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Regulatory Matters | 6 Months Ended
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Jun. 30, 2024
Regulated Operations [Abstract] |
Regulatory Matters | REGULATORY MATTERS See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information relating to regulatory matters. The recovery balances for certain retail regulatory clauses of the traditional electric operating companies and Southern Company Gas at June 30, 2024 and December 31, 2023 were as follows:
Regulatory Clause | Balance Sheet Line Item | June 30, 2024 | December 31, 2023
|  | (in millions)
Alabama Power |  |  |
Rate CNP Compliance | Other regulatory assets, current | $ | — |  | $ | 8 |
| Other regulatory assets, deferred | 46 |  | 25 |
Rate CNP PPA | Other regulatory assets, current | 18 |  | 18 |
| Other regulatory assets, deferred | 76 |  | 85 |
Rate ECR | Regulatory assets – under recovered retail fuel clause revenues | 115 |  | 246 |
Georgia Power |  |  |
Fuel Cost Recovery | Receivables – under recovered retail fuel clause revenues | $ | 671 |  | $ | 694 |
| Deferred under recovered retail fuel clause revenues | 950 |  | 1,211 |
Mississippi Power |  |  |
Fuel Cost Recovery(*) | Receivables – customer accounts, net | $ | 16 |  | $ | — |
| Deferred under recovered retail fuel clause revenues | — |  | 50 |
| Over recovered retail fuel clause revenues | — |  | 27 |
Ad Valorem Tax | Other regulatory assets, deferred | 15 |  | 12 |
Southern Company Gas |  |  |
Natural Gas Cost Recovery | Natural gas cost over recovery | $ | 171 |  | $ | 214 |
(*)Mississippi Power also has wholesale MRA and Market Based (MB) fuel cost recovery factors. At June 30, 2024 and December 31, 2023, wholesale MRA fuel costs were over recovered $11 million and $5 million, respectively, and were included in other current liabilities on Mississippi Power's balance sheets. The wholesale MB fuel cost recovery was immaterial for both periods presented. Alabama Power Rate ECR On May 8, 2024, the Alabama PSC issued a consent order to lower Rate ECR from 3.270 cents per KWH to 3.015 cents per KWH, or approximately $135 million annually, effective with July 2024 billings. The approved decrease in the Rate ECR factor will have no significant effect on Alabama Power's net income but will decrease operating cash flows related to fuel cost recovery. The rate will adjust to 5.910 cents per KWH in January 2026 absent a further order from the Alabama PSC. Plant Greene County Alabama Power jointly owns Plant Greene County Units 1 and 2 with an affiliate, Mississippi Power. See Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 of the Form 10-K for additional information. On April 26, 2024, Mississippi Power filed its 2024 IRP with the Mississippi PSC. The filing includes a schedule to retire Mississippi Power's 40% ownership interest in Plant Greene County Units 1 and 2 by the end of 2028. Alabama Power currently expects to retire Plant Greene County Units 1 and 2 (300 MWs based on 60% ownership) by the end of 2028. Alabama Power and Mississippi Power continue to evaluate operating conditions and business needs relevant to the anticipated retirement of Plant Greene County Units 1 and 2. Additionally, the unit retirements require the completion by Alabama Power of transmission and system reliability improvements, as well as agreement by Alabama Power. The ultimate outcome of this matter cannot be determined at this time. See "Mississippi Power – Integrated Resource Plan" herein for additional information. Georgia Power Integrated Resource Plans On June 27, 2024, the FERC approved five affiliate PPAs with Southern Power with capacities of 1,258 MWs beginning in 2024, 380 MWs beginning in 2025, and 228 MWs beginning in 2028, procured through requests for proposals authorized in the 2019 IRP. See Note (F) under "Georgia Power Lease Modification" for additional information. On April 16, 2024, the Georgia PSC approved Georgia Power's updated IRP (2023 IRP Update) as modified by a stipulation among Georgia Power, the staff of the Georgia PSC, and certain intervenors. In the 2023 IRP Update decision, the Georgia PSC approved the following requests: •Authority to develop, own, and operate up to 1,400 MWs from three simple cycle combustion turbines at Plant Yates with the recoverable costs not to exceed the certified amount, on which the Georgia PSC is expected to render a decision on August 20, 2024. In doing so, the Georgia PSC recognized the potential for circumstances beyond Georgia Power's control that could cause the project costs to exceed the certified amount, in which case Georgia Power would provide documentation to the Georgia PSC to explain and justify potential recovery of the additional costs. Georgia Power is required to file semi-annual construction monitoring reports with the Georgia PSC through commercial operation. •Certification of an affiliate PPA with Mississippi Power for 750 MWs, which began January 1, 2024 and will continue through December 2028. •Certification of a non-affiliate PPA for 230 MWs, which began May 1, 2024 and will continue through December 2028. •Authority to develop, own, and operate up to 500 MWs of battery energy storage facilities, including storage systems collocated with existing Georgia Power-owned solar facilities, as well as the issuance of a request for proposals for an additional 500 MWs of battery energy storage facilities. •Approval of transmission