-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PhnVBVOl5hdIvNTlB34Bjyqc/HtOmZy69eaRZscxdbI7P4aloGMWeg5sXEguEp2S vx48WYbjq8o1DlaIUjaShw== 0000003153-97-000018.txt : 19970304 0000003153-97-000018.hdr.sgml : 19970304 ACCESSION NUMBER: 0000003153-97-000018 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970212 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970303 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA POWER CO CENTRAL INDEX KEY: 0000003153 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 630004250 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03164 FILM NUMBER: 97549747 BUSINESS ADDRESS: STREET 1: 600 N 18TH ST STREET 2: P O BOX 2641 CITY: BIRMINGHAM STATE: AL ZIP: 35291 BUSINESS PHONE: 2052501000 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 12, 1997 ---------------------- ALABAMA POWER COMPANY (Exact name of registrant as specified in its charter) Alabama 1-3164 63-0004250 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 600 North 18th Street, Birmingham, Alabama 35291 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (205) 250-1000 ---------------- N/A (Former name or former address, if changed since last report.) Item 7. Financial Statements and Exhibits. (c) Exhibits. 23 - Consent of Arthur Andersen LLP. 27 - Financial Data Schedule. 99 - Audited Financial Statements of Alabama Power Company as of December 31, 1996. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALABAMA POWER COMPANY By /s/ Wayne Boston Wayne Boston Assistant Secretary Date: March 3, 1997 EX-23 2 ARTHUR ANDERSEN CONSENT ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 12, 1997 on the financial statements of Alabama Power Company, included in this Form 8-K, into Alabama Power Company's previously filed Registration Statement File Nos. 33-49653, 33-61845 and 333-17333. /s/ Arthur Andersen LLP Birmingham, Alabama February 27, 1997 EX-27 3 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the financial statements filed as Exhibit 99 and is qualified in its entirity by reference to such financial statements. 0000003153 ALABAMA POWER COMPANY 1,000 YEAR DEC-31-1996 DEC-31-1996 PER-BOOK 7,073,963 195,035 834,311 630,537 0 8,733,846 224,358 1,304,791 1,185,128 2,714,277 97,000 440,400 2,366,703 0 0 364,853 (19,801) (100,000) 8,056 (952) 2,863,310 8,733,846 3,120,775 228,108 2,276,029 2,504,137 616,638 8,716 625,354 227,262 398,092 26,602 371,490 347,500 171,420 873,780 0 0
EX-99 4 AUDIT FINANCIAL STATEMENTS MANAGEMENT'S REPORT Alabama Power Company 1996 Annual Report The management of Alabama Power Company has prepared -- and is responsible for - -- the financial statements and related information included in this report. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances 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 books and 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 directors who are not employees, 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 financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Alabama Power Company in conformity with generally accepted accounting principles. /s/ Elmer B. Harris Elmer B. Harris President and Chief Executive Officer /s/ William B. Hutchins, III William B. Hutchins, III Executive Vice President and Chief Financial Officer February 12, 1997 1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Alabama Power Company: We have audited the accompanying balance sheets and statements of capitalization of Alabama Power Company (an Alabama corporation and a wholly owned subsidiary of Southern Company) as of December 31, 1996 and 1995, and the related statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1996. 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 generally accepted auditing standards. 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 financial statements (pages 9-26) referred to above present fairly, in all material respects, the financial position of Alabama Power Company as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Birmingham, Alabama February 12, 1997 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Alabama Power Company 1996 Annual Report RESULTS OF OPERATIONS Earnings Alabama Power Company's 1996 net income after dividends on preferred stock was $371 million, representing a $10.6 million (2.9 percent) increase from the prior year. This improvement can be attributed to an increase in retail energy sales of 2.7 percent from 1995 levels and lower net interest charges compared to the prior year. This improvement was partially offset by a 4.4 percent increase in operating costs. In 1995, earnings were $361 million, representing a 1.3 percent increase from the prior year. This increase was due to an increase in retail energy sales of 4.7 percent, brought about by extreme summer weather. This improvement was partially offset by a 2.6 percent increase in operating costs. The return on average common equity for 1996 was 13.75 percent compared to 13.61 percent in 1995, and 13.86 percent in 1994. Revenues Total revenues for 1996 were $3.1 billion, reflecting a 3.2 percent increase from 1995. The following table summarizes the principal factors that affected operating revenues for the past three years: Increase (Decrease) From Prior Year ---------------------------------------- 1996 1995 1994 ---------------------------------------- (in thousands) Retail -- Change in base rates $(19,380) $ 990 $ -- Unbilled adjustment -- -- 28,000 Sales growth 61,765 18,174 45,304 Weather (29,660) 54,888 (39,964) Fuel cost recovery and other (30,846) 35,235 (84,344) --------------------------------------------------------------- Total retail (18,121) 109,287 (51,004) --------------------------------------------------------------- Sales for resale -- Non-affiliates 21,529 15,380 (9,345) Affiliates 88,890 (37,032) (17,213) --------------------------------------------------------------- Total sales for resale 110,419 (21,652) (26,558) Other operating revenues 3,703 1,997 5,095 --------------------------------------------------------------- Total operating revenues $ 96,001 $ 89,632 $(72,467) --------------------------------------------------------------- Percent change 3.2% 3.1% (2.4)% --------------------------------------------------------------- Retail revenues of $2.5 billion in 1996 decreased $18 million (0.7 percent) from the prior year, compared with an increase of $109 million (4.6 percent) in 1995. Lower fuel cost recovery was the primary reason for the decrease in 1996 retail revenues as compared to 1995. The hot weather during the summer of 1995 and higher fuel cost recovery were the primary reasons for the increase in retail revenues over 1994. Fuel revenues generally represent the direct recovery of fuel expense, including the fuel component of purchased energy, and therefore have no effect on net income. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. These capacity and energy 3 MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1996 Annual Report components, as well as the components of the sales to affiliated companies, were: 1996 1995 1994 ------------------------------------------- (in thousands) Capacity $159,488 $158,825 $165,063 Energy 315,925 209,376 222,579 ---------------------------------------------------------- Total $475,413 $368,201 $387,642 ---------------------------------------------------------- Capacity revenues from non-affiliates remained relatively constant over the past three years. Sales to affiliated companies within the Southern electric system will vary from year to year depending on demand, the availability, and the variable production cost of generating resources at each company. Kilowatt-hour (KWH) sales for 1996 and the percent change by year were as follows: KWH Percent Change ------------------------------------------- 1996 1996 1995 1994 ------------------------------------------- (millions) Residential 14,594 1.5% 9.1% (1.7)% Commercial* 10,904 8.6 4.1 3.4 Industrial* 19,999 0.7 2.0 3.2 Other 193 3.1 0.5 1.1 ---------- Total retail 45,690 2.7 4.7 3.3 Sales for resale - Non-affiliates 9,491 18.0 18.8 (5.2) Affiliates 10,292 53.5 (20.5) 4.3 ---------- Total 65,473 10.5% 2.6% 2.4% - ----------------------------------------------------------------- *The KWH sales for 1996 reflect a reclassification of approximately 200 customers from industrial to commercial, which resulted in a shift of 473 million KWH. Absent the reclassification, the percentage change in KWH sales for commercial and industrial would have been 3.9% and 3.1%, respectively. The increase in 1996 retail energy sales was primarily due to the strength of business and economic conditions in the company's service area. The 1995 retail sales growth was the result of hotter-than-normal summer weather and a strong economy in the company's service territory. Assuming normal weather, sales to retail customers are projected to grow approximately 2.7 percent annually on average during 1997 through 2002. Expenses Total operating expenses of $2.5 billion for 1996 were up $105 million or 4.4 percent compared with 1995. The major components of this increase include $85 million in fuel costs, $15 million in maintenance expense, and $17 million in depreciation and amortization offset by a decrease in purchased power of $15 million. Total operating expenses of $2.4 billion for 1995 were up 2.6 percent compared with the prior year. This increase was primarily due to higher other operation expenses and increased purchased power. This was somewhat offset by decreases in fuel costs and maintenance expenses. Fuel costs constitute the single largest expense for the company. 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 KWH generated were as follows: ---------------------------- 1996 1995 1994 ---------------------------- Total generation (billions of KWHs) 65 58 57 Sources of generation (percent) -- Coal 72 73 68 Nuclear 20 19 23 Hydro 8 8 9 Average cost of fuel per net KWH generated (cents) -- Coal 1.71 1.71 1.92 Nuclear 0.50 0.50 0.49 Total 1.46 1.48 1.56 - -------------------------------------------------------------- Note: Oil & Gas comprise less than 0.5% of generation. Fuel expense increased in 1996 by $85 million or 10.8 percent. This increase can be attributed to higher generation. Fuel expense decreased in 1995 by $10 million or 1.3 percent. This decrease resulted from lower average cost of fuel consumed. Purchased power consists primarily of purchases from the affiliates of the Southern electric system. Purchased power transactions among the company and its affiliates will vary from period to period depending on demand, the 4 MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1996 Annual Report availability, and the variable production cost of generating resources at each company. Total KWH purchases declined 9.3 percent from the prior year. The increase in maintenance expenses for 1996 is due to increased nuclear expenses, primarily outage related accruals. The decrease in 1995 over 1994 reflects the establishment in 1994 of the Natural Disaster Reserve. See Note 1 to the financial statements under "Natural Disaster Reserve" for additional information. Depreciation and amortization expense increased 5.6 percent in 1996 and 3.6 percent in 1995. These increases reflect additions to utility plant. The company contributed $6.8 million to the Alabama Power Foundation, Inc. in 1996, which represents a decrease of $4.7 million from the previous year. The Foundation makes distributions to qualified entities which are organized exclusively for charitable, educational, literary, and scientific purposes. The decline in net interest charges in 1996 by $11 million (4.5 percent) was due primarily to a charge of $10 million in 1995 to the amortization of debt discount, premium, and expense net, pursuant to an Alabama Public Service Commission (APSC) order. See Note 3 to the financial statements under "Retail Rate Adjustment Procedures" for additional details. Total net interest charges and preferred stock dividends increased 12.2 percent in 1995. This increase results from (i) interest on interim obligations which rose due to higher average interest rates on an increased average amount of short-term debt outstanding and (ii) amortization of debt discount, premium, and expense net, pursuant to such order. Effects of Inflation The company 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 the company because of the large investment in long-lived utility plant. 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 stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated more competitive environment. Future earnings in the near term will depend upon growth in electric sales, which are subject to a number of factors. Traditionally, these factors have included weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the company's service area. However, the Energy Policy Act of 1992 (Energy Act) is having a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. 