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MANAGEMENT'S REPORT
Southern Company and Subsidiary Companies 2000 Annual Report


The management of Southern Company has prepared -- and is responsible for -- the
consolidated financial statements and related information included in this
report. These statements were prepared in accordance with accounting principles
generally accepted in the United States and necessarily include amounts that are
based on the best estimates and judgments of management. Financial information
throughout this annual report is consistent with the financial statements.

   The company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that the accounting records
reflect only authorized transactions of the company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.

   The company's system of internal accounting controls is evaluated on an
ongoing basis by the company's internal audit staff. The company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.

   The audit committee of the board of directors, composed of five independent
directors provides a broad overview of management's financial reporting and
control functions. Periodically, this committee meets with management, the
internal auditors, and the independent public accountants to ensure that these
groups are fulfilling their obligations and to discuss auditing, internal
controls, and financial reporting matters. The internal auditors and independent
public accountants have access to the members of the audit committee at any
time.

   Management believes that its policies and procedures provide reasonable
assurance that the company's operations are conducted according to a high
standard of business ethics.

   In management's opinion, the consolidated financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of Southern Company and its subsidiary companies in conformity
with accounting principles generally accepted in the United States.






/s/H. Allen Franklin
H. Allen Franklin
President and Chief Executive Officer



/s/Gale E. Klappa
Gale E. Klappa
Financial Vice President, Chief Financial Officer,
and Treasurer


<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Southern Company:

We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of Southern Company (a Delaware corporation) and
subsidiary companies as of December 31, 2000 and 1999, and the related
consolidated statements of income, comprehensive income, common stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the consolidated financial statements (pages 13-35) referred
to above present fairly, in all material respects, the financial position of
Southern Company and subsidiary companies as of December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.





/s/Arthur Andersen LLP
Atlanta, Georgia
February 28, 2001



<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Southern Company and Subsidiary Companies 2000 Annual Report


RESULTS OF OPERATIONS
---------------------

OVERVIEW OF CONSOLIDATED EARNINGS

Southern Company's solid financial performance resulted in record earnings for
2000. Higher earnings were driven by both strong growth of selling electricity
in the Southeast and by the global subsidiary's competitive energy supply
business outside the Southeast. Reported earnings in both 2000 and 1999
reflected significant items not related to the normal day-to-day business
activities. After adjusting for these items, earnings per share for 2000 was
$2.13 compared with $1.90 in 1999. Earnings as reported and the details of
earnings as adjusted are shown in the following table.

   In April 2000, Southern Company announced an initial public offering of up to
19.9 percent of Mirant Corporation -- formerly Southern Energy, Inc. -- and its
intentions to spin off the remaining ownership of Mirant to Southern Company
stockholders within 12 months of the initial stock offering. On October 2, 2000,
Mirant completed an initial public offering of 66.7 million shares of common
stock.

   On February 19, 2001, Southern Company's board of directors approved the spin
off of the remaining ownership of 272 million Mirant shares to be completed in a
tax free distribution on April 2, 2001. As a result of the spin off, Southern
Company financial statements and related information reflect Mirant as
discontinued operations.

   A reconciliation of reported consolidated earnings, including discontinued
operations, to earnings as adjusted -- which exclude non-day to day business
items -- and the related explanations are as follows:

                             Consolidated         Earnings
                              Net Income          Per Share
                            ----------------   --------------
                             2000     1999       2000     1999
                             ---------------   ---------------
                               (in millions)
Earnings from --
  Continuing
    operations             $  994   $  915      $1.52     $1.33
  Discontinued
    operations                319      361        .49       .53
---------------------------------------------------------------
Earnings as reported        1,313    1,276       2.01      1.86
---------------------------------------------------------------
Mirant transition costs        80        -        .12         -
Mobile Energy
    write down                 10       69        .01       .10
Gain on asset sale              -      (78)         -      (.11)
Work force reductions           -       50          -       .07
Other                          (8)     (14)      (.01)     (.02)
---------------------------------------------------------------
Total adjustments              82       27        .12       .04
---------------------------------------------------------------
Earnings as adjusted       $1,395   $1,303      $2.13     $1.90
===============================================================

   Mirant's transition costs shown in the table include charges related to
becoming a public company and changes in their tax strategy in Asia.

   In 2000 and 1999, Southern Company recorded asset impairment charges related
to Mobile Energy Services -- see Note 3 to the financial statements. In 1999,
Mirant sold a portion of its business in the United Kingdom. Work force
reduction programs began in late 1999 for a German utility in which Mirant has
an ownership interest.

SOUTHERN COMPANY BUSINESS ACTIVITIES

Discussion of the results of operations is focused on the traditional business
of the integrated Southeast utilities. The remaining portion of Southern
Company's other business activities include telecommunications, energy products
and services, leveraged leasing activities, as well as the parent holding
company. The impact of these other business activities on the consolidated
results of operations is not significant. For more information, see Note 12.

Integrated Southeast Utilities

The five integrated Southeast utilities provide electric service in four states.
These utilities are Alabama Power, Georgia Power, Gulf Power, Mississippi Power,
and Savannah Electric. A condensed income statement for these companies is as
follows:

                                           Increase (Decrease)
                              Amount         From Prior Year
                              ------       --------------------
                                2000           2000       1999
 --------------------------------------------------------------
                                      (in millions)
Operating revenues            $9,860           $735      $(238)
---------------------------------------------------------------
Fuel                           2,564            236          7
Purchased power                  677            268         13
Other operation
  and maintenance              2,472             41          4
Depreciation
  and amortization             1,135             89       (277)
Taxes other than
  income taxes                   532             11         13
---------------------------------------------------------------
Total operating expenses       7,380            645       (240)
---------------------------------------------------------------
Operating income               2,480             90          2
Other income, net                (18)           (11)       (84)
---------------------------------------------------------------
Earnings before
  interest and taxes           2,462             79        (82)
Interest expenses
  and other                      650             15        (44)
Income taxes                     703             28        (28)
---------------------------------------------------------------
Net income                    $1,109          $  36     $  (10)
===============================================================


                                      3
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


Revenues

Operating revenues for the integrated Southeast utilities in 2000 and the amount
of change from the prior year are as follows:

                                           Increase (Decrease)
                              Amount         From Prior Year
                              -------      --------------------
                                2000           2000       1999
---------------------------------------------------------------
                                      (in millions)
Retail --
  Base revenues               $6,014           $174      $(262)
  Fuel cost recovery
    and other                  2,599            353         76
---------------------------------------------------------------
Total retail                   8,613            527       (186)
---------------------------------------------------------------
Sales for resale --
  Within service area            377             27        (24)
  Outside service area           600            127        (49)
----------------------------------------------------------------
Total sales for resale           977            154        (73)
Other operating
  revenues                       270             54         21
---------------------------------------------------------------
Operating revenues            $9,860           $735      $(238)
===============================================================
Percent change                                  8.1%      (2.5)%
---------------------------------------------------------------

   Base revenues increased $174 million in 2000 as a result of continued
customer growth in the traditional service area and the positive impact of
weather on energy sales. However, total base revenues of $5.8 billion in 1999
declined as a result of a Georgia Power rate reduction and recorded revenue
sharing in 1999. For additional information, see Note 3 to the financial
statements under "Georgia Power 1998 Retail Rate Order." Customer growth in the
Southeast somewhat offset the rate decrease.

   Electric rates include provisions to adjust billings for fluctuations in fuel
costs, the energy component of purchased power costs, and certain other costs.
Under these fuel cost recovery provisions, fuel revenues generally equal fuel
expenses -- including the fuel component of purchased energy -- and do not
affect net income. However, cash flow is affected by the economic loss from
untimely recovery of these receivables. Each company has filed or will be filing
for approval of new fuel rates to be more reflective of escalating fuel costs.

   Revenues from sales for resale within the service area were up as a result of
additional demand during the hot summer of 2000. Sales for resale revenues
within the service area were $350 million in 1999, down 6.5 percent from the
prior year. This sharp decline resulted primarily from supplying less
electricity under contractual agreements with certain wholesale customers in
1999.

   Energy sales for resale outside the service area are principally unit power
sales under long-term contracts to Florida utilities. Economy energy and energy
under short-term contracts are also sold for resale outside the service area.
Revenues from long-term unit power contracts have both a capacity and energy
component. Capacity revenues reflect the recovery of fixed costs and a return on
investment under the contracts. Energy is generally sold at variable cost. The
capacity and energy components of the unit power contracts were as follows:

                                    2000       1999       1998
---------------------------------------------------------------
                                          (in millions)
Capacity                            $177       $174       $196
Energy                               178        157        152
---------------------------------------------------------------
Total                               $355       $331       $348
===============================================================

   Capacity revenues in 2000 and 1999 varied slightly compared with the prior
year as a result of adjustments and true-ups related to contractual pricing. No
significant declines in the amount of capacity are scheduled until the
termination of the contracts in 2010.

Energy Sales

The changes in revenues for the traditional business in the Southeast are
influenced heavily by the amount of energy sold each year. Kilowatt-hour sales
for 2000 and the percent change by year were as follows:

                         Amount            Percent Change
   (billions of          ------     ---------------------------
   kilowatt-hours)        2000      2000        1999      1998
---------------------------------------------------------------
Residential               46.2       6.5%       (0.2)%    10.9%
Commercial                46.2       6.6         4.0       7.2
Industrial                56.7       1.0         1.6       2.1
Other                      1.0       2.7         1.6       3.1
                         -----
Total retail             150.1       4.3         1.7       6.2
Sales for resale --
  Within service area      9.6       1.5        (4.1)     (0.4)
  Outside service area    17.2      33.0        (0.4)     (5.6)
                         -----
Total                    176.9       6.4         1.2       4.7
===============================================================

   The rate of growth in 2000 total retail energy sales was very strong.
Residential energy sales reflected a substantial increase as a result of the
hotter-than-normal summer weather and the number of residential customers served
increased by 59,000 during the year. Commercial and industrial sales, both in


                                       4

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


2000 and 1999, continued to show slight gains in excess of the national
averages. This reflects the strength of business and economic conditions in
Southern Company's traditional service area in the southeastern United States.
The rate of increase in 1999 total retail energy sales was significantly lower
than in 1998. Residential energy sales experienced a decline as a result of
milder weather in 1999, which strongly affected the total retail sales increase
of 1.7 percent. Energy sales to retail customers are projected to increase at an
average annual rate of 2.1 percent during the period 2001 through 2011.

   Sales to customers outside the service area under long-term contracts for
unit power sales increased 21 percent in 2000 and increased 19 percent in 1999.
These changes in sales were influenced by weather and fluctuations in prices for
oil and natural gas, the primary fuel sources for utilities with which the
company has long-term contracts. However, these fluctuations in energy sales
under long-term contracts have minimal effects on earnings because the energy is
generally sold at variable cost.

Expenses

In 2000, operating expenses of $7.4 billion increased $645 million compared with
the prior year. The costs to produce electricity for the traditional business in
2000 increased by $498 million to meet higher energy demands. Non-production
operation and maintenance expenses increased $47 million in 2000. In 2000,
depreciation and amortization expenses increased $89 million of which $50
million resulted from the 1998 Georgia Power rate order as referred to earlier.

   In 1999, operating expenses of $6.7 billion decreased $240 million. This
decline was driven by a reduction of $277 million accelerated depreciation of
plant being recorded primarily as a result of the 1998 Georgia Power rate order.
The costs to produce electricity for the traditional business in the Southeast
for 1999 increased by $68 million to meet higher energy demands. All other
operation and maintenance expenses declined by $44 million.

   Fuel costs constitute the single largest expense for the integrated Southeast
utilities. The mix of fuel sources for generation of electricity is determined
primarily by system load, the unit cost of fuel consumed, and the availability
of hydro and nuclear generating units. The amount and sources of generation and
the average cost of fuel per net kilowatt-hour generated -- within the
traditional business service area -- were as follows:

                                    2000       1999       1998
-------------------------------------------------------------------
Total generation
  (billions of kilowatt-hours)       174        165        164
Sources of generation
  (percent) --
    Coal                              78         78         77
    Nuclear                           16         17         16
    Hydro                              2          2          4
    Oil and gas                        4          3          3
Average cost of fuel per net
  kilowatt-hour generated
    (cents) --                      1.51       1.45       1.48
-------------------------------------------------------------------

   In 2000, fuel and purchased power costs increased $504 million as a result of
10.6 billion more kilowatt-hours being sold than in 1999. Demand was met with
some 2.5 billion additional kilowatt-hours being purchased and using generation
with higher unit fuel cost than last year.

   Total fuel and purchased power costs of $2.7 billion in 1999 increased only
$20 million while total energy sales increased 2.0 billion kilowatt-hours
compared with the amounts recorded in 1998. Continued efforts to control energy
costs helped lower the average cost of fuel per net kilowatt-hour generated in
1999.

   Total interest charges and other financing costs in 2000 increased $15
million reflecting new generating units being constructed requiring some
external financing. Total interest charges and other financing costs in 1999
decreased $44 million from amounts reported in the previous year. The decline
reflected additional refinancing of debt in 1999.

Discontinued Operations

Mirant is a global energy company whose businesses include competitive
electricity distribution companies, independent power projects, and energy
trading and risk management companies.


                                      5


<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


   On February 19, 2001, Southern Company's board of directors approved the spin
off of Mirant, to be effective on April 2, 2001. As a result of this action,
Mirant's financial and related information is shown as discontinued operations.
All historical financial statements, footnotes, and related disclosures have
been reclassified to conform with the current year presentation.

   Earnings from discontinued operations are shown net of income taxes and
minority interest. Southern Company earnings per share as adjusted was $2.13 in
2000, of which Mirant's earnings as adjusted contributed approximately $0.60 per
share. On the same basis in 1999, Southern Company earnings per share was $1.90,
of which $0.47 was attributed to Mirant.

Effects of Inflation

Southern Company's traditional business of the integrated Southeast utilities is
subject to rate regulation and income tax laws that are based on the recovery of
historical costs. Therefore, inflation creates an economic loss because the
company is recovering its costs of investments in dollars that have less
purchasing power. While the inflation rate has been relatively low in recent
years, it continues to have an adverse effect on Southern Company because of the
large investment in utility plant with long economic lives. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.