projects necessary to support the generation resources approved in the 2023 IRP Update. On January 12, 2024, Georgia Power entered into an Agreement for Engineering, Procurement, and Construction with Mitsubishi Power Americas, Inc. and Black & Veatch Construction, Inc. to construct three 442-MW simple cycle combustion turbine units at Plant Yates (Plant Yates Units 8, 9, and 10), which are projected to be placed in service in the fourth quarter 2026, the second quarter 2027, and the third quarter 2027, respectively. The ultimate outcome of this matter cannot be determined at this time. Transmission Asset Sales On March 7, 2024, the FERC approved the sale of transmission line assets under the integrated transmission system agreement, with a net book value of $236 million. On April 24, 2024, the sale, with a purchase price of $351 million, was completed resulting in a pre-tax gain of approximately $114 million ($84 million after tax) recorded in the second quarter 2024. Nuclear Construction See Note 2 to the financial statements under "Georgia Power – Nuclear Construction" in Item 8 of the Form 10-K for additional information on Plant Vogtle Units 3 and 4 construction and cost recovery. Cost and Schedule Georgia Power placed Unit 3 and Unit 4 in service on July 31, 2023 and April 29, 2024, respectively. Since placing Unit 4 in service, Southern Nuclear has evaluated the remaining expected site demobilization costs and other contractor obligations and reduced the remaining estimate to complete forecast by approximately $21 million. Accordingly, Georgia Power recorded a pre-tax credit to income of approximately $21 million ($16 million after tax) in the second quarter 2024 to recognize capital costs previously charged to income. Georgia Power's net capital costs incurred through June 30, 2024 in connection with Plant Vogtle Units 3 and 4, and its approximate proportionate share of additional capital costs to be incurred after June 30, 2024, including completion of site demobilization and remaining contractor obligations, is as follows:
| (in millions)
Total project capital cost forecast(a)(b) | $ | 10,732 |
Net investment at June 30, 2024(b) | (10,641) |
Remaining estimate to complete | $ | 91 |
(a)Includes approximately $1.2 billion of costs that are not shared with the other Vogtle Owners. Excludes financing costs capitalized through AFUDC of approximately $440 million accrued through Unit 4's in-service date. (b)Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds. Georgia Power's financing costs for construction of Plant Vogtle Units 3 and 4 totaled approximately $3.53 billion, of which $3.08 billion had been recovered through Unit 4's in-service date. Regulatory Matters Georgia Power increased annual retail base rates by $318 million effective August 1, 2023 based on the in-service date of July 31, 2023 for Unit 3. Financing costs (debt and equity) on the remaining portion of the total Unit 3 and the common facilities construction costs continued to be recovered through the NCCR tariff or deferred. Georgia Power deferred as a regulatory asset the debt component of financing costs as well as the remaining depreciation expense until Unit 4 costs were placed in retail base rates as described below. The regulatory assets for the debt component of financing costs and depreciation expense are being recovered over a period of 10 years beginning May 2024, as approved by the Georgia PSC, with a remaining balance of $24 million and $31 million, respectively, at June 30, 2024. The equity component of financing costs ($42 million at June 30, 2024) represents an unrecognized ratemaking amount that is not reflected on Georgia Power's balance sheets. This amount will be recognized in Georgia Power's statements of income in the periods it is billable to customers. After considering construction and capital costs already in retail base rates of $2.1 billion and $362 million of associated retail rate base items for Unit 3 and common facilities, Georgia Power included in retail rate base the remaining $5.462 billion of construction and capital costs as well as $647 million of associated retail rate base items effective with the April 29, 2024 in-service date for Unit 4, pursuant to the approved Prudency Stipulation. Annual retail base revenues increased approximately $730 million and the average retail base rates were adjusted by approximately 5% (net of the elimination of the NCCR tariff described below) effective May 1, 2024. Reductions to the ROE used to calculate the NCCR tariff (pursuant to prior Georgia PSC orders) negatively impacted earnings by approximately $310 million in 2023 and $80 million through the second quarter 2024. Further, as included in the approved Prudency Stipulation, since commercial operation for Unit 4 was not achieved by March 31, 2024, Georgia Power's ROE used to determine the NCCR tariff and calculate AFUDC was reduced to zero effective April 1, 2024, which resulted in a negative impact to earnings of approximately $10 million (for one month) in the second quarter 2024 based on the April 29, 2024 in-service date. Effective May 1, 2024, following commercial operation of Unit 4, Georgia Power's NCCR tariff was eliminated and related financing costs are included in Georgia Power's general retail revenue requirements. Financing costs of $10 million that were not recovered through the NCCR tariff will be addressed in Georgia Power's next retail rate case