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 excess energy generation to other utilities. Also, electricity sales for resale rates are being driven down by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. The company is aggressively working to maintain and expand its share of wholesale business in the Southeastern power markets. Various federal and state initiatives designed to promote wholesale and retail competition, among other things, include proposals that would allow customers to choose their electricity provider. As the initiatives materialize, the structure of the utility industry could radically change. Certain initiatives could result in a change in the ownership and/or operation of generation and transmission facilities. Numerous issues must be resolved, including significant ones relating to transmission pricing and recovery of stranded investments. Being a low-cost producer could provide significant opportunities to increase market share and profitability in markets that evolve with changing regulation. Unless the company remains a low-cost producer and provides quality service, the company's retail energy sales growth could be limited, and this could significantly erode earnings. 5 MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1996 Annual Report new markets that evolve with the changing regulation. Conversely, unless the company remains a low-cost producer and provides quality service, the company's retail energy sales growth could be limited, and this could significantly erode earnings. The addition of four combustion turbine generating units in May 1996 increased related operation and maintenance expenses and depreciation expenses. These additions are to ensure reliable service to customers during critical peak times. Rates to retail customers served by the company are regulated by the APSC. Rates for the company can be adjusted periodically within certain limitations based on earned retail rate of return compared with an allowed return. In June 1995, the APSC issued an order granting the company's request for gradual adjustments to move toward parity among customer classes. This order also calls for a moratorium on any periodic retail rate increases (but not decreases) until 2001. In December 1995, the APSC issued an order authorizing the company 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. See Note 3 to the financial statements for information about this and other matters. The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry -- including the company -- regarding the recognition, measurement, and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the Financial Accounting Standards Board (FASB) has decided to review the accounting for liabilities related to closure and removal of long-lived assets, including nuclear decommissioning. If the FASB issues new accounting rules, the estimated costs of closing and removing the company's nuclear and other facilities may be required to be recorded as liabilities in the Balance Sheets. Also, the annual provisions for such costs could change. Because of the company's current ability to recover closure and removal 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. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) 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 company is 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 the company's operations is no longer subject to these provisions, the company would be required to write off related regulatory assets and liabilities, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. FINANCIAL CONDITION Overview The company's financial condition remained stable in 1996. This stability is the continuation over recent years of growth in energy sales and cost control measures combined with a significant lowering of the cost of capital, achieved through the refinancing and/or redemption of higher-cost long-term debt and preferred stock. The company had gross property additions of $425 million in 1996. The majority of funds needed for gross property additions for the last several years have been provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. The Statements of Cash Flows provide additional details. Capital Structure The company's ratio of common equity to total capitalization -- including short-term debt -- was 45.3 percent in 1996, compared with 45.0 percent in 1995, and 45.9 percent in 1994. In January 1996, Alabama Power Capital Trust I (Trust I), of which the company owns all of the common securities, issued $97 million of 7.375 percent mandatorily redeemable preferred securities. Substantially all of the assets of Trust I are $100 million aggregate principal amount of the company's 7.375 percent junior subordinated notes due March 31, 2026. Additionally, in November 6 MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1996 Annual Report 1996, the company issued through public authorities $21 million of pollution control revenue refunding bonds. In January 1997, Alabama Power Capital Trust II (Trust II), of which the company owns all of the common securities, issued $200 million of 7.60 percent mandatorily redeemable preferred securities. Substantially all of the assets of Trust II are $206 million aggregate principal amount of the company's 7.60 percent junior subordinated notes due December 31, 2036. A portion of the proceeds of the January 1997 issuance will be used for the redemption of $100 million of preferred stock in February 1997. The company's current securities ratings are as follows: Duff & Standard Phelps Moody's & Poor's ---------------------------------- First Mortgage Bonds AA- A1 A+ Company Obligated Mandatorily Redeemable Preferred Securities A+ a2 A Preferred Stock A+ a2 A ------------------------------------------------------------ Capital Requirements Capital expenditures are estimated to be $425 million for 1997, $519 million for 1998, and $622 million for 1999. The total is $1.6 billion for the three years. Actual capital costs may vary from this estimate because of factors such as changes in business conditions; revised load growth projections; changes in environmental regulations; changes in the existing nuclear plant to meet new regulatory requirements; increasing cost of labor, equipment, and materials; and cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. The company has entered into agreements with two of its industrial customers to locate cogeneration facilities at their premises. These facilities will provide process steam to the respective customers concurrent with the production of electricity for use on the company's electric system. Each facility, which is primarily composed of a combustion turbine, will have approximately 100 megawatts of electric capacity and will serve as a base load resource for the company. These facilities are expected to be placed in service in 1999 at a total cost of approximately $90 million. In addition, significant construction of transmission and distribution facilities and upgrading of generating plants will continue. Other Capital Requirements In addition to the funds needed for the capital budget, approximately $220 million will be required by the end of 1999 for maturities of first mortgage bonds. Also, the company will continue to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital if market conditions permit. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- impacts Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and affected 28 generating units of Southern Company. As a result of Southern Company's compliance strategy, an additional 22 generating units were brought into compliance with Phase I requirements. Phase II compliance is required in 2000, and all fossil-fired generating plants will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. This compliance strategy resulted in unused emission allowances being banked for later use. Construction expenditures for Phase I compliance totaled approximately $25 million for the company. For Phase II sulfur dioxide compliance, the company could use emission allowances, increase fuel switching, and/or install flue gas desulfurization 7 MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1996 Annual Report equipment at selected plants. Also equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired units as required to meet Phase II limits. Therefore, the current compliance strategy could require total Phase II estimated construction expenditures of approximately $40 million, of which $30 million remains to be spent. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 1 percent in annual revenue requirements from customers could be necessary to fully recover the company's cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. A significant portion of costs related to the acid rain provision 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. The EPA and state environmental regulatory agencies are reviewing and evaluating various matters including: revisions to the ambient air standards for ozone and particulate matter; emission control strategies for ozone nonattainment areas; additional controls for hazardous air pollutant emissions; and hazardous waste disposal requirements. The impact of new standards will depend on the development and implementation of applicable regulations. The 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 company could incur costs to clean up properties. The company conducts studies to determine the extent of any required cleanup costs and has recognized in the financial statements costs to clean up known sites. 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 applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital It is anticipated that the funds required will be derived from sources in form and quantity similar to those used in the past. To issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements designated in its mortgage indenture and corporate charter. The company's coverages are at a level that would permit any necessary amount of security sales at current interest and dividend rates. As required by the Nuclear Regulatory Commission and as ordered by the APSC, the company has established external trust funds for nuclear decommissioning costs. In 1994, the company also established an external trust fund for postretirement benefits as ordered by the APSC. The cumulative effect of funding these items over a long period will diminish internally funded capital and may require capital from other sources. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning." 8 STATEMENTS OF INCOME For the Years Ended December 31, 1996, 1995, and 1994 Alabama Power Company 1996 Annual Report
======================================================================================================================= 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues (Notes 1, 3 and 7): Revenues $2,904,155 $2,897,044 $2,770,380 Revenues from affiliates 216,620 127,730 164,762 - ----------------------------------------------------------------------------------------------------------------------- Total operating revenues 3,120,775 3,024,774 2,935,142 - ----------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 877,076 791,819 801,948 Purchased power from non-affiliates 36,813 30,065 15,158 Purchased power from affiliates 91,500 112,826 100,888 Other 505,884 501,876 458,917 Maintenance 258,482 243,218 262,102 Depreciation and amortization 320,102 303,050 292,420 Taxes other than income taxes 186,172 185,620 183,425 Federal and state income taxes (Note 8) 228,108 230,982 224,280 - ----------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,504,137 2,399,456 2,339,138 - ----------------------------------------------------------------------------------------------------------------------- Operating Income 616,638 625,318 596,004 Other Income (Expense): Allowance for equity funds used during construction (Note 1) - 1,649 3,239 Income from subsidiary (Note 6) 3,851 4,051 3,588 Charitable foundation (6,800) (11,542) (13,500) Interest income 28,318 13,768 16,944 Other, net (39,053) (21,536) (30,569) Income taxes applicable to other income 22,400 14,142 16,834 - ---------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges and Other 625,354 625,850 592,540 - ----------------------------------------------------------------------------------------------------------------------- Interest Charges and Other: Interest on long-term debt 169,390 180,714 178,045 Allowance for debt funds used during construction (Note 1) (6,480) (7,067) (3,548) Interest on interim obligations 20,617 16,917 5,939 Amortization of debt discount, premium, and expense, net 9,508 20,259 9,623 Other interest charges 27,510 27,064 19,908 Distributions on preferred securities of Alabama Power Capital Trust I (Note 9) 6,717 - - - ----------------------------------------------------------------------------------------------------------------------- Interest charges and other, net 227,262 237,887 209,967 - ----------------------------------------------------------------------------------------------------------------------- Net Income 398,092 387,963 382,573 Dividends on Preferred Stock 26,602 27,069 26,235 - ----------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 371,490 $ 360,894 $ 356,338 ======================================================================================================================= The accompanying notes are an integral part of these statements.
