacity Between Operating Companies: It is a fundamental premise of this IIC that each OPERATING COMPANY

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 11

Second Revised Rate Schedule FERC Number 138

is expected to have adequate resources to reliably serve its own obligations. Nevertheless, the OPERATING COMPANIES recognize that in any given year one or more of them may have a temporary surplus or deficit of capacity as a result of coordinated planning or by virtue of load uncertainty, unit availability, and other such circumstances. It is among the purposes of this IIC to share among the OPERATING COMPANIES the benefits and burdens of their coordinated system operations, including the cost associated with such capacity (“Reserve Sharing”). Reserve Sharing among the OPERATING COMPANIES is accomplished pursuant to transactions (referred to as “purchases” and “sales”) effectuated on a monthly basis in accordance with ARTICLES IV and V of the Manual.

Section 7.2 – Charge for Monthly Reserve Sharing Among the OPERATING COMPANIES: The OPERATING COMPANIES recognize that capacity reserves in the Pool are predominantly made up of peaking plant or equivalent purchased resources. Accordingly, the monthly charge for Reserve Sharing among the OPERATING COMPANIES will be based on the most recently acquired peaking plant resource that is available for year-round operation and scheduling. Each OPERATING COMPANY’s monthly charge for reserve capacity sold to the Pool is developed in accordance with the formula rate set out in ARTICLE V of the Manual. The monthly capacity charge for each OPERATING COMPANY, as developed in accordance with such formula rate, will be shown on Informational Schedules. Each selling OPERATING COMPANY will sell at its charge shown on such Informational Schedules and the buying OPERATING COMPANIES will purchase at the weighted average charge of the sellers.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 12

Second Revised Rate Schedule FERC Number 138

ARTICLE VIII - INTERCHANGE ENERGY TRANSACTIONS

BETWEEN THE OPERATING COMPANIES

Section 8.1 – Provision for Interchange Energy: Coordinated system operation, utilizing principles of centralized integrated system economic dispatch, results in energy transfers among the OPERATING COMPANIES. Such energy transfers are accounted for on an hourly basis and are referred to as “Interchange Energy.” The methodology for determining the amount of Interchange Energy supplied to or purchased from the Pool is set out in ARTICLE II of the Manual. Interchange Energy is composed of the following two categories: (i) Associated Interchange Energy (energy purchased or sold to serve an OPERATING COMPANY’s obligations other than those related to opportunity sales); and (ii) Opportunity Interchange Energy (energy purchased or sold to meet an OPERATING COMPANY’s responsibility for opportunity sales).

Section 8.2 – Charge for Interchange Energy: The charge for Interchange Energy sales by an OPERATING COMPANY during any hour will be based on the variable costs of the generating resources that are considered as having supplied the Interchange Energy. The methodology for determining the charges for Associated and Opportunity Interchange Energy sales to the Pool during any hour is set out in ARTICLE III of the Manual.

ARTICLE IX - PROVISION FOR OTHER INTERCHANGE TRANSACTIONS

Section 9.1 – Assignable Energy: Assignable Energy is defined as energy derived from internal sources or from OTHERS at a cost that renders it unusable from an economic dispatch perspective.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 13

Second Revised Rate Schedule FERC Number 138

Assignable Energy is assigned to one or more of the OPERATING COMPANIES consistent with the purpose for which it is acquired. Such assignment will be accomplished by first identifying the beneficiary (or beneficiaries) of the Assignable Energy and then determining the appropriate share for each such OPERATING COMPANY. For example, these shares might be based on a Peak Period Load Ratio (“PPLR”) in proportion to the PPLRs of other beneficiaries or weighted participation in a bilateral sale. Once assigned, Assignable Energy will not be delivered to the Pool unless it becomes economically usable on the integrated system.

Section 9.2 – Hydroelectric Operation During Periods of Minimum Steam Operations: During certain periods of the year when unusually good flow conditions prevail, certain steam generating units may be taken out of service to increase the utilization of hydro energy. The OPERATING COMPANY having such hydro generation may elect to take a fossil fired generating unit out of service. In the alternative, if another OPERATING COMPANY takes a fossil fired generating unit out of service for the purpose of utilizing such hydro energy, the energy rate between the two OPERATING COMPANIES for that transaction will be the average of the operation and maintenance cost of such hydro energy and the variable cost of the fossil fired generating unit.

Section 9.3 – Tie-Line Frequency Regulation by Hydro Capacity: Tie-line load control and frequency regulation by hydro involves additional costs because of increased expenditures associated with such regulation. The charge for these transactions is computed in accordance with the formula rate contained in ARTICLE VI of the Manual.

Section 9.4 – Pool Transactions with OTHERS: Capacity and energy transactions with OTHERS

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 14

Second Revised Rate Schedule FERC Number 138

that are entered into on behalf of the Pool will be governed by the following principles:

Section 9.4.1 – Pool Purchases of Capacity and Energy: The AGENT may periodically purchase capacity and energy from OTHERS for the benefit of the integrated system. Such Pool purchases will initially be allocated at cost to all OPERATING COMPANIES in proportion to their PPLRs, as provided for in ARTICLE X of this IIC. Purchases so allocated may be sold as Interchange Energy when they are economically usable on the integrated system. Adjustments may thereafter be made in order to reconcile any inequitable effects of this process among the OPERATING COMPANIES, with the intent being that none of the individual OPERATING COMPANIES should be adversely impacted by a purchase that benefits the system as a whole. These impacts will be determined through a system simulation that calculates each OPERATING COMPANY’s cost of generation that is avoided by the purchase. This avoided cost will be compared on an hourly basis to the cost of the purchase. To the extent the avoided cost exceeds the purchase cost, the effect is “positive” (i.e., cost savings) for that hour. These hourly results will be summed to determine the effect on each OPERATING COMPANY for the day. In situations where individual OPERATING COMPANIES are adversely impacted by a purchase that benefits the system as a whole, such adverse impacts will be offset through a proportional reduction in the positive net benefits realized by the other OPERATING COMPANIES. In the event the net result for the day is negative, that result is shared among the OPERATING COMPANIES on a PPLR basis.