Future Earnings Potential

The results of continuing operations for the past three years are not
necessarily indicative of future earnings potential. The level of Southern
Company's future earnings depends on numerous factors. The two major factors are
the ability of the regulated integrated Southeast utilities to achieve energy
sales growth while containing cost in a more competitive environment; and the
profitability of the new competitive market-based wholesale generating
facilities being added.

   The traditional business or the five Southeast utilities currently operate as
vertically integrated companies providing electricity to customers within the
traditional service area of the southeastern United States. Prices for
electricity provided to retail customers are set by state public service
commissions under cost-based regulatory principles. Retail rates and earnings
are reviewed and adjusted periodically within certain limitations based on
earned return on equity. See Note 3 to the financial statements for additional
information about these and other regulatory matters.

   Future earnings for the traditional business in the near term will depend
upon growth in energy sales, which is subject to a number of factors. These
factors include weather, competition, new short and long-term contracts with
neighboring utilities, energy conservation practiced by customers, the
elasticity of demand, and the rate of economic growth in the traditional service
area.

   The electric utility industry in the United States is continuing to evolve as
a result of regulatory and competitive factors. Among the primary agents of
change has been the Energy Policy Act of 1992 (Energy Act). The Energy Act
allows independent power producers (IPPs) to access a utility's transmission
network in order to sell electricity to other utilities. This enhances the
incentive for IPPs to build cogeneration plants for a utility's large industrial
and commercial customers and sell energy generation to other utilities. Also,
electricity sales for resale rates are affected by wholesale transmission access
and numerous potential new energy suppliers, including power marketers and
brokers.

   Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. Some
states have approved initiatives that result in a separation of the ownership
and/or operation of generating facilities from the ownership and/or operation of
transmission and distribution facilities. While various restructuring and
competition initiatives have been discussed in Alabama, Florida, Georgia, and
Mississippi, none have been enacted. Enactment would require numerous issues to
be resolved, including significant ones relating to recovery of any stranded
investments, full cost recovery of energy produced, and other issues related to
the current energy crisis in California. As a result of this crisis, many states

                                       6

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


have either discontinued or delayed implementation of initiatives involving
retail deregulation. The inability of a company to recover its investments,
including the regulatory assets described in Note 1 to the financial statements,
could have a material adverse effect on financial condition and results of
operations.

   Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, if Southern Company's integrated Southeast utilities do not remain
low-cost producers and provide quality service, then energy sales growth could
be limited, and this could significantly erode earnings.

   To adapt to a less regulated, more competitive environment, Southern Company
continues to evaluate and consider a wide array of potential business
strategies. These strategies may include business combinations, acquisitions
involving other utility or non-utility businesses or properties, internal
restructuring, disposition of certain assets, or some combination thereof.
Furthermore, Southern Company may engage in other new business ventures that
arise from competitive and regulatory changes in the utility industry. Pursuit
of any of the above strategies, or any combination thereof, may significantly
affect the business operations and financial condition of Southern Company.

   On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued
its final rule on Regional Transmission Organizations (RTOs). The order
encouraged utilities owning transmission systems to form RTOs on a voluntary
basis. After participating in regional conferences with customers and other
members of the public to discuss the formation of RTOs, utilities were required
to make a filing with the FERC. Southern Company filed on October 16, 2000, a
proposal for the creation of an RTO. The proposal is for the formation of a
for-profit company that would have control of the bulk power transmission system
of Southern Company and any other participating utilities. Participants would
have the option to either maintain their ownership, divest, sell, or lease their
assets to the proposed RTO. If the FERC accepts the proposal as filed, the
creation of an RTO is not expected to have a material impact on Southern
Company's financial statements. The outcome of this matter cannot now be
determined.

   The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA)
to allow holding companies to form exempt wholesale generators to sell power
largely free of regulation under PUHCA. These entities are able to own and
operate power generating facilities and sell power to affiliates -- under
certain restrictions.

   Southern Company is aggressively working to maintain and expand its share of
wholesale sales in the southeastern power markets. In January 2001, Southern
Company announced the formation of a new subsidiary -- Southern Power Company.
The new subsidiary will own, manage, and finance wholesale generating assets in
the Southeast. Southern Power will be the primary growth engine for Southern
Company's market-based energy business. Energy from its assets will be marketed
to wholesale customers under the Southern Company name. By 2005, plans call for
Southern Power to have developed or acquired more than 7,500 megawatts dedicated
to the competitive wholesale business. Within 10 years, the new wholesale
generating company's goal is to own more than 15,000 megawatts.

   In accordance with Financial Accounting Standards Board (FASB) Statement No.
87, Employers' Accounting for Pensions, Southern Company recorded non-cash
income of approximately $130 million in 2000. Pension plan income in 2001 is
expected to be less as a result of plan amendments. Future pension income is
dependent on several factors including trust earnings and changes to the plan.
For more information, see Note 2.

   Southern Company is involved in various matters being litigated. See Note 3
to the financial statements for information regarding material issues that could
possibly affect future earnings.

   Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters."

   The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry -- including Southern Company's --
regarding the recognition, measurement, and classification in the financial
statements of decommissioning costs for nuclear generating facilities. In
response to these questions, the Financial Accounting Standards Board (FASB) is
reviewing the accounting for liabilities related to the retirement of long-lived

                                       7

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


assets, including nuclear decommissioning. If the FASB issues new accounting
rules, the estimated costs of retiring Southern Company's nuclear and other
facilities may be required to be recorded as liabilities in the Consolidated
Balance Sheets. Also, the annual provisions for such costs could change. Because
of the company's current ability to recover asset retirement costs through
rates, these changes would not have a significant adverse effect on results of
operations. See Note 1 to the financial statements under "Depreciation and
Nuclear Decommissioning" for additional information.

   The integrated Southeast utilities are subject to the provisions of FASB
Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In
the event that a portion of a company's operations is no longer subject to these
provisions, the company would be required to write off related regulatory assets
and liabilities that are not specifically recoverable, and determine if any
other assets have been impaired. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.

New Accounting Standard

In June 2000, FASB issued Statement No. 138, an amendment of Statement  No. 133,
Accounting for Derivative Instruments and Hedging Activities.  Statement No.
133, as amended, establishes accounting and reporting standards for derivative
instruments and for hedging activities.  Statement No. 133 requires that
certain derivative instruments be recorded in the balance sheet as either an
asset or liability measured at fair value, and that changes in the fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met.

   Southern Company utilizes financial instruments to reduce its exposure to
changes in interest rates and foreign currency exchange rates. Southern Company
also enters into commodity related forward contracts to limit exposure to
changing prices on certain fuel purchases and electricity purchases and sales.

   Substantially all of these bulk energy purchases and sales meet the
definition of a derivative under Statement No. 133. In many cases, these
transactions meet the normal purchase and sale exception and the related
contracts will continue to be accounted for under the accrual method. Certain of
these instruments qualify as cash flow hedges resulting in the deferral of
related gains and losses in other comprehensive income until the hedged
transactions occur. Any ineffectiveness will be recognized currently in net
income. However, others will be required to be marked to market through current
period income.

   Southern Company adopted Statement No. 133 effective January 1, 2001. The
cumulative effect of adoption was a reduction of approximately $300 million in
comprehensive income, which was all related to discontinued operations. The
impact on net income was immaterial. The application of the new rules is still
evolving and further guidance from FASB is expected, which could additionally
impact Southern Company's financial statements. Also, as wholesale energy
markets mature, the accounting for future transactions could be significantly
impacted by Statement No. 133, resulting in more volatility in net income and
comprehensive income.

FINANCIAL CONDITION
------------------

Overview

Southern Company's financial condition continues to remain strong. In 2000, the
integrated Southeast utilities' earnings were at the high end of their
respective allowed range of return on equity. Also, earnings from discontinued
operations made a solid contribution. These factors drove the reported
consolidated net income to a record $1.31 billion in 2000. The quarterly
dividend declared in January 2001 was 33 1/2 cents per share, or $1.34 annually.
Southern Company is committed to a goal of maintaining its current annual
dividend of $1.34 per share and to grow the dividend over time consistent with
earnings expectations. After the Mirant spin off, Southern Company's target
will be to grow earnings per share at an average annual rate of 3 to 5 percent.

   Gross property additions to utility plant from continuing operations were
$2.2 billion in 2000. The majority of funds needed for gross property additions
since 1997 has been provided from operating activities. The Consolidated
Statements of Cash Flows provide additional details.

Market Price Risk

Southern Company is exposed to market risks, including changes in interest
rates, currency exchange rates, and certain commodity prices. To manage the

                                       8

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


volatility attributable to these exposures, the company nets the exposures to
take advantage of natural offsets and enters into various derivative
transactions for the remaining exposures pursuant to the company's policies in
areas such as counterparty exposure and hedging practices. Generally, company
policy is that derivatives are to be used only for hedging purposes. Derivative
positions are monitored using techniques that include market valuation and
sensitivity analysis.

   The company's market risk exposures relative to interest rate changes have
not changed materially versus the previous reporting period. In addition, the
company is not aware of any facts or circumstances that would significantly
impact such exposures in the near-term.

   If the company sustained a 100 basis point change in interest rates for all
variable rate debt, the change would affect annualized interest expense by
approximately $23 million at December 31, 2000. Based on the company's overall
interest rate exposure at December 31, 2000, including derivative and other
interest rate sensitive instruments, a near-term 100 basis point change in
interest rates would not materially affect the consolidated financial
statements.

   Due to cost-based rate regulations, the integrated Southeast utilities have
limited exposure to market volatility in interest rates, commodity fuel prices,
and prices of electricity. To mitigate residual risks relative to movements in
electricity prices, the companies enter into fixed price contracts for the
purchase and sale of electricity through the wholesale electricity market.
Realized gains and losses are recognized in the income statement as incurred. At
December 31, 2000, exposure from these activities was not material to the
consolidated financial statements.

   For additional information, see Note 1 to the financial statements under
"Financial Instruments for Non-Trading Activities."

Capital Structure

During 2000, the integrated Southeast utilities sold, through public
authorities, $79 million of pollution control revenue bonds. In addition, senior
notes of $650 million were issued in 2000. The companies continued to reduce
financing costs by retiring higher-cost securities. Retirements of bonds and
senior notes, including maturities, totaled $298 million during 2000, $1.2
billion during 1999, and $1.7 billion during 1998. Retirements of preferred
stock totaled $86 million during 1999 and $239 million during 1998.

   In December 2000, Southern Company issued 28 million treasury shares of
common stock through a public offering. The offering raised $800 million and
was priced at $28.50 per share. The proceeds were used to reduce debt.

   In April 1999, Southern Company announced the repurchase of up to 50 million
shares of its common stock over a two-year period through open market or
privately negotiated transactions. Under this program, 50 million shares were
repurchased by February 2000 at an average price of $25.53. Funding for the
program was provided from Southern Company's commercial paper program. At the
close of 2000, the company's common stock market value was 33 1/4 per share,
compared with book value of $15.69 per share. The market-to-book value ratio was
212 percent at the end of 2000, compared with 170 percent at year-end 1999, and
207 percent at year-end 1998.

Capital Requirements for Construction

The construction program of Southern Company is budgeted at $2.9 billion for
2001, $2.6 billion for 2002, and $1.7 billion for 2003. Actual construction
costs may vary from this estimate because of changes in such factors as:
business conditions; environmental regulations; nuclear plant regulations; load
projections; the cost and efficiency of construction labor, equipment, and
materials; and the cost of capital. In addition, there can be no assurance that
costs related to capital expenditures will be fully recovered.

   Southern Company has approximately 6,300 megawatts of new generating capacity
scheduled to be placed in service by 2003. Approximately 4,100 megawatts of
additional new capacity will be dedicated to the wholesale market and owned by
Southern Power. Significant construction of transmission and distribution
facilities and upgrading of generating plants will be continuing for the
traditional business in the Southeast.


                                      9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


Other Capital Requirements

In addition to the funds needed for the construction program, approximately $1.4
billion will be required by the end of 2003 for present improvement fund
requirements and maturities of long-term debt. Also, the subsidiaries will
continue to retire higher-cost debt and preferred stock and replace these
obligations with lower-cost capital if market conditions permit.

Environmental Matters

On November 3, 1999, the Environmental Protection Agency (EPA) brought a civil
action in the U.S. District Court against Alabama Power, Georgia Power, and the
system service company. The complaint alleges violations of the prevention of
significant deterioration and new source review provisions of the Clean Air Act
with respect to five coal-fired generating facilities in Alabama and Georgia.
The civil action requests penalties and injunctive relief, including an order
requiring the installation of the best available control technology at the
affected units. The EPA concurrently issued to the integrated Southeast
utilities a notice of violation related to 10 generating facilities, which
includes the five facilities mentioned previously. In early 2000, the EPA filed
a motion to amend its complaint to add the violations alleged in its notice of
violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as
defendants. The complaint and notice of violation are similar to those brought
against and issued to several other electric utilities. These complaints and
notices of violation allege that the utilities had failed to secure necessary
permits or install additional pollution equipment when performing maintenance
and construction at coal burning plants constructed or under construction prior
to 1978. On August 1, 2000, the U.S. District Court granted Alabama Power's
motion to dismiss for lack of jurisdiction in Georgia and granted the system
service company's motion to dismiss on the grounds that it neither owned nor
operated the generating units involved in the proceedings. On January 12, 2001,
the EPA re-filed its claims against Alabama Power in federal district court in
Birmingham, Alabama. The EPA did not include the system service company in the
new complaint. Southern Company believes that its integrated utilities complied
with applicable laws and the EPA's regulations and interpretations in effect at
the time the work in question took place. The Clean Air Act authorizes civil
penalties of up to $27,500 per day per violation at each generating unit. Prior
to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this
matter could require substantial capital expenditures that cannot be determined
at this time and possibly require payment of substantial penalties. This could
affect future results of operations, cash flows, and possibly financial
condition if such costs are not recovered through regulated rates.

   In November 1990, the Clean Air Act Amendments of 1990 (Clean Air Act) were
signed into law. Title IV of the Clean Air Act -- the acid rain compliance
provision of the law -- significantly affected Southern Company. Specific
reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired
generating plants were required in two phases. Phase I compliance began in 1995
and some 50 generating units were brought into compliance with Phase I
requirements.

   Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I nitrogen oxide and sulfur dioxide
emissions compliance totaled approximately $300 million.