9 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1996, 1995, and 1994 Alabama Power Company 1996 Annual Report
================================================================================================================================ 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 398,092 $ 387,963 $ 382,573 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 383,438 371,382 359,791 Deferred income taxes and investment tax credits 16,585 32,627 (32,613) Allowance for equity funds used during construction - (1,649) (3,239) Other, net 21,563 33,244 28,656 Changes in certain current assets and liabilities -- Receivables, net 3,958 (54,209) 19,390 Inventories 36,234 18,425 (38,946) Payables 1,006 (63,656) (21,240) Taxes accrued (5,756) 551 6,856 Energy cost recovery, retail 25,771 1,177 16,907 Other (7,111) (15,895) (14,235) - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 873,780 709,960 703,900 - -------------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (425,024) (551,781) (536,785) Other (61,119) (53,321) (26,632) - -------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (486,143) (605,102) (563,417) - -------------------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Company obligated mandatorily redeemable preferred securities 97,000 - - First mortgage bonds - - 150,000 Other long-term debt 21,000 131,500 208,720 Retirements: First mortgage bonds (83,797) - (20,387) Other long-term debt (21,907) (132,291) (305,380) Interim obligations, net (25,163) 210,134 139,882 Payment of preferred stock dividends (26,665) (27,118) (25,431) Payment of common stock dividends (347,500) (285,000) (268,000) Miscellaneous (3,634) (4,143) (8,444) - -------------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (390,666) (106,918) (129,040) - -------------------------------------------------------------------------------------------------------------------------------- Net Change in Cash (3,029) (2,060) 11,443 Cash at Beginning of Year 12,616 14,676 3,233 - -------------------------------------------------------------------------------------------------------------------------------- Cash at End of Year $ 9,587 $ 12,616 $ 183,445 ================================================================================================================================ Supplemental Cash Flow Information: Cash paid during the year for -- Interest and other (net of amount capitalized) $ 193,871 $ 189,268 $ 183,445 Income taxes 195,214 172,777 231,831 - -------------------------------------------------------------------------------------------------------------------------------- ( ) Denotes use of cash. The accompanying notes are an integral part of these statements.
10 BALANCE SHEETS At December 31, 1996 and 1995 Alabama Power Company 1996 Annual Report
========================================================================================== ASSETS 1996 1995 - ------------------------------------------------------------------------------------------ (in thousands) Utility Plant: Plant in service, at original cost (Note 1) $10,806,921 $10,430,792 Less accumulated provision for depreciation 4,113,622 3,838,093 ------------------------------------------------------------------------------------------ 6,693,299 6,592,699 Nuclear fuel, at amortized cost 123,862 100,537 Construction work in progress 256,802 362,768 ------------------------------------------------------------------------------------------ Total 7,073,963 7,056,004 - ------------------------------------------------------------------------------------------ Other Property and Investments: Southern Electric Generating Company, at equity (Note 6) 26,032 27,232 Nuclear decommissioning trusts (Note 1) 148,760 108,368 Miscellaneous 20,243 19,156 - ------------------------------------------------------------------------------------------ Total 195,035 154,756 - ------------------------------------------------------------------------------------------ Current Assets: Cash 9,587 12,616 Receivables- Customer accounts receivable 334,150 355,833 Other accounts and notes receivable 28,524 28,082 Affiliated companies 47,630 41,819 Accumulated provision for uncollectible accounts (1,171) (1,212) Refundable income taxes 5,856 2,635 Fossil fuel stock, at average cost 81,704 106,627 Materials and supplies, at average cost 167,792 179,103 Prepayments 131,870 116,331 Vacation pay deferred 28,369 29,458 - ------------------------------------------------------------------------------------------ Total 834,311 871,292 - ------------------------------------------------------------------------------------------ Deferred Charges: Deferred charges related to income taxes (Note 8) 410,010 436,837 Debt expense, being amortized 7,398 7,648 Premium on reacquired debt, being amortized 84,149 89,967 Uranium enrichment decontamination and decommissioning fund (Note 1) 37,490 40,282 Miscellaneous 91,490 87,574 - ------------------------------------------------------------------------------------------ Total 630,537 662,308 - ------------------------------------------------------------------------------------------ Total Assets $ 8,733,846 $ 8,744,360 ========================================================================================== The accompanying notes are an integral part of these balance sheets.
11 BALANCE SHEETS At December 31, 1996 and 1995 Alabama Power Company 1996 Annual Report
============================================================================================ CAPITALIZATION AND LIABILITIES 1996 1995 - -------------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): Common stock equity $2,714,277 $2,690,374 Preferred stock 340,400 440,400 Company obligated mandatorily redeemable preferred securities of Alabama Power Capital Trust I holding Company Junior Subordinated Notes (Note 9) 97,000 - Long-term debt 2,354,006 2,374,948 - -------------------------------------------------------------------------------------------- Total 5,505,683 5,505,722 - -------------------------------------------------------------------------------------------- Current Liabilities: Preferred stock due within one year (Note 11) 100,000 - Long-term debt due within one year (Note 11) 20,753 84,682 Commercial paper 364,853 390,016 Accounts payable- Affiliated companies 64,307 76,326 Other 182,563 182,401 Customer deposits 32,003 30,353 Taxes accrued- Federal and state income 35,638 13,599 Other 15,271 18,158 Interest accrued 51,941 53,527 Vacation pay accrued 28,369 29,458 Miscellaneous 96,485 70,543 - -------------------------------------------------------------------------------------------- Total 992,183 949,063 - -------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 1,177,687 1,191,591 Accumulated deferred investment tax credits 294,071 305,372 Prepaid capacity revenues, net (Note 7) 122,496 131,186 Uranium enrichment decontamination and decommissioning fund (Note 1) 33,741 36,620 Deferred credits related to income taxes (Note 8) 364,792 386,038 Natural disaster reserve (Note 1) 20,757 17,959 Miscellaneous 222,436 220,809 - -------------------------------------------------------------------------------------------- Total 2,235,980 2,289,575 - -------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 3, 4, 5, 6, 7, and 12) Total Capitalization and Liabilities $8,733,846 $8,744,360 ============================================================================================ The accompanying notes are an integral part of these balance sheets.
12 STATEMENTS OF CAPITALIZATION At December 31, 1996 and 1995 Alabama Power Company 1996 Annual Report
=================================================================================================================================== 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity: Common stock, par value $40 per share -- Authorized -- 6,000,000 shares Outstanding -- 5,608,955 shares in 1996 and 1995 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 Premium on preferred stock 146 146 Retained earnings (Note 13) 1,185,128 1,161,225 - ----------------------------------------------------------------------------------------------------------------------------------- Total common stock equity 2,714,277 2,690,374 49.3% 48.9% - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $1 par value -- Authorized -- 27,500,000 shares Outstanding -- 12,020,200 shares $25 stated capital -- 6.40% 50,000 50,000 6.80% 38,000 38,000 7.60% 150,000 150,000 Adjustable rate 5.17% - at January 1, 1997 50,000 50,000 $100 stated capital -- Auction rate - 4.09% at January 1, 1997 50,000 50,000 $100,000 stated capital -- Auction rate - 4.01% at January 1, 1997 20,000 20,000 $100 par value -- Authorized -- 3,850,000 shares Outstanding -- 824,000 shares 4.20% to 4.52% 41,400 41,400 4.60% to 4.92% 29,000 29,000 5.96% to 6.88% 12,000 12,000 - ----------------------------------------------------------------------------------------------------------------------------------- Total cumulative preferred stock (annual dividend requirement -- $26,500,000) 440,400 440,400 Less amount due within one year (Note 11) 100,000 - - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative preferred stock excluding amount due within one year 340,400 440,400 6.2 8.0 - ----------------------------------------------------------------------------------------------------------------------------------- Company Obligated Mandatorily Redeemable Preferred Securities (Note 9): $25 liquidation value -- 7.375% 97,000 - - ----------------------------------------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $7,154,000) 97,000 - 1.7 - - ----------------------------------------------------------------------------------------------------------------------------------- Long-Term Debt: First mortgage bonds -- Maturity Interest Rates March 1, 1996 4 1/2% - 60,000 February 1, 1998 5 1/2% 50,000 50,000 August 1, 1999 6 3/8% 170,000 170,000 March 1, 2000 6% 100,000 100,000 2002 through 2007 6 3/4% to 7 1/4% 575,000 575,000 2021 through 2024 7.30% to 9 1/4% 1,021,059 1,044,856 - ----------------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 1,916,059 1,999,856 Pollution control obligations 476,140 476,140 Other long-term debt 8,056 8,963 Unamortized debt premium (discount), net (25,496) (25,329) - ----------------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $171,420,000) 2,374,759 2,459,630 Less amount due within one year (Note 11) 20,753 84,682 - ----------------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 2,354,006 2,374,948 42.8 43.1 - ----------------------------------------------------------------------------------------------------------------------------------- Total Capitalization $5,505,683 $5,505,722 100.0% 100.0% =================================================================================================================================== The accompanying notes are an integral part of these statements.