Section 9.4.2 – Pool Sales of Capacity and Energy: The AGENT may from time to time arrange for the sale to OTHERS of capacity and energy available to the Pool at rates provided for in contracts or at rates mutually agreed upon. The capacity and/or energy obligation for the sale, as

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 15

Second Revised Rate Schedule FERC Number 138

well as the associated cost, is allocated to each OPERATING COMPANY on a PPLR basis. Payments by OTHERS are also distributed to the respective OPERATING COMPANIES on the basis of PPLRs.

The Pool has the exclusive right to use generation resources committed to the Pool (“Pool resources”) to engage in opportunity transactions with OTHERS that would begin and end during the period from the current hour through Friday (midnight) of the following week. Neither Southern Power Company nor any of the other OPERATING COMPANIES can use Pool resources for its own benefit in those wholesale opportunity markets. To the extent Southern Power Company engages in other transactions solely for its own benefit, it must do so using personnel (staff) separate from the personnel (staff) that conducts similar activities on behalf of the other OPERATING COMPANIES.

ARTICLE X – UTILIZATION OF PEAK-PERIOD LOAD RATIOS

Section 10.1 – Certain Allocations and Payments to be Based on Peak-Period Load Ratios: The AGENT is responsible for the annual development of Peak-Period Load Ratios (“PPLRs”) for each of the OPERATING COMPANIES. These PPLRs will be utilized for allocation of certain costs, payments, receipts and other obligations, as provided for in this IIC or the Manual. The procedure and methodology for developing the PPLRs are set out in ARTICLE I of the Manual and the resulting PPLR values are shown on an Informational Schedule.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 16

Second Revised Rate Schedule FERC Number 138

ARTICLE XI - TRANSMISSION SERVICE

Section 11.1 – Applicability of Network Integration Transmission Service: Network Integration Transmission Service (“Network Service”) provides for the integration, economic dispatch and regulation of current and planned Network Resources to serve Network Load. Since the OPERATING COMPANIES integrate, economically dispatch and regulate their generating resources to serve their bundled and grandfathered native load (“Native Load”) pursuant to this IIC, the associated use of the transmission system is in the nature of Network Service. Except for provisions related to rates and charges, the transmission service provided to these Native Load customers is comparable to Network Service under the Open Access Transmission Tariff (“OATT”). Since the OPERATING COMPANIES’ Native Load is specifically included in the determination of the load used to derive the charge for Network Service under the OATT, the OPERATING COMPANIES are bearing a cost responsibility for transactions hereunder comparable to that assigned to other Network Customers.

Section 11.2 – Transmission Service for Other Transactions: All transmission service provided to any or all of the OPERATING COMPANIES (other than service to their Native Load, as described in Section 11.1) is subject to the OATT in all respects, including adherence to the same rates, terms and conditions applicable to other market participants. Any such transmission service will be obtained pursuant to the OATT and/or from other transmission providers. Southern Power Company specifically commits to take all of its transmission service under the OATT of Southern Companies or from other transmission providers.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 17

Second Revised Rate Schedule FERC Number 138

ARTICLE XII - BILLING AND PAYMENT

Section 12.1 – Recording and Billing of Energy Transactions: Each OPERATING COMPANY will transmit to the AGENT such data and other information for each hour of the year as is necessary to develop accounting and monthly billing for the various energy transactions specified under this IIC. The AGENT is responsible for assembling all of the data and information and for preparing intercompany energy billing for each month in accordance with the provisions of this IIC. The bills shall contain such details as required to permit review and verification by the OPERATING COMPANIES.

Section 12.2 – Month-End Adjustment of Daily Energy Determinations: It is recognized that the sum of the daily totals of receipts and deliveries (which are based on instantaneous integrated meters) will not exactly equal corresponding amounts determined at month-end (which are based on accumulating meters). Such differences in energy receipts and deliveries are billed or credited to each OPERATING COMPANY at the average cost of Associated Interchange Energy to the Pool for the month.

Section 12.3 – Billing for Reserve Sharing Transactions: The AGENT is responsible for preparing a monthly bill to the OPERATING COMPANIES for all capacity transactions related to Reserve Sharing, as contemplated by this IIC. The bill shall contain such details as required to permit review and verification by the OPERATING COMPANIES.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 18

Second Revised Rate Schedule FERC Number 138

Section 12.4 – Billing and Payment Date: The AGENT renders all bills provided for in this IIC not later than the 10th day of the billing month. All payments by the OPERATING COMPANIES are made by the 20th day of the billing month.

