Ga Power Company Application Part 1

Georgia Power Company
DOE Loan Guarantee Application GPC Vogtle Expansion Project

September 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained in pages 2 - 54 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.
This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Project Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
GPC Vogtle Expansion Project DOE Loan Guarantee Application
Table of Contents
LIST O F TABLES ............................................................................................. LIST OF APPENDICES ............................................................................................ LIST O F ABBREVIATIONS ............................................................................................ Section A 1. 2. 3. 4. 5. 6. 7. Section B 1. 2. 3. A. B. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Section C 1. A. B. C. D. E. Application Information Project Name Evidence of Authority Applicant Validation Statement Eligible Lender/Holder Statement Equity Commitment Letters Project Participants Applicant Point of Contact Project Description Executive Summary Technology Description Project Eligibility Substantial Environmental Benefits New or Significantly Improved Technology Organization Prior Experience Project Sponsor's Capabilities Proposed Project Location State and Local Support Project Time Lines Key Material Components List and Status of Licenses/Permits/Approvals Detailed Total Project Cost Loan Guarantee Impact Technical Information Key Contracts and Agreements Engineering Procurement Construction (EPC) Contract Long Lead Procurements Fuel Supply Agreements Operations and Maintenance (O&M) Contracts Other
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4 4 4
7 7 7 7 7 7 7 9 10 10 12 13 14 15 16 19 20 21 22 22 22 24 24 24 26 26 26 26 26 27 27
Georgia Power Company September 2008
CONFIDENTIAL AND PROPRIETARY

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Project Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
2. 3. A. B. C. i ii iii D. E. F. G. H. Section D 1. 2. A. B. C. D. Section E 1. 2. 3. 4. 5. 6. Section F 1.
Major Project Plans Potential Environmental Impacts Facilities Project Location Proposed Project Construction and Operation Project Construction and Operations Schematic Process Diagram Upset / Error / Incident / Accident Scenarios Project Progression Status of Other Environmental and Regulatory Reviews Alternative Sites or Operating Parameters Post-Operational Requirements Other Actions in the Project Area Business Plan Potential Project Offtake Summary Business Plan Financing Plan Market Analysis Management Planning Operational Risks and Mitigation Strategies Financial Plan Background and Legal Structure Legal Authority Financial Statements Credit History Litigation and/or Conflicts Financial Model Application Certifications Certifications and Assurances
37 38 39 39 40 40 42 42 43 44 45 45 46 48 48 49 49 49 50 50 51 51 52 52 53 53 53 54 54
CONFIDENTIAL AND PROPRIETARY 3
GPC Vogtle. Expansion Project DOE Loan Guarantee Application

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
List of Tables
Table B3-1: Comparative Emissions Data Page 14
List of Appendices
Appendix A B B.1 C D E F G H H.01 H.02 H.1 I J K L M N O Content Evidence of Authority Equity Commitment Letter New Generation and Environmental Programs Site Location Map Key Milestone Schedule Licenses, Permits, and Approvals Early Site Permit Environmental Report Draft Environmental Impact Statement Statutory Provisions - IRP and Certification Service Territory Economic Outlook Planned Capacity Additions Project Organizational Chart Statutory Provisions - Incorporation Statutory Provisions - Issuance of Indebtedness GPC Annual Financial Statements GPC Current Year Quarterly Financial Statements GPC Credit History Financial Model Certifications and Assurances
List of Abbreviations
AC Alabama Power ASLB ASME CDF CERCLA CFR CIP 'CO CO2
Alternating Current Alabama Power Company Atomic Safety and Licensing Board American Society of Mechanical Engineers Core Damage Frequency Comprehensive Environmental Response, Compensation, and Liability Act Code of Federal Regulations Construction Inspection Program Carbon Monoxide Carbon Dioxide
September 2008

COL COLA Consortium Co-Owners CWIP Dalton Utilities days/yr DCD DEIS DOE EAB EPA EPC ESP ESPER FEIS FERC FFB FNP FSER GEIS GPC GPSC HNP hrs/mo IIC INPO IRP IRPP JBIC Lb/yr LWA MEAG MT MW MWe MWt NEPA NOx NPL NQA NRC
Construction and Operating License Construction and Operating License Application Westinghouse and Stone & Webster Oglethorpe Power, The Municipal Electric Authority of Georgia, and Dalton Utilities Construction Work In Progress City of Dalton Days per Year Design Control Document Draft Environmental Impact Statement Department of Energy Exclusion Area Boundary Environmental Protection Agency Engineering, Procurement, and Construction Early Site Permit Early Site Permit Environmental Report Final Environmental Impact Statement Federal Energy Regulatory Commission Federal Financing Bank Joseph M. Farley Nuclear Plant Final Safety Evaluation Report Generic Environmental Impact Statement Georgia Power Company Georgia Public Service Commission Hatch Nuclear Plant Hours per Month Intercompany Interchange Contract Institute of Nuclear Power Operations Integrated Resource Plan Integrated Resource Planning Process Japanese Bank for International Cooperation Pounds per Year Limited Work Authorization The Municipal Electric Authority of Georgia Metric Ton Megawatts Megawatt Electric Megawatt Thermal National Environmental Policy Act Nitrogen Oxides National Priorities List National Quality Assurance Nuclear Regulatory Commission
September 2008

NSR NUREG O&M OPC Owners
PM PWR S&W SCS SER Shaw SNC SO SO2 SRS Tenaska URD VEGP WEC
New Source Review Nuclear Regulatory Committee Operations and Maintenance Oglethorpe Power Company Georgia Power Company (GPC), Oglethorpe Power Company (OPC), The Municipal Electric Authority of Georgia (MEAG), and the City of Dalton Particulate Matter Pressurized Water Reactor Stone & Webster, Inc. Southern Company Services Safety Evaluation report The Shaw Group, Inc. Southern Nuclear Operating Company Southern Company Sulfur Dioxide Savannah River Site Tenaska, Inc. Utility Requirements Document Vogtle Electric Generating Plan Westinghouse Electric Company, LLC
September 2008

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 1(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
Section A: Application Information 1. Project Name For the purposes of this application, the project will be referred to as the "GPC Vogtle Expansion Project." This specifically refers to GPC's 45.7% undivided ownership interest in Vogtle Electric Generating Plant (VEGP) Units 3 and 4. 2. Evidence of Authority Evidence of Authority is hereby attached as Appendices Al and A2. 3. Applicant Validation Statement Georgia Power Company (GPC, Georgia Power, or the Company) is of the opinion that, based on the project information that will be provided in this application, there is a reasonable prospect that the indebtedness to be incurred with respect to the GPC Vogtle Expansion Project that would be guaranteed by the Department of Energy (DOE) will be repaid on time and in full (including interest) from the cash flows of GPC. GPC will submit a financial model with its complete Part I Application to be filed at a later date. 4. Eligible Lender/Holder Statement [REDACTED********************************************************************************
Any debt associated with the GPC Vogtle Expansion Project's non-eligible costs is expected to be small in relation to the total cost of the project. These non-eligible costs are likely be financed through traditional GPC financing sources, such as commercial paper, bank term loans, or senior unsecured notes, and such indebtedness will not be collateralized by the assets or resources of the GPC Vogtle Expansion Project. 5. Equity Commitment Letters GPC's Equity Commitment Letter is hereby attached as Appendix B. 6. Project Participants The following organizations will contribute to the GPC Vogtle Expansion Project: * GPC * Southern Nuclear Operating Company (SNC, or Southern Nuclear) * Southern Company Services (SCS)
Georgia Power Company CONFIDENTIAL AND PROPRIETARY
September 2008

* Westinghouse Electric Company LLC (WEC, or Westinghouse). * Stone & Webster, Inc. (S&W) GPC is a wholly owned subsidiary or The Southern Company (Southern Company), and is a vertically integrated utility providing electricity to regulated retail customers in Georgia and wholesale customers within the southeastern United States. GPC is regulated by the Georgia Public Service Commission (GPSC), the Federal Energy Regulatory Commission (FERC), and the Nuclear Regulatory Commission (NRC). The Company currently owns and operates forty-nine existing coal-fired, nuclear, combined-cycle, combustion turbine, and hydroelectric facilities within the State of Georgia. GPC plans to co-own VEGP Units 3 & 4 with Oglethorpe Power Corporation (OPC, or Oglethorpe), The Municipal Electric Authority of Georgia (MEAG) and the City of Dalton, Georgia, acting through its Board of Water, Light and Sinking Fund Commissioners (Dalton Utilities or Dalton, and together with OPC and MEAG the Co-Owners). GPC or its agent, Southern Nuclear, will perform all environmental permitting and compliance activities necessary to obtain authorizations to construct and operate VEGP Units 3 and 4. SNC is a wholly owned subsidiary of Southern Company and is engaged in the operation of nuclear power plants on behalf of Southern Company and its subsidiaries. SNC was organized in 1990 for the purpose of operating nuclear facilities owned by other subsidiaries of Southern Company. SNC operates the Edwin I. Hatch Nuclear Plant (HNP), Units 1 and 2; and VEGP, Units 1 and 2, for GPC, Oglethorpe, MEAG, and Dalton Utilities (the Owners). SNC also operates the Joseph M. Farley Nuclear Plant (FNP) Units 1 and 2 for Alabama Power Company. The combined electric generation of the three plants is in excess of 6,000 megawatts
(MWs).
SNC is the applicant for the combined Construction and Operating License (COL) with the Nuclear Regulatory Commission (NRC) and will construct and operate the new VEGP Units 3 and 4 on behalf of the Owners. SNC has entered into agreements with GPC (and GPC with the Co-Owners) to provide SNC the authority to apply for and hold a COL, and to operate the facilities on each Owner's behalf. SNC is granted the authority, on behalf of the Owners, to manage all aspects of plant construction and operation including but not limited to management of the construction of VEGP Units 3 and 4, control of the exclusion area, security, and emergency planning. SCS is a wholly owned subsidiary of Southern Company that provides support services to affiliate operating companies, and may also function as GPC's agent. SCS will provide a variety of support services during the GPC Vogtle Expansion Project, including the preparation and submittal of the Loan Guarantee Application on behalf of GPC. As described in section C.1, GPC has entered into an Engineering, Procurement and Construction (EPC) agreement with a consortium comprised of WEC and S&W (the Consortium), pursuant to which the Consortium will design, procure and construct VEGP Units 3 and 4, which will be two approximately 1,100 MW Westinghouse AP1000 nuclear units.
September 2008

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905. and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
WEC, a group company of Toshiba Corporation, is the world's pioneering nuclear power company and is a leading supplier of nuclear plant products and technologies to utilities throughout the world. Westinghouse is engaged in the business of designing, developing, supplying and testing the commercial nuclear facilities at VEGP Units 3 and 4 and has developed.the pressurized water Nuclear Power Plant known as the AP1000 for which the US NRC has issued a final design certification. Today, Westinghouse technology is the basis for approximately one-half of the world's operating nuclear plants, including 60 percent of those in the United States. In concert with S&W, a subsidiary of Shaw, Westinghouse will supply the AP1000 units that are the subject of the GPC Vogtle Expansion Project. S&W is a leading global provider of EPC contracts, and will be engaged in the business of designing and constructing the power generation facilities at VEGP Units 3 and 4. In concert with WEC, S&W will supply the AP1000 units that are the subject of the GPC Vogtle Application. In July 2000, the assets of S&W were acquired by The Shaw Group, Inc (Shaw), who is also a 20 percent owner of WEC. Shaw is a leading global provider of technology, engineering, procurement, construction, maintenance, fabrication, manufacturing, consulting, remediation and facilities management services for government and private sector clients in the energy, chemicals, environmental, infrastructure and emergency response markets. If information from other project contributors is needed, please contact the GPC Vogtle Expansion Project contacts below and they will be glad to provide the necessary contact information at that time. 7. Applicant Point of Contact The primary contact for this Application is: Earl Long Assistant Treasurer Southern Company 30 Ivan Allen Jr Boulevard BIN SC1407 Atlanta, GA, 30308 Phone: 404-506-0783 E-mail: eclong@southernco.com Fax: 404-506-0717 The secondary contact is: Steven Nichols Sr. Financial Analyst Southern Company Services 30 Ivan Allen Jr Boulevard, BIN SC1407 Atlanta, GA, 30308 Phone: 404-506-0776 E-mail: stnichol@southernco.com Fax: 404-506-0717

Section B: Project Description 1. Executive Summary If certified by the Georgia Public Service Commission (GPSC) and licensed by the NRC, SNC will construct and operate the new VEGP Units 3 and 4 on behalf of, and in order to provide electric generating capacity for, GPC and the Co-Owners. The two Westinghouse AP1000 units, with a capacity of approximately 1,100 megawatts each, would be constructed at the VEGP site near Waynesboro, Georgia and would be placed in service in 2016 and 2017, respectively. On April 8, 2008, GPC, acting for itself and as agent for the Co-Owners, and the Consortium entered into an EPC agreement to design, engineer, procure, construct, and test two AP1000 nuclear units and related facilities, structures, and improvements at VEGP (EPC Agreement). The EPC Agreement is an arrangement whereby the Consortium supplies and constructs the entire facility with the exception of certain items provided by the Owners. Under the terms of the EPC Agreement, the Owners will pay a purchase price that will be subject to certain price escalation and adjustments, adjustments for change orders, and performance bonuses. The estimated plant value to be placed in service also includes financing costs, transmission, initial nuclear fuel load and other costs that are the responsibility of the Co-Owners, as well as expected inflation. GPC's proportionate share of the estimated in-service cost of VEGP Units 3 and 4, based on its current ownership interest of 45.7 percent and subject to the escalations and adjustments mentioned above, is approximately $6.9 billion. [REDACTED *****
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The following are key milestone and projection dates for the GPC Vogtle Expansion Project: * Early Site Permit (ESP) filed with the NRC on August 15, 2006 o NRC issued Safety Evaluation Report (SER) with open item on August 30, 2008
* NRC issued draft environmental impact statement (DEIS) on September 14, 2007 * NRC issued a Final Environmental Impact Statement (FEIS) on August 13, 2008 * Limited Work Authorization (LWA) submitted to the NRC on August 16, 2007 * Combined construction and operating license application (COLA) filed with NRC on March 31, 2008 o The COLA was accepted as sufficient and docketed by NRC on May 31,2008.
September 2008
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This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 1(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
* Site Preparation commences in third quarter of 2008 * Target date to close DOE Loan Guarantee - September 2009, unless the expiration of DOE's loan guarantee budget allocation is extended beyond that date, in which case GPC's target closing date would be at the issuance of its COL which is expected in September 2011. * ESP and Limited Work Authorization (LWA) issued in September 2009. * Combined Construction and Operation License issued in September 2011 * Construction and First Concrete - October 2011 for Unit 3 and October 2012 for Unit 4 * Fuel load, startup and testing - October 2015 for Unit 3 and October 2016 for Unit 4 * VEGP Unit 3 Commercial Operation Date - April 1, 2016 * VEGP Unit 4 Commercial Operation Date - April 1, 2017 Please see section B2 for a description of the design features. Potential legal or regulatory risk associated with VEGP Units 3 and 4: The AP1000 design has been certified through Revision 15 of the Design Control Document (DCD). Currently WEC is pursuing a specific set of changes to the certified design through Revisions 16 and 17 to the DCD. The NRC has issued a schedule for the review and approval of Revision 16 that is compatible with the schedule for the review and approval of the VEGP COL. NRC has not yet issued a schedule for the review and approval of DCD Rev. 17, which will be submitted by Westinghouse in September, 2008. GPC has attempted to mitigate the risk of delay in COL licensing attributable to the approval of design changes by requiring WEC to comply with NRC schedules and to achieve approval of the DCD changes on a schedule that supports issuance of the COL by October 1, 2011. Risks associated with delays due to site specific issues, such as the suitability of the site or environmental issues, have been mitigated by pursuit of an early site permit. The early site permit is expected to be issued in September 2009. GPC has mitigated the risk of delay or adverse regulatory finding on this issue by producing a high-quality application that GPC believes demonstrates that the regulatory requirement is met. GPC believes the risk of a regulatory delay arising from environmental issues has been significantly reduced by the receipt of the Final EIS on August 13, 2008. The NRC will also exercise regulatory oversight over the finalization of the detailed design of the facility, the procurement of equipment and components, and the construction of the facility through its Construction Inspection Program (CIP). Utilizing the CIP, the NRC will ensure that the construction of the facility complies with NRC requirements. The Company has attempted to mitigate the risk of regulatory compliance issues during construction by requiring the EPC contractor to

September 2008
This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 l(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
develop and utilize an NRC approved Quality Assurance Program that satisfies both 10 C.F.R. Part 50, Appendix B and ASME NQA-1. The company is required to obtain an order from the GPSC certifying the construction of the new units. On August 1, 2008, the Company filed an application requesting certification of Vogtle Units 3 and 4. The Georgia PSC is expected to complete its review and issue a decision in March 2009. GPC will not proceed with the Plant Vogtle Expansion Project unless a certification order is granted by the Georgia PSC. See section D. 1 for a discussion regarding the certification process and recovery of costs related to the units. 2. Technology Description As described in the Executive Summary section, VEGP Units 3 and 4 will be constructed pursuant to the EPC Agreement, which grants GPC all necessary technology licenses to construct and operate the new units. The Westinghouse AP1000 is a two-loop pressurized water reactor (PWR) that uses a simplified approach to safety. The AP1000 has a gross power rating of 3415 megawatt thermal (MWt) and nominal net electric output of approximately 1,100 megawatt electric (MWe). The standardized reactor design complies with the Advanced Light Water Reactor Utility Requirements Document (URD). Additionally, the AP1000 received Final Design Approval from the NRC in September 2004, and Design Certification in December 2005. The AP1000 is the first and only Generation III + reactor to receive such certification from the NRC. In May 2007, Westinghouse submitted an application to amend the AP1000 Design Certification Document (Revision 16) and in February 2008, the NRC issued a letter to Westinghouse with a schedule that supports a Final Safety Evaluation Report (FSER) in March of 2010. Recently Westinghouse has indicated that it will submit Revision 17 in September 2008. The simplified AP1000 plant design includes overall safety systems, normal operating systems, the control room, construction techniques and instrumentation and controls. The AP1000 design is expected to save time with an accelerated construction time period of 48 months, from the pouring of first concrete to the loading of fuel. The AP1000 PWR works on the simple concept that in the event of a design-basis accident (such as a coolant pipe break), the plant is designed to achieve and maintain safe shutdown conditions without any operator action and without the need for AC power or pumps. Instead of relying on active components such as diesel generators and pumps, the AP1000 relies on the natural forces of gravity, natural circulation and compressed gases to keep the core and containment from overheating. Many active components are included in the AP1000, but are designated as non-safety related. The AP1000 meets the NRC deterministic-safety and probabilistic-risk criteria with large margins. Results of the Probabilistic Risk Assessment show a very low core damage frequency (CDF) that is 1/100 of the CDF of currently operating plants and 1/20 of the maximum CDF deemed acceptable for new advanced reactor design. Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 12

More information on the Westinghouse AP1000 design may be found at http://www.westinghousenuclear.com/docs/AP1000_brochure.pdf Under the EPC Agreement, the Owners and the Consortium have agreed to certain liquidated damages upon the Consortium's failure to comply with the schedule and performance guarantees. The Owners and the Consortium also have agreed to certain bonuses payable to the Consortium for early completion and unit performance. The Consortium's liability to the Owners for schedule and performance liquidated damages and warranty claims are subject to a cap. GPC believes the AP1000 to be a commercially viable technology. Several other AP1000 units have been contracted for, including 4 units in China and 2 units in South Carolina. Additionally several other major electric utilities are contemplating the use at the AP1000 reactor design, including Duke Energy, Florida Power and Light, Progress Energy and the Tennessee Valley Authority. The interest in the AP1000 from so many sources demonstrates the technology's commercial viability. The Final Rule for the DOE Loan Guarantee Program (10 CFR Part 609) defines a
technology in general use as a technology that "has been installed in and is being used in three or more commercial projects in the United States, in the same general application as in the proposed project, and has been in operation in each such commercial project for a period of at least five years." No advanced nuclear reactor has been constructed in the United States; therefore, the technology employed in the GPC Vogtle Expansion Project is not in general use. As GPC is not the owner of the AP1000 technology, GPC cannot ensure its further commercial availability; however, the GPC Vogtle Expansion Project's successful completion will reduce the perceived risk of future project of a similar nature. Furthermore, obtaining loan guarantees may help GPC, and other Southern Company subsidiaries, in future efforts to develop additional nuclear units. A loan guarantee would improve credit metrics such that the Company could be better assured of maintaining its financial strength. [REDACTED***************************
***************************************************************************************
*********]. Mitigating the rate impact of the GPC Vogtle Expansion Project will play an important part in the development of future nuclear facilities for the Company. With GPC projections showing a large need for new generation in the future, loan guarantees could go a long way to potentially helping the Company develop another nuclear plant beyond the GPC Vogtle Expansion Project.
3. Project Eligibility Section 1703(a) of the Energy Policy Act of 2005 (EPAct) authorizes the Secretary of the DOE to make loan guarantees only for projects that: (1) avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 13

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(0. This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
(2) employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued. The GPC Vogtle Expansion Project meets both criteria. A. Substantial Environmental Benefits The operation of a nuclear power plant to generate electricity does not generate carbon dioxide (C02), sulfur dioxide (S02) or nitrous oxide emissions (NOx). Since VEGP Units 3 and 4 will be nuclear units and produce no measurable emissions of these air pollutants of concern during facility operation, and are anticipated to generate approximately 1,100 MW (net) per unit, the emissions from these nuclear units may be compared to hypothetical emissions from alternative base load generation plants which utilize coal or natural gas as fuel. A comparison of anticipated air emissions from VEGP Units 3 and 4, as compared to predicted coaland gas-fired generation sources for comparable electric generation capacity is instructive in demonstrating the substantial air quality-related benefits associated with VEGP Units 3 and 4, including the avoidance of air pollutants or anthropogenic emissions of greenhouse gases. For VEGP Units 3 and 4, on a nuclear fuel cycle basis, i.e. including air emissions associated with the electric power in producing nuclear fuel, the NRC has estimated that the carbon dioxide emissions from VEGP Units 3 and 4 would be less than 0.82 million metric tons (0.9 million tons). 1 In comparison, for the representative pulverized coal-fired plant, above, operating for 40 years, without factoring the carbon dioxide emitted in coal mining and transportation to the facility, would be approximately 289,469,002 metric tons. VEGP Units 3 and 4 would have diesel-powered generators for standby power, akin to diesel-electric train locomotive engines in size and output, and auxiliary power systems. The NRC has noted that these support systems would be used on an infrequent basis and air pollutants discharged would be permitted by the Georgia Department of Natural Resources. Typically, the NRC limits, through license requirements, the operation of the diesel generators except for testing and emergency power. The air emissions associated with this infrequent operation and testing of this equipment and auxiliary power systems are small, and orders of magnitude less than emissions from gas or coal-fired alternatives. Emission data for available pollutants for VEGP Units 3 and 4 diesel and auxiliary equipment is provided in the table below 2 :
2 Southern
Draft NUREG-1872, Vol. 1, page 5-3 - 5-4, September, 2007, entitled "Draft Environmental Impact Statement for an Early Site Permit (ESP) at the Vogtle Electric Generating Plant Site."
Nuclear, Early Site Permit Application, NRC Accession No. ML081020179, March, 2008
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Table B3-1: Comparative Emissions Data Pollutant NOx SO 2 CO PM Coal (tons/year) 1815 5587 1815 91.4 Natural Gas (tons/year) 540 169 112 94 Nuclear (tons/year) <6.07 <1.2525 <0.515 <0.405
As can be observed by comparing the coal and gas-fired alternatives, the air pollutants associated with VEGP Units 3 and 4 are relatively miniscule compared to alternative base load generation of similar size, thus demonstrating the substantial environmental benefits of VEGP Units 3 and 4 in avoiding air pollutants and emissions of greenhouse gases. B. New or Significantly Improved Technology Section 1703 (b) of the EPAct designates specific categories of projects that shall be eligible for loan guarantees, including "advanced nuclear energy facilities." The proposed Vogtle Units 3 and 4 are advanced nuclear energy facilities and, therefore, are eligible for loan guarantees in accordance to the Act. More specifically, VEGP Units 3 and 4 will deploy the Westinghouse AP-1000 reactor design, which was approved by the NRC after December 31, 1993 in the form of a Design Certification, and this design or a substantially similar design had not been approved prior to that date.3 The Final Rule for the DOE Loan Guarantee Program (10 CFR Part 609) defines New or Significantly Improved Technology as "a technology concerned with the production, consumption or transportation of energy that is not a Commercial Technology, and that has either: (i) Only recently been developed, discovered or learned; or (ii) involves or constitutes one or more meaningful and important improvements in productivity or value, in comparison to Commercial Technologies in use in the United States at the time the Term Sheet is issued." Although each VEGP Unit includes materials and components that appear similar to existing Westinghouse-designed nuclear power facilities by including such features as nuclear fuel, a reactor pressure vessel, a containment, steam generators, an electric generation turbine, and instrumentation and controls, the safety and operational technology deployed in the Westinghouse AP1000 design is not technology in general use in the commercial marketplace. Rather, the Westinghouse AP1000 design is a new design that incorporates significant operational, safety and cost enhancements. Major technological features reflective of this new design, not yet deployed in the United States as of the time of this Application, include:
3Section 1703 does not expressly define "advanced nuclear energy facilities." Sections 638 and 1306 provide the same definition of the term "advanced nuclear facility" which is equally applicable to Section 1703. "Advanced nuclear facility" under those Sections means "any nuclear facility the reactor design for which is approved after December 31, 1993, by the Commission (and such design or a substantially similar design of comparable capacity was not approved on or before that date)."
* Reactor safety functions achieved without safety-related Alternating Current (AC) electrical power * Automatic response to accident conditions (reduction in human operator actions) * "Passive cooling" in accident conditions: natural circulation, condensation and evaporation "passive" safety functions for reactor core cooling (in contrast with active safety-related cooling systems in existing facilities) * Increased operating margin to safety limits * Actuation of reactor safety functions with "stored energy", including compressed gases (nitrogen, air) and batteries * Reduced reliance on safety-related pumps and use of natural ventilation systems in the plant * Severe accident scenarios mitigated by in-vessel retention of affected fuel * Substantially fewer safety-related pumps, valves, Class 1 E AC sources, cabling, piping and other components, consequently, smaller total building volume 4. Organization GPC, a wholly-owned subsidiary of Southern Company, is the Applicant and the proposed Borrower with respect to this Application. GPC will directly own the Project, which is GPC's 45.7% undivided ownership interest in VEGP Units 3 and 4. GPC will co-own VEGP Units 3 and 4 with three unaffiliated entities: OPC, MEAG and Dalton Utilities. GPC, or its agent, SNC will perform all environmental permitting and compliance activities necessary to obtain the authorizations to construct VEGP Units 3 and 4. SNC, also a wholly-owned subsidiary of Southern Company, is the applicant for the combined COL with the NRC and will construct and operate VEGP Units 3 and 4 on behalf of the Owners. SCS, also a wholly-owned subsidiary of Southern Company, provides support services to affiliate companies in the Southern Company system, including GPC, and may act as GPC's agent. SCS will provide a variety of support services during the Project, including assistance with the preparation of this Application. Georgia Power Company 241 Ralph McGill Blvd. NE Atlanta, Georgia, 30308 Taxpayer ID: 58-0257110 Southern Nuclear Operating Company P.O. Box 129542 Inverness Center Birmingham, Alabama 35201
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Key Project Personnel; Joseph A. (Buzz) Miller - SVP - Nuclear Development, SNC Joseph A. "Buzz" Miller is Senior Vice President of Nuclear Development for Southern Nuclear Operating Company. Mr. Miller currently serves as President of Southern Nuclear Development, LLC and will coordinate Southern Company's participation in NuStart, a consortium of utilities developing a Combined Construction and Operating license for a new nuclear plant. He joined Alabama Power in 1986 as an engineer working in the chemistry and environmental support section of Nuclear Generation. Mr. Miller was assigned to Washington D.C. in 1993 as Federal Affairs manager where he served one year at the Nuclear Energy Institute as acting vice president of Legislative Affairs. Mr. Miller's most recent position was vice president of Government Relations for Southern Company and managing the company's Washington office staff and the company's efforts with the U.S. Congress and various Executive Branch agencies and officials. In 1998, Mr. Miller was selected to serve as assistant to Southern Company Chairman, President and CEO Bill Dahlberg. He returned to Washington in May 1999 after being elected vice president of Government Relations. Mr. Miller is a 1983 graduate of Auburn University, where he received a bachelor's of science degree in chemical engineering. James. H (Jim) Miller III - President and CEO, SNC James H. "Jim" Miller III is president and chief executive officer of Southern Nuclear Operating Company. Mr. Miller, currently serves as senior vice president, compliance officer, and general counsel at GPC, and will assume the additional role as chairman of Southern Nuclear on October 1, 2008. Mr. Miller joined Southern Company in 1994 as corporate counsel for Southern Nuclear after achieving partner status with the Birmingham, Alabama-based law firm of Balch and Bingham. Since then, he has held roles of increasing responsibility, including senior vice president, external affairs, Alabama Power, and senior vice president, Birmingham Division, Alabama Power. Mr. Miller served as senior vice president, general counsel and assistant secretary for Southern Company Generation and Southern Power where he had responsibility for legal issues surrounding the wholesale generation business, as well as external issues relating to the operations of the power plants. Mr. Miller spent three years in the U.S. Navy, reaching the rank of lieutenant commander in the U.S. Naval Reserve after earning a bachelor's degree in marketing from the University of Alabama in 1971. Mr. Miller earned a Juris Doctorate from the University of Alabama in 1977, and is a graduate of the Advanced Management program at England's Oxford University and the Nuclear Reactor Technology course at the Massachusetts Institute of Technology. Dale M. Lloyd - Vogtle Deployment Director, SNC Dale Lloyd has 31 years of experience with Southern Company, and has held various management positions throughout the engineering, generation, and nuclear organizations. He worked at Plant Vogtle on the construction and project management staff for Vogtle Units 1 and 2 and was at the Vogtle site during the final CONFIDENTIAL AND PROPRIETARY Georgia Power Company 17 September 2008

year of construction/startup, the first fuel cycle and the first refueling outage. Mr. Lloyd previously was General Manager of New Generation Projects in Engineering and Construction Services, supporting the development, design, procurement, and construction of new generating facilities for Southern Company. In 2006 he was named as Vogtle 3 and 4 Deployment Director and is responsible for managing the EPC contract negotiations, developing a project and construction management organization, managing project licensing activities, and planning for future construction activities for new units that may be built at the Vogtle site. Oscar C. Harper, IV - VP - Nuclear Development, GPC Oscar Harper is the Vice President of Resource Planning and Nuclear Development for GPC. His organization is responsible for economic evaluations of demand side programs, forecasting energy load growth, and acquiring resources to meet the current and future energy needs of GPC's customers. These responsibilities also include oversight of GPC's Integrated Resource Planning Process. This is a long term analysis of generation, transmission, and environmental plans filed and overseen by the Georgia Public Service Commission on a three year continual basis. Mr. Harper joined GPC in 1984 serving in Marketing, Power Delivery, Competitive Generation, and Regulatory Affairs prior to his current position. Michael D. Garrett - President and CEO, GPC Michael D. Garrett is president and CEO of GPC, the largest subsidiary of Southern Company, one of the nation's leading generators of electricity. Mr. Garrett, a Georgia native, began his Southern Company career in 1968 at GPC. Prior to being named president and CEO of GPC, he was president and CEO of Mississippi Power. Before heading Mississippi Power, Mr. Garrett was an executive vice president at Alabama Power with responsibility for Customer Operations and Regulatory Affairs. Mr. Garrett also held Alabama Power positions as vice president of Finance; Birmingham division vice president; senior vice president of External Affairs and executive vice president of External Affairs.
Cliff Thrasher - Executive Vice President, CFO and Treasurer, GPC Cliff Thrasher is Executive Vice President, CFO and Treasurer for GPC. In his current role, Mr. Thrasher has responsibility for GPC's accounting and financial activities and structure. Mr. Thrasher has over 30 years of experience with Southern Company and its affiliates. Mr. Thrasher began his career with GPC Company in 1970 as an accounting clerk in the Invoice Accounting department. In 1974, he became responsible for maintaining the general ledger and preparing financial statements. From 1979 to 1985, he served as Accounting Research Manager. In 1985, Mr. Thrasher became Manager of Cost Accounting and Accounting Research. The following year Mr. Thrasher was promoted to Regulatory Accounting Manager with responsibility for preparing GPC's 1987 rate case. That same year Mr. Thrasher was elected Assistant Comptroller. In 1995, he was named Vice President and Comptroller of GPC. Before assuming his current position, he served as Vice
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President, Comptroller and CFO of Southern Company Generation and Southern Power Company. In addition to the experience of these key personnel, Southern Company currently has more than 100 employees who were involved in the original design, startup, or construction of Southern Company's existing nuclear units. Individuals from this pool of experienced employees will provide part of the project staffing for VEGP Units 3 and 4.
5. Prior Experience
SNC has over 30 years of experience in the design, construction, and operation of nuclear generating plants. SNC, with its architectural engineering predecessor SCS, has designed, constructed and currently operates six nuclear units at three sites: Edwin I. Hatch Nuclear Plant Units 1 and 2, Joseph M. Farley Nuclear Plant Units 1 and 2, and VEGP Units 1 and 2. Other major accomplishments for the Southern Nuclear Fleet include: Farley * In March 2007 FNP celebrated two major milestones in pursuit of Operational Excellence. For the first time in FNP history, one units (Unit 2) completed 1000 days of operation with only a single shutdown for a planned refueling outage. Further, as of the same date FNP had operated both units safely for the last 3 years without an online reactor trip, which is currently the third longest streak of all US dual unit sites. * FNP recently celebrated 30 years of reliable, safe operation. * FNP received the INPO Award of Excellence in 2007. * FNP has completed more than three years without a reactor scram. * Earlier this year (May 2008) FNP received the EEI Safety Achievement Award for 8 million safe work hours without a lost time accident. Vogtle * Unit 1 set a new record for continuous operation (504 days; breaker to breaker run from 10/30/06 to 3/16/08.) * Earlier this year, (April 2008) Plant Vogtle employees logged 4 million work hours without a lost time injury. Hatch * Earlier this year (April 2008) Plant Hatch received an EEl Safety Achievement Award for 7 million safe work hours without a lost time accident. The chart below shows SNC's excellent nuclear plant operating record, as gauged by the Institute of Nuclear Power Operations (INPO) Performance Index.
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INPO Performance Index 2008 Calculation

100 95 90 85 80o-475
70 65 60 -
55
55----------------------------------------------------N---N--
Southern Nuclear Quarterly
The INPO Performance Index is a composite of ten INPO Performance Indicators and is considered by INPO to be an overall indication of plant safety and performance. GPC has prior experience with nuclear projects through its involvement in VEGP Units 1 and 2. Additionally, GPC has experience owning and operating 48 other electric generating plants and is one of the largest electric utilities in the Southeastern United States. For the last decade Southern Company and SCS have managed one of the largest generation and environmental control construction programs in the United States. Attached as Appendix B.1 is a presentation describing that program. The presentation demonstrates Southern Company's ability to manage large projects, complete them on time and under budget, secure necessary permits and find large numbers of staff to construct the projects. While the Consortium is responsible for labor procurement under the EPC, GPC's knowledge of southeastern labor markets should prove valuable. Please see Sections A.6 for a description of the prior experience of other project participants. 6. Project Sponsor's Capabilities GPC, a Southern Company subsidiary, is vertically integrated utility providing electricity to regulated retail customers in Georgia and wholesale customers within the southeastern United States. GPC is regulated by the GPSC and the FERC and

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currently owns and operates 49 existing coal-fired, nuclear, combined-cycle,

combustion turbine, and hydroelectric facilities within the State of Georgia. GPC's financial strength is demonstrated by its senior unsecured credit ratings of A, A2 and A+ by Standard and Poor's, Moody's Investor Service and Fitch Ratings, as well as the Company's history of continuously maintaining investment grade ratings from both S&P and Moody's since the 1940s. Financial strength is further demonstrated by GPC's $22 billion balance sheet (as of 6/30/08). So long as reasonable cost recovery is allowed by the GPSC, GPC anticipates continuing financial support for the GPC Vogtle Expansion Project. GPC's investment in the Project to date includes site evaluation work, as well as preparation of several regulatory filings, including the COLA and GPSC certification filings. This investment totaled $36.7 million through June 30, 2008. Strategically, the GPC Vogtle Expansion Project provides a number of benefits for GPC. The Project provides much needed fuel diversity, and helps to lessen GPC's dependence on volatile natural gas prices. It further provides a CO2-free baseload generating resource, which will be invaluable in what is likely to be a carbonconstrained future. GPC's investment in the Project to date, in both dollars and manpower, should demonstrate the strategic significance of the Project to the Company. 7. Proposed Project Location As shown in Appendix C, the 3,169-acre VEGP site is located on a coastal plain bluff on the southwest side of the Savannah River in eastern Burke County, Georgia. The site is approximately 30 river miles above the U.S. 301 Bridge and directly across the river from the DOE's Savannah River Site (Barnwell County, South Carolina). The VEGP site is approximately 15 miles east-northeast of Waynesboro, Georgia and 26 miles southeast of Augusta, Georgia. It is also about 100 miles from Savannah, Georgia and 150 river miles from the mouth of the Savannah River. VEGP Units 1 and 2 are also located on this site. Locating the proposed additional nuclear units on an existing nuclear site will be beneficial because this existing site already has an infrastructure in place to support nuclear power generation. Other key advantages of locating additional nuclear units at the VEGP site are as follows: * Existing VEGP Units 1 and 2 site-related analysis and operating records were available as inputs for development of various sections of the ESP. * The VEGP site and its exclusion area previously underwent a screening and evaluation process establishing its suitability, including a National Environmental Policy Act (NEPA) evaluation of alternatives. The proposed additional nuclear units are located within the existing VEGP site exclusion area boundary (site property boundary). * Programs, procedures and arrangements have been established, and are inplace, with state and local government agencies, covering emergency planning, discharge permits, etc. Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 21
* Liaisons with the local community are already established. SNC is the licensed operator of the existing generating facilities at the VEGP site, with control of the existing facilities, including complete authority to regulate any and all access and activity within the plan exclusion area boundary, and authority to act as the agent of the Owners. 8. State and Local Support Please see Section D.1 of this application for a summary of the provisions of Georgia law regarding the construction of new electric generating units for inclusion in the rate base and the recovery of costs related to those units. GPSC approval and the items listed in Item 11 - List and Status of Licenses/Permits/Approvals - are required for this project to move forward. Additional support for this Project is shown in the form of letters from U.S. Senator Johnny Isakson, Georgia State Senator Bill Heath, and Georgia State Representatives Jim Marshall, Paul Brown, and Glenn Richardson. The Waynesboro City Council, Sylvania City Council, Augusta Metro Chamber of Commerce, Board of Commissioners of Burke County, Burke County Chamber of Commerce, and Screven County Board of Commissioners have all issued support of the Vogtle Expansion Project. These letters and resolutions were provided at ASLB meetings and can be provided upon request. To date no state or local financial incentives have been announced for the GPC Vogtle Expansion Project. 9. Project Time Lines The VEGP Units 3 and 4 Key Milestone Schedule is provided in Appendix D. 10. Key Material Components Below are the key material components of the GPC Vogtle Expansion Project. Water The site of the proposed new units is located on the banks of the Savannah River, which forms the boundary between the states of Georgia and South Carolina. GPC plans to withdraw water from the Savannah River pursuant to a permit from the Georgia Department of Natural Resources for the purpose of the circulating water/turbine cooling system, where river water will be used to replace cooling tower evaporative losses, drift losses and blowdown discharge. The service water system makeup, potable water system, demineralized water system, fire protection system and miscellaneous uses will be supplied by groundwater from two 1,500 gallon per minute wells to be installed in the Cretaceous aquifer on the site. GPC believes that, subject to obtaining required water use permits, adequate supplies of water are readily available from the sources listed for the respective uses and that the risk that water supplies will be inadequate to construct and operate the proposed new units is minimal.
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Construction Materials GPC has entered into an Engineering, Procurement and Construction (EPC) Agreement with a Consortium comprised of WEC and S&W pursuant to which the
Consortium is to supply all construction materials. WEC is a leading supplier of nuclear plant products and technologies to utilities throughout the world. S&W is a leading global provider of EPC contracts. S&W's assets were acquired by Shaw, which is a leading global provider of technology, engineering, procurement, construction, maintenance, fabrication, manufacturing, consulting, remediation and facilities management services for government and private sector clients in the energy, chemicals, environmental, infrastructure and emergency response markets. In the event the Consortium fails to deliver adequate construction materials, GPC's remedies are those specified under the EPC Agreement. While GPC recognizes that the world-wide demand for commodities, including construction materials and fuel, has from time-to-time placed upward pressure on the prices for such materials, GPC does not believe that there is a significant risk that adequate construction materials cannot be supplied for the proposed new units on a timely basis. Site Access The proposed new units are to be located on the site of Vogtle Electric Generating Plant Units One and Two, which is owned by GPC in common with each its CoOwners of which have also executed a development agreement with GPC relative to the proposed new units. Pursuant to the development agreement, GPC has the right to access the site and construct the proposed new units. The site itself can be accessed through U.S. Route 25; Georgia State Routes 23, 24, 56 and 80; and New River Road. A navigation channel is authorized on the Savannah River from the Port of Savannah to Augusta, Georgia and a railroad spur connects the site to the Norfolk Southern Savannah-to-Augusta track. Power Distribution Infrastructure GPC and the Co-Owners own and maintain the power delivery systems in the state of Georgia. Pursuant to agreements regarding access to those systems and its franchises granted by the Georgia Public Service Commission, GPC has the right to use existing power distribution infrastructure and to construct such additional facilities as are necessary to obtain electric power for and to market the output from the proposed new units. The site is connected to the regional power grid via two 500-kV transmission lines and four 230-kV transmission lines in four rights-of-way. The transmission lines are operated by GPC. One new 500-kV transmission line would be constructed to handle the power generated by the proposed new units. The proposed new transmission line would be routed from the site to the ThomsonVogtle substation west of Augusta, Georgia. Fuel The market for nuclear material, conversion and enrichment is international and GPC's agent for the operation of the proposed new units, SNC, has extensive contacts and contractual relationships with suppliers of nuclear fuel and services. A design and fabrication contract for the initial reactor core for the proposed new units is nearing completion with WEC. SNC will act on an appropriate schedule to secure
Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 23

nuclear fuel for the proposed units. GPC believes the risk that adequate supplies of nuclear fuel for the proposed new units will not be available is minimal.
11. List and Status of Licenses/Permits/Approvals Appendix E is a list of federal, state and local licenses, permits and approvals required for completion of VEGP Units 3 and 4. Key milestone dates associated with the COLA and the ESP are listed in the Executive Summary section. Anticipated approval dates for each of the items listed in Appendix E will be provided at a later date. 12. Detailed Total Project Cost GPC projects a total in-service cost of approximately $6.9 billion for the GPC Vogtle Expansion Project, subject to adjustments as described below. This cost includes GPC's share of the capital cost for both units as well as the initial fuel load and certain transmission system network improvements which are necessary, reasonable, customary, and directly related to the startup of the Project. This cost reflects GPC's 45.7% undivided ownership interest of the proposed VEGP Units 3 and 4 and is based upon the projected costs for these units that include escalation in accordance with the price adjustment provisions of the EPC Agreement, as well as those construction, management and interconnection costs that are the responsibility of the Owners. The indexed portion of these costs will be adjusted in accordance with their compounding periods throughout the construction of the units.
[REDACTED*************************************************************** ******
13. Loan Guarantee Impact Should the GPC Vogtle Expansion Project be awarded DOE Loan Guarantees, the impact on such project's finances are estimated as follows:
Interest Rate [REDACTED************************************************** *******
**********************************************************************************************]
Debt Term
[REDACTED*******************************************************************************
Overall Financial Debt Structure

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[REDACTED******************************************************************************
[RE D*ACT ED**********************************************************************
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Section C: Technical Information 1. Key Contracts and Agreements