proceeding. Mississippi Power Performance Evaluation Plan On June 13, 2024, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2024 with no change in retail rates. Environmental Compliance Overview Plan On May 7, 2024, the Mississippi PSC approved Mississippi Power's annual ECO Plan filing for 2024, resulting in an $8 million annual increase in revenues effective with the first billing cycle of June 2024. Ad Valorem Tax Adjustment On June 13, 2024, the Mississippi PSC approved Mississippi Power's annual ad valorem tax adjustment filing for 2024, resulting in a $5 million annual decrease in revenues effective with the first billing cycle of July 2024. This decrease is not expected to have a significant effect on Mississippi Power's net income but will affect operating cash flows. System Restoration Rider On April 11, 2024, the Mississippi PSC approved Mississippi Power's annual SRR filing, which indicated no change in retail rates. Mississippi Power's minimum annual SRR accrual was increased from $12 million to $13 million. Integrated Resource Plan On April 26, 2024, Mississippi Power filed its 2024 IRP with the Mississippi PSC. The filing includes a schedule to retire Plant Watson Unit 4 (268 MWs) and Plant Greene County Units 1 and 2 (206 MWs based on 40% ownership) and to retire early Plant Daniel Units 1 and 2 (502 MWs based on 50% ownership), all by the end of 2028, which is consistent with the completion of Mississippi Power's affiliate PPA with Georgia Power. The Plant Greene County unit retirements require the completion by Alabama Power of transmission and system reliability improvements, as well as agreement by Alabama Power. The remaining net book value of Plant Daniel Units 1 and 2 was approximately $480 million at June 30, 2024 and Mississippi Power is continuing to depreciate these units using the current approved rates. Mississippi Power expects to reclassify the net book value remaining at retirement to a regulatory asset to be amortized over a period to be determined by the Mississippi PSC in future proceedings, consistent with a 2020 Mississippi PSC order. The Plant Watson and Plant Greene County units are expected to be fully depreciated upon retirement. The 2024 IRP is subject to review by the Mississippi PSC and is expected to conclude in the third quarter 2024. The ultimate outcome of this matter cannot be determined at this time. Municipal and Rural Associations Tariff On March 29, 2024, Mississippi Power filed a request with the FERC for an $8 million increase in annual wholesale base revenues under the MRA tariff and requested an effective date of May 29, 2024. On April 19, 2024, Cooperative Energy challenged the new rates in a filing with the FERC. On May 28, 2024, the FERC issued an order accepting Mississippi Power's request effective May 29, 2024, subject to refund, and establishing hearing and settlement judge procedures. The ultimate outcome of this matter cannot be determined at this time. Southern Company Gas Infrastructure Replacement Programs and Capital Projects On June 7, 2024, the Virginia Commission approved the extension of Virginia Natural Gas' SAVE program through 2029. The extension of the program includes investments of $70 million in each year from 2025 through 2029, with a potential variance of up to $5 million allowed for the program, for a maximum total investment over the five-year extension of $355 million. Rate Proceedings Atlanta Gas Light On July 2, 2024, the Georgia PSC approved a stipulation related to Atlanta Gas Light's triennial Integrated Capacity and Delivery Plan filing, filed on February 1, 2024, which allows capital investments totaling approximately $0.6 billion annually for the years 2025 through 2027 with related revenue requirement recovery through either the annual GRAM filing or the System Reinforcement Rider surcharge adjustment. Additionally, the Georgia PSC approved a surcharge recovery mechanism for capital projects related to municipal, county, and Georgia Department of Transportation (GDOT) infrastructure work. Rate changes associated with the new surcharge, if approved, will be based on requests filed annually on September 1, with new rates to become effective January 1 of the following year. Finally, the stipulation requires Atlanta Gas Light to include an alternate rate plan for the three-year period of 2025 through 2027 with its 2025 GRAM filing. On July 31, 2024, Atlanta Gas Light submitted its annual GRAM filing with the Georgia PSC, which includes projections for the System Reinforcement Rider and municipal, county, and GDOT surcharge adjustments. The filing requests a traditional annual base rate increase of $120 million based on the projected 12-month period beginning January 1, 2025. In accordance with the approved Integrated Capacity and Delivery Plan filing, Atlanta Gas Light also included two alternative annual base rate increases for 2025 that provide for lower increases in 2025 with subsequent increases in 2026 and 2027. Resolution of the GRAM filing is expected by December 31, 2024, with new rates effective January 1, 2025. The ultimate outcome of this matter cannot be determined at this time. Virginia Natural Gas On May 31, 2024, Virginia Natural Gas filed a notice of intent with the Virginia Commission to file a base rate case on or after August 1, 2024. The ultimate outcome of this matter cannot be determined at this time.

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