Section 12.5 – Billing Corrections: If the AGENT discovers missing or erroneous data of a material nature pertaining to prior billings, a correction adjustment applicable to those billings will be based on the period affected by such missing or erroneous data, but not to exceed forty-five (45) days from the date of such discovery (“correction period”). If the correction period is forty-five days, then the period actually used for the calculation will extend to the beginning of the billing month in which the forty-five day period falls. Interest does not accrue on any such adjustment. The resulting billing correction will be applied as soon as practicable to the regular monthly bill.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 19

Second Revised Rate Schedule FERC Number 138

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY By: /s/Jerry L. Stewart Its Sr. V.P.	MISSISSIPPI POWER COMPANY By: /s/Kimberly Flowers Its VP Generation
GEORGIA POWER COMPANY By: /s/Douglass E. Jones Its Sr. VP	SOUTHERN POWER COMPANY By: /s/Robert G. Moore Its Sr. V.P.
GULF POWER COMPANY By: /s/Penny Manuel Its VP Generation	SOUTHERN COMPANY SERVICES, INC. By: /s/William Paul Bowers Its EVP

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 20

Second Revised Rate Schedule FERC Number 138

ALLOCATION METHODOLOGY AND PERIODIC

RATE COMPUTATION PROCEDURE MANUAL

Section 0.0 – Description and Purpose of Manual: This Manual is provided for in the Southern Company System Intercompany Interchange Contract (“IIC”) entered into the 1^st day of May, 2007, and contains a formula description of the methodology and procedure used to calculate the charges under the IIC. The Manual is divided into six (6) basic articles as follows:

ARTICLE I	-	Methodology for Determination of Peak-Period Load Ratios
ARTICLE II	-	Methodology for Determination of Amount of Interchange Energy Sold To and Purchased From the Pool
ARTICLE III	-	Rates for Interchange Energy
ARTICLE IV	-	Methodology for Determination of Monthly Amount of Reserve Sharing Capacity To Be Sold To or Purchased From the Pool
ARTICLE V	-	Rate for Monthly Reserve Sharing Capacity for Each Operating Company
ARTICLE VI	-	Rate for Tie-Line Load Control and Frequency Regulation by Hydro Facilities

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 21

Second Revised Rate Schedule FERC Number 138

ARTICLE I

METHODOLOGY FOR

DETERMINATION OF PEAK-PERIOD LOAD RATIOS

Section 1.1 – Provision for Peak-Period Load Ratios: This article of the Manual establishes and provides for the annual derivation of Peak-Period Load Ratios (“PPLRs”) that are utilized in energy and capacity transactions and in other allocations as provided for in the IIC. These ratios are shown on Informational Schedule No. 1.

Section 1.2 – Methodology for Determining Peak-Period Load Ratios: The Contract Year in the IIC is defined as January 1st through December 31st. The peak period is defined as the fourteen (14) hours between 7:00 a.m. and 9:00 p.m. (Prevailing Central Time) of each weekday, excluding holidays.

The Peak-Period Load Ratios for the Contract Year are based upon the prior year’s actual peak period energy in the months of June, July, and August for each OPERATING COMPANY. The system peak period energy is equal to the sum of all the OPERATING COMPANIES’ peak period energy, excluding: (i) opportunity transactions with OTHERS that would begin and end during the period from the current hour through Friday (midnight) of the following week; and (ii) any energy sales transactions that are settled on a financial basis.

The Peak-Period Load Ratios are determined by dividing each OPERATING COMPANY's summation of the June, July, and August actual weekday peak-period energy by the total system June, July, and August actual weekday peak-period energy.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 22

Second Revised Rate Schedule FERC Number 138

ARTICLE II

METHODOLOGY FOR

DETERMINATION OF AMOUNT OF INTERCHANGE

ENERGY SOLD TO AND PURCHASED FROM THE POOL

Section 2.1 – Methodology for Determination of Amounts of Interchange Energy: Interchange Energy is composed of the following two categories: (i) Associated Interchange Energy (energy purchased or sold to serve an OPERATING COMPANY’s obligations other than those related to opportunity sales); and (ii) Opportunity Interchange Energy (energy purchased or sold to meet an OPERATING COMPANY’s responsibility for opportunity sales).

Section 2.1.1 – Determination of Associated Interchange Energy: The amount of Associated Interchange Energy purchased or sold is computed hourly on the basis of the following:

1. Net receipts and deliveries, which is the total of energy delivered by each OPERATING COMPANY to all other OPERATING COMPANIES and to OTHERS, less the total of energy received by each OPERATING COMPANY from all other OPERATING COMPANIES and from OTHERS;

2. Adjustments for schedules of the OPERATING COMPANIES and OTHERS, for energy movements received from or delivered to sources within or outside the territory of the OPERATING COMPANIES and settled for under arrangements made for such energy movements;

3.	Adjustments for Opportunity Interchange Energy, as determined pursuant to Section 2.1.2 below; and
4.	Adjustments to account for: (i) the effects of remote generation to which an OPERATING COMPANY is entitled and remote load for which an OPERATING COMPANY is responsible; and (ii) hydro energy losses due to tie-line frequency regulation.

Section 2.1.2 – Determination of Opportunity Interchange Energy: The amount of Opportunity Interchange Energy purchased or sold is computed hourly for each opportunity sale in

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 23

Second Revised Rate Schedule FERC Number 138

order to account for the difference between an OPERATING COMPANY’s responsibility for an opportunity sale and the amount of energy actually generated by that OPERATING COMPANY in connection with such sale.