   Phase II sulfur dioxide compliance was required in 2000. Southern Company
used emission allowances and fuel switching to comply with Phase II
requirements. Also, equipment to control nitrogen oxide emissions was installed
on additional system fossil-fired units as necessary to meet Phase II limits and
ozone non-attainment requirements for metropolitan Atlanta through 2000.
Compliance for Phase II and initial ozone non-attainment requirements increased
total construction expenditures through 2000 by approximately $100 million.

   The one-hour ozone non-attainment standards for the Atlanta and Birmingham
areas have been set and must be implemented in May 2003. Seven generating plants
will be affected in the Atlanta area and two plants in the Birmingham area.
Additional construction expenditures for compliance with these new rules are
currently estimated at approximately $935 million.

   A significant portion of costs related to the acid rain and ozone
non-attainment provisions of the Clean Air Act is expected to be recovered
through existing ratemaking provisions. However, there can be no assurance that
all Clean Air Act costs will be recovered.

                                       10

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


     In July 1997,  the EPA revised the national ambient air quality standards
for ozone and particulate matter. This revision made the standards significantly
more stringent. In the subsequent litigation of these standards, the U.S.
Supreme Court recently dismissed certain challenges but found the EPA's
implementation program for the new ozone standard  unlawful and remanded it to
the EPA. In addition,  the Federal District of Columbia Circuit Court of Appeals
will address other legal challenges to these standards in mid-2001. If the
standards are eventually upheld, implementation could be required by 2007 to
2010.

   In September 1998, the EPA issued the final regional nitrogen oxide reduction
rules to the states for implementation. Compliance is required by May 31, 2004.
The final rule affects 21 states, including Alabama and Georgia. Additional
construction expenditures for compliance with these new rules are currently
estimated at approximately $195 million.

   In December 2000, the EPA completed its utility studies for mercury and other
hazardous air pollutants (HAPS) and issued a determination that an emission
control program for mercury and, perhaps, other HAPS is warranted. The program
is to be developed over the next four years under the Maximum Achievable Control
Technology (MACT) provisions of the Clean Air Act. This determination is being
challenged in the courts. In January 2001, the EPA proposed guidance for the
determination of Best Available Retrofit Technology (BART) emission controls
under the Regional Haze Regulations. Installation of BART controls is expected
to take place around 2010. Litigation of the BART rules is probable in the near
future.

   Implementation of the final state rules for these initiatives could require
substantial further reductions in nitrogen oxide, sulfur dioxide, mercury, and
other HAPS emissions from fossil-fired generating facilities and other
industries in these states. Additional compliance costs and capital expenditures
resulting from the implementation of these rules and standards cannot be
determined until the results of legal challenges are known, and the states have
adopted their final rules. Reviews by the new administration in Washington, D.C.
add to the uncertainties associated with BART guidance and the MACT
determination for mercury and other HAPS.

   The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: control strategies to reduce
regional haze; limits on pollutant discharges to impaired waters; water intake
restrictions; and hazardous waste disposal requirements. The impact of any new
standards will depend on the development and implementation of applicable
regulations.

   Southern Company must comply with other environmental laws and regulations
that cover the handling and disposal of hazardous waste. Under these various
laws and regulations, the subsidiaries could incur substantial costs to clean up
properties. The subsidiaries conduct studies to determine the extent of any
required cleanup costs and have recognized in their respective financial
statements costs to clean up known sites. These costs for Southern Company
amounted to $4 million in 2000, $4 million in 1999, and $6 million in 1998.
Additional sites may require environmental remediation for which the
subsidiaries may be liable for a portion or all required cleanup costs. See Note
3 to the financial statements for information regarding Georgia Power's
potentially responsible party status at a site in Brunswick, Georgia.

   Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of Southern Company's operations. The full impact of any such changes
cannot be determined at this time.

   Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. The impact of new legislation -- if
any -- will depend on the subsequent development and implementation of



                                       11
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


applicable regulations. In addition, the potential exists for liability as the
result of lawsuits alleging damages caused by electromagnetic fields.

Sources of Capital

The amount and timing of additional equity capital to be raised in 2001 -- as
well as in subsequent years -- will be contingent on Southern Company's
investment opportunities. Equity capital can be provided from any combination of
public offerings, private placements, or the company's stock plans.

   The integrated Southeast utilities plan to obtain the funds required for
construction and other purposes from sources similar to those used in the past,
which were primarily from internal sources. However, the type and timing of any
financings -- if needed -- will depend on market conditions and regulatory
approval. In recent years, financings primarily have utilized unsecured debt and
trust preferred securities.

   Southern Power will use both external funds and equity capital from Southern
Company to finance its construction program.

   To meet short-term cash needs and contingencies, Southern Company had at the
beginning of 2001 approximately $199 million of cash and cash equivalents and
$5.1 billion of unused credit arrangements with banks.

Cautionary Statement Regarding
Forward-Looking Information

Southern Company's 2000 Annual Report includes forward-looking statements in
addition to historical information. Forward-looking information includes, among
other things, statements concerning the strategic goals for Southern Company's
new wholesale business and also Southern Company's earnings per share and
earnings growth goals. In some cases, forward-looking statements can be
identified by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of these terms or other comparable terminology. Southern Company
cautions that there are various important factors that could cause actual
results to differ materially from those indicated in the forward-looking
statements; accordingly, there can be no assurance that such indicated results
will be realized. These factors include the impact of recent and future federal
and state regulatory change, including legislative and regulatory initiatives
regarding deregulation and restructuring of the electric utility industry and
also changes in environmental and other laws and regulations to which Southern
Company and its subsidiaries are subject, as well as changes in application of
existing laws and regulations; current and future litigation, including the
pending EPA civil action against Georgia Power and potentially other of Southern
Company's subsidiaries and the race discrimination litigation against certain of
Southern Company's subsidiaries; the extent and timing of the entry of
additional competition in the markets of Southern Company's subsidiaries;
potential business strategies, including acquisitions or dispositions of assets
or businesses, which cannot be assured to be completed or beneficial; internal
restructuring or other restructuring options, that may be pursued by Southern
Company; state and federal rate regulation in the United States and in foreign
countries in which Southern Company's subsidiaries operate; political, legal and
economic conditions and developments in the United States and in foreign
countries in which Southern Company's subsidiaries operate; financial market
conditions and the results of financing efforts; the impact of fluctuations in
commodity prices, interest rates and customer demand; weather and other natural
phenomena; the performance of projects undertaken by the non-traditional
business and the success of efforts to invest in and develop new opportunities;
the timing and acceptance of Southern Company's new product and service
offerings; the ability of Southern Company to obtain additional generating
capacity at competitive prices; developments in the California power markets,
including, but not limited to, governmental intervention, deterioration in the
financial condition of counterparties, default on receivables due, adverse
results in current or future litigation and adverse changes in the tariffs of
the California Power Exchange Corporation or the California Independent System
Operator Corporation; and other factors discussed elsewhere herein and in other
reports (including Form 10-K) filed from time to time by Southern Company with
the SEC.

                                       12
<PAGE>


<TABLE>

CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2000, 1999, and 1998
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                               2000                 1999              1998
----------------------------------------------------------------------------------------------------------------------------
                                                                                              (in millions)
Operating Revenues:
<S>                                                                        <C>                    <C>               <C>
Retail sales                                                               $  8,613               $8,086            $8,272
Sales for resale                                                                977                  823               896
Other revenues                                                                  476                  408               331
----------------------------------------------------------------------------------------------------------------------------
Total operating revenues                                                     10,066                9,317             9,499
----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Fuel                                                                          2,564                2,328             2,321
Purchased power                                                                 677                  409               396
Other operations                                                              1,862                1,839             1,852
Maintenance                                                                     852                  829               800
Depreciation and amortization                                                 1,171                1,139             1,340
Taxes other than income taxes                                                   536                  523               511
----------------------------------------------------------------------------------------------------------------------------
Total operating expenses                                                      7,662                7,067             7,220
----------------------------------------------------------------------------------------------------------------------------
Operating Income                                                              2,404                2,250             2,279
Other Income:
Interest income                                                                  51                   70               154
Other, net                                                                      (26)                 (55)              (53)
----------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations
  Before Interest and Income Taxes                                            2,429                2,265             2,380
----------------------------------------------------------------------------------------------------------------------------
Interest and Other:
Interest expense, net                                                           659                  556               558
Distributions on capital and preferred securities of subsidiaries               169                  175               141
Preferred dividends of subsidiaries                                              19                   20                25
----------------------------------------------------------------------------------------------------------------------------
Total interest and other                                                        847                  751               724
----------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations Before Income Taxes                       1,582                1,514             1,656
Income taxes                                                                    588                  599               670
----------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations                                             994                  915               986
Earnings from discontinued operations,
  net of income taxes of $86, $127,
  and $(121) for 2000, 1999, and 1998, respectively                             319                  361                (9)
----------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income                                                    $  1,313               $1,276           $   977
============================================================================================================================
Common Stock Data:6
Basic and diluted earnings per share of common stock -
  Earnings per share from continuing operations                               $1.52                $1.33            $ 1.41
  Earnings per share from discontinued operations (Note 11)                    0.49                 0.53             (0.01)
----------------------------------------------------------------------------------------------------------------------------
Consolidated Basic and Diluted Earnings Per Share                             $2.01                $1.86             $1.40
============================================================================================================================
Average number of shares of common stock outstanding (in millions)              653                  685               697
Cash dividends paid per share of common stock                                 $1.34                $1.34            $ 1.34
----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>

                                                                     13
<PAGE>

<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000, 1999, and 1998
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                                                                                  2000                 1999              1998
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                 (in millions)
Operating Activities:
<S>                                                                            <C>                  <C>              <C>
Consolidated net income                                                        $ 1,313              $ 1,276          $    977
Adjustments to reconcile consolidated net income
   to net cash provided from operating activities --
      Less income from discontinued operations (Note 11)                           319                  361                (9)
      Depreciation and amortization                                              1,337                1,216             1,530
      Deferred income taxes and investment tax credits                              97                   10                21
      Gain on asset sales                                                            5                   (2)              (20)
      Other, net                                                                   455                  888               (40)
      Changes in certain current assets and liabilities --
           Receivables, net                                                       (379)                (141)              (49)
           Fossil fuel stock                                                        78                  (41)              (24)
           Materials and supplies                                                  (15)                 (37)               10
           Accounts payable                                                        180                  (65)              103
           Other                                                                    66                  244              (200)
-------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities of continuing operations             2,818                2,987             2,317
-------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions                                                        (2,225)              (1,881)           (1,356)
Sales of property                                                                    -                    -                83
Other                                                                              (81)                (400)             (166)
-------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities of continuing operations                 (2,306)              (2,281)           (1,439)
-------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase (decrease) in notes payable, net                                         (275)                 831              (365)
Proceeds --
   Other long-term debt                                                            743                1,469             2,496
   Capital and preferred securities                                                  -                  250               435
   Preferred stock                                                                   -                    -               200
   Common stock                                                                    910                   24               234
Redemptions --
   First mortgage bonds                                                           (211)                (890)           (1,479)
   Other long-term debt                                                           (204)                (483)             (278)
   Capital and preferred securities                                                  -                 (100)                -
   Preferred stock                                                                   -                  (86)             (239)
   Common stock repurchased                                                       (415)                (862)             (125)
Payment of common stock dividends                                                 (873)                (921)             (933)
Other                                                                              (54)                 (76)             (155)
-------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for)
  financing activities of continuing operations                                   (379)                (844)             (209)
-------------------------------------------------------------------------------------------------------------------------------
Cash used for discontinued operations                                              (88)                 (20)             (534)
-------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents                                45                 (158)              135
Cash and Cash Equivalents at Beginning of Year                                     154                  312               177
-------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year                                       $   199              $   154          $    312
===============================================================================================================================
Supplemental Cash Flow Information
  From Continuing Operations:
Cash paid during the year for --
   Interest (net of amount capitalized)                                           $802                 $684              $680
   Income taxes                                                                   $661                 $656              $757
------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>

                                                                     14
<PAGE>

<TABLE>
CONSOLIDATED BALANCE SHEETS
At December 31, 2000 and 1999
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Assets                                                                                      2000                    1999
-------------------------------------------------------------------------------------------------------------------------
                                                                                                   (in millions)
Current Assets:
<S>                                                                                    <C>                      <C>
Cash and cash equivalents                                                                $   199                 $   154
Special deposits                                                                               6                      22
Receivables, less accumulated provisions for uncollectible accounts
   of $22 in 2000 and $22 in 1999                                                          1,312                   1,043
Unrecovered retail fuel clause revenue                                                       418                     244
Fossil fuel stock, at average cost                                                           195                     274
Materials and supplies, at average cost                                                      508                     493
Other                                                                                        187                     132
-------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                       2,825                   2,362
-------------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
In service                                                                                34,188                  32,702
Less accumulated depreciation                                                             14,350                  13,655
-------------------------------------------------------------------------------------------------------------------------
                                                                                          19,838                  19,047
Nuclear fuel, at amortized cost                                                              215                     227
Construction work in progress                                                              1,569                   1,265
-------------------------------------------------------------------------------------------------------------------------
Total property, plant, and equipment                                                      21,622                  20,539
-------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Nuclear decommissioning trusts, at fair value                                                690                     658
Net assets of discontinued operations (Note 11)                                            3,320                   2,913
Leveraged leases                                                                             596                     556
Other                                                                                        165                     156
-------------------------------------------------------------------------------------------------------------------------
Total other property and investments                                                       4,771                   4,283
-------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes                                                     957                     987
Prepaid pension costs                                                                        498                     368
Debt expense, being amortized                                                                 99                     104
Premium on reacquired debt, being amortized                                                  280                     302
Other                                                                                        310                     346
-------------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets                                                    2,144                   2,107
-------------------------------------------------------------------------------------------------------------------------
Total Assets                                                                             $31,362                 $29,291
=========================================================================================================================
The accompanying notes are an integral part of these balance sheets.



