Southern Company · 10-Q · Item 2 MD&A

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Combined Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Results of Operations

Southern Company

Alabama Power

Georgia Power

Mississippi Power

Southern Power

Southern Company Gas

Future Earnings Potential

Accounting Policies

Financial Condition and Liquidity

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

OVERVIEW

Southern Company is a holding company that owns all of the common stock of three traditional electric operating companies (Alabama Power, Georgia Power, and Mississippi Power), Southern Power, and Southern Company Gas and owns other direct and indirect subsidiaries. The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. Southern Company's reportable segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the distribution of natural gas and sale of other complementary products and services by Southern Company Gas.

Alabama Power, Georgia Power, and Mississippi Power each operate with one reportable business segment, since substantially all of their business is providing electric service to customers. Southern Power also operates its business with one reportable business segment, the sale of electricity in the competitive wholesale market. Southern Company Gas' reportable segments are gas distribution operations, gas pipeline investments, and gas marketing services. See Note (L) to the Condensed Financial Statements herein for additional information on segment reporting. For additional information on the Registrants' primary business activities, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K.

The Registrants continue to focus on several key performance indicators. For the traditional electric operating companies and Southern Company Gas, these indicators include, but are not limited to, customer satisfaction, plant availability, electric and natural gas system reliability, and execution of major construction projects. Southern Company Gas also continues to focus on several operating metrics, including customer count and volumes of natural gas sold. For Southern Power, key performance indicators include, but are not limited to, the equivalent forced outage rate and contract availability to evaluate operating results and help ensure its ability to meet its contractual commitments to customers. In addition, Southern Company and the Subsidiary Registrants focus on earnings per share and net income, respectively, as a key performance indicator.

Recent Developments

Alabama Power

In December 2025, the Alabama PSC issued a consent order to keep retail rates stable through 2027. On April 2, 2026, the State of Alabama enacted legislation providing that retail base rates established and in place on October 1, 2026 may not be increased before January 1, 2029 for utilities that are regulated by the Alabama PSC and that provide retail electric service. The ultimate outcome of this matter cannot be determined at this time. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Georgia Power

On May 28, 2026, the Georgia PSC approved a stipulation among Georgia Power, the staff of the Georgia PSC, and certain intervenors regarding Georgia Power's separate filings in February 2026 associated with recovery of fuel and storm restoration costs. The approved stipulation decreased annual fuel billings by 12.9%, or approximately $394 million, effective June 1, 2026. Under the stipulation, the Georgia PSC approved the following related to storm restoration costs:

•Recovery of $31 million annually for storm restoration costs incurred after December 31, 2025.

•Recovery of Georgia Power's adjusted regulatory asset balance totaling $869 million, as determined through the proceedings and stipulation, related to storm damage as of December 31, 2025 over a period of 67 months from June 1, 2026 through December 31, 2031, or $156 million annually.

Additionally, the stipulation provided for the treatment of the Internal Revenue Code §45U PTCs generated from Georgia Power's nuclear generating facilities in 2024 and 2025, in which Georgia Power agreed to use $77 million of these tax credits for the benefit of customers.

See Note (B) to the Condensed Financial Statements under "Georgia Power" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Mississippi Power

On June 18, 2026, the Mississippi PSC approved Mississippi Power's annual retail PEP Evaluation Report for 2026, resulting in an annual increase in revenues of approximately 1.8%, or $20 million, primarily due to increases in investment and depreciation. In accordance with the PEP rate schedule, the increase became effective with the first billing cycle of January 2026. In the PEP filing, the Mississippi PSC approved the use of approximately $7 million of the reliability reserve balance, which Mississippi Power utilized for reliability-related generation, transmission, and distribution expenses during the first six months of 2026. In conjunction with the PEP filing, the Mississippi PSC approved approximately $21 million associated with certain federal excess accumulated deferred income taxes resulting from the Tax Reform Legislation to be credited back to customers over an 18-month period starting with the first billing cycle of July 2026.

See Note (B) to the Condensed Financial Statements under "Mississippi Power" herein for additional information.

Southern Power

In the first quarter 2026, Southern Power committed to development projects to upgrade certain turbines at its existing Franklin and Wansley natural gas facilities, which are projected to add up to 400 MWs of incremental capacity. Commercial operations for the incremental capacity at the natural gas facilities are projected to occur between the second quarter 2029 and the fourth quarter 2030. T1The ultimate outcome of these matters cannot be determined at this time. In addition, during the first six months of 2026 and subsequent to June 30, 2026, Southern Power placed in service all 200 MWs of the repowering project at the Kay wind facility. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

At June 30, 2026, Southern Power's average investment coverage ratio for its generating assets, including those owned with various partners, based on the ratio of investment under contract to total investment using the respective facilities' net book value (or expected in-service value for facilities under construction) as the investment amount was 97% through 2030 and 88% through 2035, with an average remaining contract duration of approximately 12 years.

Southern Company Gas

On June 16, 2026, in connection with Nicor Gas' 2023 general base rate case proceeding, the Illinois Appellate Court determined that the Illinois Commission did not provide sufficient support for its disallowance of $43 million of Nicor Gas' planned capital investments that were expected to be completed by December 31, 2024. As the disallowance related to planned capital investments for which costs had not yet been incurred, it was not included in the pre-tax charge to income recorded in 2023. This matter remains subject to further proceedings before the Illinois Commission and had no impact on the current period financial statements.

On July 21, 2026, Nicor Gas filed a petition for leave to appeal with the Illinois Supreme Court related to the capital structure approved in Nicor Gas' 2023 general base rate case proceeding. The Illinois Supreme Court is expected to rule on the petition on September 30, 2026.

The ultimate outcome of these matters cannot be determined at this time.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS

Southern Company

Net Income

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Consolidated net income attributable to Southern Company was $1.2 billion ($1.03 per share) in the second quarter 2026 compared to $0.9 billion ($0.80 per share) for the corresponding period in 2025. For year-to-date 2026, consolidated net income attributable to Southern Company was $2.5 billion ($2.24 per share) compared to $2.2 billion ($2.01 per share) for the corresponding period in 2025. The increases were primarily due to increases within retail electric revenues associated with sales growth, higher natural gas revenues associated with base rate increases, decreases in income taxes, and increases in AFUDC equity and earnings from equity method investments, partially offset by increases in depreciation and amortization. Also contributing to the increase in the second quarter 2026 was a decrease in interest expense.

Retail Electric Revenues

In the second quarter 2026, retail electric revenues were $4.75 billion compared to $4.76 billion for the corresponding period in 2025. For year-to-date 2026, retail electric revenues were $9.39 billion compared to $9.36 billion for the corresponding period in 2025. Details of the changes in retail electric revenues were as follows:

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Rates and pricing

$

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$

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Sales growth

Weather

Fuel and other cost recovery

Retail electric revenues

$

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$

%

T2Changes in rates and pricing resulted in decreases in revenues in the second quarter and year-to-date 2026 when compared to the corresponding periods in 2025 primarily due to lower contributions from commercial and industrial customers with variable demand-driven pricing at Georgia Power, partially offset by an increase in Rate CNP Compliance revenues at Alabama Power and higher revenues associated with a tolling arrangement accounted for as a sales-type lease at Mississippi Power. Also partially offsetting the decrease in revenues for year-to-date 2026 were increases in PEP rates at Mississippi Power. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" and "Mississippi Power – Performance Evaluation Plan" in Item 8 of the Form 10-K for additional information.

Changes in sales resulted in increases in revenues in the second quarter and year-to-date 2026 when compared to the corresponding periods in 2025. Weather-adjusted residential KWH sales decreased 0.7% in the second quarter 2026 primarily due to decreased customer usage, partially offset by customer growth. Weather-adjusted residential KWH sales increased 0.1% for year-to-date 2026 primarily due to customer growth, partially offset by decreased customer usage. T3Weather-adjusted commercial KWH sales increased 7.4% and 6.0% in the second quarter and year-to-date 2026, respectively, primarily due to increased customer usage, largely driven by data centers at Georgia Power. Weather-adjusted industrial KWH sales were flat in the second quarter 2026 primarily due to increases in the primary metals and miscellaneous manufacturing sectors, offset by decreases in the paper, textiles, and chemicals sectors. Weather-adjusted industrial KWH sales increased 0.7% for year-to-date 2026 primarily due to increases in the primary metals, miscellaneous manufacturing, and stone, clay, and glass sectors.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

T4Fuel and other cost recovery revenues decreased $70 million and $21 million in the second quarter and year-to-date 2026, respectively, compared to the corresponding periods in 2025 primarily due to lower recoverable fuel costs. Electric rates for the traditional electric 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 energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.

Wholesale Electric Revenues

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In the second quarter 2026, wholesale electric revenues were $699 million compared to $681 million for the corresponding period in 2025. The increase was primarily due to an increase in energy revenues associated with a $48 million increase related to the volume of KWHs sold resulting from higher demand, partially offset by a decrease of $27 million related to the average cost per KWH sold primarily resulting from lower fuel and purchased power prices.

T5For year-to-date 2026, wholesale electric revenues were $1.66 billion compared to $1.43 billion for the corresponding period in 2025. The increase was primarily due to an increase in energy revenues associated with an increase of $123 million related to the volume of KWHs sold resulting from higher demand and $120 million related to the average cost per KWH sold primarily resulting from higher fuel and purchased power prices.

Wholesale electric revenues consist of revenues from PPAs and short-term opportunity sales. Wholesale electric revenues from PPAs (other than solar and wind PPAs) have both capacity and energy components. Capacity revenues generally represent the greatest contribution to net income and are designed to provide recovery of fixed costs plus a return on investment. Energy revenues will vary depending on fuel prices, the market prices of wholesale energy compared to the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income.

Energy sales from solar and wind PPAs do not have a capacity charge and customers either purchase the energy output of a dedicated renewable facility through an energy charge or through a fixed price related to the energy. As a result, the ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors. Wholesale electric revenues at Mississippi Power include FERC-regulated municipal and rural association sales under cost-based tariffs as well as market-based sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above the Southern Company system's variable cost to produce the energy.

Other Electric Revenues

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In the second quarter 2026, other electric revenues were $242 million compared to $220 million for the corresponding period in 2025. For year-to-date 2026, other electric revenues were $507 million compared to $463 million for the corresponding period in 2025. The increases in the second quarter and year-to-date 2026 were

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

primarily due to increases of $20 million and $37 million, respectively, in open access transmission tariff sales at the traditional electric operating companies.

Natural Gas Revenues

In the second quarter 2026, natural gas revenues were $966 million compared to $979 million for the corresponding period in 2025. For year-to-date 2026, natural gas revenues were $3.16 billion compared to $2.82 billion for the corresponding period in 2025. Details of the changes in natural gas revenues were as follows:

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Rates

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Gas costs and other cost recovery

Gas marketing services

Other

6

5

Natural gas revenues

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%

$

%

Changes in rates resulted in increases in revenues in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily due to base rate increases at Nicor Gas and Atlanta Gas Light. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

Revenues associated with gas costs and other cost recovery decreased in the second quarter 2026 as compared to the corresponding period in 2025 primarily due to lower cost of natural gas driven by lower natural gas prices, as well as decreases in other expenses passed through to customers. Revenues associated with gas costs and other cost recovery increased for year-to-date 2026 as compared to the corresponding period in 2025 primarily due to higher cost of natural gas driven by higher natural gas prices in the first quarter 2026, as well as increases in other expenses passed through to customers. See "Cost of Natural Gas" herein for additional information.