ARTICLE III

RATES FOR INTERCHANGE ENERGY

Section 3.1 – Procedure for Economic Dispatch: Centralized economic dispatch is accomplished by dispatching system generating resources and purchases to meet the obligations of the OPERATING COMPANIES and to supply energy for sales to OTHERS. System generating resources are dispatched based on marginal replacement fuel cost, variable operation and maintenance expenses, in-plant fuel handling costs, emission allowance replacement costs, compensation for transmission losses, and other such energy related costs that would otherwise not have been incurred. A purchase is recognized in economic dispatch on the basis of its energy cost. The above-referenced cost components are collectively referred to as the “variable dispatch cost.”

Section 3.2 – Associated Interchange Energy Rate: The Associated Interchange Energy Rate, as determined for each hour, is based on the variable dispatch cost of the incremental resource(s) that serve the collective obligations of the OPERATING COMPANIES. For each hour, an OPERATING COMPANY supplying Associated Interchange Energy to the Pool will receive a payment determined by multiplying the applicable Associated Interchange Energy Rate by the quantity of kilowatt-hours sold to the Pool. For each hour, an OPERATING COMPANY purchasing Associated Interchange

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 24

Second Revised Rate Schedule FERC Number 138

Energy from the Pool will be charged an amount determined by multiplying the Associated Interchange Energy Rate by the quantity of kilowatt-hours purchased from the Pool.

Section 3.3 – Opportunity Interchange Energy Rate: The Opportunity Interchange Energy Rate, as determined for each hour, is based on the variable dispatch cost of the resources that supplied such energy in connection with a given opportunity sale. This rate will be applied to each OPERATING COMPANY’s energy obligation for that transaction to derive the payment due from such OPERATING COMPANY. The resulting payments will then be used to reimburse the cost of the OPERATING COMPANIES that supplied the Opportunity Interchange Energy.

Section 3.3.1 – Opportunity Interchange Energy Rates Related to Certain Contracts and Other Obligations of the Operating Companies: The OPERATING COMPANIES are currently obligated to supply various types of energy under certain contracts with Florida Power & Light Company, Jacksonville Electric Authority, Florida Power Corporation, and South Mississippi Electric Power Association. For purposes of these contracts, the variable dispatch cost of resources supplying the energy shall be the same as described in Section 3.1 of the Manual, except that blended replacement fuel cost will be used instead of marginal replacement fuel cost.

Section 3.4 – Variable Operation and Maintenance Expenses For Fossil Fired Units: The variable Operation and Maintenance expenses for fossil fired units for the Contract Year are derived by summing the following budgeted/forecasted components for each unit: (i) all operating material, non-labor, and on-site contract labor charged to FERC Accounts 502 and 505 (Fossil Steam); and (ii) all maintenance material, non-labor, and contract labor charged to FERC Accounts 512 and 513

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 25

Second Revised Rate Schedule FERC Number 138

(Fossil Steam), and 553 (Combustion Turbine). These budgeted expense estimates may be levelized over the major maintenance cycle of a particular unit or set of units. The estimated expenses are divided by the estimated net energy output of each unit to convert the values to dollars per megawatt-hour. The variable Operation and Maintenance expense for each fossil fired unit is shown on Informational Schedule No. 2 for the Contract Year.

Section 3.4.1 – In-Plant Fuel Handling Costs for Fossil Fired Units: In-Plant fuel handling costs for each fossil fired unit for the Contract Year are based on the budgeted/forecasted expenditures for in-plant fuel handling expenses charged to FERC Account 501. These budgeted expense estimates may be levelized over the major maintenance cycle of a particular unit or set of units. The estimated expenses are divided by the estimated net energy output of each unit to convert the values to dollars per megawatt-hour. The in-plant fuel handling cost for each fossil fired unit is shown on Informational Schedule No. 2 for the Contract Year.

Section 3.5 – Blended Replacement Fuel Cost: Blended replacement fuel costs are determined monthly by the AGENT and are defined as the weighted average cost, escalated for the current dispatch period, of fuel receipts for the previous month (both long-term contract and spot market receipts) and the projected fuel receipts for the current month.

Section 3.6 – Marginal Replacement Fuel Cost: Marginal replacement fuel costs for coal are determined at least monthly by the AGENT and reflect the current market price for additional coal needed at a generating facility at the time of such need. For natural gas or oil-fired units, the marginal replacement fuel costs are updated each business day based upon next day market prices.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 26

Second Revised Rate Schedule FERC Number 138

Section 3.7 – Emission Allowance Replacement Costs: The replacement costs of emission allowances are determined at least monthly by the AGENT and reflect the current market value of such allowances.

Section 3.8 – Revisions in Methodologies: The procedures described in Sections 3.6 and 3.7 will be periodically reviewed by the AGENT and may be revised upon the approval of the Operating Committee.

ARTICLE IV

METHODOLOGY FOR DETERMINATION OF

MONTHLY AMOUNT OF RESERVE SHARING

CAPACITY TO BE SOLD TO OR PURCHASED FROM THE POOL

Section 4.1 – Formula for Determination of Monthly Reserve Sharing Capacity Sales/Purchases: The monthly capacity sale to or purchase from the Pool for each OPERATING COMPANY for reserve sharing purposes is determined from the following formula:

CS or CP	=	RS - R
Where:
CS or CP	=	Capacity sales to the Pool (CS) or capacity purchases from the Pool (CP) by an OPERATING COMPANY for reserve sharing purposes. A negative value indicates a sale to the Pool and a positive value indicates a purchase from the Pool.
RS	=	Reserve responsibility for each OPERATING COMPANY (See Section 4.1.1).
R	=	Reserve capacity for each OPERATING COMPANY (See Section 4.1.2).