13 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1996, 1995, and 1994 Alabama Power Company 1996 Annual Report
======================================================================================================== 1996 1995 1994 - -------------------------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Year $1,161,225 $1,085,256 $ 997,199 Net income after dividends on preferred stock 371,490 360,894 356,338 Cash dividends on common stock (347,500) (285,000) (268,000) Preferred stock transactions, net (7) - (118) Other adjustments to retained earnings (80) 75 (163) - -------------------------------------------------------------------------------------------------------- Balance at End of Year (Note 13) $1,185,128 $1,161,225 $1,085,256 ======================================================================================================== The accompanying notes are an integral part of these statements.
14 NOTES TO FINANCIAL STATEMENTS Alabama Power Company 1996 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Alabama Power Company (the company) is a wholly owned subsidiary of Southern Company, which is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating Company (Southern Nuclear), The Southern Development and Investment Group (Southern Development), and other direct and indirect subsidiaries. The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four southeastern states. Contracts among the companies -- dealing with jointly-owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to Southern Company and subsidiary companies. Southern Communications provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Energy designs, builds, owns and operates power production and delivery facilities and provides a broad range of energy related services in the United States and international markets. Southern Nuclear provides services to Southern Company's nuclear power plants. Southern Development develops new business opportunities related to energy products and services. Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The company is also subject to regulation by the FERC and the Alabama Public Service Commission (APSC). The company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective regulatory commissions. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates, and the actual results may differ from those estimates. Regulatory Assets and Liabilities The company is 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 to the company 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 to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: 1996 1995 ------------------------- (in thousands) Deferred income taxes $ 410,010 $ 436,837 Premium on reacquired debt 84,149 89,967 Department of Energy assessments 37,490 40,282 Vacation pay 28,369 29,458 Work force reduction costs 45,969 48,402 Deferred income tax credits (364,792) (386,038) Natural disaster reserve (20,757) (17,959) Other, net 45,521 39,172 - ---------------------------------------------------------------- Total $ 265,959 $ 280,121 ================================================================ In the event that a portion of the company's operations is no longer subject to the provisions of Statement No. 71, the company would be required to write off related regulatory assets and liabilities. In addition, the company would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. Revenues and Fuel Costs The company accrues revenues for services rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The company's electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. The company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1996, uncollectible accounts continued to average less than 1 percent of revenues. 15 NOTES (continued) Alabama Power Company 1996 Annual Report 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 $64 million in 1996, $54 million in 1995, and $65 million in 1994. The company has a contract with the U.S. Department of Energy (DOE) that provides for the permanent disposal of spent nuclear fuel. Although disposal was scheduled to begin in 1998, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2010 and 2013 at Plant Farley units 1 and 2, respectively. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This assessment will be 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. The company estimates its remaining liability at December 31, 1996, under this law to be approximately $37 million. This obligation is recognized in the accompanying Balance Sheets. Depreciation and Nuclear Decommissioning Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.3 percent in 1996 and 3.2 percent in 1995 and 1994. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost -- together with the cost of removal, less salvage -- is charged to the accumulated provision for 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 cost of decommissioning nuclear facilities and removal of other facilities. In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations requiring all licensees operating commercial power reactors to establish a plan for providing, with reasonable assurance, funds for decommissioning. The company has established 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 APSC. 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. The company has 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 the facility as of the site study year, and ultimate cost is the estimate to decommission the facility as of retirement date. The estimated costs of decommissioning -- both site study costs and ultimate costs -- at December 31, 1996, for Plant Farley were as follows: Site study basis (year) 1993 Decommissioning periods: Beginning year 2017 Completion year 2029 ----------------------------------------------------------- (in millions) Site study costs: Radiated structures $ 489 Non-radiated structures 89 ----------------------------------------------------------- Total $ 578 =========================================================== (in millions) Ultimate costs: Radiated structures $1,504 Non-radiated structures 274 ----------------------------------------------------------- Total $1,778 =========================================================== (in millions) Amount expensed in 1996 $ 18 ----------------------------------------------------------- Accumulated provisions: Balance in external trust funds $ 149 Balance in internal reserves 47 ----------------------------------------------------------- Total $ 196 =========================================================== Significant assumptions: Inflation rate 4.5% Trust earning rate 7.0 ----------------------------------------------------------- Annual provisions for nuclear decommissioning are based on an annuity method as approved by the APSC. All of the company's decommissioning costs are approved for ratemaking. The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary 16 NOTES (continued) Alabama Power Company 1996 Annual Report 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 estimates. Income Taxes The 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. Allowance For Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rate used to determine the amount of allowance was 5.8 percent in 1996, 7.1 percent in 1995, and 7.9 percent in 1994. AFUDC, net of income tax, as a percent of net income after dividends on preferred stock was 1.1 percent in 1996, 1.7 percent in 1995 and 1.5 percent in 1994. Utility Plant Utility plant is stated at original cost. 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 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 charged to utility plant. Financial Instruments The company's only financial instruments for which the carrying amount did not approximate fair value at December 31 are as follows: Carrying Fair Amount Value ------------------------- (in millions) Long-term debt: At December 31, 1996 $2,367 $2,420 At December 31, 1995 $2,451 $2,577 Preferred Securities: At December 31, 1996 97 94 At December 31, 1995 - - ------------------------------------------------------------ The fair value for long-term debt and preferred securities was based on either closing market prices or closing prices of comparable instruments. Materials and Supplies Generally, materials and supplies include the cost 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. Natural Disaster Reserve In September 1994, in response to a request by the company, the APSC issued an order allowing the company to establish a Natural Disaster Reserve. Regulatory treatment allows the company to accrue $250 thousand per month, until the maximum accumulated provision of $32 million is attained. However, in December 1995, the APSC approved higher accruals to restore the reserve to its authorized level whenever the balance in the reserve declines below $22.4 million. 17 NOTES (continued) Alabama Power Company 1996 Annual Report 2. RETIREMENT BENEFITS Pension Plan The company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on one of the following formulas: years of service and final average pay or years of service and a flat-dollar benefit. The company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trusts are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits The company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Amounts funded are primarily invested in debt and equity securities. In December 1993, the APSC issued an accounting policy statement which requires the company to externally fund net annual postretirement benefits. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." Funded Status and Cost of Benefits The following tables show actuarial results and assumptions for pension and postretirement insurance benefits as computed under the requirements of Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension ------------------- 1996 1995 -------------------- (in millions) Actuarial present value of benefit obligations: Vested benefits $ 603 $ 604 Non-vested benefits 30 25 - --------------------------------------------------------------- Accumulated benefit obligation 633 629 Additional amounts related to projected salary increases 180 173 - --------------------------------------------------------------- Projected benefit obligation 813 802 Less: Fair value of plan assets 1,334 1,256 Unrecognized net gain (413) (331) Unrecognized prior service cost 46 21 Unrecognized transition asset (40) (45) - --------------------------------------------------------------- Prepaid asset recognized in the Balance Sheets $ 114 $ 99 =============================================================== Postretirement Benefits ---------------------- 1996 1995 ---------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $116 $103 Employees eligible to retire 28 31 Other employees 98 104 ----------------------------------------------------------- Accumulated benefit obligation 242 238 Less: Fair value of plan assets 108 89 Unrecognized net loss 15 23 Unrecognized transition obligation 65 72 ----------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 54 $ 54 =========================================================== In 1995, the system companies announced a cost sharing program for postretirement benefits. The program establishes limits on amounts the company will pay to provide future retiree postretirement benefits. This change reduced the 1995 accumulated postretirement benefit obligation by approximately $41 million. 