Revenues from gas marketing services decreased in the second quarter 2026 as compared to the corresponding period in 2025 primarily due to lower commodity prices. Revenues from gas marketing services increased for year-to-date 2026 as compared to the corresponding period in 2025 primarily due to higher commodity prices in the first quarter 2026, partially offset by weather impacts.

Other Revenues

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In the second quarter 2026, other revenues were $325 million compared to $335 million for the corresponding period in 2025. The decrease was primarily due to decreases of $12 million in unregulated sales associated with energy conservation projects at Georgia Power and $8 million in sales of unregulated products and services at Alabama Power, partially offset by an increase of $10 million in unregulated sales associated with power delivery construction and maintenance projects at Georgia Power.

For year-to-date 2026, other revenues were $661 million compared to $684 million for the corresponding period in 2025. The decrease was primarily due to decreases of $30 million in unregulated sales associated with energy conservation projects at Georgia Power, $15 million in sales of unregulated products and services at Alabama Power, and $8 million in customer charges related to contributions in aid of construction included in rates in 2025 at Mississippi Power, partially offset by an increase of $24 million in unregulated sales associated with power delivery construction and maintenance projects at Georgia Power.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses

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Fuel

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Purchased power

Total fuel and purchased power expenses

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In the second quarter 2026, total fuel and purchased power expenses were $1.34 billion compared to $1.38 billion for the corresponding period in 2025. The decrease was due to a $103 million net decrease related to the average cost of fuel and purchased power, partially offset by a $69 million increase related to the volume of KWHs generated and purchased.

For year-to-date 2026, total fuel and purchased power expenses were $3.1 billion compared to $2.9 billion for the corresponding period in 2025. The increase was due to a $101 million net increase related to the volume of KWHs generated and purchased and a $57 million increase related to the average cost of fuel and purchased power.

Fuel and purchased power energy transactions at the traditional electric operating companies are generally offset by fuel revenues and do not have a significant impact on net income. See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information. Fuel expenses incurred under Southern Power's PPAs are generally the responsibility of the counterparties and do not significantly impact net income.

Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.

Details of the Southern Company system's generation and purchased power and the related costs were as follows:

Total generation (in billions of KWHs)

Total purchased power (in billions of KWHs)

6

6

Sources of generation (percent) —

Gas

Nuclear

Coal

Hydro

2

4

2

4

Wind, Solar, and Other

8

9

8

8

Cost of fuel, generated (in cents per net KWH)—

Gas

Nuclear

Coal

Average cost of fuel, generated (in cents per net KWH)

Average cost of purchased power (in cents per net KWH)(*)

(*)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Cost of Natural Gas

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Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, the natural gas distribution utilities' rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities. See Note 2 to the financial statements under "Southern Company Gas – Natural Gas Cost Recovery" in Item 8 of the Form 10-K for additional information. Cost of natural gas at the natural gas distribution utilities represented 87.0% and 84.7% of the total cost of natural gas in the second quarter and year-to-date 2026, respectively.

In the second quarter 2026, cost of natural gas was $177 million compared to $255 million for the corresponding period in 2025. The decrease reflects lower gas cost recovery as a result of a 15.8% decrease in natural gas prices.

For year-to-date 2026, cost of natural gas was $1.1 billion compared to $0.9 billion for the corresponding period in 2025. The increase reflects higher gas cost recovery, primarily in the first quarter 2026, as a result of an 11.9% increase in natural gas prices.

Cost of Other Sales

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$9

$(9)

In the second quarter 2026, cost of other sales was $176 million compared to $167 million for the corresponding period in 2025. The increase was primarily due to increases of $12 million in expenses associated with unregulated power delivery construction and maintenance projects at Georgia Power and $5 million related to energy service contracts at Southern Company Gas, partially offset by a decrease of $10 million in expenses related to sales of unregulated products and services at Alabama Power.

For year-to-date 2026, cost of other sales was $357 million compared to $366 million for the corresponding period in 2025. The decrease was primarily related to a decrease of $25 million in expenses at PowerSecure primarily related to distributed infrastructure and energy efficiency projects and $15 million in expenses related to sales of unregulated products and services at Alabama Power, partially offset by increases of $23 million in expenses associated with unregulated power delivery construction and maintenance projects at Georgia Power and $4 million related to energy service contracts at Southern Company Gas.

Other Operations and Maintenance Expenses

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In the second quarter 2026, other operations and maintenance expenses were $1.71 billion compared to $1.69 billion for the corresponding period in 2025. The increase was primarily due to a $22 million increase in certain employee compensation and benefit expenses and increases of $13 million in storm damage recovery and $13 million in transmission and distribution operational costs, both at Georgia Power, partially offset by decreases of $19 million associated with utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses at Alabama Power and $16 million in technology infrastructure and application production costs.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

For year-to-date 2026, other operations and maintenance expenses were $3.4 billion compared to $3.3 billion for the corresponding period in 2025. The increase was primarily due to a $47 million increase in certain employee compensation and benefit expenses, a $37 million increase in expenses at Southern Company Gas related to certain deferred expenses, charges related to the disallowance of certain capital investments at Nicor Gas, gas mains, and expenses passed through to customers, a $23 million increase in transmission and distribution operational costs at the traditional electric operating companies, $22 million in weather-related damage at a Southern Power solar project, and increases of $22 million in customer education and assistance expenses at Georgia Power and $18 million in NDR accruals and storm damage recovery at Alabama Power and Georgia Power.

Partially offsetting the increase were decreases of $40 million associated with utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses at Alabama Power and $30 million in planned outages at the traditional electric operating companies, $23 million of deferred costs related to the Jurisdictional Separation Study Order at Alabama Power, $21 million associated with higher nuclear property insurance refunds at Alabama Power and Georgia Power, and a decrease of $20 million in legal expenses at Southern Company Gas.

See Note (B) to the Condensed Financial Statements under "Mississippi Power – Reliability Reserve Accounting Order" and "Alabama Power – Reliability Reserve Accounting Order" herein for additional information. Also see Notes 2 and 15 to the financial statements under "Alabama Power – Jurisdictional Separation Study Order" and "Alabama Power," respectively, in Item 8 of the Form 10-K for additional information.

Depreciation and Amortization

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In the second quarter 2026, depreciation and amortization was $1.4 billion compared to $1.3 billion for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $2.85 billion compared to $2.61 billion for the corresponding period in 2025. T6The increases in the second quarter and year-to-date 2026 were primarily due to increases of $98 million and $224 million, respectively, in accelerated depreciation related to wind repowering projects at Southern Power and $102 million and $207 million, respectively, associated with additional plant in service, partially offset by a decrease of $99 million and $197 million, respectively, resulting from the extension of Georgia Power's 2022 ARP.

See Note 2 to the financial statements under "Georgia Power – Rate Plans" for additional information related to Georgia Power's 2022 ARP. Also see Note (K) to the Condensed Financial Statements under "Southern Power – Wind Repowering Projects" herein and Notes 5 and 15 to the financial statements under "Depreciation and Amortization – Southern Power" and "Southern Power – Wind Repowering Projects," respectively, in Item 8 of the Form 10-K for additional information regarding Southern Power's wind repowering projects.

Taxes Other Than Income Taxes

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In the second quarter 2026, taxes other than income taxes were $367 million compared to $403 million for the corresponding period in 2025. For year-to-date 2026, taxes other than income taxes were $831 million compared to $848 million for the corresponding period in 2025. The decreases in the second quarter and year-to-date 2026 were primarily due to decreases of $37 million and $30 million, respectively, in property taxes primarily resulting from the actualization of prior-year tax assessments at Georgia Power. Partially offsetting the decrease for year-to-date 2026 were increases of $7 million in municipal franchise fees and utility license taxes at the traditional electric operating companies and $5 million in revenue taxes as a result of higher natural gas revenues at Nicor Gas.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Allowance for Equity Funds Used During Construction

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In the second quarter 2026, allowance for equity funds used during construction was $128 million compared to $80 million for the corresponding period in 2025. For year-to-date 2026, allowance for equity funds used during construction was $248 million compared to $153 million for the corresponding period in 2025. T7The increases were primarily associated with an increase in capital expenditures subject to AFUDC at Georgia Power.

Earnings from Equity Method Investments

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N/M

N/M

In the second quarter 2026, earnings from equity method investments were $86 million compared to $10 million for the corresponding period in 2025. For year-to-date 2026, earnings from equity method investments were $136 million compared to $43 million for the corresponding period in 2025. The increases in the second quarter and year-to-date 2026 were primarily due to increases of $58 million and $68 million, respectively, at Southern Holdings related to gains and losses associated with investments in energy-related venture capital funds and increases of $9 million and $16 million, respectively, at Southern Company Gas related to SNG. See Note 7 to the financial statements in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Southern Company" and "Southern Company Gas" herein for additional information.

Interest Expense, Net of Amounts Capitalized

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In the second quarter 2026, interest expense, net of amounts capitalized was $796 million compared to $874 million for the corresponding period in 2025. For year-to-date 2026, interest expense, net of amounts capitalized was $1.57 billion compared to $1.59 billion for the corresponding period in 2025. T8The decreases in the second quarter and year-to-date 2026 were primarily due to decreases of $129 million and $118 million, respectively, in losses associated with the extinguishment of debt at the parent company and increases of $17 million and $39 million, respectively, in capitalized interest and AFUDC debt primarily associated with increased capital expenditures, partially offset by increases of $65 million and $121 million, respectively, related to higher average outstanding borrowings, $11 million and $14 million, respectively, related to higher interest rates, and $7 million and $14 million, respectively, in interest associated with PPAs accounted for as finance leases at Georgia Power.

See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information.

Other Income (Expense), Net

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In the second quarter 2026, other income (expense), net was $181 million compared to $162 million for the corresponding period in 2025. For year-to-date 2026, other income (expense), net was $336 million compared to

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

$310 million for the corresponding period in 2025. The increases in the second quarter and year-to-date 2026 were primarily due to an increase in customer charges related to contributions in aid of construction at Alabama Power.

Income Taxes

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In the second quarter 2026, income taxes were $187 million compared to $289 million for the corresponding period in 2025. For year-to-date 2026, income taxes were $414 million compared to $569 million for the corresponding period in 2025. T9The decreases were primarily due to decreases of $93 million and $87 million, respectively, in charges to a valuation allowance on certain state tax credit carryforwards at Georgia Power and increases of $35 million and $71 million, respectively, related to higher wind PTCs resulting from the purchase of the noncontrolling membership interest in the SP Wind tax equity partnership at Southern Power, partially offset by higher pre-tax earnings and decreases of $17 million and $29 million, respectively, in the flowback of excess state deferred income taxes at Georgia Power.