Section 4.1.1 – Reserve Responsibility (RS): The responsibility for the reserve capacity on

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 27

Second Revised Rate Schedule FERC Number 138

the integrated electric system is allocated among the OPERATING COMPANIES on the basis of peak hour load ratios for each month.

RS	=	L/L' x R
Where:
RS	=	Reserve responsibility for each OPERATING COMPANY.
L	=	Monthly peak hour load responsibility of each OPERATING COMPANY (See Section 4.3).
L'	=	Monthly peak hour load of the integrated electric system (See Section 4.3).
R	=	Sum of the reserve capacity for all of the OPERATING COMPANIES.

Section 4.1.2 – Reserve Capacity (R): The reserve capacity for each of the respective OPERATING COMPANIES is determined monthly by the following formula:

R	=	C - CR
Where:
C	=	Total capacity available to the OPERATING COMPANY (See Section 4.2).
CR	=	Total capacity required to meet reliably the OPERATING COMPANY’s load responsibility.

The capacity required to meet the OPERATING COMPANY’s load responsibility is determined by the following formula:

CR	=	LC + LCR
Where:
LC	=	Portion of the total capacity required to meet reliably the OPERATING COMPANY’s load responsibility that is available for load service (“available portion”).

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 28

Second Revised Rate Schedule FERC Number 138

LCR = Portion of the capacity required to meet reliably the OPERATING COMPANY’s load responsibility that is unavailable for load service for any reason (including forced outage, partial outage or maintenance outage) during the ten (10) highest system peak hours during each month averaged over the most recent three-year period (“unavailable portion”). These unavailable portions of capacity are determined by identifying unavailability specific to each individual OPERATING COMPANY by each generation type. Individual OPERATING COMPANY unavailability factors for each type of generating capacity will be applied to their respective owned resources in determining their unavailable capacity associated with load service.

The available portion of the total capacity is determined from the following formula:

LC	=	RPS + DSO + Cha + Cna + Coa
Where:
RPS	=	Reserved contract purchases from and sales to OTHERS.
DSO	=	Demand side option equivalent capacity.
Cha	=	Total conventional hydro capacity less the unavailable portion of conventional hydro capacity.
Cna	=	Total nuclear capacity less the unavailable portion of nuclear capacity.
Coa	=	Total available pumped storage hydro, coal, combustion turbine, combined cycle, oil and gas steam, and purchased resource capacity required to meet the remaining portion of the OPERATING COMPANY’s load responsibility, calculated as: L - RPS - DSO - Cha - Cna.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 29

Second Revised Rate Schedule FERC Number 138

The unavailable portion of the total capacity is determined from the following formula:
	LCR	=	Chu + Cnu + (Coa/(1 - (Cou/Cot)) - Coa)
	Where:
	Chu	=	Unavailable portion of conventional hydro capacity.
	Cnu	=	Unavailable portion of nuclear capacity.
	Cou	=	Total unavailable pumped storage hydro, coal, combustion turbine, combined cycle, oil and gas steam, and purchased resource capacity.
	Cot	=	Total pumped storage hydro, coal, combustion turbine, combined cycle, oil and gas steam, and purchased resource capacity.

Section 4.2 – Determination of Capacity Available to Each OPERATING COMPANY (C): The capacity available to each OPERATING COMPANY is determined monthly as the sum of available owned, leased, purchased or otherwise available generating units, reserved contract purchases from and sales to OTHERS, and seasonal or other power exchanges, all as established by the Operating Committee as part of the coordinated planning process. The capacity available is determined from the following formula:

C	=	Cc + Cn + Cog + Ccc + Cp + Cct + Ch + Cpsh + DSO + RPS + PRC
Where:
Cc	=	Coal capacity.
Cn	=	Nuclear capacity.
Cog	=	Oil and gas steam capacity.
Ccc	=	Combined cycle capacity
Cp	=	Peak Load capacity.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 30

Second Revised Rate Schedule FERC Number 138

Cct	=	Combustion turbine capacity.
Ch	=	Conventional hydro capacity.
Cpsh	=	Pumped storage hydro capacity.
DSO	=	Demand side option equivalent capacity.
RPS	=	Reserved contract purchases from and sales to OTHERS.
PRC	=	Purchased resource capacity.

The components of the above formula shall be computed as detailed below. The capability demonstrated in accordance with such procedures shall be used in establishing the following year's capacity values. Where seasonal references are made, the seasons shall be defined as follows: Summer (June through September); Fall (October through November); Winter (December through February); and Spring (March through May).

Section 4.2.1 – Certified Rating: The production officer at each OPERATING COMPANY will certify the full load capability of each coal electric generating unit (excluding units from which Unit Power Sales and other similar bulk power sales are made), oil and gas steam electric generating unit, combined cycle unit, and combustion turbine unit. Southern Nuclear Operating Company will certify the capability of each nuclear steam electric generating unit. These certified ratings (“Full Load” ratings) shall represent the full load capability expected to be available continuously on a daily basis, under normal operating conditions, with all units at a given plant operating concurrently. Where appropriate, certified ratings shall be adjusted to reflect cogeneration and seasonal impacts. The production officer at each OPERATING COMPANY will also certify the peak load capability of

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 31

Second Revised Rate Schedule FERC Number 138

generating units demonstrating such capability (“Peak Load” capability). The Peak Load capability shall represent the additional amount of generation obtained for a limited period of time by operating all units at a given plant concurrently and under conditions such as, but not limited to, overpressure, valves wide open and top feedwater heaters out of service. These unit ratings will be included in the informational filing submitted in accordance with ARTICLE VI of the IIC.

