UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Each of the following classes or series of securities registered pursuant to Section 12(b) of the Act is listed on the New York Stock Exchange.

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

Documents incorporated by reference: specified portions of The Southern Company's Definitive Proxy Statement on Schedule 14A relating to the 20152017 Annual Meeting of Stockholders are incorporated by reference into PART III. In addition, specified portions of the Definitive Information Statements on Schedule 14C of Alabama Power Company, Georgia Power Company, and Mississippi Power Company relating to each of their respective 20152017 Annual Meetings of Shareholders are incorporated by reference into PART III.

Each of Southern Power Company and Southern Company Gas meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format specified in General Instructions I(2)(b), (c), and (d) of Form 10-K.

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

This Annual Report on Form 10-K contains forward-looking statements. Forward-looking statements include, among other things, statements concerning retailregulated rates, the strategic goals for the wholesale business, customer and sales growth, economic recovery,conditions, fuel and environmental cost recovery and other rate actions, current and proposed environmental regulations and related compliance plans and estimated expenditures, pending or potential litigation matters, access to sources of capital, projections for the qualified pension plan,plans, postretirement benefit plan,plans, and nuclear decommissioning trust fund contributions, financing activities, completion dates of acquisitions and construction projects, filings with state and federal regulatory authorities, impact of the TIPA,PATH Act, federal income tax benefits, estimated sales and purchases under power sale and purchase agreements, and estimated construction and other plans and expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential," or "continue" or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include:

The registrants expressly disclaimsdisclaim any obligation to update any forward-looking statements.

PART I

Southern Company was incorporated under the laws of Delaware on November 9, 1945. Southern Company is registered and qualified to do business under the laws of Georgia and is qualified to do business as a foreign corporation under the laws of Alabama. Southern Company owns all of the outstanding common stock of Alabama Power, Georgia Power, Gulf Power, and Mississippi Power, each of which is an operating public utility company. The traditional electric operating companies supply electric service in the states of Alabama, Georgia, Florida, and Mississippi. More particular information relating to each of the traditional electric operating companies is as follows:

In addition, Southern Company owns all of the common stock of Southern Power Company, which is also an operating public utility company. Southern Power constructs, acquires, owns, and manages generation assets, including renewable energy projects, and sells electricity at market-based rates in the wholesale market. Southern Power Company is a corporation organized under the laws of Delaware on January 8, 20012001. The term "Southern Power" when used herein refers to Southern Power Company and its subsidiaries while the term "Southern Power Company" when used herein refers only to the parent company.

On July 1, 2016, Southern Company completed the Merger for a total purchase price of approximately $8.0 billion and Southern Company Gas became a wholly-owned, direct subsidiary of Southern Company. Southern Company Gas is an energy services holding company whose primary business is the distribution of natural gas in seven states - Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland - through the natural gas distribution utilities. Southern Company Gas is also involved in several other businesses that are complementary to the distribution of natural gas. Southern Company Gas was admitted to do business inincorporated under the Stateslaws of Alabama, Florida, and Georgia on January 10, 2001, in the State of MississippiGeorgia on January 30, 2001,November 27, 1995 for the primary purpose of becoming the holding company for Atlanta Gas Light Company, which was founded in the State of North Carolina on February 19, 2007, and in the State of South Carolina on March 31, 2009. Certain of Southern Power Company's subsidiaries are also admitted to do business in the States of California, Nevada, New Mexico, and Texas.1856.

Southern Company also owns all of the outstanding common stock or membership interests of SouthernLINC Wireless,SCS, Southern LINC, Southern Holdings, Southern Nuclear, SCS, Southern Holdings,PowerSecure, and other direct and indirect subsidiaries. SouthernLINC WirelessSCS, the system service company, has contracted with Southern Company, each traditional electric operating company, Southern Power, Southern Company Gas, Southern Nuclear, SEGCO, and other subsidiaries to furnish, at direct or allocated cost and upon request, the following services: general and design engineering, operations, purchasing, accounting, finance and treasury, tax, information technology, marketing, auditing, insurance and pension administration, human resources, systems and procedures, digital wireless communication, and other services with respect to business and operations, construction management, and power pool transactions. Southern LINC provides digital wireless communications for use by Southern Company and its subsidiary companies and also markets these services to the public and also provides wholesale fiber optic solutions to telecommunication providers incable services within the Southeast. Southern Holdings is an intermediate holding company subsidiary, primarily for Southern Company's investments in leveraged leases and for other electric services. Southern Nuclear operates and provides services to Alabama Power's and Georgia Power'sthe Southern Company system's nuclear power plants and is currently developing Plant Vogtle Units 3 and 4, which are co-owned by Georgia Power. SCSPowerSecure is a provider of products and services in the Southern Company system service company providing, at cost, specialized services to Southern Companyareas of distributed generation, energy efficiency, and its subsidiary companies. Southern Holdings is an intermediate holding subsidiary, primarily for Southern Company's investments in leveraged leases.utility infrastructure.

Alabama Power and Georgia Power each own 50% of the outstanding common stock of SEGCO. SEGCO is an operating public utility company that owns electric generating units with an aggregate capacity of 1,019,680 KWs1,020 MWs at Plant Gaston on the Coosa River near Wilsonville, Alabama. Alabama Power and Georgia Power are each entitled to one-half of SEGCO's capacity and energy. Alabama Power acts as SEGCO's agent in the operation of SEGCO's units and furnishes fuel to SEGCO for its units. SEGCO also owns one 230,000 volt transmission line extending from Plant Gaston to the Georgia state line at which

point connection is made with the Georgia Power transmission line system. SEGCO added natural gas as a fuel source for 1,000 MWs of its generating capacity in 2015. In April 2016, natural gas became the primary fuel source. Alabama Power, which owns and operates a generating unit adjacent to the SEGCO generating units, has entered into a joint ownership agreement with SEGCO for the ownership of an associated gas pipeline. Alabama Power owns 14% of the pipeline with the remaining 86% owned by SEGCO.

Southern Company's segment information is included in Note 13 to the financial statements of Southern Company in Item 8 herein. Southern Company Gas' segment information is included in Note 12 to the financial statements of Southern Company Gas in Item 8 herein.

The registrants' Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are made available on Southern Company's website, free of charge, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Southern Company's internet address is www.southerncompany.com.

The Southern Company System

Traditional Electric Operating Companies

The traditional electric operating companies are vertically integrated utilities that own generation, transmission, and distribution facilities. See PROPERTIES in Item 2 herein for additional information on the traditional electric operating companies' generating facilities. Each company's transmission facilities are connected to the respective company's own generating plants and other sources of power (including certain generating plants owned by Southern Power) and are interconnected with the transmission facilities of the other traditional electric operating companies and SEGCO. For information on the State of Georgia's integrated transmission system, see "Territory Served by the Southern Company System – Traditional Electric Operating Companies and Southern Power" herein.

Agreements in effect with principal neighboring utility systems provide for capacity and energy transactions that may be entered into from time to time for reasons related to reliability or economics. Additionally, the traditional electric operating companies have entered into voluntary reliability agreements with the subsidiaries of Entergy Corporation, Florida Electric Power Coordinating Group, and Tennessee Valley Authority and with Duke Energy Progress, Inc.,LLC, Duke Energy Carolinas, LLC, South Carolina Electric & Gas Company, and Virginia Electric and Power Company, each of which provides for the establishment and periodic review of principles and procedures for planning and operation of generation and transmission facilities, maintenance schedules, load retention programs, emergency operations, and other matters affecting the reliability of bulk power supply. The traditional electric operating companies have joined with other utilities in the Southeast (including some of those referred to above) to form the SERC to augment further the reliability and adequacy of bulk power supply. Through the SERC, the traditional electric operating companies are represented on the National Electric Reliability Council.

The utility assets of the traditional electric operating companies and certain utility assets of Southern Power Company are operated as a single integrated electric system, or power pool, pursuant to the IIC. Activities under the IIC are administered by SCS, which acts as agent for the traditional electric operating companies and Southern Power Company. The fundamental purpose of the power pool is to provide for the coordinated operation of the electric facilities in an effort to achieve the maximum possible economies consistent with the highest practicable reliability of service. Subject to service requirements and other operating limitations, system resources are committed and controlled through the application of centralized economic dispatch. Under the IIC, each traditional electric operating company and Southern Power Company retains its lowest cost energy resources for the benefit of its own customers and delivers any excess energy to the power pool for use in serving customers of other traditional electric operating companies or Southern Power Company or for sale by the power pool to third parties. The IIC provides for the recovery of specified costs associated with the affiliated operations thereunder, as well as the proportionate sharing of costs and revenues resulting from power pool transactions with third parties.

Southern Company, each traditional operating company,Power and Southern Power Company, Southern Nuclear, SEGCO, and other subsidiariesLINC have contracted with SCS to furnish, at direct or allocated cost and upon request, the following services: general and design engineering, operations, purchasing, accounting, finance and treasury, tax, information technology, marketing, auditing, insurance and pension administration, human resources, systems and procedures, digital wireless communications, and other services with respect to business and operations, construction management, and power pool transactions. Southern Power Company and SouthernLINC Wireless have also secured from the traditional electric operating companies certain services which are furnished at cost and, in the case of Southern Power Company, which are subject tocompliance with FERC regulations.

Alabama Power and Georgia Power each have a contract with Southern Nuclear to operate the Southern Company system's existing nuclear plants, Plants Farley, Hatch, and Vogtle. In addition, Georgia Power has a contract with Southern Nuclear to develop, license, construct, and operate Plant Vogtle Units 3 and 4. See "Regulation – Nuclear Regulation" herein for additional information.

Southern Power

Southern Power Company is an electric wholesale generation subsidiary with market-based rate authority from the FERC. Southern Power constructs, acquires, owns, and manages generation assets, including renewable energy projects, and sells electricity at market-based rates (under authority from the FERC) in the wholesale market. Southern Power continually seeks opportunities to execute its strategy to create value through various transactions including acquisitions and sales of assets, construction of new power plants,generating facilities, and entry into PPAs primarily with investor ownedinvestor-owned utilities, IPPs, municipalities, electric cooperatives, and electric cooperatives.other load serving entities. Southern Power Company'sPower's business activities are not subject to traditional state regulation like the traditional electric operating companies, but the majority of its business activities are subject to regulation by the FERC. Southern Power has attempted to insulate itself from significant fuel supply, fuel transportation, and electric transmission risks by generally making such risks the responsibility of the counterparties to its PPAs. However, Southern Power's future earnings will depend on the parameters of the wholesale market and the efficient operation of its wholesale generating assets, as well as Southern Power’sPower's ability to execute its acquisition and value creationgrowth strategy and to construct generating facilities. The term "Southern Power" when used herein refers to Southern Power Company and its subsidiaries while the term "Southern Power Company" when used herein refers only to the registrant. For additional

In April 2013, Southern Power Company directly owns and manages generation assets primarily in the Southeast, which are included in the power pool, and has other wholly-owned subsidiaries, two of which are Southern Renewable Energy, Inc. (SRE) and Southern Renewable Partnerships, LLC (SRP), which were created to own and operate renewable generation facilities either wholly or in partnership with various third parties, including Turner Renewable Energy, LLC (TRE), through Southern Turner RenewableFirst Solar Inc., Recurrent Energy, LLC (STR), a jointly-owned subsidiary owned 90% by Southern Power, acquired all of the outstanding membership interests of Campo Verde Solar, LLC (Campo Verde). Campo Verde constructed and owns an approximately 139-MW solar photovoltaic facility in Southern California. The solar facility began commercial operation in October 2013 and the entire output of the plant is contracted under a 20-year PPA with San Diego Gas & Electric Company (SDG&E), a subsidiary of Sempra Energy.

Some of SRP's partnerships allow for the outstanding membership interestssharing of Adobe Solar, LLC (Adobe)cash distributions and Macho Springs Solar, LLC (Macho Springs) on April 17, 2014 and May 22, 2014, respectively. The Adobe and Macho Springs solar facilities began commercial operation in May 2014 with the approximate 20-MW Adobe solar photovoltaic facility serving a 20-year PPA with Southern California Edison Company and the approximate 50-MW Macho Springs solar photovoltaic facility serving a 20-year PPA with El Paso Electric Company.

During 2016, Southern Power acquired or commenced construction of approximately 2,134 MWs of additional solar, wind, and owns annatural gas facilities and completed construction of approximately 150-MW1,060 MWs of solar photovoltaic facilityfacilities. The aggregate purchase price for projects acquired by Southern Power's subsidiaries during 2016 and 2015 was $2.3 billion and $1.4 billion, respectively. During 2016, Southern Power's subsidiaries completed construction of and placed in Southern California. The solar facility began commercial operation on November 26, 2014, and the entire outputservice projects with a total construction cost of the plant is contracted under a 25-year PPA with SDG&E.approximately $3.2 billion.