See Note (G) to the Condensed Financial Statements herein and Note 15 to the financial statements under "Southern Power – Purchase of Renewable Facility Interests" in Item 8 of the Form 10-K for additional information.

Net Income (Loss) Attributable to Noncontrolling Interests

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N/M

Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the second quarter 2026, net income attributable to noncontrolling interests was $14 million compared to a $27 million net loss for the corresponding period in 2025. For year-to-date 2026, net loss attributable to noncontrolling interests was $4 million compared to $91 million for the corresponding period in 2025. The changes in the second quarter and year-to-date 2026 were primarily due to $38 million and $79 million, respectively, in lower HLBV loss allocations to Southern Power's tax equity partners, largely resulting from Southern Power's purchase of the noncontrolling membership interests in the SP Wind tax equity partnership. See Note 15 to the financial statements under "Southern Power – Purchase of Renewable Facility Interests" in Item 8 of the Form 10-K for additional information.

Alabama Power

Net Income

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Alabama Power's net income in the second quarter 2026 was $437 million compared to $381 million for the corresponding period in 2025. The increase was primarily due to a decrease in other operations and maintenance expenses and an increase in other income (expense), net, partially offset by an increase in depreciation and amortization.

For year-to-date 2026, net income was $862 million compared to $755 million for the corresponding period in 2025. The increase was primarily due to a decrease in other operations and maintenance expenses, an increase in other income (expense), net, and an increase within retail revenues associated with sales growth, partially offset by weather impacts and an increase in depreciation and amortization.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Retail Revenues

In the second quarter 2026, retail revenues were $1.71 billion compared to $1.72 billion for the corresponding period in 2025. For year-to-date 2026, retail revenues were $3.438 billion compared to $3.441 billion for the corresponding period in 2025. Details of the changes in retail revenues were as follows:

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Rates and pricing

$

%

$

%

Sales growth (decline)

(3)

Weather

(1)

—

Fuel and other cost recovery

(8)

Retail revenues

$

(8)

%

$

(3)

%

Changes in rates and pricing resulted in increases in revenues in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily due to an increase in Rate CNP Compliance revenues resulting from higher recoverable costs. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.

Changes in sales resulted in a decrease in revenues in the second quarter 2026 and an increase in revenues for year-to-date 2026 as compared to the corresponding periods in 2025. Weather-adjusted residential KWH sales decreased 1.3% in the second quarter 2026 primarily due to a decrease in customer usage. Weather-adjusted residential KWH sales increased 0.5% for year-to-date 2026 primarily due to customer growth. Weather-adjusted commercial KWH sales decreased 0.9% and 0.3% in the second quarter and year-to-date 2026, respectively, primarily due to decreases in customer usage. Industrial KWH sales increased 2.0% and 3.0% in the second quarter and year-to-date 2026, respectively, primarily due to increases in the primary metals and mining sectors, partially offset by decreases in the chemicals and pulp and paper sectors.

Fuel and other cost recovery revenues decreased in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily as a result of lower recoverable fuel costs. Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the NDR. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues – Non-Affiliates

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, wholesale revenues from sales to non-affiliates were $85 million compared to $98 million for the corresponding period in 2025. The decrease was primarily due to a decrease in non-fuel revenues from wholesale capacity contracts.

For year-to-date 2026, wholesale revenues from sales to non-affiliates were $202 million compared to $189 million for the corresponding period in 2025. The increase consisted of a $34 million increase in energy revenues due to increases of $27 million related to the volume of KWH sales associated with higher market demand and $7 million related to the average cost per KWH sold due to higher Southern Company system fuel and purchased power prices, partially offset by a $21 million decrease in non-fuel revenues from wholesale capacity contracts.

The decreases in capacity revenues in the second quarter and year-to-date 2026 were primarily due to the expiration of a power sales agreement in December 2025, partially offset by the commencement of a new power sales

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

agreement in October 2025 associated with the acquisition of the Lindsay Hill Generating Station. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Alabama Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not affect net income. Short-term opportunity energy sales are also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.

Wholesale Revenues – Affiliates

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, wholesale revenues from sales to affiliates were $55 million compared to $36 million for the corresponding period in 2025. The increase was primarily due to an increase of 73.9% in the volume of KWH sales due to affiliated company energy needs, partially offset by a 10.3% decrease in the price of energy due to a decrease in natural gas prices.

For year-to-date 2026, wholesale revenues from sales to affiliates were $174 million compared to $105 million for the corresponding period in 2025. The increase was primarily due to increases of 49.7% in the volume of KWH sales due to affiliated company energy needs and 11.1% in the price of energy due to an increase in natural gas prices.

Wholesale revenues from sales to affiliated companies 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. Energy revenues related to these transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.

Other Revenues

(change in millions)

(% change)

(change in millions)

(% change)

$(3)

$(4)

In the second quarter 2026, other revenues were $113 million compared to $116 million for the corresponding period in 2025. For year-to-date 2026, other revenues were $241 million compared to $245 million for the corresponding period in 2025. The decreases in the second quarter and year-to-date 2026 were primarily due to decreases of $8 million and $15 million, respectively, in sales of unregulated products and services and $7 million related to undistributed customer bill credits associated with nuclear fuel disposal costs litigation in May 2025, which was offset by an additional NDR accrual within other operations and maintenance expenses, partially offset by increases of $11 million and $14 million, respectively, in open access transmission tariff sales. See Note 2 to the financial statements under "Alabama Power – Rate NDR" in Item 8 of the Form 10-K for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses

(change in millions)

(% change)

(change in millions)

(% change)

Fuel

$

(1)

%

$

%

Purchased power – non-affiliates

9

Purchased power – affiliates

5

Total fuel and purchased power expenses

$

(6)

$

In the second quarter 2026, total fuel and purchased power expenses were $452 million compared to $458 million for the corresponding period in 2025. The decrease was due to a $34 million decrease related to the average cost of fuel and purchased power, partially offset by a $28 million net increase related to the volume of KWHs generated and purchased.

For year-to-date 2026, total fuel and purchased power expenses were $1.03 billion compared to $0.97 billion for the corresponding period in 2025. The increase was due to a $40 million net increase related to the volume of KWHs generated and purchased and an $18 million net increase related to the average cost of fuel and purchased power.

Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Alabama Power's energy cost recovery clause. See Note 2 to the financial statements under "Alabama Power – Rate ECR" in Item 8 of the Form 10-K for additional information.

Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation.

Energy purchases from affiliates will vary depending on demand for energy 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 or other contractual agreements, as approved by the FERC.

Details of Alabama Power's generation and purchased power and the related costs were as follows:

Total generation (in billions of KWHs)

Total purchased power (in billions of KWHs)

2

2

4

4

Sources of generation (percent) —

Gas

Coal

Nuclear

Hydro

4

5

Cost of fuel, generated (in cents per net KWH) —

Gas

Coal

Nuclear

Average cost of fuel, generated (in cents per net KWH)

Average cost of purchased power (in cents per net KWH)(*)

(*)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, other operations and maintenance expenses were $415 million compared to $472 million for the corresponding period in 2025. The decrease was primarily due to decreases of $19 million associated with utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses, $15 million in expenses related to sales of unregulated products and services, and $8 million related to the acquisition of the Lindsay Hill Generating Station, as well as $12 million of deferred costs related to the Jurisdictional Separation Study Order.

For year-to-date 2026, other operations and maintenance expenses were $808 million compared to $935 million for the corresponding period in 2025. The decrease was primarily due to decreases of $40 million associated with utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses, $34 million in planned outages, $18 million in expenses related to sales of unregulated products and services, $16 million related to the acquisition of the Lindsay Hill Generating Station, and $7 million associated with an additional NDR accrual in May 2025, which was offset within other revenues, as well as $23 million of deferred costs related to the Jurisdictional Separation Study Order and $11 million associated with higher nuclear property insurance refunds. Partially offsetting the decreases was a $12 million increase in NDR accruals.

See Note (B) to the Condensed Financial Statements under "Alabama Power – Reliability Reserve Accounting Order" herein and Note 2 to the financial statements under "Alabama Power – Jurisdictional Separation Study Order" and " – Rate NDR" and Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Depreciation and Amortization

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, depreciation and amortization was $385 million compared to $371 million for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $766 million compared to $741 million for the corresponding period in 2025. The increases were primarily related to the acquisition of the Lindsay Hill Generating Station in September 2025 and other additional plant in service, partially offset by the deferral of expenses related to the Jurisdictional Separation Study Order. See Notes 2 and 15 to the financial statements under "Alabama Power – Jurisdictional Separation Study Order" and "Alabama Power," respectively, in Item 8 of the Form 10-K for additional information.

Other Income (Expense), Net

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, other income (expense), net was $78 million compared to $47 million for the corresponding period in 2025. For year-to-date 2026, other income (expense), net was $116 million compared to $84 million for the corresponding period in 2025. The increases were primarily due to an increase in customer charges related to contributions in aid of construction.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Income Taxes

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, income taxes were $135 million compared to $115 million for the corresponding period in 2025. For year-to-date 2026, income taxes were $263 million compared to $226 million for the corresponding period in 2025. The increases were primarily due to higher pre-tax earnings.

Georgia Power

Net Income

(change in millions)

(% change)

(change in millions)

(% change)

Georgia Power's net income in the second quarter 2026 was $779 million compared to $607 million for the corresponding period in 2025. The increase was primarily due to a decrease in income taxes, higher retail revenues associated with sales growth, an increase in AFUDC equity, and a decrease in taxes other than income taxes, partially offset by lower retail revenues associated with rates and pricing and an increase in interest expense.

For year-to-date 2026, net income was $1.4 billion compared to $1.2 billion for the corresponding period in 2025. The increase was primarily due to a decrease in income taxes, higher retail revenues associated with sales growth, an increase in AFUDC equity, and higher non-fuel-related wholesale revenues, partially offset by lower retail revenues associated with rates and pricing, an increase in other operations and maintenance expenses, and an increase in interest expense.

Retail Revenues

In the second quarter 2026, retail revenues were $2.753 billion compared to $2.765 billion for the corresponding period in 2025. For year-to-date 2026, retail revenues were $5.391 billion compared to $5.395 billion for the corresponding period in 2025. Details of the changes in retail revenues were as follows:

(change in millions)

(% change)

(change in millions)

(% change)

Rates and pricing

$

%

$

%

Sales growth

Weather

(6)

Fuel cost recovery

Retail revenues

$

%

$

(4)

%

Changes in rates and pricing resulted in decreases in revenues in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily due to lower contributions from commercial and industrial customers with variable demand-driven pricing.

Changes in sales resulted in increases in revenues in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025. Weather-adjusted residential KWH sales decreased 0.5% in the second quarter 2026 primarily due to decreased customer usage. Weather-adjusted residential KWH sales decreased 0.1% for year-to-date 2026 primarily due to decreased customer usage, largely offset by customer growth. Weather-adjusted commercial KWH sales increased 10.9% and 8.7% in the second quarter and year-to-date 2026, respectively, primarily due to increased customer usage, largely driven by data centers. Weather-adjusted industrial KWH sales

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

decreased 1.3% and 0.7% in the second quarter and year-to-date 2026, respectively, primarily due to decreases in the paper, textiles, and primary metals sectors, partially offset by increases in the miscellaneous manufacturing and stone, clay, and glass sectors.

Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreased in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025 due to lower recoverable fuel costs. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See Note (B) to the Condensed Financial Statements under "Georgia Power – Fuel Cost Recovery" herein and Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, wholesale revenues were $120 million compared to $107 million for the corresponding period in 2025. The increase was primarily due to a $15 million increase in energy revenues largely due to increases of $7 million related to the volume of KWH sales associated with higher market demand and $5 million in non-fuel-related energy revenues from wholesale contracts.

For year-to-date 2026, wholesale revenues were $347 million compared to $250 million for the corresponding period in 2025. The increase was due to an $89 million increase in energy revenues due to increases of $44 million related to the average cost per KWH sold due to higher Southern Company system fuel and purchased power prices, $30 million in non-fuel-related energy revenues from wholesale contracts, and $15 million related to the volume of KWH sales associated with higher market demand, as well as an $8 million increase in capacity revenues from new and existing power sales agreements.

Wholesale revenues from sales to non-affiliates consist of PPAs and short-term opportunity sales. Wholesale revenues from PPAs have both capacity and energy components. Wholesale capacity revenues from PPAs are recognized in amounts billable under the contract terms and provide for recovery of fixed costs and a return on investment. Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Georgia Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Short-term opportunity sales are made at market-based rates that generally provide a margin above Georgia Power's variable cost of energy.

Wholesale revenues from sales to affiliated companies 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. Energy revenues related to these transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.

Other Revenues

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, other revenues were $260 million compared to $238 million for the corresponding period in 2025. The increase was primarily due to increases of $10 million in unregulated sales associated with

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

power delivery construction and maintenance projects, $9 million in open access transmission tariff sales, $5 million in realized gains associated with price stability products for retail customers on variable demand-driven pricing tariffs, $4 million in renewable energy program revenues primarily associated with solar application fees, and $4 million in outdoor lighting sales, partially offset by a decrease of $12 million in unregulated sales associated with energy conservation projects.

For year-to-date 2026, other revenues were $538 million compared to $503 million for the corresponding period in 2025. The increase was primarily due to increases of $24 million in unregulated sales associated with power delivery construction and maintenance projects, $22 million in open access transmission tariff sales, $13 million in realized gains associated with price stability products for retail customers on variable demand-driven pricing tariffs, and $10 million in outdoor lighting sales, partially offset by a decrease of $30 million in unregulated sales associated with energy conservation projects.

Fuel and Purchased Power Expenses

(change in millions)

(% change)

(change in millions)

(% change)

Fuel

$

%

$

%

Purchased power – non-affiliates

(9)

Purchased power – affiliates

Total fuel and purchased power expenses

$

$

In the second quarter 2026, total fuel and purchased power expenses were $821 million compared to $853 million for the corresponding period in 2025. The decrease was due to an $85 million decrease related to the average cost of fuel and purchased power, partially offset by a $53 million increase related to the volume of KWHs generated and purchased.

For year-to-date 2026, total fuel and purchased power expenses were $1.9 billion compared to $1.8 billion for the corresponding period in 2025. The increase was due to an $84 million net increase related to the volume of KWHs generated and purchased, partially offset by a $16 million net decrease related to the average cost of fuel and purchased power.

Fuel and purchased power energy transactions do not have a significant impact on earnings since these fuel expenses are generally offset by fuel revenues through Georgia Power's fuel cost recovery mechanism. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.

Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation.

Energy purchases from affiliates will vary depending on demand for energy 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 or other contractual agreements, all as approved by the FERC.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Details of Georgia Power's generation and purchased power and the related costs were as follows:

Total generation (in billions of KWHs)

Total purchased power (in billions of KWHs)

9

9

Sources of generation (percent) —

Gas

Nuclear

Coal

Hydro and other

2

4

2

3

Cost of fuel, generated (in cents per net KWH) —

Gas

Nuclear

Coal

Average cost of fuel, generated (in cents per net KWH)

Average cost of purchased power (in cents per net KWH)(*)

(*)Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.

Other Operations and Maintenance Expenses

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, other operations and maintenance expenses were $667 million compared to $645 million for the corresponding period in 2025. The increase was primarily due to increases of $13 million in storm damage recovery, $13 million in transmission and distribution operational costs, $12 million in expenses associated with unregulated power delivery construction and maintenance projects, $9 million in non-outage generation maintenance expenses, and $8 million in certain employee compensation and benefit expenses, partially offset by decreases of $21 million in technology infrastructure and application production costs and $10 million in expenses associated with energy conservation projects.

For year-to-date 2026, other operations and maintenance expenses were $1.34 billion compared to $1.28 billion for the corresponding period in 2025. The increase was primarily due to increases of $24 million in expenses associated with unregulated power delivery construction and maintenance projects, $22 million in customer education and assistance expenses, $17 million in transmission and distribution operational costs, $14 million in certain employee compensation and benefit expenses, $13 million in storm damage recovery, and $13 million in non-outage generation maintenance expenses, partially offset by decreases of $26 million in expenses associated with energy conservation projects and $16 million in technology infrastructure and application production costs and an increase of $10 million in nuclear property insurance refunds.

See Note (B) to the Condensed Financial Statements under "Georgia Power – Storm Damage Recovery" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Depreciation and Amortization

(change in millions)

(% change)

(change in millions)

(% change)

$(9)

In the second quarter 2026, depreciation and amortization was $503 million compared to $512 million for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $0.99 billion compared to $1.02 billion for the corresponding period in 2025. The decreases in the second quarter and year-to-date 2026 were primarily due to decreases of $99 million and $197 million, respectively, resulting from the extension of the 2022 ARP, partially offset by increases of $75 million and $147 million, respectively, from additional plant in service and $12 million and $18 million, respectively, from depreciation associated with PPAs accounted for as finance leases. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements under "Georgia Power Lease Modification" herein for additional information.

Taxes Other Than Income Taxes

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, taxes other than income taxes were $138 million compared to $173 million for the corresponding period in 2025. For year-to-date 2026, taxes other than income taxes were $313 million compared to $342 million for the corresponding period in 2025. The decreases in the second quarter and year-to-date 2026 were primarily due to decreases of $37 million and $35 million, respectively, in property taxes primarily resulting from the actualization of prior-year tax assessments.

Allowance for Equity Funds Used During Construction

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, allowance for equity funds used during construction was $104 million compared to $56 million for the corresponding period in 2025. For year-to-date 2026, allowance for equity funds used during construction was $201 million compared to $104 million for the corresponding period in 2025. The increases were primarily due to an increase in capital expenditures subject to AFUDC.

Interest Expense, Net of Amounts Capitalized

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, interest expense, net of amounts capitalized was $228 million compared to $198 million for the corresponding period in 2025. For year-to-date 2026, interest expense, net of amounts capitalized was $431 million compared to $385 million for the corresponding period in 2025. The increases for the second quarter and year-to-date 2026 were primarily associated with increases of approximately $27 million and $52 million, respectively, related to higher average outstanding borrowings and $14 million and $21 million, respectively, in interest associated with PPAs accounted for as finance leases, partially offset by increases of $13 million and $29 million, respectively, in AFUDC debt related to increased capital expenditures. See FINANCIAL CONDITION

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein and Note (F) to the Condensed Financial Statements under "Georgia Power Lease Modification" for additional information.

Income Taxes

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, income taxes were $151 million compared to $236 million for the corresponding period in 2025. For year-to-date 2026, income taxes were $236 million compared to $334 million for the corresponding period in 2025. The decreases in the second quarter and year-to-date 2026 were primarily due to decreases of $93 million and $87 million, respectively, in charges to a valuation allowance on certain state tax credit carryforwards and increases of $12 million and $32 million, respectively, in amortization of federal PTCs and ITCs, partially offset by decreases of $17 million and $29 million, respectively, in the flowback of excess state deferred income taxes and higher pre-tax earnings for both periods presented. See Note (G) to the Condensed Financial Statements herein for additional information.

Mississippi Power

Net Income

(change in millions)

(% change)

(change in millions)

(% change)

$(7)

$(2)

Mississippi Power's net income in the second quarter 2026 was $52 million compared to $59 million for the corresponding period in 2025. For year-to-date 2026, net income was $112 million compared to $114 million for the corresponding period in 2025. The decreases were primarily due to increases in other operations and maintenance expenses and depreciation and amortization, partially offset by higher retail revenues associated with changes in rates and pricing.

Retail Revenues

In the second quarter 2026, retail revenues were $283 million compared to $274 million for the corresponding period in 2025. For year-to-date 2026, retail revenues were $556 million compared to $522 million for the corresponding period in 2025. Details of the changes in retail revenues were as follows:

(change in millions)

(% change)

(change in millions)

(% change)

Rates and pricing

$

%

$

%

Sales growth

2

1

Weather

(3)

(6)

Fuel and other cost recovery

(6)

4

Retail revenues

$

9

%

$

%

Changes in rates and pricing resulted in increases in revenues in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily due to increases in PEP rates and higher revenues associated with a tolling arrangement accounted for as a sales-type lease. See Note 2 to the financial statements under "Mississippi Power – Performance Evaluation Plan" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Mississippi Power – Performance Evaluation Plan" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Changes in sales resulted in increases in revenues in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025. Weather-adjusted residential KWH sales increased 1.3% in the second quarter 2026 primarily due to increased customer usage and customer growth. Weather-adjusted residential KWH sales decreased 0.3% for year-to-date 2026 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales increased 1.8% and 1.6% in the second quarter and year-to-date 2026, respectively, primarily due to increased customer usage. Industrial KWH sales increased 1.1% in the second quarter 2026 primarily due to increases in the petroleum and pipeline sectors, partially offset by decreases in the oil and gas extraction sectors.

Industrial KWH sales decreased 0.1% for year-to-date 2026 primarily due to decreases in the chemicals and oil and gas extraction sectors, largely offset by increases in the petroleum and pipeline sectors.

Fuel and other cost recovery revenues decreased in the second quarter 2026 as compared to the corresponding period in 2025 primarily as a result of lower recoverable fuel costs. Fuel and other cost recovery revenues increased for year-to-date 2026 as compared to the corresponding period in 2025 primarily as a result of higher recoverable fuel costs. Recoverable fuel costs include fuel and purchased power expenses reduced by the fuel and emissions portion of wholesale revenues from energy sold to customers outside Mississippi Power's service territory. 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 energy component of purchased power costs, and do not affect net income. See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information.

Wholesale Revenues – Non-Affiliates

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, wholesale revenues from sales to non-affiliates were $74 million compared to $62 million for the corresponding period in 2025. The increase was primarily due to a $13 million increase associated with new and existing power supply agreements.

For year-to-date 2026, wholesale revenues from sales to non-affiliates were $162 million compared to $133 million for the corresponding period in 2025. The increase was primarily due to a $17 million increase associated with new and existing power supply agreements and an $11 million increase in opportunity sales.

Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Mississippi Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. In addition, Mississippi Power provides service under long-term contracts with rural electric cooperative associations and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC.

Short-term opportunity energy sales are also included in sales for resale to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Mississippi Power's variable cost to produce the energy. See Note 2 to the financial statements under "Mississippi Power – Municipal and Rural Associations Tariff" in Item 8 of the Form 10-K for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Wholesale Revenues – Affiliates

(change in millions)

(% change)

(change in millions)

(% change)

$(5)

In the second quarter 2026, wholesale revenues from sales to affiliates were $35 million compared to $55 million for the corresponding period in 2025. The decrease was primarily due to decreases of $16 million related to the volume of KWH sales and $4 million related to the price of energy driven by natural gas prices.

For year-to-date 2026, wholesale revenues from sales to affiliates were $131 million compared to $136 million for the corresponding period in 2025. The decrease was primarily due to a $14 million decrease related to the volume of KWH sales, partially offset by a $10 million increase related to the price of energy driven by natural gas prices.

Wholesale revenues from sales to affiliated companies 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 or other contractual agreements, as approved by the FERC. Energy revenues related to these transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.

Other Revenues

(change in millions)

(% change)

(change in millions)

(% change)

$2

$(4)

For year-to-date 2026, other revenues were $26 million compared to $30 million for the corresponding period in 2025. The decrease was primarily due to an $8 million decrease in customer charges related to contributions in aid of construction included in rates in 2025, partially offset by a $4 million increase in sales of unregulated products and services.

Fuel and Purchased Power Expenses

(change in millions)

(% change)

(change in millions)

(% change)

Fuel

$

%

$

%

Purchased power

(3)

7

Total fuel and purchased power expenses

$

$

In the second quarter 2026, total fuel and purchased power expenses were $122 million compared to $143 million for the corresponding period in 2025. The decrease was due to an $11 million decrease related to the volume of KWHs generated and purchased and a $10 million net decrease related to the average cost of fuel and purchased power.

For year-to-date 2026, total fuel and purchased power expenses were $328 million compared to $309 million for the corresponding period in 2025. The increase was due to a $29 million increase related to the average cost of fuel and purchased power, of which $9 million is related to capacity, partially offset by a $10 million decrease related to the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause.

Energy purchases will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

territory, and the availability of the Southern Company system's generation. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.

Details of Mississippi Power's generation and purchased power and the related costs were as follows:

Total generation (in millions of KWHs)

Total purchased power (in millions of KWHs)

Sources of generation (percent) –

Gas

Coal

6

6

Cost of fuel, generated (in cents per net KWH) –

Gas

Coal

Average cost of fuel, generated (in cents per net KWH)

Average cost of purchased power (in cents per net KWH)

Other Operations and Maintenance Expenses

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, other operations and maintenance expenses were $107 million compared to $82 million for the corresponding period in 2025. The increase was primarily due to increases of $10 million associated with a decrease in utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses, $9 million in generation expenses, and $4 million in distribution and transmission expenses.

For year-to-date 2026, other operations and maintenance expenses were $194 million compared to $166 million for the corresponding period in 2025. The increase was primarily due to increases of $13 million in generation expenses, $4 million associated with a decrease in utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses, $4 million related to distribution expenses, and $3 million in expenses associated with unregulated products and services.

See Note (B) to the Condensed Financial Statements under "Mississippi Power – Reliability Reserve Accounting Order" herein for additional information.

Depreciation and Amortization

(change in millions)

(% change)

(change in millions)

(% change)

$6

$8

In the second quarter 2026, depreciation and amortization was $58 million compared to $52 million for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $113 million compared to $105 million for the corresponding period in 2025. The increases were primarily due to additional plant in service.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Power

Net Income (Loss) Attributable to Southern Power

(change in millions)

(% change)

(change in millions)

(% change)

N/M

N/M

Net loss attributable to Southern Power in the second quarter 2026 was $25 million compared to net income of $51 million for the corresponding period in 2025. The change was primarily due to higher accelerated depreciation related to wind repowering projects.

Net loss attributable to Southern Power for year-to-date 2026 was $22 million compared to net income of $138 million for the corresponding period in 2025. The change was primarily due to higher accelerated depreciation related to wind repowering projects, partially offset by higher revenues due to higher market prices and increased demand for energy related to weather impacts.

See Note (K) to the Condensed Financial Statements under "Southern Power – Wind Repowering Projects" herein and Notes 5 and 15 to the financial statements under "Depreciation and Amortization – Southern Power" and "Southern Power," respectively, in Item 8 of the Form 10-K for additional information.

Operating Revenues

(change in millions)

(% change)

(change in millions)

(% change)

Total operating revenues include PPA capacity revenues derived primarily from long-term contracts associated with natural gas facilities and PPA energy revenues derived from long-term contracts associated with Southern Power's generation facilities. To the extent Southern Power has capacity not contracted under a PPA, it may sell power into an accessible wholesale market, or, to the extent those generation assets are part of the FERC-approved IIC, it may sell power into the Southern Company power pool.

Natural Gas Capacity and Energy Revenue

Capacity revenues generally represent the greatest contribution to operating income and are designed to provide recovery of fixed costs plus a return on investment.

Energy is generally sold at variable cost or is indexed to published natural gas indices. Energy revenues will vary depending on the energy demand of Southern Power's customers and their generation capacity, as well as the market prices of wholesale energy compared to the cost of Southern Power's energy. Energy revenues also include fees for support services, fuel storage, and unit start charges. Increases and decreases in energy revenues under PPAs that are driven by fuel or purchased power prices are accompanied by an increase or decrease in fuel and purchased power costs and do not have a significant impact on net income.

Solar and Wind Energy Revenue

Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility through an energy charge or pay a fixed price related to the energy generated from the respective facility and sold to the grid. As a result, Southern Power's ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors.

See FUTURE EARNINGS POTENTIAL – "Southern Power's Power Sales Agreements" in Item 7 of the Form 10-K for additional information regarding Southern Power's PPAs.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Operating Revenues Details

Details of Southern Power's operating revenues were as follows:

(in millions)

PPA capacity revenues

$

$

$

$

PPA energy revenues

Total PPA revenues

Non-PPA revenues

Other revenues

4

8

8

Total operating revenues

$

$

$

$

In the second quarter 2026, total operating revenues were $535 million, reflecting an $11 million, or 2.0%, decrease from the corresponding period in 2025. The change in operating revenues was primarily due to the following:

•PPA capacity revenues decreased $6 million, or 4.8%, primarily due to an $18 million charge associated with a lease modification related to an affiliate PPA with Georgia Power, partially offset by an $8 million increase in capacity revenues under the PPA.

•PPA energy revenues increased $8 million, or 2.3%, primarily due to a $23 million increase related to the volume of KWHs sold under natural gas PPAs and a $7 million increase in solar revenues primarily related to the first phase of the Millers Branch solar facility being placed in service, largely offset by a $24 million decrease driven by fuel and purchased power prices. See Note (K) to the Condensed Financial Statements under "Southern Power – Construction Projects" herein for additional information.

•Non-PPA revenues decreased $9 million, or 13.0%, primarily due to a decrease of $8 million driven by the market price of energy.

For year-to-date 2026, total operating revenues were $1.2 billion, reflecting a $103 million, or 9.3%, increase from the corresponding period in 2025. The change in operating revenues was primarily due to the following:

•PPA capacity revenues decreased $6 million, or 2.4%, primarily due to an $18 million charge associated with a lease modification related to an affiliate PPA with Georgia Power, partially offset by an $8 million increase in capacity revenues under the PPA.

•PPA energy revenues increased $116 million, or 16.2%, primarily due to an increase of $63 million related to the volume of KWHs sold under natural gas PPAs and an increase of $44 million driven by fuel and purchased power prices.

•Other revenues decreased $6 million, or 42.9%, primarily due to a decrease in income from liquidated damages related to generation facility production guarantees and a warranty settlement in the prior year, partially offset by an increase in insurance proceeds.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses

Details of Southern Power's generation and purchased power were as follows:

(in billions of KWHs)

Generation

Purchased power

Total generation and purchased power

Total generation and purchased power

(excluding solar, wind, fuel cells, and tolling agreements)

Southern Power's PPAs for natural gas generation generally provide that the purchasers are responsible for either procuring the fuel (tolling agreements) or reimbursing Southern Power for substantially all of the cost of fuel relating to the energy delivered under such PPAs. Consequently, changes in such fuel costs are generally accompanied by a corresponding change in related fuel revenues and do not have a significant impact on net income. Southern Power is responsible for the cost of fuel for generating units that are not covered under PPAs. Power from these generating units is sold into the wholesale market or into the Southern Company power pool for capacity owned directly by Southern Power.

Purchased power expenses will vary depending on demand, availability, and the cost of generating resources throughout the Southern Company system and other contract resources. Load requirements are submitted to the Southern Company power pool on an hourly basis and are fulfilled with the lowest cost alternative, whether that is generation owned by Southern Power, an affiliate company, or external parties. Such purchased power costs are generally recovered through PPA revenues.

Details of Southern Power's fuel and purchased power expenses were as follows:

(change in millions)

(% change)

(change in millions)

(% change)

Fuel

$

%

$

%

Purchased power

5

Total fuel and purchased power expenses

$

$

In the second quarter 2026, total fuel and purchased power expenses decreased $13 million, or 7.3%, compared to the corresponding period in 2025. Fuel expense decreased $18 million due to a $21 million decrease associated with the average cost of fuel, partially offset by a $3 million increase related to the volume of KWHs generated. Purchased power expense increased $5 million due to an increase of $9 million related to the volume of KWHs purchased, partially offset by a $4 million decrease associated with the average cost of purchased power.

For year-to-date 2026, total fuel and purchased power expenses increased $63 million, or 15.2%, as compared to the corresponding period in 2025. Fuel expense increased $28 million primarily due to an increase of $27 million associated with the average cost of fuel. Purchased power expense increased $35 million due to an increase of $32 million related to the volume of KWHs purchased and an increase of $3 million associated with the average cost of purchased power.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses

(change in millions)

(% change)

(change in millions)

(% change)

$4

For year-to-date 2026, other operations and maintenance expenses were $278 million compared to $257 million for the corresponding period in 2025. The increase was primarily due to hail damage to solar panels at the Millers Branch solar project, partially offset by a decrease in generation expenses related to planned outages.

Depreciation and Amortization

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, depreciation and amortization was $280 million compared to $177 million for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $558 million compared to $329 million for the corresponding period in 2025. The increases in the second quarter and year-to-date 2026 were largely due to increases in accelerated depreciation of $98 million and $224 million, respectively, related to wind repowering projects. See Note (K) to the Condensed Financial Statements under "Southern Power – Wind Repowering Projects" herein and Notes 5 and 15 to the financial statements under "Depreciation and Amortization – Southern Power" and "Southern Power – Wind Repowering Projects," respectively, in Item 8 of the Form 10-K for additional information.