Section 4.2.2 – Coal (Cc)and Nuclear (Cn) Capacity: The Full Load rating of each coal and nuclear steam electric generating unit shall be based on the unit's capability during hours when such unit demonstrates full output during the months of June through August, adjusted for any temporary identifiable deratings.

Section 4.2.3 – Oil and Gas Steam Capacity (Cog): The Full Load rating of each oil and gas steam electric generating unit shall be based on the unit's demonstrated capability during hours when such unit demonstrates full output during the months of June through August, adjusted for any temporary identifiable deratings.

Section 4.2.4 – Combined Cycle Capacity (Ccc): The Full Load rating of combined cycle generating units shall be based on the unit's demonstrated capability during hours when such unit demonstrates full output during the months of June through August, adjusted for any temporary identifiable deratings. During the other months, an adjustment will be made to the Full Load rating to reflect the unit's capability at expected ambient temperatures for such non-summer period.

Section 4.2.5 – Combustion Turbine Capacity (Cct): The Full Load rating of combustion turbine units is based on the demonstrated output of such unit and the manufacturer's base design curve rating. Combustion turbine units shall demonstrate daily sustained capability during the

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 32

Second Revised Rate Schedule FERC Number 138

months of June through August, adjusted for any temporary identifiable deratings. During the fall, winter and spring, adjustments will be made to the Full Load rating to reflect the unit's capability at expected seasonal ambient temperatures.

Section 4.2.6 – Peak Load Capacity (Cp): The Peak Load capacity of demonstrating generating units shall be the additional amount of generation obtained by operating all units at a given plant concurrently and under conditions such as, but not limited to, overpressure, valves wide open and top feedwater heaters out of service. The Peak Load capacity shall be based on such unit's demonstrated capability during hours when the unit demonstrates peak load capability during the months of June through August, adjusted for temporary identifiable deratings.

Section 4.2.7 – Conventional (Ch) and Pumped Storage (Cpsh) Hydro Capacity: For purposes of the IIC, hydro capability is the average simulated generation during eight (8) consecutive hours occurring on five (5) consecutive weekdays using the average water inflows from historical data. The simulation process utilizes maximum (full) gate setting and best (most efficient) gate setting to determine the capability of the hydro facilities. The capability for the months June-August is the summer maximum gate simulated rating. For the months December-May, the capability is the winter maximum gate simulated rating. The capability of the months September-November is the summer best gate simulated rating. To the extent that an OPERATING COMPANY can demonstrate that a hydro facility can actually achieve the maximum gate rating during the fall months, the capability of such hydro facility will be the maximum gate rating.

Section 4.2.8 – Active Demand Side Options – Equivalent Capacity (DSO): The equivalent capacity of each active demand side option for each month of the calendar year is determined from

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 33

Second Revised Rate Schedule FERC Number 138

the following formula:

DSO	=	[(Cv x ICE) / (1 -(%TL/100))] x A
Where:
DSO	=	Demand side option equivalent capacity.
Cv	=	Contracted value.
ICE	=	Incremental capacity equivalent factor.
%TL	=	Six (6) percent incremental transmission losses.
A	=	Availability Factor.

The Incremental Capacity Equivalent Factor is a measure of the effect of a demand side option on generating system reliability. The Availability Factor is a measure of the probability of an active demand side option being available at the time it is needed.

Section 4.2.9 – Reserved Contract Purchases and Sales (RPS): Reserved contract purchases and sales for any month include all contracted capacity purchases from and sales to OTHERS for which there are underlying reserves.

Section 4.2.10 – Purchased Resource Capacity (PRC): Purchased resource capacity includes all purchased capacity for which an underlying generating resource is identified and may represent any type of capacity (e.g., combined cycle).

Section 4.3 – Determination of Peak Hour Load Responsibility of Each OPERATING COMPANY (L): The monthly peak hour load responsibility of each OPERATING COMPANY is determined by the following formula:

L	=	L' x La/100
Where:

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 34

Second Revised Rate Schedule FERC Number 138

L'	=	Monthly ten (10) highest hour average load of the integrated electric system.
La	=	Monthly average percent contribution of each OPERATING COMPANY’s ten (10) highest hour average loads to the sum of those loads for all OPERATING COMPANIES for the most recent three-year period.

Section 4.4 – Recognition of Resource Additions or Deletions: For additions or deletions of capacity resources for the coming year, an adjustment will be made in the capability resources of the appropriate OPERATING COMPANY based upon the actual date of the addition or deletion (e.g., commercial operation, retirement, purchase, or sale); provided, however, that the adjustment will not be made in a month earlier than that originally established by the Operating Committee pursuant to the coordinated planning process. If the actual date is on or before the 15th day of the month, the capacity adjustment begins in that month. If the actual date is beyond the 15th day of the month, the capacity adjustment begins in the following month.

Section 4.5 – Capacity Outside of the Coordinated Planning Process: If an OPERATING COMPANY has capacity that was not established by the Operating Committee as part of the coordinated planning process, such capacity will not be included as capacity available to the OPERATING COMPANY (pursuant to Section 4.2 of this Manual) for reserve sharing purposes (“unrecognized capacity”). Notwithstanding the foregoing, if an OPERATING COMPANY’s monthly capacity/load ratio, as determined by comparing its available capacity (pursuant to Section 4.2 of this Manual) with its load responsibility (pursuant to Section 4.3 of this Manual), is less than

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 35

Second Revised Rate Schedule FERC Number 138

the comparable ratio for the aggregate system (excluding the load responsibility and available capacity of the subject OPERATING COMPANY), then unrecognized capacity (up to an amount that will make these ratios comparable) will be designated as capacity available to that OPERATING COMPANY for that month.