In December 2014, Southern Power announced that it will build an approximately 131-MW solar photovoltaic facility in Taylor County, Georgia. Construction of the facility is expected to begin in September 2015. Commercial operation is scheduled to begin in the fourth quarter 2016, and the entire output of the facility is contracted under separate 25-year PPAs with Cobb EMC, Flint EMC, and Sawnee EMC.

The entire outputultimate outcome of the Decatur Parkway Solar Project is contracted under a 25-year PPA with Georgia Powerthese matters cannot be determined at this time. For additional information on SRE and the entire outputSRP, see MANAGEMENT'S DISCUSSION AND ANALYSIS – "Acquisitions" and "Construction Projects" of the Decatur Country Solar Project is contracted under a 20-year PPA with Georgia Power. The total estimated cost of the facilities is expected to be between $200 million and $220 million, which includes the acquisition price for all of the outstanding membership interests of Decatur Parkway Solar Project, LLC and Decatur County Solar Project, LLC from Tradewind Energy, Inc.

See Item 2 – Properties, Note 2 to the financial statements of Southern Power in Item 8 herein, and Note 12 to the financial statements of Southern Company under "Southern Power" in Item 8 herein for additional information regarding Southern Power's acquisitions.acquisitions, construction, and development projects.

As of December 31, 2014,2016, Southern Power had 9,074owned generating units totaling 11,768 MWs of nameplate capacity in commercial operation, after taking into consideration its equity ownership percentage of the solar and wind facilities. Taking into accountSouthern Power calculates an investment coverage ratio for its generating assets based on the ratio of investment under contract to total investment using the respective generation facilities' net book value (or expected in-service value for facilities under construction or being acquired) as the investment amount. With the inclusion of the PPAs and capacity frominvestment associated with the Taylor Countysolar and Decatur County solar projects,natural-gas fired facilities currently under construction and Bethel Wind, which was acquired subsequent to December 31, 2016, as well as the acquisition of Kay Wind, all as discussed above,other capacity and energy contracts, Southern Power hadhas an average investment coverage ratio of 77% of its available capacity covered for the next five years (201591% through 2019)2021 and 90% through 2026, with an average remaining contract duration of 70% of its available capacity covered for the next 10 years (2015 through 2024).approximately 16 years.

Southern Power’sPower's natural gas and biomass sales are primarily through long-term PPAs. Southern Power’s natural gas PPAs that consist of two types of agreements. The first type, referred to as a unit or block sale, is a customer purchase from a dedicated plant unit where all or a portion of the generation from that unit is reserved for that customer. Southern Power typically has the ability to serve the unit or block

ability to serve the unit or block sale customer from an alternate resource. The second type, referred to as requirements service, provides that Southern Power serve the customer’scustomer's capacity and energy requirements from a combination of the customer’scustomer's own generating units and from Southern Power resources not dedicated to serve unit or block sales. Southern Power has rights to purchase power provided by the requirements customers’customers' resources when economically viable.

Southern Power’sPower's electricity sales from solar salesand wind generating facilities are predominantly through long-term PPAs. Each of Southern Power’sPPAs; however, these solar and wind PPAs isdo not have a customercapacity charge and customers either purchase from a dedicated solar facility where the customer purchases the entire energy output of a dedicated renewable facility through an energy charge or provide Southern Power a certain fixed price for the facility.electricity sold to the grid.

The following tables set forth Southern Power’s existingPower's PPAs as of December 31, 2014:2016:

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Power Sales Agreements" and "Acquisitions" of Southern Power in Item 7 herein and Note 2 to the financial statements of Southern Power in Item 8 herein for additional information.

For the year ended December 31, 2014,additional information on Southern Power derived approximately 10.1%Company Gas' business activities, see MANAGEMENT'S DISCUSSION AND ANALYSIS – OVERVIEW – "Business Activities" and – FUTURE EARNINGS POTENTIAL of its revenues from sales to Florida Power & LightSouthern Company approximately 9.7% of its revenues from sales to Georgia Power, and approximately 9.1% of its revenues from sales to Duke Energy Corporation.Gas in Item 7 herein.

Other Businesses

Southern Holdings is an intermediate holding subsidiary, primarily for Southern Company's investments in leveraged leases.leases and also for energy services.

SouthernLINC WirelessSouthern LINC provides digital wireless communications for use by Southern Company and its subsidiary companies and also markets these services to the public. SouthernLINC WirelessSouthern LINC delivers multiple wireless communication options including push to talk, cellular service, text messaging, wireless internet access, and wireless data. Its system covers approximately 127,000 square miles in the Southeast. SouthernLINC WirelessSouthern LINC also provides fiber cable services within the Southeast through its subsidiary, Southern Telecom, Inc.

These efforts to invest in and develop new business opportunities offer potential returns exceeding those of rate-regulated operations. However, these activities also involve a higher degree of risk.

Construction Programs

The subsidiary companies of Southern Company are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. For estimated construction and environmental expenditures for the periods 20152017 through 2017,2021, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" of Southern Company, each traditional electric operating company, Southern Power, and Southern PowerCompany Gas in Item 7 herein. The Southern Company system's construction program consists of capital investment and capital expenditures to comply with environmental statutes and regulations. The traditional electric operating companies also anticipate costs associated with closure and groundwater monitoring under the Disposal of Coal Combustion Residuals from Electric Utilities final rule (CCR Rule), which are reflected in the Southern Company system's asset retirement obligation liabilities. In 2015,2017, the construction program is expected to be apportioned approximately as follows:

In addition, the construction program includes the development and construction of new electric generating facilities with designs that have not been finalized or previously constructed, including first-of-a-kind technology, which may result in revised estimates during construction. The abilitySee Note 3 to control coststhe financial statements of Southern Company and avoid cost overruns during the developmentGeorgia Power under "Regulatory Matters – Georgia Power – Nuclear Construction" and "Retail Regulatory Matters – Nuclear Construction," respectively, in Item 8 herein for additional information regarding Georgia Power's construction of new facilities is subjectPlant Vogtle Units 3 and 4. Also see Note 3 to a numberthe financial statements of factors, including, but not limited to, labor costsSouthern Company and productivity, adverse weather conditions, shortages and inconsistent qualityMississippi Power under "Integrated Coal Gasification Combined Cycle" in Item 8 herein for additional information regarding Mississippi Power's construction of equipment, materials, and labor, contractor or supplier delay, non-performance under construction or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, start-up activities (including major equipment failure and system integration), and/or operational performance (including additional costs to satisfy any operational parameters ultimately adopted by any PSC).the Kemper IGCC.

SeeAlso see "Regulation – Environmental Statutes and Regulations" herein for additional information with respect to certain existing and proposed environmental requirements and PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein for additional information concerning Alabama Power's, Georgia Power's, and Southern Power's joint ownership of certain generating units and related facilities with certain non-affiliated utilities. See Note 3

Financing Programs

See each of the registrant's MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY in Item 7 herein and Note 6 to the financial statements of each registrant in Item 8 herein for information concerning financing programs.

Fuel Supply

The traditional electric operating companies' and SEGCO's supply of electricity is primarily fueled by natural gas and coal. Southern Power's supply of electricity is primarily fueled by natural gas. See MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATION – "Electricity Business – Fuel and Purchased Power Expenses" of Southern Company and MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATION – "Fuel and Purchased Power Expenses" of each traditional electric operating company in Item 7 herein for information regarding the electricity generated and the average cost of fuel in cents per net KWH generated for the years 20122014 through 2014.2016.

The traditional electric operating companies have agreements in place from which they expect to receive substantially all of their coal burn requirements in 2015.2017. These agreements have terms ranging between one and sixfour years. In 2014,2016, the weighted average sulfur content of all coal burned by the traditional electric operating companies was 0.96%0.98% sulfur. This sulfur level, along with banked and purchased sulfur dioxide allowances, allowed the traditional electric operating companies to remain within limits set by Phase I of the Cross-State Air Pollution Rule (CSAPR) under the Clean Air Act. In 2014,2016, the Southern Company system did not purchase any sulfur dioxide allowances, annual nitrogen oxide emission allowances, or seasonal nitrogen oxide emission allowances from the market. As any additional environmental regulations are proposed that impact the utilization of coal, the traditional electric operating companies' fuel mix will be monitored to help ensure that the traditional electric operating companies remain in compliance with applicable laws and regulations. Additionally, Southern Company and the traditional electric operating companies will continue to evaluate the need to purchase additional emissions allowances, the timing of capital expenditures for emissions control equipment, and potential unit retirements and replacements. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" of Southern Company, each traditional electric operating company, and Southern Power in Item 7 herein for additional information on environmental matters.

SCS, acting on behalf of the traditional electric operating companies and Southern Power Company, has agreements in place for the natural gas burn requirements of the Southern Company system. For 2015,2017, SCS has contracted for 446 billion cubic feet477 Bcf of natural gas supply under agreements with remaining terms up to 15 years. In addition to natural gas supply, SCS has contracts in place for both firm natural gas transportation and storage. Management believes these contracts provide sufficient natural gas supplies, transportation, and storage to ensure normal operations of the Southern Company system's natural gas generating units.

Alabama Power and Georgia Power have numerousmultiple contracts covering a portion of their nuclear fuel needs for uranium, conversion services, enrichment services, and fuel fabrication. TheseThe uranium, conversion services, and fuel fabrication contracts haveare for terms of less than 10 years with varying expiration dates and most of themdates. The term lengths for the enrichment services contracts are for less than 10 years.15 years with varying expiration dates. Management believes suppliers have sufficient capacity for nuclear fuel supplies and processing existsproduction capability to precludepermit the impairment of normal operationsoperation of the Southern Company system's nuclear generating units.

Changes in fuel prices to the traditional electric operating companies are generally reflected in fuel adjustment clauses contained in rate schedules. See "Rate Matters – Rate Structure and Cost Recovery Plans" herein for additional information. Southern Power's PPAs (excluding solar)solar and wind) generally provide that the counterparty is responsible for substantially all of the cost of fuel.

Alabama Power and Georgia Power have contracts with the United States, acting through the DOE, that provide for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent fuel in 1998, as required by the contracts, and Alabama Power and Georgia Power have pursued and are pursuing legal remedies against the government for breach of contract. See Note 3 to the financial statements of Southern Company, Alabama Power, and Georgia Power under "Nuclear Fuel Disposal Costs" in Item 8 herein for additional information.

Territory Served by the Southern Company System

Traditional Electric Operating Companies and Southern Power

The territory in which the traditional electric operating companies provide electric service comprises most of the states of Alabama and Georgia, together with the northwestern portion of Florida and southeastern Mississippi. In this territory there are non-affiliated electric distribution systems that obtain some or all of their power requirements either directly or indirectly from the traditional electric operating companies. As of December 31, 2014,2016, the territory had an area of approximately 120,000 square miles and an estimated population of approximately 1617 million. Southern Power sells electricity at market-based rates in the wholesale market, primarily to investor-owned utilities, IPPs, municipalities, electric cooperatives, and electric cooperatives.other load serving entities.

Alabama Power is engaged, within the State of Alabama, in the generation, transmission, distribution, and purchase of electricity and the transmission, distribution, and sale of such electricity,electric service, at retail in approximately 400 cities and towns (including Anniston, Birmingham, Gadsden, Mobile, Montgomery, and Tuscaloosa), as well as in rural areas, and at wholesale to 14 municipally-owned electric distribution systems, 11 of which are served indirectly through sales to Alabama Municipal Electric Authority,AMEA, and two rural distributing cooperative associations. Alabama Power owns coal reserves near its Plant Gorgas and uses the output of coal from the reserves in its generating plants. Alabama Power also sells, and cooperates with dealers in promoting the sale of, electric appliances.

Georgia Power is engaged in the generation, transmission, distribution, and purchase of electricity and the transmission, distribution, and sale of such electricityelectric service within the State of Georgia, at retail in over 600 communities (including Athens, Atlanta, Augusta, Columbus, Macon, Rome, and Savannah), as well as in rural areas, and at wholesale currently to OPC, MEAG Power, Dalton, various EMCs, and non-affiliated utilities. Georgia Power also markets and sells outdoor lighting services.

Gulf Power is engaged, within the northwestern portion of Florida, in the generation, transmission, distribution, and purchase of electricity and the transmission, distribution, and sale of such electricity,electric service, at retail in 71 communities (including Pensacola, Panama City, and Fort Walton Beach), as well as in rural areas, and at wholesale to a non-affiliated utility.

Mississippi Power is engaged in the generation, transmission, distribution, and purchase of electricity and the transmission, distribution, and sale of such electricityelectric service within 23 counties in southeastern Mississippi, at retail in 123 communities (including Biloxi, Gulfport, Hattiesburg, Laurel, Meridian, and Pascagoula), as well as in rural areas, and at wholesale to one municipality, six rural electric distribution cooperative associations, and one generating and transmitting cooperative.

For information relating to KWH sales by customer classification for the traditional electric operating companies, see MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS of each traditional electric operating company in Item 7 herein. Also, for information relating to the sources of revenues for Southern Company, each traditional electric operating company, and Southern Power, reference is made to Item 7 herein.