Income Taxes (Benefit)

(change in millions)

(% change)

(change in millions)

(% change)

N/M

N/M

In the second quarter 2026, income tax benefit was $77 million compared to $2 million for the corresponding period in 2025. For year-to-date 2026, income tax benefit was $147 million compared to $3 million for the corresponding period in 2025. The increases were primarily due to higher wind PTCs resulting from Southern Power's purchase of the noncontrolling membership interests in the SP Wind tax equity partnership, as well as a change in pre-tax earnings attributable to Southern Power, including the impact of accelerated depreciation related to wind repowering projects. See Note (G) to the Condensed Financial Statements and Note (K) to the Condensed Financial Statements under "Southern Power – Wind Repowering Projects" herein and Notes 5 and 15 to the financial statements under "Depreciation and Amortization – Southern Power" and "Southern Power," respectively, in Item 8 of the Form 10-K for additional information.

Net Income (Loss) Attributable to Noncontrolling Interests

(change in millions)

(% change)

(change in millions)

(% change)

N/M

In the second quarter 2026, net income attributable to noncontrolling interests was $14 million compared to net loss of $27 million for the corresponding period in 2025. For year-to-date 2026, net loss attributable to noncontrolling interests was $4 million compared to $91 million for the corresponding period in 2025. The changes in the second quarter and year-to-date 2026 were primarily due to $38 million and $79 million, respectively, in lower HLBV loss allocations to tax equity partners, largely resulting from Southern Power's purchase of the noncontrolling

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

membership interests in the SP Wind tax equity partnership. See Note 15 to the financial statements under "Southern Power – Purchase of Renewable Facility Interests" in Item 8 of the Form 10-K for additional information.

Southern Company Gas

Southern Company Gas uses Heating Degree Days to measure weather and the operational effects on its business. Generally, increased Heating Degree Days result in higher demand for natural gas on Southern Company Gas' distribution system. However, Southern Company Gas has various regulatory mechanisms, such as weather and revenue normalization and straight-fixed-variable rate design, which limit positive or negative impacts to income from exposure to weather changes within typical ranges in each of its utility's respective service territory. Southern Company Gas also utilizes weather hedges to limit the negative income impacts in the event of warmer-than-normal weather in Illinois and Georgia for gas marketing services. Therefore, weather typically does not have a significant net income impact.

During the Heating Season, more customers are connected to the gas distribution systems and natural gas usage is higher in periods of colder weather. Southern Company Gas' base operating expenses, excluding cost of natural gas and bad debt expense, are incurred relatively evenly throughout the year. Seasonality also affects the comparison of certain balance sheet items across quarters, including receivables, unbilled revenues, natural gas for sale, and notes payable. However, these items are comparable when reviewing Southern Company Gas' annual results. Thus, Southern Company Gas' operating results for the interim periods presented are not necessarily indicative of annual results and can vary significantly from quarter to quarter as a result of seasonality.

Net Income

(change in millions)

(% change)

(change in millions)

(% change)

Southern Company Gas' net income in the second quarter 2026 was $126 million compared to $106 million for the corresponding period in 2025. The increase was due to a $7 million increase in net income at gas pipeline investments, a $6 million decrease in net loss at all other, a $4 million increase in net income at gas distribution operations, and a $3 million increase in net income at gas marketing services.

For year-to-date 2026, net income was $573 million compared to $524 million for the corresponding period in 2025. The increase was primarily due to a $26 million increase in net income at gas distribution operations, a $14 million increase in net income at gas pipeline investments, and an $8 million increase in net income at gas marketing services.

Natural Gas Revenues

In the second quarter 2026, natural gas revenues were $966 million compared to $979 million for the corresponding period in 2025. For year-to-date 2026, natural gas revenues were $3.16 billion compared to $2.82 billion for the corresponding period in 2025. Details of the changes in natural gas revenues were as follows:

(change in millions)

(% change)

(change in millions)

(% change)

Rates

$

%

$

%

Gas costs and other cost recovery

Gas marketing services

Other

6

5

Natural gas revenues

$

%

$

%

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Changes in rates resulted in increases in revenues in the second quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily due to base rate increases at Nicor Gas and Atlanta Gas Light. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

Revenues associated with gas costs and other cost recovery decreased in the second quarter 2026 as compared to the corresponding period in 2025 primarily due to lower cost of natural gas driven by lower natural gas prices, as well as decreases in other expenses passed through to customers. Revenues associated with gas costs and other cost recovery increased for year-to-date 2026 as compared to the corresponding period in 2025 primarily due to higher cost of natural gas driven by higher natural gas prices in the first quarter 2026, as well as increases in other expenses passed through to customers. See "Cost of Natural Gas" herein for additional information.

Revenues from gas marketing services decreased in the second quarter 2026 as compared to the corresponding period in 2025 primarily due to lower commodity prices. Revenues from gas marketing services increased for year-to-date 2026 as compared to the corresponding period in 2025 primarily due to higher commodity prices in the first quarter 2026, partially offset by weather impacts.

Cost of Natural Gas

(change in millions)

(% change)

(change in millions)

(% change)

Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from gas distribution operations. Cost of natural gas at gas distribution operations represented 87.0% and 84.7% of the total cost of natural gas in the second quarter and year-to-date 2026, respectively. See MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – "Southern Company Gas – Cost of Natural Gas" in Item 7 of the Form 10-K and "Natural Gas Revenues" herein for additional information.

In the second quarter 2026, cost of natural gas was $177 million compared to $255 million for the corresponding period in 2025. The decrease reflects lower gas cost recovery as a result of a 15.8% decrease in natural gas prices.

For year-to-date 2026, cost of natural gas was $1.1 billion compared to $0.9 billion for the corresponding period in 2025. The increase reflects higher gas cost recovery, primarily in the first quarter 2026, as a result of an 11.9% increase in natural gas prices.

The following table details the volumes of natural gas sold during all periods presented:

Second Quarter

Year-to-Date

Gas distribution operations (mmBtu in millions)

Firm

%

%

Interruptible

Total

%

%

Gas marketing services (mmBtu in millions)

Firm

9

8

%

%

Interruptible large commercial and industrial

2

3

5

7

Total

—

%

%

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, other operations and maintenance expenses were $341 million compared to $301 million for the corresponding period in 2025. The increase was primarily due to increases of $9 million in employee compensation and benefit expenses, $9 million in charges related to the disallowance of certain capital investments at Nicor Gas, $5 million in certain deferred expenses, $5 million in expenses related to energy service contracts, $4 million in certain technology infrastructure and application production costs, and $4 million in expenses for gas mains.

For year-to-date 2026, other operations and maintenance expenses were $683 million compared to $617 million for the corresponding period in 2025. The increase was primarily due to increases of $30 million in employee compensation and benefit expenses, $12 million in certain deferred expenses, $11 million in charges related to the disallowance of certain capital investments at Nicor Gas, $9 million in certain technology infrastructure and application production costs, $8 million in expenses for gas mains, and $6 million in expenses passed through to customers at gas distribution operations, partially offset by a decrease of $20 million in legal expenses.

Depreciation and Amortization

(change in millions)

(% change)

(change in millions)

(% change)

In the second quarter 2026, depreciation and amortization was $185 million compared to $172 million for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $369 million compared to $341 million for the corresponding period in 2025. The increases were primarily due to additional plant in service related to continued investments at the natural gas distribution utilities.

Earnings from Equity Method Investments

(change in millions)

(% change)

(change in millions)

(% change)

$9

In the second quarter 2026, earnings from equity method investments were $32 million compared to $23 million for the corresponding period in 2025. The increase was primarily due to higher revenue from short-term natural gas storage and borrowing services and lower legal expenses, both at SNG.

For year-to-date 2026, earnings from equity method investments were $78 million compared to $62 million for the corresponding period in 2025. The increase was primarily due to higher revenue from short-term natural gas storage and borrowing services, prior period customer refunds, and lower legal expenses, all at SNG.

See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Interest Expense, Net of Amounts Capitalized

(change in millions)

(% change)

(change in millions)

(% change)

$9

In the second quarter 2026, interest expense, net of amounts capitalized was $101 million compared to $92 million for the corresponding period in 2025. For year-to-date 2026, interest expense, net of amounts capitalized was $206 million compared to $183 million for the corresponding period in 2025. The increases were primarily associated with higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" herein for additional information on borrowings.

Other Income (Expense), Net

(change in millions)

(% change)

(change in millions)

(% change)

$7

$7

In the second quarter 2026, other income (expense), net was $25 million compared to $18 million for the corresponding period in 2025. For year-to-date 2026, other income (expense), net was $41 million compared to $34 million for the corresponding period in 2025. The increases were primarily due to lower non-service cost-related retirement benefits income.

Income Taxes

(change in millions)

(% change)

(change in millions)

(% change)

$(1)

In the second quarter 2026, income taxes were $32 million compared to $33 million for the corresponding period in 2025. The decrease was primarily due to tax benefits related to certain state tax filing positions, largely offset by higher pre-tax earnings and a decrease in the flowback of excess state deferred income taxes.

For year-to-date 2026, income taxes were $176 million compared to $162 million for the corresponding period in 2025. The increase was primarily due to higher pre-tax earnings and a decrease in the flowback of excess state deferred income taxes, partially offset by tax benefits related to certain state tax filing positions.

See Note (G) to the Condensed Financial Statements herein for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Segment Information

Operating revenues, operating expenses, and net income for each segment are provided in the table below. See Note (L) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

Operating

Revenues

Operating

Expenses

Net Income (Loss)

Operating

Revenues

Operating

Expenses

Net Income (Loss)

(in millions)

Second Quarter

Gas distribution operations

$

$

$

$

$

$

Gas pipeline investments

8

3

8

2

Gas marketing services

8

All other

2

7

(2)

5

7

(8)

Intercompany eliminations

(2)

1

—

(2)

2

—

Consolidated

$

$

$

$

$

$

Year-to-Date

Gas distribution operations

$

$

$

$

$

$

Gas pipeline investments

5

5

Gas marketing services

All other

4

4

9

9

3

Intercompany eliminations

(6)

(1)

—

(6)

1

—

Consolidated

$

$

$

$

$

$

Gas Distribution Operations

The gas distribution operations segment is the largest component of Southern Company Gas' business and is subject to regulation and oversight by regulatory agencies in each of the states it serves. These agencies approve natural gas rates designed to provide Southern Company Gas with the opportunity to generate revenues to recover the cost of natural gas delivered to its customers and its fixed and variable costs, including depreciation, interest expense, operations and maintenance, taxes, and overhead costs, and to earn a reasonable return on its investments.

With the exception of Atlanta Gas Light, Southern Company Gas' second largest utility that operates in a deregulated natural gas market and has a straight-fixed-variable rate design that minimizes the variability of its revenues based on usage, the earnings of the natural gas distribution utilities can be affected by customer usage patterns that are largely a function of price levels for natural gas and general economic conditions that may impact customers' ability to pay for service. Southern Company Gas has various regulatory and other mechanisms, such as weather and revenue normalization mechanisms, that limit its exposure to changes in customer usage, including weather changes within typical ranges in its natural gas distribution utilities' service territories. See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

In the second quarter 2026, net income increased $4 million, or 4.4%, when compared to the corresponding period in 2025, as described further below:

•Operating revenues were flat as lower gas cost recovery was offset by base rate increases. Gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

•Operating expenses decreased $12 million primarily due to a $62 million decrease in cost of natural gas as a result of lower natural gas prices compared to 2025, partially offset by a $14 million increase in depreciation primarily due to additional plant in service related to continued investments at the natural gas distribution utilities, $9 million in charges related to the disallowance of certain capital investments at Nicor Gas, a $7 million increase related to employee compensation and benefit expenses, a $6 million increase in expenses related to energy service contracts, a $5 million increase related to certain deferred expenses, and a $4 million increase in expenses for gas mains.