ARTICLE V

RATE FOR MONTHLY RESERVE SHARING

CAPACITY FOR EACH OPERATING COMPANY

Section 5.1 – Provision for Monthly Capacity Rate for Reserve Sharing: This article of the Manual establishes the formula rate for deriving the monthly reserve sharing capacity charge for each OPERATING COMPANY based on its most recently installed peaking facilities (or equivalent purchased resources) available for year-round operation or scheduling. OPERATING COMPANIES that have not installed or purchased such facilities or resources within the last five (5) years will utilize the weighted average rate of all the OPERATING COMPANIES that have installed or purchased such facilities or resources. In the event none of the OPERATING COMPANIES have installed or purchased such facilities or resources within the last five (5) years, the rate of the last facility or resource installed or purchased by any of them will be utilized for all OPERATING COMPANIES. The monthly reserve sharing capacity charges are utilized in the determination of payments to the Pool by the OPERATING COMPANIES purchasing capacity during the month and receipts from the Pool by the OPERATING COMPANIES selling capacity during the month. Each OPERATING COMPANY that sells reserve sharing capacity to the Pool will receive a payment based on the product of the amount of net capacity sales (CS) times that OPERATING

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 36

Second Revised Rate Schedule FERC Number 138

COMPANY’s monthly capacity rate. Each deficit OPERATING COMPANY will make payments to the Pool based on the product of the amount of net reserve sharing capacity purchased (CP) times the weighted average cost of such capacity sold to the Pool during the month. The monthly reserve sharing capacity rate of each OPERATING COMPANY for each month of the Contract Year is shown on Informational Schedule No. 3. Such rates will be revised in accordance with this Manual and the IIC in subsequent contract years.

Section 5.2 – Derivation of Monthly Capacity Costs of Each OPERATING COMPANY: The derivation of the monthly capacity costs of each OPERATING COMPANY, as used for purposes of the reserve sharing capacity rate, is based on one of the following: (i) the capacity cost of the most recently added peaking facility; (ii) the capacity cost of the most recent equivalent purchased resource; or (iii) the weighted system average of the capacity costs of the most recently added peaking facilities or equivalent purchased resources.

The monthly reserve sharing capacity rate of each OPERATING COMPANY for an installed peaking facility under subpart (i) will be determined by the following formula:

R1	=	(I x LFCC/100/C1) x MCWF
Where:
R1	=	Monthly charges for peaking
		facility ($/kW-Month).
I	=	Gross investment in peaking facility ($).
LFCC	=	16.3%, levelized fixed capacity charge.
C1	=	Peaking facility’s rated production capability (kW), as determined by Section 4.2 of this Manual.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 37

Second Revised Rate Schedule FERC Number 138

MCWF = Monthly Capacity Worth Factor for the applicable month.

The AGENT may periodically re-evaluate the monthly capacity worth factors based upon evaluations of system reliability. The governing MCWFs will be included in the Informational Schedules submitted in accordance with ARTICLE VI of the IIC.

For purposes of subpart (ii), the monthly reserve sharing capacity rate of each OPERATING COMPANY for an equivalent purchased resource will be the annual capacity rate ($/kW-Year) paid for such resource, multiplied by the applicable MCWF.

For purposes of subpart (iii), the monthly reserve sharing capacity rate will be the weighted system average of the costs of the most recently added peaking facilities (as determined for purposes of subpart (i)) or equivalent purchased resources (as determined for purposes of subpart (ii)), multiplied by the applicable MCWF.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 38

Second Revised Rate Schedule FERC Number 138

Section 5.3 – Monthly Reserve Sharing Capacity Rate To Be Adjusted For Production Resource Change: If a peaking facility or an equivalent purchased resource of an OPERATING COMPANY is placed in commercial operation or available for scheduling by the 15th day of the month established by the Operating Committee as part of the coordinated planning process, the budgeted investment cost or annual capacity rate will be used in the determination of the monthly reserve sharing capacity rate for such OPERATING COMPANY for that and subsequent months of the calendar year. If the facility or resource is not placed in commercial operation or available for scheduling by the 15th day of such month, the cost basis established under Section 5.2, as used to derive the monthly reserve sharing capacity rate for the previous month, will remain in effect until the month in which the facility or resource is in commercial operation or available for scheduling on or before the 15th day.

ARTICLE VI

RATE FOR TIE-LINE LOAD CONTROL AND

FREQUENCY REGULATION BY HYDRO FACILITIES

Section 6.1 – Provision for Hydro Regulation Energy Losses: Because of energy losses from hydro regulation, the OPERATING COMPANIES supplying this service are deprived of hydro energy. To distribute equitably this loss of energy among the OPERATING COMPANIES in accordance with size of loads regulated and to compensate the OPERATING COMPANIES for regulating services rendered, adjustments in billing determinations are necessary. Hydro energy losses actually incurred by regulating OPERATING COMPANIES during each day are replaced by the Pool at zero cost, and the AGENT allocates such energy losses to all OPERATING COMPANIES in accordance with Peak-Period Load Ratios. Energy lost during high-flow periods is replaced during the period in

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 39

Second Revised Rate Schedule FERC Number 138

which such losses occur, and energy lost from poorer efficiencies during normal and low-flow periods is replaced during the 14-hour peak period since hydro energy so lost could have been retained in storage and generated during this period.