The RUS has authority to make loans to cooperative associations or corporations to enable them to provide electric service to customers in rural sections of the country. As of December 31, 2014,2016, there were 71 electric cooperative organizations operating in the territory in which the traditional electric operating companies provide electric service at retail or wholesale.

One of these organizations, PowerSouth, is a generating and transmitting cooperative selling power to several distributing cooperatives, municipal systems, and other customers in south Alabama and northwest Florida. As of December 31, 2014,2016, PowerSouth owned generating units with approximately 2,0942,100 MWs of nameplate capacity, including an undivided 8.16% ownership interest in Alabama Power's Plant Miller Units 1 and 2. PowerSouth's facilities were financed with RUS loans secured by long-term contracts requiring distributing cooperatives to take their requirements from PowerSouth to the extent such energy is available. See PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein for details of Alabama Power's joint-ownership with PowerSouth of a portion of Plant Miller.

Alabama Power and Gulf Power have entered into separate agreements with PowerSouth involving interconnection between their respective systems. The delivery of capacity and energy from PowerSouth to certain distributing cooperatives in the

service territories of Alabama Power and Gulf Power is governed by the Southern Company/PowerSouth Network Transmission Service Agreement. The rates for this service to PowerSouth are on file with the FERC.

Four electric cooperative associations, financed by the RUS, operate within Gulf Power's service territory. These cooperatives purchase their full requirements from PowerSouth and SEPA (a federal power marketing agency). A non-affiliated utility also operates within Gulf Power's service territory and purchases its full requirements from Gulf Power.

Mississippi Power has an interchange agreement with SMEPA, a generating and transmitting cooperative, pursuant to which various services are provided. In 2010, Mississippi Power and SMEPA entered into an asset purchase agreement whereby SMEPA agreed to purchase a 17.5% undivided interest in the Kemper IGCC. In 2012, the Mississippi PSC approved the sale and transfer of the 17.5% undivided interest in the Kemper IGCC to SMEPA. Later in 2012, Mississippi Power and SMEPA signed an amendment to the asset purchase agreement whereby SMEPA reduced its purchase commitment percentage from a 17.5% to a 15% undivided interest in the Kemper IGCC. In March 2013, Mississippi Power and SMEPA signed an amendment to the asset purchase agreement whereby Mississippi Power and SMEPA agreed to amend the power supply agreement entered into by the parties in 2011 to reduce the capacity amounts to be received by SMEPA by half (approximately 75 MWs) at the sale and transfer of the undivided interest in the Kemper IGCC to SMEPA. In December 2013, Mississippi Power and SMEPA agreed to extend SMEPA's option to purchase through December 31, 2014.

As of December 31, 2014,2016, there were approximately 65 municipally-owned electric distribution systems operating in the territory in which the traditional electric operating companies provide electric service at retail or wholesale.

As of December 31, 2014,2016, 48 municipally-owned electric distribution systems and one county-owned system received their requirements through MEAG Power, which was established by a Georgia state statute in 1975. MEAG Power serves these requirements from self-owned generation facilities, some of which are jointly-owned with Georgia Power, and purchases from other resources. MEAG Power also has a pseudo scheduling and services agreement with Georgia Power. Dalton serves its requirements from self-owned generation facilities, some of which are jointly-owned with Georgia Power, and through purchases from Georgia Power and Southern Power through a service agreement. See PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein for additional information.

Georgia Power has entered into substantially similar agreements with Georgia Transmission Corporation, MEAG Power, and Dalton providing for the establishment of an integrated transmission system to carry the power and energy of all parties. The

Southern Power hasassumed or entered into PPAs with some of the traditional electric operating companies, and with other investor-owned utilities, IPPs, municipalities, electric cooperatives, and an energy marketing firm.other load serving entities. See "The Southern Company System -– Southern Power" above and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Power Sales Agreements" of Southern Power in Item 7 herein for additional information concerning Southern Power's PPAs.

SCS, acting on behalf of the traditional electric operating companies, also has a contract with SEPA providing for the use of the traditional electric operating companies' facilities at government expense to deliver to certain cooperatives and municipalities, entitled by federal statute to preference in the purchase of power from SEPA, quantities of power equivalent to the amounts of power allocated to them by SEPA from certain United StatesU.S. government hydroelectric projects.

Competition

The electric utility industry in the United StatesU.S. is continuing to evolve as a result of regulatory and competitive factors. Among the early primary agents of change was the Energy Policy Act of 1992, which allowed IPPs to access a utility's transmission network in order to sell electricity to other utilities.

The competition for retail energy sales among competing suppliers of energy is influenced by various factors, including price, availability, technological advancements, service, and reliability. These factors are, in turn, affected by, among other influences, regulatory, political, and environmental considerations, taxation, and supply.

The retail service rights of all electric suppliers in the State of Georgia are regulated by the Territorial Electric Service Act of 1973. Pursuant to the provisions of this Act, all areas within existing municipal limits were assigned to the primary electric supplier therein. Areas outside of such municipal limits were either to be assigned or to be declared open for customer choice of supplier by action of the Georgia PSC pursuant to standards set forth in this Act. Consistent with such standards, the Georgia PSC has assigned substantially all of the land area in the state to a supplier. Notwithstanding such assignments, this Act provides that any new customer locating outside of 1973 municipal limits and having a connected load of at least 900 KWs may exercise a one-time choice for the life of the premises to receive electric service from the supplier of its choice.

Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather Certificates" of public convenience and necessity to Mississippi Power and to six distribution rural cooperatives operating in southeastern Mississippi, then served in whole or in part by Mississippi Power, authorizing them to distribute electricity in certain specified geographically described areas of the state. The six cooperatives serve approximately 325,000 retail customers in a certificated area of approximately 10,300 square miles. In areas included in a "Grandfather Certificate," the utility holding such certificate may, without further certification, extend its lines up to five miles; other extensions within that area by such utility, or by other utilities, may not be made except upon a showing of, and a grant of a certificate of, public convenience and necessity. Areas included in such a certificate whichthat are subsequently annexed to municipalities may continue to be served by the holder of the certificate, irrespective of whether it has a franchise in the annexing municipality. On the other hand, the holder of the municipal franchise may not extend service into such newly annexed area without authorization by the Mississippi PSC.

Generally, the traditional electric operating companies have experienced, and expect to continue to experience, competition in their respective retail service territories in varying degrees from the development and deployment of alternative energy sources such as self-generation (as described below) and distributed generation technologies, as well as other factors.

Southern Power competes with investor ownedinvestor-owned utilities, IPPs, and others for wholesale energy sales primarily in the Southeastern U.S. wholesale market. The needs of this market are driven by the demands of end users in the Southeast and the generation available. Southern Power's success in wholesale energy sales is influenced by various factors including reliability and availability of Southern Power's plants, availability of transmission to serve the demand, price, and Southern Power's ability to contain costs.

As of December 31, 2014,2016, Alabama Power had cogeneration contracts in effect with 10nine industrial customers. Under the terms of these contracts, Alabama Power purchases excess energy generated by such companies. During 2014,2016, Alabama Power purchased approximately 17278 million KWHs from such companies at a cost of $4.6$2 million.

As of December 31, 2014,2016, Georgia Power had contracts in effect with 2529 small power producers whereby Georgia Power purchases their excess generation. During 2014,2016, Georgia Power purchased 598 million1.2 billion KWHs from such companies at a cost of $37$88 million. Georgia Power also has a PPAPPAs for electricity with onesix cogeneration facility.facilities. Payments are subject to reductions for failure to meet minimum capacity output. During 2014,2016, Georgia Power purchased 197512 million KWHs at a cost of $23$38 million from this facility.these facilities.

Also during 2014,2016, Georgia Power purchased energy from fourthree customer-owned generating facilities. These customers provide only energy to Georgia Power, and make no capacity commitment, and are not dispatched by Georgia Power. During 2014,2016, Georgia Power purchased a total of 3046 million KWHs from the fourthree customers at a cost of approximately $1$2 million.

As of December 31, 2014,2016, Gulf Power had agreements in effect with various industrial, commercial, and qualifying facilities pursuant to which Gulf Power purchases "as available" energy from customer-owned generation. During 2014,2016, Gulf Power purchased 185228 million KWHs from such companies for approximately $8.1$6 million.

As of December 31, 2014,2016, Mississippi Power had one cogeneration agreement in effect with one of its industrial customers. Under the terms of this contract, Mississippi Power purchases any excess generation. During 2014,2016, Mississippi Power did not purchase any excess generation from this customer.

Seasonality

The demand for electric power generationand natural gas supply is affected by seasonal differences in the weather. AtIn most of the areas the traditional electric operating companies and Southern Power, the demand forserve, electric power peakssales peak during the summer, months, with market prices reflectingwhile in most of the demand of power and available generating resources at that time. Powerareas Southern Company Gas serves, natural gas demand peaks can also be recorded during the winter. As a result, the overall operating results of Southern Company, the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas in the future may fluctuate substantially on a seasonal basis. In addition, Southern Company, the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas have historically sold less power and natural gas when weather conditions are milder.

Regulation

State Commissions

The traditional electric operating companies and the natural gas distribution utilities are subject to the jurisdiction of their respective state PSCs. The PSCs or applicable state regulatory agencies. These regulatory bodies have broad powers of supervision and regulation over public utilities operating in the respective states, including their rates, service regulations, sales of securities (except for the Mississippi PSC), and, in the cases of the Georgia PSC and the Mississippi PSC, in part, retail service territories. See "Territory Served by the Traditional Operating Companies and Southern Power"Company System" and "Rate Matters" herein for additional information.

Federal Power Act

The traditional electric operating companies, Southern Power Company and certain of its generation subsidiaries, and SEGCO are all public utilities engaged in wholesale sales of energy in interstate commerce and, therefore, are subject to the rate, financial, and accounting jurisdiction of the FERC under the Federal Power Act. The FERC must approve certain financings and allows an "at cost standard" for services rendered by system service companies such as SCS and Southern Nuclear. The FERC is also authorized to establish regional reliability organizations which enforce reliability standards, address impediments to the construction of transmission, and prohibit manipulative energy trading practices.

Alabama Power and Georgia Power are also subject to the provisions of the Federal Power Act or the earlier Federal Water Power Act applicable to licensees with respect to their hydroelectric developments. As of December 31, 2014,2016, among the hydroelectric projects subject to licensing by the FERC are 14 existing Alabama Power generating stations having an aggregate

installed capacity of 1,662,4001,670,000 KWs and 1817 existing Georgia Power generating stations having anand one generating station partially owned by Georgia Power, with a combined aggregate installed capacity of 1,087,296 KWs.

In August 2013, Alabama Power filed an application with the FERC to relicense the Holt hydroelectric project located on the Warrior River. The current Holt license will expireexpired on August 31, 2015. Since the FERC did not act on Alabama Power's new license application prior to expiration, the FERC issued to Alabama Power an annual license authorizing continued operation of the project under the terms and conditions of the expired license until action is taken on the new license and, on December 22, 2016, issued a new 50-year license to Alabama Power.

In 2012, Georgia Power filed an application withDecember 2015, the FERC issued a new 30-year license to relicenseAlabama Power for the Bartlett's FerryMartin Dam project located on the Chattahoochee River near Columbus, Georgia.Tallapoosa River. Alabama Rivers Alliance, American Rivers, the Georgia Environmental Protection Division, and the Atlanta Regional Commission filed petitions for rehearing of the FERC order, which the FERC denied on November 15, 2016.

In 2016, Georgia Power continued the process of developing an application to relicense the Wallace Dam project on the Oconee River. The FERC issued a newcurrent Wallace Dam project license will expire on December 22, 2014.June 1, 2020.

Georgia Power and OPC also have a license, expiring in 2027, for the Rocky Mountain Plant, a pure pumped storage facility of 847,800 KW capacity. See PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein for additional information.

Licenses for all projects, excluding those discussed above, expire in the period 2023-2034years 2023-2040 in the case of Alabama Power's projects and in the period 2020-2044years 2024-2044 in the case of Georgia Power's projects.

Upon or after the expiration of each license, the U.S. Government, by act of Congress, may take over the project or the FERC may relicense the project either to the original licensee or to a new licensee. In the event of takeover or relicensing to another, the original licensee is to be compensated in accordance with the provisions of the Federal Power Act, such compensation to reflect the net investment of the licensee in the project, not in excess of the fair value of the property, plus reasonable damages to other property of the licensee resulting from the severance therefrom of the property. The FERC may grant relicenses subject to certain requirements that could result in additional costs.

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

Nuclear Regulation

Alabama Power, Georgia Power, and Southern Nuclear are subject to regulation by the NRC. The NRC is responsible for licensing and regulating nuclear facilities and materials and for conducting research in support of the licensing and regulatory process, as mandated by the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and the Nuclear Nonproliferation Act of 1978;1978, as amended; and in accordance with the National Environmental Policy Act of 1969, as amended, and other applicable statutes. These responsibilities also include protecting public health and safety, protecting the environment, protecting and safeguarding nuclear materials and nuclear power plants in the interest of national security, and assuring conformity with antitrust laws.