A. Engineering Procurement Construction (EPC) Contract On April 8, 2008, Georgia Power, acting for itself and as agent for the Co-Owners, and the Consortium entered into the EPC Agreement to design, engineer, procure, construct, and test two AP1000 nuclear units with electric generating capacity of approximately 1,100 MWs each and related facilities, structures, and improvements at the VEGP. The EPC Agreement is an arrangement whereby the Consortium supplies and constructs the entire facility with the exception of certain items provided by the Owners. Under the terms of the EPC Agreement, the Owners will pay a purchase price that will be subject to certain price escalation and adjustments, adjustments for change orders, and performance bonuses. Each Owner is severally (and not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to the Consortium under the EPC Agreement. GPC's proportionate share, based on its current ownership interest, is 45.7%. If certified by the Georgia PSC and licensed by the NRC, VEGP Units 3 and 4 are scheduled to be placed in service in 2016 and 2017, respectively. The total plant value to be placed in service will also include financing costs for each of the Owners, the impacts of inflation on commodity costs, transmission, and other costs that are the responsibility of the Owners. GPC's proportionate share of the estimated costs, based on its current ownership interest, is approximately $6.4 billion, subject to adjustments and performance bonuses.under the EPC Agreement. The plant value to be certified by the GPC excludes certain other Loan Guarantee eligible costs, [REDACTED******************************************************]. The Owners and the Consortium have agreed to certain liquidated damages upon the Consortium's failure to comply with the schedule and performance guarantees. The Owners and the Consortium also have agreed to certain bonuses payable to the Consortium for early completion and unit performance. The Consortium's liability to the Owners for schedule and performance liquidated damages and warranty claims is subject to a cap. B. Long Lead Procurements SNC and GPC previously entered into an agreement with Westinghouse to provide for long lead material components prior to Georgia Public Service Commission certification C. Fuel Supply Agreements While GPC is actively working towards the completion of a fuel supply agreement, no agreement has been signed to date. Georgia Power Company September 2008 26 CONFIDENTIAL AND PROPRIETARY
This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle of review and Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes evaluation.
D. Operations and Maintenance (O&M) Contracts Pursuant to the Amended and Restated Operating Agreement for Plant Vogtle, the Co-Owners have appointed GPC as the agent with authority over the operation and maintenance of VEGP Units 3 and 4 (as well as the existing units) at VEGP. Pursuant to the Amended and Restated Nuclear Operating Agreement between GPC and SNC, GPC has delegated to SNC the authority to provide all nuclear operating services (particularly all things required to be done by the licensed operator) for VEGP Units 3 and 4 (as well as the existing units) since SNC will be the licensed operator of VEGP Units 3 and 4. E. Other Designation of SNC as Agent GPC has designated SNC as its agent to perform licensing, quality assurance and construction oversight for the GPC Vogtle Expansion Project. SNC will act as the licensed constructor under the COL and the licensed operator upon the completion of the GPC Vogtle Expansion Project. Joint Ownership Agreement The Ownership Agreement governs the ownership rights Co-Owners of VEGP Units 3 and 4 and the authority and Agent for the Co-Owners with respect to the development, of VEGP Units 3 and 4 and any future capital additions Units 3 and 4. Agent's Responsibilities Under the Ownership Agreement, OPC, MEAG and Dalton have appointed GPC as their agent (the "Agen't), with sole authority and responsibility for the planning, licensing, design, construction, acquisition, completion, startup, commissioning, renewal, addition, replacement, modification and decommissioning of VEGP Units 3 and 4. The Agent is required to discharge its responsibilities in a manner consistent with Prudent Utility Practice. Neither the Agent nor any Co-Owner may make an adverse distinction between VEGP Units 3 and 4 or any other generating unit in which the Agent or such Co-Owner has an interest because of the Co-Ownership of VEGP Units 3 and 4 with the other Co-Owners. Ownership Rights GPC, OPC, MEAG and Dalton have made elections for the following ownership percentages: GPC - 45.7%, OPC - 30%, MEAG - 22.7% and Dalton - 1.6% pursuant to the Plant Vogtle Owners Agreement Authorizing Development, Construction, Licensing and Operation of Additional Generating Units, dated as of May 13, 2005, among the Co-Owners, as amended (the "Development Agreement"). Under the Development Agreement, each Co-Owner will have one last opportunity (as provided therein) to reduce its participation in VEGP Units 3 and 4, and the other
and responsibilities of the responsibilities of GPC as licensing and construction or modifications to VEGP
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in This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle
Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and
evaluation.
Co-Owners may proportionately increase their ownership interests by the percentage reduced. 4 Each Co-Owner will own its respective ownership interest in VEGP Unit 3 or 4 as a tenant in common with the other Co-Owners. A tenancy in common is an ownership structure in which all parties to the tenancy have the right to equal access and use of the entirety of the property. The ownership interest includes a fee simple interest in VEGP Units 3 and 4 and the site inside the existing boundaries of Plant Vogtle where VEGP Units 3 and 4 will be located, as well as easement rights to access the existing Plant Vogtle property and rights to use common facilities currently existing at Plant Vogtle. Each Co-Owner may convey liens and security interests in its respective ownership interest to secure its indebtedness. OPC's ownership interest will be subject to the lien of its Indenture. The other Co-Owners do not currently anticipate a lien on their respective ownership interests other than in connection with a DOE loan guarantee. Additionally, the Co-Owners have waived their right (a) to a partition or any accounting thereof related to VEGP Units 3 and 4 and (b) to any equitable lien rights. With limited exceptions, the Co-Owners may not otherwise sell or transfer all or any portion of their interest in either or both of VEGP Units 3 and 4 without first offering such interest to the other Co-Owners. This right of first refusal may be waived by a vote of Co-Owners holding an aggregate of 90% of the ownership interests. The exceptions include sales or transfers: (a)Used to finance the discharge of nuclear fuel payment obligations; (b)To a governmental authority in connection with financing a pollution control facility; (c)Made to convey a security interest to secure bonds; or (d)To allow a Co-Owner to sell its Ownership Interests when it does not wish to repair a damaged VEGP Unit 3 or 4 but the remaining Co-Owners do. In addition, the Ownership Agreement allows the Trustee under OPC's Indenture to dispose of OPC's ownership interest, without complying with the right of first refusal, if OPC defaults under its indenture and an agency or instrumentality of the United States government holds debt that is secured by the Indenture. In such event, the trustee of OPC's Indenture is required to allow the other Co-Owners to offer to purchase OPC's ownership interest but may reject such offers. The trustee also must permit the other Co-Owners to participate in any other auction or bid process related to the ownership interest.
4 Under the Development Agreement, each Co-Owner may reduce its ownership percentage prior to the date of the "Major Milestone", which will occur on December 1, 2008, subject to extension as provided in the Development Agreement. If a Co-Owner elects to reduce its ownership percentage prior to the Major Milestone, the Co-Owner will
forfeit its investment in the percentage ownership interest that is given up and will have no further obligations with
respect to that percentage ownership interest. The other Co-Owners would then have the option to increase their percentage ownership interests by their respective pro rata shares of the ownership interest that is given up.
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Damage or Destruction If either VEGP Unit 3 or 4 is damaged or destroyed, and the cost of repairing or rebuilding the unit (less any deductible) is estimated to be covered by insurance, then the unit will be repaired or rebuilt unless the Co-Owners decide, by a vote of the Co-Owners holding an aggregate of 90% of the ownership interests in such unit, not to repair or rebuild such unit (in which event the Co-Owners desiring to repair or rebuild the unit may buy out the Co-Owners who do not want to participate in the repair or reconstruction). Conversely, if the cost of repairing or rebuilding the unit (less any deductible) is not stimated to be covered by insurance, then the unit will not be repaired or rebuilt unless (1) the Co-Owners decide, by a vote of Co-Owners holding an aggregate of 90% of the ownership interests in such unit, to repair or rebuild such unit, or (2) one or more Co-Owners desiring to repair or rebuild the unit buy out any Co-Owners who do not want the unit repaired or rebuilt. Insurance The Agent must carry at all times, in the names of the Co-Owners and as their interests may appear, builder's risk (including transit risk, if applicable) or installation floater insurance of the "all risks" type, covering such hazards as the Agent deems appropriate consistent with its customary practices and Prudent Utility Practice. The cost of such insurance is included as a Cost of Construction. In addition, each Co-Owner may maintain, at its sole cost and expense, such additional or other insurance policies as it deems necessary or advisable to protect its interests, provided such additional insurance does not reduce or diminish the insurance coverage maintained by the Agent. The Agent must reasonably satisfy itself that all contractors, subcontractors, engineers, suppliers and manufacturers associated with VEGP Units 3 and 4 carry appropriate insurance (for workers' compensation, public liability, automobile liability and such other hazards as the Agent deems appropriate), which insurance must protect the Co-Owners to the same extent as the Agent. Similarly, the Agent will require that all contracts with third parties relating to VEGP Units 3 and 4 provide the same protection for the Co-Owners as for the Agent, including indemnification obligations. Project Management Board The development, licensing and construction of VEGP Units 3 and 4 will be managed and supervised by a Project Management Board ("PMB"), which will be comprised of senior executives from GPC and its Affiliates. The PMB is intended to serve as the highly integrated senior management oversight board that will make major project decisions for the Agent and will provide a forum for the review and discussion of Relevant Information. Additionally, the PMB shall establish and Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 29

monitor construction schedules and provide a venue for review and discussion of construction budgets. The Co-Owners, through their Designated Representatives, (i) may attend all meetings of the PMB and (ii) will be provided with information and reports regarding VEGP Units 3 and 4 at the same time such information and reports are provided to the PMB members. Information and Audit Rights The Agent will provide the Co-Owners with access to information relevant to the development, licensing, construction and ownership of VEGP Units 3 and 4. To the extent practicable and cost-effective, the Agent will provide access to such information electronically. The Agent will also provide monthly status reports to the Co-Owners during construction of VEGP Units 3 and 4. If supplemental meetings are held for major project decisions, the Agent will distribute supplemental reports with respect to such decisions. During construction of VEGP Units 3 and 4, there will be an annual review of the PMB and information flow process to determine whether it is adequate for the CoOwners' needs. Dissatisfied Co-Owners may appeal to the PMB, and if the CoOwner remains dissatisfied the CEO of the Co-Owner may discuss the issues with the CEO of the Agent. The Co-Owners have the right to conduct management audits of the Agent's performance, at their own expense. Management audit rights include the right of access to, subject to applicable regulations of the Nuclear Regulatory Commission and vendor requirements, architectural, engineering and design drawings and specifications, contracts, books, records, reports or other documents relating to VEGP Units 3 and 4. The Co-Owners also have the right to conduct cost audits, at their own expense, with access to books, records, contracts and other documents related to the Agent's performance which set forth (1) costs applicable to the Cost of Construction, Fuel Costs and other costs for each VEGP Unit 3 or 4 to the extent necessary to enable the auditors to verify that the costs have been properly billed to the Agent or to the auditing Co-Owner, and (2) matters relating to the planning, licensing, design, construction, acquisition, completion, start up, commissioning, renewal, addition, replacement, modification and Decommissioning of either VEGP Unit 3 or 4 in proceedings before any governmental authority having jurisdiction. Site Representatives Each Co-Owner will have the right to have one site representative for each of VEGP Units 3 and 4 at all reasonable times to observe the Agent's performance of its responsibilities under the Agreement. Additional construction site representatives may also be requested by a Co-Owner, and the Agent may not unreasonably deny such requests. Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 30

Payments and Billing Disputes The Co-Owners will be responsible for the Cost of Construction (as well as Capital Costs and Fuel Cost after Commercial Operation) of VEGP Units 3 and 4 in proportion to their respective Ownership Interest in such unit. Each party pays its ownership percentage share of the actual costs; no agency fee or risk premium is paid to the Agent. The Co-Owners will be invoiced monthly by the Agent based on the Cost of Construction anticipated to be incurred in the succeeding month. In subsequent invoices, the Agent will provide an accounting to the Co-Owners of Costs of Construction incurred and credits for previous months and make appropriate adjustments to amounts invoiced to the Co-Owners. The Co-Owners and their representatives have the right to audit the Agent's books and records to determine the propriety of costs allocated to the Co-Owners. The Co-Owners may contest and audit (1) costs incurred prior to commercial operation of VEGP Unit 3 or 4 at any time up to 180 days following commercial operation (or 180 days following receipt of the Agent's accounting of such costs, if later), and (2) costs incurred after commercial operation at any time up to 180 days following receipt from the Agent of an accounting of such costs (interpreted as provided in the Ownership Agreement). Remedies For Non-Payment In the event of a payment default by a Co-Owner, the defaulting Co-Owner will not be entitled to receive any output of capacity or energy from either of VEGP Units 3 and 4, or to exercise any other right of a Co-Owner under the Agreement, until all overdue amounts have been paid, together with interest at a rate equal to the Prime Rate plus five percentage points (5%). Both before and after commercial operation, any non-defaulting Co-Owner may, with notice to the other Co-Owners, pay amounts owed by a defaulting Co-Owner. Such paying Co-Owner will have the right to be reimbursed by the defaulting CoOwner, together with interest, and, after commercial operation, will also be entitled to a corresponding portion of the defaulting Co-Owner's output of VEGP Units 3 and 4 until reimbursed (the paying Co-Owner must also pay the defaulting Co-Owner's pro rata share of Operating Costs and Fuel Costs). If the payment default is with respect to costs incurred prior to commercial operation and such default lasts for one year or more, then each Co-Owner may elect either (1) to purchase the defaulting Co-Owner's interest in VEGP Units 3 and 4 (in proportion to its ownership interest), or (2) to invest additional funds in VEGP Units 3 and 4 and have the ownership interests of the Co-Owners adjusted to reflect such amounts invested.
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The Agent will be entitled to sell the defaulting Co-Owner's right to output from VEGP Units 3 and 4 until all overdue amounts owed by the defaulting Co-Owner have been paid, together with interest. The net proceeds from any such sale will be applied to reduce the liability of the defaulting Co-Owner, and any excess net proceeds will be applied as a credit against the defaulting Co-Owner's share of future costs under the Ownership Agreement. A non-defaulting Co-Owner may also loan funds to the defaulting Co-Owner at a reasonable rate of interest, and may, at its option, receive an appropriate portion of the defaulting Co-Owner's output of VEGP Units 3 and 4. In the event a Co-Owner defaults on any payments owed in connection with financing its ownership interest in VEGP Units 3 and 4, any other Co-Owner will have the option to pay such overdue amounts directly to the defaulting Co-Owner's lender and will be entitled to be reimbursed for any such payments by the defaulting Co-Owner, together with interest. The Co-Owners' rights with respect to non-payment are covenants running with the land and binding on the Co-Owners' successors in title. For Other Breaches If GPC fails to perform its obligations as Agent in a manner consistent with Prudent Utility Practice, the other Co-Owners may, as their sole remedy, remove GPC as Agent. In addition, if the Agent makes an adverse distinction between VEGP Units 3 and 4 and any other generating unit in which it has an interest because of its CoOwnership of VEGP Units 3 and 4 with the other Co-Owners, as discussed above, or takes any action by which it intends to put another Co-Owner at a disadvantage, then the Co-Owners may also pursue any remedy available to them at law or equity. Other remedies available to Co-Owners include the right to sue any non-paying party to enforce payment obligations and recover increased costs incurred as a result of the non-payment, rights of set-off, rights to seek declaratory judgments, and as noted above, the right to seek injunctive relief to enforce the Agent's obligations to provide information. OperatingAgreement The Operating Agreement will govern the rights and responsibilities of Georgia Power, Oglethorpe, MEAG and Dalton as Co-Owners, and the authority and responsibilities of Georgia Power as Agent for the Co-Owners, with respect to the management, operation and maintenance of VEGP Unit 3 or 4 following Commercial Operation. The Operating Agreement also applies to the Existing Units at Plant Vogtle, which are outside the scope of this summary.
Agent's Responsibilities Under the Operating Agreement, Oglethorpe, MEAG and Dalton have appointed Georgia Power as their agent (the "Agent"), with sole authority and responsibility for the management, operation and maintenance of VEGP Unit 3 or 4, including procurement of nuclear fuel for VEGP Unit 3 or 4. The Agent is required to discharge its responsibilities in accordance with Prudent Utility Practice. Neither the Agent nor any Co-Owner may make an adverse distinction between any of VEGP Unit 3 or 4 or any other generating unit in which the Agent or any Co-Owner has an interest because of the Co-Ownership of VEGP Unit 3 or 4 with the other CoOwners. Entitlement to Output The Co-Owners will be entitled to the net capacity and energy output of each Additional Unit in proportion to their respective ownership interests in such unit. The Agent has sole authority for the scheduling and dispatch of the output of VEGP Unit 3 or 4 and shall schedule and dispatch each Additional Unit on a continuous economic dispatch basis, to the extent each such unit is capable of such dispatch. In addition to receiving such proportionate share of the output at the operating level established based upon the economic dispatch of VEGP Unit 3 or 4, any Co-Owner may request to receive energy from such unit up to its proportionate share of the output of such unit at maximum practicable capability, provided such Co-Owner agrees to be responsible for any additional costs resulting therefrom and all other Co-Owners agree. Fuel Costs Each Co-Owner shall own an undivided ownership interest in nuclear fuel and shall be responsible for the payment of Fuel Costs for each Additional Unit in proportion to its entitlement of energy generated by such Additional Unit during such Fuel Period. Fuel Costs are paid pursuant to the Ownership Agreement. Each Co-Owner may make its own financial arrangements for the discharge of its fuel payment obligations so long as such arrangements do not adversely affect the rights of the other Co-
Owners.
Insurance At all times during operation of VEGP Unit 3 or 4, the Agent must carry, in the names of the Co-Owners and as their interests may appear, insurance covering general public liability, nuclear property (including decontamination), nuclear worker coverage, suppliers and transporters, secondary financial protection, and nuclear liability, in each case in such amounts and with such deductible or self-insurance features as the Agent deems appropriate consistent with its customary practices and Prudent Utility Practice. The Agent must also keep in force such nuclear liability insurance and indemnity agreements as are necessary to comply with applicable
regulations of the Nuclear Regulatory Commission or any other regulatory agency

having jurisdiction. The cost of all such insurance policies and indemnity agreements will be included in Operating Costs.

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Each Co-Owner must separately carry its own workers compensation insurance, either through statutory coverage or self-insurance, which will be at such Party's sole cost and expense, except that the cost of GPC's Plant Vogtle workers compensation insurance will be included in Operating Costs. In addition, each Co-Owner may maintain, at its sole cost and expense, such additional or other insurance policies as it deems necessary or advisable to protect its interests; provided such additional insurance does not reduce or diminish the insurance coverage maintained by the Agent. The Agent will require all contracts with third parties relating to Plant Vogtle to provide the same protection for the Co-Owners as for the Agent. Payments The Co-Owners will be responsible for the Operating Costs with respect to each Additional Unit in proportion to their respective ownership interests in such unit. Each Co-Owner pays its ownership percentage share of the actual costs; no agency fee or risk premium is paid to the Agent. The Co-Owners will be invoiced monthly by the Agent based on the Operating Costs anticipated to be incurred in the succeeding month. In subsequent invoices, the Agent will provide an accounting to the other CoOwners of Operating Costs incurred and credits for preceding months and make appropriate adjustments to amounts invoiced to the Co-Owners. Remedies For Non-Payment * In the event of a payment default by a Co-Owner, the defaulting Co-Owner will not be entitled to receive any output of capacity and energy from VEGP Unit 3 or 4 or to exercise any other right of a Co-Owner under the Agreement with respect to VEGP Unit 3 or 4, if the default relates to either or both of VEGP Unit 3 or 4, in either case until all overdue amounts have been paid, together with interest at a rate equal to the Prime Rate plus five percentage points (5%). The Agent will be entitled to sell the defaulting Co-Owner's right to output from VEGP Unit 3 or 4 until all overdue amounts owed by the defaulting CoOwner have been paid, together with interest. The net proceeds from any such sale will not relieve the non-paying party from liability but will be applied to reduce the liability of the defaulting Co-Owner, and any excess net proceeds will be applied as a credit against the defaulting Co-Owner's share of future Operating Costs. The Co-Owners' rights with respect to non-payment are covenants running with the land and binding on the Co-Owners' successors in title. A Lender to any defaulting Co-Owner is entitled to make payments directly to the Agent with respect to amounts owed by its borrower under the Operating Agreement.
* *
For Other Breaches * If Georgia Power fails to perform its obligations as Agent in a manner consistent with Prudent Utility Practice, the other Co-Owners may, as their sole remedy, remove Georgia Power as Agent. In addition, if the Agent makes an adverse distinction between any Vogtle Unit and any other generating unit in which it has an interest because of its Co-Ownership of the Vogtle Unit with the other Co-Owners, or takes any action by which it intends to put another Co-Owner at a disadvantage, then the other Co-Owners may also pursue any remedy available to them at law or equity. Other remedies available to Co-Owners include the right to sue any nonpaying party to enforce payment obligations and recover increased costs incurred as a result of the non-payment, rights of set-off, and the right to seek injunctive relief to enforce the parties' respective obligations to provide information.
Strategic Plan, Budgets, Site Representatives and Information Flow Agreements relating to Co-Owner rights with respect to strategic plans, Operating & Maintenance budgets and fuel budgets, as well as site representatives, information and audit rights relating to operations and maintenance matters, are set forth in the Second Amended and Restated Nuclear Managing Board Agreement. Nuclear Managing Board Agreement The NMBA provides for the Nuclear Managing Board ("NMB") to function as an oversight board for the implementation and administration of the ownership (with respect to capital expenditures after Commercial Operation and Fuel Costs) and operating agreements for VEGP Unit 3 or 4 by, among other things, reviewing and approving certain major contracts, strategic plans and operating, capital and fuel budgets. The NMBA also applies to Plant Hatch and the Existing Units at Plant Vogtle, which are outside the scope of this summary. Nuclear Managing Board - Composition and Role The NMB consists of one member and an alternate from each of the Co-Owners. The NMB meets at least every two months unless all members agree to less frequent meetings. The primary function of the NMB is as an oversight board and forum for Co-Owner input with respect to the implementation and administration of the Co-Owners' agreements regarding the ownership (with respect to Capital expenditures after Commercial Operation and Fuel Costs) and operation of VEGP Unit 3 or 4, and to approve certain material actions of Southern Nuclear Operating Company, Inc. (the "Operating Agent"), the operating agent for VEGP Unit 3 or 4. In addition, the NMB also administers the Nuclear Operating Agreement between Georgia Power and the Operating Agent, pursuant to which the Operating Agent, as Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 35

the operator licensed by the Nuclear Regulatory Commission, operates and maintains VEGP Unit 3 or 4. Requisite Owner Action Certain matters, including Major Contracts, must be approved by the NMB by "Requisite Owner Action," which means with respect to matters involving VEGP Unit 3 or 4, a vote of 90% of the percentage undivided ownership interests of the CoOwners of VEGP Unit 3 or 4. Maior Contracts The NMB must approve, by Requisite Owner Action, the execution of any contract for: * Procurement of (1) firm supply of natural or enriched uranium, (2) uranium enrichment services or (3) outage services, in each case over a term greater than 5 years and in an amount greater than $50 million; Procurement of equipment in an amount greater than $30 million for any single item; or Any expenditure greater than $50 million in one year or $100 million in the aggregate.
* *
Review and Approval of Plans and Budgets Beginning the year prior to Commercial Operation of VEGP Unit 3 or 4, and each year thereafter, the Operating Agent will present to the NMB for review and approval a strategic plan and a 10-year fuel plan, as well as budgets for operation and maintenance, fuel and capital improvements, with respect to VEGP Unit 3 or 4. The NMBA provides a schedule for submission of such plans and budgets to allow each Co-Owner to provide input on these proposed plans and budgets prior to their submission to the NMB. If the NMB approves a plan or budget by Requisite Owner Action, the plan or budget is approved by the Co-Owners in whole. If the NMB disapproves a proposed plan or budget by Requisite Owner Action, the Operating Agent must revise and re-submit the plan or budget to the NMB. If the NMB disapproves a plan or budget, any dispute will be resolved through the dispute resolution process described below. Information and Audit Rights GPC and the Operating Agent will provide the Co-Owners with access to information relevant to the operation and maintenance of VEGP Unit 3 or 4 and the costs of New Investment Services, Operation and Maintenance Services and Fuel Services to be paid by the Co-Owners. A variety of reports and informational updates are required to be provided in a formal, routine manner, including monthly performance reports, reports on actual costs as compared to budgets, and copies of certain regulatory correspondence. Information with respect to non-routine matters, such as unplanned outages and
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replacement of plant managers and significant officers, is also required to be provided. The Co-Owners may also make formal requests for additional information. The Co-Owners have the right to conduct management audits and cost audits similar to those provided for by the Ownership Agreement. Site Representatives Each Co-Owner is entitled to have a reasonable number of site representatives at VEGP Unit 3 or 4 for the purpose of observing and reporting on plant condition and activities. Dispute Resolution Any disputes (other than billing disputes) arising under the NMBA must first be submitted to the NMB for resolution through discussion among the NMB. If those discussions are unsuccessful, the dispute may then be submitted to the CEOs of all the parties for good-faith negotiations. If a dispute remains unresolved for 50 days, GPC will have the authority to resolve the dispute in a manner consistent with Prudent Utility Practice, and all non-disputed elements of any plan or budget shall be deemed approved by the NMB; provided that the disputing Co-Owner will nevertheless be entitled to proceed with non-binding arbitration concerning the dispute.
2. Major Project Plans A. Construction Plan GPC, acting for itself and as agent for the Co-Owners, has entered into an EPC Agreement with the Consortium to design, engineer, procure, construct and test two AP1000 nuclear units and related facilities, structures, and improvements at VEGP. Under the terms of the EPC Agreement, the Consortium will supply and construct the entire facility with the exception of certain items provided by the Owners. The Consortium will provide the owners a construction execution plan at a future date prior to construction. The following are key milestone and projection dates for the construction: * Site Preparation commences in third quarter of 2008 * ESP and Limited Work Authorization (LWA) issued in September 2009. * Combined Construction and Operation License issued in September 2011 * Construction and First Concrete - October 2011 for Unit 3 and October 2012 for Unit 4 * Fuel load, startup and testing - October 2015 for Unit 3 and October 2016 for Unit 4 * VEGP Unit 3 Commercial Operation Date - April 1, 2016 Georgia Power Company September 2008 37 CONFIDENTIAL AND PROPRIETARY

* VEGP Unit 4 Commercial Operation Date - April 1, 2017 B. O&M Plan SNC performs or oversees all operations and maintenance for VEGP Units 1 and 2 and will perform operations and maintenance activities for VEGP Units 3 and 4. GPC anticipates that staffing and procedures will be similar for budget and personnel projections but does not have a final operations and maintenance Plan at this time. SNC, working with several vendors, will develop and finalize the operational and maintenance Plan as the GPC Vogtle Expansion Project moves closer to commercial operation in 2016 and 2017. C. Spent Fuel Disposition Plan The Nuclear Waste Policy Act of 1982, as amended, 42 USC 10101(NWPA) obligates the DOE to take possession and dispose of spent nuclear fuel from civilian nuclear power reactors in the United States. In accordance with the NWPA, GPC intends to enter into a contract, through its agent SNC, for the disposal of spent nuclear fuel generated by proposed VEGP Units 3 and 4. Pending receipt and disposal of the spent nuclear fuel by DOE, the spent nuclear fuel generated by VEGP Units 3 and 4 will be stored on the site of the reactors under a general license issued by NRC to licensees of commercial nuclear reactors. D. Decommissioning Plan In accordance with NRC regulations at 10 CFR 50.75, an external decommissioning sinking fund will be established for proposed VEGP Units 3 and 4 similar to that established for VEGP Units 1 and 2. Funding for the sinking fund is expected to be established by an order of the GPSC, again similar to that for VEGP Units 1 and 2. Funding of the sinking fund will be required to satisfy requirements for decommissioning funding established by NRC and set forth in NRC's regulations at 10 CFR 50.75. Funds from the sinking fund, including accumulated interest, will be used as necessary for the decommissioning of the Units upon approval of the NRC after the permanent cessation of operation of the proposed Units. 3. Potential Environmental Impacts The DOE's initial solicitation for applications for Loan Guarantees related to nuclear power plants (The Solicitation) requires that Part I of the Application include "an outline of potential environmental impacts of the project and how impacts will be mitigated" in order to provide a basis for the DOE to meet its responsibilities under the National Environmental Policy Act, 42 USC 4321-4370f (NEPA). The Solicitation also provides that Part II of the Application must contain a more detailed Environmental Report (ESPER) and states that required environmental information for the ESPER may be extracted from an environmental report submitted to the NRC in conjunction with the applicant's NRC license. Attachment B to the Solicitation provides a detailed description of the types of information required by DOE's NEPA regulations. A detailed ESPER, prepared by GPC's agent SNC, and a Final Environmental Impact Statement (FEIS) for an ESP at the VEGP Site prepared by the NRC Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 38

(NUREG - 1872), have been completed for the ESP. The ESPER and FEIS are attached hereto as Appendices F.1 - F.2 and G.1 - G.2, respectively. These NEPA documents are comprehensive and address all environmental issues related to the siting, construction and operation of VEGP 3 and 4 to the full extent of NEPA's requirements. SNC has also submitted an Environmental Report in support of the combined construction operating license application (COLA) for VEGP Units 3 and 4 that in most cases incorporates by reference the ESPER and Draft Environmental Impact Statement (DEIS) for the ESP. The New and Significant Information review required for the COLA is also complete. To the extent that the FEIS for the ESP materially differs from the DEIS, the Environmental Report for the COLA for VEGP 3 and 4 will be revised, as appropriate, to reflect those changes. All of the environmental information requested in Attachment B of the Solicitation is included in the ESPER and the FEIS. This section of the Application will reference the sections of the ESPER and the FEIS containing the requested information. The NRC concluded there were no issues that would prevent issuance of an ESP in the recently published FEIS. A. Facilities The AP1000 units and support facilities proposed for the VEGP site will be designed around the Westinghouse standardized unit approach. The standardized unit design does not share common support facilities and structures between units, with the exception of the Technical Support Center, Sewage Treatment Plant, and a few ancillary facilities. Each AP1000 unit is based on a "stand alone" concept and consists of five principal generation structures: the nuclear island, turbine building, annex building, diesel generator building, and radwaste building. Structures that make up the nuclear island include the containment building, shield building, and auxiliary building. A detailed description and site plan of all buildings and related infrastructure associated with the proposed new units is contained in the Chapter 3.1 of the ESPER and Chapter 3.2 of the FEIS. B. Project Location The 3,169 acre VEGP site is located on a coastal plain bluff on the southwest side of the Savannah River in eastern Burke County, Georgia. The site is approximately 15 miles east north east of Waynesboro, Georgia and 26 miles southeast of Augusta, Georgia, the nearest population center (i.e., having more than 25,000 residents). The site is approximately 30 river miles above the U.S. Highway 301 Bridge and directly across the river from DOE's Savannah River Site (Barnwell County, South Carolina). It is also about 100 miles from Savannah, Georgia, and 150 river miles from the mouth of the Savannah River. The site exclusion area boundary (EAB) is bounded by River Road, Hancock Landing Road and 1.7 miles of the Savannah River (River Miles 150.0 to 151.7). The property boundary entirely encompasses the EAB and extends beyond River Road in some areas. The existing VEGP Units 1 and 2 are Westinghouse PWR plants licensed by the NRC in 1987 and 1989, respectively, and have been in commercial operation since that time. Each unit has a thermal power rating of 3,565 MWt. Plant Wilson, a six-unit oil-fueled combustion turbine facility constructed in 1974 and owned by GPC, is also located on the VEGP
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This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 (f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
site. The proposed VEGP Units 3 and 4 footprint will be adjacent to and west of the existing VEGP Units 1 and 2. A detailed description, including demographic and socioeconomic characteristics, species descriptions and cultural resources, of the relevant characteristics and environmental conditions of the site, the site vicinity and the surrounding region and a map of the location of the VEGP Units 3 and 4 are provided in Chapter 2 of the ESPER and Chapter 2.0 of the FEIS. C. Proposed Project Construction and Operation Pre-construction activities and the construction process are described in Chapters 3.9 and 3.10.1 of the ESPER and in Chapter 4.0 of the FEIS. Environmental impacts, including environmental justice considerations, of construction of the proposed units are addressed in Chapter 4 of the ESPER and Chapter 4.0 of the FEIS and environmental impacts, including environmental justice considerations, of operation are addressed in Chapter 5 of the ESPER and Chapter 5.0 of the FEIS. i Project Construction and Operations a) Pre-Construction Pre-construction activities include site preparation, installation of temporary construction support facilities, excavations for facility structures and installation of security features. Specific pre-construction activities are enumerated in greater detail under the discussion of project milestones in Part 4 below. b) Construction The AP1000 design calls for a high degree of modularization. It is planned that the steel module components in the nuclear island will be fabricated offsite and shipped to site via barge and/or rail and assembled into complete modules prior to setting in the power block. The assembly of the components into complete modules on site will begin during the pre-construction phase. The completion of early module assembly is planned to coincide with the completion of VEGP Unit 3 containment base mat foundation. Major power plant construction of safety-related structures, systems and components (SSCs) will begin after the NRC issues a COL to SNC. Each AP1000 unit is a series of buildings and structures and is erected from the bottom up with the top remaining open until the major mechanical and electrical equipment and piping are placed on each elevation. Much of the commodity installation consists of the setting of prefabricated civil/structural, electrical, mechanical and piping modules with field connections. Large components such as steam generators will be delivered to the site by barge for installation. Specific construction activities are enumerated in greater detail under the discussion of project milestones in Part 4 below. c) Operations Georgia Power Company September 2008
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The plant water balance and water treatment technologies for the proposed AP1000 units are consistent with the AP1000 Design Control Document (Westinghouse 2005) and are based on site characteristics and engineering evaluations. The VEGP site has two sources of water available for plant water supply: surface water from the Savannah River and groundwater from the confined Cretaceous and Tertiary aquifers. Effluents from both sources will be returned to the Savannah River. Water-use impacts of project operations are discussed in Chapter 3.3 of the ESPER and 5.3.2 of the FEIS. A table quantifying projected plant water use is found in Table 3.3-1 of the ESPER. Project operation will generate radioactive waste that can be liquid, solid, or gaseous. Radioactive waste management systems will be designed to minimize releases from reactor operations to values as low as reasonably achievable. These systems will be designed and maintained to meet the requirements of 10 CFR 20 and 10 CFR 50. Management of radioactive wastes is discussed at Chapter 3.5 of the ESPER and Chapter 3.2.3 of the FEIS. Other than water treatment systems, no other AP1000 systems have effluent streams containing chemical or biocides. Because the new units would use make-up and process water from the Savannah River and groundwater as the existing units do, the ESPER indicates the water treatment chemical regime currently used for VEGP Units 1 and 2 will also be used for the new AP1000 units. SNC expects that both systems will be treated in the same way. Any new non-radioactive liquid effluents that will be discharged to the Savannah River will be regulated pursuant to VEGP's National Pollutant Discharge Elimination System permit. The VEGP list of permitted outfalls will be expanded to include any additional outfall locations or new constituents, adjusted flow paths, or increased volumes created by the construction and operation of the new units. As part of the AP1000 construction, the existing sanitary waste treatment system will be expanded, as required, by adding additional package units to support the increased volume. If there is a need during peak construction (or outage support) activities for additional sanitary waste provisions, approved supplemental means will be employed. Water quality impacts are discussed at Chapter 4.2.3 of the ESPER and Chapter 5.3.3 of the FEIS. VEGP generates small quantities of hazardous wastes and is classified as a small-quantity generator, although SNC manages the hazardous waste program as if the site were a large quantity generator. SNC maintains a Waste Minimization Plan for Hazardous Waste. Wastes are accumulated temporarily on site and periodically shipped offsite for disposal at a permitted disposal facility. All hazardous wastes activities are performed in compliance with federal regulations and VEGP Units 1 and 2 waste handling procedures. VEGP Units 1 and 2 have procedures in place to minimize the impact in the unlikely event of a hazardous waste spill. The treatment, storage and disposal of wastes generated by

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construction and operation of the new units will be managed as current wastes are managed. Hazardous waste management is discussed at Chapter 3.6.3.3 of the ESPER. Project operations and related environmental impacts are described in Chapters 3.2 through 3.8, 3.10.3, and 5 of the ESPER and in Chapters 3.2 and 5.0 of the FEIS. d) Workforce Estimates The maximum onsite workforce for two AP1000 units with a 12 month lag between construction starts is estimated to be 3,400 people, assuming 18 months of site preparation followed by 66 months of construction for both units. SNC has estimated that the additional operations workforce for two additional units constructed at an existing two-unit PWR site will be 820 people.
ii Schematic Process Diagram The following diagrams are found in the ESPER and the FEIS: Simplified Flow Diagram of Reactor Power Conversion System, ESPER Fig. 3.2-1 and FEIS Fig. 3-2; Water Use Diagram Summary, ESPER Fig. 3.3-1; Water Use Diagram Details, ESPER Fig. 3.3-2; and General Cooling System Flow Diagram, ESPER Fig. 3.4-1 and FEIS Fig. 3-3. iii Upset / Error / Incident / Accident Scenarios SNC has assessed the environmental impacts of postulated accidents involving radioactive materials and included those assessments in the ESPER. Chapter 7.1 of the ESPER and Chapter 5.10.1 of the FEIS evaluate design basis accidents. The results of the VEGP site analysis, as shown in Tables 7.1-1 through 7.1-22 of the ESPER, demonstrate that the radiological consequences of the scenarios considered meet the site acceptance criteria of 10 CFR 50.34. SNC has considered the potential impact of severe accidents. The total calculated dose-risk to the 50-mile population from airborne releases is less than the population risk for all current reactors that have undergone license renewal. SNC's qualitative analysis indicates that risk from the surface water pathway is small. The risks of groundwater contamination from an AP1000 accident are several orders of magnitude less than the risk from surface water contamination for currently licensed reactors. Additionally, interdiction could substantially reduce the groundwater pathway risks. Severe accident impacts are discussed at Chapter 7.2 of the ESPER and Chapter 5.10.2 of the FEIS.
SNC's consideration of severe accident mitigation measures is also
summarized and explained in ESPER Chapter 7.3 and FEIS Chapter 5.10.3.
Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 42
The NRC has concluded that the overall transportation accident risks associated with advanced light water reactor spent fuel shipments are likely to be small and are consistent with the risks associated with transportation of spent fuel from current generation reactors presented in Table S-4 of 10 CFR 51.52. The same conclusion is true of the transportation accident risks associated with the spent fuel from proposed new reactors at the VEGP site. ESPER Chapter 7.4 and FEIS Chapter 6.2 include further discussion of transportation accidents. D. Project Progression Pre-construction milestones are as follows, based on Chapter 3.9.2 of the ESPER. It should be noted, however, that the durations are not sequential; multiple activities will take place concurrently. Installation and Establishment of Environmental Controls (4 months). Groundwater monitoring wells; silt screens; debris basins; settling basins; dams; site drainage; stormwater management system; dust suppression controls; solid waste storage areas; backfill borrow, spoils, and topsoil storage areas; and spill containment controls. Road and Rail Construction (3 months). Heavy haul route approximately 1.6 miles in length from the barge slip on the Savannah River to the construction site; a construction access route approximately 1 mile in length from River Road to the new power block; an access road approximately 2 miles in length from the new power block area to the new intake structure; underground circulating water make-up lines adjacent to that access road; upgrade of rail line that runs from its connection with the Norfolk and Southern line near Waynesboro (Greens Cut/ Shell Bluff) to its termination at VEGP with spurs into the unloading areas, a distance of approximately 16 miles; temporary parking lots. Security Construction (3 months). Access control points, fencing, lighting, physical barriers and guard houses. Temporary Utilities (6 months). Above-ground and underground infrastructure for power, potable water, wastewater and waste treatment facilities, fire protection, and construction gas and air systems. Temporary Construction Facilities (9 months). Offices, warehouses, toilets, change rooms, training and personnel access facilities; preparation of the concrete batch plant for aggregate unloading and storage; erection of the cement storage silos and the batch plant. Lay-down, Fabrication, Shop Area Preparation (5 months). Lay-down areas; construction fencing; shop and fabrication areas including the concrete slabs for formwork lay-down, equipment parking and maintenance, fuel and lubricant storage; concrete pads for cranes and crane assembly. Clearing, Grubbing, and Grading (3 months). Removal of trees and vegetation; removal of top soil to a storage area in preparation for excavation; grading of switchyard and cooling tower areas in preparation for foundation installation. Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 43
Underground Pipe Installation (4 months). Docking and Unloading Facilities Installation (9 months). Installation of new barge slip on the downstream side of the intake structure, including placement of any crane foundations; erection of a heavy lift crane. Intake/Discharge Coffer Dams and Piling Installation (3 months). Installation of a sheet pile coffer dam and dewatering system on the west side of the Savannah River upstream of the VEGP intake to facilitate the construction of the Unit 3 and 4 intake structure and canal; driving of piling to facilitate construction of the new discharge system downstream of the existing VEGP discharge line; excavation, erection of intake structure and installation of piping. Power Block Earthwork (Excavation) (6 months). Excavation of the power block area to approximately 90 feet below grade. Module Assembly (15 months). Nuclear Island Basemat Foundations (5 months). Power Block Earthwork (Backfill) (8 months). Installation of backfill from onsite borrow pits up to the buildings' foundation grades. Civil installations. Concrete pipe; backfill; concrete formwork and structural modules; concrete; reinforcing and embedded steel; structural steel; and painting. Mechanical/HVAC installations. Vessels; pumps; compressors; tanks; heat exchangers; turbine generators; condensers; cooling towers; HVAC ductwork; and process equipment. Electrical installations. Transformers; electrical panels and instruments; switchgear; cable trays; and conduit, cable, wire and electrical terminations. Pipe and instrumentation installations: Large- and small-bore piping; valves and hangers; instrument trays and tubing; and control instruments. SNC intends to seek authorization to operate VEGP Units 3 and 4 for a license period of 40 years with a possibility of renewals at 20 year intervals. Further operation beyond that time period will depend on the condition of the plant, economic issues, regulatory considerations, and other factors. Generally, the AP1000 unit is designed to operate for not less than 60 years. E. Status of Other Environmental and Regulatory Reviews A comprehensive explanation and summary of required regulatory reviews, approvals, and consultations is found at Chapter 1.3 of the ESPER. Tables 1.3-1 through 1.3-5 list each required approval individually. As previously noted, SNC is providing NEPA documentation, i.e., the FEIS, with this Application. Most regulatory reviews and approvals are still forthcoming. SNC will apply for and receive any required authorizations prior to initiating the given activity.
This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle. Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
F. Alternative Sites or Operating Parameters SNC has prepared an analysis of alternatives to the construction and operation of new nuclear units with closed cycle cooling at VEGP, as well as alternative plant and transmission systems. The decision to co-locate the new nuclear units at VEGP was based on a comparison of three nuclear sites that supply electric power to Southern Company's customers (VEGP; Farley Nuclear Plant near Dothan, Alabama; and Hatch Nuclear Plant near Baxley Georgia) and a greenfield site that had previously been proposed for a four-unit nuclear plant but never developed (the Barton Site, near Clanton, Alabama). SNC's review of those locations found that none was obviously superior to the existing VEGP site. SNC considered alternatives to the heat dissipation, circulating water and transmission systems for the proposed VEGP Units 3 and 4 and determined they were not environmentally preferable. SNC also has determined that a number of alternative energy sources are not economically or technically feasible, and those sources that are feasible (i.e., a coal-fired or gas-fired electric generating plant) would not be environmentally preferable. The alternatives analysis is found at Chapter 9 of the ESPER and Chapter 9.0 of the FEIS and is divided into four sections: No-Action Alternative (ESPER Chapter 9.1; FEIS Chapter 9.1) Energy Alternatives (ESPER Chapter 9.2; FEIS Chapter 9.2) Alternative Sites (ESPER Chapter 9.3; FEIS Chapters 9.4 and 9.5) Alternative Plant and Transmission Systems (ESPER Chapter 9.4; FEIS Chapters 9.4 and 9.5) G. Post-Operational Requirements The NRC defines decommissioning as the safe removal of a nuclear facility from service and the reduction of residual radioactivity to a level that permits release of the property and termination of the license (10 CFR 50). NRC regulation 10 CFR 50.82 specifies the regulatory actions that the NRC and a licensee must take to decommission a nuclear power facility. NRC regulation 10 CFR 20, Subpart E identifies the radiological criteria that must be met for license termination. These requirements apply to the existing fleet of power reactors and to advanced reactors such as the AP1000. Decommissioning must occur because NRC regulations do not permit an operating license holder to abandon a facility after ending operations. However, the NRC prohibits licensees from performing decommissioning activities that result in significant environmental impacts not previously reviewed [10 CFR 50.82(a)(6)(ii)]. Therefore, the NRC has indicated that licensees for existing reactors can rely on the information in a generic environmental impact statement (GEIS) on the environmental impacts of decommissioning the existing fleet of domestic nuclear power reactors (NRC 2002).

September 2008

The DOE funded a study completed in 2004 that compares activities required to decommission existing reactors to those required for advanced reactors, including the AP1000. In addition, SNC has prepared a decommissioning cost analysis for the AP1000 at VEGP, which relies on technical information provided in the DOE-funded study and site-specific information for the currently operating units at VEGP. SNC has concluded that the DOE-funded study and the SNC cost analysis form a basis for concluding that the environmental impacts that the decommissioning GEIS identifies are representative of impacts that can be reasonably expected from decommissioning the AP1000. SNC projected total site-specific decommissioning costs for an AP1000 at VEGP using the same cost estimating methodology and assumptions used by NRC as the basis for decommissioning funding regulations in 10 CFR 50.75. SNC projected the cost to decommission one AP1000 unit using the DECON (immediate dismantlement) alternative is estimated to be $427.4 million, as reported in 2006 dollars. Under DECON method, soon after the nuclear facility closes, equipment, structures, and portions of the facility containing radioactive contaminants are removed or decontaminated to a level that permits release of the property and termination of the NRC license. Decommissioning activities are described further in Chapter 5.9 of the ESPER and Chapter 6.3 of the FEIS. H. Other Actions in the Project Area The Georgia side of the Savannah River within six miles of the VEGP site (the environmental justice screening area per Environmental Protection Agency guidance) is primarily rural undeveloped land with a few homes and small farms. Figure 2.2-2 of the ESPER identifies United States Geological Survey land use classifications in the vicinity of VEGP. Much of the undeveloped land in the vicinity is sandhill-upland pine or oak-hickory hardwood communities. The 7,000-acre Yuchi Wildlife Management Area managed by Georgia Department of Natural Resources is adjacent to VEGP property. No other recreation areas are within six miles of the VEGP site. No mineral deposits or mines occur in Burke County. DOE's Savannah River Site (SRS) is directly across the Savannah River from VEGP. The SRS has two industrial areas which are no longer active and have undergone remediation and one fossil-fueled power plant within the six-mile radius. The remainder of the SRS within the six-mile radius is river swamp, bottomland hardwood or upland pinehardwood communities. The U.S. Forest Service maintains pine plantations on the SRS land that is not industrial. Barnwell County, South Carolina has no mineral deposits or mines. The site and region are described further at Chapter 2.2 of the ESPER and Chapter 2.2 of the FEIS. The principal economic centers nearest to the VEGP site include Augusta (Richmond County), Martinez (Columbia County), Evans (Columbia County), and Waynesboro (Burke County). The three-county area has a diversified, expanding industry base. Manufacturing firms in the three counties produce a variety of products from disposal diapers to golf carts. The area has two natural resource assets - wood and kaolin. The 50-mile region is a large supplier of kaolin for ceramics and fillers. Forestry Georgia Power Company September 2008 46 CONFIDENTIAL AND PROPRIETARY
companies manufacture wood products ranging from paper products and pulpwood to furniture and flooring. Textile firms manufacture fabrics and apparel. Medical supplies, services (including hospitals and physicians), and technology are also important to the area. Medical companies produce pharmaceuticals, medical supplies, and diagnostic equipment. Two of the largest employers in the area are the U.S. Army's Fort Gordon and DOE's SRS. Additional information about economic activity, transportation, infrastructure, and related issues in the region is found in Chapter 2.5.1 of the ESPER and Chapter 2.8.2 of the FEIS. A cumulative environmental impact is an "impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (Federal or nonFederal) or person undertakes such other actions." 40 CFR 1508.7. SNC has considered the range of cumulative impacts and concluded that the impacts from construction and operation of one or more units at the VEGP site will not contribute significantly to existing or future cumulative impacts to the vicinity or the region. The cumulative impact analysis is provided in Chapter 10.5 of the ESPER and Chapter 7 of the FEIS.
Section D: Business Plan 1. Potential Project Offtake The GPC Vogtle Expansion Project will be constructed as a rate base facility. As stated previously, the Project is GPC's 45.7% individual ownership interest in two approximately 1,100MW AP1000 nuclear plants, for a total of approximately 1,000MW of nuclear power plant capacity. The following is a summary of the provisions of Georgia law regarding the construction of new electric generating units for inclusion in rate base and the recovery of costs related to those units. The full text of the relevant statutory provisions (Official Code of Georgia Annotated, 46-3A1 through 46-3A-11) and the relevant rules and regulations of GPSC ("Georgia PSC") (Rule 515-3-4.01 through Rule 515-3-4-.12) have been attached hereto as Appendix H. Under Georgia law, at least once every three years each electric utility subject to regulation by the GPSC is required to file an Integrated Resource Plan (IRP) for approval by the GPSC. The IRP must specify how the electric utility intends to meet the future electrical needs of its customers through a combination of supply-side and demand-side resources. The GPSC must approve each IRP. Under the Integrated Resource Planning Process (IRPP) statutory provisions, no electric utility may commence construction of a new generating unit to serve Georgia retail customers without having first obtained from the GPSC a certificate of public convenience or necessity. As part of the application for a certificate of public convenience or necessity, the electric utility must provide, among other things, a cost-benefit analysis covering the estimated useful life of all capacity resource options considered in developing its IRP and an estimate of the costs of the new generating units to be constructed. Each certificate of public convenience or necessity approved by the GPSC must include a description of the new generating units, the approximate construction or implementation schedule, and the approved cost. Once an electric utility has completed a new generating unit that has been certified, the utility may include in its rate base the lesser of actual or certified construction costs and those costs will be recoverable through rates. The certified costs may be excluded from rate base only on the basis of fraud, concealment, failure to disclose a material fact, imprudence or criminal misconduct. If actual costs exceed the certified costs, those additional costs may be included in rate base if the electric utility shows that the costs were reasonable and prudent. Upon application of an electric utility or upon its own motion, the GPSC may reexamine any certificate of public convenience or necessity to determine whether new forecasts of future requirements require the modification of the construction of a certified generating unit. If the GPSC finds that the new unit is no longer needed, the GPSC may revoke or modify the certificate. If the electric utility cancels or abandons the construction of the certified generating unit, the electric utility may recover through rates over a reasonable period of time (absent fraud, concealment, failure to CONFIDENTIAL AND PROPRIETARY Georgia Power Company 48 September 2008
disclose a material fact, imprudence or criminal misconduct) the amount of its investment in the new unit, along with the cost of carrying the unamortized portion of such investment, net of actual salvage value. In July 2007, the GPSC approved the 2007 IRP of GPC, which included new nuclear units as a preferred generation option for the 2016-2017 timeframe. On May 1, 2008, the Company submitted the construction of Plant Vogtle Units 3 and 4 as the Company's self-build proposal in response to a request for proposals (RFP) for electric generating capacity beginning in 2016 - 2017. No outside bids were received during that RFP. On August 1, 2008 GPC submitted an application for a certificate of public convenience and necessity for VEGP Units 3 and 4. A decision of the GPSC is expected in March 2009. 2. Summary Business Plan A. Financing Plan Regardless of the Project's capital structure, GPC intends to seek DOE Loan Guarantees for 100% of the debt associated with the GPC Vogtle Expansion Project's Eligible Costs, as defined in DOE's final rulemaking on the Loan Guarantee Program. [REDACTED********************************************************************* ******************************** GPC's senior unsecured credit ratings are A, A2 and A+ from Standard & Poor's, Moody's Investor Service and Fitch Ratings, respectively. [REDACTED**************************************************************
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. . .. [R E D A C T E D ***** *********************........
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B. Market Analysis The GPC Vogtle Expansion Project would be placed into regulated retail rate base by GPC if certified by the GPSC. The market for the plant will be GPC's regulated customers. As such GPC would expect to recover the certified costs of construction and operation through rates. Please see Section D.1 of this Application for a more detailed discussion of the IRP and certification processes. Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 49
This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle
Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and
evaluation.
GPC has one of the fastest growing service territories with some of the highest needs for additional capacity in the country. Attached as Appendices H.01 and H.02 are two presentations demonstrating the strength of GPC's service territory. The first gives an outlook on the economy, while the second shows GPC's planned capacity additions. C. Management Planning Attached as Appendix H.1 is an organizational chart for the Project. It shows high level view of the various organizations with oversight or execution responsibilities for the GPC Vogtle Expansion Project. D. Operational Risks and Mitigation Strategies As a regulated, rate base recovery plant, the operational risks faced by the GPC Vogtle Expansion Project do not affect the Project's financial performance in the same way they would affect an unregulated plant. SNC will construct VEGP Units 3 and 4 only upon receipt of a certification order by GPC from the GPSC. As described above, under Georgia law, once an electric utility has completed a new generating unit that has been certified, the utility may include in its rate base the lesser of actual or certified construction costs and those costs will be recoverable through rates. The certified costs may be excluded from rate base only on the basis of fraud, concealment, failure to disclose a material fact, imprudence or criminal misconduct. If actual costs exceed the certified costs, those additional costs may be included in rate base if the electric utility shows that the costs were reasonable and prudent. In addition, O&M costs are recoverable through the rate setting mechanism. The regulated nature of the plant therefore greatly reduces operational risks faced by the GPC Vogtle Expansion Project. In addition to the protection afforded by regulated rate recovery, operational risks for the GPC Vogtle Expansion Project are further mitigated by risk sharing measures and minimum performance standards in the EPC Agreement with the Consortium and by the Ownership Agreement with the Co-Owners, each of which will be detailed in later submissions to DOE. Operational risks to the GPC Vogtle Expansion Project are further reduced by SNC's expertise in operating nuclear plants. Please see section B.5 for a description of SNC's experience and accomplishments in these areas.
September 2008
50
Section E: Financial Plan
1. Background and Legal Structure