•Interest expense, net of amounts capitalized increased $8 million primarily due to higher average outstanding borrowings.

•Income taxes increased $4 million primarily as a result of higher pre-tax earnings.

For year-to-date 2026, net income increased $26 million, or 6.4%, when compared to the corresponding period in 2025, as described further below:

•Operating revenues increased $331 million primarily due to higher gas cost recovery and base rate increases. Gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas.

•Operating expenses increased $274 million primarily due to a $177 million increase in cost of natural gas as a result of higher natural gas prices in the first quarter 2026 compared to 2025, a $30 million increase in depreciation primarily due to additional plant in service related to continued investments at the natural gas distribution utilities, a $22 million increase related to employee compensation and benefit expenses, a $12 million increase related to certain deferred expenses, and $11 million in charges related to the disallowance of certain capital investments at Nicor Gas, partially offset by a $20 million decrease in legal expenses.

•Interest expense, net of amounts capitalized increased $17 million primarily due to higher average outstanding borrowings.

•Income taxes increased $16 million primarily as a result of higher pre-tax earnings.

Gas Pipeline Investments

The gas pipeline investments segment consists primarily of joint ventures in natural gas pipeline investments including SNG and Dalton Pipeline. See Note (E) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

In the second quarter 2026, net income increased $7 million, or 46.7%, when compared to the corresponding period in 2025. The increase was primarily due to higher revenue from short-term natural gas storage and borrowing services and lower legal expenses, both at SNG.

For year-to-date 2026, net income increased $14 million, or 34.1%, when compared to the corresponding period in 2025. The increase was primarily due to higher revenue from short-term natural gas storage and borrowing services, prior period customer refunds, and lower legal expenses, all at SNG.

Gas Marketing Services

The gas marketing services segment provides energy-related products and services to natural gas markets and participants in customer choice programs that were approved in various states to increase competition. These programs allow customers to choose their natural gas supplier while the local distribution utility continues to provide distribution and transportation services. Gas marketing services is weather sensitive and uses a variety of hedging strategies, such as weather derivative instruments and other risk management tools, to partially mitigate potential weather impacts.

For year-to-date 2026, net income increased $8 million, or 10.8%, when compared to the corresponding period in 2025. The increase was primarily due to higher retail margins, partially offset by higher operations and maintenance expenses and income taxes.

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AND RESULTS OF OPERATIONS (Continued)

All Other

All other includes a renewable natural gas business, AGL Services Company, and Southern Company Gas Capital, as well as various corporate operating expenses that are not allocated to the reportable segments and interest income (expense) associated with affiliate financing arrangements. See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information.

In the second quarter 2026, net loss decreased $6 million when compared to the corresponding period in 2025 primarily due to tax benefits related to certain state tax filing positions.

FUTURE EARNINGS POTENTIAL

Each Registrant's results of operations are not necessarily indicative of its future earnings potential. The level of the Registrants' future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Registrants' primary businesses of selling electricity and/or distributing natural gas, as described further herein. The Registrants are unable to predict changes in law, regulations, regulatory guidance, legal interpretations, policy positions, and implementation actions that may occur in the future.

For the traditional electric operating companies, these factors include the ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs during a time of increasing customer affordability concerns and costs, including those related to projected long-term demand growth, stringent environmental standards, including CCR rules, safety, system reliability and resiliency, fuel, restoration following major storms, and capital expenditures, including constructing new electric generating plants, extending the retirement dates of certain fossil fuel plants, and expanding and improving the transmission and distribution systems; continued customer growth; and the trends of an uncertain inflationary environment and reduced electricity usage per customer, especially in residential and commercial markets.

Earnings in the electricity business will also depend upon maintaining and growing sales and pricing of large customers such that incremental costs are met with adequate incremental revenues, considering, among other things, recent trends driving projected growth in electricity consumption including the increasing digitization of the economy and growth in data centers, an increase in industrial activity in the Southern Company system's electric service territory, and continued electrification of transportation. The traditional electric operating companies enter into large load contracts that support economic development and benefit existing customers.

Since 2023, the traditional electric operating companies have contracts with new data centers and other large load customers covering approximately 11 gigawatts of electric load, with each contract individually representing a maximum electric load greater than 100 MWs, that have been reviewed by the applicable state PSC. Additional contracts totaling approximately five gigawatts of electric load have been agreed with customers and are subject to review by the applicable state PSC. The approximately 16 gigawatts of new contracts (Large Load Contracts) fully ramp up over several years after commencement of service. Some of the Large Load Contracts are currently in effect and have commenced service. Service under the remaining Large Load Contracts is expected to begin through 2028.

All of the Large Load Contracts contain minimum bill provisions. Large Load Contracts totaling approximately 13 gigawatts of electric load (including substantially all signed after 2024) also contain minimum duration, termination payment requirements, and financial security requiring customers to post collateral or provide an acceptable guarantee based on the customer's credit ratings. Certain Large Load Contracts requiring construction of specifically dedicated assets contain provisions for contribution by the customer to construction costs. These terms and conditions are designed to generate adequate incremental revenues associated with incremental costs to serve these customers.

These growth opportunities may be affected by a variety of factors, such as energy efficiency, changes in technology, reliability and operational factors, customer demand, and government policies, which could increase or decrease the associated pace of growth. In addition, these opportunities present risks such as capital access and cost

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AND RESULTS OF OPERATIONS (Continued)

recovery risks. See Note 2 to the financial statements under "Georgia Power – Integrated Resource Plans" in Item 8 of the Form 10-K for additional information regarding Georgia Power's related regulatory proceedings.

The level of future earnings for Southern Power's competitive wholesale electric business depends on numerous factors including the parameters of the wholesale market and the efficient operation of its wholesale generating assets; Southern Power's ability to execute its growth strategy through the development, construction, or acquisition of generating facilities and other energy projects while containing costs; regulatory matters; customer creditworthiness; total electric generating capacity available in Southern Power's market areas; Southern Power's ability to successfully remarket capacity as current contracts expire; renewable portfolio standards; continued availability of federal and state ITCs and PTCs under current and future tax legislation and U.S. Treasury guidance; transmission constraints; cost of generation from units within the Southern Company power pool; and operational limitations.

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters" in Item 7 of the Form 10-K for information regarding the IRA's expansion of the availability of federal ITCs and PTCs and the OBBB's restrictions on federal ITCs and PTCs. Also see Note (K) to the Condensed Financial Statements under "Southern Power" herein for information regarding construction projects.

The level of future earnings for Southern Company Gas' primary business of distributing natural gas and its complementary businesses in the gas pipeline investments and gas marketing services sectors depends on numerous factors. These factors include the natural gas distribution utilities' ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs, including those related to projected long-term demand growth, safety, system reliability and resiliency, natural gas, and capital expenditures, including expanding and improving the natural gas distribution systems; the completion and subsequent operation of ongoing infrastructure and other construction projects; customer creditworthiness; and certain policies to limit the use of natural gas, such as the potential in Illinois and across certain other parts of the United States for state or municipal bans on the use of natural gas or policies designed to promote electrification.

The volatility of natural gas prices has an impact on Southern Company Gas' customer rates, its long-term competitive position against other energy sources, and the ability of Southern Company Gas' gas marketing services business to capture value from locational and seasonal spreads. Additionally, changes in commodity prices, primarily driven by tight gas supplies, geopolitical events, and diminished gas production, subject a portion of Southern Company Gas' operations to earnings variability and may result in higher natural gas prices. Additional economic factors may contribute to this environment. The demand for natural gas may increase, including from large customers, which may cause natural gas prices to rise and drive higher volatility in the natural gas markets on a longer-term basis. Alternatively, a significant drop in oil and natural gas prices could lead to a consolidation of natural gas producers or reduced levels of natural gas production.

Earnings for both the electricity and natural gas businesses are subject to a variety of other factors. These factors include weather; competition; developing new and maintaining existing energy contracts and associated load requirements with wholesale customers; demand growth from data centers and other large load customers and associated load and operating requirements; customer energy conservation practices; the use of alternative energy sources by customers; government incentives to reduce overall energy usage; fuel, labor, and material prices in an environment of heightened inflation and material and labor supply chain disruptions; and the price elasticity of demand. Demand for electricity and natural gas in the Registrants' service territories is primarily driven by the pace of economic growth or decline that may be affected by changes in regional and global economic conditions and could be influenced by changes in technology, public policy, utility efficiency programs, and customer behavior.

Geopolitical conflicts (such as the current Middle East conflict) and significant changes in fiscal, monetary, or trade policies could affect actual economic activity and historical economic relationships in ways not anticipated in economic outlooks or Southern Company system plans. Additionally, changes in inflation, interest rates, and credit market conditions could affect the cost of doing business. All of these factors may impact future earnings. See RESULTS OF OPERATIONS herein for information on energy sales in the Southern Company system's service territory during the first six months of 2026.

As part of its ongoing effort to adapt to changing market conditions, Southern Company continues to evaluate and consider a wide array of potential business strategies. These strategies may include business combinations,

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AND RESULTS OF OPERATIONS (Continued)

partnerships, strategic alliances, joint ventures, and acquisitions involving other utility or non-utility businesses or properties, disposition of, or the sale of interests in, certain assets or businesses, internal restructuring, or some combination thereof. Furthermore, Southern Company may engage in new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations, risks, and financial condition of Southern Company. In addition, Southern Power and Southern Company Gas regularly consider and evaluate joint development arrangements as well as acquisitions and/or dispositions of businesses and assets as part of their business strategies. See Note 15 to the financial statements in Item 8 of the Form 10-K, Note (K) to the Condensed Financial Statements herein, and "Construction Programs" herein for additional information.

For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL in Item 7 of the Form 10-K.

Environmental Matters

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" and – FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" in Item 7 and Note 3 to the financial statements under "Environmental Remediation" and Note 6 to the financial statements in Item 8 of the Form 10-K, as well as Note (C) to the Condensed Financial Statements under "General Litigation Matters" and "Environmental Remediation" herein, for additional information.

Environmental Laws and Regulations

Water Quality

On May 18, 2026, the EPA published the Unmanaged Combustion Residual Leachate (UCRL) proposed rule, which revises the UCRL requirements from the 2024 ELG Rule. The UCRL proposed rule offers a range of regulatory and technology options to address UCRL. The ultimate impacts of this proposed rule cannot be determined at this time; however, a final rule could result in significant compliance costs.