The NRC licenses for Georgia Power's Plant Hatch Units 1 and 2 expire in 2034 and 2038, respectively. The NRC licenses for Alabama Power's Plant Farley Units 1 and 2 expire in 2037 and 2041, respectively. The NRC licenses for Plant Vogtle Units 1 and 2 expire in 2047 and 2049, respectively.

In 2012, the NRC issued combined construction and operating licenses (COLs) for Plant Vogtle Units 3 and 4. Receipt of the COLs allowed full construction to begin. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Retail Regulatory Matters – Nuclear Construction" of Georgia Power in Item 7 herein and Note 3 to the financial statements of Southern Company under "Retail Regulatory"Regulatory Matters – Georgia Power – Nuclear Construction" and Georgia Power under "Retail Regulatory Matters – Nuclear Construction" in Item 8 herein for additional information.

See Notes 1 and 9 to the financial statements of Southern Company, Alabama Power, and Georgia Power in Item 8 herein for information on nuclear decommissioning costs and nuclear insurance.

Environmental Statutes and Regulations

The Southern Company system's electric utilities' operations are subject to extensive regulation by state and federal environmental agencies under a variety of statutes and regulations governing environmental media, including air, water, and land resources. Included are laws and regulations regarding the handling and disposal of waste and release of hazardous substances from certain current and former operating sites, and locations affected by historical operations or subject to contractual obligations. Compliance with these existing environmental requirements involves significant capital and operating costs, a major portion of which is expected to be recovered through existing ratemaking provisions or through market-based contracts. There is no assurance, however, that all such costs will be recovered. For Southern Company Gas, substantially all of these costs are related to former manufactured gas plants (MGP) sites, which are primarily recovered through existing ratemaking provisions. See Note 3 to the financial statements of Southern Company Gas under "Environmental Matters" in Item 8 herein for additional information.

Compliance with the federal Clean Air Actenvironmental statutes and resulting regulations has been, and will continue to be, a significant focus for Southern Company, each traditional electric operating company, Southern Power, SEGCO, and SEGCO.Southern Company Gas. In addition, existing environmental laws and regulations may be changed or new laws and regulations may be adopted or otherwise become applicable to the Southern Company system, including laws and regulations designed to address air and water quality, water, CCRs, global climate change,

The Southern Company system's ultimate environmental compliance strategy, including potential electric generating unit retirement and replacement decisions, and future environmental capital expenditures will be affected by the final requirements of new or revised environmental regulations; the time periods over which compliance with regulations is required; individual state implementation of regulations, as applicable; the outcome of any legal challenges to the environmental rules andrules; any additional rulemaking activities in response to legal challenges and court decisions; the cost, availability, and existing inventory of emissions allowances; the impact of future changes in generation and emissions-related technology and costs; andtechnology; the fuel mix of the electric utilities.utilities; and environmental remediation requirements. Compliance costs may arise from existing unit retirements, installation of additional environmental controls, upgrades to the transmission system, closure and monitoring of CCR facilities, and adding or changing fuel sources for certain existing units. Environmental compliance spending over the next several years may differ materially from the amounts estimated. Such expenditures could affect unit retirement and replacement decisions and results of operations, cash flows, and financial condition if such costs are not recovered on a timely basis through regulated rates for the traditional electric operating companies and the natural gas distribution utilities or through long-term wholesale agreements for the traditional electric operating companies or market-based rates forand Southern Power. Further, higher costs that are recovered through regulated rates could contribute to reduced demand for electricity,energy, which could negatively affect results of operations, cash flows, and financial condition. Also see MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" of Southern Company, each of the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas in Item 7 herein for additional information. The ultimate outcome of these matters cannot be determined at this time.

Compliance with any new federal or state legislation or regulations relating to air, quality, water, CCRs, global climate change,and land resources or other environmental and health concerns could significantly affect the Southern Company system. Although new or revised environmental legislation or regulations could affect many areas of the electric utilities' and natural gas distribution utilities' operations, the full impact of any such changes cannot be determined at this time. Additionally, many of the electric utilities' commercial and industrial customers may also be affected by existing and future environmental requirements, which for some may have the potential to ultimately affect their demand for electricity.electricity and natural gas. See "Construction Program" herein for additional information.

Rate Matters

Rate Structure and Cost Recovery Plans

The rates and service regulations of the traditional electric operating companies are uniform for each class of service throughout their respective retail service territories. Rates for residential electric service are generally of the block type based upon KWHs used and include minimum charges. Residential and other rates contain separate customer charges. Rates for commercial service are presently of the block type and, for large customers, the billing demand is generally used to determine capacity and minimum bill charges. These large customers' rates are generally based upon usage by the customer and include rates with special features to encourage off-peak usage. Additionally, Alabama Power, Gulf Power, and Mississippi Power are generally allowed by their respective state PSCs to negotiate the terms and cost of service to large customers. Such terms and cost of service, however, are subject to final state PSC approval.

The traditional electric operating companies recover their respective costs through a variety of forward-looking, cost-based rate mechanisms. Fuel and net purchased energy costs are recovered through specific fuel cost recovery provisions. These fuel cost recovery provisions are adjusted to reflect increases or decreases in such costs as needed or on schedules as required by the respective PSCs. Approved environmental compliance, storm damage, and certain other costs are recovered at Alabama Power, Gulf Power, and Mississippi Power through specific cost recovery mechanisms approved by their respective PSCs. Certain similar costs at Georgia Power are recovered through various base rate tariffs as approved by the Georgia PSC. Costs not recovered through specific cost recovery mechanisms are recovered at Alabama Power and Mississippi Power through annual, formulaic cost recovery proceedings and at Georgia Power and Gulf Power through base rate proceedings.

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Retail Regulatory"Regulatory Matters" of Southern Company and each of the traditional electric operating companies in Item 7 herein and Note 3 to the financial statements of Southern Company and each of the traditional electric operating companies under "Retail Regulatory Matters" in Item 8 herein for a discussion of rate matters and certain cost recovery mechanisms. Also, see Note 1 to the financial statements of Southern Company and each of the traditional electric operating companies in Item 8 herein for a discussion of recovery of fuel costs, storm damage costs, and environmental compliance costs through rate mechanisms.

See "Integrated Resource Planning" herein for a discussion of Georgia PSC certification of new demand-side or supply-side resources and decertification of existing supply-side resources for Georgia Power. In addition, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Retail Regulatory Matters – Nuclear Construction" of Georgia Power in Item 7 herein and Note 3 to the financial statements of Southern Company under "Retail Regulatory"Regulatory Matters – Georgia Power – Nuclear Construction" and Georgia Power under "Retail Regulatory Matters – Nuclear Construction" in Item 8 herein for a discussion of the Georgia Nuclear Energy Financing Act and the Georgia PSC certification of Plant Vogtle Units 3 and 4, which have allowed Georgia Power to recover financing costs for construction of Plant Vogtle Units 3 and 4 during the construction period beginning in 2011.

See Note 3 to the financial statements of Southern Company and Mississippi Power under "Integrated Coal Gasification Combined Cycle" in Item 8 herein and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Integrated Coal Gasification Combined Cycle – Rate Recovery of Kemper IGCC Costs" of Mississippi Power in Item 7 herein for information on cost recovery plans and a settlement agreement between Mississippi Power and the Mississippi PSC with respect to the Kemper IGCC.

The traditional electric operating companies and Southern Power Company and certain of its generation subsidiaries are authorized by the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "FERC Matters" of each of the registrants in Item 7 herein for information on the traditional electric operating companies' and Southern Power Company's market-based rate authority and a pending FERC proceeding relating to this authority.

Gulf Power servesThrough 2015, long-term contracts associated with Gulf Power's co-ownership of a unit with Georgia Power at Plant Scherer, covering 100% ofnon-affiliate capacity sales from Gulf Power's ownership of that unit in 2015, and 41% forPlant Scherer Unit 3 (205 MWs) provided the next five years. These capacity revenues represented 82%majority of Gulf Power's total wholesale capacity revenues for 2014. Gulf Power is actively pursuing replacementearnings. Contract expirations at the end of 2015 and the end of May 2016 related to Plant Scherer Unit 3 wholesale contracts but the expiration of current contracts could haveservices had a material negative impact on Gulf Power's earnings.earnings in 2016 but did not have a material impact on Southern Company's earnings in 2016. Remaining contract sales from Plant Scherer Unit 3 cover approximately 24% of Gulf Power's ownership of the unit through 2019. On October 12, 2016, Gulf Power filed a petition (2016 Rate Case) with the Florida PSC requesting an annual increase in retail rates and charges of $106.8 million based on the projected test year of January 1, 2017 through December 31, 2017 and a retail return on equity (ROE) of 11% compared to the current retail ROE of 10.25%. The requested increase includes recovery of the portion of Plant Scherer Unit 3 that has been rededicated to serving retail customers following the contract expirations discussed above. If retail recovery of Plant Scherer Unit 3 is not approved by the Florida PSC in the 2016 Rate Case, Gulf Power may consider an asset sale. The current book

Mississippi Power serves long-term contracts with rural electric cooperative associations and municipalitiesa municipality located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. The contracts with these wholesale customers represented 21.9%19.8% of Mississippi Power's operating revenues in 20142016 and are largely subject to rolling 10-year cancellation notices. Historically, these wholesale customers have acted as a group and any changes in contractual relationships for one customer are likely to be followed by the other wholesale customers.

Integrated Resource Planning

Each of the traditional electric operating companies continually evaluates its electric generating resources in order to ensure that it maintains a cost-effective and reliable mix of resources to meet the existing and future demand requirements of its customers. See "Environmental Statutes and Regulations" above for a discussion of existing and potential environmental regulations that may impact the future generating resource needs of the traditional electric operating companies.

Certain of the traditional electric operating companies periodicallyare required to file IRPs with their respective state PSC as discussed below.

Georgia Power

Triennially, Georgia Power must file an IRP with the Georgia PSC that specifies how it intends to meet the future electrical needs of its customers through a combination of demand-side and supply-side resources. The Georgia PSC, under state law, must certify any new demand-side or supply-side resources for Georgia Power to receive cost recovery. Once certified, the lesser of actual or certified construction costs and purchased power costs is recoverable through rates. Certified costs may be excluded from recovery only on the basis of fraud, concealment, failure to disclose a material fact, imprudence, or criminal misconduct.

See Note 3 to the financial statements of Southern Company under "Retail Regulatory"Regulatory Matters -– Georgia Power -– Rate Plans"Plans," "– Integrated Resource Plan," and "– Nuclear Construction" and Note 3 to the financial statements of Georgia Power under "Retail

Regulatory Matters – Integrated ResourceRate Plans," "– Renewables Development,Integrated Resource Plan," and "– Nuclear Construction" in Item 8 herein for additional information.

Gulf Power

Annually by April 1, Gulf Power must file a 10-year site plan with the Florida PSC containing Gulf Power's estimate of its power-generating needs in the period and the general location of its proposed power plant sites. The 10-year site plans submitted by the state's electric utilities are reviewed by the Florida PSC and subsequently classified as either "suitable" or "unsuitable." The Florida PSC then reports its findings along with any suggested revisions to the Florida Department of Environmental Protection for its consideration at any subsequent electrical power plant site certification proceedings. Under Florida law, any 10-year site plans submitted by an electric utility are considered tentative information for planning purposes only and may be amended at any time at the discretion of the utility with written notification to the Florida PSC.

Gulf Power's most recent 10-year site plan was classified by the Florida PSC as "suitable" in November 2014.2016. Gulf Power's most recent 10-year site plan and environmental compliance plan identify environmental regulations and potential legislation or regulation that would impose mandatory restrictions on greenhouse gas emissions. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Statutes and Regulations – Air Quality," "Environmental Matters –"– Environmental Statutes and Regulations – Coal Combustion Residuals," and "Environmental Matters –"– Global Climate Issues" of Gulf Power in Item 7 herein. Gulf Power continues to evaluate the economics of various potential planning scenarios for units at certain Gulf Power coal-fired generating plants as EPA and other regulations develop.

SubsequentAs a result of the cost to December 31, 2014,comply with environmental regulations imposed by the EPA, Gulf Power announced plans to retireretired its coal-fired generation at Plant Smith Units 1 and 2 (357 MWs) byon March 31, 2016. The plant will continue to operate and produce electricity with its other generating units on site. The retirement of these units is not expected to have a material impact on the Gulf Power's financial statements. Gulf Power expects to recover through its rates the remaining book value of the retired units and certain costs associatedfiled a petition with the retirements; however, recovery will be considered by the Florida PSC in future rate proceedings. Therequesting permission to recover the remaining net book value of Plant Smith Units 1 and 2 and the remaining materials and supplies associated with these units at December 31, 2014 wasas of the retirement date. On August 29, 2016, the Florida PSC approved Gulf Power's request to reclassify these costs, totaling approximately $80 million.