GPC, a Georgia corporation, is both the applicant and the prospective borrower pursuant to this Application. GPC is a wholly-owned subsidiary of The Southern Company, a Delaware corporation. The Company was incorporated under the laws of the State of Georgia on June 26, 1930. The Company is engaged in the generation and purchase of electric energy and the distribution and sale of such electricity within the State of Georgia at retail in over 600 communities (including Athens, Atlanta, Augusta, Columbus, Macon, Rome and Savannah), as well as in rural areas, and at wholesale currently to 39 rural cooperative associations through OPC, a corporate cooperative of electric membership corporations in Georgia, and to 50 municipalities, 48 of which are served through the MEAG, a public corporation and an instrumentality of the State of Georgia. The principal executive offices of GPC are located at 241 Ralph McGill Boulevard, N.E., Atlanta, Georgia 30308-3374, and the telephone number is (404) 506-6526. History and Legal Structure The original predecessor to GPC was formed in 1883 as the Georgia Electric Light Company of Atlanta, primarily for the purpose of providing lighting for the city of Atlanta. As the service area of this predecessor company expanded, it became necessary for several of the small power utilities in north Georgia to join together and form the Georgia Railway and Power Company. In the late 1920s, the major utilities in the state began plans to consolidate to form GPC. A major portion of this consolidation was completed in 1927, with the formation of the predecessor GPC. On June 26, 1930, through the consolidation of the predecessor GPC and the Columbus Electric and Power Company, GPC was incorporated as a consolidated corporation under the laws of the State of Georgia (Official Code of Georgia Annotated (46-8-334 through 46-8-336)). Attached hereto as Appendix I is a copy of the relevant code sections of the Official Code of Georgia Annotated relating to GPC's incorporation as a consolidated corporation (Official Code of Georgia Annotated (46-8-334 through 46-8-336)). GPC's charter is on file with the office of the Secretary of State of the State of Georgia, and has not been included in this initial submission due to its substantial length of several hundred pages. The full text of GPC's charter will be included in the complete Part I application to be submitted at a later date. The Project The GPC Vogtle Expansion Project will be owned directly by the Company. Pursuant to a joint ownership and development agreement with OPC, MEAG, and Dalton Utilities, GPC and the Owners will construct two new nuclear generating units at the site of the VEGP. Each Owner has an undivided ownership interest in the Georgia Power Company September 2008 CONFIDENTIAL AND PROPRIETARY 51
VEGP Units 3 and 4, with GPC holding a 45.7% undivided ownership interest, OPC holding a 30.0% undivided ownership interest, MEAG holding a 22.7% undivided ownership interest and Dalton Utilities holding a 1.6% undivided ownership interest. 2. Legal Authority For a summary of the provisions of Georgia law regarding the construction of new electric generating units by electric utilities for inclusion in rate base and the recovery of costs related to those units, see Section D.1 Application. The following is a summary of the provisions of Georgia law regarding the required approval of the Georgia PSC in connection with the issuance of stocks, bonds, notes or other indebtedness by a regulated electric utility. The full text of the relevant statutory provision (Official Code of Georgia Annotated, 46-2-28) and the relevant rules and regulations of the GPSC (Rule 515-4-1-.01 through Rule 515-4-1-.15) have been attached hereto as Appendix J. Under Section 46-2-28 of the Official Code of Georgia Annotated, it is unlawful for a regulated electric utility to issue stocks, bonds, notes or other evidences of debt, payable more than 12 months after the date of issuance, except upon the approval of the Georgia PSC. Any such securities issued must be for the purpose of the acquisition of property, the construction and equipping of power plants and carsheds, the completion, extension or improvement of facilities or properties, the improvement or maintenance of service, the discharge or lawful refunding of obligations or for other lawful corporate purposes. Under such Section 46-2-28(d), before issuing stocks, bonds, notes or other evidences of indebtedness, an electric utility must secure an order from the Georgia PSC authorizing such issuance, the amount thereof, and the purpose for which the issue is authorized. The provisions of Georgia PSC rules 515-4-1-.01 through 515-41-.15 set forth the procedures for filing an application for such an order. In advance of the issuance of any indebtedness that would be subject to a DOE loan guarantee, the Company will file an application and obtain an order of the Georgia PSC authorizing such debt issuance. 3. Financial Statements Attached hereto as Appendices K.1 through K.3 are the Company's audited financial statements and associated notes for the past three years, prepared by the Company in accordance with accounting principals generally accepted in the United States and audited by Deloitte & Touche LLP, an independent registered public accounting firm, which are included in the Company's Annual Report on Form 10-K for the fiscal years ended December 31, 2005, 2006, and 2007 (the "10-Ks"). Attached hereto as Appendices L.1 and L.2 are the Company's unaudited financial statements and associated notes for the current year, which are included in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2008 and the three and six months ended June 30, 2008(the "10-Qs"). Attached to each of the 10-Ks and the 10-Qs is a copy of the certifications of Michael D. Garrett, President and Chief Executive Officer of the Company, and Cliff S. CONFIDENTIAL AND PROPRIETARY Georgia Power Company 52 September 2008
This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle and Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review evaluation.
Thrasher, Chief Financial Officer of the Company, delivered in connection with the filing of the Form 10-K and the Form 10-Q and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which certify the financial statements contained in the Form 10-K and the Form 10-Q. 4. Credit History Included as a credit history are the latest published credit analyses on GPC from each of Moody's Investors' Service, Standard & Poor's, and Fitch Ratings. Additionally included is a Dun & Bradstreet report showing a clean credit history for GPC. This information is included as Appendices M.1 through M.4. Please see section B4 for GPC's identifying information.
5. Litigation and/or Conflicts

Please refer to Note 3 to the financial statements of GPC included in Item 8 of the 10-Ks and Note (B) to unaudited financial statements of GPC included in Item 1 of the 10-Qs. These financial statements have been included as an attachment to this Application pursuant to Section E.3 of the Application. 6. Financial Model Two scenarios have been provided for the GPC financial models. [REDACTED
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The financial models included in this application are based on the current estimates and assumptions of management and are not intended to represent guarantees of future financial performance. Particularly given the lengthy time period covered by the models, actual results may differ materially from the estimates included in the models.
53

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in, 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 l(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
Section F: Application Certifications 1. Certifications and Assurances Attached as Appendix 0 is GPC's Certifications and Assurances Form.
September 2008
54
Attachment D Loan Guarantee Application Form
5402 DOE FORM NO.: EFFECTIVE DATE: 03/08
FORM APPROVED OMB NO. 1910-5134 EXPIRATION DATE: 03/11
U.S. Department of Energy Loan Guarantee for Projects that Employ Innovative Technologies puan e f gy L This form is for usebyApplican tssking aU Dertn 0W109p-58 Ii(SC gorn ) 651 et 2005, Publicia ofth Energy Policy Act if the Applicant has any tax whe 609. (Social-Security nunbeirs are requesed for purpoes og delinquent accountis ith the IRS asrequired y MB Policy CrcularA-129.) Afterompletig this form pleasepnt two copis and send to the address below. Iis highlyreconmmended that all mail.be sent ia Express hldbe uplcaoaded using Fed Connect at www.fedconnet. net. For mor information' Mail. Fullpplicati ' on the program, please visit ourwebsite. at http://www.gprogram.energy.O.. i e*s P Mail All.Paer Copi.t: . Director ff WogrGamarfintee .spOEI Washington, DC 20585-0121g K WoIN a,
a M
fce it.
Ae 1000 Independ enc1!e'M S
In reference to DOE Solicitation No. Invitation No. GENERAL INFORMATION Organization Name Georgia Power Company First Name Contact Last Name Earl _ _ [Long Phone Number 404.506.0783 Address 30 Ivan Allen Jr. Boulevard State City
Atlanta GA
DE-FOA-0000006
Federal Tax ID or Social Security No. 58-0257110 Position/Title __J j Assistant Treasurer Fax Number i 404.506.0717
9 Digit Zip Code

____
30308-3003
Email eclong@southerco.com Project Location - City

Munnerlyn
DUNS Number j 00-692-4989 State

GA
_30830-2965
NAIC Number 4911 - Electric Services 9 Digit Zip Code
PROJECT SPONSORS (ASSET HOLDERS) WITH EQUITY OF 5 PERCENT OR MORE Federal Tax ID or Social Security No. Organization Name [Georgia Power Company - same information as above Position/Title First Name Contact Last Name
S__.
______________________
3___~
Phone Number
DOE FORM NO.: 5402
Fax Number
FORM APPROVED
EFFECTIVE DATE: 03/08
OMB NO. 1910-5134 EXPIRATION DATE: 03/11
Address City Organization Name Contact Last Name Phone Number Address City State 9 Digit Zip Code First Name State
....
9 Digit Zip Code ----------Federal Tax ID or Social Security No. Position/Title Fax Number
Organization Name Contact Last Name Phone Number Address City State First Name
Federal Tax ID or Social Security No. Position/Title Fax Number
9 Digit Zip Code
Organization Name Contact Last Name Phone Number Address . ..... ~ . ............. I City State
A res...
_.......
Federal Tax ID or Social Security No. First Name

.........
Position/Title
_........_ _------..........
I
Fax Number
......................--....
____........
9 Digit Zip Code
Organization Name Contact Last Name . ... ....... Phone Number

DOE FORM NO.: 540.2
Federal Tax ID or Social Security No. First Name ............... Position/Title
__ __
..
..
_____.
______................I
Fax Number
FORM APPROVED
EFFECTIVE DATE: 03/08
OMB NO. 1910-5134 EXPIRATION DATE: 03/11
IAdress______________ Address
________________
________ _
_____
City
State
9 Digit Zip Code
SUMMARY OF LOAN GUARANTEE REQUEST
G:uarantee ":7K. Equity*

t
M sed-Guaranteed
* Please indicate dollars in millions
CATEGORY OF PROJECT Category

1
Description
Renewable Energy Systems
Check
Chec Box.
2 3 4 5
Advanced Fossil Energy Technology (including coal gasification

meeting the criteria in paragraph 1703 (d) of EPAct 2005
Hydrogen fuel cell technology for residential, industrial or

transportation applications
Advanced nuclear energy facilities Carbon capture and sequestration practices and technologies, including agricultural and forestry practices that store and
sequester carbon
7 8 9 1
Efficient electrical generation, transmission and distribution technologies Efficient end-use energy technologies Production facilities for fuel efficient vehicles including hybrid and advanced diesel vehicles Pollution control equipment Refineries, meaning facilities at which crude oil is refined into
_gasoline
DOE FORM NO.: 5402 EFFECTIVE DATE: 03/08
RESTRICTIONS ON DISCLOSURE AND USE OF INFORMATION Title XVII of the Energy Policy Act of 2005 authorizes the collection of this information. The primary use of this information is by the Loan Guarantee Program Office of the Department of Energy in its review of applications for loan guarantees under Title XVII. Additional disclosures of this information may be made as required by law. Where the information provided is a social security number, the provision of the information is voluntary but failure to disclose may result in disapproval of the application. All information collected will be handled in accordance with the Freedom of Information Act (5 U.S.C. 552) and all applicable laws. Patentable ideas, trade secrets, proprietary, or confidential commercial or financial information, disclosure of which may harm the applicant, should be included in an Application only when such information is necessary to convey an understanding of the proposed project. The use and disclosure of such data may be restricted, provided the applicant specifically identifies and marks such data in accordance with the following provisions: 1. Applicant hereby discloses that (fill in the blank below in this Application Form with the specific Application Sections containing proprietary data): "Sections of this Application contain data which have been submitted in confidence and contain trade secrets or proprietary information, and such data shall be used or disclosed only for evaluation purposes; provided that, if this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, DOE shall have the right to use or disclose the data herein, other than such data that have been properly reasserted as being trade secret or proprietary in the loan guarantee agreement. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any source, including the applicant." 2. Include the following legend on the first or cover page of each document or electronic file submitted that contains such data (be sure to specify the page numbers from such document or electronic file that contains the proprietary data):
"The data contained in pages of this document or electronic file which hereby forms a
part of the Application have been submitted in confidence and contain trade secrets or proprietary information, and such data shall be used or disclosed only for evaluation purposes; provided that, if this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, DOE shall have the right to use or disclose the data herein, other than such data that have been properly reasserted as being trade secret or proprietary in the loan guarantee agreement. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any source, including the applicant."
S,5
540.2 DOE FORM NO.: EFFECTIVE DATE: 03/08
3. Include the following legend on each page of a document or electronic file containing such data (a) as a header on the page or (b) to specifically identify and mark each line or paragraph on the page containing such data: 'The following contains proprietary information that (name of applicant) requests not be released to persons outside the Government, except for purposes of review and evaluation."
BURDEN DISCLOSURE STATEMENT
This data is being collected to support applications for loan guarantees from the Department of Energy under Title XVII of the Energy Policy Act of 2005 (22 USC 16511, et seq.). The data you supply will be used for the review of business and credit risks relating to projects which qualify for loan guarantees under Title XVII. Public reporting burden for this collection of information is estimated to average 10.36 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Office of the Chief Information Officer, Records Management Division, IM-23, U.S. Department of Energy, 1000 Independence Ave SW, Washington, DC, 20585-1290; and to the Office of Management and Budget, OIRA, Washington, DC 20503. Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a currently valid OMB control number. Submission of this data is required to obtain a guarantee of the repayment of principal and interest on loans relating to projects that qualify for such guarantees under Title XVII of the Energy Policy Act of 2005 (22 USC 16511, etseq.).
DOE FORM NO.: 540.2 EFFECTIVE DATE: 03/08
CERTIFICATION The undersigned certifies that the data and information submitted and the representations made in this Application and any attachments to this Application are true and correct, to the best of the Applicant's knowledge and belief after due diligence, and that the Applicant has not omitted any material facts. The undersigned further certifies to having full authority to bind the Applicant. Applicant (Organization Name) Georgia Power Company Name of Applicant's Authorized Officer (willfulfil on-line cerification) Title Cliff Thrasher Executive VP .. ... . .......... ......................... and CFO j Signature of authorized officer (foypaerco only) Date

DOE Loan Guarantee Application Appendix A.1: Evidence of Authority GPC Vogtle Expansion Project
August 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained on page 2 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.

GEORGIA A
ASOUTHERN
COMPA"
POWER
Georgia Power Company 241 Ralph McGill Boulevard Atlanta, GA 30308
August 6, 2008 DOE Loan Guarantee Program Office 1000 Independence Avenue, S.W. Washington, D.C. 20585-0121 Attention: Director Ladies and Gentlemen: As part of Georgia Power Company's ("the Company") DOE Loan Guarantee Application ("the Application"), the Company is required to attest to the accuracy of the information provided, both written and oral, in the application process. With this letter, I, Cliff S. Thrasher, Executive Vice President and Chief Financial Officer, hereby attest to the accuracy of both written and oral information provided by the Company to the DOE in the application process. Attached as Appendix A.2, please find evidence of my authority to represent the Company. Respectfully,
(Cliff S. Thrasher) Executive Vice President & Chief Financial Officer Date: Lt6 AuL -00
"
August 2008

DOE Loan Guarantee Application Appendix A.2: Evidence of Authority GPC Vogtle Expansion Project
August 2008
NOTICE ON DISCLOSURE AND USE OF DATA
The data and information contained on page 2 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.
The undersigned hereby certify that the following are duly qualified and acting officers of Georgia Power Company and that the signatures set opposite their names are true specimens of the signatures of such officers, respectively: Michael D. Garrett President and Chief Executive Officer // /
Cliff S. Thrasher
Executive Vice President, Chief Financial Officer and

Treasurer
__ _ __ _ _ _ _
Ann P. Daiss
Vice President, Comptroller and Chief Accounting Officer
(J
"P
U. d
Daniel Lowery
Corporate Secretary
Robert B. Morris
Assistant Comptroller and Assistant Secretary
|6d
Wayne Boston
Assistant Secretary and
/_
__
Assistant Treasurer
Date:
May 2, 2007
Assistant Secretary
Assistant Secretary

DOE Loan Guarantee Application Appendix B: Equity Commitment Letter GPC Vogtle Expansion Project
September 2009
GEORGIAA POWER
A SOUTHERN COMPANY

241 Ralph McGill Boulevard Atlanta, GA 30308
August 6, 2008 DOE Loan Guarantee Program Office 1000 Independence Avenue, S.W. Washington, D.C. 20585-0121 Attention: Director Ladies and Gentlemen: As part of Georgia Power Company's ("the Company") DOE Loan Guarantee Application ("the Application"), the Company is required to submit an Equity Commitment Letter from the Project Sponsor and a description of the source of such equity. As the Company is the Project Sponsor, this letter shall serve as the Company's Equity Commitment Letter and description of the source of such equity for the purpose of the Application. If the Company determines the best course of action for its ratepayers, shareholders, and other stakeholders is to maintain its 45.7% undivided ownership interest in Vogtle Electric Generating Plant Units 3 & 4 ("the Facility") described in the Application, obtains the necessary regulatory approvals for the Facility and obtains regulatory approval for rate base cost recovery that will enable the Company to preserve its creditworthiness and earn a reasonable return, then the Company commits to provide the equity financing needed to complete the construction and begin operation of the Facility. The Company may obtain the necessary equity funding from a variety of sources. These sources include, but are not limited to, internally generated funds, equity contributions from its parent, The Southern Company, and any other source the Company deems appropriate for the raising of the equity required to complete the construction and begin operation of the Facility. Respectfully, Georgia Power Company
By:
Title:
Date:
___
__
_-
(Cliff S. Thrasher) Executive Vice President & Chief Financial Officer

_____ _ _ _2_0_ _
August 2008

DOE Loan Guarantee Application Appendix C: Site Location Map GPC Vogtle Expansion Project
August 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained on page 2 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 l(f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.
Alken
58
Yuchi \
ardeWoods B Rads
____.---
.3. .0 GEORGIA
Lakesand Rivers
Site Boundary
0 0.5 1
3Mile
Mgmt Wildlife NAea
Georgia Power Company August 2008 August 2008

DOE Loan Guarantee Application Appendix D: Key Milestone Schedule GPC Vogtle Expansion Project
August 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained on page 2 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 1(f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.
1905, and 10 C.F.R. 1004.1 l(f). This This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. approval of the GPC Vogtle Expansion Loan Guarantee information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
Vogtle 3&4 Schedule

1-1-05
0-05
135 Months
ESP Prep. ES
08-06
4-1-2016
,
-7-1-08
signed with Westinghouse
08-15-06
19 Months *MOU
01-12-06
93 Months
*ESP
06-06 COL Prep.
4-1-0
O
Submittal
22 Months
3-31-08 4-1-08
COLA Submittal NRC COL Review 40 Months 9-1-11 !0-1-11

4-1-09
Construction 48 Months +Full Notice to Proceed

4-1-09
10-1-15
02-06
PSC Certification 37 Months
S/U4 1 16 I
Pre-Const. Activities
o -i09
4 MonthN
05-09 v
6 Months
nts
05-09
Unit 3
COD
Eincavatin P
7 Months
12-09
08-06
ESP Review:S_,_ 38 Months
:11-1-09
4-1-17
-1
.LWA Received
' 11-1-9
Un
COD
LWA Activities
12-69 19 Months 7-11
August 2008

DOE Loan Guarantee Application Appendix E: Licenses, Permits, and Approvals GPC Vogtle Expansion Project
August 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained on pages 2-6 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11 (f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.

Federal, State and Local Licenses, Permits and Approvals

Permit or Regulatory Requirement Section 404 Dredge & Fill Permit (Corps of Engineers) Purpose/Permitted Activity Regulatory Authority Agency Contact
Construction Work in Wetlands which includes construction of Rail Corridor Upgrade, Discharge/Intake Structure, Barge Facilities, and Retention Ponds (2)
Federal Aviation Administration 77.15 Permit
Permit needed for construction of an object that has the potential to affect navigable airspace (height in excess of 200 ft) or within 20,000 ft of an airport.
33 CFR 323 33 CFR 330 33 CFR 322 CWA Section 316(b)(33 CFR320.2(f), 322,323,328) 49USC1501 14 CFR 77 Objects Affecting Navigable Airspace
912-652-5214 U.S. Army Corps of Engineers Savannah District100 W. Oglethorpe Ave. Savannah, GA 31401 Tel: 718-553-2616 FAA Eastern Regional Office Air Traffic Division, AEA-520 JFK International Airport Fitzgerald Federal Building Jamaica, NY 11430 USCG USDOT USNRC
Private Aids to Navigation Certificate of Registration NRC Design Certification Rule
For installation of navigation aids at the facility for coffer dams only Transportation of Hazardous Materials This is already in place Amendment to the Design Certification Rule for the AP 1000 to incorporate Revision 16 of the Design Control Document, as modified by Technical Report 134, Revision 4 As part of House Bill 285, there are new education and training certification requirements included in the 2003 amendments to the Georgia Erosion & Sedimentation Act (Act). These new certification requirements state that all persons involved in land development design review, permitting, construction, monitoring or inspection or any land disturbing activity shall meet the education and training certification requirements, dependent on their level of involvement with the process, as developed by the commission in consultation with the division and the Stakeholder Advisory Board created pursuant to Code section 12-7-20. Permit to use Groundwater - Site characterization, Consumptive use of 100,000 GPD or more, Dewater (Deep Well) foundation if needed for more than 60 days, Certification of abandon wells
COMDTINST M16500.3A 49 CFR 107, Subpart G 10 CFR Part 52
Education and Training Certification Program(Note This is not a permit, but a requirement of the State of Georgia for all land disturbing activities)
House Bill 285 Code section 12-7-20. Authority O.C.G.A. 26-27(7.1) and 12-7-19.
The Education and Training Certification Program is administered by the E&SC Education and Certification Program of the Georgia Soil and Water Conservation Commission, telephone (706) 542-1840. For additional information, access the Commission's website: www.gaswcc.org; click on Education/Certification. Tel: 404-675-1680 GAEPD Water Withdrawal Permitting Program Groundwater Permitting Unit
__(GWUR)
Well Permits
OCGA R.12-590 GA R.391-32-.03,.09,.14
Georgia Power Company August 2008
This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. persons in 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(f). This information shall not be released to persons outside DOE, except for other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation. 4220 International
Parkway, Suite 101

Atlanta, GA30354
Permit or Regulatory
Requirement
Purpose/Permitted Activity Upgrade entrance and provide turning lanes. Construction - Discharge Stormwater from site during construction
Regulatory Authority 23 CFR 1.23
Agency Contact
Department of Transportation (DOT) Highway

Encroachment
GDOT 2 Capitol Square S.W. Atlanta, Georgia 30334

(404) 656-5267
General NPDES Permit for Storm Water Discharges from Construction Activities
GA Water Quality Control Act OCGA R. 12-5-20, GA R.391-3-6 (This/Like Permits may be
local authority)
GAEPD West Central District Office 2640 Shurling Drive Macon, GA 31211 478-751-6612 and/or LIA GAEPD and/or LIA
General NPDES Stormwater Permit Construction Linear Projects
For relocation of Macintosh Line and new 500 KV line. Needed prior to land disturbing activities of greater than 1 acre, or in the case of transmission line corridor within 200 feet of the bank of any state waters.
GA Water Quality Control Act OCGA R. 12-5-20, 12-7-1 GA R.391-3-6 and 7 (This/Like Permits may be local authority) Burke County Soil Erosion and Sedimentation Control Ordinance of 912-95, art.V,
R.5-100
Georgia SIP Construction & Operating Permit (may include contractor small sources)
Construction air emissions, including concrete batch plant. Will also cover 1st 12 months of operation. Although required prior to construction, this permit wouldn't be considered a "construction permit" and should be obtained during COL process. It addresses impacts of the facility, not impacts from construction of
the facility.
FCAA OCGA R.12-9-1 GA R. 391-3-1
Georgia Air Protection Branch 4244 International Parkway, Suite 120 Atlanta, GA 30354 Phone: 404.363.7000

Requirement
Purpose/Permitted Activity The GA EPD administers the Water Quality Certification program pursuant to Section 401 of the CWA. GA issues certification for any activity which requires a Federal permit and may result in a discharge to state waters. This certification must state that applicable effluent limits and water quality standards will not be violated. All activities requiring a Federal 404 permit result in a discharge to waters or wetlands, so GA EPD must take certification action on all 404 permit applications. During review of applications for WQC, the GA EPD looks at whether or not there are feasible alternatives to the activity, if the activity is water dependent, and the intended purpose of the activity. Certification is denied if the activity will adversely affect existing or designated uses. The Federal permit cannot be issued if certification is denied. Any applicant for a Federal permit or license for an activity which may result in a discharge to navigable waters must receive certification from the GA EPD that applicable State water
quality standards will not be violated.
Regulatory Authority CWA Section 401, OCGA R.12-5-20, GA 391-3-6
Agency Contact GA EPD
Section 401 Water Quality Certification
Public Water Supply System
Needed to construct/operate a public, non-transient and/or transient, noncommunity water supply system.
40 CFR 141, GA Safe Drinking Water Act of 1977 OCGA R. 12-5170;

GA R.391-3-5
GAEPD Drinking Water Program 2 Martin Luther King Jr. Drive, SE, Suite 1362 East Atlanta, GA 30334 Region IV Permit Contact, Permits Section, USEPA 345 Courtland Street, NE, Atlanta, GA 30365,
404-881-2017
NPDES Permit to Construct a Sanitary Wastewater, Wastewater

Treatment
Permit(s) are required to expand existing wastewater treatment facilities
CWA, 33 U.S.C 1251 Section 208 of the Federal Clean Water Act State
Law (TBD)
Spills Prevention Control and Countermeasure

Plan
Construction - ensure plan in place prior to construction
40 CFR 112
USEPA
August 2008

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(bX4), 18 U.S.C. 1905, and 10 C.F.R. 1004.1 1(f). This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
Permit or Regulatory Requirement Construction Landfill
Purpose/Permitted Activity
Regulatory Authority GA Comprehensive Solid Waste Management Act OCGA R.12-8-20, GA R. 391-3-4 TBD
Agency Contact
Private modification for landfill #2 for vertical expansion, Closure for landfill #3. On-site disposal of solid waste consisting of earth and earth like products, concrete, cured asphalt, rock, bricks, and land clearing debris. To remove 6 USTs on site
GAEPD
Underground Storage Tank (UST) Removal
Hazardous Site Response Act (HSRA) Release Notification/Report ing Asbestos Removal Solid Waste Handling Permit
To remediate old firing range
Rules for Hazardous Site Response, Chapter 391-319 TBD GA Comprehensive Solid Waste Management Act OCGA R.12-8-20, GA R. 391-3-4
Georgia Department of Natural Resources Environmental Protection Division Underground Storage Tank Management Program 4244 International Parkway, Suite 104, Atlanta, Georgia 30354 404/362-2687 GAEPD Hazardous Sites Response Program 404.657.8600
Removal and disposal of asbestos from existing buildings, prior to demolition Disposal of industrial solid wastes. Transportation of putrescible wastes for disposal at a permitted landfill
GAEPD GAEPD
Land Disturbing Activity
All land disturbing activities within county boundaries.
Burke County Code of Ordinances Article VII, Sec. 260311 Jefferson, Warren, and Macduffie County Ordinances
Burke County Building Office
Land Disturbing Activity
All land disturbing activities within county boundaries. For transmission line corridor.
TBD
August 2008

This page contains confidential trade secret and proprietary information that meets the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11(0f. This information shall not be released to persons outside DOE, except for persons in other United States Federal Government agencies whose review is required for approval of the GPC Vogtle Expansion Loan Guarantee Application. DOE and other required reviewers shall use the information only for purposes of review and evaluation.
Requirement
Purpose/Permitted Activity
Regulatory Authority Burke County Code of Ordinances

Article VII, Sec. 260311
Agency Contact
Building Permit
Construction, alteration, repair, or demolition of any building or structure within the county boundaries.
Burke County Building Office

DOE Loan Guarantee Application Appendix H - Statutory Provisions - IRP and Certification GPC Vogtle Expansion Project
August 2008
Page 1
3 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4,2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-1 (2008) 46-3A-1. Definitions
As used in this chapter: (1) "Capacity resource" means an electric plant, a long-term power purchase, or a demand-side capacity option. (2) "Commission" means the Georgia Public Service Commission. (3) "Construction" means clearing of land, excavation, or other substantial activity leading to the operation of an electric plant other than planning, land surveying, land acquisition, subsurface exploration, design work, licensing or other regulatory activity, contracting for construction, or environmental protection measures and activities associated therewith. (4) "Demand-side capacity option" means a program proposed by a utility or the commission for the reduction of future electricity requirements the utility's Georgia retail customers would otherwise impose, including, but not limited to, conservation, load management, cogeneration, and renewable energy technologies. (5) "Electric plant" means any facility, or the portion of a facility, that produces electricity or that, at the time application for certification is made pursuant to this chapter, is intended to produce electricity for a utility's Georgia retail customers. "Electric plant" includes the realty and ancillary facilities for the construction of the plant. (6) "Long-term power purchase" means a purchase of electric capacity and energy for a period exceeding one year, the principal purpose of which is to supply the requirements of the Georgia retail customers of a utility. (7) "Plan" means an integrated resource plan which contains the utility's electric demand and energy forecast for at least a 20 year period, contains the utility's program for meeting the requirements shown in its forecast in an economical and reliable manner, contains the utility's analysis of all capacity resource options, including both demand-side and supply-side options, and sets forth the utility's assumptions and conclusions with respect to the effect of each capacity resource option on the future cost and reliability of electric service. The plan shall also: (A) Contain the size and type of facilities which are expected to be owned or operated in whole or in part by such utility and the construction of which is expected to commence during the ensuing ten years or such longer period as the commission deems necessary and shall identify all existing facilities intended to be removed from service during such period or upon completion of such construction;
Page 2 O.C.G.A. 46-3A-1
(B) Contain practical alternatives to the fuel type and method of generation of the proposed electric generating facilities and set forth in detail the reasons for selecting the fuel type and method of generation; (C) Contain a statement of the estimated impact of proposed and alternative generating plants on the environment and the means by which potential adverse impacts will be avoided or minimized; (D) Indicate in detail the projected demand for electric energy for a 20 year period and the basis for determining the projected demand; (E) Describe the utility's relationship to other utilities in regional associations, power pools, and networks; (F) Identify and describe all major research projects and programs which will continue or commence in the succeeding three years and set forth the reasons for selecting specific areas of research; (G) Identify and describe existing and planned programs and policies to discourage inefficient and excessive power use; and (H) Provide any other information as may be required by the commission. (8) "Supply-side capacity option" means an electric plant, a long-term power purchase, or any other source of additional energy. (9) "Utility" means any electric supplier whose rates are fixed by the commission. HISTORY: Code 1981, 46-3A-1, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
Page 1
4 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-2 (2008) 46-3A-2. Filing and approval of an integrated resource plan
(a) On or before January 31, 1992, and at least every three years thereafter as may be determined by the commission, each utility shall file with the commission an integrated resource plan as described in this chapter. (b) Not more than 60 days after a utility has filed its plan, the commission shall convene a public hearing on the adequacy of the plan. At the hearing any interested person may make comments to the commission regarding the contents and adequacy of the plan. After the hearing, the commission shall determine whether: (1) The utility's forecast requirements are based on substantially accurate data and an adequate method of forecasting; (2) The plan identifies and takes into account any present and projected reductions in the demand for energy which may result from measures to improve energy efficiency in the industrial, commercial, residential, and energy-producing sectors of the state; and (3) The plan adequately demonstrates the economic, environmental, and other benefits to the state and to customers of the utility, associated with the following possible measures and sources of supply:
(A) Improvements in energy efficiency;