                                                                     15
</TABLE>


<PAGE>

<TABLE>

CONSOLIDATED BALANCE SHEETS (continued)
At December 31, 2000 and 1999
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity                                                            2000                    1999
----------------------------------------------------------------------------------------------------------------------------
                                                                                                        (in millions)
Current Liabilities:
<S>                                                                                          <C>                     <C>
Securities due within one year                                                               $    67                 $   329
Notes payable                                                                                  1,680                   1,955
Accounts payable                                                                                 869                     669
Customer deposits                                                                                140                     128
Taxes accrued --
   Income taxes                                                                                   88                     107
   Other                                                                                         208                     198
Interest accrued                                                                                 121                     139
Vacation pay accrued                                                                             119                     113
Other                                                                                            445                     391
----------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                                                      3,737                   4,029
----------------------------------------------------------------------------------------------------------------------------
Long-term debt (See accompanying statements)                                                   7,843                   7,251
----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes                                                              4,074                   3,884
Deferred credits related to income taxes                                                         551                     640
Accumulated deferred investment tax credits                                                      664                     693
Employee benefits provisions                                                                     478                     465
Prepaid capacity revenues                                                                         58                      80
Other                                                                                            653                     430
----------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities                                                   6,478                   6,192
----------------------------------------------------------------------------------------------------------------------------
Company or subsidiary obligated mandatorily redeemable
   capital and preferred securities (See accompanying statements)                              2,246                   2,246
----------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries (See accompanying statements)                         368                     369
----------------------------------------------------------------------------------------------------------------------------
Common stockholders' equity (See accompanying statements)                                     10,690                   9,204
----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                                                   $31,362                 $29,291
============================================================================================================================
Commitments and Contingent Matters (Notes 1, 2, 3, 5, 8, 9, and 10)
----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these balance sheets.
</TABLE>

                                                                     16
<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31, 2000 and 1999
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                  2000             1999              2000              1999
----------------------------------------------------------------------------------------------------------------------------
                                                                      (in millions)                    (percent of total)
Long-Term Debt of Subsidiaries:
First mortgage bonds --
   Maturity                        Interest Rates
   --------                        --------------
<S>                               <C>                        <C>               <C>
   2000                            6.00%                      $      -          $   200
   2003                            6.13% to 6.63%                  325              325
   2004                            6.60%                            35               35
   2005                            6.07%                            10               10
   2006 through 2010               6.50% to 6.90%                   95               95
   2021 through 2025               6.88% to 9.00%                  635              646
   2026 through 2030               6.88%                            30               30
----------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds                                       1,130            1,341
----------------------------------------------------------------------------------------------------------------------------
Long-term notes payable --
   5.35% to 9.75% due 2001-2004                                    766              584
   5.38% to 8.58% due 2005-2008                                    744              964
   6.25% to 7.63% due 2009-2017                                    170              170
   6.38% to 8.12% due 2018-2038                                    793              801
   6.63% to 7.13% due 2039-2048                                  1,029            1,029
   Adjustable rates (5.79% to 7.75% at 1/1/01)
      due 2000-2005                                                734              148
----------------------------------------------------------------------------------------------------------------------------
Total long-term notes payable                                    4,236            3,696
----------------------------------------------------------------------------------------------------------------------------
Other long-term debt --
   Pollution control revenue bonds --
      Collateralized:
         4.38% to 6.75% due 2000-2026                              539              617
         Variable rates (4.73% to 5.05% at 1/1/01)
           due 2015-2025                                            90              120
      Non-collateralized:
         4.53% to 6.75% due 2015-2034                              406              263
         Variable rates (3.50% to 5.35% at 1/1/01)
           due 2011-2037                                         1,475            1,510
----------------------------------------------------------------------------------------------------------------------------
Total other long-term debt                                       2,510            2,510
----------------------------------------------------------------------------------------------------------------------------
Capitalized lease obligations                                       95               97
----------------------------------------------------------------------------------------------------------------------------
Unamortized debt (discount), net                                   (61)             (64)
----------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
   requirement -- $509 million)                                  7,910            7,580
Less amount due within one year                                     67              329
----------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year              7,843            7,251              37.1%             38.0%
----------------------------------------------------------------------------------------------------------------------------
 </TABLE>

                                                                     17



<PAGE>

<TABLE>
CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued)
At December 31, 2000 and 1999
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                 2000             1999              2000              1999
---------------------------------------------------------------------------------------------------------------------------
                                                                     (in millions)                    (percent of total)
Company or Subsidiary Obligated Mandatorily
   Redeemable Capital and Preferred Securities:
$25 liquidation value --
<S>                                                             <C>              <C>               <C>             <C>
   6.85% to 7.00%                                                 435              435
   7.13% to 7.38%                                                 297              297
   7.60% to 7.63%                                                 415              415
   7.75%                                                          649              649
   8.14% to 8.19%                                                 400              400
   Auction rate (6.52% at 1/1/01)                                  50               50
---------------------------------------------------------------------------------------------------------------------------
Total company or subsidiary obligated mandatorily
   redeemable capital and preferred securities (annual
   distribution requirement -- $169 million)                    2,246            2,246              10.6              11.8
---------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock of Subsidiaries:
$100 par or stated value --
   4.20% to 7.00%                                                  98               99
$25 par or stated value --
   5.20% to 5.83%                                                 200              200
Adjustable and auction rates -- at 1/1/01:
   5.14% to 5.25%                                                  70               70
---------------------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock of subsidiaries
  (annual dividend requirement -- $19 million)                    368              369               1.7               1.9
---------------------------------------------------------------------------------------------------------------------------
Common Stockholders' Equity:
Common stock, par value $5 per share --
   Authorized -- 1 billion shares
   Issued   -- 2000:  701 million shares
            -- 1999:  701 million shares
   Treasury -- 2000:   19 million shares
            -- 1999:   35 million shares
   Par value                                                    3,503            3,503
   Paid-in capital                                              3,153            2,480
   Treasury, at cost                                             (545)            (919)
Retained earnings                                               4,672            4,232
Accumulated other comprehensive income
  from discontinued operations                                    (93)             (92)
---------------------------------------------------------------------------------------------------------------------------
Total common stockholders' equity                              10,690            9,204              50.6              48.3
---------------------------------------------------------------------------------------------------------------------------
Total Capitalization                                          $21,147          $19,070             100.0%            100.0%
===========================================================================================================================
The accompanying notes are an integral part of these statements.

</TABLE>


                                                                     18
<PAGE>

<TABLE>
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2000, 1999, and 1998
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>

                                                                                                      Accumulated
                                                                                                         Other
                                                                                                      Comprehensive
                                                                 Common Stock                            Income
                                                 -------------------------------------                    From
                                                  Par          Paid In                      Retained   Discontinued
                                                 Value         Capital       Treasury       Earnings    Operations       Total
-------------------------------------------------------------------------------------------------------------------------------
                                                                                 (in millions)

<S>                                            <C>             <C>         <C>              <C>        <C>           <C>
Balance at January 1, 1998                      $3,467          $2,331      $      -         $3,842     $     7       $  9,647
Net income                                           -               -             -            977           -            977
Other comprehensive income                           -               -             -              -           8              8
Stock issued                                        32             132            70              -           -            234
Stock repurchased, at cost                           -               -          (125)             -           -           (125)
Cash dividends                                       -               -             -           (933)          -           (933)
Other                                                -               -            (3)            (8)          -            (11)
-------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998                     3,499           2,463           (58)         3,878          15          9,797
Net income                                           -               -             -          1,276           -          1,276
Other comprehensive income                           -               -             -              -        (107)          (107)
Stock issued                                         4              17             1              -           -             22
Stock repurchased, at cost                           -               -          (861)             -           -           (861)
Cash dividends                                       -               -             -           (921)          -           (921)
Other                                                -               -            (1)            (1)          -             (2)
-------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999                     3,503           2,480          (919)         4,232         (92)         9,204
Net income                                           -               -             -          1,313           -          1,313
Other comprehensive income                           -               -             -              -          (1)            (1)
Stock issued                                         -               -           910              -           -            910
Stock repurchased, at cost                           -               -          (414)             -           -           (414)
Cash dividends                                       -               -             -           (873)          -           (873)
Other                                                -             673          (122)             -           -            551
-------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000                    $3,503          $3,153        $ (545)        $4,672      $  (93)       $10,690
===============================================================================================================================
</TABLE>

<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2000, 1999, and 1998
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>

                                                                                  2000                 1999                1998
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                   (in millions)

<S>                                                                            <C>                  <C>                 <C>
Consolidated Net Income                                                         $1,313               $1,276                $977
Other comprehensive income from discontinued operations,
   net of minority interest:
      Foreign currency translation adjustments                                     (2)                (165)                  12
      Less applicable income taxes (benefits)                                      (1)                 (58)                   4
-------------------------------------------------------------------------------------------------------------------------------
Consolidated Comprehensive Income                                              $1,312               $1,169                 $985
===============================================================================================================================
The accompanying notes are an integral part of these statements.

</TABLE>


                                                                19

<PAGE>

NOTES TO FINANCIAL STATEMENTS
Southern Company and Subsidiary Companies 2000 Annual Report


1. SUMMARY OF SIGNIFICANT ACCOUNTING
   POLICIES

General

Southern Company is the parent company of five integrated Southeast utilities, a
system service company, Southern Communications Services (Southern LINC),
Southern Company Energy Solutions, Southern Nuclear Operating Company (Southern
Nuclear), Mirant Corporation -- formerly Southern Energy, Inc. -- and other
direct and indirect subsidiaries. The integrated Southeast utilities -- Alabama
Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric --
provide electric service in four states. Contracts among the integrated
Southeast utilities -- related to jointly owned generating facilities,
interconnecting transmission lines, and the exchange of electric power -- are
regulated by the Federal Energy Regulatory Commission (FERC) and/or the
Securities and Exchange Commission (SEC). The system service company provides,
at cost, specialized services to Southern Company and subsidiary companies.
Southern LINC provides digital wireless communications services to the
integrated Southeast utilities and also markets these services to the public
within the Southeast. Southern Company Energy Solutions develops new business
opportunities related to energy products and services. Southern Nuclear provides
services to Southern Company's nuclear power plants. Mirant acquires, develops,
builds, owns, and operates power production and delivery facilities and provides
a broad range of energy-related services to utilities and industrial companies
in selected countries around the world. Mirant businesses include independent
power projects, integrated utilities, a distribution company, and energy trading
and marketing businesses outside the southeastern United States. As a result of
the approved spin off of Mirant, Southern Company's financial statements and
related information, both current and historical, reflect Mirant as discontinued
operations. For additional information, see Note 11.

   The financial statements reflect Southern Company's investments in the
subsidiaries on a consolidated basis. All material intercompany items have been
eliminated in consolidation. Certain prior years' data presented in the
consolidated financial statements have been reclassified to conform with the
current year presentation.

   Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both the company and its subsidiaries are
subject to the regulatory provisions of the PUHCA. The integrated Southeast
utilities also are subject to regulation by the FERC and their respective state
public service commissions. The companies follow accounting principles generally
accepted in the United States and comply with the accounting policies and
practices prescribed by their respective commissions. The preparation of
financial statements in conformity with accounting principles generally accepted
in the U.S. requires the use of estimates, and the actual results may differ
from those estimates.

Regulatory Assets and Liabilities

The integrated Southeast utilities are subject to the provisions of Financial
Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects
of Certain Types of Regulation. Regulatory assets represent probable future
revenues associated with certain costs that are expected to be recovered from
customers through the ratemaking process. Regulatory liabilities represent
probable future reductions in revenues associated with amounts that are expected
to be credited to customers through the ratemaking process. Regulatory assets
and (liabilities) reflected in the Consolidated Balance Sheets at December 31
relate to the following:

                                           2000           1999
---------------------------------------------------------------
                                             (in millions)
Deferred income tax charges               $ 957          $ 987
Premium on reacquired debt                  280            302
Department of Energy assessments             46             52
Vacation pay                                 92             87
Postretirement benefits                      30             33
Deferred income tax credits                (551)          (640)
Accelerated amortization                   (220)           (85)
Storm damage reserves                       (34)           (29)
Other, net                                  116            144
---------------------------------------------------------------
Total                                     $ 716          $ 851
===============================================================

   In the event that a portion of a company's operations is no longer subject to
the provisions of FASB Statement No. 71, the company would be required to write
off related regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the company would be required
to determine if any impairment to other assets exists, including plant, and
write down the assets, if impaired, to their fair value.


                                       20

<PAGE>

NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


Revenues and Fuel Costs

Revenues are recognized as services are rendered. Unbilled revenues are accrued
at the end of each fiscal period. Fuel costs are expensed as the fuel is used.
Electric rates for the integrated Southeast utilities include provisions to
adjust billings for fluctuations in fuel costs, the energy component of
purchased power costs, and certain other costs. Revenues are adjusted for
differences between recoverable fuel costs and amounts actually recovered in
current regulated rates.

   Southern Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts continued to average less than 1 percent of revenues.

   Fuel expense includes the amortization of the cost of nuclear fuel and a
charge, based on nuclear generation, for the permanent disposal of spent nuclear
fuel. Total charges for nuclear fuel included in fuel expense amounted to $136
million in 2000, $137 million in 1999, and $133 million in 1998. Alabama Power
and Georgia Power have contracts with the U.S. Department of Energy (DOE) that
provide for the permanent disposal of spent nuclear fuel. The DOE failed to
begin disposing of spent fuel in January 1998 as required by the contracts, and
the companies are pursuing legal remedies against the government for breach of
contract. Effective June 2000, an on-site dry storage facility for Plant Hatch
became operational. Sufficient capacity is believed to be available to continue
dry storage operations at Plant Hatch through the life of the plant. Sufficient
fuel storage capacity currently is available at Plant Vogtle to maintain
full-core discharge capability for both units into the year 2014. Sufficient
fuel storage capacity is available at Plant Farley to maintain full-core
discharge capability until the refueling outage scheduled in 2006 for Farley
Unit 1 and the refueling outage scheduled in 2008 for Farley Unit 2. Procurement
of on-site dry spent fuel storage capacity at Plant Farley is in progress, with
the intent to place the capacity in operation as early as 2005.

   Also, the Energy Policy Act of 1992 required the establishment of a Uranium
Enrichment Decontamination and Decommissioning Fund, which is funded in part by
a special assessment on utilities with nuclear plants. This assessment is being
paid over a 15-year period, which began in 1993. This fund will be used by the
DOE for the decontamination and decommissioning of its nuclear fuel enrichment
facilities. The law provides that utilities will recover these payments in the
same manner as any other fuel expense. Alabama Power and Georgia Power -- based
on its ownership interests -- estimate their respective remaining liability at
December 31, 2000, under this law to be approximately $25 million and $19
million. These obligations are recorded in the Consolidated Balance Sheets.