Mississippi Power

Mississippi Power's 2010 IRP indicated that Mississippi Power plans to construct the Kemper IGCC to meet its identified needs, to add environmental controls at Plant Daniel Units 1 and 2, to defer environmental controls at Plant Watson Units 4 and 5, and to continue operation of the combined cycle Plant Daniel Units 3 and 4. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Statutes and Regulations – Air Quality" and "Environmental Matters –"– Global Climate Issues" of Mississippi Power in Item 7 herein. On August 1,In 2014, Mississippi Power entered into a settlement agreement with the Sierra Club (Sierra Club Settlement Agreement) that, among other things, required the Sierra Club to dismiss or withdraw all pending legal and regulatory challenges to the Kemper IGCC and the flue gas desulfurization system project at Plant Daniel Units 1 and 2. Under the Sierra Club Settlement Agreement,2, which also occurred in 2014. In addition, and consistent with Mississippi Power’sPower's ongoing evaluation of recent environmental rules and regulations, Mississippi Power agreed to retire, repower with natural gas, or convert to an alternative non-fossil fuel source Plant Sweatt Units 1 and 2 (80 MWs) no later than December 2018.2018 (and the units were retired in July 2016). Mississippi Power also agreed that it would cease burning coal or other solid fuel at Plant Watson Units 4 and 5 (750 MWs) and begin operating those units solely on natural gas no later than April 2015 (which occurred in April 2015) and cease burning coal and other solid fuel at Plant Greene County Units 1 and 2 (200 MWs) no later than April 2016 (which occurred in February and March 2016, respectively), and begin operating those units solely on natural gas no later than April 2016.

For information regarding Mississippi Power's construction of the Kemper IGCC, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Integrated Coal Gasification Combined Cycle" of Mississippi Power in Item 7 herein and Note 3 to the financial statements of Southern Company and Mississippi Power under "Integrated Coal Gasification Combined Cycle" in Item 8 herein.

Employee Relations

The Southern Company system had a total of 26,36932,015 employees on its payroll at December 31, 2014.2016.

The traditional electric operating companies and the natural gas distribution utilities have separate agreements with local unions of the IBEW and the Utilities Workers Union of America generally covering wages, working conditions, and procedures for handling grievances and arbitration. These agreements apply with certain exceptions to operating, maintenance, and construction employees.

Alabama Power has agreements with the IBEW in effect through August 15, 2019. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date.

Georgia Power has an agreement with the IBEW covering wages and working conditions, which is in effect through June 30, 2016.2021.

Gulf Power has an agreement with the IBEW covering wages and working conditions, which is in effect through April 15, 2019. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date.

Mississippi Power has an agreement with the IBEW covering wages and working conditions, which is in effect through May 1, 2019. In 2013, Mississippi Power signed a separate agreement with the IBEW related solely to the Kemper IGCC, whichIGCC; the current agreement is in effect through March 15, 2016.2021.

Southern Nuclear has ana five-year agreement with the IBEW covering certain employees at Plants Hatch and Vogtle which is in effect through June 30, 2016.2021. A five-year agreement between Southern Nuclear and the IBEW representing certain employees at Plant Farley is in effect through August 15, 2019. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date.

The agreements also make the terms of the pension plans for the companies discussed above subject to collective bargaining with the unions at either a five-year or a 10-year cycle, depending upon union and company actions.

In addition to the other information in this Form 10-K, including MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL in Item 7 of each registrant, and other documents filed by Southern Company and/or its subsidiaries with the SEC from time to time, the following factors should be carefully considered in evaluating Southern Company and its subsidiaries. Such factors could affect actual results and cause results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, Southern Company and/or its subsidiaries.

Southern Company and its subsidiaries are subject to substantial governmental regulation. Compliance with current and future regulatory requirements and procurement of necessary approvals, permits, and certificates may result in substantial costs to Southern Company and its subsidiaries.

Southern Company and its subsidiaries, including the traditional electric operating companies, Southern Power, and Southern Power,Company Gas, are subject to substantial regulation from federal, state, and local regulatory agencies. Southern Company and its subsidiaries are required to comply with numerous laws and regulations and to obtain numerous permits, approvals, and certificates from the governmental agencies that regulate various aspects of their businesses, including rates and charges, service regulations, retail service territories, sales of securities, sales and marketing of energy-related products and services, incurrence of indebtedness, asset acquisitions and sales, accounting and tax policies and practices, physical security and cyber-securitycyber security policies and practices, and the construction and operation of fossil-fuel, nuclear, hydroelectric, solar, wind, and biomasselectric generating facilities, as well as transmission, storage, transportation, and distribution facilities.facilities for the electric and natural gas businesses. For example, the respective state PSCsPSC or other applicable state regulatory agency must approve the traditional electric operating companies' requested rates for retail electric customers and the natural gas distribution utilities' requested rates for gas distribution operations customers. The traditional electric operating companies and the natural gas distribution utilities seek to recover their costs (including a reasonable return on invested capital) through their retail rates, and there can be no assurance that a state PSC or other applicable state regulatory agency, in a future rate proceeding, will notmay alter the timing or amount of certain costs for which recovery is allowed or modify the current authorized rate of return. Rate refunds may also be required. Additionally, the rates charged to wholesale customers by the traditional electric operating companies and by Southern Power must be approved by the FERC. These wholesale rates could be affected by changes to Southern Power's and the traditional electric operating companies' ability to conduct business pursuant to FERC market-based rate authority. The FERC rules related to retaining the authority to sell electricity at market-based rates in the wholesale markets are important for the traditional electric operating companies and Southern Power if they are to remain competitive in the wholesale markets in which they operate.

The impact of any future revision or changes in interpretations of existing regulations or the adoption of new laws and regulations applicable to Southern Company or any of its subsidiaries cannot now be predicted.is uncertain. Changes in regulation or the imposition of additional regulations could influence the operating environment of Southern Company and its subsidiaries and may result in substantial costs.costs or otherwise negatively affect their results of operations.

The Southern Company system is subject to extensive federal, state, and local environmental requirements which, among other things, regulate air emissions, GHG, water usage and discharges,discharge, release of hazardous substances, and the management and disposal of waste in order to adequately protect the environment. Compliance with these environmental requirements requires the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas to commit significant expenditures, forincluding installation and operation of pollution control equipment, environmental monitoring, emissions fees, andremediation costs, and/or permits at substantially all of their respective facilities. Southern Company, the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas expect that these expenditures will continue to be significant in the future. Through December 31, 2014, the traditional operating companies had invested approximately $10.6 billion in environmental capital retrofit projects to comply with these requirements.

Existing environmental laws and regulations may be revised or new laws and regulations related to air quality, GHG, water CCR, global climate change,quality, waste, endangered species, or other environmental and health concerns may be adopted or become applicable to the traditional electric operating companies, Southern Power, and/or Southern Power.Company Gas.

The Southern Company system's ultimate environmental compliance strategy, including potential unit retirement and replacement decisions, and future environmental capital expenditures will be affected by the final requirements of new or revised environmental regulations; the time periods over which compliance with regulations is required; individual state implementation of regulations, as applicable; the outcome of any legal challenges to the environmental rules and any additional rulemaking activities in response to legal challenges and court decisions; the cost, availability, and existing inventory of emissions allowances; the impact of future changes in generation and emissions-related technology and costs; and the fuel mix of the electric utilities. Compliance costs may arise from existing unit retirements, installation of additional environmental controls, upgrades to the transmission system, closure and groundwater monitoring of CCR facilities, and adding or changing fuel sources for certain existing units.

Environmental compliance spending over the next several years may differ materially from the amounts estimated. Such expenditures could affect unit retirement and replacement decisions and results of operations, cash flows, and financial condition if such costs are not recovered on a timely basis through regulated rates for the traditional electric operating companies and the natural gas distribution utilities or through long-term wholesale agreements for the traditional electric operating companies or market-based rates forand Southern Power. Further, higher costs that are recovered through regulated rates could contribute to reduced demand for electricity,energy, which could negatively affect results of operations, cash flows, and financial condition. Additionally, if Southern Company, any traditional electric operating company, Southern Power, or Southern PowerCompany Gas fails to comply with environmental laws and regulations, even if caused by factors beyond its control, that failure may result in the assessment of civil or criminal penalties and fines and/or remediation costs.

Costs associated with these mattersactions could require substantial capital expenditures thatbe significant to the utility industry and the Southern Company system. However, the ultimate financial and operational impact of the final rules on the Southern Company system cannot be determined at this time and could possibly require paymentwill depend upon numerous factors, including the Southern Company system's ongoing review of substantial penalties.

generation and final legislationemissions-related technology and costs; the impact of future decisions regarding unit retirement and replacement, including the type and amount of any such replacement generation capacity; and the time periods over which compliance will be required.

Because natural gas is a fossil fuel with lower carbon content relative to other traditional fuels, future carbon constraints may create additional demand for natural gas, both for production of electricity and direct use in homes and businesses.  The impact is already being seen in the power production sector due to both environmental regulations and litigation are likely tolow natural gas costs.  Future regulation of methane, a GHG and primary constituent of natural gas, could likewise result in significantincreased costs to the Southern Company system and additional costsaffect the demand for natural gas as well as the prices charged to customers and could result in additional operating restrictions.the competitive position of natural gas.

The traditional electric operating companies currently own and operate transmission facilities as part of a vertically integrated utility. A small percentage of transmission revenues are collected through the wholesale electric tariff but the majority of transmission revenues are collected through retail rates. FERC rules pertaining to regional transmission planning and cost allocation present challenges to transmission planning and the wholesale market structure in the Southeast. The key impacts of these rules include:

The FERC rules related to transmission are intended to spur the development of new transmission infrastructure to promote and

Owners and operators of bulk power systems, including the traditional electric operating companies, are subject to mandatory reliability standards enacted by the North American Electric Reliability Corporation and enforced by the FERC. Compliance with or changes in the mandatory reliability standards may subject the traditional electric operating companies Southern Power, and Southern CompanyPower to higher operating costs and/or increased capital expenditures. If any traditional electric operating company or Southern Power is found to be in noncompliance with the mandatory reliability standards, such traditional electric operating company or Southern Power could be subject to sanctions, including substantial monetary penalties.

The financial performance of Southern Company and its subsidiaries may be adversely affected if the subsidiaries are unable to successfully operate their facilities or perform certain corporate functions.

The financial performance of Southern Company and its subsidiaries depends on the successful operation of its subsidiaries'the electric utilities' generating, transmission, and distribution facilities and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions. There are many risks that could affect these operations and performance of corporate functions, including:

A decrease or elimination of revenues from the electric generation, transmission, or distribution facilities or natural gas distribution or storage facilities or an increase in the cost of operating the facilities would reduce the net income and cash flows and could adversely impact the financial condition of the affected traditional electric operating company, Southern Power, or Southern PowerCompany Gas and of Southern Company. In addition, an investment in a subsidiary with such generation, transmission, or distribution facilities could be adversely impacted.

Operation of nuclear facilities involves inherent risks, including environmental, safety, health, regulatory, natural disasters, terrorism, and financial risks, that could result in fines or the closure of the nuclear units owned by Alabama Power or Georgia Power and which may present potential exposures in excess of insurance coverage.

Alabama Power owns, and contracts for the operation of, two nuclear units and Georgia Power holds undivided interests in, and contracts for the operation of, four existing nuclear units. The six existing units are operated by Southern Nuclear and represent approximately 3,680 MWs, or 7.9%8%, of the Southern Company system's electric generation capacity as of December 31, 2014.2016. In addition, these units generated approximately 23% and 22%24% of the total KWHs generated by Alabama Power and Georgia Power, respectively, in the year ended December 31, 2014.2016. In addition, Southern Nuclear, on behalf of Georgia Power and the other co-owners, is overseeing the construction of Plant Vogtle Units 3 and 4. Due solely to the increase in nuclear generating capacity, the below risks are expected to increase incrementally once Plant Vogtle Units 3 and 4 are operational. Nuclear facilities are subject to environmental, safety, health, operational, and financial risks such as:

It is possible that damages, decommissioning, or other costs could exceed the amount of decommissioning trusts or external insurance coverage, including statutorily required nuclear incident insurance.

The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities. In the event of non-compliance with NRC licensing and safety-related requirements, the NRC has the authority to impose fines and/or shut down any unit, depending upon its assessment of the severity of the situation, until compliance is achieved. NRC orders or regulations related to increased security measures and any future safety requirements promulgated by the NRC could require Alabama Power and Georgia Power to make substantial operating and capital expenditures at their nuclear plants. In addition, if a serious nuclear incident were to occur, it could result in substantial costs to Alabama Power or Georgia Power and Southern Company. A major incident at a nuclear facility anywhere in the world could cause the NRC to limit,delay or prohibit construction of new nuclear units or require significant changes to the operation or licensing of any domestic nuclear unit that could result in substantial costs.additional safety measures at new and existing units. Moreover, a major incident at any nuclear facility in the United States,U.S., including facilities owned and operated by third parties, could require Alabama Power and Georgia Power to make material contributory payments.