Section 6.2 – Provision for Increases in Cost Due to Hydro Regulation: Payments are made to hydro regulating OPERATING COMPANIES for each hour of such regulation for the increase in operating and maintenance expenditures for governor mechanisms and water turbine parts, and these expenses are allocated to all OPERATING COMPANIES in accordance with Peak-Period Load Ratios. Such payments are calculated using actual expenses incurred through the last calendar year available, adjusted to current-year dollars, for the cost of labor, engineering and supervision, and materials and supplies in the following FERC Accounts: 544-10, Generator and Exciters; 544-20, Hydraulic Turbines and Settings; 544-40, Governors and Control Apparatus; and 544-50, Powerhouse Remote Control Equipment. The basis for hourly payments is the difference in the average hourly costs for regulating plants and non-regulating plants, expressed in the following formula:

Hourly Charge	=	[MCW - (MCWO/HWO) x MCWH]/HOR
Where:
MCW	=	Summation of costs for regulating plants.
MCWO	=	Summation of costs for non-regulating plants.
HWO	=	Summation of hours for non-regulating plants.
MCWH	=	Summation of hours for regulating plants.
HOR	=	Summation of hours in the regulating mode for regulating plants.

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

Southern Company Services, Inc. Original Sheet No. 40

Second Revised Rate Schedule FERC Number 138

The regulating OPERATING COMPANIES shall supply the AGENT an hourly statement of energy losses incurred in providing hydro regulating services. Such statement should include sufficient detail to permit review and verification by the AGENT.

Section 6.3 – Regulation by Pumped Storage Hydro Projects: It is understood that pumped storage hydro projects owned by the OPERATING COMPANIES may also be used for regulation of the integrated electric system. In such event, the hourly charge for such regulation will be the same charge derived under the formula contained in Section 6.2 hereof.

Section 6.4 – Provision for Increases in Cost Due to Hydro Scheduling: Because the use of hydro resources for tie-line load control and frequency regulation does not allow the hydro energy to be scheduled in the most cost effective manner, less economic gains are achieved than would have been if the hydro energy had been used to displace only the highest cost other energy sources. The difference in actual displacement costs represents the value of the lost economic opportunity by the owning OPERATING COMPANY by such use of hydro energy, or the costs of providing higher cost energy. The AGENT shall allocate such costs to all the OPERATING COMPANIES in accordance with Peak-Period Load Ratios.

[END OF MANUAL]

Issued by: Charles D. Long, IV, V.P., Fleet Operations & Trading Effective: May 1, 2007

Issued on: May 18, 2007

Filed pursuant to order dated April 19, 2007 accepting compliance filing in Docket Nos. EL05-102, etal., Southern Company Services, Inc., 119 FERC ¶ 61,065 (2007).

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	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
(d)	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: May 7, 2007

/s/David M. Ratcliffe

David M. Ratcliffe

Chairman, President 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	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
(d)	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: May 7, 2007

/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: May 7, 2007

/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, Art P. Beattie, 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: May 7, 2007

/s/Art P. Beattie

Art P. Beattie

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: May 7, 2007

/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, Cliff S. Thrasher, 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: May 7, 2007

/s/Cliff S. Thrasher

Cliff S. Thrasher

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: May 7, 2007

/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: May 7, 2007

/s/Ronnie R. Labrato

Ronnie R. Labrato

Vice President and Chief Financial Officer

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: May 7, 2007

/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, Frances V. Turnage, 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: May 7, 2007

/s/Frances Turnage

Frances V. Turnage

Vice President, Treasurer and Chief Financial Officer

EX-31.F.1

Exhibit 31(f)1

SOUTHERN POWER COMPANY

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Ronnie L. Bates, 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: May 7, 2007

/s/Ronnie L. Bates

Ronnie L. Bates

President and Chief Executive Officer

EX-31.F.2

Exhibit 31(f)2

SOUTHERN 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 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: May 7, 2007

/s/Michael W. Southern

Michael W. Southern

Senior Vice President 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 March 31, 2007, 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 March 31, 2007, 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 March 31, 2007, 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, President and

Chief Executive Officer

/s/Thomas A. Fanning

Thomas A. Fanning

Executive Vice President,

Chief Financial Officer and Treasurer

Date: May 7, 2007

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 March 31, 2007, 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 March 31, 2007, 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 March 31, 2007, 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/Art P. Beattie

Art P. Beattie

Executive Vice President,

Chief Financial Officer and Treasurer

Date: May 7, 2007

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 March 31, 2007, 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 March 31, 2007, 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 March 31, 2007, 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/Cliff S. Thrasher

Cliff S. Thrasher

Executive Vice President,

Chief Financial Officer and Treasurer

Date: May 7, 2007

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 March 31, 2007, 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 March 31, 2007, 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 March 31, 2007, 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 and Chief Financial Officer

Date: May 7, 2007

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 March 31, 2007, 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 March 31, 2007, 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 March 31, 2007, 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/Frances Turnage

Frances V. Turnage

Vice President, Treasurer and

Chief Financial Officer

Date: May 7, 2007

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 Southern Power Company for the quarter ended March 31, 2007, 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 March 31, 2007, 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 March 31, 2007, fairly presents, in all material respects, the financial condition and results of operations of Southern Power Company.

/s/Ronnie L Bates

Ronnie L. Bates

President and Chief Executive Officer

/s/Michael W. Southern

Michael W. Southern

Senior Vice President and

Chief Financial Officer

Date: May 7, 2007