Depreciation and Nuclear Decommissioning

Depreciation of the original cost of plant in service is provided primarily by
using composite straight-line rates, which approximated 3.4 percent in both 2000
and 1999 and 3.3 percent in 1998. When property subject to depreciation is
retired or otherwise disposed of in the normal course of business, its original
cost -- together with the cost of removal, less salvage -- is charged to
accumulated depreciation. Minor items of property included in the original cost
of the plant are retired when the related property unit is retired. Depreciation
expense includes an amount for the expected costs of decommissioning nuclear
facilities and removal of other facilities.

   Georgia Power recorded accelerated amortization and depreciation amounting to
$135 million in 2000, $85 million in 1999, and $314 million in 1998. See Note 3
under "Georgia Power 1998 Retail Rate Order" for additional information.

   The Nuclear Regulatory Commission (NRC) requires all licensees operating
commercial power reactors to establish a plan for providing, with reasonable
assurance, funds for decommissioning. Alabama Power and Georgia Power have
external trust funds to comply with the NRC's regulations. Amounts previously
recorded in internal reserves are being transferred into the external trust
funds over periods approved by the respective state public service commissions.
The NRC's minimum external funding requirements are based on a generic estimate
of the cost to decommission the radioactive portions of a nuclear unit based on
the size and type of reactor. Alabama Power and Georgia Power have filed plans
with the NRC to ensure that -- over time -- the deposits and earnings of the
external trust funds will provide the minimum funding amounts prescribed by the
NRC.

   Site study cost is the estimate to decommission a specific facility as of the
site study year, and ultimate cost is the estimate to decommission a specific
facility as of its retirement date. The estimated costs of decommissioning --
both site study costs and ultimate costs -- based on the most current study as

                                       21

<PAGE>

NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


of December 31, 2000, for Alabama Power's Plant Farley and Georgia Power's
ownership interests in plants Hatch and Vogtle were as follows:

                                   Plant      Plant      Plant
                                  Farley      Hatch     Vogtle
--------------------------------------------------------------
Site study basis (year)             1998       2000       2000
Decommissioning periods:
   Beginning year                   2017       2014       2027
   Completion year                  2031       2042       2045
--------------------------------------------------------------
                                        (in millions)
Site study costs:
   Radiated structures              $629       $486       $420
   Non-radiated structures            60         37         48
--------------------------------------------------------------
Total                               $689       $523       $468
==============================================================
                                        (in millions)
Ultimate costs:
   Radiated structures            $1,868     $1,004     $1,468
   Non-radiated structures           178         79        166
--------------------------------------------------------------
Total                             $2,046     $1,083     $1,634
==============================================================

Significant assumptions:
   Inflation rate                    4.5%       4.7%       4.7%
   Trust earning rate                7.0        6.5        6.5
--------------------------------------------------------------

   The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
from the above estimates because of changes in the assumed date of
decommissioning, changes in NRC requirements, or changes in the assumptions used
in making these estimates.

   Georgia Power has filed with the NRC an application requesting a 20-year
renewal of the licenses for both units at Plant Hatch, which would permit the
operation of both units until 2034.

   Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the respective state public service commissions. The amount
expensed in 2000 and fund balances were as follows:

                                   Plant      Plant      Plant
                                  Farley      Hatch     Vogtle
---------------------------------------------------------------
                                        (in millions)
Amount expensed in 2000             $ 18       $ 19       $  9
Accumulated provisions:
   External trust funds,
      at fair value                 $314       $230       $146
   Internal reserves                  38         20         12
---------------------------------------------------------------
Total                               $352       $250       $158
===============================================================

     Alabama Power's decommissioning costs for ratemaking are based on the site
study. Effective January 1, 1999, the Georgia Public Service Commission (GPSC)
increased Georgia Power's annual provision for decommissioning expenses TO $28
million. This amount is based on the NRC generic estimate to decommission  the
radioactive portion of the facilities as of 1997. The estimates are $526 million
and $438 million for plants Hatch and Vogtle, respectively.  The ultimate costs
associated with the 1997 NRC minimum funding requirements are $1.1 billion and
$1.3  billion for plants Hatch and  Vogtle,  respectively.  Alabama  Power and
Georgia Power expect their respective state public service commissions to
periodically review and adjust, if necessary, the amounts collected in rates for
the anticipated cost of decommissioning.

Income Taxes

Southern Company uses the liability method of accounting for deferred income
taxes and provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory
disallowances and impairments. Original cost includes: materials; labor; minor
items of property; appropriate administrative and general costs; payroll-related
costs such as taxes, pensions, and other benefits; and the estimated cost of
funds used during construction. The cost of funds used during construction was
$71 million in 2000, $36 million in 1999, and $19 million in 1998. The cost of
maintenance, repairs, and replacement of minor items of property is charged to
maintenance expense. The cost of replacements of property -- exclusive of minor
items of property -- is capitalized.

Leveraged Leases

Southern Company has several leveraged lease agreements -- ranging up to 30
years -- that primarily relate to energy generation, distribution, and
transportation assets. The investment income earned from these leveraged leases
is immaterial for all periods presented.


                                       22
<PAGE>


NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


Impairment of Long-Lived Assets and Intangibles

Southern Company evaluates long-lived assets for impairment when events or
changes in circumstances indicate that the carrying value of such assets may not
be recoverable. The determination of whether an impairment has occurred is based
on an estimate of undiscounted future cash flows attributable to the assets, as
compared to the carrying value of the assets. If an impairment has occurred, the
amount of the impairment recognized is determined by estimating the fair value
of the assets and recording a provision for loss if the carrying value is
greater than the fair value. For assets identified as held for sale, the
carrying value is compared to the estimated fair value less the cost to sell in
order to determine if an impairment provision is required. Until the assets are
disposed of, their estimated fair value is reevaluated when circumstances or
events change.

Cash and Cash Equivalents

For purposes of the consolidated financial statements, temporary cash
investments are considered cash equivalents. Temporary cash investments are
securities with original maturities of 90 days or less.

Materials and Supplies

Generally, materials and supplies include the costs of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.

Comprehensive Income

Comprehensive income -- consisting of net income and foreign currency
translation adjustments, net of taxes -- is presented in the consolidated
financial statements. The objective of the statement is to report a measure of
all changes in common stock equity of an enterprise that result from
transactions and other economic events of the period other than transactions
with owners.

Financial Instruments for Non-Trading Activities

Southern Company uses derivative financial instruments to hedge exposures to
fluctuations in interest rates, foreign currency exchange rates, and certain
commodity prices. Gains and losses on qualifying hedges are deferred and
recognized either in income or as an adjustment to the carrying amount of the
hedged item when the transaction occurs.

   Southern Company is exposed to losses related to financial instruments in the
event of counterparties' nonperformance. The company has established controls to
determine and monitor the creditworthiness of counterparties in order to
mitigate the company's exposure to counterparty credit risk. The company is
unaware of any counterparties that will fail to meet their obligations.

   Southern Company has firm purchase commitments for equipment that require
payment in euros. As a hedge against fluctuations in the exchange rate for
euros, the company entered into forward currency swaps. The notional amount is
32 million euros maturing in 2001 through 2002. At December 31, 2000, the
unrecognized gain on these swaps was approximately $3 million.

   Other Southern Company financial instruments for which the carrying amount
did not equal fair value at December 31 were as follows:

                                       Carrying           Fair
                                         Amount          Value
------------------------------------------------------------------
                                            (in millions)
Long-term debt:
   At December 31, 2000                  $7,815         $7,702
   At December 31, 1999                   7,483          7,046
Capital and preferred securities:
   At December 31, 2000                   2,246          2,190
   At December 31, 1999                   2,246          1,942
------------------------------------------------------------------

   The fair values for long-term debt and capital and preferred securities were
based on either closing market price or closing price of comparable instruments.

2. Retirement Benefits

Southern Company has defined benefit, trusteed, pension plans that cover
substantially all employees. Southern Company provides certain medical care and
life insurance benefits for retired employees. Substantially all these employees
may become eligible for such benefits when they retire. The integrated Southeast
utilities fund trusts to the extent required by their respective regulatory
commissions. In late 2000, Southern Company adopted several pension and
postretirement benefits plan changes that had the effect of increasing benefits
to both current and future retirees. The effects of these changes will be to
increase annual pension and postretirement benefits costs by approximately
$28 million and $26 million, respectively.



                                       23

<PAGE>

NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


   The measurement date for plan assets and obligations is September 30 for each
year. The following disclosures exclude discontinued operations.

Pension Plans

Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:

                                                Projected
                                           Benefit Obligations
                                           ---------------------
                                             2000         1999
----------------------------------------------------------------
                                                (in millions)
Balance at beginning of year               $3,098       $3,084
Service cost                                   94           95
Interest cost                                 227          204
Benefits paid                                (145)        (143)
Actuarial (gain) loss                         (28)        (142)
----------------------------------------------------------------
Balance at end of year                     $3,246       $3,098
================================================================

                                               Plan Assets
                                             -------------------
                                             2000         1999
----------------------------------------------------------------
                                                (in millions)
Balance at beginning of year               $5,266       $4,646
Actual return on plan assets                1,030          771
Benefits paid                                (139)        (151)
----------------------------------------------------------------
Balance at end of year                     $6,157       $5,266
================================================================

   The accrued pension costs recognized in the Consolidated Balance
as follows:

                                             2000         1999
---------------------------------------------------------------
                                                (in millions)
Funded status                             $ 2,911      $ 2,168
Unrecognized transition obligation            (64)         (77)
Unrecognized prior service cost                97          106
Unrecognized net gain                      (2,446)      (1,829)
---------------------------------------------------------------
Prepaid asset recognized in the
   Consolidated Balance Sheets            $   498      $   368
===============================================================

   Components of the pension plans' net periodic cost were as follows:

                                    2000      1999      1998
--------------------------------------------------------------
                                          (in millions)
Service cost                       $  94    $   95     $   86
Interest cost                        227       204        204
Expected return on
   plan assets                      (384)     (348)      (320)
Recognized net gain                  (64)      (41)       (47)
Net amortization                      (3)       (4)        (3)
--------------------------------------------------------------
Net pension cost (income)          $(130)   $  (94)    $  (80)
==============================================================

Postretirement Benefits

Changes during the year in the accumulated benefit obligations and in the fair
value of plan assets were as follows:

                                               Accumulated
                                           Benefit Obligations
                                           --------------------
                                             2000         1999
---------------------------------------------------------------
                                                (in millions)
Balance at beginning of year               $  980       $1,029
Service cost                                   18           21
Interest cost                                  76           68
Benefits paid                                 (43)         (36)
Actuarial (gain) loss                          21         (102)
---------------------------------------------------------------
Balance at end of year                     $1,052       $  980
===============================================================

                                               Plan Assets
                                             ------------------
                                             2000         1999
---------------------------------------------------------------
                                                (in millions)
Balance at beginning of year                 $395         $336
Actual return on plan assets                   47           36
Employer contributions                         59           60
Benefits paid                                 (42)         (37)
---------------------------------------------------------------
Balance at end of year                       $459         $395
===============================================================

   The accrued postretirement costs recognized in the Consolidated Balance
Sheets were as follows:

                                             2000         1999
---------------------------------------------------------------
                                                (in millions)
Funded status                               $(593)       $(585)
Unrecognized transition obligation            189          203
Unrecognized prior service cost                66            -
Unrecognized net loss (gain)                  (53)          10
Fourth quarter contributions                   35           26
---------------------------------------------------------------
Accrued liability recognized in the
   Consolidated Balance Sheets              $(356)       $(346)
===============================================================

   Components of the postretirement plans' net periodic cost were as follows:


                                    2000      1999       1998
--------------------------------------------------------------
                                          (in millions)
Service cost                        $ 18      $ 21       $ 18
Interest cost                         76        68         68
Expected return on
   plan assets                       (34)      (26)       (21)
Recognized net gain                    -         2          2
Net amortization                      18        15         15
--------------------------------------------------------------
Net postretirement cost             $ 78      $ 80       $ 82
==============================================================


                                       24

<PAGE>

NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


   The weighted average rates assumed in the actuarial calculations
for both the pension plans and postretirement benefits were:

                                             2000         1999
---------------------------------------------------------------
Discount                                     7.50%        7.50%
Annual salary increase                       5.00         5.00
Long-term return on plan assets              8.50         8.50
---------------------------------------------------------------

   An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 7.29
percent for 2000, decreasing gradually to 5.50 percent through the year 2005,
and remaining at that level  thereafter.  An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
2000 as follows:

                                      1 Percent      1 Percent
                                      Increase        Decrease
---------------------------------------------------------------
                                            (in millions)
Benefit obligation                      $71                $63
Service and interest costs                6                  6
---------------------------------------------------------------

Employee Savings Plan

Southern Company also sponsors a 401(k) defined contribution plan covering
substantially all employees. The company provides a 75 percent matching
contribution up to 6 percent of an employee's base salary. Total matching
contributions made to the plan for the years 2000, 1999, and 1998 were
$49 million, $46 million, and $43 million, respectively.

 3. CONTINGENCIES AND REGULATORY
    MATTERS

Georgia Power Potentially Responsible Party Status

In January 1995, Georgia Power and four other unrelated entities were notified
by the Environmental Protection Agency (EPA) that they have been designated as
potentially responsible parties under the Comprehensive Environmental Response,
Compensation, and Liability Act with respect to a site in Brunswick, Georgia. As
of December 31, 2000, Georgia Power had recorded approximately $5 million in
cumulative expenses associated with Georgia Power's agreed-upon share of the
removal and remedial investigation and feasibility study costs for this site.

   The final outcome of this matter cannot now be determined. However, based on
the nature and extent of Georgia Power's activities relating to the site,
management believes that the company's portion of any remaining remediation
costs should not be material to the financial statements.