(B) Pooling of power; (C) Purchases of power from neighboring states; (D) Facilities which operate on alternative sources of energy; (E) Facilities that operate on the principle of cogeneration or hydro-generation; and (F) Other generation facilities and demand-side options. (c) Within 120 days after the filing of each integrated resource plan, the commission shall approve and adopt an integrated resource plan.
Page 2 O.C.G.A. 46-3A-2
HISTORY: Code 1981, 46-3A-2, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
Page 1
5 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-3 (2008) 46-3A-3. Actions prohibited without a certificate of public convenience and necessity
(a) After January 31, 1992, no utility shall commence the construction of an electric plant, sell an existing plant or any portion thereof which is included in the retail rate base or which has been certified, enter into a long-term purchase of electric power, or make expenditures for a demand-side capacity option for serving the utility's Georgia retail customers without having first obtained from the commission a certificate that public convenience and necessity requires, or will require, such construction, sale, purchase, or expenditure. (b) No utility shall increase or decrease the capacity of: (1) A generating unit of an electric power plant; (2) A long-term power purchase; or (3) A demand-side capacity option by more than 15 percent of its demonstrated capacity in megawatts for serving the utility's Georgia retail customers without first obtaining a certificate or an amendment to a certificate, as appropriate, that public convenience or necessity requires or will require such increase or decrease; provided, however, no certificate shall be required if the increase or decrease is caused by a rule, regulation, or law mandated by any duly constituted local, state, or federal governmental body or agency or is caused by power pooling, forced or maintenance outages, or short-term sales for a period of less than one year. HSTORY: Code 1981, 46-3A-3, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
Page 1
6 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-4 (2008) 46-3A-4. Issuance of a certificate of public convenience and necessity; application to include plan and cost-benefit analysis
(a) The commission shall issue a certificate upon a finding that there is or will be a need for the proposed capacity resource at the time that the proposed resource is proposed to be utilized to assure an economical and reliable supply of electric power and energy for the Georgia retail customers of a utility, that the certificate is required by the public convenience and necessity, and that the certificate complies with the provisions of this chapter and the rules of the commission. (b) The utility's application for a certificate shall be accompanied by its current integrated resource plan, whether or not previously filed. (c) The utility's application for a certificate shall contain a cost-benefit analysis covering the estimated useful life of all capacity resource options considered in developing its current integrated resource plan. The estimated cost of the capacity resource proposed to be certificated shall be presented in such reasonable detail as the commission may require. HISTORY: Code 1981, 46-3A-4, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
Page 1
7 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session ** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-5 (2008) 46-3A-5. Application for certificate; hearing; decision; contents of certificate; fee
(a) A utility seeking a certificate or an amendment to a certificate shall make an application to the commission which contains the information required by this chapter. (b) No sooner than 30 days after an application is made for a certificate or an amendment, the commission shall conduct a public hearing on the application. Within 300 days after filing of the first such application and within 180 days after filing of each application thereafter, the commission shall issue an order adopting a forecast of future Georgia retail electricity requirements of the utility and describing in what manner the prospective certificate relates to the integrated resource plan and either granting the requested certificate or denying the requested certificate and authorizing a specific alternative means of supplying the requirements found by the commission to exist. Each certificate shall describe the capacity resource, its approximate construction or implementation schedule, and its approved cost. If the commission fails to so act within 300 days after the first such application has been made and within 180 days after each subsequent application has been made, the forecast application and certificate shall be deemed granted by operation of law. (c) Within 60 days after the filing of an integrated resource plan or an application has been made with the commission for a certificate or amendment, the commission shall establish a fee therefor and notify the applicant thereof. The fee amount so established shall be in an amount reasonably necessary to defray the expense of the commission in reviewing the plan or determining whether to grant the application, including but not limited to the expense of conducting any certification proceedings required for such application. The fee so established shall not be recoverable from ratepayers of the applicant if the application or certification is denied nor shall the fee for review of the plan or any subsequent amendment thereto be recoverable from ratepayers. Such fee must be remitted to the commission before the commission may take any further action upon the application. For purposes of any time periods established in subsection (b) of this Code section and subsection (c) of Code Section 46-3A-2, an application shall be deemed to have been filed only when the fee established therefor has been remitted to the commission. In the event a joint application is filed by more than one utility, a single such fee only shall be required. The funds assessed and collected pursuant to this subsection shall be deposited in the state's general fund. HISTORY: Code 1981, 46-3A-5, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
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8 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-6 (2008) 46-3A-6. Reexamination of a certificate of public convenience and necessity; modification or revocation Upon application of a utility or upon its own motion, the commission may reexamine any certificate granted under this chapter to determine whether new forecasts of future requirements require the modification of the construction, purchase, sale, or expenditure for a certificated capacity resource. If upon such reexamination the commission finds that the certificated capacity resource is no longer needed or that any additional certificated capacity resource is needed to assure a reliable supply of electric power and energy for the utility's Georgia retail customers, the commission may modify or revoke the certificate. If the utility cancels, abandons, or increases some or all of the capacity resource as a result of such modification or revocation of the certificate, it may recover through any rate-making vehicle over a reasonable period of time, absent fraud, concealment, failure to disclose a material fact, imprudence, or criminal misconduct, the amount of its investment in such capacity resource, along with the cost of carrying the unamortized portion of that investment, net of actual salvage value, to the extent such investment is verified as made pursuant to the certificate. The commission shall disallow such investment and costs resulting from fraud, concealment, failure to disclose a material fact, imprudence, or criminal misconduct. HISTORY: Code 1981, 46-3A-6, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
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9 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-7 (2008) 46-3A-7. Construction costs as part of rate base; review of construction work in progress; verification of expenditures; recovery of costs of canceled construction
(a) So long as the commission has not modified or revoked the certificate for an electric plant under Code Section 46-3A-6 and to the extent the utility seeks to add to its rate base upon completion of the plant construction costs that do not exceed 100 percent of those approved by the commission under Code Section 46-3A-5, Code Section 46-3A-6, or subsection (b) of this Code section, that construction cost amount may be excluded from the rate base only on the basis of fraud, concealment, failure to disclose a material fact, imprudence, or criminal misconduct. Inclusion of costs in excess of 100 percent of those approved by the commission shall not be permitted unless shown by the utility to have been reasonable and prudent. (b) In addition to the review of the continuing need for an electric plant under construction prescribed in Code Section 46-3A-6, the commission, upon its own motion, may conduct or the utility may request that the commission conduct an ongoing review of such construction as it proceeds. Every one to three years, or at such lesser intervals upon the direction of the commission or request of the utility, the applicant shall file a progress report and any proposed revisions in the cost estimates, construction schedule, or project configuration. Within 180 days of such filing, the commission shall verify and approve or disapprove expenditures made pursuant to the certificate and shall approve, disapprove, or modify any proposed revisions. If the commission fails to so act within 180 days after such filing, the previous expenditures and any proposed revisions shall be deemed approved by operation of law. (c) If the commission verifies expenditures as made pursuant to a certificated capacity resource, that verification forecloses subsequent exclusion of those costs from the utility's rate base, absent fraud, concealment, failure to disclose a material fact, imprudence, or criminal misconduct. (d) If the commission disapproves of all or part of the proposed revisions and the utility cancels construction of some or all of the facility as a result of the disapproval, the utility may recover through any rate-making vehicle over a reasonable period of time, absent fraud, concealment, failure to disclose a material fact, imprudence, or criminal misconduct, the amount of its actual investment, net of actual salvage value, in the partially completed portion of the facility along with the cost of carrying the unamortized balance of that investment to the extent such investment is verified as made pursuant to the certificate. HISTORY: Code 1981, 46-3A-7, enacted by Ga. L. 1991, p. 1696, 1. Title Note
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10 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-8 (2008) 46-3A-8. Recovery of actual cost of certificated long-term power purchase
The approved or actual cost, whichever is less, of purchase of any certificated long-term power purchase shall be recovered in rates by the utility, along with an additional sum as determined by the commission to encourage such purchases. The commission shall consider lost revenues, if any, changed risks, and an equitable sharing of benefits between the utility and its retail customers. HISTORY: Code 1981, 46-3A-8, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
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11 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-9 (2008) 46-3A-9. Recovery of actual cost of certificated demand-side capacity option
The approved or actual cost, whichever is less, of any certificated demand-side capacity option shall be recovered by the utility in rates, along with an additional sum as determined by the commission to encourage the development of such resources. The commission shall consider lost revenues, if any, changed risks, and an equitable sharing of benefits between the utility and its retail customers. HISTORY: Code 1981, 46-3A-9, enacted by Ga. L. 1991, p. 1696, 1. JUDICIAL DECISIONS AUTHORITY OF COMMISSION. --The commission had authority under O.C.G.A. 46-3A-9 to allow a utility to recover the costs of demand-side energy conservation programs and interruptible service credits through riders or surcharges outside of a general rate case and the test year statute. Georgia Power Co. v. Georgia Indus. Group, 214 Ga. App. 196, 447 S.E.2d 118 (1994). Title Note Chapter Note
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12 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4,2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-10 (2008) 46-3A-10. Effect on rates of changed revenues and risks; basis and effect of commission decision
In setting rates for any certificated capacity resource, the commission shall consider changed revenues and changed risks, if any. The commission's decision in any certification, recertification, modification, or construction review proceeding shall be based on evidence of record. Compliance with the provisions of the certificate as approved or modified by the commission shall result in a presumption of prudence. The commission's findings, although subject to judicial review, shall not be subject to relitigation in any other proceeding; provided, however, the issuance of a certificate under this Code section shall not preempt any duly constituted local, state, or federal governmental body or agency from its regulation of environmental or safety matters incidental to construction of electric generating plants. HISTORY: Code 1981, 46-3A-10, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
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13 of 13 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 3A. INTEGRATED RESOURCE PLANNING Go to the Georgia Code Archive Directory O.C.G.A. 46-3A-11 (2008) 46-3A-11. Inapplicability of chapter to providers whose rates not fixed by commission
This chapter shall not apply to any provider of wholesale or retail electric service whose rates are not fixed by the commission. HISTORY: Code 1981, 46-3A-11, enacted by Ga. L. 1991, p. 1696, 1. Title Note Chapter Note
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2 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.01 (2008) 515-3-4-.01 Commission Authority and Scope of Provisions. Amended. (1) Consistent with Official Code of Georgia Annotated (O.C.G.A.) 46-3A (H.B.280), each electricity supplier (hereinafter "utility") in the state of Georgia whose rates are fixed by the Public Service Commission (hereinafter "Commission") shall be required to develop and file for review and approval by the Commission integrated resource plans and applications for certificates and amendments for construction or sale of electric plants, long term power purchases (including purchase or sale of existing power plants), and expenditures for demand-side capacity options as described by these regulations. These regulations establish guidelines for the development and submission of plans and certificate applications and amendments, including the solicitation, evaluation and approval of purchased power as among the potential supply-side options, and provide for the periodic review of each utility's integrated resource plan and capacity resource construction projects and implementation programs. Interim plan monitoring is established through reporting requirements. (2) The Commission will approve the utility's integrated resource plan, approve it subject to stated conditions, approve it with modifications, approve it in part and reject it in part, reject the utility's resource plan as filed, or provide an alternate plan, upon determining, after a hearing is conducted, that this action is in the public interest. (3) Notwithstanding the provisions of paragraphs 515-3-4-.01(2), above, failure to substantially comply with the provisions of this chapter may result in summary rejection of an applicant's plan. Such rejection may be without prejudice to the refiling of the application. (4) These rules shall not be construed to apply to any matters prior to the effective date of O.C.G.A. Section 46-3A. Ga. L. 1878-79 p. 125; 1907 pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705; Public Utility Holding Company Act of 1995, Sec. 32. HISTORY: Original Rule entitled "Commission Authority and Scope of Provisions" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. May 12, 1994; eff. Jun. 1, 1994. AMENDED: F. Oct. 27, 1997; eff. Nov. 16, 1997.
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3 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING
Ga. Comp. R. & Regs. r. 515-3-4-.02 (2008)
515-3-4-.02 Definitions. Amended. (1) Allowance: Authority to emit one ton of sulfur dioxide, as set forth in the Clean Air Act Amendments of 1990 (PL 101-549), at Title IV. (2) Avoided Cost: The cost over a future period to the electric utility of marginal energy and capacity from a utility supply-side resource for which an alternative resource may be substituted. Avoided costs shall be reported by season and time-of-day if variations are sufficient to warrant such time-differentiation. Avoided costs shall be as determined by current Commission policy. (a) The direct avoided cost, for the purposes of developing the integrated resource plan shall consist of: 1. Avoided generating capacity cost, adjusted for transmission and distribution losses and reserve margin requirements; 2. Avoided transmission and distribution system capacity cost; and 3. Avoided energy cost, adjusted for transmission and distribution system losses. (b) The total avoided cost, for use in the societal cost test for the purposes of developing the integrated resource plan shall consist of: 1. The direct avoided cost defined above; 2. Avoided externality costs which have been monetized or considered through an adder (5%) or as otherwise determined by this Commission associated with a utility supply-side resource; and 3. Other avoided costs and benefits which have not been monetized, including an adjustment for risk associated with a utility resource. (3) Capacity Factor: The ratio of the net energy produced by a generating facility to the amount of energy that could have been produced, in the absence of any scheduled or unscheduled outages, in any selected time period. Net capacity factor equals net power generation in the period divided by the product of [number of hours in the period and net dependable capacity], where net power generation is gross station output less in-station electricity consumption. (4) Capacity Resource: An electric plant, a long-term power purchase, or a demand-side capacity option. (5) Clean Air Act Amendments of 1990 (PL 101-549): All titles of the amended Clean Air Act, subsequent rules
Page 2 Ga. Comp. R. & Regs. r. 515-3-4-.02
and amendments, future revisions to the Act, and future federal legislation related to air quality. (6) Cogeneration: Production by a Qualifying Facility of electricity which the utility is required to purchase or in some instances carry over its transmission facilities as defined in and pursuant to the Public Utility Regulatory Policies Act of 1978, at 16 U.S.C. 796. An entity providing electricity from its Qualifying Facility is a cogenerator. (7) Commission: Georgia Public Service Commission. (8) Construction: The clearing of land, excavation, or other substantial activity leading to the operation of an electric plant other than planning, land surveying, land acquisition, subsurface exploration, design work, licensing or other regulatory activity, contracting for construction, or environmental protection measures and activities associated therewith. (9) Customer (or participant) Cost: The incremental cost to the customer (or to any person or entity, other than the utility serving the customer), for a demand-side measure. (10) Demand-Side Capacity Option: A program for the reduction of future electricity requirements the utility's Georgia retail customers would otherwise impose, including, but not limited to energy efficiency and energy management options (together known as demand-side resources), and cogeneration and renewable resource technologies. (Cogeneration and renewable resource technologies are generally included among supply-side resources because they add to the total amount of electrical energy produced by society). (11) Demand-Side Measure: Any hardware, equipment or practice which is installed or instituted for energy efficiency or energy management purposes. (12) Demand-Side Program: A utility program designed to implement demand-side measures. (13) Demand-Side Resource: A resource that reduces the demand for electrical power or energy as a result of applying demand-side programs to implement one or more demand-side measures. (14) Direct Costs: These are costs which are paid directly by the utility, the customer, or a third party and include such items as the cost of demand-side management equipment and programs, fuel and operating and maintenance costs, and generating, transmission, and distribution equipment. (15) Electric Plant: Any facility, or portion of a facility, that produces electricity, or is intended to produce electricity, for a utility's Georgia retail customers. Electric plant includes the realty, ancillary facilities, and associated facilities required to interconnect the electric plant with the bulk power supply system. (16) End-Use: Light, heat, cooling, refrigeration, motor drive, microwave energy, video or audio signal, computer processing, electrolytic process, or other useful work produced by electricity or its substitute. If equivalent energy-related amenity levels and/or productivity are maintained, the end-use service is considered constant for purposes of these regulations. (17) Energy Efficiency: The decrease of power (kilowatt, or "kW") or energy (kilowatt-hour, or "kWh") requirements of participating customers during any selected time period with end-use service held constant. (18) Energy Management: The modification of the time pattern of customer energy usage, with end-use service held constant. (19) Equivalent Availability: The availability of a generating facility in any selected time period, considering both scheduled and unscheduled, partial and full outages. The equivalent availability factor equals the [service hours plus reserve hours minus equivalent derated hours] divided by the number of hours in the period, where service hours are the hours the unit is electrically connected to the load, reserve hours are the hours the unit is shut down for economic
reasons and equivalent derated hours are the number of forced or scheduled derated hours times megawatt reduction divided by the maximum dependable capacity. (20) Exempt Wholesale Generator: Any person determined by the Federal Energy Regulatory Commission to be engaged directly, or indirectly through one or more affiliates as defined in section 2(a)(l 1)(B) of the Public Utility Holding Company Act of 1935, and exclusively in the business of owning and/or operating all or part of one or more eligible electric generating facilities and selling electric energy at wholesale. A person shall be deemed an exempt wholesale generator who complies with the definition of same under section 32(a) of the Public Utility Holding Company Act of 1935. (21) Externalities (or external costs/benefits): Those environmental and social costs or benefits of energy which result from the production, delivery, or reduction in use through efficiency improvements and which are external to the transaction between the supplier (including the supplier of efficiency improvements) and the wholesale (e.g., utility) or retail (e.g., ratepayer) customer. Externalities should be quantified and expressed in monetary terms where possible. Those externalities that cannot be quantified or expressed in monetary terms shall nonetheless be qualitatively considered in the societal cost test to develop resource plans. (22) FERC: Federal Energy Regulatory Commission. (23) Independent Power Producer: A supplier of electricity from an electric plant that is not directly owned and operated by a utility for serving its retail customers, and not a utility operating company that sells electricity as part of an affiliated utility operating company system. Independent power producers include non-utility generators and exempt wholesale generators. (24) Indirect Costs/Benefits: These are costs which result from utility actions but are not paid directly by either the utility or the customers. Indirect costs include such items as the environmental impacts of air pollutant emissions from power plants, land use disruptions from building power plants and transmission lines, and similar generalized costs. Indirect benefits are benefits which result from utility actions but are not received directly by either the utility or the customers. Indirect benefits include consideration of economic developments, increased tax base and similar generalized benefits. (25) Integrated Resource Planning (IRP): A utility resource planning process in which an integrated combination of demand-side and supply-side resources is selected to satisfy future energy service demands in the most economic and reliable manner while balancing the interests of utility customers, utility shareholders and society-at-large. In IRP, all resources reasonably available to reliably meet future energy service demands are considered by the utility on a fair and consistent basis. These options include, but are not limited to: (a) Options that increase the available supply from, or efficiency of, existing utility facilities, such as plant heat-rate improvements, plant refurbishment and life-extension, transmission and distribution system loss reduction; (b) Options that increase the available supply from new utility sources, such as new conventional plants and new advanced technology plants; (c) Options that increase the available supply from utility sources, including power pool purchases; (d) Options that increase the available supply from non-utility sources, such as cogenerators and independent power producers; (e) Options that reduce demands for utility-supplied power and energy through energy efficiency; (f) Options that reduce demands for utility-supplied power and energy through energy management; and
(g) Options that reduce demands for utility-supplied power and energy through use of alternative fuels. (26) Long-Term: Exceeding one year. (27) Long-Term Power Purchase: Any purchase of electric capacity and energy for a period exceeding one year, the principal purpose of which is to supply the requirements of the Georgia retail customers of a utility. Long-term power purchases are one of several supply-side resources. (28) Market Discount Rate: A rate which reflects current customers' after-tax cost of capital. The utility's after-tax cost of capital is one such rate. (29) Net Dependable Capacity: The maximum capacity a generating facility can sustain over a specified period of time, as modified for ambient limitations and less auxiliary loads, as reported to the U.S. Department of Energy on Form IE-411 or its successor. (30) Participant's Test: The economic test which measures the quantifiable benefits and costs to the customer due to participation in a program. (31) Pilot Demand-Side Program: A demand-side program which is implemented on a trial basis by the utility for one or any combination of customer classes for which the demand-side measure, program design, or method of implementation has not yet been proven cost-effective through either the implementation of a pilot program in the utility's service territory or the implementation of a transferrable pilot or full scale program in the service territory of another electric utility. Pilot programs are limited in scope as to tartet population, duration or a combination of these factors. (32) Plan: The integrated resource plan, as defined in O.C.G.A. 46-3A, filed by the utility pursuant to these regulations, to cover the twenty-year forecast period from the year of filing. The plan will contain the utility's electricity demand forecasts, analysis of all capacity resource options, analysis of alternative system configurations, list of assumptions, and supporting data and information. (33) PURPA: The Public Utility Regulatory Policies Act of 1978 including any amendments. (34) Rate Impact Analysis: An analysis of the extent to which unit rates for electricity are altered by the implementation of an alternative system configuration. (35) Rate Impact Measure Test: The economic test which measures the changes in customer rates as a result of changes in utility revenues and operating costs caused by a program. (36) Request for Proposals: A formal written document submitted to potential utility, cogenerator, independent power producer and exempt wholesale generator suppliers, and others seeking proposals to sell supply-side capacity resource(s) in order to supply the requirements of the Georgia retail customers of a utility. (37) Screening Tests: The evaluations used to determine which demand and supply-side resource options are eligible for inclusion in the alternative system configurations. The demand-side screening tests may include the rate impact measure test, utility cost test, the participant's test, the total resource cost test and the societal cost test. The primary test for screening supply-side additions will be based upon the present value of revenue requirement over the life of the resource at varying levels of operation or capacity factor. (38) Societal Cost Test: An analytic test which identifies resources that provide net benefits considering economic, environmental and social factors. A resource option is cost-effective under the societal cost test when present value life cycle benefits exceed present value life cycle costs, evaluated at the utility discount rate. Total benefits equal the total avoided costs multiplied by the energy/capacity supplied by the resource option, plus any resource-specific benefits not
otherwise reflected in the total avoided cost. Total costs equal the total installed cost of the resource option plus its operating costs plus any monetized and non-monetized costs attributable to the option. (39) Supply-Side Resource: A resource which can provide for a supply of electrical energy and/or capacity to the utility. Supply-side resources include supply-side capacity options, supplies from other utilities, cogenerators, renewable resource technologies, or independent third parties via existing or new transmission facilities; and the life extension, upgrading, plant refurbishment, efficiency improvement, or capital additions of existing generation, transmission or distribution facilities of the utility. (40) System Configuration: A set of demand-side resource options, supply-side resource options, or a combination thereof, which is designed to provide electric service needs over the planning period. (41) Total Resource Cost Test: An economic test which measures the "net" costs of a demand-side management program as a resource option based on the total costs of the program, including both the participant's and the utility's cost. (42) Transmission facilities shall be generally defined as those having the following general characteristics: (a) Transmission facilities are generally network in nature and are interconnected with other transmission systems; (b) Power generally flows through a transmission system; (c) Network transmission systems serve both native load and external markets through interconnecting with other transmission systems; (d) Power flowing on a transmission system may be consumed over a diverse geographic area; and (e) Transmission shall be at voltage levels as prescribed by the FERC. (43) Utility: Any electric supplier whose rates are fixed by the Commission. (44) Utility Enterprise: A utility, its parent holding company and affiliated companies. (45) Utility Cost Test: An analytic test which considers only the direct utility economics of resource options. A resource option is cost effective under the utility cost test when present value life cycle benefits exceed present value life cycle costs, evaluated at a market discount rate. Direct benefits equal the direct avoided costs multiplied by the energy/capacity supplied by the resource option. Direct costs equal the utility cost of installing the resource option plus the utility's operating costs. Ga. L. 1878-79 p. 125; 1907; pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705, 16 U.S.C. Seca. 791, 796; 15 U.S.C. Secs. 79 et seq., Public Utility Holding Company Act of 1935 Sec. 32. HISTORY: Original Rule entitled "Definitions" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. May 12, 1994; eff. Jun. 1, 1994. AMENDED: F. Oct. 27, 1997; eff. Nov. 16, 1997.
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4 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.03 (2008) 515-3-4-.03 Energy and Demand Forecasting Requirements. Amended. (1) Time Frame of Analysis. (a) Historic Data. Energy and demand forecasts shall utilize and report historic data from the three years preceding the filing year when such historic data are available. (b) Forecast period. All energy and demand forecasts shall be performed for each year of the twenty-year period beginning with the filing year. (2) Contents of Energy and Demand Forecasts. (a) Characteristics. The forecasts specified below shall be weather normalized. The methodologies and processes used to normalize for weather shall be fully described and justifiable. (b) The load forecast shall include and report the following items for each historic and forecast years including: first, the jurisdictional portion of each utility; second, the utility including sales to Georgia partial requirements and full requirements wholesale, if applicable; and third, the utility including all Georgia retail and wholesale loads for which the utility has planning responsibility, if applicable: 1. The total annual energy consumption for electricity for the utility and for each of the utility's customer classes; 2. The total monthly energy consumption for the utility and for each of the utility's aggregate customer classes, for the most recent three years of history and the first three years of the forecast period; 3. The summer, winter and annual peak demands for each of the customer classes; 4. The monthly coincident and non-coincident peak demands for each of the customer classes, for the most recent three years of history and the first three years of the forecast period; 5. Annual load factor; and 6. Edison Electric Institute load data for the most recent three years, supplied both in hard copy and on a computer disk in ASCII format. (c) Analysis and Documentation of Peak Demand and Energy Forecasts. The Forecast documentation shall be the utility's standard forecast documentation which outlines the rationale and pertinent factors used for the utility's own planning purposes. The historic data and forecast of peak demand and energy usage shall include, and shall separately
identify and describe the impact on peak demand and energy usage of the following load requirements and resources: 1. Utility demand-side programs which were implemented before preparing the plan under consideration; 2. Existing government-sponsored or mandated demand-side programs; 3. Price-induced substitution of alternative fuels for electricity and vice versa; 4. Actual and expected interruptible demand, including number of customers and firm capacity contracted for interruption from each customer, and, for historic years, the amount of interruptible demand which was actually interrupted; 5. Self-generation and cogeneration by existing and future customers, including the number of customers with such capacity, their total capacity rating and, where applicable, the capacity and energy they are contracted to provide; and 6. Transmission and distribution losses. (d) Evaluation of Previous Forecasts. Each utility plan shall contain an evaluation of the previous forecast. The evaluation must assess the accuracy of the previous forecast(s), attempt to explain the deviation between forecasted and actual energy and demand, and describe revisions to subsequent methodologies and assumptions utilized to correct for potential deviations, as appropriate. (3) Forecasting Methodology. (a) Forecasting Methodology and Determinants. Utility forecasts used in the integrated resource plan filing shall be based on desegregated end-use methods or some other comparable forecasting methodology. The forecast of energy and demand shall identify and describe the significant determinants used in forecasting future peak demand and energy usage. In addition to end-use specifications, each forecast should address the following factors influencing peak demand and energy usage, where appropriate: 1. Demographics, including population, number of households, household type (e.g., single versus multi-family), employment, and income; 2. Economic conditions, including gross product of the service area; 3. Price of electricity and price elasticity of demand for electricity; 4. The substitution of electricity for and with competing fuels in end-uses, including the rates of penetration and saturation of the market of those end-uses; 5. The future price of competing end-use fuels; 6. Behavioral factors which affect energy use by customers; 7. Energy policies of the state and federal government affecting energy use, both existing and reasonably anticipated; and 8. Any other factors deemed relevant. (b) Each utility energy and demand forecast shall include detailed descriptions of the source of all determinants upon which it relies and shall document and fully justify the procedure by which the determinants were incorporated into the peak demand and energy usage forecasts. The determinants used in forecasting energy and demand must be consistent with and integrated into the different components of the forecast;
(c) Data Requirements. Utility energy and demand forecasts shall be based on the best available data. Where reliable data are not available, estimates should be used and justified. Each utility shall develop a data base of electricity consumption patterns by customer class and by end-use where applicable (e.g., classes for which end-use data have been collected within the most recent five years). When using end-use forecasting methodologies, each utility shall submit the most current data available on end-use appliance penetration and saturation rates and end-use electricity consumption patterns. Each forecast shall include a detailed description of data used in making the forecast, an identification of the sources of such data, and a detailed explanation of specific techniques employed for gathering, organizing, adjusting, or interpreting the data; (d) Econometric Forecasting Methods. Where statistical or econometric methods are used in developing forecast inputs or in the forecasting process, analyses of the reasonableness of such methods and models shall be presented, including computer outputs with parameter estimates; and (e) Load research. Each utility shall identify and describe ongoing and planned load research. (4) Sensitivity Analyses and Contingency Planning. (a) Sensitivity to Major Assumptions. The energy and demand forecast shall include an analysis of the sensitivity of results to the major assumptions and estimates used in preparing the forecasts. (b) Sensitivity Planning. Each utility plan must contain a series of demand forecasts sensitivities which represents a reasonable range of electricity sales and demand which its system may be required to serve. The range must include three levels of expected growth based on alternative assumptions of demand determinants, as follows: 1. A base case scenario should be developed, which incorporates all assumptions that are likely to occur. This case shall be used to project revenue requirements, avoided costs, ceiling prices, and resource blocks; 2. A high growth scenario; and 3. A low growth scenario. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705. HISTORY: Original Rule entitled "Energy and Demand Forecasting Requirements" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. Oct. 27, 1997; eff. Nov. 16, 1997.
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5 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.04 (2008) 515-3-4-.04 Identification of Capacity Resources. Amended. (1) Existing Resources. (a) Assessment of Existing Resources. The utility shall describe all existing resources, including existing power purchases, sales and exchanges, demand-side resources, purchases from non-utility sources, purchases from other utilities, cogeneration, standby generation capacity, interruptible service capacity, pooling or coordination agreements that reduce resource requirements, owned or partially-owned generating facilities, and any other supply-side resources. Any projected changes must be documented. The utility shall also describe all resources available to the utility enterprise, to the extent that these resources affect the resources available to the utility; (b) Assessment of Existing Transmission. The utility shall analyze the adequacy of its existing transmission system to determine its capability to serve load over the next ten years, to evaluate the supply-side resource potential of actions to reduce transmission losses, to evaluate the potential impacts of demand-side resources on the transmission network, and to assess the transmission component of the avoided cost; (c) The utility must provide a comprehensive analysis of proposed compliance with Title IV of the Clean Air Act Amendments of 1990; (d) Assessment of the Future Potential of Existing Resources. Each utility shall assess the role of existing demand-side and supply-side resources in meeting future demand requirements. For those resources for which any action other than continued use in its existing condition appears to be cost-effective, the utility shall assess and document the cost and benefit associated with any such action, and justify why such action will or will not be taken. Such assessment with respect to the use of existing supply-side capacity resources must include comparison against the resources offered in response to the utility's Request for Proposals, with the exception of the capacity resources identified in Rule 515-3-4-.04(3)(i); (2) Potential New Electric Plant and New Transmission Facilities. (a) The utility shall identify and fully describe all potential new utility electric plant options and transmission facilities options for meeting future demand. To the extent practicable and economically feasible, the options considered shall include all technologies and designs which are expected to be available within the twenty-year planning period, either on a commercial scale or on a demonstration scale. The utility shall also fully describe all new electric plant and transmission facilities options available to the utility enterprise to the extent that these resources affect supply-side resources available to the utility; (b) The utility shall perform an initial screening utilizing the screening test of all future electric plant options to
eliminate those which, upon preliminary evaluation, are not cost-effective in relationship to other available electric plant options. These cost-benefit analyses shall be provided in the integrated resource plan for each electric plant option. If the utility eliminates any electric plant options, then each such option shall be identified, and the reason for rejection shall be fully explained and justified; and (c) The utility shall submit a comprehensive and detailed bulk transmission plan of the Georgia Integrated Transmission System every three years. The utility shall identify future transmission facilities required to solve the transmission system inadequacies during the next ten years, as identified in 515-3-4-.04(1)(b). The purpose of this analysis is to assure that the transmission network is capable of reliably supporting the loads and resources placed upon it during the next ten years, that costs of the transmission network associated with supply- and demand-side resources are properly considered, that the avoided costs reflect the expected transmission system expansion, and that transmission system loss reduction opportunities are considered as a supply-side resource. Approval or adoption of an integrated resource plan does not constitute approval of transmission facilities for which information is provided under this section. The utility plan shall include at least the following: 1. An Executive Summary containing an overview of the plan, the results, conclusions and recommendations: 2. A Section that details all processes, procedures, guidelines and applicable planning standards used in the development of the plan. 3. A Section that contains a review and analysis of any major outage events in the prior three years, including a discussion of the problem, action taken and any conclusions and recommendations. In addition, a discussion of any significant issues affecting the reliability or adequacy of the transmission system and plans to address them. 4. A Section that summarizes the results of the long-term analyses of the transmission network by year for the next ten years which would include at least the following: i. An overview of the existing integrated transmission system ("ITS") plan for Georgia as a whole and by regions within the State, including interfaces. ii. A ten year study of all regional interfaces and their import and export capabilities as defined in the applicable NERC/SERC guidelines, as well as plans for future interconnections and improvements to existing interconnections. iii. A ten year plan by year with details of all approved budgeted projects including discussions of the problems, alternatives and the final solutions as well as all forecasted projects including discussions of the problems and proposed solutions. Details of all approved budgeted projects shall include at least the following: (1) the expected termination points and length for each new transmission line; (2) identification of existing transmission facilities planned for upgrade, rebuilding or retirement; (3) the expected design voltage, capacity and in-service date for each new, upgraded or rebuilt transmission facility; (4) the approximate cost of each planned expansion or alteration to the transmission network. iv. A list of all transmission projects proposed for the 500 kV, 230 kV and 115 kV systems, by year for the next 10 years. 5. An appendix that contains the Siemens load flow program (PSS/E) data files. The cases to be included are the Summer Contract cases for the 10 year plan period without the proposed fixes and an IDEV file containing the proposed fixes for each year. These files will be provided in electronic format. 6. Public information regarding preferred sites on the transmission system for the interconnection of new generation. (d) The utility shall submit documentation which discusses the following:
1. A general discussion of the decision making process, criteria, and standards employed at the utility as it relates to resource development and acquisition, including, but not limited to a discussion of the utility's organization, the review and approval procedure, and schedule for resource assessment and acquisition plan preparation; 2. A discussion which outlines and justifies the general methodological approach taken for resource assessment and selection; 3. A discussion of the models, methods, data sets and information used by the utility to obtain the results; 4. A discussion of key assumptions and judgments used in the assessment and how those assumptions and judgments were incorporated into the analyses; 5. An identification and discussion of those factors (e.g., environmental laws, inflation, customer acceptance) which are most likely to have the greatest impact on the selected system configuration, and those factors that could prevent the successful implementation of the resource acquisition plan as presented; 6. A discussion and justification of the criteria (e.g., present value of revenue requirements, capital requirements, environmental impacts, flexibility, diversity) used to screen each resource alternative and the criteria used to select the final system configuration presented in the application(s) for certification; 7. A discussion and justification of why each alternative in the screening analysis was either accepted or rejected for further analysis; and why each alternative was or was not included in the final mix of resource options; 8. A discussion and justification of the criteria used in determining the appropriate level of reliability and the required reserve or capacity margin, and a discussion of how this determination has influenced the selection of options; and 9. A discussion of research efforts and/or programs underway or planned which are directed at developing data for future assessments and refinements of analyses. (3) Request for Proposals Procedure for Long-Term New Supply-Side Options. (a) Notwithstanding language contained in any other rule set forth in this chapter, the following terms shall have the following definitions as used in this Utility Rule 515-3-4-.04(3): 1. "Commission" means the Georgia Public Service Commission. 2. "Independent Evaluator" or "IE" means the entity or entities selected pursuant to the RFP Rule to conduct a RFP Process. 3. "IRP" means the filing made by the utility in which it proposes a specific integrated resource plan for adoption/approval by the GPSC. 4. "IRP Plan" means the specific integrated resource plan adopted by the GPSC for a utility, as may be modified from time to time, and which identifies specific supply-side resource blocks to be added by the utility at specific periods in time. 5. "PPA Execution Date" means the date on which a power purchase agreement between the soliciting utility and the winning bidder is executed pursuant to a RFP Process. 6. "RFP" means the notice of a request for proposals distributed to the marketplace by the IE under the RFP Rule identifying the needed resources and the time for providing those resources as set out in the IRP Plan, or any amendment thereto.
7. "RFP Document" shall mean the collection of materials identified in part IV.4 and distributed to interested bidders and pursuant to which the bids shall be submitted and evaluated during the RFP Process. 8. "RFP Process" means the preparation and issuance of a RFP and all the activities subsequently associated therewith that are expected to terminate in the execution of a PPA between the soliciting utility and the winning bidder, and in which an Independent Evaluator is selected pursuant to and performs the functions described in this Proposed RFP/IE Structure. 9. "RFP Rule" means GPSC Rule 515-3-4-.04(3) as amended from time to time, including specifically as amended to adopt the procedures and principles contained in this Proposed RFP/IE Structure. 10. "RFP Service Date" means that date six months in advance of the date the RFP is expected to be issued, as further described in paragraph 11.3. 11. "Staff" means the Commission Staff assigned to participate in the RFP Process. (b) Requirement to use an RFP Process. 1. For each block of required new supply-side resources identified in the IRP, the utility shall propose a schedule for conducting a RFP Process, including specifically the expected date upon which the RFP shall be issued that solicits each such new supply-side resource along with the amount of capacity required. This information shall be considered public information and made available to all potential bidders. 2. The RFP Process shall be utilized for every block of required new supply-side resource identified in the IRP Plan, except as provided in Rule 515-3-4-.04(3)(i). (c) Role and Selection of an Independent Evaluator. 1. The IE will be retained by the soliciting entity under a contract that is acceptable to the Commission and which is consistent with the RFP Rule. In order to help assure independence, the IE shall be selected by and report to the Commission. The soliciting entity (i.e., Georgia Power Company or Savannah Electric and Power Company), the Staff and potential bidders may recommend persons or entities to serve as the IE. The Commission shall establish the minimum qualifications and requirements for an IE and shall select the IE pursuant to the selection process described herein. The role and function of the IE in the RFP Process shall be as set forth herein. 2. Any IE considered by the Commission shall be required to disclose any financial or personal interest involving any soliciting entity or any potential bidder, including but not limited to all substantive assignments for any Southern Company affiliate or any other potential bidder during the preceding five (5) years. The Commission may consider this interest in selecting the IE. The Commission will post on its web site the list of all IE candidates being considered and their statements of interest. The Commission will invite and consider any comments from the soliciting entity and potential bidders concerning the IE candidates prior to the selection of the IE. No IE selected by the Commission may perform services for the soliciting entity or any bidder for a period of two (2) years after the completion of an RFP Process in which the IE served. 3. The IE shall be retained in time to begin service at least six months prior to the expected issuance of the RFP ("RFP Service Date"). Consequently, the IE selection process identified in paragraphs II.2 and 11.3 shall be concluded in time for the IE to begin service as of the RFP Service Date. From the date the IE is selected, no bidder or potential bidder shall have any communication with the IE, Staff, or the soliciting entity pertaining to the RFP, the RFP documents, the RFP process, the'evaluation or the evaluation process or any related subjects except as those communications are specifically allowed by this proposed RFP/IE structure or as are made publicly through the IE's website.
4. The IE will report to the Commission and the Staff. In carrying out its duties, the IE will work in coordination with the Staff and the soliciting entity with regard to the RFP Process as further described herein. 5. If the IE becomes aware of a violation of any requirements of the RFP Process as contained in the RFP Rule, the shall immediately report that violation, together with any recommended remedy, to the Commission. IE 6. The IE's fees shall be funded through reasonable bid fees collected by the soliciting entity. The soliciting entity shall be authorized to collect bid fees up to $ 10,000 per bid to defray its costs of evaluating the bids and, in addition, the soliciting entity may charge each bid an amount which shall be equal the estimated total cost of the IE divided by the anticipated number of bids. To the extent that insufficient funds are collected through this method to pay all of the IE's fees, the soliciting entity shall pay the outstanding cost. Invoices for services rendered by the IE should be sent directly to the Commission for its review. After they are reviewed and approved, the invoices will be forwarded to the soliciting entity for payment, which will be made directly to the IE. (d) Affiliate Communications. 1. Any affiliate of the soliciting entity that intends to submit a bid in response to the RFP, as well as any other persons acting for that affiliate or on its behalf in support of the development and submission of such bid, shall be known collectively as the "Bid Team." 2. The representatives of the soliciting entity that will be evaluating the bids submitted in response to the RFP, as well as any other persons acting for or on behalf of the soliciting entity regarding any aspect of the RFP Process, shall be known collectively as the "Evaluation Team." 3. No later than the RFP Service Date, the Bid Team shall be separately identified and physically segregated from the Evaluation Team for purposes of all activities that are part of the RFP Process. The names and complete titles of each member of the Bid Team and the Evaluation Team shall be reduced to writing and filed with the Commission for use by the IE. 4. There shall be no communications, either directly or indirectly, between the Bid Team and Evaluation Team from the RFP Service Date through the PPA Execution Date regarding any aspect of the RFP Process, except (i) necessary communications as may be made through the IE and (ii) negotiations between the Bid Team and the Evaluation Team for a final PPA in the event and then only after the Bid Team has been selected by the soliciting entity as the winning bid. The Evaluation Team will have no direct or indirect contact or communications with any bidder other than through the IE as described further herein, until such time as a winning bid is selected by the soliciting entity and negotiations for a final PPA have begun. 5. At no time shall any information regarding the RFP Process be shared with any bidder, including the Bid Team, unless the precise same information is shared with all bidders in the same manner and at the same time. 6. On or before the RFP Service Date, each member of the Bid Team shall execute an acknowledgement that he or she agrees to abide by the restrictions and conditions contained in paragraphs III.3 through III.5 above. At the PPA Execution Date, each member of the Bid Team shall execute an acknowledgement that he or she has met the restrictions and conditions contained in paragraph III.3 through III.5 above. These acknowledgements shall be filed with the Commission by the Bid Team within 10 days of their execution. 7. Should any bidder, including the Bid Team, attempt to contact a member of the Evaluation Team directly, such bidder shall be directed to the IE for all information and such communication shall be reported to the IE by the Evaluation Team member. At the RFP Service Date, each Evaluation Team member shall execute an acknowledgement that he or she agrees to abide by the and conditions contained in paragraphs III.3 through 1.5 above and, as of the PPA Execution Date, shall execute an acknowledgement that he or she has met the restrictions and conditions contained in paragraphs 111.3 through 111.5 above. These acknowledgements shall be filed with the Commission by the Evaluation
Team within 10 days of their execution. (e) RFP Structure and Process. 1. Identification of Bidders and Design of RFP. i. The soliciting entity will provide the Staff and the IE with a list of the companies that have submitted proposals in the three most recent solicitations conducted on behalf of the soliciting entity, as well as a list of all potential bidders to whom notice of those prior solicitations was sent. The soliciting entity shall be responsible for preparation of the final list of potential bidders to whom notice of the upcoming solicitation will be sent. ii. The soliciting entity will be responsible for preparing an initial draft of the RFP Document, including RFP procedures, evaluation factors, credit and security obligations, a pro forma power purchase agreement, the inclusion of any "proxy price" agreed to by the Staff and the IE against which the soliciting entity wishes to have the RFP bids tested, and a solicitation schedule. No later than one hundred twenty (120) days prior to the planned issue date of the RFP, the soliciting entity will supply the draft of the RFP Document to the Staff and the IE. These drafts shall be posted on the Commission's website and be accessible through a link established for the use of the IE (the "IE website"). iii. If the soliciting entity wishes to consider an option for full or partial ownership of a self-build option, the utility must submit its construction proposal ("Self-build Proposal") to provide all or part of the capacity requested in the RFP to the IE at the time all other bids are due. Once submitted, the Self-build Proposal may not be modified by the soliciting entity. Provided, however, that in the event that the soliciting entity demonstrates to the satisfaction of the Staff and the IE that the Self-build Proposal contains an error and that correction of the error is in the best interest of customers and will not be harmful to the RFP Process, the soliciting entity may correct the error. Persons who have participated or assisted in the preparation of the Self-build Proposal in any way may not be a member of the Bid Team, nor communicate with the Bid Team during the RFP Process about any aspect of the RFP Process. The soliciting entity's Self-build Proposal must consist of the entire cost to complete the project including the "overnight cost," project capital additions, the Allowance for Funds Used During Construction (AFUDC) and the non-fuel operating and maintenance cost of the proposed self-build facility. The "overnight cost" is the cost to build the plant all at once, or "overnight," without consideration of financing costs. The utility thus may choose to make no commitment to the structure of the construction organization, to the timing of the project, or to its financing costs. iv. The RFP and RFP Document together shall identify all factors to be considered in the evaluation of bids. In addition to the matters specified in Commission Rule 515-3-4-.04(3)(b), the following materials or matters shall be included in either the RFP or RFP Document, as appropriate: I. a pro forma power purchase agreement containing all expected material terms and conditions; II. information on the Southern Company OASIS that will permit each prospective bidder to identify any native load growth transmission service reservation made by or on behalf of the soliciting entity; and III. the solicitation schedule. With respect to item (iv)(I) above, the Commission shall conduct a process beginning at the conclusion of this IRP case, to be concluded within the shortest time practicable, in which all interested parties may participate to develop a pro forma power purchase agreement that will become part of the RFP Document. It is anticipated that the pro-forma power purchase agreement that is part of the RFP Document may be modified from time to time with the consent of both contracting parties in a manner that does not depart from the terms upon which the winning bid was selected. v. The Staff and the IE will critique the initial draft RFP and RFP Document and provide their input to the soliciting entity. The soliciting entity may incorporate changes based on this critique if it so chooses. The initial draft RFP and RFP Document, plus the Staff/IE critique thereof, will be posted on the IE website.
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vi. The IE and Staff, plus the soliciting entity, may conduct at least one public bidders conference to discuss the draft RFP and RFP Document with interested parties, including but not limited to potential bidders. Potential bidders may submit written questions or recommendations to the IE regarding the draft RFP and RFP Document in advance of the bidders' conference. All such questions and recommendations shall be posted on the IE website. The IE shall have no private communication with any potential bidders regarding any aspect of the draft RFP and RFP Document. vii. Based on the input received from potential bidders and other interested parties, and based on their own review of the draft RFP and RFP Document, the Staff and the IE will submit a report to the soliciting entity detailing suggested recommendations for changes to the RFP and RFP Document prior to its issuance. This report shall be provided to the Commission and posted on the IE website for review by potential bidders. viii. The soliciting entity shall submit its final version of the RFP and RFP Document to the Commission for approval or modification. Once approved by the Commission, the final RFP and RFP Document shall be posted on the IE website. At any time after the RFP is issued, through the time the winning bid is selected by the soliciting entity, the schedule for the solicitation may be modified upon mutual agreement among the soliciting entity, the IE and the Staff, or upon approval by the Commission. ix. At the time the content of the RFP is considered for approval, the Commission may determine whether there will a single round of bidding, or whether a "competitive tier and refreshed bid" process will be used. The Commission will consider comments and views of the soliciting entity and any interested party, including potential bidders, on this issue. In the event that the Commission does not expressly determine that a "competitive tier and refreshed bid" process shall be used, there will be only one round of bidding. x. Notwithstanding the foregoing, there shall be a single round of bidding to obtain the next supply-side resource identified in the current IRP case and that block of supply-side resource shall be procured through the RFP Process. 2. Issuance of RFP and Bidder Communications. i. The IE will transmit the final RFP and RFP Document to the bidder list via the IE's website, pursuant to the solicitation schedule contained in the RFP and RFP Document. ii. The only bidder communications permitted prior to submission of bids shall be conducted through the IE. Bidder questions and IE responses shall be posted on the IE website. To the extent such questions and responses contain competitively sensitive information for a particular bidder, this information may be redacted. iii. The soliciting entity may not communicate with any bidder regarding the RFP Process, the content of the RFP and RFP Document, or the substance of any potential response by a bidder to the RFP; provided, however, the soliciting entity shall provide timely, accurate responses to an IE request for information regarding any aspect of the RFP and RFP Document or the RFP Process. iv. Bidders shall submit bids pursuant to the solicitation schedule contained in the RFP and RFP Document. The soliciting entity, Staff, and the IE shall have access to all bids and all supporting documentation submitted by bidders in the course of the RFP Process. v. The soliciting entity shall cause native load growth reservations to be made on the Southern Company OASIS for all bids that are not otherwise capable of using an existing native load growth reservation for evaluation purposes. 3. Evaluation of Responses to RFP. i. The evaluation stage of the RFP Process will proceed on two tracks. On one track, the soliciting entity will evaluate all bids based on a total cost impact analysis such as was applied in the 2005/2006 Georgia RFP (the "TCI Analysis"). The soliciting entity will conduct this track in an appropriate manner, consistent with the principles and
procedures contained in this Proposed RFP/IE Structure. ii. A second track will be conducted by the Staff and the IE. The Staff and IE shall have discretion to utilize whatever they consider the optimum combination of auditing the soliciting entity track and conducting its own independent evaluation in order to evaluate the resource options submitted to the soliciting entity in the RFP Process. The Staff and IE may apply the TCI Analysis as part of conducting their independent evaluation. iii. The soliciting entity, the Staff or the IE may request further information from any bidder regarding its bid. Any communications between the soliciting entity and a bidder in this regard shall be conducted through the IE. The soliciting entity shall be informed of the content of any communications between the Staff/lE and a bidder. Should it be determined necessary by the IE, the soliciting entity and the bidder, conference calls between the soliciting entity and a bidder may be conducted for the sole purpose of clarification and understanding of a particular bid. All conference calls must be initiated by the IE and the IE will be present on each call for its duration. Communications will be conducted on a confidential basis between the IE and the bidder, and may include one face-to-face meeting between the IE, the soliciting entity, and each bidder to discuss the proposal, unless a bidder declines such a meeting. iv. In order to conduct both its independent evaluation function and its auditing function, the IE and the Staff shall have access to all information and resources utilized by the soliciting entity in conducting its TCI Analysis. The soliciting entity shall provide complete and open access to all documents and information utilized by the soliciting entity in its TCI Analysis; and the IE and Staff shall be allowed to actively and contemporaneously monitor all aspects of the soliciting entity evaluation process in the manner they deem appropriate. The soliciting entity shall facilitate this access so that the soliciting entity evaluation process is transparent to the Staff and the IE. The soliciting entity shall have an affirmative responsibility to respond to any request for access or information made by the Staff and/or the IE. To the extent the IE determines that the evaluation processes of the two tracks are yielding different results, the IE shall notify the soliciting entity and attempt to identify the reasons for the differences as early as practicable. Where practicable, the soliciting entity and the IE shall attempt to reconcile such differences. v. The Staff and the IE, as well as the soliciting entity, may rely on the Southern Services Transmission Planning ("SSTP") group to conduct all necessary transmission analyses concerning bids received. SSTP analyses provided to the Staff and the IE shall be equivalent in quality and content as that provided to the soliciting entity. No bidder, including any bidder that is an affiliate of the soliciting entity, shall communicate with the SSTP group during the course of the RFP Process regarding any aspect of the RFP. 4. Bidding Stages. i. If the Commission has directed that a "competitive tier and refreshed bid" process be used, the IE and the soliciting entity will follow steps 22 through 26 in the evaluation process. ii. The soliciting entity shall perform its evaluation of the bids and shall develop a competitive tier that narrows the bids to a manageable number that the soliciting entity believes are the best competitive options ("soliciting entity Competitive Tier"). The Staff and the IE also shall perform their independent evaluation of the bids and develop their own competitive tier that narrows the bids to a manageable number that the Staff and the IE believe are the best competitive options ("Staff/IE Competitive Tier"). iii. The soliciting entity shall provide the soliciting entity Competitive Tier to the Staff and the IE. Simultaneously, the Staff and the IE shall provide the StafflIE Competitive Tier to the soliciting entity. iv. If the soliciting entity Competitive Tier and the Staff/lE Competitive Tier are identical, the IE shall notify all companies on the Competitive Tier lists that they have the opportunity to better their bids as final best offers. The IE shall post the Competitive Tier list on the IE website showing each bidder's relative rank and the total evaluated cost of each bid. Each bidder on this list will be identified blindly so each bidder knows the identity of the bidder for only its bid but sees its rank compared to those of all other anonymous bidders who made the Competitive Tier.
v. If there are differences between the soliciting entity Competitive Tier and the Staff/IE Competitive Tier, the soliciting entity, the Staff, and the IE shall meet to try to resolve such differences in order to agree on a single Competitive Tier list. To the extent that such agreement cannot be reached, the IE shall notify all parties on each list that they have the opportunity to better their bids as final best offers. The IE shall post the combined Competitive Tier list on the IE website showing each bidder's relative rank and the total evaluated cost of each bid. Each bidder on this list will be identified blindly so each bidder knows the identity of the bidder for only its bid but sees its rank compared to those of all other anonymous bidders who made the Competitive Tier. vi. The refreshed "better" bids/final best offers shall be evaluated independently by: (1) the soliciting entity; and (2) the Staff and the IE, in each case consistent with the process outlined above for initial bids. 5. Certification of Resource(s). i. After it has completed its evaluation, and pursuant to the RFP schedule, the soliciting entity shall notify the Staff and the IE of which resource(s) the soliciting entity has selected to win the bid. ii. The Staff and the IE shall notify the soliciting entity whether they agree with the determination by the soliciting entity. The Staff/IE shall also notify the soliciting entity of the results of their independent evaluation. iii. If the Staff and IE do not agree with the selection made by the soliciting entity, they shall meet to discuss the differences in their selections. iv. The soliciting entity is responsible for determining which resource(s) it will submit to the Commission for certification. The soliciting entity may consider the Staff/IE evaluation in making its decision, but the soliciting entity remains ultimately responsible for the selection. v. Based on the pro-forma PPA included in the RFP Document, the soliciting entity may negotiate a final PPA with the bidder for each resource it has selected so that the Commission may consider the exact terms under which the resource will be certified. Any such PPA shall be expressly conditioned on the final decision of the Commission in the certification proceeding. If the soliciting entity conducts such negotiations, the IE and the Staff shall have the right, but not the obligation, to attend any and all negotiating sessions for the purpose of monitoring them. In the alternative, the soliciting entity may wait until the certification proceedings are complete to begin negotiations with the bidder for each selected resource based on the pro-forma PPA included in the RFP Document. vi. The soliciting entity shall file with the Commission a request for certification of the resource(s) chosen by the soliciting entity. vii. The Staff and the IE shall participate in the certification proceeding and testify regarding: (1) their independent evaluation of whether the resource selected by the soliciting entity should be selected and if not, which resource(s) in their view should be selected as a result of the RFP process; and (2) whether the soliciting entity conducted the RFP process in a fair and impartial manner. viii. The Commission will conduct the certification proceeding and may take any actions it deems appropriate as allowed by law. ix. If the soliciting entity has not yet negotiated a specific PPA prior to the certification, upon approval of PPA award recommendations by the Commission, the soliciting entity will proceed to negotiate or finalize appropriate contractual arrangements consistent with the approved award(s). The IE and the Staff shall have the right, but not the obligation, to attend any and all negotiating sessions for the purpose of monitoring them. The soliciting entity will make a compliance filing once the PPA is executed and the IE and the Staff will report to the Commission their opinion as to whether the PPA as executed complies with the Commission's certification order.
x. The soliciting entity will maintain a complete record of all materials developed for, generated during, or used in the RFP Process for (3) three years beyond the date of certification of the selected proposal(s), including any such materials prepared and/or used by the IE, as well as hard copies or electronically stored copies of all materials and exchanges posted on the IE's website. xi. The IE will enter into an appropriate agreement pertaining to the disclosure and use of any models, analytical tools, data, or other materials of a confidential or proprietary nature that are provided or made available by the soliciting entity in conjunction with the RFP Process. (f) The only exceptions from the requirement to procure supply-side capacity through competitive bidding shall be the following: 1. Purchases from Qualifying Facilities (30 MW or less) as required by 16 U.S.C. Section 796; 2. Repowering, life extension or efficiency improvement of an existing generating plant that does not require significant capital investment; 3. Supply-side capacity resources of extraordinary advantage that require immediate action, as demonstrated in a joint petition for certification by the utility and, where applicable, the potential provider; 4. Modification to comply with environmental regulatory requirements; and 5. Any supply-side resource that would provide power at a capacity level of 30 MW or less. 6. The Commission shall expressly consider in each IRP, and make a determination in each IRP Plan, whether to exclude from the RFP Process any new supply-side resources identified in the soliciting entity's approved IRP Plan; and 7. It is the Commission policy that investor-owned electric utilities under its regulation shall maintain a minimum percentage of their capacity as "self-owned" rate-based assets. Such percentage shall be set by Commission order and may be changed from time to time. In those situations in which the soliciting utility is nearing or finds that it would fall below this minimum percentage level, the soliciting utility shall inform the Commission of this eventuality in advance of the RFP Process at which time the Commission, in its discretion, may suspend these rules and provide guidance to the soliciting utility as to how it should proceed. At the time when the utility decides to consider one of these options as an exception to the RFP solicitation requirement of Rule 515-3-4-.04(3)(f), the utility must so notify the Commission through an informational filing. The informational filing shall not constitute a certificate application for the resource option being considered, although an application is required if such a resource is selected. (g) If the utility selects a purchase option, it must either include in the proposed contract each of the following four provisions, or show as a part of its resulting certificate application why other benefits of the proposed purchase warrant the Commission's approval: 1. A "regulatory out" clause written in terms acceptable to the contracting parties; 2. A "take-and-pay" provision that the utility will pay the variable charges associated with energy generated by the seller's facility only when it actually purchases that energy. It will pay capacity charges only when the seller's unit is effectively available for service, subject to appropriate contractual provisions regarding routine maintenance. "Take-or-pay" provisions, under which the utility would be committed to pay for power regardless of the seller's performance, will not be approved; 3. Security deposits to ensure that if the seller's facility fails to produce power, the utility is covered such as for the extra costs of purchasing or generating replacement power. The parties should negotiate the form of such deposits such
as whether they are separate or joined with general deposits securing contract performance generally; and 4. An option for the utility to purchase the seller's facility if for any reason the seller is unwilling or unable to meet its contractual obligations after a reasonable opportunity for cure. The contract should allow the utility to submit a price offer, or to have a right of first refusal to match an outstanding bona fide offer. The contract should also specify that the seller may not force the utility to undertake such a purchase of the facility; that the utility may, without waiving any other contract rights, elect to operate and maintain the facility if the seller fails to operate and maintain the facility after a reasonable opportunity for cure; and that the seller may not sell its facility or delegate its contractual obligations without notice to and consent of the utility, which consent shall not be unreasonably withheld. The utility must provide an informational notification to the Commission if it elects to operate and maintain the facility, if it elects to purchase the facility, if the seller sells the facility to a third party, or if the seller delegates its contractual obligations to a third party. (h) In conducting evaluation of the bids received in the RFP process, the utility shall not: 1. add any adjustments on the basis of expected impacts to the utility's cost of capital; and 2. impose a penalty on the price of purchased power or discount on the cost of utility self-generation on the basis of reliability of purchased power as part of the utility's resource mix. These requirements are without prejudice to the utility at its option also performing evaluations taking into account all aspects of cost and risk it believes appropriate as a matter of information for the Commission for case-by-case review during resulting certificate application proceedings. (4) Potential New Demand-Side Resources. (a) Demand-side Resource Assessment and Initial Cost Screening: 1. Assessing Demand-Side Measures. A comprehensive range of demand-side measures shall be evaluated for each customer segment, and the utility shall compile a list of measures based upon an inventory of end-use devices and consumption patterns developed for energy and demand forecasting. For each DSM measure included on this list, the applicant shall provide the following information: (i) A brief description of the measure; (ii) Measure costs and basis for costs; (iii) Measure kW and kWh load impacts and associated avoided costs; (iv) Measure useful life; (v) Forecast of market potential; (vi) Current saturation of the measure; (vii) Assumptions on participant benefits, if any, other than electricity savings; and (viii) Any other supporting data deem pertinent by the utility. 2. Screening. The utility shall screen all demand-side measure utilizing the fate impact measure test, the participant's test, the total resource cost test and the societal cost test. The utility shall perform a final screening of demand-side programs based on current Commission policy.
(i) Program administrative costs shall not be included in the total cost for the initial screening of the measure because programs have yet to be designed. After programs are designed, program administrative costs are estimated and included in subsequent screening of demand-side programs; (ii) Program costs include the participant's direct cost of a demand-side measure, the utility's direct cost of a demand-side measure, and the utility's administrative cost for developing and implementing the demand-side measure. Participant's costs are incremental costs and include only those costs which would not have been incurred but for participation in the program; (iii) Utility estimates of these costs and benefits should, to the extent practicable, be evaluated on the same basis as electric supply-side resources; 3. Measure elimination. Those measures which fail the Total Resource Cost test shall be eliminated from program consideration. If the utility eliminates any demand-side measures, each such measure shall be identified, and the reason for rejection shall be fully explained. (b) Development of Program Design for Measures Passing Initial Screening: 1. All demand-side measures which passed the Total Resource Cost test may be incorporated into one or more demand-side programs, taking into account the program administrative costs and interactions between measures; and 2. Programs should pass the final screening test and be designed as either full scale or pilot programs. Authority O.C.G.A. Secs. 46-2-30. History. Original Rule entitled "Identification of Capacity Resources" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. Amended: F. May 12, 1994; eff. June 1, 1984. Amended: F. Oct. 27, 1997; eff. Nov. 16, 1997. Amended: F. Oct. 6, 2004; eff. Oct. 26, 2004. Amended: F. Apr. 14, 2006; eff. May 4, 2006. Amended: F. Dec. 11, 2007; eff. Dec. 31, 2007.
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6 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.05 (2008) 515-3-4-.05 Development of Integrated Resource Plan. (1) Development of Integrated Resource Plans. (a) Each utility shall develop a base case integrated resource plan based on the most economic and reliable combination of potential demand and supply-side resources, to meet the needs identified by the base case demand forecast scenario. The overall objective of the plan should be based on current Commission policy concerning minimizing customer bills, minimizing overall rates and maximizing net societal benefit. All potential resources which were identified and described as required in Rule 515-3-4-.04, and which were not excluded by the appropriate screening tests and where applicable to the Request for Proposal process, shall be considered for inclusion in the utility's integrated resource plan; (b) The utility shall provide the following information for its integrated resource plan: 1. The utilities program for meeting the requirements shown in its demand and energy forecast in an economic and reliable manner. The utilities's analysis shall be for all capacity resources options, including both demand-side and supply-side options, and set forth the utilities assumptions and conclusions with respect to the effect of each capacity resource option on the future cost and reliability of electric service. These analyses shall be consistent with analyses required by Rule 515-3-4-.04; 2. A detailed projection of the utilities electric demand and energy forecast for at least a 20-year period as required by Rule 515-3-4-.03(b); 3. The size and type of facilities which are expected to be owned or operated in whole or in part or to be removed from service as specifically required by Rule 515-3-4-.04; 4. Practical alternatives to the fuel type and method of generation of the proposed electric generating facilities and set forth in detail the reasons for selecting the fuel type and method of generation; 5. A statement of the estimated impact of proposed and alternative generating plants ont he environment and the means by which potential adverse impacts will be avoided or minimized; 6. An adequate demonstration of the economic, environmental, and other benefits to the state and to customers of the utility, associated with the possible measures and sources of supply including; improvements in energy efficiency; pooling of power; purchases of power from neighboring states; facilities which operate on alternative sources on energy; facilities which operate on the principal of cogeneration or hydro-generation; and other generation facilities and demand-side options;
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7. A description of the utility's relationship to other utilities in regioinal associations, power pools, and networks; 8. An identification and description of all major research projects and programs which will continue or commence in the succeeding three years and set forth the reasons for selecting specific areas of research; 9. Identify and describe existing and planned programs and policies to discourage inefficient and excessive use of power; 10. Net present value of the revenue requirement, including all direct utility costs associated with the resource to measure economics of utility service; 11. Net present value of the participant's direct costs; 12. Impact on the utility system and its customers, including nonprice criteria such as operating performance of the resource, and ability to meet energy service needs of customers; and 13. Impact on utility transmission and distribution system requirements, including additional long-term facilities and operating procedures required. (c) The utility shall describe the criteria used in developing its integrated resource plan; and (d) The utility shall conduct an analysis of the sensitivity of all major assumptions and estimates used in its integrated resource plan. This analysis shall at a minimum include: 1. Forecast of load; 2. In-service dates of supply and demand resources; 3. Unit availability; 4. Fuel prices; 5. Inflation in plant construction costs and costs of capital; 6. Availability and costs of purchased power; 7. Pending federal or state legislation or regulation; and 8. Rate Impact Analysis. (2) Power Pooling and Coordination. (a) The utility will document how its plan, subject to FERC requirements has taken, advantage of the economic, environmental, and other benefits to the state and to customers of the utility associated with cooperative planning and coordination of pooling of power; and (b) The utility shall describe and justify its reserve margin requirement for the planning period, and set forth the method used to determine the appropriate reserve margin. (3) Financial Information. (a) The financial assumptions and models used in the plan shall be described. The plan shall include at a minimum the following financial information, together with supporting documentation and justification:
1. The general rate of inflation;

