Oglethorpe Power Corporation
Notes to Condensed Financial Statements (Unaudited)
September 30,March 31, 2006 and 2005 and 2004

(A)

(A)General.General.   The condensed financial statements included in this report have been prepared by Oglethorpe Power Corporation (Oglethorpe), pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the information furnished in this report reflects all adjustments (which include only normal recurring adjustments) and estimates necessary to fairly state, in all material respects, the results for the periods ended September 30, 2005March 31, 2006 and 2004.2005. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations, although Oglethorpe believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in Oglethorpe’sOglethorpe's latest Annual Report on Form 10-K for the year ended December 31, 2004,2005, as filed with the SEC. Certain amounts for 20042005 have been reclassified to conform to the current period presentation. The results of operations for the three-month and nine-month periodsperiod ended September 30, 2005March 31, 2006 are not necessarily indicative of results to be expected for the full year. As noted in Oglethorpe’s 2004Oglethorpe's 2005 Annual Report on Form 10-K, substantially all of Oglethorpe’sOglethorpe's sales are to its Members and, thus, the receivables on the accompanying balance sheets are principally from its Members. (See “Notes"Notes to Financial Statements”Statements" in Item 8 of Oglethorpe’s 2004Oglethorpe's 2005 Annual Report on Form 10-K.)

(B)

(B)NewAccounting Pronouncements.   In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (Interpretation No. 47). This Interpretation clarifies that the term “conditional asset retirement obligation” as used in Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations”, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of Oglethorpe. The obligation to perform the asset retirement activity is unconditional even though uncertainty may exist about the timing and/or method of settlement. Thus, the timing and/or method of settlement may be conditional on a future event. Accordingly, Oglethorpe is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Interpretation No. 47 will be adopted by Oglethorpe by no later than by the end of the current fiscal year ending December 31, 2005. Oglethorpe will implement this standard during the fourth quarter of 2005. Retroactive application for interim financial information is permitted but not required. Oglethorpe is assessing the impact of this Interpretation and currently believes that Interpretation No. 47 will not have a material impact on its financial statements.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of APB Opinion No. 20 and SFAS No. 3. SFAS 154 requires retrospective application to prior periods’ financial statements of voluntary change in accounting principle, unless it is impractical to do so. Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including, in net income, for the period of the change, the cumulative effect of changing to the newly adopted accounting principle. SFAS 154 also requires that a change in the method of depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is affected by a change in accounting principle. Opinion No. 20 previously required that such a change be reported as a change in accounting principle. SFAS 154 also requires that any errors in the financial statements of a prior period shall be reported as a prior-period

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adjustment by restating the prior period financial statements. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Oglethorpe will implement this standard during the first quarter of 2006. Oglethorpe does not currently expect this statement to have an impact on its financial statements.

(C)Proposed Accounting Interpretation.In July 2005, the FASB issued an Exposure Draft of a proposed Interpretation, “Accounting"Accounting for Uncertain Tax Positions—an Interpretation of FASB Statement No. 109.”" The objective of the Proposed Interpretation is to clarify the accounting for uncertain tax positions. Generally, an entity would be required to recognize, in its financial statements, the best estimate of the impact of a tax position only if that position is probablemore likely than not of being sustained on audit based solely on the technical merits of the position. The term “probable” is used in this Proposed Interpretation consistent with its use in SFAS No. 5, “Accounting for Contingencies”, to mean “the future event or events are likely to occur.” Individual tax positions that fail to meet the probable threshold will generally result in either (a) a reduction in the deferred tax asset or an increase in a deferred tax liability or (b) an increase in a liability for income taxes payable or the reduction of an income tax refund receivable. Comments on the Exposure Draft were due September 12, 2005.sustained. Oglethorpe is monitoring developments of the Proposed Interpretation and is assessing the impact that the Proposed Interpretation may have on its financial statements. Oglethorpe cannot predict what actions the FASB will take or how such actions might ultimately affect Oglethorpe’sOglethorpe's financial position or results of operations.

(C)

(D)Accumulated Comprehensive Margin (Loss).The table below provides a detail of the beginning and ending balance for each classification of other comprehensive margin (loss) along with the amount of any reclassification adjustments included in margin for each of the periods presented in the Statement of Patronage Capital and Membership Fees and Accumulated Other Comprehensive Margin (Loss). There were no material changes in the nature, timing or amounts of expected reclassification adjustments(gain) loss reclassified to net margin from the amounts disclosed in Oglethorpe’sOglethorpe's Annual Report on Form 10-K for the year ended December 31, 2004. Oglethorpe’s2005.