Environmental Litigation

On November 3, 1999, the EPA brought a civil action in the U.S. District Court
against Alabama Power, Georgia Power, and the system service company. The
complaint alleges violations of the prevention of significant deterioration and
new source review provisions of the Clean Air Act with respect to five
coal-fired generating facilities in Alabama and Georgia. The civil action
requests penalties and injunctive relief, including an order requiring the
installation of the best available control technology at the affected units. The
Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation
at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per
day.

   The EPA concurrently issued to the integrated Southeast utilities a notice of
violation related to 10 generating facilities, which includes the five
facilities mentioned previously. In early 2000, the EPA filed a motion to amend
its complaint to add the violations alleged in its notice of violation, and to
add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The
complaint and notice of violation are similar to those brought against and
issued to several other electric utilities. These complaints and notices of
violation allege that the utilities had failed to secure necessary permits or
install additional pollution equipment when performing maintenance and
construction at coal burning plants constructed or under construction prior to
1978. On August 1, 2000, the U.S. District Court granted Alabama Power's motion
to dismiss for lack of jurisdiction in Georgia and granted the system service
company's motion to dismiss on the grounds that it neither owned nor operated
the generating units involved in the proceedings. On January 12, 2001, the EPA
re-filed its claims against Alabama Power in federal district court in
Birmingham, Alabama. The EPA did not include the system service company in the
new complaint. Southern Company believes that its integrated utilities complied
with applicable laws and the EPA's regulations and interpretations in effect at
the time the work in question took place.


                                       25
<PAGE>


NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


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

Mobile Energy Services' Petition for Bankruptcy

Mobile Energy Services Holdings (MESH), a subsidiary of Southern Company, is the
owner and operator of a facility that generates electricity, produces steam, and
processes black liquor as part of a pulp and paper complex in Mobile, Alabama.
On January 14, 1999, MESH filed a petition for Chapter 11 bankruptcy relief in
the U.S. Bankruptcy Court. This action was in response to Kimberly-Clark Tissue
Company's (Kimberly-Clark) announcement in May 1998 of plans to close its pulp
mill, effective September 1, 1999. The pulp mill had historically provided 50
percent of MESH's revenues.

   As a result of settlement discussions with Kimberly-Clark and MESH's
bondholders, Southern Company recorded in 1999 a $69 million after-tax write
down of its investment in MESH. Southern Company recorded an additional $10
million after-tax write down in 2000. At December 31, 2000, MESH had total
assets of $373 million and senior debt outstanding of $190 million of first
mortgage bonds and $72 million related to tax-exempt bonds. In connection with
the bond financings, Southern Company provided certain limited guarantees, in
lieu of funding debt service and maintenance reserve accounts with cash. As of
December 31, 2000, Southern Company had paid the full $41 million pursuant to
the guarantees. Southern Company continues to have guarantees outstanding of
certain potential environmental and other obligations of MESH that represent a
maximum contingent liability of $19 million at December 31, 2000. Mirant has
agreed to indemnify Southern Company for any future obligations incurred under
such guarantees.

   On August 4, 2000, MESH filed a proposed plan of reorganization with the
bankruptcy court. The proposed plan of reorganization was again amended on
February 21, 2001. Changes in circumstances since the filing of the amended plan
may require further modifications of the plan. Southern Company expects that
approval of a plan of reorganization would result in a termination of Southern
Company's ownership interest in MESH, but would not affect Southern Company's
continuing guarantee obligations described earlier. The final outcome of this
matter cannot now be determined.

California Electricity Markets Litigation

Five lawsuits have been filed in the superior courts of California alleging that
certain owners of electric generation facilities in California, including
Southern Company, engaged in various unlawful and anticompetitive acts that
served to manipulate wholesale power markets and inflate wholesale electricity
prices in California. Four of the suits seek class action status. One lawsuit
naming Southern Company, Mirant, and other generators as defendants alleges
that, as a result of the defendants' conduct, customers paid approximately $4
billion more for electricity than they otherwise would have and seeks an award
of treble damages, as well as other injunctive and equitable relief. The other
suits likewise seek treble damages and equitable relief. While two of the suits
name Southern Company as a defendant, it appears that the allegations, as they
may relate to Southern Company, are directed to activities of subsidiaries of
Mirant. One such suit names Mirant itself as a defendant. Southern Company has
notified Mirant of its claim for indemnification for costs associated with these
actions under the terms of the master separation agreement that governs the spin
off of Mirant. Mirant has undertaken the defense of all of the claims. The final
outcome of these lawsuits cannot now be determined.

Race Discrimination Litigation

On July 28, 2000, a lawsuit alleging race discrimination was filed by three
Georgia Power employees against Georgia Power, Southern Company, and the system
service company in the United States District Court for the Northern District of
Georgia. The lawsuit also raised claims on behalf of a purported class. The
plaintiffs seek compensatory and punitive damages in an unspecified amount, as
well as injunctive relief. On August 14, 2000, the lawsuit was amended to add
four more plaintiffs and a new defendant, Southern Company Energy Solutions,
Inc. The lawsuit is in the discovery phase. The final outcome of this matter
cannot now be determined.

Alabama Power Rate Adjustment Procedures

In November 1982, the Alabama Public Service Commission (APSC) adopted rates
that provide for periodic adjustments based upon Alabama Power's earned return


                                     26

<PAGE>


NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


on end-of-period retail common equity. The rates also provide for adjustments to
recognize the placing of new generating facilities in retail service. Both
increases and decreases have been placed into effect since the adoption of these
rates. The rate adjustment procedures allow a return on common equity range of
13 percent to 14.5 percent and limit increases or decreases in rates to 4
percent in any calendar year. There is a moratorium on any periodic retail rate
increases (but not decreases) until July 2001.

   In December 1995, the APSC issued an order authorizing Alabama Power to
reduce balance sheet items -- such as plant and deferred charges -- at any time
the company's actual base rate revenues exceed the budgeted revenues. In April
1997, the APSC issued an additional order authorizing Alabama Power to reduce
balance sheet asset items. This order authorizes the reduction of such items up
to an amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by Alabama Power. In 1998,
Alabama Power -- in accordance with the 1995 rate order -- recorded $33 million
of additional amortization of premium on reacquired debt. Alabama Power did not
record any additional amounts in 2000 or 1999.

   The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.

Georgia Power 1998 Retail Rate Order

As required by the GPSC, Georgia Power filed a general rate case in 1998. On
December 18, 1998, the GPSC approved a three-year rate order for Georgia Power
ending December 31, 2001. Under the terms of the order, Georgia Power's earnings
will continue to be evaluated against a retail return on common equity range of
10 percent to 12.5 percent. Georgia Power's annual retail rates were decreased
by $262 million effective January 1, 1999, and by an additional $24 million
effective January 1, 2000. In addition, the order provided for $85 million
annually to be applied to accelerated amortization or depreciation of assets,
and up to an additional $50 million annually in 2000 and 2001 of any earnings
above the 12.5 percent return. In accordance with the rate order, Georgia Power
recorded accelerated amortization of $135 million and $85 million in 2000 and
1999, respectively. In May 2000, the GPSC ordered that these funds be maintained
in a regulatory liability account and ordered that interest be accrued on this
account at the prime rate. In 2000, interest of $10 million was recorded. These
amounts are reflected on the balance sheets in deferred credits and other
liabilities, other.

   Two-thirds of any additional earnings above the 12.5 percent return in any
year will be applied to rate reductions and the remaining one-third retained by
Georgia Power. In both 2000 and 1999, Georgia Power's return was above 12.5
percent, and accordingly, it recorded in 1999 $79 million of revenues to be
refunded to customers in 2000. In 2000, Georgia Power recorded $44 million as an
estimate of revenues to be refunded in 2001. Georgia Power is required to file a
general rate case on July 1, 2001. At that time, the GPSC is expected to
determine whether the rate order should be continued, modified, or discontinued.

4. JOINT OWNERSHIP AGREEMENTS

Alabama Power owns an undivided interest in units 1 and 2 of Plant Miller and
related facilities jointly with Alabama Electric Cooperative, Inc.

   Georgia Power owns undivided interests in plants Vogtle, Hatch, Scherer, and
Wansley in varying amounts jointly with Oglethorpe Power Corporation (OPC), the
Municipal Electric Authority of Georgia, the city of Dalton, Georgia, Florida
Power & Light Company (FP&L), and Jacksonville Electric Authority (JEA). In
addition, Georgia Power has joint ownership agreements with OPC for the Rocky
Mountain facilities and with Florida Power Corporation (FPC) for a combustion
turbine unit at Intercession City, Florida.

   At December 31, 2000, Alabama Power's and Georgia Power's ownership and
investment (exclusive of nuclear fuel) in jointly owned facilities with the
above entities were as follows:

                             Jointly Owned Facilities
                       ----------------------------------------
                         Percent     Amount of      Accumulated
                       Ownership    Investment     Depreciation
                       ----------  ----------------------------
                                         (in millions)
Plant Vogtle
   (nuclear)                45.7%       $3,301          $1,724
Plant Hatch
   (nuclear)                50.1           873             650
Plant Miller
   (coal)
   Units 1 and 2            91.8           743             312
Plant Scherer
   (coal)
   Units 1 and 2             8.4           112              53
Plant Wansley
   (coal)                   53.5           300             150
Rocky Mountain
   (pumped storage)         25.4           169              72
Intercession City
   (combustion turbine)     33.3            11               1
---------------------------------------------------------------



                                       27

<PAGE>


NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


   Alabama Power and Georgia Power have contracted to operate and maintain the
jointly owned facilities -- except for the Rocky Mountain project and
Intercession City -- as agents for their respective co-owners. The companies'
proportionate share of their plant operating expenses is included in the
corresponding operating expenses in the Consolidated Statements of Income.

5. LONG-TERM POWER SALES AND LEASE
   AGREEMENTS

The integrated Southeast utilities have long-term contractual agreements for the
sale and lease of capacity to certain non-affiliated utilities located outside
the system's service area. These agreements are firm and are related to specific
generating units. Because the energy is generally provided at cost under these
agreements, profitability is primarily affected by capacity revenues.

   Unit power from specific generating plants is currently being sold to FP&L,
FPC, and JEA. Under these agreements, approximately 1,500 megawatts of capacity
is scheduled to be sold annually unless reduced by FP&L, FPC, and JEA for the
periods after 2000 with a minimum of three years notice -- until the expiration
of the contracts in 2010. Capacity revenues from unit power sales amounted to
$177 million in 2000, $174 million in 1999, and $196 million in 1998.

   During 2000, Georgia Power and Mississippi Power entered into certain
operating leases for portions of their generating unit capacity. Capacity
revenues from these operating leases amounted to $20 million in 2000 and are
included in the financial statements as sales for resale. Minimum future
capacity revenues from noncancelable operating leases as of December 31, 2000
are as follows:

Year                                                   Amounts
-----                                                -----------
                                                   (in millions)
2001                                                     $  53
2002                                                        66
2003                                                        66
2004                                                        66
2005                                                        27
2006 and thereafter                                        114
----------------------------------------------------------------
Total                                                     $392
================================================================

6. Income Taxes

At December 31, 2000, the tax-related regulatory assets and liabilities were
$957 million and $551 million, respectively. These assets are attributable to
tax benefits flowed through to customers in prior years and to taxes applicable
to capitalized interest. These liabilities are attributable to deferred taxes
previously recognized at rates higher than current enacted tax law and to
unamortized investment tax credits. The following tables and disclosures exclude
discontinued operations.

   Details of income tax provisions are as follows:

                                     2000       1999      1998
---------------------------------------------------------------
                                           (in millions)
Total provision for income taxes:
Federal --
   Current                          $ 421      $ 504     $ 548
   Deferred                            95         11        23
---------------------------------------------------------------
                                      516        515       571
---------------------------------------------------------------
State --
   Current                             71         85       102
   Deferred                             1         (1)       (3)
---------------------------------------------------------------
                                       72         84        99
---------------------------------------------------------------
Total                               $ 588      $ 599     $ 670
===============================================================

   The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:

                                                2000      1999
---------------------------------------------------------------
                                                 (in millions)
Deferred tax liabilities:
   Accelerated depreciation                   $3,199    $3,088
   Property basis differences                  1,105     1,175
   Other                                         650       444
---------------------------------------------------------------
Total                                          4,954     4,707
---------------------------------------------------------------
Deferred tax assets:
   Federal effect of state deferred taxes        111       113
   Other property basis differences              206       221
   Deferred costs                                190       102
   Pension and other benefits                    125       121
   Other                                         231       198
---------------------------------------------------------------
Total                                            863       755
---------------------------------------------------------------
Net deferred tax liabilities                   4,091     3,952
Portion included in current assets, net          (17)      (68)
---------------------------------------------------------------
Accumulated deferred income taxes
   in the Consolidated Balance Sheets         $4,074    $3,884
===============================================================

   In accordance with regulatory requirements, deferred investment tax credits
are amortized over the lives of the related property with such amortization
normally applied as a credit to reduce depreciation in the Consolidated
Statements of Income. Credits amortized in this manner amounted to $30 million

                                       28


<PAGE>


NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


in 2000, $30 million in 1999, and $38 million in 1998. At December 31, 2000, all
investment tax credits available to reduce federal income taxes payable had been
utilized.

   The provision for income taxes differs from the amount of income taxes
determined by applying the applicable U.S. Federal statutory rate to earnings
before income taxes and preferred dividends of subsidiaries, as a result of the
following:

                                       2000      1999     1998
---------------------------------------------------------------
Federal statutory rate                 35.0%     35.0%    35.0%
State income tax,
     net of federal deduction           3.4       3.8      3.8
Non-deductible book
   depreciation                         1.7       1.9      4.0
Difference in prior years'
   deferred and current tax rate       (1.3)     (1.3)    (1.3)
Other                                  (2.1)     (0.3)    (1.6)
---------------------------------------------------------------
Effective income tax rate              36.7%     39.1%    39.9%
===============================================================

   Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis.

7. Common Stock

Stock Issued and Repurchased

The amount and timing of additional equity capital to be raised in 2001 -- as
well as in subsequent years -- will be contingent on Southern Company's
investment opportunities. Equity capital may be provided from any combination of
public offerings, private placements, or the company's stock plans.

   In December 2000, Southern Company issued 28 million treasury shares of
common stock through a public offering. The offering, which included an
overallotment of 3 million shares, raised some $800 million and was priced at
$28.50 per share. The proceeds were used to repay short-term commercial paper.