2. The AFUDC rates used in the plan; 3. The cost of capital rates used in the plan (debt, equity, and weighted) and the assumed capital structure; 4. The discount rates used in the calculations to determine present worth; 5. The tax rates used in the plan; 6. Present worth of revenue requirements for the plan; 7. Nominal revenue requirements by year; 8. Average system rates per kWh by year; and 9. An overall assessment of the business and financial risks associated with the plan including the identification of appropriate financial measures by year. (4) Commission Determination. The Commission shall determine which combinations of resource options passing the screening test best serve the public interest considering economics, safety, reliability, flexibility, risk, equity among ratepayers and classes, customer bills, externalities and other factors the Commission deems appropriate. (5) The Plan. Every six months after the approval of the integrated resource plan, the utility shall submit to the Commission and other parties to the proceeding a progress report of the actions taken and expenditures incurred to implement the plan. This report shall compare the expenditures budgeted and incurred, the actions proposed and taken, and explain any significant deviations from the utility's plan. If the utility has not complied with a specific provision of its most recently approved plan, the utility should include in its report an explanation of why it has not yet complied with the provision in question. This explanation should also include the utility intended actions over the next six-month period with respect to this provision. Any party of record may request the Commission hold a hearing on the report. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705. HISTORY: Original Rule entitled "Development of Integrated Resource Plan" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. May 12, 1994; eff. Jun. 1, 1994. AMENDED: F. Oct. 27, 1997; eff. Nov. 16, 1997.
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7 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r.515-3-4-.06 (2008) 515-3-4-.06 Integrated Resource Plan Filing Requirements and Procedures. Amended. (1) On or before January 31, 1992, and every three years thereafter, each utility shall file a twenty year integrated resource plan with the Commission (twenty-five copies) and an application for approval of that plan. The application for review and approval of the plan shall clearly identify: (a) The name of the applicant(s) and address(es) of the principal place of business of the applicant; (b) The name, title, address, voice phone, and facsimile phone number of the person authorized to receive notices and communications with respect to the application; (c) The location(s) that the public may inspect a copy of the application; and (d) Requests by the utility that any information utilized in the plan which the utility deems trade secret be filed in accordance with the Commission's Trade Secret Rule 515-3-1-.11. (2) Copies of the executive summary and technical volumes shall be made available by the utility for public inspection at its region offices located throughout the state; (3) Plan Filing: Specific Requirements. Plan filings must contain the following information: (a) Executive Summary. Each utility shall prepare an Executive Summary, separately bound and suitable for distribution to the public, which shall be a non-technical description of the plan. This document shall summarize the contents of the Technical Volume(s). The summary shall include: 1. A brief introduction describing the utility, its existing facilities, purchase power arrangements, demand-side programs, and the purpose of the plan; 2. A description of the utility's relationship to the utility enterprise and to other utilities in regional associations, power pools and networks; 3. The base case forecast growth in peak demand and energy for the next twenty years, with and without utility demand-side programs, and a listing of the economic and demographic assumptions associated with each; 4. A summary of the system configurations proposed to meet expected energy service needs for the next twenty years, clearly showing the demand-side resources and supply-side resources contained in each. For each resource, the utility shall indicate its anticipated timing, magnitude, and cost;
5. A description of the major research projects and programs the utility will continue or commence during the ensuing three year period, and the reasons for their selection; 6. A schedule for the acquisition of data, including planned activities to update and refine the quality of data used in forecasting, and budget for such acquisition; 7. A section describing any plans to acquire new or additional models for forecasting, or resource integration analysis and evaluation; 8. A tabulation of all costs associated with the development of the plan; 9. A tabulation of costs for which the utility will seek recovery and the method and timing of that recovery; and 10. Such other information as the Commission may determine appropriate. (b) Technical Volume(s). Each utility shall prepare Technical volume(s) which shall include: 1.The information required by Rules 515-3-4-.03 through 515-3-4-.05; 2. A description detailing the relationship of the utility to the utility enterprise and to other utilities in regional associations, power pools and networks. The utility shall explain how planning and operation are coordinated among the utilities. The utility shall describe the terms of any contracts or agreements that govern the functioning of the enterprise, associations, power pools or networks; 3. A description of all major research projects and programs which will continue or commence within the next three years after filing the plan; and 4. Any other information as may be required by the Commission. (c) Technical Appendix. A utility's plan must include a technical appendix. The appendix must contain the following: 1. Sufficient detail to enable the technically proficient reader to understand how the plan and its forecasts were prepared and to verify the adequacy and accuracy of the assumptions, data and the methods used in developing the plan; 2. All significant information used in the plan; and 3. Documentation, inputs, and summary outputs for all models and formulas used. (d) Waiver of Information. If, after a good-faith effort, the utility cannot provide the data required by these Rules, the utility must request a waiver, in writing. This request must be filed no less than 60 days prior to the filing of the plan. The utility must publish in appropriate media of mass dissemination that it has applied for a waiver. The request shall include: 1. Reference to the requirement for information that is the subject of the waiver request; 2. An explanation of the reasons the required information was impractical to supply; and 3. Proposed substitute information, if applicable. If no waiver is granted, materials must be filed as required in the Rules. (4) Hearing and Review of Integrated Resource Plans.
(a) Proceedings. The Commission shall commence a hearing within sixty days of receipt of a utility's complete integrated resource plan; (b) Completeness of the Utility Plan. The Commission shall determine whether the utility plan is complete within thirty days following the initial submission of the plan by the utility. The Commission will inform the utility of substantive defects in the content of the plan which would materially affect the Commission's ability to continue the plan review process. If the Commission finds as a matter of fact that the utility plan is not complete, by Order of the Commission the review process may be stayed until the utility has submitted a complete plan. (c) Fees. Within sixty days after receipt of the complete plan, the Commission shall establish a fee therefor and notify the applicant. Upon receipt of the fee from the applicant, the Commission shall continue its review of the plan; and (d) Standard for Approval. Based upon the evidence of record presented at the hearing on the plan, the Commission shall render a decision either approving the plan, approving it subject to stated conditions, approving it with modifications, approving it in part and rejecting it in part, rejecting it as filed, or provide an alternate plan, within one-hundred-twenty days of receipt of fees related to the utility's completed application. A utility's integrated resource plan shall be approved if found to be in the public interest and to substantially comply with these regulations. (5) Amendment of the plan. The utility shall submit an amendment to its plan before it submits its next plan if within the first three years of the approved integrated resource plan (a) It anticipates submitting an application for a certificate to construct or purchase a supply-side capacity resource which was not previously approved as part of the integrated resource plan; (b) It anticipates the need to release an RFP, or make a binding commitment for the acquisition or construction of a demand resource or supply resource excepted from the RFP process, which was not previously approved as part of the integrated resource plan; (c) The basic data used in the formulation of its last approved plan requires significant modification which affects the choice of a resource or use of an RFP which was approved as part of the integrated resource plan; and (d) It finds that other conditions warrant amendment of the plan. The conditions under which such an amendment is sought shall be specifically set forth in the application for amendment. (6) Subsequent Plans. Once a plan has been approved, the Commission may limit the scope of issues it will consider in the review of subsequent plans to those issues directly related to material changes. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705. HISTORY: Original Rule entitled "Integrated Resource Plan Filing Requirements and Procedures" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. May 12, 1994; eff. Jun. 1, 1994. AMENDED: F. Oct. 27, 1997; eff. Nov. 16, 1997.
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8 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.07 (2008) 515-3-4-.07 Supply-Side Resource Certificate Filing Requirements and Procedures. Amended. (1) Certification of Long-Term Supply-Side Resources. The Utility shall file an application for certification of a Supply-Side Resource as required by O.C.G.A. 46-3A with the Commission (twenty-five copies). The application for review and approval of the certificate shall clearly identify: (a) The name of the applicant(s) and address(es) of the principal place of business of the applicant(s); (b) The name, title, address, voice phone, and facsimile phone number of the person authorized to receive notices and communications with respect to the application; (c) The location(s) that the public may inspect a copy of the application; (d) Requests by the utility that any information utilized in the plan which the utility deems trade secret be filed in accordance with the Commission's Trade Secret Rule 515-3-1-.11; and (e) Hearing and Review of Supply-Side Resource Certificate Applications. 1. Proceedings. The Commission shall commence a hearing no sooner than thirty days after receipt of fees related to the utility's completed application for certification of a Supply-Side Resource. A completed application must include all information required by these Rules as appropriate, as well as documentation that all applicable state and federal permits required to complete the project have been secured, or in the event that the permit is unsecurable until an appropriate later phase of project completion, the application process must have been initiated in accordance with applicable federal, state or local statutes; 2. Completeness of the Utility Certificate Application. The Commission shall determine whether the utility certificate application filing is complete within thirty days following the initial submission of the certificate application by the utility. The Commission will inform the utility of substantive defects in the content of the certificate application filing which would materially affect the Commission's ability to continue the certificate application review process. If the Commission finds as a matter of fact that the utility certificate application is not complete, by Order of the Commission the review process may be stayed until the utility has submitted a complete certificate application; 3. Fees. Within sixty days after receipt of the completed application, the Commission shall establish a fee therefor and notify the applicant. Upon receipt of the fee from the applicant, the Commission shall continue its review of the certificate application; 4. Waiver of Information. If, after a good-faith effort, the utility cannot provide the data required by these Rules,
the utility must request a waiver, in writing. This request must be filed no less than 60 days prior to the filing of the certificate application. The utility must publish in appropriate media of mass dissemination that it has applied for a waiver. The request shall include: (i) Reference to the requirement for information that is the subject of the waiver request; (ii) An explanation of the reasons the required information was impractical to supply; and (iii) Proposed substitute information, if applicable; If no waiver is granted, materials must be filed as required in the Rules. 5. Standard for Approval. Based upon the evidence of record presented at the hearing on the application, the Commission shall render a decision either approving the application, approving it subject to stated conditions, approving it in part and rejecting it in part, rejecting it as filed, or providing an alternate capacity resource certification within one hundred eighty days of receipt of fees related to the utility's completed application. A utility's application shall be approved if found to be in the public interest and to substantially comply with these regulations. A utility's application relative to a contract to buy capacity or energy from an exempt wholesale generator that is an affiliate or associate of the applying utility shall not be approved unless the Commission determines: (i) That the Commission has sufficient regulatory authority, resources and access to books and records of the applicant utility and any relevant associate, affiliate or subsidiary company to exercise its duties under this section of the Commission's Rules and under the Energy Policy Act of 1992, Section 711, adding new section 32(k) to the Public Utility Holding Company Act of 1935, 15 U.S.C. 79 et seq.; (ii) That the proposed transaction: (I) Will benefit consumers; (II) Does not violate any State law; (III) Would not provide the exempt wholesale generator any unfair competitive advantage by virtue of its affiliation or association with the electric utility company applicant; and (IV) Is in the public interest. (iii) Reciprocal arrangements among companies that are not affiliates or associate companies of each other that are entered into in order to avoid the provisions of this subparagraph or 32k of the Public Utility Holding Company Act of 1935 as amended are prohibited. (2) Construction of New Electric Plant. (a) The application itself shall contain at a minimum the following information: 1. A statement of how the proposed application is consistent with the most currently approved Integrated Resource Plan (IRP) and RFP (Request for Proposal) process. If a revised IRP is available, it shall also be filed; 2. A cost-benefit analysis covering the estimated useful life of all capacity resource options considered in developing its current integrated resource plan, along with a summary comparison of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the proposed resource is economical and reliable, or justification of the utility's decision to select the self-build construction option as an exception to the RFP requirement pursuant to Rule 515-3-4-.04(3)(i);
3. A description of the resource to include identification of plant size and type with summary level engineering/design specifications. The description should include at a minimum the following: (i) A site selection analysis including alternatives, geological considerations and environmental considerations; (ii) Description of fuel use, both primary and back-up, and provisions for transporting and storing fuel; (iii) Estimated annual costs, in accordance with the breakdown specified in the FERC Uniform System of Accounts, separately identifying the following: (I) Annual depreciation on capital investment; (II) Annual return and income taxes on capital investment; (I) The operation and maintenance (O&M) costs over the life of the facility described as costs which are variable, in current dollars per kWh, with expenses for fuel and other items indicated separately; and costs which are fixed, in current dollars per kW; (IV) Insurance; (V) Waste handling and disposal; and (VI) Property taxes; (iv) The rates of escalation of cost, including: (I) Capital costs; (II) O&M costs which are variable and related to fuel; (III) O&M costs which are variable and unrelated to fuel; and (IV) O&M costs which are fixed. (v) The total annual average cost per kWh at projected loads in current dollars for each year of the plan for the proposed facility; (vi) Equivalent availability factors, including both scheduled and forced outage rates; (vii) Capacity factors for each year in the planning period; (viii) Duty cycle (i.e., baseload, intermediate, or peaking), identifying expected hours per year of operation, number of starts per year, and cycling conditions for each year in the planning period; (ix) Heat rates (efficiency) for various levels of operation; (x) Unit lifetime, both for accounting book purposes and engineering design purposes, with explanations of differences; (xi) Estimated environmental impact, including specific emission, production, or usage data for each of the following categories: (1) Pounds of sulfur oxides per MMBTU;
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(II) Pounds of oxides of nitrogen and nitrous oxides per MMBTU; (III) Pounds of carbon dioxide per MMBTU; (IV) Pounds of volatile organic hydrocarbons per MMBTU; (V) Pounds of carbon monoxide per MMBTU; (VI) Pounds of particulates/air toxics per MMBTU; (VII) Pounds of methane per MMBTU; (VIII) Pounds of chlorofluorocarbons, halogens, and other ozonedepleting substances per MMBTU; (IX) Tons per year of solid waste (ash, scrubber sludge, high- and low-level nuclear waste); (X) Gallons per year of water impacts or use (water input, water output, receiving water impacts; (XI) Tons per year of spent nuclear fuel; (XII) Acres of land use; (XIII) Pounds of hydrogen sulfides per MMBTU; and (XIV) Pounds of ammonia per MMBTU; (xii) Lead time, separately identifying the estimated time required for engineering, permitting and licensing, design, construction and pre-commercial operation date testing; (xiii) Potential socioeconomic impacts such as employment, personal income levels, and the competitiveness and health of the marketplace economy of the state; and (xiv) Any special design features peculiar to this facility. 4. The total cost estimate for the proposed project is to include construction and non-construction related costs incurred through commercial operation. This cost estimate should include but not be limited to the following: (i) Identification of major contracts, including, where known: scope, type, contractor, cost estimate, contractor selection process and selection criteria; (ii) Cost expenditure plan, by year, to include a breakdown of the following areas: planning, licensing, engineering/design, construction, contingency, start-up; (iii) Identification of those costs associated with but not defined as construction costs, including separately all cost incurred to date and to-go costs for each area and/or activity; (iv) AFUDC, Ad Valorem and Sales Tax expenditures by year; (v) Estimated annual capital additions over the life of the resource; (vi) Decommissioning/dismantlement costs; and (vii) Cost breakout of dedicated transmission and distribution facilities and a statement as to whether or not such costs are included in Rule 515-3-4-.07(2)(a)4(i) through (v) above.
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5. Where available, a cost comparison of projects similar by type/design and capacity completed in the U.S. during the past five years. Include commercial operation date, actual completion cost, and current dollar equivalent with accompanying adjustment assumptions. Identify any major design differences; 6. The construction and non-construction activities schedule in both milestone summary form and in as much detail as has been used in developing the total cost estimate of the supply-side resource; 7. A formal Critical Path schedule shall be submitted showing major activities on the critical path and near-critical path activities with their sensitivity to the critical path; 8. As part of the schedule, provide lead times for major procurement items (turbines, generators, specialty items, etc.) and sensitivity of schedule to variations in duration of major tasks; 9. A description of the legal relationship between the utility and major vendors, including any affiliate relationship(s); and 10. Any other information the Commission deems necessary. (b) Construction Monitoring. The utility shall file such information periodically as specified by the Commission to produce an accurate, ongoing evaluation of management decisions, methods, schedules, budget and cost in order to verify and approve expenditures made pursuant to the certificate; or to approve, disapprove, or modify any proposed certificate amendments, including the following: 1. The information should include sufficient data to confirm that standards of public convenience and necessity are being met in an economic and reliable manner; 2. Data provided to allow monitoring of a supply-side construction project shall include: (i) Actual project expenditures and a comparison of actual to budgeted expenditures with an explanation of variances in excess of 5 percent or other tolerance as specified by the Commission. In addition, a forecast of the completed cost of the project should be provided and any variance between the budgeted cost and the forecast completed cost should be explained; (ii) The status of critical path activities, project milestone events and other significant activities. Status of these activities should include the start date, percent complete and estimated completion date. Significant variances between the existing schedule and the original project schedule should be explained; (iii) The procurement status of significant components. The procurement status should include the date that the purchase order or requisition was placed, the date the component is needed on site and the estimated arrival date. All estimated arrival dates later than the required on site date should be explained; (iv) The status of all required federal, state, and local licenses and permits including the date when the license or permit is needed, the expected date that the license or permit will be received and a discussion of the impact and planned corrective action for any license or permit whose receipt date is estimated to be after its need date; (v) A summary of major contracts including scope of work, estimate of the contract amount used in preparation of the project budget and actual contract amount. Any variance between the estimated and actual contract amount greater than 5 percent (or other tolerance specified by the Commission) shall be fully explained. (vi) The utility shall notify the Commission upon determining that the forecast completed cost of the project differs from the certified cost of the project by more than 5 percent (or other tolerance specified by the commission) or that the projected commercial operation date of the project is later than the commercial operation date submitted in the certification application; and
(vii) Any other relevant documents, data or information requested by the Commission. 3. A utility making application for periodic review of construction must provide documentation that summarizes progress-to-date of the application and compares it to that projected in documentation submitted under Rule 515-3-4-.07(2). The utility, on a periodic basis as specified by the Commission during construction monitoring, must provide written explanations of all variances from planned progress, and an estimate of the ultimate impact of the variance on project cost and completion schedule. No utility may submit an application until previous applications have been disposed of, either through hearing or lapse of time; and 4. Upon commercial operation of the project, completion of the project without commercial operation, or termination of the project, the utility shall within ninety days submit to the Commission a report summarizing the final cost figures for the project. This report shall contain explanations for all cost variations that exceed five percent of the estimates contained in the approved certificate or amendment(s). (3) Sale or Purchase of All or Part of an Existing Plant. The utility shall provide the following information in relation to the sale or purchase of an ownership interest in all or part of an existing plant: (a) The terms of sale or purchase, including cash proceeds and any other non-cash considerations, along with the evaluation of their cash equivalent, and a copy of the contract for the sale or purchase; (b) The construction cost of the property and additions or improvements over the life of the plant; (c) The proposed ratemaking treatment of these costs; (d) Depreciation through the planned date of transfer; (e) The impact on the overall electric power production costs of removing or adding the operating costs associated with the transferred property on the total utility operating costs. This analysis shall include a summary comparison and supporting information of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the proposed purchase or sale is economic and reliable; (f) Relationship and impact of the proposed sale or purchase on the currently approved IRP; (g) Applicable information specified in Rule 515-3-4-.04(1), (2), and (3); (h) A description of the legal relationship between the purchasing and selling entities, including any affiliate relationship(s); and (i) Any other information the Commission deems necessary. (4) Sale or Purchase of All or Part of a Plant Under Construction. The utility shall provide the following information in relation to the sale or purchase of an ownership interest in all or part of a plant under construction: (a) Information on the proceeds of the sale or purchase, and whether the price is fixed independent of the final cost of the total plant, or varies in any manner; (b) Allocation of non-specific hard costs to the portions of the plant being sold and retained; (c) The treatment of soft costs such as corporate overhead, engineering, design, construction management and utility costs during construction; specifically how both prior and future costs will be allocated between the sold and retained portion of the plant; (d) Impact of the sale or purchase on utility operating costs. This analysis shall include a summary comparison and
supporting information of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the proposed purchase or sale is economic and reliable; (e) Applicable information specified in Rule 515-3-4-.04(1), (2), and (3); (f) Relationship and impact of the proposed sale or purchase on the currently approved IRP; (g) A description of the legal relationship between the purchasing and selling entities, including any affiliate relationship(s); (h) A copy of the contract for the sale or purchase; and (i) Any other information the Commission deems necessary. (5) Long-Term Purchase of Capacity or Energy. The utility shall provide the following information in relation to the long-term purchase of capacity or energy: (a) The terms of purchase, including cash proceeds and any other non-cash considerations, along with the evaluation of their cash equivalent, and a copy of the purchase contract; (b) The proposed ratemaking treatment of these costs; (c) The impact on the overall electric power production costs of removing or adding any operating costs associated with the purchase. This analysis shall include a summary comparison and supporting information of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the proposed purchase is economic and reliable; (d) Applicable information specified in Rule 515-3-4-.04(3); (e) Impact of the proposed purchase on the currently approved IRP; (f) A description of the legal relationship between the purchasing and selling entities, including any affiliate relationship(s); (g) The following information shall be filed as part of the certificate application if the utility proposes a contract to purchase electric capacity or energy from an exempt wholesale generator that is an affiliate or associate company of the applying utility: 1. A statement explaining why the applicant believes that the Commission has sufficient regulatory authority, resources and access to books and records of the electric utility company and any relevant associate, affiliate or subsidiary company to exercise its duties under this section of the Commission's Rules and under the Energy Policy Act of 1992, Section 711, adding new section 32(k) to the Public Utility Holding Company Act of 1935, 15 U.S.C. 79 et seq.; 2. A statement why the applicant believes the Commission should determine that the proposed transaction: (i) Will benefit consumers; (ii) Does not violate any State law; (iii) Would not provide the exempt wholesale generator any unfair competitive advantage by virtue of its affiliation or association with the electric utility company applicant; and (iv) Is in the public interest
3. A statement as to whether the approval of any other state utility commission or federal entity is necessary to allow the applicant to enter into the contract, and if so, the status of any application to obtain such approval; and (h) Any other information the Commission deems necessary. (6) Sale or Purchase of a Portion of the Capacity or Energy Output of a Plant Under Construction. The utility shall provide the following information in relation to the sale or purchase of a portion of the capacity or energy output of a plant under construction: (a) Information on the proceeds of the sale or purchase, and whether the price is fixed independent of the final cost of the total plant, or varies in any manner; (b) Allocation of non-specific hard costs to the portions of the plant output, being sold and retained; (c) The treatment of soft costs such as corporate overhead, engineering, design, construction management and utility costs during construction; specifically how both prior and future costs will be allocated between the sold and retained portion of the output of the plant; (d) Impact of the sale or purchase on utility operating costs. This analysis shall include a summary comparison and supporting information of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the proposed purchase or sale is economic and reliable; (e) Applicable information specified in Rule 515-3-4-.04(1), (2), and (3); (f) Relationship and impact of the proposed sale or purchase on the currently approved IRP; (g) A description of the legal relationship between the purchasing and selling entities, including any affiliate relationship(s); (h) A copy of the contract for the sale or purchase; (i) If the applicant proposes purchase of a portion of the capacity or energy output of a plant under construction from an exempt wholesale generator that is an affiliate or associate company of the utility, statements containing the information specified in Rule 515-3-4-.07(5)(g); and (j) Any other information the Commission deems necessary. (7) Any other long-term supply-side resource. The utility shall provide the following information in relation to any other proposed supply-side resource: (a) Information on the nature of the proposed supply-side resource and the costs expected to be incurred in connection therewith, including a copy of any associated contract(s); (b) The accounting allocation of the costs associated with the proposed supply-side resource; (c) The proposed ratemaking treatment of these costs; (d) The impact on the overall electric power production costs of removing or adding any operating costs associated with the supply-side resource. This analysis shall include a summary comparison and supporting information of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the proposed resource is economic and reliable; (e) Applicable information specified in Rule 515-3-4-.04(1), (2), and (3);
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(f) Relationship and impact of the proposed supply-side resource on the currently approved IRP; (g) A description of the legal relationship between the major entities involved with the proposed supply-side resource, including the utility, major vendors or power sellers, customers providing customer-owned or supplied resources, and/or any affiliate relationship; (h) If the proposed supply-side resource involves any payments to be made by the utility directly or indirectly to an exempt wholesale generator that is an affiliate or associate company of the utility, statements containing the information specified in Rule 515-3-4-.07(5)(g); and (i) Any other information the Commission deems necessary. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705, Public Utility Holding Co. Act of 1935, Sec. 32. HISTORY. Original Rule entitled "Filing Requirements for a Supply-Side Resource Certificate" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. May 12, 1994; eff. Jun. 1, 1994. AMENDED: Rule retitled "Supply-Side Resource Certificate Filing Requirements and Procedures" F. Oct. 27, 1997; eff. Nov. 16, 1997.
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9 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.08 (2008) 515-3-4-.08 Supply-Side Resource Certificate Amendment Filing Requirements and Procedures. (1) The Utility shall submit an amended application for certification (as the certificate is described under Rule 515-3-4-.07) in the event that: (a) The construction schedule has significantly changed; (b) The total cost estimate has been revised such that the costs are over the estimates in the approved certificate by more than five percent or some other variation tolerance as specified by the Commission in the approved certificate; (c) The scope of the project has changed; (d) The load forecast has changed sufficiently such that the need for a resource of the type/size previously approved may not be warranted or sufficient; (e) The terms of the purchase contract have or are proposed to be significantly changed, including without limitation substantial changes in the ownership or operation of the plant; (f) The utility proposes to change the contractual arrangements pertaining to the project such that it will make any payments to an exempt wholesale generator that is an affiliate or associate of the utility; (g) Any sufficient change has occurred or is expected to occur in the conditions under which the original certificate was approved. (2) The Utility shall file with the Commission twenty-five copies of the certificate amendment application; (3) The application for review and approval of the certificate amendment shall clearly identify: (a) The name of the applicant(s) and address(es) of the principal place of business of the applicant; (b) The name, title, address, voice phone, and facsimile phone number of the person authorized to receive notices and communications with respect to the application; (c) The location(s) that the public may inspect a copy of the application; and (d) Requests by the utility that any information utilized in the plan which the utility deems trade secret be filed in accordance with the Commission's Trade Secret Rule 515-3-1-.11.
(4) Hearing and Review of Supply-Side Resource Certificate Amendments. (a) Proceedings. The Commission shall commence a hearing no sooner than thirty days after receipt of fees related to the utility's completed certificate amendment application; (b) Completeness of the Utility Certificate Amendment Application. The Commission shall determine whether the utility certificate amendment application filing is complete within thirty days following the initial submission of the certificate amendment application by the utility. The Commission will inform the utility of substantive defects in the content of the certificate amendment application filing which would materially affect the Commission's ability to continue the certificate amendment application review process. If the Commission finds as a matter of fact that the utility certificate amendment application is not complete, by Order of the Commission the review process may be stayed until the utility has submitted a complete certificate amendment application; (c) Fees. Within sixty days after receipt of the complete certificate amendment application, the Commission shall establish a fee therefor and notify the applicant. Upon receipt of the fee from the applicant, the Commission shall continue its review of the certificate amendment application; (d) Waiver of Information. If, after a good-faith effort, the utility cannot provide the data required by these Rules, the utility must request a waiver, in writing. This request must be filed no less than 60 days prior to the filing of the amendment. The utility must publish in appropriate media of mass dissemination that it has applied for a waiver. The request shall include: 1. Reference to the requirement for information that is the subject of the waiver request; 2. An explanation of the reasons the required information was impractical to supply; 3. Proposed substitute information, if applicable; If no waiver is granted, materials must be filed as required in the Rules. (e) Standard for Approval. Based upon the evidence of record presented at hearing on the certificate amendment application, the Commission shall render a decision either approving the certificate amendment, approving it subject to stated conditions, approving it in part and rejecting it in part, rejecting it, or providing an alternate capacity resource certificate amendment within one-hundred eighty days of receipt of fees related to the utility's completed certificate amendment application. A utility's application shall be approved if found to be in the public interest and to substantially comply with these regulations; and, in the case of any amendment pursuant to which the utility would make any payments to an exempt wholesale generator that is an affiliate or associate of the utility, if the Commission determines: 1. That the Commission has sufficient regulatory authority, resources and access to books and records of the utility and any relevant associate, affiliate or subsidiary company to exercise its duties under this section of its Rules and under section 32(k) of the Public Utility Holding Company Act of 1935, as amended; and 2. That the transaction pursuant to which such payments would be made: (i) Will benefit consumers; (ii) Does not violate any State law; (iii) Would not provide the exempt wholesale generator any unfair competitive advantage by virtue of its affiliation or association with the utility; and
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(iv) Is in the public interest. (f) Reciprocal arrangements among companies that are not affiliates or associate companies of each other that are entered into in order to avoid the provisions of this Rule or of section 32(k) of the Public Utility Holding Company Act of 1935, as amended, relating to approval of any transaction involving payments by the utility to an affiliate or associate exempt wholesale generator are prohibited. (5) The amendment application itself shall contain at a minimum the following information: (a) A copy of the originally approved certificate, as well as any already approved amendments; (b) A narrative explanation of the circumstances requiring amendment of the certificate, including a copy of any new or amended contract(s); (c) Updated information, as applicable, regarding the supply-side resource, and its known and reasonably expected effects on the currently approved IRP, as required by Rule 515-3-4-.07; (d) Updated information regarding the progress of construction or implementation, as required by Rule 515-3-4-.07(2)(b); (e) A cost-benefit analysis covering the estimated useful life of the amended resource, along with a summary comparison of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the amended resource is economic and reliable; and (f) A statement showing why the Commission should find that the amendment is in the public interest and substantially complies with these regulations, and, if applicable, should make the determinations specified in subsections (4)(e)(1) and (2) above. Ga. L. 1878-79 p. 125; 1907 pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705; Public Utility Holding Co. Act of 1935, Sec. 32. HISTORY. Original Rule entitled "Filing Requirements for a Supply-Side Resource Certificate Amendment" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. May 12, 1994; eff. Jun. 1, 1994. AMENDED: Rule retitled "Supply-Side Resource Certificate Amendment Filing Requirements and Procedures". F. Oct. 27, 1997; eff. Nov. 16, 1997.
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10 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved.
*** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT ***
TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.09 (2008) 515-3-4-.09 Demand-Side Resource Certificate Filing Requirements and Procedures. Amended. (1) The Utility shall file an application for certification of a demand-side resource as required by O.C.G.A. 46-3A with the Commission (twenty-five copies). The application for review and approval of the certificate shall clearly identify: (a) The name of the applicant(s) and address(es) of the principal place of business of the applicant; (b) The name, title, address, voice phone, and facsimile phone number of the person authorized to receive notices and communications with respect to the application; (c) The location(s) that the public may inspect a copy of the application; and (d) Requests by the utility that any information utilized in the plan which the utility deems trade secret be filed in accordance with the Commission's Trade Secret Rule 515-3-1-.11. (2) Hearing and Review of Demand-Side Resources Certificate Applications. (a) Proceedings. The Commission shall commence a hearing no sooner than thirty days after receipt of fees related to the utility's completed application for certification of a demand-side resource. A completed application must include
all information described in Rule 515-3-4-.04(4) as well as documentation that all applicable state and federal permits
required to complete the project have been secured, or, in the event that the permit is unsecurable until an appropriate later phase of project completion, the application process must have been initiated in accordance with applicable federal, state, or local statutes; (b) Completeness of the Utility Certificate Application. The Commission shall determine whether the utility certificate application filing is complete within thirty days following the initial submission of the certificate application by the utility. The Commission will inform the utility of substantive defects in the content of the certificate application filing which would materially affect the Commission's ability to continue the certificate application review process. If the Commission finds as a matter of fact that the utility certificate application is not complete, by Order of the Commission the review process may be stayed until the utility has submitted a complete certificate application; (c) Fees. Within sixty days after receipt of the completed certificate application, the Commission shall establish a fee therefor and notify the applicant. Upon receipt of the fee from the applicant, the Commission shall continue its review of the certificate application; (d) Waiver of Information. If, after a good-faith effort, the utility cannot provide the data required by these Rules,
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the utility must request a waiver, in writing. This request must be filed no less than 60 days prior to the filing of the certificate application. The utility must publish in appropriate media of mass dissemination that it has applied for a waiver. The request shall include: 1. Reference to the requirement for information that is the subject of the waiver request; 2. An explanation of the reasons the required information was impractical to supply; and 3. Proposed substitute information, if applicable; If no waiver is granted, materials must be filed as required in the Rules. (e) Standard for Approval. Based upon the evidence of record presented at the hearing on the application, the Commission shall render a decision either approving the application, approving it subject to stated conditions, approving it in part and rejecting it in part, rejecting it as filed, or providing an alternate capacity resource certification within one-hundred eighty days of receipt of the fees related to the utility's completed application. A utility's application shall be approved if found to be in the public interest and to substantially comply with these regulations; and (f) Each utility may file annually one application requesting certification of all demand-side resource activities proposed by the utility for implementation during the program year. The Commission approval of the annual consolidated demand-side resource filing will have the same force as approval of the individual component demand-side programs. The Commission encourages this alternative to filing separate certificate applications for each full-scale and pilot demand-side program. (3) The application itself shall contain at a minimum the following information: (a) A statement of how the proposed application is consistent with or affects the most-currently approved Integrated Resource Plan (IRP). If a revised IRP is available, it shall also be filed; (b) If the demand-side resource is a new resource, information must be provided for it that corresponds to information required for demand-side resources in the IRP Rule 515-3-4-.04(4). Information as to how the resource would affect the IRP must also be furnished; (c) A summary description of each program or service to be offered shall include customers and markets targeted, projected market penetration levels, implementation and evaluation schedule, projected capacity and energy savings, participant costs and savings, projected program costs and benefits, data collection activities, process and impact evaluation plans, and expected costs; (d) A cost-benefit analysis based on current Commission policy, covering the estimated useful life of the proposed demand-side resource as well as the useful life of the energy efficiency and energy management measures which comprise the demand-side resource, along with a summary comparison of the benefits and costs of other alternatives considered in the preparation of the applicant's IRP, sufficient to demonstrate that the proposed resource is economic and reliable; and (e) A description of the demand-side resource to include identification of the specific energy efficiency and energy management measures and programs, strategies and type of delivery mechanisms proposed. The description should include at a minimum the information contained in Rule 515-3-4-.04(4), including the following: 1. Resource Assessment and Program Design. Resource assessment and program design must be consistent with Rule 515-3-4-.04(4)(a) and Rule 515-3-4-.04(4)(b); 2. Demand-Side Resource Costs:
.... ... .... ....
(i) Delineation of Program Costs. For each program design, detailed estimates of program costs shall be developed by end-use or program as appropriate. In developing these estimates, the following components of cost shall be separately identified: (I) Expected demand-side resource expenditures by program participants, if any; (II) Expected demand-side resource expenditures by the utility, if any; (III) Expected demand-side resource expenditures by third parties (e.g., Southern Company or energy service company), if any; (IV) Utility administrative expenses for the program that add to the total cost of the demand-side resource(s); (V) Descriptions of demand-side program related contracts, including where known, scope, type, contractor, cost estimate, contractor selection process and criteria; (VI) Cost expenditure plan, by year, to include a breakdown of the following areas: end-use data collection, demand-side program planning, marketing, engineering/design, implementation, start-up, monitoring and evaluation; (VII) Total cost estimate to include all work papers and assumptions, broken out by demand-side measure and program, hardware, incentive payments, administrative costs, major design features, and other related activities; (VIII) In cases where activities (e.g., market research) associated with demand-side programs, also serve other functions, the allocation of costs among those functions, including separately all costs incurred to date and to-go costs for each area and/or activity; (IX) Termination costs; (X) Estimated annual capital costs over the life of the resource; and (XI) The costs of utility educational and informational activities that are focused on demand-side programs, but that do not directly cause demand-side measure implementation must be separately described. (ii) The utility shall provide the design, implementation, monitoring and evaluation activities schedule in milestone summary form; and (iii) The utility shall provide where available, a comparison of existing demand-side programs similar in type or design implemented by the applicant or a utility elsewhere. 3. Projected Effects of Demand-Side Resources. The effects on energy consumption and peak demand of each program design shall be estimated by program; 4. Program Evaluation. Each utility shall file a summary of the process and load impact evaluation plan, concurrently with the development of the programs themselves, to assess the implementation and quantify the impact on energy and capacity use of the demand-side resources. The evaluation plan shall identify the type and timing of the measurement activity used to evaluate each demand-side resource. The evaluation plan shall provide a process by which the results will be used to modify impact estimates for future planning and design of demand-side programs. The plan shall identify procedures to be employed with regard to the following aspects of the evaluation of each program: (i) Establishment of protocols to collect basic data regarding load impact, participation level, utility costs, third party costs, and total costs. Load impact data should be aimed at determining load shape impacts, net program savings, useful life of measures and persistence of savings, including utility actions to optimize market penetration of programs; and
. ... . . ..... .. .. . ... ... ... ........... . . ... . ... ... ... ..
(ii) Comparison of demand patterns of similar participant and nonparticipant groups, and/or use of customer bill analysis, engineering estimates, end-use meter data, or other methods to identify the gross and net impacts of program participation on customers' usage and demand patterns. 5. Demand-Side Resource Implementation Monitoring. The utility shall file monthly data on a quarterly basis, except as indicated otherwise, the following information regarding demand-side programs to enable the monitoring and evaluation of the program. If, upon review of the information submitted in a quarterly implementation monitoring report, the Commission determines that a change in program design, schedule, cost, or evaluation methodology is substantial enough to warrant the utility filing for a demand-side certificate amendment and the utility has not done so, the amendment process described in Rule 515-3-4-.10 shall be initiated. The quarterly report shall include: (i) Sufficient data to confirm that standards of public convenience and necessity are being met in an economic and reliable manner; (ii) Cost/benefit analysis using the screening test under which the program was certified; and (iii) Data pertaining to various implementation factors. The data shall include: (1) Complete documentation of expenditures with comparisons to and calculated variations from original budget, with explanations of variances in excess of five percent (or some other predetermined variation tolerance as specified by the Commission in the approved certificate); (II) A completed schedule showing comparison of planned implementation and completion dates for all significant activities and explanations for major variations in planned vs. actual dates; (III) Notification of any modifications to the program that do not automatically require amendment, including changes to program evaluation methodology; (IV) Major contracts and their scope, in summary form, at such time as they become available; (V) The utility shall notify the Commission immediately upon determining that the cost and/or schedule for any demand-side resource has changed from that included in the approved certificate. Revised cost and schedule estimates shall be provided to the Commission in as much detail as has been developed by the utility; and (VI) Any other relevant documents used by management to evaluate implementation, if requested. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705. HISTORY. Original Rule entitled "Filing Requirements for a Demand-Side Resource Certificate" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: Rule retitled "Demand-Side Resource Certificate Filing Requirements and Procedures". F. Oct. 27, 1997; eff. Nov. 16, 1997.
...........
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Page 1
11 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.10(2008) 515-3-4-.10 Filing Requirements for a Demand-Side Resource Certificate Amendment. Amended. (1) The Utility shall submit an amended application for certification (as the certificate is described under Rule 515-3-4-.09) of a fullscale demand-side program in the event that: (a) The implementation schedule has significantly changed; (b) The total cost estimate has been revised, for reasons other than variances in projected participation levels, such that the costs are over the estimates in the approved certificate by more than five percent or some other variation tolerance as specified by the Commission in the approved certificate; (c) Major program design features have changed; (d) The results obtained through program monitoring, process or impact evaluation indicate a necessary change; (e) The load forecast has changed sufficiently such that the need for a resource of the type/size previously approved may or may not be warranted or sufficient; and (f) Any sufficient change in conditions under which the original certificate was approved. (2) The Utility shall file with the Commission twenty-five copies of the certificate amendment application; (3) The application for review and approval of the certificate amendment shall clearly identify: (a) The name of the applicant(s) and address(es) of the principal place of business of the applicant; (b) The name, title, address, voice phone, and facsimile phone number of the person authorized to receive notices and communications with respect to the application; (c) The location(s) that the public may inspect a copy of the application; and (d) Requests by the utility that any information utilized in the plan which the utility deems trade secret be filed in accordance with the Commission's Trade Secret Rule 515-3-1-. 11. (4) Hearing and Review of Demand-Side Resource Certificate Amendments. (a) Proceedings. The Commission shall commence a hearing within no sooner than thirty days after receipt of fees related to a utility's completed certificate amendment application;
. ........... ........ .. .. .................... .
(b) Completeness of the Utility Certificate Amendment Application. The Commission shall determine whether the utility certificate amendment application filing is complete within thirty days following the initial submission of the certificate amendment application by the utility. The Commission will inform the utility of substantive defects in the content of the certificate amendment application filing which would materially affect the Commission's ability to continue the certificate amendment application review process. If the Commission finds as a matter of fact that the utility certificate amendment application is not complete, by Order of the Commission the review process may be stayed until the utility has submitted a complete certificate amendment application; (c) Fees. Within sixty days after receipt of the complete certificate amendment application, the Commission shall establish a fee there-for and notify the applicant. Upon receipt of the fee from the applicant, the Commission shall continue its review of the certificate amendment application; (d) Waiver of Information. If, after a good-faith effort, the utility cannot provide the data required by these Rules, the utility must request a waiver, in writing. This request must be filed no less than 60 days prior to the filing of the amendment. The utility must publish in appropriate media of mass dissemination that it has applied for a waiver. The request shall include: 1. Reference to the requirement for information that is the subject of the waiver request; 2. An explanation of the reasons the required information was impractical to supply; and 3. Proposed substitute information, if applicable; If no waiver is granted, materials must be filed as required in the Rules. (e) Standard for Approval. Based upon the evidence of record presented at the hearing on the certificate amendment application, the Commission shall render a decision either approving the certificate amendment, approving it subject to stated conditions, approving it in part and rejecting it in part, or rejecting it, or providing an alternate capacity resource certificate amendment within one-hundred eighty days of receipt of fees related to the utility's completed certificate amendment application. A utility's certificate amendment shall be approved if found to be in the public interest and to substantially comply with these regulations. (5) The amendment application itself shall contain at a minimum the following information: (a) A statement of how the proposed application is consistent with the most-currently approved Integrated Resource Plan (IRP). If a revised IRP is available, it shall be filed also; (b) A copy of the originally approved certificate, as well as any already approved amendments; (c) A narrative explanation of the circumstances requiring amendment of the certificate; (d) Updated information, as applicable, regarding the demandside resource, as required by Rule 515-3-4-.09; (e) Updated information, as applicable, regarding the progress of construction or implementation, as required by Rule 515-3-4-.09(3)(e)5; and (f) A cost-benefit analysis covering the estimated useful life of the amended demand-side resource as well as the useful life of the energy efficiency and energy management measures which comprise the demand-side resource, along with a summary comparison of the benefits and costs of other alternatives considered in the preparation of the applicants IRP, sufficient to demonstrate that the amended resource is economic and reliable. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705.
...
. .. . . . .... .. ........ . ..... . ... . .. .. .
.. .. .
HISTORY. Original Rule entitled "Filing Requirements for a Demand-Side Resource Certificate Amendment" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. Oct. 27, 1997; eff Nov. 16, 1997.
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.. ....
Page 1
12 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.11 (2008) 515-3-4-.11 Cost Recovery and Financial Incentives. Amended. (1) Recovery of the costs of developing an integrated resource plan or an amendment thereto. (a) Fees paid by the utility accompanying a plan filing are expressly excluded from cost recovery; and (b) All costs incurred by a utility in developing its plan must be accounted for in its books and records separately from amounts attributable to any of its other activities. All accounts, including subaccounts, must be maintained in such a manner as will allow these costs to be identified readily. (2) Recovery of costs for certificate application and certificate amendments. (a) Fees paid by the utility accompanying a certificate application or an amendment application are excluded from cost recovery unless the application or amendment is approved; and (b) All costs incurred by a utility in developing its certificate application or amendment must be accounted for in its books and records separately from amounts attributable to any of its other activities. All accounts, including subaccounts, must be maintained in such a manner as will allow these costs to be identified readily. (3) Recovery of Certified Costs and Financial Incentive Mechanisms. (a) The certified or actual cost, whichever is less, of purchase of any certificated long-term power purchase shall be recovered in rates by the utility along with the additional sum as determined by the Commission to encourage such purchases. The Commission shall consider lost revenues, if any, changed risks, and an equitable sharing of benefits between the utility and its retail customers; and (b) The certified or actual cost, whichever is less, of any certificated demand-side capacity option shall be recovered by the utility in rates, along with an additional sum, as determined by the Commission to encourage the development of such resources. The Commission shall consider lost revenues, if any, changed risks, and an equitable sharing of benefits between the utility and its retail customers. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705. HISTORY. Original Rule entitled "Cost Recovery and Financial Incentives" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. Oct. 27, 1997; eff. Nov. 16, 1997.
Page 1
13 of 13 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION GENERAL RULES CHAPTER 515-3-4 INTEGRATED RESOURCE PLANNING Ga. Comp. R. & Regs. r. 515-3-4-.12 (2008) 515-3-4-.12 Amendments to Rules and Severability. Amended. (1) These Rules may be amended at any time by the Commission as provided for by the Administrative Procedures Act, O.C.G.A. 50-13-4; and (2) If any provision of this Chapter of the Rules is held invalid, the Commission intends that such invalidity not effect the remaining provisions to the extent that they can be given effect. Ga. L. 1878-79 p. 125; 1907, pp. 72-81; 1922 pp. 142-147; 1975 pp. 404-412; 1991 pp. 1696-1705. HISTORY. Original Rule entitled "Amendments to Rules and Severability" adopted. F. Dec. 10, 1991; eff. Dec. 30, 1991. AMENDED: F. Oct. 27, 1997; eff. Nov. 16, 1997.
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DOE Loan Guarantee Application Appendix H.01: Service Territory Economic Outlook GPC Vogtle Expansion Project
September 2008
NOTICE ON DISCLOSURE AND USE OF DATA The data and information contained on pages 2-8 of this document and any electronic file which hereby forms a part of the Application have been submitted to DOE by Georgia Power Company in confidence and contain trade secrets and proprietary information and meet the criteria for protection from public disclosure in 5 U.S.C. 552(b)(4), 18 U.S.C. 1905, and 10 C.F.R. 1004.11 (f) By way of this notice, the applicant hereby invokes all of the procedural and substantive protections in these provisions of law and other applicable law with respect to this data and information. The data and information shall be used by DOE only for the purpose of evaluating this application under DOE's Loan Guarantee Program under Title XVII of the Energy Policy Act of 2005. If this applicant is issued a loan guarantee under Title XVII of the Energy Policy Act of 2005 as a result of or in connection with the submission of this Application, this data and information shall continue to be claimed as confidential, trade secret, and proprietary unless and until such claim is withdrawn or altered in the final loan guarantee agreement or by other written communication from Georgia Power Company. This restriction does not limit the Government's right to use or disclose data obtained without restriction from any other source.
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DOE Loan Guarantee Application Appendix I - Statutory Provisions Incorporation GPC Vogtle Expansion Project
August 2008
Search - 1 Result - 46-8-334. Purchase, mortgage, transfer, or disposal of capital stock, ... Page 1 of 2
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Search Within original *%5 1 of 1 Book Browse O.C.G.A. 46-8-334 (Copy w/ Cite) O.C.G.A. 46-8-334 GEORGIA CODE Copyright 2007 by The State of Georgia All rights reserved. *** Current through the 2007 Regular Session ***
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TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 8. RAILROAD COMPANIES ARTICLE 12. STREET, SUBURBAN, AND INTERURBAN RAILROADS O.C.G.A. 46-8-334 (2007) 46-8-334. Purchase, mortgage, transfer, or disposal of capital stock, bonds, or other indebtedness; acquisition of property, rights, and franchises By vote of a majority of the outstanding capital stock, any corporation formed under the laws of this state for the purpose of operating by electricity a street railroad, suburban railroad, or interurban railroad, or for the purpose of generating electricity, may guaranty; purchase or otherwise acquire; own; hold; mortgage; pledge; sell; assign; and transfer or otherwise dispose of all of its capital stock, bonds, securities, or other evidence of indebtedness and may issue its bonds and stock in payment thereof. Any electric railroad corporation organized under the laws of this or any adjacent state for the purpose of connecting its railroad, constructed or about to be constructed, with any railroad constructed by any other electric railroad company, or for the purpose of obtaining motive power for its operation, may acquire, by lease, purchase, merger, or consolidation, the property, rights, and franchises of any other electric railroad corporation, or of any corporation formed for the purpose of generating electricity, organized under the laws of this or any adjacent state; and any railroad or electric corporation organized under the laws of this state is authorized in any such case to dispose, in like manner, of its property, rights and franchises. No act shall be deemed authorized under this Code section which is inhibited by any provision of the Constitution of Georgia or by any provision of the Constitution or statutes of the United States, or which has the effect or is intended to have the effect of defeating or lessening competition or of encouraging monopoly. HISTORY: Ga. L. 1909, p. 163, 1; Ga. L. 1910, p. 95, 1; Civil Code 1910, 2607; Code 1933, 94-1014.
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O.C.G.A. 46-8-335 GEORGIA CODE Copyright 2007 by The State of Georgia All rights reserved. *** Current through the 2007 Regular Session *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 8. RAILROAD COMPANIES ARTICLE 12. STREET, SUBURBAN, AND INTERURBAN RAILROADS O.C.G.A. 46-8-335 (2007) 46-8-335. Time of effectiveness of guaranty or acquisition of stock, property, and franchises; protection of rights of dissenting stockholders (a) No guaranty or acquisition of stock, securities, property, rights, or franchises of any corporation shall become effective under Code Section 46-8-334 until the expiration of 30 days from the authorization of such guaranty or acquisition by the stockholders. (b) If any stockholder who does not vote in favor of such action files with the secretary of the corporation, within 30 days of the authorization by the other stockholders, his written disapproval thereof, no such guaranty or acquisition shall become effective until the ascertainment and payment of the award provided for in this Code section. If such disapproval is so filed, either the dissenting stockholder or the corporation may, within ten days thereafter, apply by petition to the commission, on 15 days' notice, for an adjudication by the commission as to whether the action so authorized is for the public benefit. If the commission does not find that such action is for the public benefit, the guaranty or acquisition shall not become effective unless the consent of all of the other stockholders is given thereto within 30 days after the report of the findings of the commission. If the commission finds that such action is for the public benefit, the value of the stock of the dissenting stockholder, without regard to appreciation or depreciation thereof in consequence of such action, shall be ascertained by a proceeding to be held in the county of the principal office of the corporation and thereafter paid to such dissenting stockholder, all in accordance with Title 22, so far as such title may be applicable; and thereupon the dissenting stockholder shall transfer his stock to the corporation, to be disposed of by the directors or to be retained for the benefit of the remaining stockholders. HISTORY: Ga. L. 1909, p. 163, 2; Civil Code 1910, 2608; Code 1933, 94-1015.
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1 of 1 Book Browse O.C.G.A. 46-8-336 (Copy w/ Cite) 40 O.C.G.A. 46-8-336 GEORGIA CODE Copyright 2007 by The State of Georgia All rights reserved. *** Current through the 2007 Regular Session ***
TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 8. RAILROAD COMPANIES ARTICLE 12. STREET, SUBURBAN, AND INTERURBAN RAILROADS O.C.G.A. 46-8-336 (2007) 46-8-336. Manner of acquiring property, franchises, and rights; nature of rights and privileges of purchasing or consolidated corporation; Secretary of State's certificate as evidence of existence of corporation (a) Before any acquisition under Code Section 46-8-334 of the physical property, rights, and franchises of any corporation shall become effective, the directors of the selling and purchasing corporations shall enter into a joint agreement prescribing the terms and conditions of the transaction; the name by which the purchasing or consolidated corporation shall be known; the number, names, and places of residence of the first directors and the officers thereof (who shall hold their offices until their successors have been chosen or appointed); the number of the shares of the capital stock, whether common or preferred, and the amount or par value of each share thereof, of such purchasing or consolidated corporation; and all such other provisions and details as such first-mentioned directors shall deem necessary to perfect such acquisition. (b) The agreement shall thereafter be considered by the stockholders of each of the corporations. If the agreement is ratified by a vote of a majority of the stock of each of the corporations, that fact shall be certified upon the agreement by the secretaries of the respective corporations, under the seals thereof; and the agreement so adopted, ratified, and certified shall be filed in the office of the Secretary of State. (c) If the Secretary of State is satisfied that Code Sections 46-8-334 and 46-8-335 have been complied with in relation to such acquisition, and that the acquisition is not inhibited by any provision of the Constitution of Georgia or of the Constitution and statutes of the United States, he shall thereupon issue his certificate that said corporations have complied with said Code sections and that such purchasing or consolidated corporation shall thenceforth constitute a corporation by the name provided in the.agreement. (d) After the issuance of the certificate by the Secretary of State, the purchasing or consolidated corporation shall be possessed of all the rights, privileges, powers, and franchises, of both a public and a private nature, and be subject to all the duties and liabilities, debts, and obligations of each of the corporations participating in the agreement; and said certificate of the Secretary of State, or a duplicate thereof duly certified, shall be conclusive evidence of the existence of such corporation in all the courts of this state.
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HISTORY: Ga. L. 1909, p. 163, 3; Civil Code 1910, 2609; Code 1933,
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DOE Loan Guarantee Application Appendix J - Statutory Provisions Issuance of Indebtedness GPC Vogtle Expansion Project
August 2008
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I of 2 DOCUMENTS OFFICIAL CODE OF GEORGIA ANNOTATED Copyright 2008 by The State of Georgia All rights reserved. *** Current Through the 2008 Regular Session *** *** Annotations Current Through April 4, 2008 *** TITLE 46. PUBLIC UTILITIES AND PUBLIC TRANSPORTATION CHAPTER 2. PUBLIC SERVICE COMMISSION ARTICLE 2. JURISDICTION, POWERS, AND DUTIES GENERALLY Go to the Georgia Code Archive Directory O.C.G.A. 46-2-28 (2008) 46-2-28. Procedure for issuance of stocks, bonds, notes, or other debt by companies under commission's jurisdiction
(a) Each of the companies over which the commission has jurisdiction shall be required to furnish the commission a list of any stocks and bonds the issuance of which is contemplated. (b) It shall be unlawful for any of such companies to issue stocks, bonds, notes, or other evidences of debt, payable more than 12 months after the date of issuance, except upon the approval of the commission, and then only when necessary and for such amount as may be reasonably required for the acquisition of property; the construction and equipment of power plants and carsheds; the completion, extension, or improvement of its facilities or properties; the improvement or maintenance of its service; the discharge or lawful refunding of its obligations; or other lawful corporate purposes falling within the spirit of this Code section. (c) The decision of the commission shall be final as to the validity of the issuance of stocks, bonds, notes, or other evidences of debt by companies under the jurisdiction of the commission. (d) Before issuing stocks, bonds, notes, or other evidence of debt, a company under the jurisdiction of the commission shall secure an order from the commission authorizing such issue, the amount thereof, and the purpose and use for which the issue is authorized. For the purpose of enabling it to determine whether such order should be issued, the commission shall make such inquiry or investigation, hold such hearings, and examine such witnesses, books, papers, documents, or contracts as it may deem advisable or necessary. (e) Notwithstanding any other provision of this Code section, a company under the jurisdiction of the commission may issue notes or other evidences of debt for proper and lawful corporate purposes, payable at periods of not more than 12 months from the date of issuance, without the consent of the commission, provided that no such notes or other evidences of debt shall, in whole or in part, directly or indirectly, be refunded by any issue of stocks, bonds, or other evidences of debt running for more than 12 months without the consent of the commission. (f) Notwithstanding any other provision of this Code section, motor common carriers and motor contract carriers regulated under Chapter 7 of this title shall be exempt from the provisions of this Code section. HISTORY: Ga. L. 1907, p. 72, 8; Civil Code 1910, 2665; Code 1933, 93-414; Ga. L. 1986, p. 1518, 1.
" O.C.G.A. 46-2-28
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OPINIONS OF THE ATTORNEY GENERAL COMMISSION HEARING REQUIRED FOR APPLICATION FOR LOAN APPROVAL. -Public Service Commission is required to afford hearing on application for approval of a loan; such a proceeding is accurately characterized as one in which "the legal rights, duties, or privileges of a party are required by law to be determined by an agency after an opportunity for hearing," and is, therefore, a contested case within the meaning of the Georgia Administrative Procedure Act (see O.C.G.A. Ch. 13, T. 50). 1975 Op. Att'y Gen. No. 75-139. Title Note Chapter Note Article Note
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1 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.01 (2008) 515-4-1-.01 Applications Must be Sworn To. Amended. (1) All applications for the issuance of stocks, bonds or notes, or other evidence of debts, payable more than twelve months after date thereof, by companies subject to these rules shall be by written petition, verified by the president or other officer of such company, setting forth the information hereinafter required. Such petition may be duly assigned for hearing as provided herein except that those petitions submitted by Electric Membership Corporations, small businesses as defined in O.C.G.A. (50-13-4.a3), and other small businesses that may, from time to time, finance through government lending agencies or through government administered or guaranteed loans shall not require a hearing. (2) For applications not requiring a hearing, all discovery, responses, analysis and recommendations must be completed such that the application can be acted upon by this Commission in Administrative Session within 60 days of the original filing. AUTHORITY: Ga. L. 1978-79 as amended: Ga. L. 1975, pp. 404-412. ADMINISTRATIVE HISTORY: Original Rule entitled "Applications Must be Sworn To" was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 4 1 1 . AMENDED: Filed July 29, 1986; effective August 17, 1986.
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2 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES
Ga. Comp. R. & Regs. r. 515-4-1-.02 (2008)
515-4-1-.02 What Applications of Utilities Must Show. All such applications filed by any utility company subject to these rules, shall set out all the properties of applicant, transmission lines, central equipment, buildings, generating stations and other structures or property, giving a general description thereof. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, pp. 4 1 1.
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3 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.03 (2008) 515-4-1-.03 Financial Statement. (1) Said petition shall also contain in addition to full description of its property a sworn statement in detail of the financial condition of the company, giving the amount and kinds of the capital stock, bonds, and other obligations outstanding; the consideration on which the same were issued clearly and fully stated; the rate and amount of dividends declared thereon, and all other items of outstanding indebtedness; and as to all, whether and how secured, and if secured by mortgage or pledge, a copy of the instrument shall be annexed to the petition; and said petition shall also contain a statement of the amount of any of its stock held by other corporations, and the names of and the amount held by each; and all facts needed to show that the capitalization and proposed capitalization of said company is lawful and legitimate and does not violate either the laws or the Constitution of this State, or the United States. (2) Information Need Not be Repeated. In case the petitioning corporation or party shall have already or previously made and filed a report to this Commission showing its capitalization and financial condition in compliance with the standing order on that subject, the matter thus already reported need not again be repeated in the application, but may be made part thereof by appropriate form of reference, with any new facts or data added to bring the recital down to date. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138,439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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4 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved.
*** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT ***
TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES
Ga. Comp. R. & Regs. r. 515-4-1-.04 (2008)
515-4-1-.04 Tabulated Statement of Desired Issues. Said petition shall contain a statement of the amount and kind of stock which the corporation desires to issue; and a tabulated statement of bonds or notes which the corporation desires to issue, the terms and rate of interest, and whether and how to be secured, and if to be secured by a mortgage, or pledge, a copy of the same shall be attached. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 4 1 1.
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5 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.05 (2008) 515-4-1-.05 Use of Proceeds from Desired Issues. Said petition shall contain a statement of the use to which the capital to be secured by the issue of such stock, bonds, or notes is to be put, with a definite statement of how much is to be used for the acquisition of property; how much for the construction and equipment of power plants; how much for car sheds, and the completion, extension, or improvement of its facilities or properties; how much for the improvement and maintenance of its service; how much for the discharge or lawful refund of its obligations, or for lawful corporate purposes. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 4 11 .
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6 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.06 (2008) 515-4-1-.06 Property to be Acquired; How Service is to be Improved. Said petition shall contain a statement in detail of the property which is to be acquired, with its value, a detailed description of the construction, completion, extension, or improvement of its facilities set forth in such a manner, that an estimate may be made of its cost; a statement of the character of the improvement of its service proposed, and the reasons why the service should be maintained from its capital; if it is proposed to discharge or refund its obligations a statement of the nature and description of its obligations, including their par value and the amount for which they were actually sold, and the application of the proceeds arising from such sale. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138,439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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7 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga Comp. R. & Regs. r. 515-4-1-.07 (2008) 515-4-1-.07 Copies of All Contracts to be Filed. Said petition shall contain a statement showing whether any contracts have been made for the acquisition of such property, or for such construction, completion, extension, or improvement of its facilities, or for the disposition of any of its stocks, bonds, or notes which it is proposed to issue; and if any such contracts have been made, copies thereof must be attached to the petition, as well as a statement showing how much money or other thing of value has been received by the corporation under such contract. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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8 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.08 (2008) 515-4-1-.08 Capitalizing Franchises, Etc. Said petition shall contain a statement showing whether any of the outstanding stock, or bonds, or notes, as contemplated in the Act of August 22, 1907, have been issued or used in capitalizing any franchise or any right to own, operate or enjoy any franchise, or any contract for consolidation or lease, or for services rendered or to be rendered, or a bonus to any person or persons natural or artificial, and if so, shall state the amount and character thereof, and the franchise, right, contract, or lease, service or bonus, so capitalized. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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9 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.09 (2008) 515-4-1-.09 Consolidation or Merger. If the stock is to be issued by a new corporation to be formed by a merger or consolidation of two or more other corporations, the petition shall contain a complete description of the properties to be consolidated, and a complete statement of the financial condition of the corporation so consolidated of the kind set out in 515-4-1-.03. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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10 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.10 (2008) 515-4-1-.10 Reference Where Chartered by General Law. Attached to said petition must be a certified copy of the charter, if granted by the legislature or accurate citations to volume and page if to be found in the published laws; or a copy of the petition filed with the Secretary of State, or any court, and a certificate of incorporation issued by the Secretary of State, or court, if incorporated under a general law; duly certified copies of all certificates, statements, or records which modify, change, or extend the purposes or powers of such corporation. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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11 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.11 (2008) 515-4-1-.11 Law Must be Complied With. Said petition shall set out in detail all acts done by said corporation in obedience to the laws of the State, applicable to such desired issue or increase of capital or issue of bonds, and shall fully and affirmatively show that all requirements of the laws of Georgia have been fully complied with. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439,615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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12 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.12 (2008) 515-4-1-.12 Petitioners to Make Further Report. Said petition shall state fully the method and instrumentalities proposed for carrying into effect with safety to the petitioners and the public the purposes stated, and for complying with all conditions imposed by law or by the Commission, and expressing the readiness of petitioners to make a report of actings and doings under the same as the Commission may require. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138,439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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13 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.13 (2008) 515-4-1-.13 Hearings Before Commission; Applicant to Produce Witnesses. When a petition is assigned for hearing in accordance with Rule 515-4-1-.01, the Commission shall fix a time and place for hearing thereon, and shall give to the applicant not less than ten days' notice thereof, either personally or by mail; the applicant shall publish a notice of the application and the time and place of the hearing in such newspapers and at such times as the Commission shall direct. At the hearing the applicant shall produce such witnesses and furnish such books, papers, documents, and contracts as the Commission shall at any time before final decision on the application require, and must establish to the satisfaction of the Commission that the proposed issue of stocks, bonds, notes, or other evidence of indebtedness is for the benefit of the public service, and is otherwise lawful. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104,105; 1970, p. 104; 1972, pp. 138,439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
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14 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.14 (2008) 515-4-1-.14 All Proceeds Must be Used for Purposes Approved. On the conclusion of the hearing, or so soon thereafter as circumstances permit, the Commission will make up its opinion and frame its order upon the facts appearing in each instance and the law applicable thereto. Each application will be kept open and further order may be made from time to time as may be needful for the security and protection of all concerned, and for a due compliance with the law and the orders of this Commission. All bonds and stocks when authorized by the Commission, and the proceeds of the same, must be used for the purpose or purposes authorized, and for none other, under pain of the penalties in such case provided by law. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified by Ga. L. 1975, p. 411.
Ri
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15 of 15 DOCUMENTS RULES AND REGULATIONS OF THE STATE OF GEORGIA

