Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2026, for The Southern Company and its subsidiary registrants: Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas. The Southern Company is a holding company operating traditional electric utilities, a competitive wholesale power generator (Southern Power), and a natural gas distributor (Southern Company Gas). The filing includes unaudited financial statements and management discussion and analysis.
Key Financial Metrics (Consolidated)
| Metric | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Total Operating Revenues | $8,397 million | $7,775 million | +$622 million (8.0%) |
| Operating Income | $2,018 million | $2,010 million | +$8 million (0.4%) |
| Consolidated Net Income | $1,338 million | $1,270 million | +$68 million (5.4%) |
| Net Income Attributable to Southern Company | $1,356 million | $1,334 million | +$22 million (1.6%) |
| Diluted Earnings Per Share (EPS) | $1.20 | $1.21 | -$0.01 |
| Operating Cash Flow | $1,226 million | $1,250 million | -$24 million |
| Investing Cash Flow | ($3,421 million) | ($2,834 million) | ($587 million) increase in outflow |
| Financing Cash Flow | $1,542 million | $2,815 million | ($1,273 million) decrease |
| Long-Term Debt | $67,148 million | $65,649 million (Dec 2025) | +$1,499 million |
| Cash and Cash Equivalents | $981 million | $1,639 million (Dec 2025) | -$658 million |
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased 8.0% year-over-year. Retail electric revenues rose 0.8% driven by sales growth (partially offset by weather), while wholesale electric revenues surged 29.7% due to higher energy prices and volumes. Natural gas revenues increased 19.1% primarily due to higher gas costs passed through to customers and base rate increases.
- Expense Increases: Fuel expenses increased 15.4% and cost of natural gas increased 37.4%, largely reflecting higher commodity prices. Depreciation and amortization rose 10.4%, driven by a $127 million increase in accelerated depreciation from Southern Power's wind repowering projects.
- Profitability: Despite higher expenses, net income increased due to higher revenues and a decrease in income tax expense (effective tax rate dropped to 14.5% from 18.1%), attributed to increased federal Production Tax Credits (PTCs).
- Segment Performance:
- Traditional Electric Utilities: Net income increased to $1.113 billion, driven by sales growth and AFUDC equity increases.
- Southern Power: Net income attributable to Southern Power dropped significantly to $4 million from $87 million, primarily due to accelerated depreciation from wind repowering and hail damage to solar panels.
- Southern Company Gas: Net income increased to $447 million, driven by higher gas distribution operations income.
Guidance, Outlook, and Risks
- Construction and Capital Expenditures: Significant capital investment continues, particularly at Georgia Power (battery storage, combined cycle plants) and Southern Power (wind repowering, solar projects). Georgia Power has recorded approximately $3.7 billion in capital costs for projects approved through 2025.
- Regulatory Matters:
- Alabama Power: State legislation enacted in April 2026 freezes retail base rates until January 2029.
- Georgia Power: Facing an appeal regarding the certification of 9,885 MW of resources. Fuel cost recovery balances remain above thresholds requiring monitoring.
- Mississippi Power: Submitted a Performance Evaluation Plan (PEP) requesting a 1.8% revenue increase, effective January 2026.
- Financing Activities: Georgia Power and Alabama Power entered into DOE Loan Guarantee agreements in February 2026. Georgia Power received initial advances of approximately $1.0 billion. Southern Company issued $1.3 billion in junior subordinated notes in March 2026.
- Risks and Contingencies:
- Environmental: Ongoing litigation regarding Coal Combustion Residuals (CCR) closure plans at Alabama Power (Plant Barry and Plant Gadsden). EPA proposed rule changes on CCR regulations in April 2026.
- Legal: A class action lawsuit filed in July 2025 alleging antitrust violations regarding nuclear employee compensation.
- Market: Exposure to natural gas price volatility for Southern Company Gas and wholesale market prices for Southern Power.
Investor Verification Checklist
- Wind Repowering Impact: Verify the duration and total cost of accelerated depreciation charges at Southern Power, which significantly impacted Q1 2026 earnings.
- Regulatory Rate Cases: Monitor the outcome of the appeal against Georgia Power's 2025 All-Source Certification and the final decision on Mississippi Power's PEP filing.
- DOE Loan Utilization: Track the drawdown schedule and project eligibility for the new DOE Loan Guarantee facilities at Georgia Power and Alabama Power.
- CCR Litigation: Review updates on the EPA settlement and citizen suits regarding Alabama Power's CCR closure methodologies, as these could materially impact Asset Retirement Obligations (ARO).
- Data Center Demand: Assess the ramp-up timeline and revenue recovery mechanisms for the ~11 gigawatts of new data center contracts signed since 2023.