18 NOTES (continued) Alabama Power Company 1996 Annual Report The weighted average rates assumed in the actuarial calculations were: 1996 1995 1994 ------------------------------- Discount 7.8% 7.3% 8.0% Annual salary increase 5.3 4.8 5.5 Long-term return on plan assets 8.5 8.5 8.5 ---------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 9.3 percent for 1996, decreasing gradually to 5.8 percent through the year 2005 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated benefit obligation as of December 31, 1996, by $20 million and the aggregate of the service and interest cost components of the net retiree cost by $2 million. Components of the plans' net cost are shown below: Pension ---------------------------------------------------------------- 1996 1995 1994 ------------------------------- (in millions) Benefits earned during the year $ 21.5 $ 21.2 $ 20.8 Interest cost on projected benefit obligation 59.5 54.3 51.2 Actual (return) loss on plan assets (148.9) (236.3) 23.5 Net amortization and deferral 43.8 136.9 (116.2) ---------------------------------------------------------------- Net pension cost (income) $ (24.1) $ (23.9) $ (20.7) ================================================================ Of the above net pension income, $20.3 million in 1996, $17.1 million in 1995, and $15.7 million in 1994 were recorded as credits to operating expenses, and the remainder was recorded as credits to construction and other accounts. Postretirement Benefits -------------------- 1996 1995 1994 -------------------- (in millions) Benefits earned during the year $ 5 $ 7 $ 8 Interest cost on accumulated benefit obligation 17 18 18 Amortization of transition obligation 4 7 6 Actual (return) loss on plan assets (7) (10) 1 Net amortization and deferral 2 5 (4) - ------------------------------------------------------------- Net postretirement costs $21 $27 $29 ============================================================= Of the above net postretirement costs recorded, $17.8 million in 1996, $22.7 million in 1995, and $23 million in 1994 were charged to operating expenses and the remainder was charged to construction and other accounts. Work Force Reduction Programs The company has incurred costs for work force reduction programs. The costs related to these programs were $26.7 million, $14.3 million and $8.2 million for the years 1996, 1995 and 1994, respectively. In addition, certain costs of these programs were deferred and are being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $46.0 million at December 31, 1996. 3. LITIGATION AND REGULATORY MATTERS Retail Rate Adjustment Procedures In November 1982, the APSC adopted rates that provide for periodic adjustments based upon the company's earned return 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 13.0 percent to 14.5 percent and limit increases or decreases in rates to 4 percent in any calendar year. In June 1995, the APSC issued a rate order granting the company's request for gradual adjustments to move toward parity among customer classes. This order 19 NOTES (continued) Alabama Power Company 1996 Annual Report also calls for a moratorium on any periodic retail rate increases (but not decreases) until July 2001. In December 1995, the APSC issued an order authorizing the company 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. The ratemaking procedures will remain in effect until the APSC votes to modify or discontinue them. Appliance Warranty Litigation In 1996, legal actions against the company were filed in several counties in Alabama charging the company with fraud and non-compliance with regulatory statutes relating to the offer, sale, and financing of "extended service contracts" in connection with the sale of electric appliances. Some of these suits were filed as class actions, while others were filed on behalf of multiple individual plaintiffs. The plaintiffs seek damages for an unspecified amount. The company has offered extended service agreements to its customers since January 1984, and approximately 175,000 extended service agreements could be involved in these proceedings. The final outcome of these cases cannot now be determined. FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the operating companies' wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. In November 1995, a FERC administrative law judge issued an opinion that the FERC staff failed to meet its burden of proof, and therefore, no change in the equity return was necessary. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter is pending before the FERC. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings, as well as certain other contracts that reference these proceedings in determining return on common equity, and if refunds were ordered, the amount of refunds could range up to approximately $160 million at December 31, 1996 for Southern Company, of which the company's portion would be approximately $76 million. However, management believes that rates are not excessive, and that refunds are not justified. 4. CAPITAL BUDGET The company's capital expenditures are currently estimated to total $425 million in 1997, $519 million in 1998, and $622 million in 1999. The capital budget is subject to periodic review and revision, and actual capital cost incurred may vary from the above estimates because of numerous factors. These factors include: changes in business conditions; revised load growth projections; changes in environmental regulations; changes in the existing nuclear plant to meet new regulatory requirements; increasing costs of labor, equipment, and materials; and cost of capital. At December 31, 1996, significant purchase commitments were outstanding in connection with the construction program. The company has entered into agreements with two of its industrial customers to locate cogeneration facilities at their premises. These facilities will provide process steam to the respective customers concurrent with the production of electricity for use on the company's electric system. Each facility, which is primarily composed of a combustion turbine, will have approximately 100 megawatts of electric capacity and will serve as a base load resource for the company. These facilities are expected to be placed in service in 1999 at a total cost of approximately $90 million. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading of generating plants. 20 NOTES (continued) Alabama Power Company 1996 Annual Report 5. FINANCING, INVESTMENT, AND COMMITMENTS General To the extent possible, the company's construction program is expected to be financed primarily from internal sources. Short-term debt is often utilized and the amounts available are discussed below. The company may issue additional long-term debt and preferred securities for the purposes of debt maturities, redeeming higher-cost securities, and meeting additional capital requirements. Financing The ability of the company to finance its capital budget depends on the amount of funds generated internally and the funds it can raise by external financing. The company's primary sources of external financing are sales of first mortgage bonds and preferred stock to the public and receipt of additional paid-in capital from Southern Company. In order to issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements contained in its mortgage indenture and corporate charter. The most restrictive of these provisions requires, for the issuance of additional first mortgage bonds, that before-income-tax earnings, as defined, cover pro forma annual interest charges on outstanding first mortgage bonds at least twice; and for the issuance of additional preferred stock, that gross income available for interest cover pro forma annual interest charges and preferred stock dividends at least one and one-half times. The company's coverages are currently at a level that would permit any necessary amount of security sales at current interest and dividend rates. Bank Credit Arrangements The company, along with Southern Company and Georgia Power Company, has entered into agreements with several banks outside the service area to provide $400 million of revolving credit to the companies through June 30, 1999. To provide liquidity support for commercial paper programs, the company and Georgia Power Company have exclusive right to $135 million and $165 million, respectively, of the available credit. However, the allocations can be changed among the borrowers by notifying the respective banks. The companies have the option of converting the short-term borrowings into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. Additionally, the company maintains committed lines of credit in the amount of $680 million (including $208 million of such lines under which borrowings may be made only to fund purchase obligations relating to variable rate pollution control bonds) which expire at various times during 1997 and, in certain cases, provide for average annual compensating balances. Because the arrangements are based on an average balance, the company does not consider any of its cash balances to be restricted as of any specific date. Moreover, the company borrows from time to time pursuant to arrangements with banks for uncommitted lines of credit. At December 31, 1996, the company had regulatory approval to have outstanding up to $750 million of short-term borrowings. Assets Subject to Lien The company's mortgage, as amended and supplemented, securing the first mortgage bonds issued by the company, constitutes a direct lien on substantially all of the company's fixed property and franchises. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the 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. Total estimated long-term obligations at December 31, 1996, were as follows: Year Amounts - ---- ------------------- (in millions) 1997 $ 808 1998 770 1999 569 2000 300 2001 317 2002 - 2013 2,594 - ------------------------------------------------ Total commitments $5,358 ================================================ 21 NOTES (continued) Alabama Power Company 1996 Annual Report Operating Leases The company has entered into coal rail car rental agreements with various terms and expiration dates. At December 31, 1996, estimated minimum rental commitments for noncancellable operating leases were as follows: Amounts Year ---------------- (in millions) 1997 $ 3 1998 3 1999 3 2000 3 2001 3 2002- 2017 53 - --------------------------------------------------------- Total minimum payments $68 ========================================================== 6. JOINT OWNERSHIP AGREEMENTS The company and Georgia Power Company own equally all of the outstanding capital stock of Southern Electric Generating Company (SEGCO), which owns electric generating units with a total rated capacity of 1,020 megawatts, together with associated transmission facilities. The capacity of these units is sold equally to the company and Georgia Power Company under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, interest expense and a return on equity, whether or not SEGCO has any capacity and energy available. The company's share of expenses totaled $75 million in 1996, $71 million in 1995 and $74 million in 1994, and is included in "Purchased power from affiliates" in the Statements of Income. In addition, the company has guaranteed unconditionally the obligation of SEGCO under an installment sale agreement for the purchase of certain pollution control facilities at SEGCO's generating units, pursuant to which $24.5 million principal amount of pollution control revenue bonds are outstanding. Georgia Power Company has agreed to reimburse the company for the pro rata portion of such obligation corresponding to its then proportionate ownership of stock of SEGCO if the company is called upon to make such payment under its guaranty. At December 31, 1996, the capitalization of SEGCO consisted of $52 million of equity and $76 million of long-term debt on which the annual interest requirement is $4.7 million. SEGCO paid dividends totaling $10.1 million in 1996, $7.6 million in 1995, and $11.6 million in 1994, of which one-half of each was paid to the company. SEGCO's net income was $7.7 million, $8.1 million, and $7.2 million for 1996, 1995 and 1994, respectively. The company's percentage ownership and investment in jointly-owned generating plants at December 31, 1996, follows: Total Megawatt Company Facility (Type) Capacity Ownership ------------------- ------------ ----------------- Greene County 500 60.00% (1) (coal) Plant Miller Units 1 and 2 1,320 91.84% (2) (coal) -------------------------------------------------------- (1) Jointly owned with an affiliate, Mississippi Power Company. (2) Jointly owned with Alabama Electric Cooperative, Inc. Company Accumulated Facility Investment Depreciation ------------------- -------------- --------------- (in millions) Greene County $ 90 $ 40 Plant Miller Units 1 and 2 714 296 -------------------------------------------------------- 7. LONG-TERM POWER SALES AGREEMENTS General The company and the operating affiliates of Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. The agreements for non-firm capacity expired in 1994. Other agreements -- expiring at various dates discussed below -- are firm and pertain to capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, profitability is primarily affected by revenues from capacity sales. The company's capacity revenues have been as follows: Unit Other Year Power Long-Term Total ---------------------------------------------------------- (in millions) 1996 $151 $ - $151 1995 157 - 157 1994 152 7 159 ---------------------------------------------------------- 22 NOTES (continued) Alabama Power Company 1996 Annual Report Unit power from Plant Miller is being sold to Florida Power Corporation (FPC), Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA) and the City of Tallahassee, Florida. Under these agreements, approximately 1,200 megawatts of capacity is scheduled to be sold through 1999. Thereafter, these sales will remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 1999 with a minimum of three years notice -- until the expiration of the contracts in 2010. Alabama Municipal Electric Authority (AMEA) Capacity Contracts In August 1986, the company entered into a firm power purchase contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum 100 megawatts) for a period of 15 years commencing September 1, 1986 (1986 Contract). In October 1991, the company entered into a second firm power purchase contract with AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80 megawatts) for a period of 15 years commencing October 1, 1991 (1991 Contract). In both contracts the power will be sold to AMEA for its member municipalities that previously were served directly by the company as wholesale customers. Under the terms of the contracts, the company received payments from AMEA representing the net present value of the revenues associated with the respective capacity entitlements, discounted at effective annual rates of 9.96 percent and 11.19 percent for the 1986 and 1991 contracts, respectively. These payments are being recognized as operating revenues and the discounts are being amortized to other interest expense as scheduled capacity is made available over the terms of the contracts. In order to secure AMEA's advance payments and the company's performance obligation under the contracts, the company issued and delivered to an escrow agent first mortgage bonds representing the maximum amount of liquidated damages payable by the company in the event of a default under the contracts. No principal or interest is payable on such bonds unless and until a default by the company occurs. As the liquidated damages decline under the contracts, a portion of the bonds equal to the decreases are returned to the company. At December 31, 1996, $128.2 million of such bonds was held by the escrow agent under the contracts. 8. INCOME TAXES At December 31, 1996, the tax-related regulatory assets and liabilities were $410 million and $365 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows: 1996 1995 1994 ------------------------------------------- (in thousands) Total provision for income taxes: Federal -- Currently payable $172,911 $166,105 $219,494 Deferred-- current year (6,309) 43,493 (48,153) reversal of prior years 18,948 (15,817) 15,932 Deferred investment tax credits - (75) (1) - ---------------------------------------------------------------------------- 185,550 193,706 187,272 - ---------------------------------------------------------------------------- State-- Currently payable 16,212 18,108 20,565 Deferred-- current year 697 5,117 (4,067) reversal of prior years 3,249 (91) 3,676 - ---------------------------------------------------------------------------- 20,158 23,134 20,174 - ---------------------------------------------------------------------------- Total 205,708 216,840 207,446 Less income taxes credited to other income (22,400) (14,142) (16,834) - ---------------------------------------------------------------------------- Total income taxes charged to operations $228,108 $230,982 $224,280 ============================================================================ The tax effects of temporary differences between the carrying amounts of 23 NOTES (continued) Alabama Power Company 1996 Annual Report assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 1996 1995 ------------------------------ (in millions) Deferred tax liabilities: Accelerated depreciation $ 816 $ 780 Property basis differences 466 491 Premimum on reacquired debt 31 31 Other 51 42 - ---------------------------------------------------------------------- Total 1,364 1,344 - ---------------------------------------------------------------------- Deferred tax assets: Capacity prepayments 34 35 Other deferred costs 27 26 Postretirement benefits 21 25 Unbilled revenue 15 13 Other 54 43 - ---------------------------------------------------------------------- Total 151 142 - ---------------------------------------------------------------------- Net deferred tax liabilities 1,213 1,202 Portion included in current assets (liabilities), net (35) (10) - ---------------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $1,178 $1,192 ====================================================================== Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $11 million in 1996, $12 million in 1995, and $13 million in 1994. At December 31, 1996, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 1996 1995 1994 -------------------------- Federal statutory rate 35.0% 35.0% 35.0% State income tax, net of federal deduction 2.2 2.5 2.2 Non-deductible book depreciation 1.5 1.6 1.6 Differences in prior years' deferred and current tax rates (1.6) (1.8) (2.9) Other (3.0) (1.4) (0.7) -------------------------------------------------------------- Effective income tax rate 34.1% 35.9% 35.2% ============================================================== 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. Tax benefits from losses of the parent company are allocated to each subsidiary based on the ratio of taxable income to total consolidated taxable income. 9. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES In January 1996, Alabama Power Capital Trust I (Trust I), of which the company owns all of the common securities, issued $97 million of 7.375 percent mandatorily redeemable preferred securities. Substantially all of the assets of Trust I are $100 million aggregate principal amount of the company's 7.375 percent junior subordinated notes due March 31, 2026. In January 1997, Alabama Power Capital Trust II (Trust II), of which the company also owns all of the common securities, issued $200 million of 7.60 percent mandatorily redeemable preferred securities. Substantially all of the assets of Trust II are $206 million aggregate principal amount of the company's 7.60 percent junior subordinated notes due December 31, 2036. A portion of the proceeds of the January 1997 issuance will be used for the redemption of $100 million of preferred stock in February 1997. 24 NOTES (continued) Alabama Power Company 1996 Annual Report 10. OTHER LONG-TERM DEBT Details of other long-term debt at December 31 are as follows: 1996 1995 -------------------------- (in thousands) Obligations incurred in connection with the sale of tax-exempt pollution control revenue bonds by public authorities- Collateralized - 5.5% to 6.5 % due 2023-2024 $223,040 $223,040 Variable rates (4.15% to 5.0% at 1/1/97) due 2015-2017 89,800 89,800 Non-collateralized - 7.25% due 2003 1,000 1,000 7.4% due 2016 - 21,000 5.8% due 2022 9,800 9,800 Variable rates (4.65% to 5.1% at 1/1/97) due 2021 - 2022 152,500 131,500 - -------------------------------------------------------------- 476,140 476,140 Capitalized lease obligations 8,056 8,963 - -------------------------------------------------------------- Total $484,196 $485,103 ============================================================== Pollution control obligations represent installment purchases of pollution control facilities financed by funds derived from sales by public authorities of revenue bonds. The company is required to make payments sufficient for the authorities to meet principal and interest requirements of such bonds. With respect to $312.8 million of such pollution control obligations, the company has authenticated and delivered to the trustees a like principal amount of first mortgage bonds as security for its obligations under the installment purchase agreements. No principal or interest on these first mortgage bonds is payable unless and until a default occurs on the installment purchase agreements. The estimated aggregate annual maturities of other long-term debt through 2001 are as follows: $1.0 million in 1997, $1.0 million in 1998, $1.2 million in 1999, $1.1 million in 2000 and $1.0 million in 2001. 11. SECURITIES DUE WITHIN ONE YEAR A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt and preferred stock due within one year at December 31 is as follows: 1996 1995 --------------------------- (in thousands) Bond improvement fund requirements $ 19,410 $20,047 First mortgage bond maturities and redemptions 391 63,750 Other long-term debt maturities (Note 10) 952 885 --------------------------------------------------------------- Total long-term debt due within one year 20,753 84,682 --------------------------------------------------------------- Preferred stock to be reacquired 100,000 - --------------------------------------------------------------- Total $120,753 $84,682 =============================================================== The annual first mortgage bond improvement fund requirement is 1 percent of the aggregate principal amount of bonds of each series authenticated, so long as a portion of that series is outstanding, and may be satisfied by the deposit of cash and/or reacquired bonds, the certification of unfunded property additions or a combination thereof. The 1997 requirement of $19.4 million was satisfied by the deposit of cash in 1997, all of which was used for the redemption of outstanding first mortgage bonds. Also in early 1997, the company redeemed $391 thousand first mortgage bonds and announced the February 1997 redemption of $100 million preferred stock. The preferred stock will be redeemed with a portion of the proceeds from the January 1997 Trust II security issuance. Scheduled maturities amount to $952 thousand in connection with capitalized office building leases and a street light lease. 12. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988 (Act), the company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at Plant Farley. The Act provides funds up to $8.9 billion for public liability claims that could arise from a single nuclear incident. Plant Farley 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 which could be assessed, after a nuclear incident, against all owners of nuclear 25 NOTES (continued) Alabama Power Company 1996 Annual Report reactors. The company could be assessed up to $79 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 the company is $159 million per incident but not more than an aggregate of $20 million to be paid for each incident in any one year. The company is a member of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium assessment in the event that losses exceed accumulated reserve funds. The company's maximum annual assessment per incident is limited to $9 million under the current policy. Additionally, the company has 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 NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company. NEIL also covers the additional cost 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 cost of replacement power in an amount up to $3.5 million per week (starting 21 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 maximum annual assessments per incident under current policies for the company would be $15 million for excess property damage and $8 million for replacement power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, 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. The company participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, the company could be subject to a maximum total assessment of $6 million. All retrospective assessments, whether generated for liability, property or replacement power may be subject to applicable state premium taxes. 13. COMMON STOCK DIVIDEND RESTRICTIONS The company's first mortgage bond indenture contains various common stock dividend restrictions that remain in effect as long as the bonds are outstanding. At December 31, 1996, retained earnings of $796 million was restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. Supplemental indentures in connection with future first mortgage bond issues may contain more stringent common stock dividend restrictions than those currently in effect. 14. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 1996 and 1995 are as follows: Net Income After Dividends Quarter Operating Operating on Preferred Ended Revenues Income Stock ------------------- ----------------------------------------- (in thousands) March 1996 $732,809 $142,052 $ 73,159 June 1996 779,587 151,673 95,778 September 1996 913,308 222,523 152,589 December 1996 695,071 100,390 49,964 March 1995 $646,771 $122,949 $ 65,328 June 1995 753,053 157,685 88,926 September 1995 938,284 233,322 167,938 December 1995 686,666 111,362 38,702 ---------------------------------------------------------------- The company's business is influenced by seasonal weather conditions. 26 SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1996 Annual Report