Copyright (c) 2008, Darby Printing Company All Rights Reserved. *** THIS DOCUMENT IS CURRENT THROUGH THE 06/30/08 CUMULATIVE SUPPLEMENT *** TITLE 515: GEORGIA PUBLIC SERVICE COMMISSION STOCKS AND BONDS CHAPTER 515-4-1 STOCK AND BOND APPLICATION RULES Ga. Comp. R. & Regs. r. 515-4-1-.15 (2008) 515-4-1-.15 Negotiation or Competitive Bidding for Security Issues. (1) This rule shall apply to all issuances of securities for which the Commission orders it to apply pursuant to the laws of Georgia except where: (a) Such securities are issued and sold prior to January 1, 1976, or are issued pursuant to authorization granted prior to the effective date of this rule. (b) The gross proceeds to the issuer of the securities will be less than $ 2,000,000. (c) Such securities consist of evidences of debt of a maturity of ten years or less, from date of issue to a commercial bank, insurance company or similar institution not for resale to the public provided no commission, fee, or remuneration is to be paid in connection therewith to any third person (except an associated service company charging only its cost of services) for negotiating the transaction. (d) Such securities are to be issued prorata to existing holders of securities of the applicant pursuant to any preemptive right or privilege, or in connection with any liquidation or reorganization, or recapitulation of surplus. (e) Such security is issued in exchange for outstanding securities where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange. (f) The Commission, on application filed pursuant to this rule, finds that compliance with the competitive bidding requirements of this rule would not be appropriate or consistent with the public interest. Such findings will not be made where the issuer has engaged in negotiating for the sale or underwriting of the securities without having been authorized in writing by the Commission prior to such negotiation. Nothing in this section shall be deemed to preclude the Commission from entering any order which would otherwise be appropriate. (g) Such securities and loans are issued or guaranteed by the United States government or an agency of the United States government or by a State or local government or agency. (h) The exceptions contained in this rule shall not be construed as a waiver of the requirements of Section 93-414 of the 1933 Code of Georgia for Commission approval of security issues. (2) Except as provided in this rule, the Commission will not approve, pursuant to Section 93-414 of the 1933 Code of Georgia, the issuance of stocks, bonds, notes or other evidence of debt by any company or corporation over which the authority of the Commission is extended by law unless such securities be issued pursuant to competitive bidding. Where the Commission grants an application for authorization and approval to issue and sell securities through
competitive bidding, the applicant shall publicly invite sealed, written proposals for the purchase or underwriting of such securities at least one week (or such other period as the Commission may by order fix), prior to entering into any contract or agreement for the issuance or sale of such securities. (a) The public invitation shall describe the type and amount of securities to be bid for, and shall state the date, time and place for opening of bids. Such invitation or the statement of terms and conditions relating to bids, shall reserve the right to reject any or all bids and, among other things, describe the arrangements made for independent counsel for bidders. No bids shall be invited, or accepted, from any person who, prior to the submission of bids, has performed any service for compensation in connection with the issuance and sale of the proposed securities, or who has received or will receive any fee or compensation in connection with the issuance and sale of the proposed securities (except as successful bidder), nor shall any bid be invited or accepted under which officers or directors would benefit from or share in the proceeds from the securities. Such proposals as may be received in response to the public invitation shall not be opened at any time or place other than as specified in the invitation. The duly authorized representative of any person making any such proposal shall be entitled to be present at the opening of such proposals and to examine each proposal submitted. The invitation or the statement of terms and conditions relating to bids shall refer to the limitation herein prescribed. (3) After receiving and opening all bids submitted as provided in paragraph (2) of this rule, the applicant shall within the period specified in the public invitation for proposals (unless all bids are rejected), accept that bid which shall be most favorable on the basis of the specifications set forth in the Commission's order. No bid shall be accepted from a person who directly or indirectly controls or is controlled by, or is under the same common control with the applicant without approval by further order of the Commission. (4) Promptly after the opening of the proposals the applicant shall report to the Commission by telephone or telegraph the information called for in paragraph (4) (b) hereof and shall file with the Commission a verified statement in writing, together with five conformed copies thereof, setting forth: (a) The action taken to comply with the Commission's order of authorization and paragraphs (2) and (3) of this rule, including a statement that the method of complying with the competitive bidding requirements as described in the application has been carried out. (b) A summary of the terms of the proposals received, including the name of each bidder or representative of a bidding group, the interest or dividends rate specified (where applicable), the price to be paid the issuer per share or per $ 100 principal amount, the cost of money to the issuer (except in the case of common stock), the name of the successful bidder, and the successful bidder's initial public offering price with the resulting yield to the public (except in the case of common stock), accompanied by a true and correct copy of the proposal accepted. (5) If the application to issue securities is deemed to fall within any of the exceptions contained in paragraph (1) of this rule, and such exception is relied upon as waiving the requirement for competitive bidding, the application shall specifically refer to such exception and show that it is applicable. (6) If the application to issue securities does not fall within clauses (a), (b), (c), (d), or (e) of paragraph (1) of this rule the application shall either: (a) Set forth the proposed method of complying with the competitive bidding requirements of paragraphs (2), (3), and (4) of this rule, including summarization of the principal terms of the proposed invitation as part of the application; or (b) Apply for exemption from the competitive bidding requirements of paragraphs (2), (3), and (4) of this rule upon findings as referred to in paragraph (1) (f). Such an application may be made only where the issuer has not, prior to the
filing of the application, engaged in any negotiation for the sale or underwriting of the securities and does not so engage
prior to Commission action on the application for exemption, and the application so shows, provided that engaging in
negotiation may be permitted where the Commission has given its written authorization in advance. Such application for exemption may be filed as part of an application for securities approval, or as a separate application filed at any time prior to the filing of such an application for securities approval. Such application for exemption shall show the specific grounds relied on as warranting the finding referred to in paragraph (1) (f) of this rule. If an application for such exemption is denied by the Commission after the application for securities approval has been filed, the requirements of clause (a) of this paragraph shall be complied with by amendment to the application. (7) There shall also be set forth in the application or amendment thereto: (a) The name and address of any person receiving or entitled to receive a fee for services (other than attorneys, accountants, and similar technical services) in connection with the negotiation for or consummation of the issuance or sale of securities, or for services in securing underwriters, sellers, or purchasers of securities, other than fees included in any competitive bid; the amount of each such fee; and facts showing the necessity of the services and that the fee does not exceed the customary fee for such services in arms-length transactions and is reasonable in the light of the cost of rendering the service and any other relevant factors. (b) All facts showing or tending to show that the issuer or applicant directly or indirectly controls, or is controlled by, or is under the same common control as, any person named pursuant to the requirements of (7) (a), or showing or tending to show the opposite. (8) The evidence submitted shall include copies of any contract, underwriting, or other arrangement entered into for the sale or marketing of the securities. Where a contract or underwriting is not in final form so as to permit filing, a preliminary draft or a summary containing such identification of the parties thereto and such principal terms thereof as may be practicable, may be filed, pending filing of a conformed copy in the form executed. (9) An application for approval under this rule will ordinarily require a minimum of thirty days after it is filed to allow for public notice, investigation, opportunity for hearing, consideration by the Commission and issuance of its order. (10) The effective date of this rule is January 1, 1976. AUTHORITY: Ga. L. 1878-79, p. 125; 1907, pp. 72, 75; 1922, pp. 143, 144; 1950, p. 311; 1956, pp. 104, 105; 1970, p. 104; 1972, pp. 138, 439, 615; 1973, pp. 200-220. ADMINISTRATIVE HISTORY: Original Rule was filed on December 29, 1975; effective January 1, 1976, as specified
by Ga. L. 1975, p. 411.
APPENDIX K GPC ANNUAL FINANCIAL STATEMENTS
Table of Contents MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Georgia Power Company 2007 Annual Report The management of Georgia Power Company (the "Company") is responsible for establishing and maintaining an adequate system of internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002 and as defined in Exchange Act Rule 13a-15(f). A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Under management's supervision, an evaluation of the design and effectiveness of the Company's internal control over financial reporting was conducted based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2007. This Annual Report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report.
/s/ Michael D. Garrett Michael D. Garrett President and Chief Executive Officer
/s/ Cliff S. Thrasher Cliff S. Thrasher Executive Vice President, Chief Financial Officer, and Treasurer February 25, 2008 II-162
Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Georgia Power Company We have audited the accompanying balance sheets and statements of capitalization of Georgia Power Company (the "Company") (a wholly owned subsidiary of Southern Company) as of December 31, 2007 and 2006, and the related statements of income, comprehensive income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2007. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such financial statements (pages II-186 to II-223) present fairly, in all material respects, the financial position of Georgia Power Company at December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 5 to the financial statements, in 2007 the Company changed its method of accounting for uncertainty in income taxes. As discussed in Note 2 to the financial statements, in 2006 the Company changed its method of accounting for the funded status of defined benefit pension and other postretirement plans. /s/ Deloitte & Touche LLP
Atlanta, Georgia February 25, 2008 11-163
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Georgia Power Company 2007 Annual Report OVERVIEW Business Activities Georgia Power Company (the Company) operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Many factors affect the opportunities, challenges, and risks of the Company's business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, and fuel prices. In December 2007, the Company completed a major retail rate proceeding (2007 Retail Rate Plan) that should provide earnings stability over the term of the 2007 Retail Rate Plan. This regulatory action also enables the recovery of substantial capital investments to facilitate the continued reliability of the transmission and distribution networks, continued generation and other investments as well as the recovery of increased operating costs. The 2007 Retail Rate Plan includes a tariff specifically for the recovery of costs related to environmental controls mandated by state and federal regulations. Appropriately balancing required costs and capital expenditures with customer prices will continue to challenge the Company for the foreseeable future. The Company is required to file a general rate case by July 1, 2010, which will determine whether the 2007 Retail Rate Plan should be continued, modified, or discontinued. The Company also received regulatory orders to increase its fuel cost recovery rate effective June 1,2005, July 1, 2006, and March 1,2007. The Company is required to file its next fuel cost recovery case by March 1, 2008. Key Performance Indicators In striving to maximize shareholder value while providing cost-effective energy to more than two million customers, the Company continues to focus on several key indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income after dividends on preferred and preference stock. The Company's financial success is directly tied to the satisfaction of its customers. Key elements of ensuring customer satisfaction include outstanding service, high reliability, and competitive prices. Management uses customer satisfaction surveys and reliability indicators to evaluate the Company's results. Peak season equivalent forced outage rate (Peak Season EFOR) is an indicator of fossil/hydro plant availability and efficient generation fleet operations during the months when generation needs are greatest. The rate is calculated by dividing the number of hours of forced outages by total generation hours. The 2007 fossil/hydro Peak Season EFOR of 2.23% was better than target. The nuclear generating fleet also uses Peak Season EFOR as an indicator of availability and efficient generation fleet operations during the peak season. The 2007 nuclear Peak Season EFOR of 1.23% was also better than target. Transmission and distribution system reliability performance is measured by the frequency and duration of outages. Performance targets for reliability are set internally based on historical performance, expected weather conditions, and expected capital expenditures. The 2007 performance was better than target for these reliability measures. Net income after dividends on preferred and preference stock is the primary component of the Company's contribution to Southern Company's earnings per share goal. II-164
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report The Company's 2007 results compared to its targets for some of these key indicators are reflected in the following chart:
2007 Target Performance 2007 Actual Performance
Key Performance Indicator
Customer Satisfaction Peak Season EFOR - fossil/hydro Peak Season EFOR Net Income nuclear
Top quartile in customer surveys 2.75% or less 2.00% or less $835 million
Top quartile in customer surveys 2.23% 1.23% $836 million
See RESULTS OF OPERATIONS herein for additional information on the Company's financial performance. The financial performance achieved in 2007 reflects the continued emphasis that management places on these indicators, as well as the commitment shown by employees in achieving or exceeding management's expectations. Earnings The Company's 2007 net income after dividends on preferred and preference stock totaled $836 million representing a $48.9 million, or 6.2%. increase over 2006. Operating income increased slightly in 2007 primarily due to increased operating revenues from transmission and outdoor lighting and decreased property taxes. Net income increased primarily due to higher allowance for equity funds used during construction and lower income tax expenses resulting from the Company's donation of Tallulah Gorge to the State of Georgia. This net income increase was partially offset by higher non-fuel operating expenses and increased financing costs. The Company's 2006 earnings totaled $787 million representing a $42.9 million, or 5.8%, increase over 2005. Operating income increased in 2006 due to higher base retail revenues and wholesale non-fuel revenues, partially offset by higher non-fuel operating expenses. The Company's 2005 earnings totaled $744 million representing a $61.6 million, or 9.0%, increase over 2004. Operating income increased in 2005 due to higher base retail revenues resulting from retail rate increases and favorable weather conditions, partially offset by an increase in non-fuel operating expenses. RESULTS OF OPERATIONS A condensed income statement for the Company follows:
Amount 2007 Increase (Decrease) from Prior Year 2006
(in millions)
2007
2005
Operating revenues Fuel Purchased power Other operations and maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating income Total other income and (expense) Income taxes Net income Dividends on preferred and preference stock Net income after dividends on preferred and preference stock 11-165
$7,572 2,641 1,050 1,562 511 291 6,055 1,517 (257) 418 842 6 $ 836
$326 408 (95) 1 13 (8) 319 7 18 (25) 50 1 $ 49
$ 170 296 (171) (11) (28) 23 109 61 (22) (5) 44 1 $ 43
$1,348 649 215 86 230 33 1,213 135 (19) 54 62 1 $ 61
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Operating Revenues Operating revenues in 2007, 2006, and 2005, and the percent of change from the prior year were as follows:
2007 Amount 2006 (in millions)
2005
Retail - prior year Estimated change in Rates and pricing Sales growth Weather Fuel cost recovery Retail - current year Wholesale revenues Non-affiliates Affiliates Total wholesale revenues Other operating revenues Total operating revenues Percent change
$6,205.6 (66.2) 46.5 17.7 294.4 6,498.0 537.9 277.9 815.8 257.9 $7,571.7 4.5%
$6,064.4 (76.8) 76.6 7.5 133.9 6,205.6 551.7 252.6 804.3 235.7 $7,245.6 2.4%
$5,118.8 270.7 67.4 21.7 585.8 6,064.4 524.8 275.5 800.3 211.1 $7,075.8 23.5%
Retail base revenues were $3.8 billion in 2007. There was not a material change in total retail base revenues compared to 2006, although industrial base revenues decreased $56.5 million, or 8.5%, primarily due to lower sales and a lower contribution from market-driven rates for large commercial and industrial customers. This decrease was partially offset by a $31.8 million, or 2.1%, increase in residential base revenues as well as a $22.6 million, or 1.5%, increase in commercial base revenues primarily due to higher sales from favorable weather and customer growth of 1.2%. Retail base revenues of $3.8 billion in 2006 increased $7 million, or 0.2%, from 2005 primarily due to customer growth of 1.9% and more favorable weather, partially offset by lower contributions from market-driven rates to large commercial and industrial customers. Retail base revenues of $3.8 billion in 2005 increased by $360 million, or 10.6%, from 2004 primarily due to the retail rate increases effective January 1, 2005 and June 1, 2005, sustained economic strength, customer growth, more favorable weather, and generally higher prices to large business customers. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses, including the fuel component of purchased power, and do not affect net income. See FUTURE EARNINGS POTENTIAL - "PSC Matters - Fuel Cost Recovery" herein for additional information. Wholesale revenues from sales to non-affiliated utilities were:
2007 2006
(in millions)
2005
Unit power sales Capacity Energy Total Other power sales Capacity and other Energy Total Total non-affiliated 11-166
$ 33 33 66 158 314 472 $538
$ 33 38 71 165 316 481 $552
$ 33 32 65 155 305 460 $525
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Revenues from unit power sales have remained relatively constant in all periods presented. Revenues from other non-affiliated sales decreased $9.6 million, or 2.0%, in 2007, and increased $21.0 million, or 4.6%, and $273.2 million, or 146.2%, in 2006 and 2005, respectively. The decrease in 2007 was primarily due to a decrease in revenues from large territorial contracts resulting from lower emissions allowance prices. The increase in 2006 was due to a 0.6% increase in the demand for kilowatt-hour (KWH) energy sales due to a new contract with an electrical membership corporation (EMC) that went into effect in April 2006. The increase in 2005 was primarily due to contracts with 30 EMCs that went into effect in January 2005 which increased the demand for energy. Wholesale revenues from sales to affiliated companies within the Southern Company system will vary from year to year depending on demand and the availability and cost of generating resources at each company. These affiliated sales and purchases are made in accordance with the Intercompany Interchange Contract (1IC), as approved by the Federal Energy Regulatory Commission (FERC). In 2007, KWH energy sales to affiliates decreased 5.0% while revenues from sales to affiliates increased 10.0%. This was primarily due to the increased cost of fuel and other marginal generation costs. In 2006 and 2005, KWH energy sales to affiliates increased 8.5% and 2.2%, respectively, due to higher demand. However, revenues from these sales decreased by 8.3% in 2006 due to reduced cost per KWH delivered while revenues from these sales increased 59 .8 % in 2005 due to higher fuel prices. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost. Other operating revenues increased $22.2 million, or 9.4%, in 2007 primarily due to an $11.6 million increase in transmission revenues due to the increased usage of the Company's transmission system by non-affiliated companies, a $7.9 million increase in revenues from outdoor lighting activities due to a 10% increase in the number of lighting customers, and a $4.0 million increase from customer fees. Other operating revenues increased $24.6 million, or 11.6%, in 2006 primarily due to increased revenues of $14.1 million related to work performed for the other owners of the integrated transmission system (ITS) in the State of Georgia, higher customer fees of $4.6 million, and higher outdoor lighting revenues of $6.1 million. Other operating revenues increased $26.1 million, or 14.1%, in 2005 primarily due to higher transmission revenues of $16 million related to work performed for the other owners of the ITS, higher revenues under the open access tariff agreement, higher outdoor lighting revenues of $5.4 million, and higher customer fees that went into effect in 2005 of $5.9 million. Energy Sales Changes in revenues are influenced heavily by the change in volume of energy sold from year to year. KWH sales for 2007 and the percent change by year follow:
KWH Percent Change
2007
(in billions)
2007
2006
2005
Residential Commercial Industrial Other Total retail Wholesale Non-affiliates Affiliates Total wholesale Total energy sales
26.8 33.1 25.5 0.7 86.1
2.4% 2.9 (0.3) 5.6 1.8
2.7% 2.5 (1.0) (10.5) 1.4
2.7% 6.0 (5.0) (1.0) 1.3
10.6 5.2 15.8 101.9
(1.0) (5.0) (2.3) 1.1%
0.9 8.5 3.4 1.7%
95.0 2.2 50.9 6.9%
Residential KWH sales increased 2.4% in 2007 over 2006 due to favorable weather and a 1.3% increase in residential customers. Commercial KWH sales increased 2.9% in 2007 over 2006 primarily due to favorable weather and a 0.3% increase in commercial customers. Industrial KWH sales decreased 0.3% primarily due to reduced demand and closures within the textile industry; however, this was partially offset by a 2.9% increase in the number of industrial customers. Residential KWH sales increased 2.7% in 2006 over 2005 due to customer growth of 1.9% and more favorable weather. Commercial KWH sales increased 2.5% in 2006 over 2005 due to customer growth of 2.0% and a reclassification of customers from industrial to 11-167
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report commercial to be consistent with the rate structure approved by the Georgia Public Service Commission (PSC). Industrial KWH sales decreased 1.0% due to a 3.4% decrease in the number of customers as a result of this reclassification. Residential KWH sales increased 2.7% in 2005 over 2004 due to more favorable weather, customer growth of 1.8%, and a 0.9% increase in the average energy consumption per customer. Commercial KWH sales increased 6.0% in 2005 when compared to 2004 due to more favorable weather, sustained economic strength, customer growth of 1.9%, and a reclassification of customers from industrial to commercial to be consistent with the rate structure approved by the Georgia PSC. Industrial KWH sales decreased 5.0% primarily due to this reclassification of customers. Fuel and Purchased Power Expenses Fuel costs constitute the single largest expense for the Company. The mix of fuel sources for generation of electricity is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. Additionally, the Company purchases a portion of its electricity needs from the wholesale market. Details of the Company's electricity generated and purchased were as follows:
2007 2006 2005
Total generation (billions ofKWHs) Total purchased power (billions of KWHs) Sources of generation (percent) Coal Nuclear Gas Hydro Cost of fuel, generated (cents per net KWH) Coal Nuclear Gas Average cost of fuel, generated (centsper net KWH) Average cost of purchased power (cents per net KWH)
87.0 18.9 75 18 7 2.87 0.51 6.28 2.68 7.27
83.7 21.9 75 18 6 1 2.58 0.47 5.76 2.39 6.38
82.7 20.5 76 18 4 2 1.91 0.47 14.03 2.12 7.51
Fuel and purchased power expenses were $3.7 billion in 2007, an increase of $312.9 million, or 9.3%, above prior year costs. This increase was driven by a $414.5 million increase in total energy costs due to the higher average cost of fuel and purchased power. This was partially offset by a $101.6 million reduction due to less KWHs purchased. Fuel and purchased power expenses were $3.4 billion in 2006, an increase of $124.4 million, or 3.8%, above prior year costs. This increase was driven by a $146.1 million increase related to higher KWHs generated and purchased partially offset by a $21.7 million decrease in the average cost of fuel and purchased power. Fuel and purchased power expenses were $3.3 billion in 2005, an increase of $863.4 million, or 36.1%, above prior year costs. This increase was the result of an $881.2 million increase in the average cost of fuel and purchased power partially offset by a $17.8 million decrease related to total lower KWHs generated and purchased. In 2007, the Company entered into power purchase agreements (PPAs) with companies to purchase a total of approximately 1,795 megawatts (MW). These contracts start in 2010. These agreements have been approved by the Georgia PSC and the FERC, as required. Of the total capacity, approximately 561 MW will expire in 2017, 292 MW in 2025, and 942 MW in 2030. These contracts are expected to result in higher non-fuel expenses that will be subject to recovery through future base rates. Additionally, in December 2007 and January 2008. the Company entered into two biomass renewable generation contracts for 50 MW each. Both contracts begin in 2010 and one expires in 2025 and the other expires in 2030. 11-168
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report These In 2006, the Company entered into three PPAs to purchase a total of approximately 1,000 MW annually from June 2009 through May 2024. agreements were approved by the Georgia PSC. These agreements satisfy growth and replace expiring agreements. The agreements are expected to result in higher non-fuel expenses that will be subject to recovery through future base rates. While there has been a significant upward trend in the cost of coal and natural gas since 2003, prices moderated somewhat in 2006 and 2007. Coal prices have been influenced by a worldwide increase in demand from developing countries, as well as increases in mining and fuel transportation costs. While demand for natural gas in the United States continued to increase in 2007, natural gas supplies have also risen due to increased production and higher storage levels. During 2007, uranium prices were volatile and increased over the course of the year due to increasing long-term demand, with primary production levels at approximately 55% to 60% of demand. Secondary supplies and inventories were sufficient to fill the primary production shortfall. Fuel expenses generally do not affect net income, since they are offset by fuel revenues under the Company's fuel cost recovery provisions. See FUTURE EARNINGS POTENTIAL - "PSC MATTERS - Fuel Cost Recovery" for additional information. Other Operations and Maintenance Expenses In 2007, the total change in other operations and maintenance expenses was immaterial compared to 2006. In 2006, other operations and maintenance expenses decreased $11.0 million, or 0.7%, from the prior year. Maintenance for generating plants decreased $20.0 million in 2006 as a result of fewer scheduled outages than 2005, offset by an increase of $18.2 million for transmission and distribution expenses related to load dispatching and overhead line maintenance. Also contributing to the decrease were lower employee benefit expenses related to medical benefits and lower workers compensation expense of $23.2 million, partially offset by lower pension income of $13.7 million. In 2005, other operations and maintenance expenses increased $86 million, or 5.8%. Maintenance for generating plant and transmission and distribution increased $27.5 million and $15.9 million, respectively, as a result of scheduled outages and, to a lesser extent, certain flexible projects planned for other million periods. Increased employee benefit expense of $18.9 million related to pension and medical benefits and higher property insurance costs of $4.6 resulting from storm damage also contributed to the increase. Customer assistance expense and uncollectible account expense also increased an additional $9.3 million in 2005 over 2004, primarily as a result of promotional expenses related to an energy efficiency program and an increased number of customer bankruptcies. Depreciation and Amortization Depreciation and amortization increased $12.4 million, or 2.5%, in 2007 from the prior year primarily due to a 3.4% increase in plant in service from the prior year. This increase was partially offset by a decrease in amortization due to a regulatory liability related to the inclusion of certified PPAs in retail rates as ordered by the Georgia PSC under the terms of the retail rate plan for the three years ended December 31, 2007 (2004 Retail Rate Plan). Depreciation and amortization decreased $27.9 million, or 5.3%, in 2006 from the prior year due to the scheduled decrease in amortization related to this regulatory liability. This decrease was partially offset by a $15.9 million, or 3.2%, increase in depreciation expense in 2006 over 2005 due to an increase in plant in service. Depreciation and amortization increased $230 million, or 77.5%, in 2005 over 2004 primarily due to the expiration at the end of 2004 of certain accelerated amortization provisions of the previously existing retail rate plan. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" for additional information. Taxes Other than Income Taxes Taxes other than income taxes decreased $7.7 million, or 2.6%, in 2007 primarily due to the resolution of a dispute regarding property taxes in Monroe County, Georgia. See Note 3 to the financial statements under "Property Tax Dispute" for additional information. Taxes other than income taxes increased $22.8 million, or 8.3%, in 2006 primarily due to higher property taxes of$13.3 million as a result of an increase in property values and higher municipal 13.6%, in 2005 gross receipts taxes of $9.1 million as a result of increased retail operating revenues. Taxes other than income taxes increased $33 million, or higher municipal gross receipts taxes of $18.1 million resulting from increased retail operating revenues and higher property taxes of primarily due to $14.0 million. 11-169
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Allowance for Equity Funds Used During Construction Allowance for equity funds used during construction (AFUDC) increased $36.7 million, or 116.3%, in 2007 primarily due to the increase in the Company's construction work in progress balance related to ongoing transmission, distribution, and environmental projects. AFUDC remained relatively constant in 2006 and 2005. Interest Expense, Net ofAmounts Capitalized Interest expense increased $25.5 million, or 8.0%, in 2007 primarily due to a 13.9% increase in long-term debt levels due to the issuance of additional senior notes and pollution control bonds. Interest expense increased $22.5 million, or 7.6%, in 2006 primarily due to generally higher interest rates on variable rate debt and commercial paper, the issuance of additional senior notes, and higher average balances of short-term debt. Interest expense increased $40.6 million, or 15.9%, in 2005 primarily due to the issuance of additional senior notes and generally higher interest rates on variable rate debt and commercial paper. Other Income and (Expense), Net Other income and (expense), net increased $5.8 million, or 66.5%, in 2007 primarily due to $4.0 million from land and timber sales. Other income and stock (expense), net increased $1.9 million, or 26.7%, in 2006 primarily due to reduced expenses of $2.9 million and $5.0 million related to the employee ownership plan and charitable donations, respectively, and increased revenues of $3.6 million, $5.4 million, and $3.4 million related to a residential pricing of program, customer contracting, and customer facilities charges, respectively. These increases were partially offset by net financial gains on gas hedges $18.6 million in 2005. Other income and (expense), net increased $21.5 million in 2005 from 2004, or 148.0%, primarily due to $16.8 million of additional gas hedge gains. Income Taxes Income taxes decreased $24.8 million, or 5.6%, in 2007 primarily due to state and federal deductions for the Company's donation of 2,200 acres in the Tallulah Gorge area to the State of Georgia and higher federal manufacturing deductions. In 2006, income taxes decreased $5.1 million, or 1.1%, primarily due to the recognition of state tax credits. In 2005, income taxes increased $53.5 million, or 13.6%, primarily due to higher pre-tax net income. See Note 5 to the financial statements for additional information. Effects of Inflation The Company is subject to rate regulation that is based on the recovery of historical costs. When historical costs are included, or when inflation exceeds projected costs used in rate regulation or market-based prices, the effects of inflation can create an economic loss since the recovery of costs could be in dollars that have less purchasing power. In addition, income tax laws are based on historical costs. 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 utility plant with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money is obligations such as long-term debt, preferred securities, preferred stock, and preference stock. Any recognition of inflation by regulatory authorities reflected in the rate of return allowed in the Company's approved electric rates. FUTURE EARNINGS POTENTIAL General The Company operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Prices for electricity provided by the Company to retail customers are set by the Georgia PSC under cost-based regulatory principles. Prices for electricity relating to PPAs, interconnecting transmission lines, and the exchange of electric power are set by the FERC. Retail rates and revenues are reviewed and adjusted periodically with certain limitations. See ACCOUNTING POLICIES - "Application of Critical Accounting Policies and Estimates - Electric Utility Regulation" herein and Note 3 to the financial statements under "Retail Regulatory Matters" and "FERC Matters" for additional information about regulatory matters. 11-170
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of the Company's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Company's business of selling electricity. These factors include the ability of the Company to maintain a stable regulatory environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. Future earnings in the near term will depend, in part, upon growth in energy sales, which is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth in the Company's service area. Environmental Matters Compliance costs related to the Clean Air Act and other environmental statutes and regulations could affect earnings if such costs cannot continue to be fully recovered in rates on a timely basis. Environmental compliance spending over the next several years may exceed amounts estimated. Some of the factors driving the potential for such an increase are higher commodity costs, market demand for labor, and scope additions and clarifications. The timing, specific requirements, and estimated costs could also change as environmental statutes and regulations are adopted or modified. Under the 2007 Retail Rate Plan approved by the Georgia PSC on December 18, 2007, an environmental compliance cost recovery (ECCR) tariff was implemented on January 1, 2008 to allow for the recovery of most of the costs related to environmental controls mandated by state and federal regulation scheduled for completion in 2008, 2009, and 2010. See Note 3 to the financial statements under "Rate Plans" for additional information. New Source Review Actions In November 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S. District Court for the Northern District of Georgia against certain Southern Company subsidiaries, including Alabama Power and the Company, alleging that these subsidiaries had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws at certain coal-fired generating facilities including the Company's Plants Bowen and Scherer. Through subsequent amendments and other legal procedures, the EPA filed a separate action in January 2001 against Alabama Power in the U.S. District Court for the Northern District of Alabama after Alabama Power was dismissed from the original action. In these lawsuits, the EPA alleged that NSR violations occurred at eight coal-fired generating facilities operated by Alabama Power and the Company. The civil actions request penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The action against the Company has been administratively closed since the spring of 2001, and the case has not been reopened. In June 2006, the U.S. District Court for the Northern District of Alabama entered a consent decree between Alabama Power and the EPA, resolving the alleged NSR violations at Plant Miller. The consent decree required Alabama Power to pay $100,000 to resolve the government's claim for a civil penalty and to donate $4.9 million of sulfur dioxide emission allowances to a nonprofit charitable organization and formalized specific emissions reductions to be accomplished by Alabama Power, consistent with other Clean Air Act programs that require emissions reductions. In August 2006, the district court in Alabama granted Alabama Power's motion for summary judgment and entered final judgment in favor of Alabama Power on the EPA's claims related to the four remaining plants. The plaintiffs appealed the district court's decision to the U.S. Court of Appeals for the Eleventh Circuit, and the appeal was stayed by the Appeals Court pending the U.S. Supreme Court's decision in a similar case against Duke Energy. The Supreme Court issued its decision in the Duke Energy case in April 2007. On October 5, 2007, the U.S. District Court for the Northern District of Alabama issued an order in the Alabama Power case indicating a willingness to re-evaluate its previous decision in light of the Supreme Court's Duke Energy opinion. On December 21, 2007, the Eleventh Circuit vacated the district court's decision in the Alabama Power case and remanded the case back to the district court for consideration of the legal issues in light of the Supreme Court's decision in the Duke Energy case. The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $32,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome in this matter could require substantial capital expenditures or affect the timing of currently budgeted capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. Such expenditures could affect future results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. The EPA has issued a series of proposed and final revisions to its NSR regulations under the Clean Air Act, many of which have been subject to legal challenges by environmental groups and states. In June 2005, the U.S. Court of Appeals for the District of Columbia Circuit upheld, in part, the EPA's revisions to NSR regulations that were issued in December 2002 but vacated portions of those II-171
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report revisions addressing the exclusion of certain pollution control projects. These regulatory revisions have been adopted by the State of Georgia. In March 2006, the U.S. Court of Appeals for the District of Columbia Circuit also vacated an EPA rule which sought to clarify the scope of the existing routine maintenance, repair, and replacement exclusion. The EPA has also published proposed rules clarifying the test for determining when an emissions increase subject to the NSR permitting requirements has occurred. The impact of these proposed rules will depend on adoption of the final rules by the EPA and the State of Georgia's implementation of such rules, as well as the outcome of any additional legal challenges, and, therefore, cannot be determined at this time. Carbon Dioxide Litigation In July 2004, attorneys general from eight states, each outside of Southern Company's service territory, and the corporation counsel for New York City filed a complaint in the U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies' emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Under common law public and private nuisance theories, the plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining global warming and (2) requiring each of the defendants to cap its emissions of carbon dioxide and then reduce those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. In September 2005, the U.S. District Court for the Southern District of New York granted Southern Company's and the other defendants' motions to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit in October 2005, and no decision has been issued. The ultimate outcome of these matters cannot be determined at this time. Environmental Statutes and Regulations General The Company's operations are subject to extensive regulation by state and federal environmental agencies under a variety of statutes and regulations governing environmental media, including air, water, and land resources. Applicable statutes 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; the Emergency Planning & Community Right-to-Know Act; and the Endangered Species Act. Compliance with these environmental requirements involves significant capital and operating costs, a major portion of which is expected to be recovered through existing ratemaking provisions. Through 2007, the Company had invested approximately $2.4 billion in capital projects to comply with these requirements, with annual totals of $856 million, $351 million, and $117 million for 2007, 2006, and 2005, respectively. The Company expects that capital expenditures to assure compliance with existing and new statutes, and regulations will be an additional $707 million, $353 million, and $246 million for 2008, 2009, and 2010, respectively. The Company's compliance strategy is impacted by changes to existing environmental laws, statutes and regulations, the cost, availability, and existing inventory of emission allowances, and the Company's fuel mix. Environmental costs that are known and estimable at this time are included in capital expenditures discussed under FINANCIAL CONDITION AND LIQUIDITY - "Capital Requirements and Contractual Obligations" herein. Compliance with possible additional federal or state legislation or regulations related to global climate change, air quality, or other environmental and health concerns could also significantly affect the Company. New environmental legislation or regulations, or changes to existing statutes or regulations, could affect many areas of the Company's operations; however, the full impact of any such changes cannot be determined at this time. Air Quality Compliance with the Clean Air Act and resulting regulations has been and will continue to be a significant focus for the Company. Through 2007, the Company had spent approximately $2.1 billion in reducing sulfur dioxide (SO 2) and nitrogen oxide (NO x) emissions and in monitoring emissions pursuant to the Clean Air Act. Additional controls have been announced and are currently being installed at several plants to further reduce SO 2, NO x, and mercury emissions, maintain compliance with existing regulations, and meet new requirements. In 2004, the EPA designated nonattainment areas under an eight-hour ozone standard. Areas within the Company's service area that were designated as nonattainment under the eight-hour ozone standard include Macon and a 20-county area within metropolitan Atlanta. The Macon area was redesignated by the EPA as an attainment area on September 19, 2007. In December 2006, the 11-172
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report U.S.Court of Appeals for the District of Columbia Circuit vacated the first set of implementation rules adopted in 2004 and remanded the rules to the EPA for further refinement. On June 20, 2007, the EPA proposed additional revisions to the current eight-hour ozone standard which, if enacted, could result in the designation of new nonattainment areas within the Company's service territory. The EPA has requested comment and is expected to publish final revisions to the standard in 2008. The impact of this decision, if any, cannot be determined at this time and will depend on subsequent legal action and/or future nonattainment designations and state regulatory plans. During 2005, the EPA's fine particulate matter nonattainment designations became effective for several areas within the Company's service area. State plans for addressing the nonattainment designations under the existing standard are required by April 2008 and could require further reductions in SO 2 and NO x emissions from power plants. In September 2006, the EPA published a final rule which increased the stringency of the 24-hour average fine particulate matter air quality standard. In December 2007, state agencies recommended to the EPA that an area encompassing all or parts of 22 counties within metropolitan Atlanta be designated as nonattainment for this standard. The EPA plans to designate nonattainment areas based on the new standard by December 2009. The ultimate outcome of this matter depends on the development and submittal of the required state plans and the resolution of pending legal challenges and, therefore, cannot be determined at this time. The EPA issued the final Clean Air Interstate Rule in March 2005. This cap-and-trade rule addresses power plant SO 2 and NO xemissions that were found to contribute to nonattainment of the eight-hour ozone and fine particulate matter standards in downwind states. Twenty-eight eastern states, including the State of Georgia, are subject to the requirements of the rule. The rule calls for additional reductions of NO xand/or SO 2 to be achieved in two phases, 2009/2010 and 2015. The State of Georgia has completed plans to implement this program. These reductions will be accomplished by the installation of additional emission controls at the Company's coal-fired facilities and/or by the purchase of emission allowances from a cap-and-trade program. The State of Georgia implemented the Clean Air Interstate Rule, and in June 2007, approved a "multi-pollutant rule" that will require plant specific emission controls on all but the smallest generating units in Georgia according to a schedule set forth in the rule. The rule is designed to ensure reductions in emissions of SO 2, NO x, and mercury in Georgia. The Clean Air Visibility Rule (formerly called the Regional Haze Rule) was finalized in July 2005. The goal of this rule is to restore natural visibility conditions in certain areas (primarily national parks and wilderness areas) by 2064. The rule involves (1) the application of Best Available Retrofit Technology (BART) to certain sources built between 1962 and 1977 and (2) the application of any additional emissions reductions which may be deemed necessary for each designated area to achieve reasonable progress by 2018 toward the natural conditions goal. Thereafter, for each 10-year planning period, additional emissions reductions will be required to continue to demonstrate reasonable progress in each area during that period. For power plants, the Clean Air Visibility Rule allows states to determine that the Clean Air Interstate Rule satisfies BART requirements for SO 2 and NO x. Extensive studies were performed for each of the Company's affected units to demonstrate that additional particulate matter controls are not necessary under BART. At the request of the State of Georgia, additional analyses were performed for certain units in Georgia to demonstrate that no additional SO 2 controls were required. States are currently completing implementation plans that contain strategies for BART and any other measures required to achieve the first phase of reasonable progress. The impacts of the eight-hour ozone and the fine particulate matter nonattainment designations, and the Clean Air Visibility Rule on the Company will depend on the development and implementation of rules at the state level. Therefore, the full effects of these regulations on the Company cannot be determined at this time. The Company has developed and continually updates a comprehensive environmental compliance strategy to comply with the continuing and new environmental requirements discussed above. As part of this strategy, the Company plans to install additional SO 2 and NO x emission controls within the next several years to assure continued compliance with applicable air quality requirements. In March 2005. the EPA published the final Clean Air Mercury Rule, a cap-and-trade program for the reduction of mercury emissions from coal-fired power plants. The rule sets caps on mercury emissions to be implemented in two phases, 2010 and 2018, and provides for an emission allowance trading market. The final Clean Air Mercury Rule was challenged in the U.S. Court of Appeals for the District of Columbia Circuit. The petitioners alleged that the EPA was not authorized to establish a cap-and-trade program for mercury emissions and instead the EPA must establish maximum achievable control technology standards for coal-fired electric utility steam generating units. On February 8, 2008, the court issued its ruling and vacated the Clean Air Mercury Rule. The Company's overall environmental compliance strategy relies primarily on a combination of S02 and NOx controls to reduce mercury emissions. Any significant changes in the strategy will depend on the outcome of any appeals and/or future federal and state rulemakings. Future rulemakings could require emission reductions more stringent than required by the Clean Air Mercury Rule. 11-173
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Water Quality In July 2004, the EPA published its final technology-based regulations under the Clean Water Act for the purpose of reducing impingement and entrainment of fish, shellfish, and other forms of aquatic life at existing power plant cooling water intake structures. The rules require baseline biological information and, perhaps, installation of fish protection technology near some intake structures at existing power plants. On January 25, 2007, the U.S. Court of Appeals for the Second Circuit overturned and remanded several provisions of the rule to the EPA for revisions. Among other things, the court rejected the EPA's use of "cost-benefit" analysis and suggested some ways to incorporate cost considerations. The full impact of these regulations will depend on subsequent legal proceedings, further rulemaking by the EPA, the results of studies and analyses performed as part of the rules' implementation, and the actual requirements established by State of Georgia regulatory agencies and, therefore, cannot be determined at this time. EnvironmentalRemediation The Company must comply with other environmental laws and regulations that cover the handling and disposal of waste and release of hazardous substances. Under these various laws and regulations, the Company could incur substantial costs to clean up properties. The Company conducts studies to determine the extent of any required cleanup and has recognized in its financial statements the costs to clean up known sites. Amounts for cleanup and ongoing monitoring costs were not material for any year presented. The Company may be liable for some or all required cleanup costs for additional sites that may require environmental remediation. See Note 3 to the financial statements under "Environmental Matters - Environmental Remediation" for additional information. Global Climate Issues Federal legislative proposals that would impose mandatory requirements related to greenhouse gas emissions continue to be considered in Congress. The ultimate outcome of these proposals cannot be determined at this time; however, mandatory restrictions on the Company's greenhouse gas emissions could result in significant additional compliance costs that could affect future unit retirement and replacement decisions and results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. In April 2007, the U.S. Supreme Court ruled that the EPA has authority under the Clean Air Act to regulate greenhouse gas emissions from new motor vehicles. The EPA is currently developing its response to this decision. Regulatory decisions that will follow from this response may have implications for both new and existing stationary sources, such as power plants. The ultimate outcome of these rulemaking activities cannot be determined at this time; however, as with the current legislative proposals, mandatory restrictions on the Company's greenhouse gas emissions could result in significant additional compliance costs that could affect future unit retirement and replacement decisions and results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. In addition, some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. For example, on July 13, 2007, the Governor of the State of Florida signed three executive orders addressing reduction of greenhouse gas emissions within the state, including statewide emission reduction targets beginning in 2017. Included in the orders is a directive to the Florida Secretary of Environmental Protection to develop rules adopting maximum allowable emissions levels of greenhouse gases for electric utilities, consistent with the statewide emission reduction targets, and a request to the Florida PSC to initiate rulemaking requiring utilities to produce at least 20% of their electricity from renewable sources. The impact of any similar state requirements on the Company will depend on the development, adoption, and implementation of state laws or rules governing greenhouse gas emissions, and the ultimate outcome cannot be determined at this time. International climate change negotiations under the United Nations Framework Convention on Climate Change also continue. Current efforts focus on a potential successor to the Kyoto Protocol for the post 2008 through 2012 timeframe. The outcome and impact of the international negotiations cannot be determined at this time. The Company continues to evaluate its future energy and emission profiles and is participating in voluntary programs to reduce greenhouse gas emissions and to help develop and advance technology to reduce emissions. II-174
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. In December 2004, the FERC initiated a proceeding to assess Southern Company's generation dominance within its retail service territory. The ability to charge market-based rates in other markets is not an issue in the proceeding. Any new market-based rate sales by the Company in Southern Company's retail service territory entered into during a 15-month refund period that ended in May 2006 could be subject to refund to a cost-based rate level. In late June and July 2007, hearings were held in this proceeding and the presiding administrative law judge issued an initial decision on November 9, 2007 regarding the methodology to be used in the generation dominance tests. The proceedings are ongoing. The ultimate outcome of this generation dominance proceeding cannot now be determined, but an adverse decision by the FERC in a final order could require the Company to charge cost-based rates for certain wholesale sales in the Southern Company retail service territory, which may be lower than negotiated market-based rates, and could also result in refunds of up to $5.8 million, plus interest. The Company believes that there is no meritorious basis for this proceeding and is vigorously defending itself in this matter. On June 21, 2007, the FERC issued its final rule regarding market-based rate authority. The FERC generally retained its current market-based rate standards. The impact of this order and its effect on the generation dominance proceeding cannot now be determined. Intercompany Interchange Contract The Company's generation fleet is operated under the IIC, as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine (1) the provisions of the IIC among the traditional operating companies (including the Company), Southern Power, and Southern Company Services, Inc. (SCS), as agent, under the terms of which the power pool of Southern Company is operated, (2) whether any parties to the IIC have violated the FERC's standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company's code of conduct defining Southern Power as a "system company" rather than a "marketing affiliate" is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power's inclusion in the IIC in 2000. The FERC also previously approved Southern Company's code of conduct. In October 2006, the FERC issued an order accepting a settlement resolving the proceeding subject to Southern Company's agreement to accept certain modifications to the settlement's terms and Southern Company notified the FERC that it accepted the modifications. The modifications largely involve functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. Southern Company filed with the FERC in November 2006 a compliance plan in connection with the order. On April 19, 2007, the FERC approved, with certain modifications, the plan submitted by Southern Company. Implementation of the plan is not expected to have a material impact on the Company's financial statements. On November 19, 2007, Southern Company notified the FERC that the plan had been implemented and the FERC division of audits subsequently began an audit pertaining to compliance implementation and related matters, which is ongoing. Generation Interconnection Agreements In November 2004, generator company subsidiaries of Tenaska, Inc. (Tenaska), as counterparties to three previously executed interconnection agreements with subsidiaries of Southern Company, including the Company, filed complaints at the FERC requesting that the FERC modify the agreements and that the Company refund a total of $7.9 million previously paid for interconnection facilities. No other similar complaints are pending with the FERC. On January 19, 2007, the FERC issued an order granting Tenaska's requested relief. Although the FERC's order required the modification of Tenaska's interconnection agreements, under the provisions of the order the Company determined that no refund was payable to Tenaska. Southern Company requested rehearing asserting that the FERC retroactively applied a new principle to existing interconnection agreements. Tenaska requested rehearing of the FERC's methodology for determining the amount of refunds. The requested rehearings were denied and Southern Company and Tenaska have appealed the orders to the U.S. Circuit Court for the District of Columbia. The final outcome of this matter cannot now be determined. II-175
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Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report PSC Matters Rate Plans In December 2007, the Georgia PSC approved the 2007 Retail Rate Plan for the years 2008 through 2010. Under the 2007 Retail Rate Plan, the Company's earnings will continue to be evaluated against a retail return on common equity (ROE) range of 10.25% to 12.25%. Two-thirds of any earnings above 12.25% will be applied to rate refunds with the remaining one-third applied to an ECCR tariff. The Company agreed that it will not file for a general base rate increase during this period unless its projected retail ROE falls below 10.25%. Retail base rates increased by approximately $99.7 million effective January 1, 2008 to provide for cost recovery of transmission, distribution, generation and other investments, as well as increased operating costs. In addition, the ECCR tariff was implemented to allow for the recovery of costs for required environmental projects mandated by state and federal regulations. The ECCR tariff increased rates by approximately $222 million effective January 1, 2008. The Company is required to file a general rate case by July 1, 2010, in response to which the Georgia PSC would be expected to determine whether the 2007 Retail Rate Plan should be continued, modified, or discontinued. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" for additional information. Fuel Cost Recovery The Company has established fuel cost recovery rates approved by the Georgia PSC. In March 2006, the Company and Savannah Electric filed a combined request for fuel cost recovery rate changes with the Georgia PSC to be effective July 1, 2006, concurrent with the merger of the companies. In June 2006. the Georgia PSC ruled on the request and approved an increase in the Company's total annual billings of approximately $400 million. The Georgia PSC order provided for a combined ongoing fuel forecast but reduced the requested increase related to such forecast by $200 million. With respect to the merger, the Georgia PSC also set a Merger Transition Adjustment (MTA) applicable to customers in the former Savannah Electric service territory so that the fuel rate that became effective on July 1, 2006 plus the MTA equaled the applicable fuel rate paid by such customers as of June 30, 2006. Amounts collected under the MTA were credited to customers in the original Georgia Power service territory through a Merger Transition Credit (MTC) through December 31, 2007. The order also required the Company to file for a new fuel cost recovery rate on a semi-annual basis, beginning in September 2006. Accordingly, in September 2006, the Company filed a request to recover fuel costs incurred through August 2006 by increasing the fuel cost recovery rate. In November 2006, under agreement with the Georgia PSC staff, the Company filed a supplementary request reflecting a forecast of annual fuel costs, as well as updated information for previously incurred fuel costs. On February 6, 2007, the Georgia PSC approved an increase in the Company's total annual billings of approximately $383 million effective March 1, 2007. The order reduced the Company's requested increase in the forecast of annual fuel costs by $40 million and disallowed $4 million of previously incurred fuel costs. Estimated under recovered fuel costs through February 2007 are to be recovered through May 2009 for customers in the original Georgia Power territory and through November 2009 for customers in the former Savannah Electric territory. The order also requires the Company to file for a new fuel cost recovery rate no later than March 1, 2008. As of December 31, 2007, the Company had a total under recovered fuel cost balance of approximately $692 million, of which approximately $106 million is not included in current rates. Fuel cost recovery revenues as recorded on the financial statements are adjusted for differences in actual recoverable costs and amounts billed in current regulated rates. Accordingly, a change in the billing factor has no significant effect on the Company's revenues or net income, but does impact annual cash flow. In accordance with Georgia PSC order, approximately $307 million of the under recovered regulatory clause revenues for the Company is included in deferred charges and other assets at December 31, 2007. See Note 1 to the financial statements under "Revenues" and Note 3 to the financial statements under "Retail Regulatory Matters" for additional information. Income Tax Matters Georgia State Income Tax Credits The Company's 2005 through 2007 income tax filings for the State of Georgia include state income tax credits for increased activity through Georgia ports. The Company has also filed similar claims for the years 2002 through 2004. The Georgia Department of Revenue (DOR) has not responded to these claims. On July 24, 2007, the Company filed a complaint in the Superior Court of Fulton 11-176
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report effect on County to recover the credits claimed for the years 2002 through 2004. If allowed, these claims could have a significant, possibly material, positive negative effect on the Company's net income. If the Company is not successful, payment of the related state tax could have a significant, possibly material, the Company's cash flow. The ultimate outcome of this matter cannot now be determined. See Note 3 under "Income Tax Matters" and Note 5 under "Unrecognized Tax Benefits" for additional information. Internal Revenue Code Section 199 Domestic Production Deduction Internal The American Jobs Creation Act of 2004 created a tax deduction for the portion of income attributable to U.S. production activities as defined in the Revenue Code of 1986, as amended (Internal Revenue Code), Section 199 (production activities deduction). The deduction is equal to a stated percentage of the years 2005 and qualified production activities net income. The percentage is phased in over the years 2005 through 2010 with a 3% rate applicable to under 2006, a 6% rate applicable for years 2007 through 2009, and a 9% rate applicable for all years after 2009. See Note 5 to the financial statements Tax Rate" for additional information. "Effective Bonus Depreciation On February 13, 2008, President Bush signed the Economic Stimulus Act of 2008 (Stimulus Act) into law. The Stimulus Act includes a provision that allows 50% bonus depreciation for certain property acquired in 2008 and placed in service in 2008, or in limited circumstances, 2009. The Company is currently assessing the financial implications of the Stimulus Act; however, the ultimate impact cannot be determined at this time. Nuclear Nuclear Projects In August 2006, as part of a potential expansion of Plant Vogtle, the Company and Southern Nuclear Operating Company, Inc. (SNC) filed an application with the Nuclear Regulatory Commission (NRC) for an early site permit (ESP) on behalf of the owners of Plant Vogtle. In addition, the Company and SNC notified the NRC of their intent to apply for a combined construction and operating license (COL) in 2008. Ownership agreements have been signed with each of the existing Plant Vogtle co-owners. See Note 4 to the financial statements for additional information on these co-owners. In June 2006, the Georgia PSC approved the Company's request to establish an accounting order that would allow the Company to defer for future recovery the ESP and COL costs, of which the Company's portion is estimated to total approximately $51 million. At December 31, 2007, approximately $28.4 million is included in deferred charges and other assets. At this point, no final decision has been made regarding actual construction. Any new generation resource must be certified by the Georgia PSC in a separate proceeding. Nuclear Relicensing In January 2002, the NRC granted the Company a 20-year extension of the licenses for both units at Plant Hatch which permits the operation of Units 1 and 2 until 2034 and 2038, respectively. The Company filed an application with the NRC in June 2007 to extend the licenses for Plant Vogtle Units 1 and 2 for an additional 20 years. The Company anticipates the NRC may make a decision regarding the license extension for Plant Vogtle as early as 2009. Other Matters The Company is involved in various other matters being litigated, regulatory matters, and certain tax-related issues that could affect future earnings. In addition, the Company is subject to certain claims and legal actions arising in the ordinary course of business. The Company's business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury, common law nuisance, and citizen enforcement of environmental requirements such as opacity and air and water quality standards, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to at hazardous materials have become more frequent. The ultimate outcome of such pending or potential litigation against the Company cannot be predicted from such this time; however, for current proceedings not specifically reported herein, management does not anticipate that the liabilities, if any, arising current proceedings would have a material adverse effect on the Company's financial statements. See Note 3 to the financial statements for information regarding material issues. 11-177
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report ACCOUNTING POLICIES Application of Critical Accounting Policies and Estimates The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements. In the application of these policies, certain estimates are made that may have a material impact on the Company's results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. Senior management has reviewed and discussed the following critical accounting policies and estimates with the Audit Committee of Southern Company's Board of Directors. Electric Utility Regulation The Company is subject to retail regulation by the Georgia PSC and wholesale regulation by the FERC. These regulatory agencies set the rates the Company is permitted to charge customers based on allowable costs. As a result, the Company applies Financial Accounting Standards Board (FASB) Statement No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), which requires the financial statements to reflect the effects ofrale regulation. Through the ratemaking process, the regulators may require the inclusion of costs or revenues in periods different than when they would be recognized by a non-regulated company. This treatment may result in the deferral of expenses and the recording of related regulatory assets based on anticipated future recovery through rates or the deferral of gains or creation of liabilities and the recording of related regulatory liabilities. The application of SFAS No. 71 has a further effect on the Company's financial statements as a result of the estimates of allowable costs used in the ratemaking process. These estimates may differ from those actually incurred by the Company; therefore, the accounting estimates inherent in specific costs such as depreciation, nuclear decommissioning, and pension and postretirement benefits have less of a direct impact on the Company's results of operations than they would on a nonregulated company. As reflected in Note 1 to the financial statements, significant regulatory assets and liabilities have been recorded. Management reviews the ultimate recoverability of these regulatory assets and liabilities based on applicable regulatory guidelines and accounting principles generally accepted in the United States. However, adverse legislative, judicial, or regulatory actions could materially impact the amounts of such regulatory assets and liabilities and could adversely impact the Company's financial statements. Contingent Obligations The Company is subject to a number of federal and state laws and regulations, as well as other factors and conditions that potentially subject it to environmental, litigation, income tax, and other risks. See FUTURE EARNINGS POTENTIAL herein and Note 3 to the financial statements for more information regarding certain of these contingencies. The Company periodically evaluates its exposure to such risks and records reserves for those matters where a loss is considered probable and reasonably estimable in accordance with generally accepted accounting principles. The adequacy of reserves can be significantly affected by external events or conditions that can be unpredictable; thus, the ultimate outcome of such matters could materially affect the Company's financial statements. These events or conditions include the following: * Changes in existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances, hazardous and solid wastes, and other environmental matters. * Changes in existing income tax regulations or changes in Internal Revenue Service (IRS) or Georgia DOR interpretations of existing regulations. * Identification of additional sites that require environmental remediation or the filing of other complaints in which the Company may be asserted to be a potentially responsible party. * Identification and evaluation of other potential lawsuits or complaints in which the Company may be named as a defendant. * Resolution or progression of existing matters through the legislative process, the court systems, the IRS, the FERC, or the EPA. 11-178
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Unbilled Revenues Revenues related to the sale of electricity are recorded when electricity is delivered to customers. However, the determination of KWH sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, amounts of electricity delivered to customers, but not yet metered and billed, are estimated. Components of the unbilled revenue estimates include total KWH territorial supply, total KWH billed, estimated total electricity lost in delivery, and customer usage. These components can fluctuate as a result of a number of factors including weather, generation patterns, and power delivery volume and other operational constraints. These factors can be unpredictable and can vary from historical trends. As a result, the overall estimate of unbilled revenues could be significantly affected, which could have a material impact on the Company's results of operations. New Accounting Standards Income Taxes On January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), which requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The provisions of FIN 48 were applied to all tax positions beginning January 1, 2007. The adoption of FIN 48 did not have a material impact on the Company's financial statements. See Note 5 under "Unrecognized Tax Benefits" for additional information. Pensions and Other Postretirement Plans On December 31, 2006, Plans" (SFAS No. 158), No. 158 will require the December 31 beginning the Company adopted FASB Statement No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement which requires recognition of the funded status of its defined benefit postretirement plans in the balance sheets. Additionally, SFAS Company to change the measurement date for its defined benefit postretirement plan assets and obligations from September 30 to with the year ending December 31, 2008. See Note 2 to the financial statements for additional information.
Fair Value Measurement The FASB issued FASB Statement No. 157, "Fair Value Measurements" (SFAS No. 157) in September 2006. SFAS No. 157 provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. The Company adopted SFAS No. 157 in its entirety on January 1, 2008, with no material effect on its financial condition or results of operations. Fair Value Option In February 2007, the FASB issued FASB Statement No. 159, "Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115" (SFAS No. 159). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. The Company adopted SFAS No. 159 on January 1, 2008, with no material effect on its financial condition or results of operations. FINANCIAL CONDITION AND LIQUIDITY Overview The Company's financial condition remained stable at December 31, 2007. Cash flow from operations totaled $1.4 billion, an increase of $248.5 million from 2006, primarily due to higher retail revenues primarily related to higher fuel cost recovery revenues and less cash used for working capital primarily from lower inventory additions and increases in other current liabilities. Cash flow from operations increased $117.4 million in 2006, primarily from increased retail operating revenues partially offset by higher fuel inventories and an increase in under recovered deferred fuel costs. In 2005, cash flow from operations increased $58.4 million primarily from increased retail operating revenues, partially offset by the increase in under recovered deferred fuel costs. 11-179
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Net cash used for investing activities totaled $1.9 billion due to gross property additions primarily related to installation of equipment to comply with environmental standards, construction of transmission and distribution facilities, and purchase of nuclear fuel. The majority of funds needed for gross the issuance of property additions for the last several years have been provided from operating activities, capital contributions from Southern Company, and short-term debt and preference stock. long and Cash provided from financing activities totaled $429.7 million primarily related to the issuance of new senior notes. The statements of cash flows provide additional details. See "Financing Activities" herein. Preference Stock Significant balance sheet changes in 2007 include a $726 million increase in long-term debt and a $221 million increase in Preferred and an increase replace short-term debt and provide funds for the Company's continuous construction programs. Other balance sheet changes include primarily to in total property, plant and equipment of $1.3 billion and a $206 million decrease in the under recovered fuel balance. The Company's ratio of common equity to total capitalization - including short-term debt - was 47.5% in 2007, 48.6% in 2006, and 47.9% in 2005. The stock, and preference Company has received investment grade ratings from the major rating agencies with respect to debt, preferred securities, preferred stock. Sources of Capital The Company plans to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from operating cash flows. However, the type and timing of any future financings, if needed, will depend on market conditions, regulatory approvals, and other factors. The issuance of long-term securities by the Company is subject to the approval of the Georgia PSC. In addition, the issuance of short-term debt securities by the Company is subject to regulatory approval by the FERC. Additionally, with respect to the public offering of securities, the Company files of securities registration statements with the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended. The amounts authorized by the Georgia PSC and the FERC are continuously monitored and appropriate filings are made to ensure flexibility in the capital markets. The Company obtains financing separately without credit support from any affiliate. See Note 6 to the financial statements under "Bank Credit Arrangements" for additional information. The Southern Company system does not maintain a centralized cash or money pool. Therefore, funds of the Company are not commingled with funds of any other company. The Company's current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source for under recovered fuel costs and to meet cash needs which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, at the beginning of 2008 the Company had credit arrangements with banks totaling $1.2 billion, of which $8 million was used to support an outstanding letter of credit. See Note 6 to the financial statements under "Bank Credit Arrangements" for additional information. At the beginning of 2008, bank credit arrangements were as follows:
Expires
Total $1,160
Unused (in millions) $1,152
2008 $40
2012 $1,120
The credit arrangement that expires in 2008 allows for the execution of term loans for an additional two-year period. The Company may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of the Company and the other traditional operating companies. Proceeds from such issuances for the benefit of the Company are loaned directly to the Company and are not commingled with proceeds from issuances for the benefits of any other operating company. The obligations of each company under these arrangements are several; there is no cross affiliate credit support. As of December 31, 2007, the Company had $616 million of outstanding commercial paper and a $100 million short-term bank loan outstanding. 11-180
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Financing Activities During 2007, the Company issued $1.5 billion of senior notes and $225 million of preference stock and incurred $191 million of obligations related to the issuance of pollution control bonds. The issuances were used to reduce the Company's short-term indebtedness, fund senior note maturities totaling $300 million, redeem $763 million of long-term debt payable to affiliated trusts, and fund the Company's ongoing construction program. Credit Rating Risk The Company does not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change to BBB- or Baa3 or below. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. These contracts are primarily for physical electricity purchases and sales. At December 31, 2007, the maximum potential collateral requirements at a BBB- or Baa3 rating were approximately $9 million. The maximum potential collateral requirements at a rating below BBB- or Baa3 were approximately $515 million. The Company is also party to certain agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for the Company and/or Alabama Power. These agreements are primarily for natural gas and power price risk management activities. At December 31, 2007, the Company's total exposure related to these types of agreements was approximately $15 million. Market Price Risk Due to cost-based rate regulation, the Company has limited exposure to market rate volatility in interest rates, commodity fuel prices, and prices of electricity. To manage the volatility attributable to these exposures, the Company nets the exposures to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company's policies in areas such as counterparty exposure and hedging practices. The Company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress tests, and sensitivity analysis. To mitigate future exposure to changes in interest rates, the Company enters into forward starting interest rate swaps and other derivatives that have been designated as hedges. These derivatives have a notional amount of $539 million and are related to anticipated debt issuances over the next two years. The weighted average interest rate on $1.4 billion of outstanding variable long-term debt that has not been hedged at January 1, 2008 was 4.5%. If the Company sustained a 100 basis point change in interest rates for all unhedged variable rate long-term debt, the change would affect annualized interest expense by approximately $14.2 million at January 1, 2008. Subsequent to December 31, 2007, the Company converted $115 million of floating rate pollution control bonds to a fixed rate mode. Additionally, the Company entered into floating to fixed interest rate swaps on $601 million of variable rate long-term debt. These actions reduced the Company's exposure to variable rate debt to $704 million for the remainder of the year. Subsequent to these actions, a 100 basis point change in interest rates for all unhedged variable rate long-term debt would affect annualized interest expense by $7.7 million. See Notes 1 and 6 to the financial statements under "Financial Instruments" for additional information. The Company's $704 million of variable interest rate exposure relates to tax-exempt auction rate pollution control bonds. Recent weakness in the auction markets has resulted in higher interest rates. The Company has sent notice of conversion of $662 million of these auction rate securities to alternative interest rate determination methods and plans to remarket all remaining auction rate securities in a timely manner. None of the securities are insured or backed by letters of credit that would require approval of a guarantor or security provider. It is not expected that the higher rates as a result of the weakness in the auction markets will be material. To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, into financial hedge contracts for gas purchases. 11-181
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report The Company has implemented a fuel hedging program at the instruction of the Georgia PSC. The changes in fair value of energy-related derivative contracts and year-end valuations were as follows at December 31:
Changes in Fair Value 2007 2006
(in millions)
Contracts beginning of year Contracts realized or settled New contracts at inception Changes in valuation techniques Current period changes(a) Contracts end of year (a) Current period changes also include the changes in fair value of new contracts entered into during the period, if any.
$(38.0) 41.6 (4.0) $ (0.4)
$ 35.3 40.2 (113.5) $ (38.0)
Source of 2007 Year-End Valuation Prices Total Fair Value Maturity Year I (in millions) 1-3 Years
Actively quoted External sources Models and other methods Contracts end of year
$(1.1) 0.7 $(0.4)
$(5.8) 0.7 $(5.1)
$4.7 $4.7
Unrealized gains and losses from mark to market adjustments on derivative contracts related to the Company's fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through the Company's fuel cost recovery mechanism. The Company realized net losses in 2007 and 2006 of $68 million and $66 million, respectively. Through June 30, 2006, the Company was allowed to retain 25% of net financial gains in earnings, and in 2005 the Company had a total net gain of $74.6 million of which the Company retained $18.6 million. See Note 3 to the financial statements under "Retail Regulatory Matters - Fuel Hedging Program" for additional information. Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. At December 31, 2007, the fair value gains (losses) of energy-related derivative contracts were reflected in the financial statements as follows:
Amounts
(in millions)
Regulatory assets, net Net income Total fair value
$(0.4) $(0.4)
Unrealized gains (losses) recognized in income were not material for any year presented. The Company is exposed to market price risk in the event of nonperformance by counterparties to the derivative energy contracts. The Company's policy is to enter into agreements with counterparties that have investment grade credit ratings by Moody's and Standard & Poor's or with counterparties who have posted collateral to cover potential credit exposure. Therefore, the Company does not anticipate market risk exposure from nonperformance by the counterparties. For additional information, see Notes 1 and 6 to the financial statements under "Financial Instruments." Capital Requirements and Contractual Obligations The construction program of the Company is currently estimated to be $2.0 billion for 2008, $2.0 billion for 2009, and $1.8 billion for 2010. Environmental expenditures included in these estimated amounts are $707 million, $353 million, and $246 million for 2008, 2009, and 2010, respectively. Actual construction costs may vary from these estimates because of changes in such factors as: business II-182
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report conditions; environmental statutes and regulations; nuclear plant regulations; FERC rules and regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. As a result of requirements by the NRC, the Company has established external trust funds for nuclear decommissioning costs. For additional information, see Note 1 to the financial statements under "Nuclear Decommissioning." In addition, as discussed in Note 2 to the financial statements, the Company provides postretirement benefits to substantially all employees and funds trusts to the extent required by the Georgia PSC and the FERC. Other funding requirements related to obligations associated with scheduled maturities of long-term debt and preferred securities and the related interest, preferred and preference stock dividends, leases, derivative obligations, and other purchase commitments are as follows. See Notes 1, 6, and 7 to the financial statements for additional information. II-183
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Contractual Obligations
2008 20092010 20112012
(in millions)
After 2012
Uncertain Timing (d)
Total
Long-term debt (a)Principal Interest Preferred and preference stock dividends (b) Derivative obligations ()Commodity Interest Operating leases Unrecognized tax benefits and interest (d) Purchase commitments (e)Capital (0 Limestone (~ Coal Nuclear fuel Natural gas (h) Purchased power Long-term service agreements (i) Trusts Nuclear decommissioning 0) Postretirement benefits (k) Total (a)
199 323 17 9 14 29 1,915 5 1,653 116 684 342 12
$ 283 611 35
$ 403 593 35 34 30 129 220 761 581 58 7 $2,851
$ 5,257 5,730 29 51 21 125 2,803 2,345 637 56 $17,054
$96 $96
$ 6,142 7,257 87 9 17 141 96 5,412 115 3,322 727 4,980 3,958 734 77 69 $33,143
3 49 3,497 29 1,519 266 732 690 27 7 46 $7,794
7 23 $5,348
All amounts are reflected based on final maturity dates. The Company plans to continue to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of January 1, 2008, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest rate risk. Preferred and preference stock does not mature; therefore, amounts provided are for the next five years only. For additional information see Notes 1 and 6 to the financial statements. The timing related to the realization of $96 million in unrecognized tax benefits and interest payments cannot be reasonably and reliably estimated due to uncertainties in the timing of the effective settlement of tax positions. Of this $96 million, $71 million is the estimated cash payment. See Note 3 and Note 5 to the financial statements for additional information. The Company generally does not enter into non-cancelable commitments for other operations and maintenance expenditures. Total other operations and maintenance expenses for the last three years were $1.6 billion, $1.6 billion, and $1.6 billion, respectively. The Company forecasts capital expenditures over a three-year period. Amounts represent current estimates of total expenditures, excluding those amounts related to contractual purchase commitments for uranium and nuclear fuel conversion, enrichment, and fabrication services. At December 31, 2007, significant purchase commitments were outstanding in connection with the construction program. As part of the Company's program to reduce sulfur dioxide emissions from certain of its coal plants, the Company is constructing certain equipment and has entered into various long-term commitments for the procurement of limestone to be used in such equipment. Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected have been estimated based on the New York Mercantile Exchange future prices at December 31, 2007. Long-term service agreements include price escalation based on inflation indices. Projections of nuclear decommissioning trust contributions are based on the 2007 Retail Rate Plan. The Company forecasts postretirement trust contributions over a three-year period. No contributions related to the Company's pension trust are currently expected during this period. See Note 2 to the financial statements for additional information related to the pension and postretirement plans, including estimated benefit payments. Certain benefit payments will be made through the related trusts. Other benefit payments will be made from the Company's corporate assets. II-184
(b) (c) (d)
(e) (f)
(g) (h) (i) (j) (k)
Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2007 Annual Report Cautionary Statement Regarding Forward-Looking Statements The Company's 2007 Annual Report contains forward-looking statements. Forward-looking statements include, among other things, statements concerning retail rates, fuel cost recovery, environmental regulations and expenditures, the Company's projections for postretirement benefit trust contributions, financing activities, access to sources of capital, the impacts of the adoption of new accounting rules, completion of construction projects, and estimated construction and other expenditures. In some cases, forward-looking statements can be identified by tenninology such as "may," "will," "could," "should," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential," or "continue" or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include: * the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water quality and emissions of sulfur, nitrogen, mercury, carbon, soot, or particulate matter and other substances, and also changes in tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; current and future litigation, regulatory investigations, proceedings, or inquiries, including FERC matters and the pending EPA civil action against the Company; the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates; variations in demand for electricity, including those relating to weather, the general economy, population, business growth (and declines), and the effects of energy conservation measures; available sources and costs of fuel; effects of inflation; ability to control costs; investment performance of the Company's employee benefit plans; advances in technology; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate cases related to fuel cost recovery; internal restructuring or other restructuring options that may be pursued; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company; the ability of counterparties of the Company to make payments as and when due; the ability to obtain new short- and long-term contracts with neighboring utilities; the direct or indirect effect on the Company's business resulting from terrorist incidents and the threat of terrorist incidents; interest rate fluctuations and financial market conditions and the results of financing efforts, including the Company's credit ratings; the ability of the Company to obtain additional generating capacity at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as an avian influenza, or other similar occurrences; the direct or indirect effects on the Company's business resulting from incidents similar to the August 2003 power outage in the Northeast; the effect of accounting pronouncements issued periodically by standard-setting bodies; and other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Company from time to time with the SEC.
* * * * * * * * * * * * * * * * * * * *
The Company expressly disclaims any obligation to update any forward-looking statements. 11-185
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STATEMENTS OF INCOME For the Years Ended December 31, 2007, 2006, and 2005 Georgia Power Company 2007 Annual Report
2007 2006 (in thousands) 2005
Operating Revenues: Retail revenues Wholesale revenues Non-affiliates Affiliates Other revenues Total operating revenues Operating Expenses: Fuel Purchased power Non-affiliates Affiliates Other operations Maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and (Expense): Allowance for equity funds used during construction Interest income Interest expense, net of amounts capitalized Other income (expense), net Total other income and (expense) Earnings Before Income Taxes Income taxes Net Income Dividends on Preferred and Preference Stock Net Income After Dividends on Preferred and Preference Stock The accompanying notes are an integral part of these financial statements. 11-186
$6,498,003 537,913 277,832 257,904 7,571,652 2,640,526 332,064 718,327 1,016,608 545,128 511,180 291,136 6,054,969 1,516,683 68,177 3,560 (343,462) 14,705 (257,020) 1,259,663 417,521 842,142 6,006 $ 836,136
$ 6,205,620 551,731 252,556 235,737 7,245,644 2,233,029 332,606 812,433 1,025,848 534,621 498,754 298,824 5,736,115 1,509,529 31,524 2,459 (317,947) 8,833 (275,131) 1,234,398 442,334 792,064 4,839 $ 787,225
$6,064,363 524.800 275,525 211,149 7,075,837 1,937,378 421,033 895,243 1,009,993 561,464 526,652 276,027 5,627,790 1,448,047 29,145 6,537 (295,486) 6,971 (252.833) 1,195,214 447,448 747,766 3,393 $ 744,373
Table of Contents STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2007, 2006, and 2005 Georgia Power Company 2007 Annual Report
2007 2006
(in thousands)
2005
Operating Activities: Net income Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization Deferred income taxes and investment tax credits, net Allowance for equity funds used during construction Pension, postretirement, and other employee benefits Stock option expense Tax benefit of stock options Other, net Changes in certain current assets and liabilities Receivables Fossil fuel stock Materials and supplies Prepaid income taxes Other current assets Accounts payable Accrued taxes Accrued compensation Other current liabilities Net cash provided from operating activities Investing Activities: Property additions Investment in restricted cash from pollution control bonds Nuclear decommissioning trust fund purchases Nuclear decommissioning trust fund sales Cost of removal net of salvage Change in construction payables, net of joint owner portion Other Net cash used for investing activities Financing Activities: Increase (decrease) in notes payable, net Proceeds Senior notes Preferred and preference stock Pollution control bonds Gross excess tax benefit of stock options Capital contributions from parent company Redemptions Pollution control bonds Capital leases Senior notes First mortgage bonds Preferred and preference stock Other long-term debt Payment of preferred and preference stock dividends Payment of common stock dividends Other Net cash provided from (used for) financing activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Supplemental Cash Flow Information: Cash paid during the period for Interest (net of $28,668, $12,530, and $11,949 capitalized, respectively) Income taxes (net of refunds) The accompanying notes are an integral part of these financial statements. 11-187
842,142 616,796 (78,010) (68,177) 8,836 5,977 1,811 33,731 134,276 (1,211) (32,998) 10,002 (4,359) 22,626 (33,320) (30,039) 20,703 1,448,786 (1,765,344) (59,525) (448,287) 441,407 (47,565) 24,893 (25,479) (1,879,900) (17,690) 1,500,000 225,000 190,800 4,695 322,448
792,064 588,428 16,159 (31,524) 18,604 5,805 1,163 3,293 1,193 (194,256) 31,317 1,060 774 (85,189) 82,735 (10,328) (21,054) 1,200,244 (1,219,498) (464,274) 457,394 (33,620) 35,075 (16,005) (1,240,928) 406,768 150,000 153,910 2,796 312,544
$ 747,766 616,963 257,501 (29,145) (13,335) 17,263 (6,933) (650.593) (2,898) (55,805) (38,975) 3,585 122,117 77,164 4,162 34,029 1,082,866 (891,314) (381,235) 372,536 (30,764) 4,190 (788) (927,375) 97,713 625,000 185,000 149,475 (185,000) (1,095) (450,000)
(2,185) (300,000) (762,887) (3,143) (689,900) (37,482) 429,656 (1,458) 16,850 $ 15,392
(153,910) (136) (150,000) (20,000) (14,569) (2.958) (630,000) (8,049) 46,396 5,712 11,138 $ 16,850
(3,246) (582,800) (21,760) (186,713) (31,222) 42,360 $ 11,138
317,938 456,852
317,536 398,735
$ 263,802 196,930
Table of Contents BALANCE SHEETS At December 31, 2007 and 2006 Georgia Power Company 2007 Annual Report
Assets 2007
(in thousands)
2006
CurrentAssets: Cash and cash equivalents Restricted cash Receivables Customer accounts receivable Unbilled revenues Under recovered regulatory clause revenues Other accounts and notes receivable Affiliated companies Accumulated provision for uncollectible accounts Fossil fuel stock, at average cost Materials and supplies, at average cost Vacation pay Prepaid income taxes Other Total current assets Property, Plant, and Equipment: In service Less accumulated provision for depreciation Nuclear fuel, at amortized cost Construction work in progress Total property, plant, and equipment Other Property and Investments: Equity investments in unconsolidated subsidiaries Nuclear decommissioning trusts, at fair value Other Total other property and investments Deferred Charges and Other Assets: Deferred charges related to income taxes Prepaid pension costs Deferred under recovered regulatory clause revenues Other regulatory assets Other Total deferred charges and other assets Total Assets The accompanying notes are an integral part of these financial statements. 11-188
15392 48,279 491,389 137,046 384,538 147,498 21,699 (7,636) 393,222 337,652 69,394 51,101 55,169 2,144,743 22,011,215 8,696,668 13,314,547 198,983 1,797,642 15,311,172 53,813 588,952 47,914 690,679
16,850 474,046 130,585 353,976 93,656 21,941 (10,030) 392,011 304,514 61,907 61,104 85,725 1,986,285 21,279,792 8,343,309 12,936,483 180,129 923,948 14,040,560 70,879 544,013 58,848 673,740
532,539 1,026,985 307,294 541,014 268,335 2,676,167 $20,822,761
510,531 688,671 544,152 629,003 235,788 2,608,145 $19,308,730
Table of Contents BALANCE SHEETS At December 31, 2007 and 2006 Georgia Power Company 2007 Annual Report
Liabilities and Stockholder's Equity 2007 2006
Current Liabilities: Securities due within one year Notes payable Accounts payable Affiliated Other Customer deposits Accrued taxes -Income taxes Other Accrued interest Accrued vacation pay Accrued compensation Other Total current liabilities Long-term Debt (See accompanying statements) Deferred Credits and Other Liabilities: Accumulated deferred income taxes Deferred credits related to income taxes Accumulated deferred investment tax credits Employee benefit obligations Asset retirement obligations Other cost of removal obligations Other regulatory liabilities Other Total deferred credits and other liabilities Total Liabilities Preferred and Preference Stock (See accompanying statements) Common Stockholder's Equity (See accompanying statements) Total Liabilities and Stockholder's Equity Commitments and Contingent Matters (See notes) The accompanying notes are an integral part of these financial statements. 1-189
(in thousands)
198,576 715,591 236,332 463,945 171,553 68,782 219,585 74,674 56,303 114,974 103,225 2,423,540 5,937,792
303,906 733,281 238,093 402,222 155,763 217,603 275.098 74,643 49,704 141,356 125,494 2,717,163 5,211,912
2,850,655 146,886 269,125 678,826 663,503 414,745 577,642 158,670 5,760,052 14,121,384 265,957 6,435,420 $20,822,761
2,815,724 157,297 282,070 698,274 626,681 436,137 281,391 80,839 5,378,413 13,307,488 44,991 5,956,251 $19,308,730
Table of Contents STATEMENTS OF CAPITALIZATION At December 31, 2007 and 2006 Georgia Power Company 2007 Annual Report
2007
(in thousands)
2006
2007
(percentof total)
2006
Long-Term Debt: Long-term debt payable to affiliated trusts -4.88% to 7.13% due 2042 to 2044 Long-term notes payable 4.875% due July 15, 2007 6.55% due May 15, 2008 4.10% due August 15, 2009 Variable rate (5.00% at 1/1/08) due 2008 Variable rate (5.09% at 1/1/08) due 2009 4.00% due 2011 5.125% due 2012 4.90% to 6.375% due 2013-2047 Total long-term notes payable Other long-term debt Pollution control revenue bonds: 3.76% to 5.45% due 2012-2036 Variable rate (3.74% to 5.25% at 1/1/08) due 2011-2041 Total other long-term debt Capitalized lease obligations Unamortized debt discount Total long-term debt (annual interest requirement - $322.8 million) Less amount due within one year Long-term debt excluding amount due within one year Preferred and Preference Stock: Non-cumulative preferred stock $25 par value - 6.125% Authorized - 50,000,000 shares Outstanding - 1,800,000 shares Non-cumulative preference stock $100 par value - 6.50% Authorized - 15,000,000 shares Outstanding - 2,250,000 shares Total preferred and preference stock (annual dividend requirement - $17.4 million) Common Stockholder's Equity: Common stock, without par value Authorized: 20,000,000 shares Outstanding: 9,261,500 shares Paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total common stockholder's equity Total Capitalization The accompanying notes are an integral part of these financial statements. II-190
206,186 45,000 125,000 150,000 150,000 100,000 200,000 3,200,000 3,970,000
969,073 300,000 45,000 125,000 150,000 100,000 200,000 1,850,000 2,770,000
774,370 1,120,275 1,894,645 70,733 (5,196) 6,136,368 198,576 5,937,792
774,370 929,475 1,703,845 76,227 (3,327) 5,515,818 303,906 5,211,912
47.0%
46.5%
44,991
44,991
220,966 265,957
44,991 2.1 0.4
398,473 3,374,777 2,676,063 (13,893) 6,435,420 $12,639,169
398,473 3,039,845 2.529,826 (11,893) 5,956,251 $11,213,154
50.9 100.0%
53.1 100.0%
Table of Contents STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 2007, 2006, and 2005 Georgia Power Company 2007 Annual Report Common Stock Balance at December 31, 2004 Net income after dividends on preferred stock Capital contributions from parent company Other comprehensive income (loss) Cash dividends on common stock Other Balance at December 31, 2005 $398,473 398,473 Paid-In Capital $2,550,801 166,738 2,717,539 Retained Earnings
(in thousands)
Other Comprehensive Income (Loss) $(37,040) -744,373 474 -22 (36,566)
Total $5,123,276 166,738 474 (582,800) 5,452,083 322,306 5,184 19,489 (630,000) (36) 5,956,251 836,136 334,931 (2,000) (689,900) 2 $6,435,420
$2,211,042 744,373 (582,800) 22 2,372,637
Net income after dividends on preferred stock