Coal Combustion Residuals

On April 13, 2026, the EPA published a proposed rule that, if finalized, would make several revisions to the existing federal CCR regulations, including rescinding CCR management unit provisions. The proposal also provides additional clarity around the scope of beneficial use and provides for site-specific groundwater, closure, and corrective action flexibilities under federal or state CCR permits.

On July 14, 2026, the EPA proposed the approval of the State of Alabama's partial CCR permit program. If approved, the state's permit program will operate in lieu of the federal CCR program.

The ultimate impact of these actions cannot be determined at this time.

Based on compliance requirements for closure and monitoring of landfills and surface impoundments pursuant to state and federal CCR rules, the traditional electric operating companies have periodically updated, and expect to continue periodically updating, their related cost estimates and ARO liabilities for each CCR unit as additional information related to compliance monitoring, closure methodologies and strategies, schedules, and/or costs becomes available. Some of these updates have been, and future updates may be, material. The cost estimates for Alabama Power are based on closure-in-place for all surface impoundments. The cost estimates for Georgia Power and Mississippi Power are based on a combination of closure-in-place for some surface impoundments and closure by removal for others.

Additionally, the closure designs and plans in the States of Alabama and Georgia are subject to approval by environmental regulatory agencies. Absent continued recovery of ARO costs through regulated rates, results of operations, cash flows, and financial condition for Southern Company and the traditional electric operating companies could be materially impacted.

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Regulatory Matters

See Note 2 to the financial statements in Item 8 of the Form 10-K, OVERVIEW – "Recent Developments" herein, and Note (B) to the Condensed Financial Statements herein for a discussion of regulatory matters related to Alabama Power, Georgia Power, Mississippi Power, and Southern Company Gas, including items that could impact the applicable Registrants' future earnings, cash flows, and/or financial condition.

Georgia Power

On June 12, 2026, the NRC approved Southern Nuclear's subsequent license renewal application for Plant Hatch Units 1 and 2, renewing both units' operating licenses for an additional 20 years (through 2054 and 2058 for Units 1 and 2, respectively).

Construction Programs

The Southern Company system strategy continues to include developing and constructing new electric generating and battery energy storage facilities, expanding and improving the electric transmission and electric and natural gas distribution systems, and undertaking projects to comply with environmental laws and regulations.

The traditional electric operating companies are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. Major generation construction projects are subject to state PSC approval in order to be included in retail rates, through which the traditional electric operating companies recover their approved investment and a return on investment. See Note 2 to the financial statements under "Georgia Power – Integrated Resource Plans" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Georgia Power – Construction" herein for information regarding Georgia Power's current construction projects.

Southern Power's construction program includes the Millers Branch solar project, the Kay, Grant, Grant Plains, Wake, and Bethel wind repowering projects, and the incremental capacity upgrade projects at the Franklin and Wansley natural gas facilities. The repowering projects result in accelerated depreciation related to the equipment being replaced that will continue until the projects' completion dates, which are projected to occur through the third quarter 2027. At June 30, 2026, the remaining pre-tax accelerated depreciation is projected to total approximately $200 million in 2026 and $100 million in 2027. The ultimate impact of these matters cannot be determined at this time. See Note (K) to the Condensed Financial Statements under "Southern Power" herein and Note 5 to the financial statements under "Depreciation and Amortization – Southern Power" in Item 8 of the Form 10-K for additional information.

Southern Company Gas is engaged in various infrastructure improvement programs designed to update or expand the natural gas distribution systems of the natural gas distribution utilities to improve reliability and resiliency, reduce emissions, and meet operational flexibility and growth. The natural gas distribution utilities recover their approved investment and a return on investment associated with these infrastructure programs through their regulated rates, as approved by their applicable state regulatory agency. See Note 2 to the financial statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" in Item 8 of the Form 10-K for additional information on Southern Company Gas' construction program.

See FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" herein for additional information regarding the Registrants' capital requirements for their construction programs.

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AND RESULTS OF OPERATIONS (Continued)

Income Tax Matters

See Note (G) to the Condensed Financial Statements herein and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters" in Item 7 of the Form 10-K for additional information.

Federal Tax Legislation

The OBBB modified certain renewable energy tax incentives and added eligibility restrictions for certain credits related to renewable facilities that are controlled or influenced by, or that receive material assistance from, a prohibited foreign entity.

The U.S. Treasury issued a notice on February 12, 2026, which provides interim safe harbors related to the evaluation of material assistance from a prohibited foreign entity. Southern Company is assessing this guidance and its potential implications for eligibility of technology-neutral tax credits for renewable projects for which construction begins in 2026. The U.S. Treasury has indicated that additional guidance and regulations are expected later in 2026. The ultimate outcome of this matter cannot be determined at this time.

Corporate Alternative Minimum Tax

On February 18, 2026, the U.S. Treasury issued guidance regarding the calculation of the CAMT. The CAMT, enacted as part of the IRA, generally imposes a 15% minimum tax on a corporation's adjusted financial statement income (AFSI) for taxable years beginning after December 31, 2022, subject to applicable thresholds and adjustments under the Internal Revenue Code. The guidance includes provisions that, in certain circumstances, would permit taxpayers to reflect certain repair-related tax deductions as reductions to AFSI for purposes of computing CAMT.

Regulated utilities industry participants have engaged with the U.S. Treasury regarding the interaction of repair-related costs, regulatory accounting, and the CAMT framework. Southern Company is evaluating the guidance, including its applicability to Southern Company's specific facts and circumstances. If applicable, the guidance could reduce Southern Company's potential CAMT exposure by permitting the inclusion of certain repair-related deductions in the computation of AFSI, which could affect Southern Company's income taxes and cash tax position in future periods. Southern Company will continue to assess the impact of the guidance and any further administrative guidance or regulatory developments.

Georgia State Tax Legislation

On May 11, 2026, the State of Georgia enacted tax legislation that reduced the corporate income tax rate from 5.19% to 4.99% effective for the 2026 tax year. This legislation reduced the amount of Southern Company's and certain subsidiaries' income taxes in the State of Georgia and existing state net accumulated deferred tax liabilities and increased regulatory liabilities at Georgia Power and Southern Company Gas. The legislation is not expected to have a material impact on the net income of the applicable Registrants in 2026.

General Litigation and Other Matters

The Registrants are involved in various matters being litigated and/or regulatory and other matters that could affect future earnings, cash flows, and/or financial condition. The ultimate outcome of such pending or potential litigation against each Registrant and any subsidiaries or regulatory and other matters cannot be determined at this time; however, for current proceedings and/or matters not specifically reported herein or in Notes (B) and (C) to the Condensed Financial Statements herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings and/or matters would have a material effect on such Registrant's financial statements. See Notes (B) and (C) to the Condensed Financial Statements for a discussion of various contingencies, including matters being litigated, regulatory matters, and other matters which may affect future earnings potential.

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AND RESULTS OF OPERATIONS (Continued)

ACCOUNTING POLICIES

See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES in Item 7 of the Form 10-K for a complete discussion of the Registrants' critical accounting policies and estimates, as well as recently issued accounting standards.

Application of Critical Accounting Policies and Estimates

The Registrants prepare their financial statements in accordance with GAAP. Significant accounting policies are described in the notes to the financial statements 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 the Registrants' results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements.

FINANCIAL CONDITION AND LIQUIDITY

Overview

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Overview" in Item 7 of the Form 10-K for additional information. The financial condition of each Registrant remained stable at June 30, 2026. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. See "Cash Requirements," "Sources of Capital," and "Financing Activities" herein for additional information.

At the end of the second quarter 2026, the market price of Southern Company's common stock was $95.71 per share (based on the closing price as reported on the NYSE) and the book value was $34.40 per share, representing a market-to-book ratio of 278%, compared to $87.20, $32.18, and 271%, respectively, at the end of 2025. Southern Company's common stock dividend for the second quarter 2026 was $0.76 per share compared to $0.74 per share in the second quarter 2025.

Cash Requirements

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" in Item 7 of the Form 10-K for a description of the Registrants' significant cash requirements.

The Registrants' significant cash requirements include estimated capital expenditures associated with their construction programs. The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental laws and regulations; the outcome of any legal challenges to environmental rules; changes in electric generating plants, including unit retirements and replacements and adding or changing fuel sources at existing electric generating units or extending the retirement dates of certain generating plants, to meet regulatory requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected environmental compliance program; changes in legislation, regulation, and/or tariff policy; the cost, availability, and efficiency of construction labor, equipment, and materials; project scope and design changes; abnormal weather; delays in construction due to public or political considerations or judicial or regulatory action; storm impacts; and the cost of capital.

In addition, with respect to the traditional electric operating companies and the natural gas distribution utilities, there can be no assurance that any costs related to capital expenditures and AROs will be fully recovered. Additionally, expenditures associated with Southern Power's planned acquisitions may vary due to market opportunities and the execution of its growth strategy.

In the first quarter 2026, Southern Power committed to development projects to upgrade certain turbines at the Franklin and Wansley natural gas facilities. The remaining aggregate construction costs for these projects are expected to be between $580 million and $645 million. See Note (K) to the Condensed Financial Statements under "Southern Power – Natural Gas Turbine Upgrade Projects" herein for additional information regarding Southern Power's construction projects.

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AND RESULTS OF OPERATIONS (Continued)

Long-term debt maturities and the interest payable on long-term debt each represent a significant cash requirement for the Registrants. See "Financing Activities" herein for information on changes in the Registrants' long-term debt balances since December 31, 2025.

Fuel and purchased power costs represent a significant component of funding ongoing operations for the traditional electric operating companies and Southern Power. Fuel costs include purchases of coal (for the traditional electric operating companies) and natural gas (for the traditional electric operating companies and Southern Power), as well as the related transportation and storage. Since December 31, 2025, Alabama Power and Georgia Power have entered into additional commitments for natural gas primarily related to Alabama Power's conversion of Plant Barry Unit 5 from coal to natural gas and Georgia Power's ongoing construction of generation projects. Total estimated costs for these additional fuel commitments at June 30, 2026 are provided in the table below.

See Note (B) to the Condensed Financial Statements under "Georgia Power – Construction" herein and Note 2 to the financial statements under "Alabama Power – Environmental Accounting Order" in Item 8 of the Form 10-K for additional information.

Thereafter

(in millions)

Southern Company

$

$

$

$

$

Alabama Power

—

Georgia Power

Sources of Capital

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt, hybrid, and/or equity issuances. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings.

The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company. In addition, Alabama Power and Georgia Power plan to utilize borrowings from the FFB. Operating cash flows provide a substantial portion of the Registrants' cash needs. See Note (F) to the Condensed Financial Statements under "DOE Loan Guarantee Borrowings" herein for additional information.

The amount, type, and timing of any financings in 2026, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and will depend upon prevailing market conditions, regulatory approvals (for certain of the Subsidiary Registrants), and other factors. See "Cash Requirements" and "Financing Activities" herein for additional information.

By regulation, Nicor Gas is restricted, up to its retained earnings balance, in the amount it can dividend or loan to affiliates and is not permitted to make money pool loans to affiliates. At June 30, 2026, the amount of subsidiary retained earnings restricted to dividend totaled $2.0 billion. This restriction did not impact Southern Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.

Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash

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