   In April 1999, Southern Company's Board of Directors approved the repurchase
of up to 50 million shares of Southern Company's common stock over a two-year
period through open market or privately negotiated transactions. Under this
program, 50 million shares were repurchased by February 2000 at an average price
of $25.53. Funding for the program was provided from Southern Company's
commercial paper program.

Shares Reserved

At December 31, 2000, a total of 59 million shares was reserved for issuance
pursuant to the Southern Investment Plan, the Employee Savings Plan, the Outside
Directors Stock Plan, and the Performance Stock Plan.

Performance Stock Plan

The performance stock plan provides non-qualified stock options to a large
segment of Southern Company's employees ranging from line management to
executives. As of December 31, 2000, 5,744 current and former employees
participated in the plan. The maximum number of shares of common stock that may
be issued under the plan may not exceed 40 million. The prices of options
granted to date have been at the fair market value of the shares on the dates
of grant. Options granted to date become exercisable pro rata over a maximum
period of three years from the date of grant. Options outstanding will expire
no later than 10 years after the date of grant, unless terminated earlier by
the Southern Company Board of Directors in accordance with the plan. Stock
option activity in 1999 and 2000 for the plan is summarized below:

                                         Shares        Average
                                        Subject   Option Price
                                      To Option      Per Share
---------------------------------------------------------------
Balance at December 31, 1998          6,445,398         $22.77
Options granted                       2,108,818          26.56
Options canceled                        (28,630)         25.48
Options exercised                       (56,708)         19.51
---------------------------------------------------------------
Balance at December 31, 1999          8,468,878          23.73
Options granted                       6,977,038          23.25
Options canceled                       (226,597)         23.66
Options exercised                      (984,897)         21.63
---------------------------------------------------------------
Balance at December 31, 2000         14,234,422         $23.63
===============================================================
Shares reserved for future grants:
  At December 31, 1998               36,598,001
  At December 31, 1999               34,515,156
  At December 31, 2000               27,750,261
---------------------------------------------------------------
Options exercisable:
  At December 31, 1999                4,525,349
  At December 31, 2000                5,898,698
---------------------------------------------------------------

   Southern Company accounts for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25. Accordingly, no
compensation expense has been recognized.


                                       29
<PAGE>


NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


   The following table summarizes information about options outstanding at
December 31, 2000:

                                      Price Range of Options
                                    --------------------------
                                     14-20      21-24    25-28
--------------------------------------------------------------
Outstanding:
   Shares (in thousands)               430     10,217    3,587
   Average remaining
      life (in years)                  2.5        8.2      8.1
   Average exercise price           $17.36     $22.79   $26.77
Exerciseable:
   Shares (in thousands)               424      3,653    1,822
   Average exercise price           $17.64     $21.96   $26.84
--------------------------------------------------------------

   The estimated fair values of stock options granted in 2000, 1999 and 1998
were derived using the Black-Scholes stock option pricing model. The following
table shows the assumptions and the weighted average fair values of stock
options:

                                     2000       1999      1998
-----------------------------------------------------------------
Interest rate                         6.7%       5.8%      5.5%
Average expected life of
   stock options (in years)           4.0        3.7       3.7
Expected volatility of
   common stock                      20.9%      20.7%     19.2%
Expected annual dividends
   on common stock                  $1.34      $1.34     $1.34
Weighted average fair value
   of stock options granted         $3.36      $4.61     $4.27
-----------------------------------------------------------------

   The pro forma impact on earnings of fair-value accounting for options granted
-- as required by FASB Statement No. 123, Accounting for Stock-Based
Compensation -- is 1.2 cents per share in 2000 and less than 1 cent in both 1999
and 1998.

Diluted Earnings Per Share

For Southern Company, the only difference in computing basic and diluted
earnings per share is attributable to outstanding options under the Performance
Stock Plan. The effect of the stock options was determined using the treasury
stock method. Shares used to compute diluted earnings per share are as follows:

                                   Average Common Stock Shares
                                -------------------------------
                                2000         1999         1998
---------------------------------------------------------------
                                      (in thousands)
As reported shares           653,086      685,163      696,944
Effect of options              1,108          580          739
---------------------------------------------------------------
Diluted shares               654,194      685,743      697,683
===============================================================

Common Stock Dividend Restrictions

The income of Southern Company is derived primarily from equity in earnings of
its subsidiaries. At December 31, 2000, consolidated retained earnings included
$3.5 billion of undistributed retained earnings of the subsidiaries. Of this
amount, $2.0 billion was restricted against the payment by the subsidiary
companies of cash dividends on common stock under terms of bond indentures.

8. FINANCING

Capital and Preferred Securities

Company or subsidiary obligated mandatorily redeemable capital and preferred
securities have been issued by special purpose financing entities of Southern
Company and its subsidiaries. Substantially all the assets of these special
financing entities are junior subordinated notes issued by the related company
seeking financing. Each of these companies considers that the mechanisms and
obligations relating to the capital or preferred securities issued for its
benefit, taken together, constitute a full and unconditional guarantee by it of
the respective special financing entities' payment obligations with respect to
the capital or preferred securities. At December 31, 2000, capital securities of
$950 million and preferred securities of $1.3 billion were outstanding. Southern
Company guarantees the notes related to $950 million of capital or preferred
securities issued on its behalf.

Long-Term Debt Due Within One Year

A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:

                                               2000       1999
--------------------------------------------------------------
                                                (in millions)
Bond improvement fund requirements              $11      $  14
Less:
   Portion to be satisfied by certifying
      property additions                         11          9
--------------------------------------------------------------
Cash requirements                                 -          5
First mortgage bond maturities
   and redemptions                                -        200
Other long-term debt maturities                  67        124
--------------------------------------------------------------
Total                                           $67       $329
==============================================================

   The first mortgage bond improvement fund requirements amount to 1 percent of
each outstanding series of bonds authenticated under the indentures prior to


                                       30

<PAGE>

NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


January 1 of each year, other than those issued to collateralize pollution
control revenue bonds and other obligations. The requirements may be satisfied
by depositing cash or reacquiring bonds, or by pledging additional property
equal to 166 2/3 percent of such requirements.

   With respect to the collateralized pollution control revenue bonds, the
integrated Southeast utilities have authenticated and delivered to trustees a
like principal amount of first mortgage bonds as security for obligations under
installment sale or loan agreements. The principal and interest on the first
mortgage bonds will be payable only in the event of default under the
agreements.

   Improvement fund requirements and/or serial maturities through 2005
applicable to other long-term debt are as follows: $67 million in 2001; $489
million in 2002; $479 million in 2003; $323 million in 2004; and $600 million in
2005.

Assets Subject to Lien

Each of Southern Company's subsidiaries is organized as a legal entity, separate
and apart from Southern Company and its other subsidiaries. The subsidiary
companies' mortgages, which secure the first mortgage bonds issued by the
companies, constitute a direct first lien on substantially all of the companies'
respective fixed property and franchises. There are no agreements or other
arrangements among the subsidiary companies under which the assets of one
company have been pledged or otherwise made available to satisfy obligations of
Southern Company or any of its other subsidiaries.

Bank Credit Arrangements

At the beginning of 2001, unused credit arrangements with banks totaled $5.1
billion, of which $3.2 billion expires during 2001, $1.0 billion during 2002,
and $900 million during 2003 and 2004. The following table outlines the credit
arrangements by company:

                                   Amount of Credit
                           -----------------------------------
                                                 Expires
                                               ---------------
                                                        2002 &
Company                   Total    Unused      2001     beyond
-------                   ------------------------------------
                                     (in millions)
Alabama Power            $  925    $  925    $  535     $  390
Georgia Power             1,765     1,765     1,265        500
Gulf Power                  123       115       115          -
Mississippi Power           117       117       117          -
Savannah Electric            65        50        40         10
Southern Company          2,100     2,100     1,100      1,000
Other                        60        51        51          -
--------------------------------------------------------------
Total                    $5,155    $5,123    $3,223     $1,900
==============================================================

   Approximately $2.9 billion of the credit facilities allows for term loans
ranging from one to three years. Most of the agreements include stated borrowing
rates but also allow for competitive bid loans.

   All of the credit arrangements require payment of commitment fees based on
the unused portion of the commitments or the maintenance of compensating
balances with the banks. These balances are not legally restricted from
withdrawal. Of the total $5.1 billion in unused credit, $2.1 billion, $1.65
billion, and $780 million are syndicated credit arrangements of Southern
Company, Georgia Power, and Alabama Power, respectively. These facilities also
require the payment of agent fees.

   A portion of the $5.1 billion unused credit with banks is allocated to
provide liquidity support to the companies' variable rate pollution control
bonds. The amount of variable rate pollution control bonds requiring liquidity
support as of December 31, 2000, was $1.6 billion.

   Southern Company, Alabama Power, and Georgia Power borrow through commercial
paper programs that have the liquidity support of committed bank credit
arrangements. In addition, the companies from time to time borrow under
uncommitted lines of credit with banks.

9. COMMITMENTS

Construction Program

Southern  Company is engaged in continuous construction programs, currently
estimated to total $2.9 billion in 2001, $2.6  billion in 2002,  and $1.7
billion in 2003. The construction programs are subject to periodic review
and revision, and actual construction costs may vary  from the above
estimates because of numerous factors. These factors include:  changes in
business conditions;  acquisition of additional generating assets; revised
load growth estimates;  changes in environmental regulations;  changes in
existing nuclear plants to meet new regulatory requirements;  increasing
costs of labor, equipment,  and materials; and cost of capital. At December
31, 2000, significant purchase commitments were outstanding in connection
with the construction program.  Southern Company has approximately  6,300
megawatts of additional generating capacity scheduled to be placed in
service by 2003.

   See Management's Discussion and Analysis under "Environmental Matters" for
information on the impact of the Clean Air Act Amendments of 1990 and other
environmental matters.

                                       31

<PAGE>


NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


Fuel and Purchased Power Commitments

To supply a portion of the fuel requirements of the generating plants, Southern
Company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels, and other financial commitments.
Also, Southern Company has entered into various long-term commitments for the
purchase of electricity. Total estimated long-term obligations at December 31,
2000, were as follows:

                                                     Purchased
Year                                    Fuel           Power
----                                 -------------------------
                                            (in millions)
2001                                 $ 2,481            $   81
2002                                   1,897                97
2003                                   1,711                99
2004                                   1,328                95
2005                                   1,055                95
2006 and thereafter                    3,764               693
--------------------------------------------------------------
Total commitments                    $12,236            $1,160
==============================================================

Operating Leases

Southern Company has operating lease agreements with various terms and
expiration dates. These expenses totaled $42 million, $35 million, and $26
million for 2000, 1999, and 1998, respectively. At December 31, 2000, estimated
minimum rental commitments for noncancelable operating leases were as follows:

Year                                                   Amounts
----                                              ------------
                                                 (in millions)
2001                                                     $  57
2002                                                        71
2003                                                        71
2004                                                        68
2005                                                        64
2006 and thereafter                                        388
--------------------------------------------------------------
Total minimum payments                                    $719
==============================================================

Guarantees

Southern Company has made separate guarantees to certain counterparties
regarding performance of contractual commitments by Mirant's trading and
marketing subsidiaries. At December 31, 2000, the total notional amount of
guarantees was $419 million and the estimated fair value of net contractual
commitments outstanding was approximately $259 million. Based upon a statistical
analysis of credit risk, Southern Company's potential exposure under these
contractual commitments would not materially differ from the estimated fair
value.

   At December 31, 2000, Southern Company had guaranteed $11 million related to
a Mirant purchase power agreement. The guarantee expires March 2001.
Southern Company also has guaranteed certain of Mirant's foreign currency swap
transactions. At December 31, 2000, notional amounts under these swaps were the
differences between (pound)44 million and $68 million and between DM370 million
and $206 million; however, due to favorable exchange ratesSouthern Company had
no exposure under these guarantees. The sterling and deutsche mark swaps expire
in 2002 and 2003, respectively.

   After the spin off, Mirant will pay Southern Company a monthly fee of 1
percent on the average aggregate maximum principal amount of all guarantees
outstanding until they are replaced or expire. Southern Company's guarantees
related to Mirant trading and marketing activities are limited to a maximum
of $425 million, with any guarantees since October 2, 2000 expiring no later
than October 2, 2001. Mirant must use reasonable efforts to release Southern
Company from all such support arrangements and will indemnify Southern Company
for any obligations incurred.

10. NUCLEAR INSURANCE

Under the Price-Anderson Amendments Act of 1988, Alabama Power and Georgia Power
maintain agreements of indemnity with the NRC that, together with private
insurance, cover third-party liability arising from any nuclear incident
occurring at the companies' nuclear power plants. The act provides funds up to
$9.5 billion for public liability claims that could arise from a single nuclear
incident. Each nuclear plant is insured against this liability to a maximum of
$200 million by private insurance, with the remaining coverage provided by a
mandatory program of deferred premiums that could be assessed, after a nuclear
incident, against all owners of nuclear reactors. A company could be assessed up
to $88 million per incident for each licensed reactor it operates, but not more
than an aggregate of $10 million per incident to be paid in a calendar year for
each reactor. Such maximum assessment, excluding any applicable state premium
taxes, for Alabama Power and Georgia Power -- based on its ownership and buyback
interests -- is $176 million and $178 million, respectively, per incident, but
not more than an aggregate of $20 million per company to be paid for each
incident in any one year.


                                       32

<PAGE>

NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


   Alabama Power and Georgia Power are members of Nuclear Electric Insurance
Limited (NEIL), a mutual insurer established to provide property damage
insurance in an amount up to $500 million for members' nuclear generating
facilities.

   Additionally, both companies have policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million primary
coverage. This excess insurance is also provided by NEIL.

   NEIL also covers the additional costs that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased costs of replacement power in an
amount up to $3.5 million per week -- starting 12 weeks after the outage -- for
one year and up to $2.8 million per week for the second and third years.

   Under each of the NEIL policies, members are subject to assessments if losses
each year exceed the accumulated funds available to the insurer under that
policy. The current maximum annual assessments for Alabama Power and Georgia
Power under the three NEIL policies would be $17 million and $19 million,
respectively.