Capital contributions from parent company Other comprehensive income (loss) Adjustment to initially apply FASB Statement No. 158, net of tax Cash dividends on common stock Other Balance at December 31, 2006 Net income after dividends on preferred and preference stock Capital contributions from parent company Other comprehensive income (loss) Cash dividends on common stock Other Balance at December 31, 2007
--398,473 $398,473
322,306
787,225
-
-787,225
5.184 19,489 (11,893) (2,000) $(13,893)
--(630,000) (36) 3,039,845 2,529,826 334,931 1 $3,374,777 836,136 (689,900) 1 $2,676,063
The accompanying notes are an integral part of these financial statements. STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2007, 2006, and 2005 Georgia Power Company 2007 Annual Report
2007 2006 (in thousands) 2005
Net income after dividends on preferred and preference stock Other comprehensive income (loss): Qualifying hedges: Changes in fair value, net of tax of $(1,831), $(935), and $1,522, Reclassification adjustment for amounts included in net income, net of tax of $278, $(441), and $861, respectively Marketable securities: Changes in fair value, net of tax of $291, $(494), and $317, respectively Pension and other postretirement benefit plans: Change in additional minimum pension liability, net of tax of $-, $5,143, and $(2,216), respectively Total other comprehensive income (loss) Comprehensive Income The accompanying notes are an integral part of these financial statements. II-191
$836,136
$787,225
$744,373
(2,938) 441 497
(1.454) (700) (817)
2,420 1,065 501
(2,000) $834,136
8,155 5,184 $792,409
(3,512) 474 $744,847
Table of Contents NOTES TO FINANCIAL STATEMENTS Georgia Power Company 2007 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Georgia Power Company (the Company) is a wholly owned subsidiary of Southern Company, which is the parent company of four traditional operating companies, Southern Power Company (Southern Power), Southern Company Services, Inc. (SCS), Southern Communications Services, Inc. (SouthernLINC Wireless), Southern Company Holdings, Inc. (Southern Holdings), Southern Nuclear Operating Company, Inc. (Southern Nuclear), and other direct and indirect subsidiaries. The traditional operating companies - Alabama Power, the Company, Gulf Power, and Mississippi Power - provide electric service in four Southeastern states. The Company operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Southern Power constructs, acquires, and manages generation assets and sells electricity at market-based rates in the wholesale market. SCS, the system service company, provides at cost, specialized services to Southern Company and its subsidiary companies. SouthernLINC Wireless provides digital wireless communications services to the traditional operating companies and also markets these services to the public, and provides fiber cable services within the Southeast. Southern Holdings is an intermediate holding company subsidiary for Southern Company's investments in synthetic fuels and leveraged leases and various other energy-related businesses. The investments in synthetic fuels ended on December 31, 2007. Southern Nuclear operates and provides services to Southern Company's nuclear power plants. The equity method is used for subsidiaries in which the Company has significant influence but does not control and for variable interest entities where the Company is not the primary beneficiary. The Company is subject to regulation by the Federal Energy Regulatory Commission (FERC) and the Georgia Public Service Commission (PSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by its regulatory commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Reclassifications Certain prior years' data presented in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on total assets, net income, or cash flows. The balance sheets and the statements of cash flows have been modified to combine "Long-term Debt Payable to Affiliate Trusts" with "Long-term Debt." Correspondingly, the statements of income were modified to report "Interest expense to affiliate trusts" together with "Interest expense, net of amounts capitalized". The balance sheets were also modified to show a separate line item for "Prepaid Income Taxes", the amount of which was included in "Prepaid Expenses" in the previous year's presentation. Due to immateriality, the statements of cash flows were also modified by combining "Deferred expensesaffiliates" with "Other, net" within the operating activities section. Affiliate Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at direct or allocated cost: general and design engineering, purchasing, accounting and statistical analysis, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, and other services with respect to business and operations and power pool operations. Costs for these services amounted to $442 million in 2007, $386 million in 2006, and $348 million in 2005. Cost allocation methodologies used by SCS were approved by the Securities and Exchange Commission prior to the repeal of the Public Utility Holding Company Act of 1935, as amended, and management believes they are reasonable. The FERC permits services to be rendered at cost by system service companies. The Company has an agreement with Southern Nuclear under which the following nuclear-related services are rendered to the Company at cost: general executive and advisory services, general operations, management and technical services, administrative services including procurement, accounting, employee relations, systems and procedures services, strategic planning and budgeting services, and other services with respect to business and operations. Costs for these services amounted to $380 million in 2007, $348 million in 2006, and $328 million in 2005. II-192
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report The Company had an agreement with Southern Power under which the Company operated and maintained Southern Power's Plants Dahlberg, Franklin, and Wansley at cost. On August 1, 2007, that agreement was terminated and replaced with a service agreement under which the Company provides to Southern Power labor and other specifically requested services. Billings under these agreements with Southern Power amounted to $6.8 million in 2007, $5.4 million in 2006, and $5.2 million in 2005. The Company has an agreement with SouthemLINC Wireless under which the Company receives digital wireless communications services and purchases digital equipment. Costs for these services amounted to $7.0 million in 2007, $7.1 million in 2006, and $7.7 million in 2005. Southern Company's 30% ownership interest in Alabama Fuel Products, LLC (AFP), which produced synthetic fuel, was terminated July 1, 2006. The Company had an agreement with an indirect subsidiary of Southern Company that provided services for AFP. Under this agreement, the Company provided certain accounting functions, including processing and paying fuel transportation invoices, and the Company was reimbursed for its expenses. Amounts billed under this agreement totaled approximately $85 million in 2007, $76 million in 2006, and $61 million in 2005. In addition, the Company purchased synthetic fuel from AFP for use at Plant Branch. Synthetic fuel purchases totaled $179 million, $195 million, and $216 million in 2007, 2006, and 2005, respectively. The synthetic fuel purchases and related party transactions were terminated as of December 31, 2007. The Company has entered into several power purchase agreements (PPAs) with Southern Power for capacity and energy. Expenses associated with these PPAs were $440 million, $407 million, and $469 million in 2007, 2006, and 2005, respectively. Additionally, the Company had $26 million and $28 million of prepaid capacity expenses included in deferred charges and other assets in the balance sheets at December 31, 2007, and 2006, respectively. See Note 7 under "Purchased Power Commitments" for additional information. The Company has an agreement with Gulf Power under which Gulf Power jointly owns a portion of Plant Scherer. Under this agreement, the Company operates Plant Scherer, and Gulf Power reimburses the Company for its proportionate share of the related expenses which were $5.1 million in 2007, $8.0 million in 2006, and $4.3 million in 2005. See Note 4 for additional information. In 2007, the Company sold equipment at cost to Gulf Power for $4.0 million. The Company provides incidental services to other Southern Company subsidiaries which are generally minor in duration and amount. However, with the hurricane damage experienced by Alabama Power, Gulf Power, and Mississippi Power in 2005, assistance provided to aid in storm restoration, including company labor, contract labor, and materials, caused an increase in these activities. The total amount of storm assistance provided to Alabama Power, Gulf Power, and Mississippi Power in 2005 was $4.3 million, $5.0 million, and $55.2 million, respectively. These activities were billed at cost. The Company provided no significant storm assistance to an affiliate in 2007 and 2006. Also see Note 4 for information regarding the Company's ownership in and PPA with Southern Electric Generating Company (SEGCO) and Note 5 for information on certain deferred tax liabilities due to affiliates. The traditional operating companies, including the Company, and Southern Power may jointly enter into various types of wholesale energy, natural gas, and certain other contracts, either directly or through SCS as agent. Each participating company may be jointly and severally liable for the obligations incurred under these agreements. See Note 7 under "Fuel Commitments" for additional information. 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" (SFAS No. 71). Regulatory assets represent probable future revenues associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. 11-193
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Regulatory assets and (liabilities) reflected in the Company's balance sheets at December 31 relate to the following:
2007 2006 Note
(in millions)
Deferred income tax charges Loss on reacquired debt Vacation pay Corporate building lease Generating plant outage costs Underfunded retiree benefit plans Fuel-hedging assets Other regulatory assets Asset retirement obligations Other cost of removal obligations Deferred income tax credits Overfunded retiree benefit plans Fuel-hedging liabilities Other regulatory liabilities Total Note: The recovery and amortization periods for these regulatory assets and (liabilities) are as follows: (a)
$533 175 69 49 44 235 14 68 41 (415) (147) (540) (9) (12) $105
$511 171 62 51 56 310 58 42 53 (436) (157) (218) (6) (39) $458
(a) (b) (c) (d) (e) (f) (g) (d) (a) (a) (a) (f) (g) (d)
Asset retirement and removal liabilities are recorded, deferred income tax assets are recovered, and deferred tax liabilities are amortized over the related property lives, which may range up to 60 years. Asset retirement and removal liabilities will be settled and trued up following completion of the related activities. Recovered over either the remaining life of the original issue or, if refinanced, over the life of the new issue which may range up to 50 years. Recorded as earned by employees and recovered as paid, generally within one year. Recorded and recovered or amortized as approved by the Georgia PSC. See "Property, Plant, and Equipment" herein. Recovered and amortized over the average remaining service period which may range up to 16 years. See Note 2 under "Retirement Benefits." Fuel-hedging assets and liabilities are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed 42 months. Upon final settlement, costs are recovered through the fuel cost recovery clause.
(b) (c) (d) (e) (f) (g)
In the event that a portion of the Company's operations is no longer subject to the provisions of SFAS No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine if any impairment to other assets, including plant, exists and write down the assets, if impaired, to their fair value. All regulatory assets and liabilities are reflected in rates. Revenues Energy and other revenues are recognized as services are provided. Unbilled revenues are accrued at the end of each fiscal period. Electric rates for the Company include provisions to adjust billings for fluctuations in fuel costs and the energy component of purchased power costs, and certain other costs. Revenues are adjusted for differences between the actual recoverable costs and amounts billed in current regulated rates. Retail fuel cost recovery rates require periodic filings with the Georgia PSC. The Company is required to file its next fuel case by March 1, 2008. See Note 3 under "Retail Regulatory Matters - Fuel Cost Recovery." II-194
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report The Company has a diversified base of customers. No single customer or industry comprises 10% or more of revenues. For all periods presented, uncollectible accounts averaged less than 1% of revenues. Fuel Costs Fuel costs are expensed as the fuel is used. Fuel expense includes the cost of purchased emission allowances as they are used. Fuel expense also includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Nuclear Fuel Disposal Costs The Company has contracts with the United States, acting through the U.S. Department of Energy (DOE), that provide for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent nuclear fuel in 1998 as required by the contracts, and the Company is pursuing legal remedies against the government for breach of contract. On July 9, 2007, the U.S. Court of Federal Claims awarded the Company S30 million, based on its ownership interests, representing all of the direct costs of the expansion of spent nuclear fuel storage facilities from 1998 through 2004. On July 24, 2007, the government filed a motion for reconsideration, which was denied on November 1, 2007. The government filed an appeal on January 2, 2008. No amounts have been recognized in the financial statements as of December 31, 2007. The final outcome of this matter cannot be determined at this time, but no material impact on net income is expected as any award received is expected to be returned to customers. Sufficient pool storage capacity for spent fuel is available at Plant Vogtle to maintain full-core discharge capability for both units into 2014. Construction of an on-site dry storage facility at Plant Vogtle is expected to begin in sufficient time to maintain pool full-core discharge capability. At Plant Hatch, an on-site dry storage facility is operational and can be expanded to accommodate spent fuel through the expected life of the plant. Property, Plant, and Equipment Property, plant, and equipment is stated at original cost, less regulatory disallowances and impairments. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll- related costs such as taxes, pensions, and other benefits; and the interest capitalized and/or cost of funds used during construction. The Company's property, plant, and equipment consisted of the following at December 31:
2007
(in millions)
2006
Generation Transmission Distribution General Plant acquisition adjustment Total plant in service
$10,180 3,593 6,985 1,225 28 $22,011
$10,064 3,331 6,652 1,205 28 $21,280
The cost of replacements of property, exclusive of minor items of property, is capitalized. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense as incurred or performed with the exception of certain generating plant maintenance costs. As mandated by a Georgia PSC order, the Company defers and amortizes nuclear refueling costs over the unit's operating cycle before the next refueling. The refueling cycles are 18 and 24 months for Plants Vogtle and Hatch, 11-195
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report costs for the combustion turbines respectively. Also, in accordance with the Georgia PSC order, the Company defers the costs of certain significant inspection at Plant Mclntosh and amortizes such costs over 10 years, which approximates the expected maintenance cycle. Income and Other Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary from differences. Investment tax credits utilized are deferred and amortized to income over the average life of the related property. Taxes that are collected customers on behalf of governmental agencies to be remitted to these agencies are presented net on the statements of income. In accordance with FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), the Company recognizes tax positions that are "more likely than not" of being effect of sustained upon examination by the appropriate taxing authorities. See Note 5 under "Unrecognized Tax Benefits" for additional information on the adopting FIN 48. Depreciation and Amortization in each of Depreciation of the original cost of utility plant in service is provided primarily by using composite straight-line rates, which approximated 2.6% PSC. Effective 2007, 2006, and 2005. Depreciation studies are conducted periodically to update the composite rates that are approved by the Georgia January 1, 2008, the Company's depreciation rates were revised by the Georgia PSC. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its original cost, together with the cost of removal, less salvage, is charged to accumulated depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Under the Company's retail rate plan for the three years ended December 31, 2007 (2004 Retail Rate Plan), the Company was ordered to recognize Georgia PSC-certified capacity costs in rates evenly over the three years covered by the 2004 Retail Rate Plan. The Company recorded credits to amortization of $19 million and $14 million in 2007 and 2006, respectively, and an increase to amortization of $33 million in 2005. See Note 3 under "Retail Regulatory Matters - Rate Plans" for additional information. Asset Retirement Obligations and Other Costs of Removal Asset retirement obligations are computed as the present value of the ultimate costs for an asset's future retirement and are recorded in the period in which the liability is incurred. The costs are capitalized as part of the related long-lived asset and depreciated over the asset's useful life. The Company has received accounting guidance from the Georgia PSC allowing the continued accrual of other future retirement costs for long-lived assets that the Company does not have a legal obligation to retire. Accordingly, the accumulated removal costs for these obligations will continue to be reflected in the balance sheets as a regulatory liability. The liability recognized to retire long-lived assets primarily relates to the Company's nuclear facilities, which include the Company's ownership interests in Plants Hatch and Vogtle. The fair value of assets legally restricted for settling retirement obligations related to nuclear facilities as of December 31, 2007 was $589 million. In addition, the Company has retirement obligations related to various landfill sites, ash ponds, underground storage tanks, and asbestos removal. The Company also has identified retirement obligations related to certain transmission and distribution facilities, leasehold improvements, not been equipment on customer property, and property associated with the Company's rail lines. However, liabilities for the removal of these assets have the range of time over which the Company may settle these obligations is unknown and cannot be reasonably estimated. The Company will recorded because continue to recognize in the statements of income the allowed removal costs in accordance with its regulatory treatment. Any difference between costs recognized under FASB Statement No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143) and FASB Interpretation No. 47, "Conditional Asset Retirement Obligations" and those reflected in rates are recognized as either a regulatory asset or liability in the balance sheets as ordered by the Georgia PSC. See "Nuclear Decommissioning" herein for further information on amounts included in rates. 11-196
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Details of the asset retirement obligations included in the balance sheets are as follows:
2007
(in millions)
2006
Balance beginning of year Liabilities incurred Liabilities settled Accretion Cash flow revisions Balance end of year Nuclear Decommissioning
$627 (3) 40 $664
$635 5 (2) 41 (52) $627
The Nuclear Regulatory Commission (NRC) requires licensees of commercial nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. The Company has external trust funds to comply with the NRC's regulations. Use of the funds is restricted to nuclear decommissioning activities and the funds are managed and invested in accordance with applicable requirements of various regulatory bodies, including the NRC, the FERC, and the Georgia PSC, as well as the Internal Revenue Service (IRS). The trust funds are invested in a tax-efficient manner in a diversified mix of equity and fixed income securities and are classified as available-for-sale. The trust funds are included in the balance sheets at fair value, as obtained from quoted market prices for the same or similar investments. As the external trust funds are actively managed by unrelated parties with limited direction from the Company, the Company does not have the ability to choose to hold securities with unrealized losses until recovery. Through 2005, the Company considered other-than-temporary impairments to be immaterial. However, since the January 1, 2006 effective date of FASB Staff Position FAS 115-1/124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" (FSP No. 115-1), the Company considers all unrealized losses to represent other-than-temporary impairments. The adoption of FSP No. 115-1 had no impact on the results of operations, cash flows, or financial condition of the Company as all losses have been and continue to be recorded through a regulatory liability, whether realized, unrealized, or identified as other-than-temporary. Details of the securities held in these trusts at December 31, 2007 were as follows:
2007 Unrealized Gains Other-than-Temporary Impairments (in millions) Fair Value
Equity Debt
Other
$125.5 4.8 $130.3