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Oglethorpe's effective tax rate is zero; therefore, all amounts below are presented net of tax.

		Accumulated Other Comprehensive Margin (Loss)
		(dollars in thousands)
		Interest Rate					Available-for-sale					Financial
		Swap Arrangements					Securities					Gas Hedges					Total
Balance at December 31, 2003			$	(49,916	)			$	(618	)			$	720			$	(49,814	)
Unrealized gain/(loss)			2,182					216					(2,007		)		391
Reclassification adjustments			—					(874		)			2,532				1,658
Balance at September 30, 2004			$	(47,734	)			$	(1,276	)			$	1,245			$	(47,765	)
Balance at December 31, 2004			$	(45,254	)			$	(1,506	)			$	(136	)		$	(46,896	)
Unrealized gain/(loss)			6,880					943					2,133				9,956
Reclassification adjustments			—					—					(341		)		(341		)
Balance at September 30, 2005			$	(38,374	)			$	(563	)			$	1,656			$	(37,281	)

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		Accumulated Other Comprehensive Margin (Loss)
		(dollars in thousands)
		Interest Rate Swap Arrangements		Available-for-sale Securities		Financial Gas Hedges		Total

Balance at December 31, 2004		($45,254	)	($1,506	)	($136	)	($46,896	)
Unrealized gain/(loss)		(2,244	)	(322	)	—		(2,566	)
(Gain) loss reclassified to net margin		—		—		136		136
Balance at March 31, 2005		($47,498	)	($1,828	)	$—		($49,326	)
Balance at December 31, 2005		($34,910	)	($588	)	$1,159		($34,339	)
Unrealized gain/(loss)		4,994		(57	)	(1,308	)	3,629
(Gain) loss reclassified to net margin		—		28		152		180
Balance at March 31, 2006		($29,916	)	($617	)	$3		($30,530	)

matter is uncertain at this time, as is Oglethorpe’sOglethorpe's responsibility, if any, for a share of any penalties or other costs that might be assessed against GPC.

In January 2003, the Sierra Club appealed an unsuccessful challenge to an air operating permit for the Chattahoochee combined cycle facility to the United StatesU. S. Court of Appeals for the Eleventh Circuit. Oglethorpe acquired this facility when it merged with Chattahoochee EMC in May 2003. Oglethorpe intervened in the appeal on behalf of the U.S. Environmental Protection Agency (EPA). In May 2004, the Court ruled in favor of the Sierra Club, invalidating EPA’sEPA's denial of the petition and remanding the matter to EPA for further consideration. In OctoberNovember 2005, EPA issued an order denying Sierra Club’sClub's petition to object to the Chattahoochee facility’sfacility's air operating permit. EPA has indicated that it intends to issue another order correcting an error in the October order, but still denying the petition. WhetherIn January 2006, the Sierra Club filed an appeal of that order to the U.S. Court of Appeals for the Eleventh Circuit. Oglethorpe has again intervened in the appeal on behalf of EPA. Although Oglethorpe believes that the appeal will appeal this latest round of orders denying its petition is unknown. While Oglethorpe continues to believenot affect facility operations pending further consideration and that a favorable outcome in this matter is likely, an unfavorable ruling could temporarily affect the ability of the facility to continue operations.

(E)

(F)LEM Arbitration.   In October 2004, LG&E Energy Marketing Inc. (LEM), and its affiliates initiated a binding arbitration process to resolve certain issues relating to the LEM agreement. Oglethorpe recorded a $15.0 million reserve at December 31, 2004 for estimated damages payable to LEM. In June 2005, the arbitration panel selected LEM’s remedy, which required Oglethorpe to pay LEM approximately $16.0 million. Oglethorpe recorded an additional $1.0 million accrual to purchased power energy costs during the second quarterSale of 2005 and payment was made to LEM in July 2005.

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The $16.0 million accrual previously reflected as an unbilled receivable on the balance sheets was billed to the Members in July 2005.

(G)Sale ofSO₂ Allowances.During 2005 and principally the quarter ended September 30, 2005,March 31, 2006, Oglethorpe sold SO₂ allowances in excess of its needs to various third parties and received approximately $57.0$38.8 million in net proceeds from these sales. This gain on saleThere were no sales during the first quarter of SO₂ allowances was offset, however, by a $40.4 million reduction in Sales to Members and by $16.6 million in amortization of deferred asset retirement obligations costs in the form of accretion expense. As a result, there was no net change to net margin. In October 2005, Oglethorpe sold an additional $4.5 million of SO₂ allowances. The net proceeds from the October sale is also expected to be fully offset by additional amortization of deferred asset retirement obligations costs.2005.

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