=========================================================================================================================== 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $3,120,775 $3,024,774 $2,935,142 Net Income after Dividends on Preferred Stock (in thousands) $371,490 $360,894 $356,338 Cash Dividends on Common Stock (in thousands) $347,500 $285,000 $268,000 Return on Average Common Equity (percent) 13.75 13.61 13.86 Total Assets (in thousands) $8,733,846 $8,744,360 $8,459,217 Gross Property Additions (in thousands) $425,024 $551,781 $536,785 - --------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,714,277 $2,690,374 $2,614,405 Preferred stock 340,400 440,400 440,400 Preferred stock subject to mandatory redemption - - - Subsidiary obligated mandatorily redeemable preferred securities 97,000 - - Long-term debt 2,354,006 2,374,948 2,455,013 - --------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,505,683 $5,505,722 $5,509,818 =========================================================================================================================== Capitalization Ratios (percent): Common stock equity 49.3 48.9 47.4 Preferred stock 6.2 8.0 8.0 Company obligated mandatorily redeemable preferred securities 1.7 - - Long-term debt 42.8 43.1 44.6 - --------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 =========================================================================================================================== First Mortgage Bonds (in thousands): Issued - - 150,000 Retired 83,797 - 20,387 Company Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued 97,000 - - Preferred Stock (in thousands): Issued - - - Retired - - - - --------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A+ A Duff & Phelps AA- A+ A+ Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A A A- Duff & Phelps A+ A A- - --------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,073,559 1,058,197 1,042,974 Commercial 171,827 166,480 162,239 Industrial 5,100 5,338 5,341 Other 732 725 716 - --------------------------------------------------------------------------------------------------------------------------- Total 1,251,218 1,230,740 1,211,270 =========================================================================================================================== Employees (year-end) 6,865 7,261 7,996
27 SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1996 Annual Report
============================================================================================================================ 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $3,007,609 $2,846,840 $2,846,794 Net Income after Dividends on Preferred Stock (in thousands) $346,494 $338,555 $339,666 Cash Dividends on Common Stock (in thousands) $252,900 $273,300 $232,900 Return on Average Common Equity (percent) 13.94 14.02 14.55 Total Assets (in thousands) $8,248,683 $6,593,618 $6,549,462 Gross Property Additions (in thousands) $435,843 $367,463 $397,011 - ---------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,526,348 $2,443,493 $2,387,198 Preferred stock 440,400 489,400 484,400 Preferred stock subject to mandatory redemption - - - Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 2,362,852 2,202,473 2,382,635 - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,329,600 $5,135,366 $5,254,233 ============================================================================================================================ Capitalization Ratios (percent): Common stock equity 47.4 47.6 45.4 Preferred stock 8.3 9.5 9.2 Company obligated mandatorily redeemable preferred securities - - - Long-term debt 44.3 42.9 45.4 - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ============================================================================================================================ First Mortgage Bonds (in thousands): Issued 860,000 745,000 250,000 Retired 699,788 931,797 227,695 Company Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued - - - Preferred Stock (in thousands): Issued 158,000 150,000 - Retired 207,000 145,000 17,500 - ---------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps A+ A A Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A- A- A- - ---------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,027,130 1,012,294 997,585 Commercial 157,337 152,530 148,228 Industrial 5,391 5,434 5,496 Other 713 704 697 - ---------------------------------------------------------------------------------------------------------------------------- Total 1,190,571 1,170,962 1,152,006 ============================================================================================================================ Employees (year-end) 8,009 8,116 8,513 28A
SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1996 Annual Report
============================================================================================================================= 1990 1989 1988 - ----------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $2,722,424 $2,629,354 $2,476,626 Net Income after Dividends on Preferred Stock (in thousands) $312,803 $311,146 $283,475 Cash Dividends on Common Stock (in thousands) $220,800 $217,300 $212,700 Return on Average Common Equity (percent) 14.00 14.53 14.03 Total Assets (in thousands) $6,362,293 $6,279,431 $6,180,945 Gross Property Additions (in thousands) $444,680 $459,199 $643,892 - ----------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,280,590 $2,188,811 $2,094,815 Preferred stock 484,400 484,400 484,400 Preferred stock subject to mandatory redemption 12,500 17,500 22,500 Subsidiary obligated mandatorily redeemable preferred securities - - - Long-term debt 2,397,931 2,435,129 2,496,492 - ----------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,175,421 $5,125,840 $5,098,207 ============================================================================================================================= Capitalization Ratios (percent): Common stock equity 44.1 42.7 41.1 Preferred stock 9.6 9.8 9.9 Company obligated mandatorily redeemable preferred securities - - - Long-term debt 46.3 47.5 49.0 - ----------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ============================================================================================================================= First Mortgage Bonds (in thousands): Issued - - 150,000 Retired 33,122 75,650 42,445 Company Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued - - - Preferred Stock (in thousands): Issued - - 100,000 Retired 5,000 5,000 2,500 - ----------------------------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps A A 6 Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A- A- 7 - ----------------------------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 985,566 974,622 964,581 Commercial 144,340 141,265 137,955 Industrial 5,322 5,200 5,120 Other 690 684 678 - ----------------------------------------------------------------------------------------------------------------------------- Total 1,135,918 1,121,771 1,108,334 ============================================================================================================================= Employees (year-end) 9,473 9,698 10,302
28B SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1996 Annual Report
========================================================================================================= 1987 1986 - --------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $2,574,634 $2,549,574 Net Income after Dividends on Preferred Stock (in thousands) $257,239 $273,456 Cash Dividends on Common Stock (in thousands) $201,100 $191,300 Return on Average Common Equity (percent) 13.56 15.12 Total Assets (in thousands) $5,912,000 $5,570,653 Gross Property Additions (in thousands) $600,589 $553,767 - --------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $1,946,747 $1,847,608 Preferred stock 384,400 384,400 Preferred stock subject to mandatory redemption 27,500 30,000 Subsidiary obligated mandatorily redeemable preferred securities - - Long-term debt 2,386,258 2,210,108 - --------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $4,744,905 $4,472,116 ========================================================================================================= Capitalization Ratios (percent): Common stock equity 41.0 41.3 Preferred stock 8.7 9.3 Company obligated mandatorily redeemable preferred securities - - Long-term debt 50.3 49.4 - --------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ========================================================================================================= First Mortgage Bonds (in thousands): Issued 200,000 125,000 Retired 108,082 405,765 Company Obligated Mandatorily Redeemable Preferred Securities (in thousands): Issued - - Preferred Stock (in thousands): Issued - - Retired 5,000 42,224 - --------------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 Standard and Poor's A A Duff & Phelps 6 6 Preferred Stock - Moody's a2 a2 Standard and Poor's A- A- Duff & Phelps 7 7 - --------------------------------------------------------------------------------------------------------- Customers (year-end): Residential 950,101 934,798 Commercial 134,533 130,540 Industrial 4,955 4,725 Other 713 697 - --------------------------------------------------------------------------------------------------------- Total 1,090,302 1,070,760 ========================================================================================================= Employees (year-end) 10,457 10,367
28C SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1996 Annual Report
============================================================================================================== 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $998,806 $997,069 $913,146 Commercial 696,453 670,453 647,202 Industrial 759,628 805,596 803,587 Other 13,729 13,619 13,515 - -------------------------------------------------------------------------------------------------------------- Total retail 2,468,616 2,486,737 2,377,450 Sales for resale - non-affiliates 391,669 370,140 354,760 Sales for resale - affiliates 216,620 127,730 164,762 - -------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 3,076,905 2,984,607 2,896,972 Other revenues 43,870 40,167 38,170 - -------------------------------------------------------------------------------------------------------------- Total $3,120,775 $3,024,774 $2,935,142 ============================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 14,593,761 14,383,231 13,183,147 Commercial 10,904,476 10,043,220 9,645,798 Industrial 19,999,258 19,862,577 19,479,364 Other 192,573 186,848 185,876 - -------------------------------------------------------------------------------------------------------------- Total retail 45,690,068 44,475,876 42,494,185 Sales for resale - non-affiliates 9,491,237 8,046,189 6,775,176 Sales for resale - affiliates 10,292,066 6,705,174 8,432,533 - -------------------------------------------------------------------------------------------------------------- Total 65,473,371 59,227,239 57,701,894 ============================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.84 6.93 6.93 Commercial 6.39 6.68 6.71 Industrial 3.80 4.06 4.13 Total retail 5.40 5.59 5.59 Sales for resale 3.07 3.38 3.42 Total sales 4.70 5.04 5.02 Residential Average Annual Kilowatt-Hour Use Per Customer 13,705 13,686 12,746 Residential Average Annual Revenue Per Customer $937.95 $948.71 $882.88 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 11,151 10,831 10,431 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 8,413 7,958 8,217 Summer 9,912 10,090 9,028 Annual Load Factor (percent) (Note 2) 61.3 59.2 62.2 Plant Availability (percent): Fossil-steam 86.6 88.3 86.9 Nuclear 90.5 81.1 92.5 - -------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 67.0 67.1 62.9 Nuclear 18.5 17.1 21.7 Hydro 7.1 7.0 8.4 Oil and gas 0.4 0.4 * Purchased power - From non-affiliates 2.4 2.7 1.3 From affiliates 4.6 5.7 5.7 - -------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ============================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,035 10,025 9,961 Cost of fuel per million BTU (cents) 147.09 148.68 157.62 Average cost of fuel per net kilowatt-hour generated (cents) 1.48 1.49 1.57 ============================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent.