In addition, potential terrorist threats and increased public scrutiny of utilities could result in increased nuclear licensing or compliance costs that are difficult to predict.

The traditional electric operating companies, Southern Power, and Southern PowerCompany Gas face the risk of physical and cyber attacks, both threatened and actual, against their respective generation and storage facilities, the transmission and distribution infrastructure used to transport power,energy, and their information technology systems and network infrastructure, which could negatively impact the ability of the traditional electric operating companies or Southern Power to generate, transport, and deliver power, or otherwise operate their respective facilities, or the ability of Southern Company Gas to distribute or store natural gas, or otherwise operate its facilities, in the most efficient manner or at all. In addition, physical or cyber attacks against key suppliers or service providers could have a similar effect on Southern Company and its subsidiaries.

The traditional electric operating companies, Southern Power, and Southern PowerCompany Gas operate in a highly regulated industryindustries that requiresrequire the continued operation of sophisticated information technology systems and network infrastructure, which are part of an interconnected regional grid.distribution systems. In addition, in the ordinary course of business, the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas collect and retain sensitive information, including personal identification information about customers, employees, and employeesstockholders, and other confidential information. In some cases, administration of certain functions is outsourced to service providers that could be targets of cyber attacks. The traditional electric operating companies, Southern Power, and Southern PowerCompany Gas face on-going threats to their assets. Despite the implementation of robust security measures, all assets are potentially vulnerable to disability, failures, or unauthorized access due to human error, natural disasters, technological failure, or internal or external physical or cyber attacks. If the traditional electric operating companies', Southern Power's, or Southern Power'sCompany Gas' assets were to fail, be physically damaged, or be breached and were not recovered in a timely way, the traditional electric operating companies, Southern Power, or Southern PowerCompany Gas may be unable to fulfill critical business functions, and sensitive and other data could be compromised. Any physical security breach, cyber breach or theft, damage, or improper disclosure of sensitive electronic data may also subject the applicable traditional electric operating company, Southern Power, or Southern PowerCompany Gas to penalties and claims from regulators or other third parties.

These events could harm the reputation of and negatively affect the financial results of Southern Company, the traditional electric operating companies, Southern Power, or Southern PowerCompany Gas through lost revenues, costs to recover and repair damage, and costs associated with governmental actions in response to such attacks.

The traditional operating companies and Southern PowerCompany system may not be able to obtain adequate natural gas and other fuel supplies which could limit their abilityrequired to operate theirfacilities.the traditional electric operating companies' and Southern Power's electric generating plants or serve Southern Company Gas' natural gas customers.

The traditional electric operating companies and Southern Power purchase fuel, including coal, natural gas, uranium, fuel oil, and biomass, as applicable, from a number of suppliers. Disruption in the delivery of fuel, including disruptions as a result of, among other things, transportation delays, weather, labor relations, force majeure events, or environmental regulations affecting

any of these fuel suppliers, could limit the ability of the traditional electric operating companies and Southern Power to operate their respectivecertain facilities, which could result in higher fuel and thusoperating costs and potentially reduce the net income of the affected traditional electric operating company or Southern Power and Southern Company.

The traditional operating companies are dependent on coal for a portionSouthern Company Gas' primary business is the distribution and sale of their electric generating capacity. The traditional operating companies depend on coal supply contracts,natural gas through its regulated and thereunregulated subsidiaries. Natural gas supplies can be no assurance thatsubject to disruption in the counterparties to these agreements will fulfill their obligations to supply coal to the traditional operating companies. The suppliers under these agreements may experience financialevent production or technical problems which inhibit their ability to fulfill their obligations to the traditional operating companies. In addition, the suppliers under these agreements may not be required to supply coal to the traditional operating companies under certain circumstances,distribution is curtailed, such as in the event of a hurricane or a pipeline failure. Southern Company Gas also relies on natural disaster. Ifgas pipelines and other storage and transportation facilities owned and operated by third parties to deliver natural gas to wholesale markets and to Southern Company Gas' distribution systems. The availability of shale gas and potential regulations affecting its accessibility may have a material impact on the supply and cost of natural gas. Disruption in natural gas supplies could limit the ability to fulfill these contractual obligations.

The traditional operating companies are unable to obtain their coal requirements under these contracts, the traditional operating companies may be required to purchase their coal requirements at higher prices, which may not be recoverable through rates.

Natural gas supplies canThe traditional electric operating companies are also dependent on coal for a portion of their electric generating capacity. The traditional electric operating companies depend on coal supply contracts, and the counterparties to these agreements may not fulfill their obligations to supply coal to the traditional electric operating companies. The suppliers under these agreements may experience financial or technical problems that inhibit their ability to fulfill their obligations to the traditional electric operating companies. In addition, the suppliers under these agreements may not be subjectrequired to disruption insupply coal to the event production or distribution is curtailed,traditional electric operating companies under certain circumstances, such as in the event of a hurricane or a pipeline failure. The availability of shale gas and potential regulations affecting its accessibilitynatural disaster. If the traditional electric operating companies are unable to obtain their coal requirements under these contracts, the traditional electric operating companies may have a material impact on the supply and cost of natural gas.

The revenues of Southern Company, the traditional electric operating companies, and Southern Power depend in part on sales under PPAs. The failure of a counterparty to one of these PPAs to perform its obligations, the failure of the traditional electric operating companies or Southern Power to satisfy minimum requirements under the PPAs, or the failure to renew the PPAs or successfully remarket the related generating capacity could have a negative impact on the net income and cash flows of the affected traditional electric operating company or Southern Power and of Southern Company.

Most of Southern Power's generating capacity has been sold to purchasers under PPAs. Southern Power's top three customers, Georgia Power, Duke Energy Corporation, and San Diego Gas & Electric accounted for 16.5%, 7.8%, and 5.7%, respectively, of Southern Power's total revenues for the year ended December 31, 2016. In addition, the traditional electric operating companies enter into PPAs with non-affiliated parties. Revenues are dependent on the continued performance by the purchasers of their obligations under these PPAs. The failure of one of the purchasers to perform its obligations could have a negative impact on the net income and cash flows of the affected traditional electric operating company or Southern Power and of Southern Company. Although the credit evaluations undertaken and contractual protections implemented by Southern Power and the traditional electric operating companies take into account the possibility of default by a purchaser, actual exposure to a default by a purchaser may be greater than predicted or specified in the applicable contract.

Additionally, neither Southern Power nor any traditional electric operating company can predict whether the PPAs will be renewed at the end of their respective terms or on what terms any renewals may be made. As an example, Gulf Power had long-term sales contracts to cover 100% of its ownership share of Plant Scherer Unit 3 (205 MWs) and these capacity revenues represented 82% of Gulf Power's total wholesale capacity revenues for 2015. Following contract expirations at the end of 2015 and the end of May 2016, Gulf Power's remaining contracted sales from the unit cover approximately 24% of Gulf Power's ownership of the unit through 2019. The expiration of these contracts had a material negative impact on Gulf Power's earnings in 2016 and may continue to have a material negative impact in future years. In addition, the failure of the traditional electric operating companies or Southern Power to satisfy minimum operational or availability requirements under these PPAs could result in payment of damages or termination of the PPAs.

A key element of the business models of Southern Company, the traditional electric operating companies and Southern Power is that generating power at central station power plants achieves economies of scale and produces power at a competitive cost. There are distributed generation and storage technologies that produce and store power, including fuel cells, microturbines, wind turbines, solar cells, and solar cells.batteries. Advances in technology or changes in laws or regulations could reduce the cost of these or other alternative methods of producing power to a level that is competitive with that of most central station power electric production or result in smaller-scale, more fuel efficient, and/or more cost effective distributed generation.generation that allows for increased self-generation by customers. Broader use of distributed generation by retail electricenergy customers may also result from customers’customers' changing perceptions of the merits of utilizing existing generation technology or tax or other economic incentives. Additionally, there can be no assurance that a state PSC or legislature will not attempt tomay modify certain aspects of the traditional electric operating companies’companies' business as a result of these advances in technology. If these technologies became cost competitive and achieved sufficient scale, the market share of the traditional operating companies and Southern Power could be eroded, and the value of their respective electric generating facilities could be reduced.

It is also possible that rapid advances in central station power generation technology could reduce the value of the current electric generating facilities owned by the traditional electric operating companies and Southern Power. Changes in technology could also alter the channels through which electric customers buy or utilize power, which could reduce the revenues or increase the expenses of Southern Company, the traditional electric operating companies, or Southern Power.

If new technologies become cost competitive and achieve sufficient scale, the market share of the traditional electric operating companies, Southern Power, and Southern Company Gas could be eroded, and the value of their respective electric generating facilities or natural gas distribution and storage facilities could be reduced. Additionally, Southern Company Gas' market share could be reduced if Southern Company Gas cannot remain price competitive in its unregulated markets. If state PSCs or other applicable state regulatory agencies fail to adjust rates to reflect the impact of any changes in loads, increasing self-generation, and the growth of distributed generation, the financial condition, results of operations, and cash flows of Southern Company and the affected traditional electric operating companiescompany or Southern Company Gas could be materially adversely affected.

Events such as an aging workforce without appropriate replacements, mismatch of skill sets to future needs, or unavailability of contract resources may lead to operating challenges such as lack of resources, loss of knowledge, and a lengthy time period associated with skill development, especiallyincluding with the workforce needs associated with the Kemper IGCCmajor construction projects and Plant Vogtle Units 3 and 4 construction.ongoing operations. The Southern Company system's costs, including costs for contractors to replace employees, productivity costs, and safety costs, may rise. Failure to hire and adequately obtain replacement employees, including the ability to transfer significant internal historical knowledge and expertise to the new employees, or the future availability and cost of contract labor may adversely affect Southern Company and its subsidiaries' ability to manage and operate their businesses. If Southern Company

and its subsidiaries including the traditional operating companies, are unable to successfully attract and retain an appropriately qualified workforce, results of operations could be negatively impacted.

Southern Company, the traditional electric operating companies, Southern Power, and/or Southern PowerCompany Gas may incur additional costs or delays in the construction of new plants or other facilities and may not be able to recover their investments. Also, existing facilities of the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas require ongoing capital expenditures, including those to meet environmental standards.

The businesses of the registrants require substantial capital expenditures for investments in new facilities and, for the traditional electric operating companies, capital improvements to transmission, distribution, and generation facilities, and, for Southern Company Gas, capital improvements to natural gas distribution and storage facilities, including those to meet environmental standards. Certain of the traditional electric operating companies and Southern Power are in the process of constructing new generating facilities and adding environmental controls equipment at existing generating facilities. Southern Company Gas is replacing certain pipelines in its natural gas distribution system and is involved in three new gas pipeline construction projects. The Southern Company system intends to continue its strategy of developing and constructing other new facilities, expanding or updating existing facilities, and adding environmental control equipment. These types of projects are long-termlong term in nature and in some cases include the development and construction of facilities with designs that have not been finalized or previously constructed. The completion of these types of projects without delays or significant cost overruns is subject to substantial risks, including:

Construction delays could result in the loss of otherwise available investment tax credits, production tax credits,PTCs, and other tax incentives. Furthermore, if construction projects are not completed according to specification, a traditional electric operating company, Southern Power, or Southern PowerCompany Gas and Southern Company may incur liabilities and suffer reduced plant efficiency, higher operating costs, and reduced net income.

Once facilities come into commercial operation,become operational, ongoing capital expenditures are required to maintain reliable levels of operation. Significant portions of the traditional electric operating companies' existing facilities were constructed many years ago. Older generation equipment, even if maintained in accordance with good engineering practices, may require significant capital expenditures to maintain efficiency, to comply with changing environmental requirements, or to provide safe and reliable operations.

The two largest construction projects currently underway in the Southern Company system are the construction of Plant Vogtle Units 3 and 4 and the Kemper IGCC. In addition, Southern Power has 567 MWs of natural gas and renewable generation under construction at three project sites.

Southern Nuclear, on behalf of Georgia Power and the other co-owners, is overseeing the construction of and will operate Plant Vogtle Units 3 and 4 (each, an approximately 1,100 MW AP1000 nuclear generating unit). Georgia Power owns 45.7% of the new units. The NRC certified the Westinghouse Electric Company LLC's Design Control Document, as amended (DCD), for the AP1000 nuclear reactor design, in late 2011, and issued combined COLs in early 2012. Receipt of the COLs allowed full construction to begin. There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4, at the federal and state level, and additional challenges are expectedmay arise as construction proceeds.