   For all on-site property damage insurance policies for commercial nuclear
power plants, the NRC requires that the proceeds of such policies shall be
dedicated first for the sole purpose of placing the reactor in a safe and stable
condition after an accident. Any remaining proceeds are to be applied next
toward the costs of decontamination and debris removal operations ordered by the
NRC, and any further remaining proceeds are to be paid either to the company or
to its bond trustees as may be appropriate under the policies and applicable
trust indentures.

   All retrospective assessments -- whether generated for liability, property,
or replacement power -- may be subject to applicable state premium taxes.

11. DISCONTINUED OPERATIONS

In April 2000, Southern Company announced an initial public offering of up to
19.9 percent of Mirant and its intentions to spin off the remaining ownership of
Mirant to Southern Company stockholders within 12 months of the initial stock
offering. On October 2, 2000, Mirant completed an initial public offering of
66.7 million shares of common stock priced at $22 per share. This represented
19.7 percent of the 338.7 million shares outstanding. As a result of the stock
offering, Southern Company recorded a $560 million increase in paid-in capital
with no gain or loss being recognized.

   On February 19, 2001, Southern Company's board of directors approved the
spin off of its remaining ownership of 272 million Mirant shares to be
completed in a tax free distribution on April 2, 2001. Shares from the spin off
will be distributed at a ratio of approximately 0.4 for every share of
Southern Company common stock held at record date.

   As a result of the spin off, Southern Company's December 31, 2000, financial
statements have been prepared with Mirant's results of operations and cash flows
shown as discontinued operations. All historical financial statements presented
and footnotes have been reclassified to conform to this presentation, with the
historical assets and liabilities of Mirant presented on the balance sheet as
net assets of discontinued operations.

   Summarized financial information for the discontinued operations is as
follows at December 31:

                                     2000       1999      1998
---------------------------------------------------------------
                                           (in millions)
Revenues                          $13,315     $2,265    $1,819
Income taxes                           86        127      (121)
Net income                            319        361        (9)
---------------------------------------------------------------

                                             2000         1999
---------------------------------------------------------------
                                                (in millions)
Current assets                           $  9,057     $  1,254
Total assets                               22,377       12,191
Current liabilities                         9,726        3,169
Total liabilities                          17,585        8,473
Minority and other interests                1,472          805
Net assets of
   discontinued operations                  3,320        2,913
---------------------------------------------------------------

12. SEGMENT AND RELATED INFORMATION

Southern Company's reportable business segment is the five integrated Southeast
utilities that provide electric service in four states. Net income and total
assets for discontinued operations are included in the reconciling eliminations
column. The all other category includes parent Southern Company, which does not

                                       33

<PAGE>

NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Report


allocate operating expenses to business segments. Also, this category includes
segments below the quantitative threshold for separate disclosure. These
segments include telecommunications, energy products and services, and leasing
and financing services. Intersegment revenues are not material. Financial data
for business segments and products and services are as follows:


<TABLE>

Business Segments
<CAPTION>

                                            Integrated
                                             Southeast                    All              Reconciling
Year                                         Utilities                  Other             Eliminations            Consolidated
----                                       ------------------------------------------------------------------------------------
                                                                               (in millions)
2000
-----
<S>                                           <C>                     <C>                     <C>                      <C>
Operating revenues                            $  9,860                $   246                 $    (40)                $10,066
Depreciation and amortization                    1,135                     36                        -                   1,171
Interest income                                     43                      9                       (1)                     51
Interest expense                                   631                    197                        -                     828
Income taxes                                       703                   (115)                       -                     588
Segment net income (loss)                        1,109                   (115)                     319                   1,313
Total assets                                    26,917                  2,200                    2,245                  31,362
Gross property additions                         2,199                     26                        -                   2,225
-------------------------------------------------------------------------------------------------------------------------------

                                            Integrated
                                             Southeast                    All              Reconciling
Year                                         Utilities                  Other             Eliminations            Consolidated
----                                       ------------------------------------------------------------------------------------
                                                                               (in millions)
1999
-----
Operating revenues                             $ 9,125                $   221                 $    (29)               $  9,317
Depreciation and amortization                    1,046                     93                        -                   1,139
Interest income                                     64                     50                      (44)                     70
Interest expense                                   613                    155                      (37)                    731
Income taxes                                       675                    (76)                       -                     599
Segment net income (loss)                        1,073                   (154)                     357                   1,276
Total assets                                    25,336                  2,127                    1,828                  29,291
Gross property additions                         1,854                     27                        -                   1,881
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                34


<PAGE>

<TABLE>
NOTES (continued)
Southern Company and Subsidiary Companies 2000 Annual Eeport

<CAPTION>
                                            Integrated
                                             Southeast                    All              Reconciling
Year                                         Utilities                  Other             Eliminations            Consolidated
-----                                      ------------------------------------------------------------------------------------
                                                                              (in millions)
1998
----
<S>                                           <C>                     <C>                      <C>                    <C>
Operating revenues                            $  9,363                $   167                  $   (31)               $  9,499
Depreciation and amortization                    1,323                     17                        -                   1,340
Interest income                                    150                     58                      (54)                    154
Interest expense                                   654                     99                      (54)                    699
Income taxes                                       703                    (33)                       -                     670
Segment net income (loss)                        1,083                    (97)                      (9)                    977
Total assets                                    24,420                  2,817                    1,486                  28,723
Gross property additions                         1,298                     58                        -                   1,356
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
Products and Services
<CAPTION>

                                                      Integrated Southeast Utilities Revenues
                                   --------------------------------------------------------------------------------------------
Year                               Retail                        Wholesale                   Other                       Total
----                               -------------------------------------------------------------------------------------------
                                                              (in millions)
<S>                               <C>                                <C>                      <C>                      <C>
2000                              $8,613                             $977                     $270                      $9,860
1999                               8,086                              823                      216                       9,125
1998                               8,272                              896                      195                       9,363
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>

13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial data for 2000 and 1999 -- including discontinued
operations for net income and earnings per share -- are as follows:
<CAPTION>

                                                                                   Per Common Share
                                                                   ----------------------------------------------------
                           Operating    Operating Consolidated                                          Price Range
Quarter Ended               Revenues       Income   Net Income    Earnings       Dividends          High          Low
-------------              ------------------------------------   -----------------------------------------------------
                                        (in millions)
<S>                         <C>           <C>            <C>       <C>            <C>              <C>           <C>
March 2000                   $2,052        $  428         $245      $0.38          $0.335           25 7/8        20 3/8
June 2000                     2,522           598          342       0.52           0.335           27 7/8        21 11/16
September 2000                3,198         1,041          614       0.95           0.335           35            23 13/32
December 2000                 2,294           337          112       0.16           0.335           33 22/25      27 1/2

March 1999                   $1,920        $  408         $224      $0.32          $0.335           29 5/8        23 1/4
June 1999                     2,288           569          314       0.45           0.335           29 3/16       22 3/4
September 1999                3,050           981          615       0.90           0.335           28            25
December 1999                 2,059           292          123       0.19           0.335           27 1/8        22 1/16
-----------------------------------------------------------------------------------------------------------------------
Southern Company's business is influenced by seasonal weather conditions.
</TABLE>


                                                                35
<PAGE>

<TABLE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1996-2000
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                                                                     2000           1999        1998       1997        1996
-------------------------------------------------------------------------------------------------------------------------------

<S>                                                               <C>             <C>         <C>        <C>         <C>
Operating Revenues (in millions)                                  $10,066         $9,317      $9,499     $8,774      $8,675
Total Assets (in millions)                                        $31,362        $29,291     $28,723    $27,898     $26,352
Gross Property Additions (in millions)                             $2,225         $1,881      $1,356     $1,138      $1,064
Return on Average Common Equity (percent)                           13.20          13.43       10.04      10.30       12.53
Cash Dividends Paid Per Share of Common Stock                       $1.34          $1.34       $1.34      $1.30       $1.26
-------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income (in millions):
   Continuing operations                                          $   994        $   915        $986       $990      $1,046
   Discontinued operations                                            319            361          (9)       (18)         81
-------------------------------------------------------------------------------------------------------------------------------
   Total                                                           $1,313         $1,276        $977       $972      $1,127
===============================================================================================================================
Basic and Diluted Earnings Per Share of Common Stock:
   Continuing operations                                            $1.52          $1.33      $ 1.41     $ 1.45      $1.56
   Discontinued operations                                           0.49           0.53       (0.01)     (0.03)      0.12
-------------------------------------------------------------------------------------------------------------------------------
   Total                                                            $2.01          $1.86      $ 1.40      $1.42      $1.68
===============================================================================================================================
Capitalization (in millions):
Common stock equity                                               $10,690       $  9,204    $  9,797   $  9,647    $  9,216
Preferred stock and securities                                      2,614          2,615       2,465      2,155       1,402
Long-term debt                                                      7,843          7,251       6,505      6,347       6,556
-------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year                       $21,147        $19,070     $18,767    $18,149     $17,174
===============================================================================================================================
Capitalization Ratios (percent):
Common stock equity                                                  50.6           48.3        52.2       53.2        53.7
Preferred stock and securities                                       12.3           13.7        13.1       11.9         8.2
Long-term debt                                                       37.1           38.0        34.7       34.9        38.1
-------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year                         100.0          100.0       100.0      100.0       100.0
===============================================================================================================================
Other Common Stock Data:
Book value per share (year-end)                                    $15.69         $13.82      $14.04     $13.91      $13.61
Market price per share:
   High                                                                35             29 5/8      31 9/16    26 1/4      25 7/8
   Low                                                                 20 3/8         22 1/16     23 15/16   19 7/8      21 1/8
   Close                                                               33 1/4         23 1/2      29 1/16    25 7/8      22 5/8
Market-to-book ratio (year-end) (percent)                           211.9          170.0       207.0      186.0       166.2
Price-earnings ratio (year-end) (times)                              16.5           12.6        20.8       18.2        13.5
Dividends paid (in millions)                                         $873           $921        $933       $889        $846
Dividend yield (year-end) (percent)                                   4.0            5.7         4.6        5.0         5.6
Dividend payout ratio (percent)                                      66.5           72.2        95.6       91.5        75.1
Shares outstanding (in thousands):
   Average                                                        653,087        685,163     696,944    685,033     672,590
   Year-end                                                       681,158        665,796     697,747    693,423     677,036
Stockholders of record (year-end)                                 160,116        174,179     187,053    200,508     215,246
-------------------------------------------------------------------------------------------------------------------------------
Customers (year-end) (in thousands):
Residential                                                         3,398          3,339       3,277      3,220       3,157
Commercial                                                            527            513         497        479         464
Industrial                                                             14             15          15         16          17
Other                                                                   5              4           5          5           5
-------------------------------------------------------------------------------------------------------------------------------
Total                                                               3,944          3,871       3,794      3,720       3,643
===============================================================================================================================
Employees (year-end)                                               26,021         26,269      25,206     24,682      25,034
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                36

<PAGE>

<TABLE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1996-2000 (continued)
Southern Company and Subsidiary Companies 2000 Annual Report

<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                               2000           1999        1998       1997        1996
-----------------------------------------------------------------------------------------------------------------------

Operating Revenues (in millions):
<S>                                                        <C>              <C>         <C>        <C>         <C>
Residential                                                $  3,367         $3,105      $3,163     $2,837      $2,894
Commercial                                                    2,922          2,743       2,763      2,595       2,559
Industrial                                                    2,292          2,237       2,267      2,139       2,136
Other                                                            32              1          79         76          76
-----------------------------------------------------------------------------------------------------------------------
Total retail                                                  8,613          8,086       8,272      7,647       7,665
Sales for resale within service area                            377            350         374        376         409
Sales for resale outside service area                           600            473         522        510         429
-----------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity                      9,590          8,909       9,168      8,533       8,503
Other revenues                                                  476            408         331        241         172
-----------------------------------------------------------------------------------------------------------------------
Total                                                       $10,066         $9,317      $9,499     $8,774      $8,675
=======================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential                                                  46,213         43,402      43,503     39,217      40,117
Commercial                                                   46,249         43,387      41,737     38,926      37,993
Industrial                                                   56,746         56,210      55,331     54,196      52,798
Other                                                           970            945         929        903         911
-----------------------------------------------------------------------------------------------------------------------
Total retail                                                150,178        143,944     141,500    133,242     131,819
Sales for resale within service area                          9,579          9,440       9,847      9,884      10,935
Sales for resale outside service area                        17,190         12,929      12,988     13,761      10,777
-----------------------------------------------------------------------------------------------------------------------
Total                                                       176,947        166,313     164,335    156,887     153,531
=======================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential                                                    7.29           7.15        7.27       7.23        7.21
Commercial                                                     6.32           6.32        6.62       6.67        6.74
Industrial                                                     4.04           3.98        4.10       3.95        4.04
Total retail                                                   5.74           5.62        5.85       5.74        5.81
Sales for resale                                               3.65           3.68        3.92       3.75        3.86
Total sales                                                    5.42           5.36        5.58       5.44        5.54
Average Annual Kilowatt-Hour
   Use Per Residential Customer                              13,702         13,107      13,379     12,296      12,824
Average Annual Revenue Per Residential Customer             $998.38        $937.81     $972.89    $889.50     $925.12
Plant Nameplate Capacity Owned (year-end) (megawatts)        32,807         31,425      31,161     31,146      31,076
Maximum Peak-Hour Demand (megawatts):
Winter                                                       26,370         25,203      21,108     22,969      22,631
Summer                                                       31,359         30,578      28,934     27,334      27,190
System Reserve Margin (at peak) (percent)                       8.1            8.5        12.8       15.0        14.0
Annual Load Factor (percent)                                   60.2           59.2        60.0       59.4        62.3
Plant Availability (percent):
Fossil-steam                                                   86.8           83.3        85.2       88.2        86.4
Nuclear                                                        90.5           89.9        87.8       88.8        89.7
-----------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal                                                           72.3           73.1        72.8       74.7        73.3
Nuclear                                                        15.1           15.7        15.4       16.5        16.7
Hydro                                                           1.5            2.3         3.9        4.3         4.1
Oil and gas                                                     4.0            2.8         3.3        1.7         1.5
Purchased power                                                 7.1            6.1         4.6        2.8         4.4
-----------------------------------------------------------------------------------------------------------------------
Total                                                         100.0          100.0       100.0      100.0       100.0
=======================================================================================================================


                                                                37
</TABLE>

</TEXT>
</DOCUMENT>