29 SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1996 Annual Report
=================================================================================================================================== 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $947,277 $845,660 $864,347 Commercial 634,895 589,816 582,730 Industrial 832,938 800,311 790,224 Other 13,344 12,734 12,662 - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 2,428,454 2,248,521 2,249,963 Sales for resale - non-affiliates 364,105 407,791 407,912 Sales for resale - affiliates 181,975 158,088 159,375 - ----------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,974,534 2,814,400 2,817,250 Other revenues 33,075 32,440 29,544 - ----------------------------------------------------------------------------------------------------------------------------------- Total $3,007,609 $2,846,840 $2,846,794 =================================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 13,185,062 12,069,268 12,324,898 Commercial 9,185,462 8,629,869 8,526,131 Industrial 18,595,237 18,260,274 17,511,579 Other 181,673 176,798 174,760 - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 41,147,434 39,136,209 38,537,368 Sales for resale - non-affiliates 7,143,672 8,382,571 8,810,442 Sales for resale - affiliates 8,081,324 7,210,697 7,784,285 - ----------------------------------------------------------------------------------------------------------------------------------- Total 56,372,430 54,729,477 55,132,095 =================================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.18 7.01 7.01 Commercial 6.91 6.83 6.83 Industrial 4.48 4.38 4.51 Total retail 5.90 5.75 5.84 Sales for resale 3.59 3.63 3.42 Total sales 5.28 5.14 5.11 Residential Average Annual Kilowatt-Hour Use Per Customer 12,936 12,017 12,435 Residential Average Annual Revenue Per Customer $929.36 $842.00 $872.04 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 10,431 10,431 10,539 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 7,152 7,077 6,586 Summer 9,457 8,801 8,627 Annual Load Factor (percent) (Note 2) 58.6 59.6 59.9 Plant Availability (percent): Fossil-steam 89.7 88.9 93.1 Nuclear 86.6 80.2 87.0 - ----------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 63.9 64.3 61.5 Nuclear 20.1 19.0 20.8 Hydro 6.9 8.5 8.2 Oil and gas * * * Purchased power - From non-affiliates 1.1 1.2 1.6 From affiliates 8.0 7.0 7.9 - ----------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =================================================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,003 10,000 9,985 Cost of fuel per million BTU (cents) 173.66 164.57 170.49 Average cost of fuel per net kilowatt-hour generated (cents) 1.74 1.65 1.70 =================================================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent.
30A SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1996 Annual Report
============================================================================================================= 1990 1989 1988 - ------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $825,645 $781,982 $761,805 Commercial 551,634 533,487 510,910 Industrial 777,580 762,274 738,755 Other 12,103 11,743 11,255 - ------------------------------------------------------------------------------------------------------------- Total retail 2,166,962 2,089,486 2,022,725 Sales for resale - non-affiliates 434,996 409,202 355,362 Sales for resale - affiliates 93,473 104,488 76,691 - ------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,695,431 2,603,176 2,454,778 Other revenues 26,993 26,178 21,848 - ------------------------------------------------------------------------------------------------------------- Total $2,722,424 $2,629,354 $2,476,626 ============================================================================================================= Kilowatt-Hour Sales (in thousands): Residential 11,996,794 11,346,736 11,332,285 Commercial 8,201,534 7,915,685 7,711,092 Industrial 17,713,153 17,360,791 16,881,342 Other 170,420 166,485 165,122 - ------------------------------------------------------------------------------------------------------------- Total retail 38,081,901 36,789,697 36,089,841 Sales for resale - non-affiliates 10,277,060 10,292,329 7,905,750 Sales for resale - affiliates 4,519,275 5,048,743 3,551,142 - ------------------------------------------------------------------------------------------------------------- Total 52,878,236 52,130,769 47,546,733 ============================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.88 6.89 6.72 Commercial 6.73 6.74 6.63 Industrial 4.39 4.39 4.38 Total retail 5.69 5.68 5.60 Sales for resale 3.57 3.35 3.77 Total sales 5.10 4.99 5.16 Residential Average Annual Kilowatt-Hour Use Per Customer 12,256 11,717 11,839 Residential Average Annual Revenue Per Customer $843.50 $807.50 $795.84 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 9,879 9,879 9,279 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 6,293 7,264 6,377 Summer 8,878 8,256 7,991 Annual Load Factor (percent) (Note 2) 57.4 59.5 59.6 Plant Availability (percent): Fossil-steam 92.2 90.7 91.3 Nuclear 86.5 83.1 91.9 - ------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 57.0 54.1 53.9 Nuclear 21.6 21.0 26.1 Hydro 8.7 11.0 4.8 Oil and gas 0.1 0.1 0.1 Purchased power - From non-affiliates 0.9 1.8 0.5 From affiliates 11.7 12.0 14.6 - ------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ============================================================================================================= Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,072 10,061 10,137 Cost of fuel per million BTU (cents) 171.55 172.20 168.21 Average cost of fuel per net kilowatt-hour generated (cents) 1.73 1.73 1.71 ============================================================================================================= Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent. 30B
SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1996 Annual Report
==================================================================================================================== 1987 1986 - -------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $759,957 $738,864 Commercial 501,088 481,676 Industrial 721,298 705,395 Other 10,968 10,811 - -------------------------------------------------------------------------------------------------------------------- Total retail 1,993,311 1,936,746 Sales for resale - non-affiliates 443,880 472,938 Sales for resale - affiliates 118,746 120,911 - -------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,555,937 2,530,595 Other revenues 18,697 18,979 - -------------------------------------------------------------------------------------------------------------------- Total $2,574,634 $2,549,574 ==================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 11,149,225 10,606,698 Commercial 7,476,924 7,015,589 Industrial 15,969,075 15,025,806 Other 159,422 153,282 - -------------------------------------------------------------------------------------------------------------------- Total retail 34,754,646 32,801,375 Sales for resale - non-affiliates 10,523,554 9,064,049 Sales for resale - affiliates 4,963,997 4,456,360 - -------------------------------------------------------------------------------------------------------------------- Total 50,242,197 46,321,784 ==================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.82 6.97 Commercial 6.70 6.87 Industrial 4.52 4.69 Total retail 5.74 5.90 Sales for resale 3.63 4.39 Total sales 5.09 5.46 Residential Average Annual Kilowatt-Hour Use Per Customer 11,848 11,457 Residential Average Annual Revenue Per Customer $807.61 $798.09 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 9,337 9,337 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 6,138 6,257 Summer 7,886 7,892 Annual Load Factor (percent) (Note 2) 58.3 56.2 Plant Availability (percent): Fossil-steam 90.2 88.5 Nuclear 83.3 83.8 - -------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 52.5 58.8 Nuclear 21.7 23.8 Hydro 6.3 4.2 Oil and gas 0.2 0.1 Purchased power - From non-affiliates 0.2 2.0 From affiliates 19.1 11.1 - -------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 ==================================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,214 10,209 Cost of fuel per million BTU (cents) 176.72 179.65 Average cost of fuel per net kilowatt-hour generated (cents) 1.80 1.83 ==================================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent.
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