On February 27, 2015, Georgia Power filed its twelfth VCM report withPSC in the Alternative Rate Plan approved by the Georgia PSC coveringfor the period from Julyyears 2014 through 2016) to 10.00% effective January 1, through December 31, 2014, which requests approval for an additional $0.22016. For purposes of the AFUDC calculation, the ROE on costs between $4.418 billion and $5.440 billion will also be 10.00% and the ROE on any amounts above $5.440 billion would be Georgia Power's average cost of construction capital costs incurred during that period and reflectslong-term debt. If the Contractor’s revised forecast for completion ofGeorgia PSC adjusts Georgia Power's ROE rate setting point in a rate case prior to Plant Vogtle Units 3 and 4 as well as additional estimated owner-related costsbeing placed into retail rate base, then the ROE for purposes of approximately $10 million per month expected to result fromcalculating both the Contractor’s proposed 18-month delay, including property taxes, oversight costs, compliance costs,NCCR tariff and other operational readiness costs. No Contractor costs related toAFUDC will likewise be 95 basis points lower than the Contractor’s proposed 18-month delay are included in the twelfth VCM report. Additionally, while Georgia Power has not agreed to any change to the guaranteed substantial completion dates, the twelfth VCM report includes a requested amendment to the Plant Vogtle Units 3 and 4 certificate to reflect the Contractor’s revised forecast, to include the estimated owner's costs associated with the proposed 18-month Contractor delay, and to increase the estimated total in-service capital cost of Plant Vogtle Units 3 and 4 to $5.0 billion.

Processes are in place that are designed to assure compliance with the requirements specified in the DCDWestinghouse Design Control Document for the AP1000 nuclear reactor and the COLs,combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. As a result of such compliance processes, certain license amendment requests have been filed and approved or are pending before the NRC. Various design and other licensing-based compliance issues are expected tomatters, including the timely resolution of Inspections, Tests, Analyses, and Acceptance Criteria and the related approvals by the NRC, may arise as construction proceeds, which may result in additional license amendments or require other resolution. If any license amendment requests or other licensing-based compliance issues are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs either to the Vogtle Owners or the Contractor or to both.

In addition to Toshiba's reaffirmation of its commitment, the Contractor provided Georgia Power with revised forecasted in-service dates of December 2019 and September 2020 for Plant Vogtle Units 3 and 4, respectively.  Georgia Power is currently reviewing a preliminary summary schedule supporting these dates that ultimately must be reconciled to a detailed integrated project schedule. As construction continues, the risk remains that ongoing challenges with Contractor performance including additional challenges in itslabor productivity, fabrication, delivery, assembly, delivery, and installation of the shield buildingplant systems, structures, and structural modules, delays in the receipt of the remaining permits necessary for the operation of Plant Vogtle Units 3 and 4,components, or other issues could arise and may further impact project schedule and cost. In addition,Georgia Power expects the IRSContractor to employ mitigation efforts and believes the Contractor is responsible for any related costs under the Vogtle 3 and 4 Agreement. Georgia Power estimates its financing costs for Plant Vogtle Units 3 and 4 to be approximately $30 million per month, with total construction period financing costs of approximately $2.5 billion. Additionally, Georgia Power estimates its owner's costs to be approximately $6 million per month, net of delay liquidated damages.

The revised forecasted in-service dates are within the timeframe contemplated in the Vogtle Cost Settlement Agreement and would enable both units to qualify for PTCs the Internal Revenue Service has allocated production tax credits to each of Plant Vogtle Units 3 and 4, which require the applicable unit to be placed in service before 2021. AdditionalThe net present value of the PTCs is estimated at approximately $400 million per unit.

Future claims by the Contractor or Georgia Power (on behalf of the Vogtle Owners) are also likely tocould arise throughout construction. These claims may be resolved through formal and informal dispute resolution procedures under the engineering, procurement,Vogtle 3 and construction agreement4 Agreement and, under enhanced dispute resolution procedures, may be resolved through litigation after the completion of nuclear fuel load for both units.

See Note 3 to the financial statements of Southern Company under "Regulatory Matters - Georgia Power - Nuclear Construction" and of Georgia Power under "Retail Regulatory Matters - Nuclear Construction" for additional information regarding Plant Vogtle Units 3 and 4, but also may be resolved through litigation.4.

On August 17, 2016, the period from March 2013 through December 31, 2014, $257.2 million had been collected primarilyMississippi PSC established a discovery docket to be usedmanage all filings related to mitigate customer rate impactsKemper IGCC prudence issues. On October 3, 2016 and November 17, 2016, Mississippi Power made filings in this docket including a review and explanation of differences between the Kemper IGCC project estimate set forth in the 2010 CPCN proceedings and the most recent Kemper IGCC project estimate, as well as comparisons of current cost estimates and current expected plant operational parameters to the estimates presented in the 2010 CPCN proceedings for the first five years after the Kemper IGCC is placed in service.

Rate Order, (2) fix no rate increases untilIn the fourth quarter 2016, as a part of the Integrated Resource Plan process, the Southern Company system completed its regular annual updated fuel forecast, the 2017 Annual Fuel Forecast. This updated fuel forecast reflected significantly lower long-term estimated costs for natural gas than were previously projected. As a result of the updated long-term natural gas forecast, as well as the revised operating expense projections reflected in the discovery docket filings, on February 21, 2017, Mississippi Power filed an updated project economic viability analysis of the Kemper IGCC as required under the Mississippi PSCPSC’s April 2012 order confirming authorization of the Kemper IGCC. The project economic viability analysis measures the life cycle economics of the Kemper IGCC compared to feasible alternatives, natural gas combined cycle generating units, under a variety of scenarios and considering fuel, operating and capital costs, and operating characteristics, as well as federal and state taxes and incentives. The reduction in the projected long-term natural gas prices in the 2017 Annual Fuel Forecast and, to a lesser extent, the increase in the estimated Kemper IGCC operating costs, negatively impact the updated project economic viability analysis.

After the remainder of the plant is placed in compliance with the Court’s ruling,service, AFUDC equity of approximately $11 million per month will no longer be recorded in income, and (3) enter an order refunding amounts collected under the 2013 MPSC Rate Order. Through December 31, 2014, Mississippi Power had collected $257.2expects to incur approximately $25 million through rates under the 2013 MPSC Rate Order. Any required refunds would also include carrying costs. The Court’s decision will become legally effective upon the issuanceper month in depreciation, taxes, operations and maintenance expenses, interest expense, and regulatory costs in excess of a mandate to thecurrent rates. Mississippi PSC. Absent specific instruction from the Court, the Mississippi PSC will determine the method and timing of the refund. Mississippi Power is reviewing the Court’s decision and expects to file a motionrequest for rehearing which would stayauthority from the Court's mandate until eitherMississippi PSC and the case is reheard and decided or seven daysFERC to defer all Kemper IGCC costs incurred after the Court issuesin-service date that cannot be capitalized, are not included in current rates, and are not required to be charged against earnings as a result of the $2.88 billion cost cap until such time as the Mississippi PSC completes its order denying Mississippi Power's request for rehearing. Mississippi Power is also evaluating its regulatory options.

Mississippi Power withdraws the Rate Mitigation Plan, Mississippi Power would seekis required to file a rate recovery through alternate means, which could include a traditional rate case.

Although the 2017 Rate Case has not yet been filed and is subject to approvalfuture developments with either the Kemper IGCC or the Mississippi PSC, consistent with its approach in the 2013 and 2015 rate proceedings in accordance with the law passed in 2013 authorizing multi-year rate plans, Mississippi Power is developing both a traditional rate case requesting full cost recovery of the $3.31 billion (net of $137 million in additional DOE Grants) not currently in rates and a rate mitigation plan that together represent Mississippi Power’s probable filing strategy. Mississippi Power also expects that timely resolution of the 2017 Rate Case will likely require a negotiated settlement agreement. In the event an agreement acceptable to both Mississippi Power and the MPUS (and other parties) can be negotiated and ultimately approved by the Mississippi PSC.

Mississippi Power expectshas evaluated various scenarios in connection with its processes to prepare the 2017 Rate Case and Southern Company and Mississippi Power have recognized an additional $80 million charge to income, which is the estimated minimum probable amount of the $3.31 billion of Kemper IGCC costs not currently in rates that would not be recovered under the probable rate mitigation plan to be filed by June 3, 2017. Given the variety of potential scenarios and the uncertainty of the outcome of future regulatory proceedings with the Mississippi PSC (and any subsequent related legal challenges), the ultimate

outcome of these matters cannot now be determined but could result in its evaluation of the Rate Mitigation Plan and other related proceedings during the operation of the Kemper IGCC. To the extent the Kemper IGCC does not satisfy the operational parameters ultimately adopted by the Mississippi PSC or Mississippi Power incurs additional costs in order to satisfy such parameters, therefurther charges that could behave a material adverse effectimpact on Southern Company'sCompany’s and Mississippi Power’s results of operations, financial condition, and liquidity.

In addition, any failure to place the Kemper IGCC in-service by April 15, 2016 or to capture and sequester (via enhanced oil recovery) at least 65% of the carbon dioxide produced by the Kemper IGCC during operations in accordance with IRS requirements would result in the loss of Phase II tax credits that have been allocated to the Kemper IGCC. Through December 31, 2014, Southern Company and Mississippi Power are defendants in various lawsuits that allege improper disclosure about the Kemper IGCC. While Southern Company and Mississippi Power believe that these lawsuits are without merit, an adverse outcome could have recorded tax benefits totaling $276 million,a material impact on Southern Company’s and Mississippi Power's results of which approximately $210 million have been utilized through that date.operations, financial condition, and liquidity. In addition, the SEC is conducting a formal investigation of Southern Company and Mississippi Power concerning the estimated costs and expected in-service date of the Kemper IGCC. Southern Company and Mississippi Power believe the investigation is focused primarily on periods subsequent to 2010 and on accounting matters, disclosure controls and procedures, and internal controls over financial reporting associated with the Kemper IGCC.

The ultimate outcome of these matters, including the resolution of legal challenges, determinations of prudency, and the specific manner of recovery of prudently-incurred costs, is subject to further regulatory actions and cannot be determined at this time.

The electric generation operations and energy marketing operations of Southern Company, the traditional electric operating companies and Southern Power and the natural gas operations of Southern Company Gas are subject to risks, many of which are beyond their control, including changes in powerenergy prices and fuel costs, thatwhich may reduceSouthern Company's, the traditional electric operating companies', Southern Power's, and/or Southern Power'sCompany Gas' revenues and increase costs.

The generation, operationsenergy marketing, and energy marketingnatural gas operations of the Southern Company system are subject to changes in powerenergy prices and fuel costs, which could increase the cost of producing power, or decrease the amount received from the sale of power.energy, and/or make electric generating facilities less competitive. The market prices for these commodities may fluctuate significantly over relatively short periods of time. Among the factors that could influence powerenergy prices and fuel costs are:

Certain of these factors could increase the expenses of the traditional electric operating companies, Southern Power, or Southern PowerCompany Gas and Southern Company. For the traditional electric operating companies and Southern Company Gas' regulated gas distribution operations, such increases may not be fully recoverable through rates. Other of these factors could reduce the revenues of the traditional electric operating companies, Southern Power, or Southern PowerCompany Gas and Southern Company.

Historically, the traditional electric operating companies and Southern Company Gas from time to time have experienced underrecovered fuel and/or purchased gas cost balances and may experience such balances in the future. While the traditional electric operating companies and Southern Company Gas are generally authorized to recover underrecovered fuel and/or purchased gas costs through fuel cost recovery clauses, recovery may be denied if costs are deemed to be imprudently incurred, and delays in the authorization of such recovery could negatively impact the cash flows of the affected traditional electric operating company or Southern Company Gas and Southern Company.

The consumption and use of energy are fundamentally linked to economic activity. This relationship is affected over time by changes in the economy, customer behaviors, and technologies. Any economic downturn could negatively impact customer growth and usage per customer, thus reducing the sales of electricityenergy and revenues. Additionally, any economic downturn or disruption of financial markets, both nationally and internationally, could negatively affect the financial stability of customers and counterparties of the traditional electric operating companies, Southern Power, and Southern Power.Company Gas.

Outside of economic disruptions, changes in customer behaviors in response to energy efficiency programs, changing conditions and preferences, or changes in the adoption of technologies could affect the relationship of economic activity to the consumption of electricity. On the customer behavior side,energy.

Both federal and state programs exist to influence how customers use energy, and several of the traditional electric operating companies and Southern Company Gas have PSC or other applicable state regulatory agency mandates to promote energy efficiency. TheConservation programs could impact the financial results of Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas in different ways. For example, if any traditional electric operating company or Southern Company Gas is required to invest in conservation measures that result in reduced sales from effective conservation, regulatory lag in adjusting rates for the impact of these measures could have a negative financial impact on such traditional electric operating company or Southern Company Gas and Southern Company. Customers could also voluntarily reduce their consumption of energy in response to decreases in their disposable income, increases in energy prices, or individual conservation efforts.

In addition, the adoption of technology by customers can have both positive and negative impacts on sales. Many new technologies utilize less energy than in the past. However, new electric and natural gas technologies such as electric and natural gas vehicles can create additional demand. There can be no assurance that theThe Southern Company system's planning processes will appropriately estimatesystem uses best available methods and experience to incorporate the impactseffects of changes in customer behavior, state and federal programs, PSC or other applicable state regulatory agency mandates, and technology.technology, but the Southern Company system's planning processes may not appropriately estimate and incorporate these effects.

All of the factors discussed above could adversely affect Southern Company's, the traditional electric operating companies', Southern Power's, and/or Southern Power'sCompany Gas' results of operations, financial condition, and liquidity.

The operating results of Southern Company, the traditional electric operating companies, andSouthern Power, and Southern Company Gas are affected by weather conditions and may fluctuate on a seasonal and quarterly basis. In addition, significant weather events, such as hurricanes, tornadoes, floods, droughts, and winter storms, could result in substantial damage to or limit the operation of the properties of the traditional electric operating companies, Southern Power, and/or Southern PowerCompany Gas and could negatively impact results of operation, financial condition, and liquidity.

Electric power and natural gas supply isare generally a seasonal business.businesses. In many parts of the country, demand for power peaks during the summer months, with market prices also peaking at that time. In other areas, power demand peaks during the winter months. In most of the areas the traditional electric operating companies serve, electric power sales peak during the summer,

while in most of the areas Southern Company Gas serves, natural gas demand peaks during the winter. As a result, the overall operating results of Southern Company, the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas may fluctuate substantially on a seasonal basis. In addition, the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas have historically sold less power and natural gas when weather conditions are milder. Unusually mild weather in the future could reduce the

In addition, volatile or significant weather events could result in substantial damage to the transmission and distribution lines of the traditional electric operating companies, and the generating facilities of the traditional operating companies and Southern Power. The traditionalelectric operating companies and Southern Power, and the natural gas distribution and storage facilities of Southern Company Gas. The traditional electric operating companies, Southern Power, and Southern Company Gas have significant investments in the Atlantic and Gulf Coast regions and Southern Power has wind and natural gas investments in various states, including Maine, Minnesota, Oklahoma, and Texas, which could be subject to major storm activity.severe weather, as well as solar investments in various states, including California, which could be subject to natural disasters. Further, severe drought conditions can reduce the availability of water and restrict or prevent the operation of certain generating facilities.

In the event a traditional electric operating company or Southern Company Gas experiences any of these weather events or any natural disaster or other catastrophic event, recovery of costs in excess of reserves and insurance coverage is subject to the approval of its state PSC.PSC or other applicable state regulatory agency. Historically, the traditional electric operating companies from time to time have experienced deficits in their storm cost recovery reserve balances and may experience such deficits in the future. Any denial by the applicable state PSC or other applicable state regulatory agency or delay in recovery of any portion of such costs could have a material negative impact on a traditional electric operating company's or Southern Company Gas' and Southern Company's results of operations, financial condition, and liquidity.

In addition, damages resulting from significant weather events within the service territory of any traditional electric operating company or Southern Company Gas or affecting Southern Power's customers may result in the loss of customers and reduced demand for electricityenergy for extended periods. Any significant loss of customers or reduction in demand for electricityenergy could have a material negative impact on a traditional electric operating company's, Southern Power's, or Southern Power'sCompany Gas' and Southern Company's results of operations, financial condition, and liquidity.

Southern Company and its subsidiaries have made significant acquisitions and dispositionsinvestments in the past and may in the future make additional acquisitions, dispositions, or other strategic ventures or investments. Southern Company and dispositions. Southern Power, in particular,its subsidiaries continually seeksseek opportunities to create value through various transactions, including acquisitions or sales of assets.

Southern Company and its subsidiaries may face significant competition for acquisitiontransactional opportunities and there can be no assurance that anticipated acquisitions willtransactions may not be completed on acceptable terms or at all. In addition, these transactions are intended to, but may not, result in the generation of cash or income, the realization of savings, the creation of efficiencies, or the reduction of risk. These transactions may also affect the liquidity, results of operations, and financial condition of Southern Company and its subsidiaries.

These transactions also involve risks, including:

Southern Company is aand Southern Company Gas are holding companycompanies and, as such, Southern Company hasthey have no operations of itstheir own. Substantially all of Southern Company's and Southern Company Gas' respective consolidated assets are held by subsidiaries. A significant portion of Southern Company Gas' debt is issued by its 100%-owned subsidiary, Southern Company Gas Capital, and is fully and unconditionally guaranteed by Southern Company Gas. Southern Company's and Southern Company Gas' ability to meet itstheir respective financial obligations, including making interest and principal payments on outstanding indebtedness, and, for Southern Company, to pay dividends on its common stock, is primarily dependent on the net income and cash flows of itstheir respective subsidiaries and theirthe ability of those subsidiaries to pay upstream dividends or to repay funds to Southern Company.borrowed funds. Prior to funding Southern Company or Southern Company'sCompany Gas, the respective subsidiaries have regulatory restrictions and financial obligations that must be satisfied, including among others, debt service and preferred and preference stock dividends. Southern Company'sThese subsidiaries are separate legal entities and have no obligation to provide Southern Company or Southern Company Gas with funds.

There are a number of factors that rating agencies evaluate to arrive at credit ratings for Southern Company, the traditional electric operating companies, and Southern Power, Southern Company Gas, Southern Company Gas Capital, and Nicor Gas, including capital structure, regulatory environment, the ability to cover liquidity requirements, and other commitments for capital. Southern Company, the traditional electric operating companies, and Southern Power, Southern Company Gas, Southern Company Gas Capital, and Nicor Gas could experience a downgrade in their ratings if any rating agency concludes that the level of business or financial risk of the industry or Southern Company, the traditional electric operating companies, or Southern Power, Southern Company Gas, Southern Company Gas Capital, or Nicor Gas has deteriorated. Changes in ratings methodologies by the agencies could also have a negative impact on credit ratings. If one or more rating agencies downgrade Southern Company, the traditional electric operating companies, or Southern Power, Southern Company Gas, Southern Company Gas Capital, or Nicor Gas, borrowing costs likely would increase, including automatic increases in interest rates under applicable term loans and credit facilities, the pool of investors and funding sources would likely decrease, and, particularly for any downgrade to below investment grade, significant collateral requirements may be triggered in a number of contracts. Any credit rating downgrades could require a traditional electric operating company, or Southern Power, Southern Company Gas, Southern Company Gas Capital, or Nicor Gas to alter the mix of debt financing currently used, and could require the issuance of secured indebtedness and/or indebtedness with additional restrictive covenants.

Southern Company, the traditional electric operating companies, and Southern Power each engage in a long-term planning process to estimate the optimal mix and timing of new generation assets required to serve future load obligations. ThisSouthern Company Gas engages in a long-term planning process to estimate the optimal mix and timing of building new pipelines and storage facilities, replacing existing pipelines, rewatering storage facilities, and entering new markets and/or expanding in existing markets. These planning processes must look many years into the future in order to accommodate the long lead times associated with the permitting and construction of new generation and associated transmission facilities and natural gas distribution and storage facilities. Inherent risk exists in predicting demand this far into the future as these future loads are dependent on many uncertain factors, including regional economic conditions, customer usage patterns, efficiency programs, and customer technology adoption. Because regulators may not permit the traditional electric operating companies or Southern Company Gas' regulated operating companies to adjust rates to recover the costs of new generation and associated transmission assets while such assets are being constructed, the traditional operating companiesand/or new pipelines and related infrastructure in a timely manner or at all, Southern Company and its subsidiaries may not be able to fully recover these costs or may have exposure to regulatory lag associated with the time between the incurrence of costs of additional capacity and the traditional operating companies' recovery in customers' rates. In addition, under Southern Power's model of selling capacity and energy at negotiated market-based rates under long-term PPAs, Southern Power might not be able to fully execute its business plan if

market prices drop below original forecasts. Southern Power and/or the traditional electric operating companies may not be able to extend existing PPAs or to find new buyers for existing generation assets as existing PPAs expire, or they may be forced to market these assets at prices lower than originally intended. These situations could have negative impacts on net income and cash flows for the affected traditional electric operating company, Southern Power, or Southern PowerCompany Gas, and for Southern Company.

Southern Company, the traditional electric operating companies, and Southern Power, Southern Company Gas, and Nicor Gas rely on access to both short-term money markets and longer-term capital markets as a significant source of liquidity for capital requirements not satisfied by the cash flow from their respective operations. If Southern Company, any traditional electric operating company, or Southern Power, Southern Company Gas, or Nicor Gas is not able to access capital at competitive rates or on favorable terms, its ability to implement its business plan will be limited by impacting its ability to fund capital investments or acquisitions that Southern Company, the traditional electric operating companies, or Southern Power, Southern Company Gas, or Nicor Gas may otherwise rely on to achieve future earnings and cash flows. In addition, Southern Company, the traditional electric operating companies, and Southern Power, Southern Company Gas, and Nicor Gas rely on committed bank lending agreements as back-up liquidity which allows them to access low cost money markets. Each of Southern Company, the traditional electric operating companies, and Southern Power, Southern Company Gas, and Nicor Gas believes that it will maintain sufficient access to these financial markets based upon current credit ratings. However, certain events or market disruptions may increase the cost of borrowing or adversely affect the ability to raise capital through the issuance of securities or other borrowing arrangements or the ability to secure committed bank lending agreements used as back-up sources of capital. Such disruptions could include:

Georgia Power’sPower's ability to make future borrowings through its term loan credit facility with the Federal Financing Bank is subject to the satisfaction of customary conditions, as well as certification of compliance with the requirements of the loan guarantee program under Title XVII of the Energy Policy Act of 2005, including accuracy of project-related representations and warranties, delivery of updated project-related information and evidence of compliance with the prevailing wage requirements of the Davis-Bacon Act of 1931, as amended, compliance with the Cargo Preference Act of 1954, and certification from the DOE’sDOE's consulting engineer that proceeds of the advances are used to reimburse certain costs of construction relating to Plant Vogtle Units 3 and 4 that are eligible for financing under the Title XVII Loan Guarantee Program.

The costs of providing pension and other postretirement benefit plans are dependent on a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plan, changes may decreasein actuarial assumptions, future government regulation, changes in life expectancy, and the frequency and amount of the Southern Company system's required or voluntary contributions made to the plans. Changes in actuarial assumptions and differences between the assumptions and actual values, as well as a significant decline in the value of benefitinvestments that fund the pension and other postretirement plans, if not offset or mitigated by a decline in plan liabilities, could increase pension and other postretirement expense, and the Southern Company system could be required from time to time to fund the pension plans with significant amounts of cash. Such cash funding obligations could have a material impact on liquidity by reducing cash flows and could negatively affect results of operations. Additionally, Alabama Power and Georgia Power each hold significant assets in their nuclear decommissioning trust assets or may increase plan costs, which then could require significant additional funding.

The financial condition of some insurance companies, the threat of terrorism, and natural disasters, among other things, could have disruptive effects on insurance markets. The availability of insurance covering risks that Southern Company, the traditional electric operating companies, Southern Power, Southern Company Gas, and their respective competitors typically insure against may decrease, and the insurance that Southern Company, the traditional electric operating companies, Southern Power, and Southern PowerCompany Gas are able to obtain may have higher deductibles, higher premiums, and more restrictive policy terms. Further, there is no guarantee that the insurance policies maintained by the Southern Company, the traditional electric operating companies, Southern Power, and Southern Power willCompany Gas may not cover all of the potential exposures or the actual amount of loss incurred.

Any losses not covered by insurance, or any increases in the cost of applicable insurance, could adversely affect the results of operations, cash flows, or financial condition of Southern Company, the traditional electric operating companies, Southern Power, or Southern Power.Company Gas.

The use of derivative contracts by Southern Company and its subsidiaries in the normal course of business could result in financial losses that negatively impact the net income of Southern Company and its subsidiaries.subsidiaries or in reported net income volatility.

Southern Company and its subsidiaries, including the traditional electric operating companies, Southern Power, and Southern Power,Company Gas, use derivative instruments, such as swaps, options, futures, and forwards, to manage their commodity and interest rate exposures and, to a lesser extent, manage foreign currency exchange rate exposure and engage in limited trading activities. Southern Company and its subsidiaries could recognize financial losses as a result of volatility in the market values of these contracts or if a counterparty fails to perform. These risks are managed through risk management policies, limits, and procedures. These risk management policies, limits, and procedures might not work as planned and cannot entirely eliminate the risks associated with these activities. In addition, derivative contracts entered into for hedging purposes might not off-set the underlying exposure being hedged as expected, resulting in financial losses. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these financial instruments can involve management's judgment or use of estimates. The factors used in the valuation of these instruments become more difficult to predict and the calculations become less reliable the further into the future these estimates are made. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the value of the reported fair value of these contracts.

None.

Item 2. PROPERTIES

Electric Properties

The traditional electric operating companies, Southern Power, and SEGCO, at December 31, 2014,2016, owned and/or operated 33 hydroelectric generating stations, 3329 fossil fuel generating stations, three nuclear generating stations, and 1314 combined cycle/cogeneration stations, nine33 solar facilities, seven wind facilities, one biomass facility, and one landfill gas facility. The amounts of capacity for each company, as of December 31, 2014,2016, are shown in the table below.