Unrealized Gains
$(12.2) (1.8)
-
$402.4 171.8
14.8
Total
2006
$(14.0)
Other-than-Temporary Impairments (in millions)
$589.0
Fair Value
Equity Debt
Other
$106.9 3.0 109.9
$(5.0) (0.7)
-
$378.3 165.4
0.3
Total
$(5.7)
$544.0
The contractual maturities of debt securities at December 31, 2007 were as follows: $2.6 million in 2008, $38.5 million in 2009-2012, $41.1 million in 20132017. and $85.4 million thereafter. Sales of the securities held in the trust funds resulted in cash proceeds of $441.4 million, $457.4 million, and $372.5 million in 2007, 2006, and 2005, respectively, all of which were re-invested. Realized gains and other-than-temporary impairment losses were $43.7 million and $39.1 million, respectively, in 2007 and $17.8 million and $12.1 million, respectively, in 2006. Net realized gains/(losses) were $12.6 million in 2005. Realized gains and other-thantemporary impairment losses are determined on a specific II-197
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report identification basis. In accordance with regulatory guidance, all realized and unrealized gains and losses are included in the regulatory liability for asset retirement obligations in the balance sheets and are not included in net income or other comprehensive income. Unrealized gains and other-than-temporary impairment losses are considered non-cash transactions for purposes of the statements of cash flows. Unrealized losses were not material in any period presented and did not require the recognition of any impairment to the underlying investments. Amounts previously recorded in internal reserves are being transferred into the external trust funds over periods approved by the Georgia PSC. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission only the radioactive portions of a nuclear unit based on the size and type of reactor. The Company has filed plans with the NRC designed to ensure that, over time, the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. Site study cost is the estimate to decommission a specific facility as of the site study year. The estimated costs of decommissioning are based on the most current study performed in 2006. The site study costs and accumulated provisions for decommissioning as of December 31, 2007 based on the Company's ownership interests were as follows:
Plant Hatch Plant Vogle
Decommissioning periods: Beginning year Completion year
2034 2061
(in millions)
2027 2051
Site study costs: Radiated structures Non-radiated structures Total site study costs Accumulated provision
$ 544 46 $ 590 $ 368
$ 507 67 $ 574 $ 222
The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from these estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making these estimates. For ratemaking purposes, the Company's decommissioning costs are based on the NRC generic estimate to decommission the radioactive portion of the facilities. The Georgia PSC approved annual decommissioning costs for ratemaking were $7 million annually for Plant Vogtle for 2005 through 2007. Under the 2007 Retail Rate Plan, the annual decommissioning cost for ratemaking will decrease to $3 million for Plant Vogtle. Based on current estimates, the Company projects the external trust funds for Plant Hatch will be adequate to meet the decommissioning obligations with no further contributions. The NRC estimates are $450 million and $313 million for Plants Hatch and Vogtle, respectively. Significant assumptions used to determine the costs for ratemaking include an estimated inflation rate of 2.9% and an estimated trust earnings rate of 4.9%. Another significant assumption was that the operating licenses for Plant Vogtle, would remain at 40 years until a 20-year extension requested by the Company in June 2007 is authorized by the NRC. The Company anticipates the NRC may make a decision regarding the license extension for Plant Vogtle as early as 2009. Allowance for Funds Used During Construction (AFUDC) and Interest Capitalized In accordance with regulatory treatment, the Company records AFUDC, which represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new regulated 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 equity component of AFUDC is not included in calculating taxable income. For the years 2007, 2006, and 2005, the average AFUDC rates were 8.4%, 8.3%, and 8.0%, respectively, and AFUDC capitalized was $96.8 million, $44.1 million, and $41.1 million, respectively. AFUDC and interest capitalized, net of taxes were 10.3%, 5.0%, and 4.9% of net income after dividends on preferred and preference stock for 2007, 2006, and 2005, respectively. 11-198
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Impairment of Long-Lived Assets and Intangibles be The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not The determination of whether an impairment has occurred is based on either a specific regulatory disallowance or an estimate of undiscounted recoverable. future cash flows attributable to the assets, as compared with the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined by either the amount of regulatory disallowance or by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. For assets identified as held for sale, the carrying value is compared to the estimated fair value less the cost to sell in order to determine if an impairment loss is required. Until the assets are disposed of, their estimated fair value is re-evaluated when circumstances or events change. Storm Damage Reserve The Company maintains a reserve for property damage to cover the cost of damages from major storms to its transmission and distribution lines and the cost of uninsured damages to its generation facilities and other property as mandated by the Georgia PSC. Under the 2004 Retail Rate Plan, the Company accrued $6.6 million annually that was recoverable through base rates. Starting January 1, 2008, the Company will accrue $21.4 million annually under the 2007 Retail Rate Plan. The Company expects the Georgia PSC to periodically review and adjust, if necessary, the amounts collected in rates for storm damage costs. Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the average costs of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Fuel Inventory Fuel inventory includes the average costs of oil, coal, natural gas, and emission allowances. Fuel is charged to inventory when purchased and then expensed as used and recovered by the Company through fuel cost recovery rates approved by the Georgia PSC. Emission allowances granted by the Environmental Protection Agency (EPA) are included in inventory at zero cost. Stock Options Southern Company provides non-qualified stock options to a large segment of the Company's employees ranging from line management to executives. Prior to January 1, 2006, the Company accounted for options granted in accordance with Accounting Principles Board Opinion No. 25; thus, no compensation expense was recognized because the exercise price of all options granted equaled the fair market value on the date of the grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions ofFASB Statement No. 123(R), "Share-Based Payment" (SFAS No. 123(R)), using the modified prospective method. Under that method, compensation cost for the years-ended December 31, 2007 and 2006 was recognized as the requisite service was rendered and included: (a) compensation cost for the portion of share-based awards granted prior to and that were outstanding as of January 1, 2006, for which the requisite service had not been rendered, based on the grant-date fair value of those awards as calculated in accordance with the original provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation", and (b) compensation cost for all sharebased awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Results for prior periods have not been restated. The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company's employees are recognized in the Company's financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company. 11-199
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report For the Company, the adoption of SFAS No. 123(R) resulted in a reduction in earnings before income taxes and net income of $6.0 million and $3.7 million, respectively, for the year ended December 31, 2007, and $5.8 million and $3.6 million, respectively, for the year ended December 31, 2006. Additionally, SFAS No. 123(R) requires the gross excess tax benefits from stock option exercises to be reclassified as a financing cash flow as opposed to an operating cash flow; the reduction in operating cash flows and the increase in financing cash flows for the years ended December 31, 2007 and December 31, 2006 was $4.7 million and $2.8 million, respectively. For the year ended December 31, 2005, prior to the adoption of SFAS No. 123(R), the pro forma impact on net income of fair-value accounting for options granted was as follows:
2005 As Reported Options Impact After Tax
(in millions)
Pro Forma
Net income
$744
$(3)
$741
Because historical forfeitures have been insignificant and are expected to remain insignificant, no forfeitures were assumed in the calculation of compensation expense; rather they are recognized when they occur. The estimated fair values of stock options granted in 2007, 2006, and 2005 were derived using the Black-Scholes stock option pricing model. Expected volatility was based on historical volatility of Southern Company's stock over a period equal to the expected term. The Company used historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options. The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted:
Year Ended December 31 2007 2006 2005
Expected volatility Expected term (in years) Interest rate Dividend yield Weighted average grant-date fair value Financial Instruments
14.8% 5.0 4.6% 4.3% $4.12
16.9% 5.0 4.6% 4.4% $4.15
17.9% 5.0 3.9% 4.4% $3.90
The Company uses derivative financial instruments to limit exposure to fluctuations in interest rates, the prices of certain fuel purchases, and electricity purchases and sales. All derivative financial instruments are recognized as either assets or liabilities and are measured at fair value. Substantially all of the Company's bulk energy purchases and sales contracts that meet the definition of a derivative are exempt from fair value accounting requirements and are accounted for under the accrual method. Other derivative contracts qualify as cash flow hedges of anticipated transactions or are recoverable through the Georgia PSC-approved fuel hedging program. This results in the deferral of related gains and losses in other comprehensive income or regulatory assets and liabilities, respectively, until the hedged transactions occur. Any ineffectiveness arising from cash flow hedges is recognized currently in net income. Other derivative contracts are marked to market through current period income and are recorded on a net basis in the statements of income. The Company is exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the Company's exposure to counterparty credit risk. The Company's financial instruments for which the carrying amount did not equal fair value at December 31 were as follows:
Carrying Amount
(in millions)
Fair Value
Long-term debt: 2007 2006 The fair values were based on either closing market prices or closing prices of comparable instruments. II-200
$6,066 $5,440
$5,969 $5,376
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Comprehensive Income The objective of comprehensive income is to report a measure of all changes in common stock equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income consists of net income, changes in the fair value of qualifying cash flow hedges and marketable securities, and prior to the adoption of SFAS No.158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" (SFAS No. 158) the minimum pension liability, less income taxes and reclassifications for amounts included in net income. Variable Interest Entities The primary beneficiary of a variable interest entity must consolidate the related assets and liabilities. The Company has established certain wholly-owned trusts to issue preferred securities. However, the Company is not considered the primary beneficiary of the trusts. Therefore, the investments in these trusts are reflected as Other Investments, and the related loans from the trusts are reflected as Long-term Debt in the balance sheets. See Note 6 under "Long-Term Debt Payable to Affiliated Trusts" for additional information. 2. RETIREMENT BENEFITS The Company has a defined benefit, trusteed pension plan covering substantially all employees. The plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the plan are expected for the year ending December 31, 2008. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds related trusts to the extent required by the FERC. For the year ending December 31, 2008, postretirement trust contributions are expected to total approximately $23.0 million. The measurement date for plan assets and obligations is September 30 for each year presented. Pursuant to SFAS No. 158, the Company will be required to change the measurement date for its defined benefit postretirement plans from September 30 to December 31 beginning with the year ending December 31, 2008. 11-201
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Pension Plans The total accumulated benefit obligation for the pension plans was $2.0 billion in 2007 and $2.0 billion in 2006. Changes during the year in the projected benefit obligations and the fair value of plan assets were as follows:
2007 (in millions) 2006
Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Benefits paid Plan amendments Actuarial (gain) loss Balance at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid Fair value of plan assets at end of year Funded status at end of year Fourth quarter contributions Prepaid pension asset, net
$2,136 51 126 (98) 15 (52) 2,178
$2,172 53 117 (95) 2 (113) 2,136
2,710 456 5 (98) 3,073 895 2 $ 897
2,493 306 6 (95) 2,710 574 2 $ 576
At December 31, 2007, the projected benefit obligations for the qualified and non-qualified pension plans were $2.0 billion and $133 million, respectively. All plan assets are related to the qualified pension plan. Pension plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). The Company's investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily as hedging tools but may also be used to gain efficient exposure to the various asset classes. The Company primarily minimizes the risk of large losses through diversification but also monitors and manages other aspects of risk. The actual composition of the Company's pension plan assets as of the end of the year, along with the targeted mix of assets, is presented below:
Target 2007 2006
Domestic equity International equity Fixed income Real estate Private equity Total II-202
36% 24 15 15 10 100%
38% 24 15 16 7 100%
38% 23 16 16 7 100%
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Amounts recognized in the balance sheets related to the Company's pension plans consist of the following:
Prepaid pension costs Other regulatory assets Current liabilities, other Other regulatory liabilities Employee benefit obligations
$1,027 64 (7) (540) (123)
$ 689 56 (6) (218) (107)
Presented below are the amounts included in regulatory assets and regulatory liabilities at December 31, 2007 and 2006 related to the defined benefit pension plans that have not yet been recognized in net periodic pension cost along with the estimated amortization of such amounts for 2008.
Prior Service Cost Net(Gain)/Loss (in millions)
Balance at December 31, 2007: Regulatory asset Regulatory liabilities Total
$ 24 81 $105
(in millions)
40 (621) $(581) $
Balance at December 31, 2006: Regulatory asset Regulatory liabilities Total
$ 11 92 $103
(in millions)
45 (310) $(265)
Estimated amortization in net periodic pension cost in 2008: Regulatory assets Regulatory liabilities Total
3 11 $ 14
$ $
3 3
The changes in the balances of regulatory assets and regulatory liabilities related to the defined benefit pension plans for the year ended December 31, 2007 are presented in the following table:
Regulatory Liabilities Regulatory Assets (in millions)
Beginning balance Net gain Change in prior service costs Reclassification adjustments: Amortization of prior service costs Amortization of net gain Total reclassification adjustments Total change Ending balance 11-203
$56 (1) 15 (3) (3) (6) 8 $64
$(218) (311) (11) (11) (322) $(540)
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Components of net periodic pension cost (income) were as follows:
2007 2006
(in millions)
2005
Service cost Interest cost Expected return on plan assets Recognized net (gain) loss Net amortization Net periodic pension cost (income)
51 126 (195) 3 14 $ (1)
$ 53 117 (184) 6 8 $ -
$ 47 112 (186) 4 9 $ (14)
Net periodic pension cost (income) is the sum of service cost, interest cost, and other costs netted against the expected return on plan assets. The expected return on plan assets is determined by multiplying the expected rate of return on plan assets and the market-related value of plan assets. In determining the market-related value of plan assets, the Company has elected to amortize changes in the market value of all plan assets over five years rather than recognize the changes immediately. As a result, the accounting value of plan assets that is used to calculate the expected return on plan assets differs from the current fair value of the plan assets. Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31, 2007, estimated benefit payments were as follows:
Benefit Payments (in millions)
2008 2009 2010 2011 2012 2013 to 2017 II-204
$110 115 119 134 142 $682
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Other Postretirement Benefits Changes during the year in the accumulated postretirement benefit obligations (APBO) and in the fair value of plan assets were as follows:
2007
(in millions)
2006
Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Benefits paid Actuarial (gain) loss Retiree drug subsidy Balance at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid Fair value of plan assets at end of year Funded status at end of year Fourth quarter contributions Accrued liability (recognized in the balance sheets)
$807 10 47 (35) (33) 2 798 388 54 18 (33) 427 (371) 31 $(340)
$812 11 43 (34) (27) 2 807 362 35 48 (57) 388 (419) 20 $(399)
Other postretirement benefits plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code. The Company's investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily as hedging tools but may also be used to gain efficient exposure to the various asset classes. The Company primarily minimizes the risk of large losses through diversification but also monitors and manages other aspects of risk. The actual composition of the Company's other postretirement benefit plan assets as of the end of the year, along with the targeted mix of assets, is presented below:
Target 2007 2006
Domestic equity International equity Fixed income Real estate Private equity Total
43% 21 29 4 3 100%
46% 23 25 4 2 100%
44% 20 27 6 3 100%
Amounts recognized in the balance sheets related to the Company's other postretirement benefit plans consist of the following:
Other regulatory assets Employee benefit obligations 11-205
$ 171 (340)
$ 255 (399)
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Presented below are the amounts included in regulatory assets at December 31, 2007 and 2006 related to the other postretirement benefit plans that have not yet been recognized in net periodic postretirement benefit cost along with the estimated amortization of such amounts for 2008:
Prior Service Cost Net (Gain)/Loss (in millions) Transition Obligation
Balance at December 31, 2007: Regulatory assets Balance at December 31, 2006: Regulatory assets Estimated amortization in net periodic postretirement benefit cost in 2008: Regulatory assets
$22
$ 94
$55
$24
$166
$64
$ 2
$ 9
The change in the balance of regulatory assets related to the other postretirement benefit plans for the year ended December 31, 2007 is presented in the following table:
Regulatory Assets (in millions)
Beginning balance Net gain Change in prior service costs Reclassification adjustments: Amortization of transition obligation Amortization of prior service costs Amortization of net gain Total reclassification adjustments Total change Ending balance Components of the other postretirement benefit plans' net periodic cost were as follows:
2007 2006
(in millions)
$254 (64)
(9) (2) (8) (19) (83) $171
2005
Service cost Interest cost Expected return on plan assets Net amortization Net postretirement cost
$10 47 (26) 19 $50
$ 11 44 (25) 22 $ 52
$ 11 43 (23) 19 $ 50
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Act) provides a 28% prescription drug subsidy for Medicare eligible retirees. The effect of the subsidy reduced the Company's expenses for the years ended December 31, 2007, 2006, and 2005 by approximately $14 million, $16 million, and $11 million, respectively. II-206
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the APBO for the postretirement plans. Estimated benefit payments are reduced by drug subsidy receipts expected as a result of the Medicare Act as follows:
Benefit Payments Subsidy Receipts (in millions) Total
2008 2009 2010 2011 2012 2013 to 2017 Actuarial Assumptions
$ 43 46 51 55 58 $331
$ (3) (4) (4) (5) (5) $(37)
$ 40 42 47 50 53 $294
The weighted average rates assumed in the actuarial calculations used to determine both the benefit obligations as of the measurement date and the net periodic costs for the pension and other postretirement benefit plans for the following year are presented below. Net periodic benefit costs were calculated in 2004 for the 2005 plan year using a discount rate of 5.75%.
2007 2006 2005
Discount Annual salary increase Long-term return on plan assets
6.30% 3.75 8.50
6.00% 3.50 8.50
5.50% 3.00 8.50
The Company determined the long-term rate of return based on historical asset class returns and current market conditions, taking into account the diversification benefits of investing in multiple asset classes. An additional assumption used in measuring the APBO was a weighted average medical care cost trend rate of 9.75% for 2008. decreasing gradually to 5.25% through the year 2015, and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2007 as follows:
1 Percent Increase (in millions) I Percent Decrease
Benefit obligation Service and interest costs Employee Savings Plan
$62 $ 5
$53 $ 4
The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides an 85% matching contribution up to 6% of an employee's base salary. Prior to November 2006, the Company matched employee contributions at a rate of 75% up to 6% of the employee's base salary. Total matching contributions made to the plan for 2007, 2006, and 2005 were $24 million. $21 million, and $20 million, respectively. 3. CONTINGENCIES AND REGULATORY MATTERS General Litigation Matters The Company is subject to certain claims and legal actions arising in the ordinary course of business. In addition, the Company's business activities are subject to extensive governmental regulation related to public health and the environment. Litigation over environmental issues and claims of various types, including property damage, personal injury, common law nuisance, and citizen enforcement of environmental requirements such as opacity and air and water quality standards, has increased generally throughout the United States. In particular, personal injury claims for damages caused by alleged exposure to hazardous materials have become 11-207
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report for current more frequent. The ultimate outcome of such pending or potential litigation against the Company cannot be predicted at this time; however, proceedings would have a proceedings not specifically reported herein, management does not anticipate that the liabilities, if any, arising from such current material adverse effect on the Company's financial statements. Environmental Matters New Source Review Actions In November 1999, the EPA brought a civil action in the U.S. District Court for the Northern District of Georgia against certain Southern Company of the Clean subsidiaries, including Alabama Power and the Company, alleging that these subsidiaries had violated the New Source Review (NSR) provisions Air Act and related state laws at certain coal-fired generating facilities, including the Company's Plants Bowen and Scherer. Through subsequent amendments and other legal procedures, the EPA filed a separate action in January 2001 against Alabama Power in the U.S. District Court for the Northern District of Alabama after Alabama Power was dismissed from the original action. In these lawsuits, the EPA alleged that NSR violations occurred at eight order coal-fired generating facilities operated by Alabama Power and the Company. The civil actions request penalties and injunctive relief, including an closed since requiring the installation of the best available control technology at the affected units. The action against the Company has been administratively the spring of 2001, and the case has not been reopened. In June 2006, the U.S. District Court for the Northern District of Alabama entered a consent decree between Alabama Power and the EPA, resolving the alleged NSR violations at Plant Miller. The consent decree required Alabama Power to pay $100,000 to resolve the government's claim for a civil penalty be and to donate $4.9 million of sulfur dioxide emission allowances to a nonprofit charitable organization and formalized specific emissions reductions to accomplished by Alabama Power, consistent with other Clean Air Act programs that require emissions reductions. In August 2006, the district court in Alabama granted Alabama Power's motion for summary judgment and entered final judgment in favor of Alabama Power on the EPA's claims related to the remaining four plants. Court The plaintiffs appealed the district court's decision to the U.S. Court of Appeals for the Eleventh Circuit, and the appeal was stayed by the Appeals in a similar case against Duke Energy. The Supreme Court issued its decision in the Duke Energy case in pending the U.S. Supreme Court's decision April 2007. On October 5, 2007, the U.S. District Court for the Northern District of Alabama issued an order in the Alabama Power case indicating a willingness to re-evaluate its previous decision in light of the Supreme Court's Duke Energy opinion. On December 21, 2007, the Eleventh Circuit vacated the district court's decision in the Alabama Power case and remanded the case back to the district court for consideration of the legal issues in light of the Supreme Court's decision in the Duke Energy case. The Company believes it has complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $32,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome in either of these cases could require substantial capital expenditures or affect the timing of currently budgeted capital results expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. Such expenditures could affect future and financial condition if such costs are not recovered through regulated rates. of operations, cash flows, Carbon Dioxide Litigation In July 2004, attorneys general from eight states, each outside of the Company's service territory, and the corporation counsel for New York City filed a complaint in the U.S. District Court for the Southern District of New York against Southern Company, including the Company, and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies' emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Under common law public and private nuisance theories, the plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining global wanning and (2) requiring each of the defendants to cap its emissions of carbon dioxide and then reduce those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. The Company believes these the claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. In September 2005, the U.S. District Court for Southern District of New York granted Southern Company's and the other defendants' motions to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit in October 2005 and no decision has been issued. The ultimate outcome of these matters cannot be determined at this time. 11-208
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Environmental Remediation Through 2007, the Company recovered environmental costs through its base rates. Beginning in 2005, such rates included an annual accrual of $5.4 million for environmental remediation. Beginning in January 2008, the Company is recovering environmental remediation costs through a new tariff (see "Rate Plans" herein) that includes an annual accrual of $1.2 million for environmental remediation. Environmental remediation expenditures will be charged against the reserve as they are incurred. The annual accrual amount will be reviewed and adjusted in future regulatory proceedings. Under Georgia PSC ratemaking provisions, $22 million had previously been deferred in a regulatory liability account for use in meeting future environmental remediation costs of the Company and was amortized over a three-year period that ended December 31, 2007. As of December 31, 2007, the balance of the environmental remediation liability was $13.5 million. The Company has been designated as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), including a large site in Brunswick, Georgia on the CERCLA National Priorities List (NPL). The parties have completed the removal of wastes from the Brunswick site as ordered by the EPA. Additional claims for recovery of natural resource damages at this site or for the assessment and potential cleanup of other sites on the Georgia Hazardous Sites Inventory and the CERCLA NPL are anticipated. The final outcome of these matters cannot now be determined. However, based on the currently known conditions at these sites and nature and extent of activities relating to these sites, management does not believe that additional liabilities, if any, at these sites would be material to the Company's financial statements. FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. In December 2004, the FERC initiated a proceeding to assess Southern Company's generation dominance within its retail service territory. The ability to charge market-based rates in other markets is not an issue in the proceeding. Any new market-based rate sales by the Company in Southern Company's retail service territory entered into during a 15-month refund period that ended in May 2006 could be subject to refund to a cost-based rate level. In late June and July 2007, hearings were held in this proceeding and the presiding administrative law judge issued an initial decision on November 9, 2007 regarding the methodology to be used in the generation dominance tests. The proceedings are ongoing. The ultimate outcome of this generation dominance proceeding cannot now be determined, but an adverse decision by the FERC in a final order could require the Company to charge cost-based rates for certain wholesale sales in the Southern Company retail service territory, which may be lower than negotiated market-based rates and could also result in refunds of up to $5.8 million, plus interest. The Company believes that there is no meritorious basis for this proceeding and is vigorously defending itself in this matter. On June 21, 2007, the FERC issued its final rule regarding market-based rate authority. The FERC generally retained its current market-based rate standards. The impact of this order and its effect on the generation dominance proceeding cannot now be determined. Intercompany Interchange Contract The Company's generation fleet is operated under the Intercompany Interchange Contract (IIC), as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine (I) the provisions of the IIC among the traditional operating companies (including the Company), Southern Power, and SCS, as agent, under the terms of which the power pool of Southern Company is operated, (2) whether any parties to the IIC have violated the FERC's standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company's code of conduct defining Southern Power as a "system company" rather than a "marketing affiliate" is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power's inclusion in the IIC in 2000. The FERC also previously approved Southern Company's code of conduct. In October 2006, the FERC issued an order accepting a settlement resolving the proceeding subject to Southern Company's agreement to accept certain modifications to the settlement's terms and Southern Company notified the FERC that it accepted the modifications. The modifications largely involve functional separation and information restrictions related to marketing activities conducted on 1I-209
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report behalf of Southern Power. Southern Company filed with the FERC in November 2006 a compliance plan in connection with the order. On April 19, 2007, the FERC approved, with certain modifications, the plan submitted by Southern Company. Implementation of the plan is not expected to have a material impact on the Company's financial statements. On November 19, 2007, Southern Company notified the FERC that the plan had been implemented and the FERC division of audits subsequently began an audit pertaining to compliance implementation and related matters, which is ongoing. Generation Interconnection Agreements In November 2004, generator company subsidiaries of Tenaska, Inc. (Tenaska), as counterparties to three previously executed interconnection agreements with subsidiaries of Southern Company, including the Company, filed complaints at the FERC requesting that the FERC modify the agreements and that the Company refund a total of $7.9 million previously paid for interconnection facilities. No other similar complaints are pending with the FERC. On January 19, 2007, the FERC issued an order granting Tenaska's requested relief. Although the FERC's order required the modification of Tenaska's interconnection agreements, under the provisions of the order the Company determined that no refund was payable to Tenaska. Southern Company requested rehearing asserting that the FERC retroactively applied a new principle to existing interconnection agreements. Tenaska requested rehearing of FERC's methodology for determining the amount of refunds. The requested rehearings were denied and Southern Company and Tenaska have appealed the orders to the U.S. Circuit Court for the District of Columbia. The final outcome of this matter cannot now be determined. Right of Way Litigation In late 2001, certain subsidiaries of Southern Company, including Alabama Power, the Company, Gulf Power, Mississippi Power, and Southern Telecom, Inc. (a subsidiary of SouthernLINC Wireless), were named as defendants in a lawsuit brought by a telecommunications company that uses certain of the defendants' rights of way. This lawsuit alleges, among other things, that the defendants are contractually obligated to indemnify, defend, and hold harmless the telecommunications company from any liability that may be assessed against it in pending and future right of way litigation. The Company believes that the plaintiffs claims are without merit. In the fall of 2004, the trial court stayed the case until resolution of the underlying landowner litigation discussed above. In January 2005, the Georgia Court of Appeals dismissed the telecommunications company's appeal of the trial court's order for lack ofjurisdiction. An adverse outcome in this matter, combined with an adverse outcome against the telecommunications company could result in substantial judgments; however, the final outcome cannot now be determined. Income Tax Matters The Company's 2005 through 2007 income tax filings for the State of Georgia included state income tax credits for increased activity through Georgia ports. The Company has also filed similar claims for the years 2002 through 2004. The Georgia Department of Revenue has not responded to these claims. On July 24, 2007, the Company filed a complaint in the Superior Court of Fulton County to recover the credits claimed for the years 2002 through 2004. If the Company prevails, these claims could have a significant, and possibly material, positive effect on the Company's net income. If the Company is not successful, payment of the related state tax could have a significant, and possibly material, negative effect on the Company's cash flow. The ultimate outcome of this matter cannot now be determined. See Note 5 under "Unrecognized Tax Benefits" for additional information. Property Tax Matters The Monroe County Board of Tax Assessors (Monroe Board) had issued assessments reflecting substantial increases in the ad valorem tax valuation of the Company's 22.95% ownership interest in Plant Scherer, which is located in Monroe County, Georgia (Monroe County) for tax years 2003 through 2007. In November 2004, the Company filed suit against the Monroe Board in the Superior Court of Monroe County. The Company requested injunctive relief prohibiting Monroe County and the Monroe Board from unlawfully changing the value of Plant Scherer and ultimately collecting additional ad valorem taxes from the Company. In December 2005, the court granted Monroe County's motion for summary judgment. The Company filed an appeal of the Superior Court's decision to the Georgia Supreme Court. On March 30, 2007, the Georgia Court of Appeals reversed the trial court and ruled that the Monroe Board had exceeded its legal authority and remanded the case for entry of an injunction prohibiting the Monroe Board from collecting taxes based on its 11-210
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report this decision. independent valuation of Plant Scherer. On July 16, 2007, the Georgia Supreme Court agreed to hear the Monroe Board's requested review of On January 9, 2008, the Georgia Supreme Court upheld the appeals court decision. This litigation is now concluded. Retail Regulatory Matters Merger Effective July 1, 2006, Savannah Electric, which was also a wholly owned subsidiary of Southern Company, was merged into the Company. The Company has accounted for the merger in a manner similar to a pooling of interests, and the Company's financial statements included herein now reflect the merger as though it had occurred on January 1, 2004. Rate Plans In December 2004, the Georgia PSC approved the 2004 Retail Rate Plan for the Company. Under the terms of the 2004 Retail Rate Plan, the Company's earnings were evaluated against a retail return on equity (ROE) range of 10.25% to 12.25%. Two-thirds of any earnings above 12.25% were applied to rate refunds, with the remaining one-third retained by the Company. Retail rates and customer fees increased by approximately $203 million effective January 1, 2005 to cover the higher costs of purchased power, operating and maintenance expenses, environmental compliance, and continued investment in new generation, transmission, and distribution facilities to support growth and ensure reliability. In 2007, the Company refunded 2005 earnings above 12.25% retail ROE. There were no refunds related to earnings for the years 2006 and 2007. In December 2007, the Georgia PSC approved the 2007 Retail Rate Plan for the years 2008 through 2010. Retail base rates increased by approximately $99.7 million effective January 1, 2008 to provide for cost recovery of transmission, distribution, generation, and other investment, as well as increased operating costs. In addition, the new environmental compliance cost recovery (ECCR) tariff was implemented to recover costs incurred for environmental projects required by state and federal regulations. The ECCR tariff increased rates by approximately $222 million effective January 1, 2008. Under the 2007 Retail Rate Plan, the Company's earnings will continue to be evaluated against a retail ROE range of 10.25% to 12.25%. Two thirds of any earnings above 12.25% will be applied to rate refunds with the remaining one-third applied to the ECCR tariff. The Company agreed that it will not file for a general base rate increase during this period unless its projected retail ROE falls below 10.25%. The Company is required to file a general rate case by July 1, 2010, in response to which the Georgia PSC would be expected to determine whether the 2007 Retail Rate Plan should be continued, modified, or discontinued. Fuel Cost Recovery The Company has established fuel cost recovery rates approved by the Georgia PSC. In May 2005, the Georgia PSC approved the Company's request to increase customer fuel rates by approximately 9.5% to recover under recovered fuel costs of approximately $508 million existing as of May 31, 2005 over a four-year period that began June 1, 2005. In November 2005, the Georgia PSC voted to approve Savannah Electric's request to increase customer rates to recover estimated under recovered fuel costs of approximately $71.8 million as of November 30, 2005 over an estimated four-year period beginning December 1, 2005, as well as future projected fuel costs. In March 2006, the Company and Savannah Electric filed a combined request for fuel cost recovery rate changes with the Georgia PSC to be effective July 1, 2006, concurrent with the merger of the companies. In June 2006, the Georgia PSC ruled on the request and approved an increase in the Company's total annual fuel billings of approximately $400 million. The Georgia PSC order provided for a combined ongoing fuel forecast but reduced the requested increase related to such forecast by $200 million. The Georgia PSC also set a merger transition adjustment (MTA) applicable to customers in the former Savannah Electric service territory so that the fuel rate that became effective on July 1, 2006 plus the MTA equaled the applicable fuel rate paid by such customers as of June 30, 2006. Amounts collected under the MTA were being credited to customers in the original Georgia Power service territory through a merger transition credit through December 31, 2007. The order also required the Company to file for a new fuel cost recovery rate on a semi-annual basis, beginning in September 2006. Accordingly, on September 15, 2006, the Company filed a request to recover fuel costs incurred through August 2006 by increasing the fuel cost recovery rate. On November 13, 2006, under agreement with the Georgia PSC staff, the Company filed a supplementary request reflecting a forecast of annual fuel costs, as well as updated information for previously incurred fuel costs. 11-211
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report On February 6, 2007, the Georgia PSC approved an increase in the Company's total annual billings of approximately $383 million effective March 1, 2007. The Georgia PSC order reduced the Company's requested increase in the forecast of annual fuel costs by $40 million and disallowed $4 million of previously incurred fuel costs. Estimated under recovered fuel costs through February 2007 are being recovered through May 2009 for customers in the original Georgia Power territory and through November 2009 for customers in the former Savannah Electric territory. On December 31, 2006, the Company had an under recovered fuel balance of approximately $898 million, of which approximately $544 million was included in deferred charges and other assets in the balance sheets. As of December 31, 2007, the Company had an under recovered fuel balance of approximately $692 million, of which approximately $307 million is included in deferred charges and other assets in the balance sheets. The order also requires the Company to file for a new fuel cost recovery rate no later than March 1, 2008. Fuel Hedging Program The Georgia PSC has approved a natural gas, oil procurement, and hedging program that allows the Company to use financial instruments to hedge price and commodity risk associated with these fuels, subject to certain limits in terms of time, volume, dollars, and physical amounts hedged. The costs of the program, including any net losses, are recovered as a fuel cost through the fuel cost recovery clause. Annual net financial gains from the hedging program, through June 30, 2006, were shared with the retail customers receiving 75% and the Company retaining 25% of the total net gains. Effective July 1, 2006, the profit sharing framework related to the fuel hedging program was terminated. In 2005, the Company had a total net gain of $74.6 million, of which the Company retained $18.6 million. The Company realized net losses in 2006 and 2007 of $66 million and $68 million, respectively. Nuclear Project Cost Deferral In June 2006, the Georgia PSC approved the Company's request to defer for future recovery the early site permit and combined construction and operating license costs, of which the Company's portion is estimated to total approximately $51 million. At December 31, 2007, approximately $28.4 million is included in deferred charges and other assets. At this point, no final decision has been made regarding actual construction. Any new generation resource must be certified by the Georgia PSC in a separate proceeding. 4. JOINT OWNERSHIP AGREEMENTS The Company and Alabama Power own equally all of the outstanding capital stock of SEGCO which owns electric generating units with a total rated capacity of 1,020 megawatts, as well as associated transmission facilities. The capacity of the units has been sold equally to the Company and Alabama Power under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, debt service, and return on investment, whether or not SEGCO has any capacity and energy available. The term of the contract extends automatically for two-year periods, subject to either party's right to cancel upon two year's notice. The Company's share of expenses included in purchased power from affiliates in the statements of income is as follows:
2007 2006
(in millions)
2005
Energy Capacity Total
$ 66 42 $108
$58 38 $96
$54 38 $92
The Company owns undivided interests in Plants Vogtle, Hatch, Scherer, and Wansley in varying amounts jointly with Oglethorpe Power Corporation (OPC), the Municipal Electric Authority of Georgia (MEAG), the city of Dalton, Georgia, Florida Power & Light Company, Jacksonville Electric Authority, and Gulf Power. Under these agreements, the Company has contracted to operate and maintain the plants as agent for the co-owners and is jointly and severally liable for third party claims related to these plants. In addition, the Company jointly owns the Rocky Mountain pumped storage hydroelectric plant with OPC who is the operator of the plant. The Company and Progress Energy Florida, Inc. jointly own a combustion turbine unit (Intercession City) operated by Progress Energy Florida, Inc. 11-212
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report At December 31, 2007 the Company's percentage ownership and investment (exclusive of nuclear fuel) in jointly owned facilities in commercial operation were as follows:
Facility (Type). Company Ownership Accumulated Depreciation
Investment (in millions)
Plant Vogtle (nuclear) Plant Hatch (nuclear) Plant Wansley (coal) Plant Scherer (coal) Units 1 and 2 Unit 3 Rocky Mountain (pumped storage) Intercession City (combustion-turbine)
45.7% 50.1 53.5 8.4 75.0 25.4 33.3
$3,288 938 406 116 566 170 12
$1,900 509 185 64 309 99 3
At December 31, 2007, the portion of total construction work in progress related to Plants Wansley, Scherer, and Rocky Mountain was $170.3 million, $66.5 million, and $4.0 million, respectively, primarily for environmental projects. The Company's proportionate share of its plant operating expenses is included in the corresponding operating expenses in the statements of income. 5. INCOME TAXES Southern Company files a consolidated federal income tax return and combined income tax returns for the States of Alabama, Georgia, and Mississippi. Under a joint consolidated income tax allocation agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis and no subsidiary is allocated more expense than would be paid if they filed a separate income tax return. In accordance with IRS regulations, each company is jointly and severally liable for the tax liability. Current and Deferred Income Taxes The transfer of the Plant McIntosh construction project from Southern Power to the Company in 2005 resulted in a deferred gain to Southern Power for federal income tax purposes. The Company is reimbursing Southern Power for the remaining balance of the related deferred taxes of $4.6 million as it is reflected in Southern Power's future taxable income. $4.1 million of this payable to Southern Power is included in Other Deferred Credits and $0.5 million is included in Affiliated Accounts Payable in the balance sheets at December 31, 2007. The transfer of the Dahlberg, Wansley, and Franklin projects to Southern Power from the Company in 2001 and 2002 also resulted in a deferred gain for federal income tax purposes. Southern Power is reimbursing the Company for the remaining balance of the related deferred taxes of $9.5 million as it is reflected in the Company's future taxable income. $7.7 million of this receivable from Southern Power is included in Other Deferred Debits and $1.8 million is included in Affiliated Accounts Receivable in the balance sheets at December 31, 2007. II-213
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Details of income tax provisions are as follows:
2007 2006 (in millions) 2005
FederalCurrent Deferred State Current Deferred Deferred investment tax credits Total
$442 (72) 370 54 (6) 48 $418
$393 7 400 33 9 42 $442
$166 226 392 24 32 56 $448
The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows:
2007
(in millions)
2006
Deferred tax liabilities -Accelerated depreciation Property basis differences Employee benefit obligations Fuel clause under recovery Premium on reacquired debt Regulatory assets associated with employee benefit obligations Asset retirement obligations Other Total Deferred tax assets Federal effect of state deferred taxes Employee benefit obligations Other property basis differences Other deferred costs Other comprehensive income Regulatory liabilities associated with employee benefit obligations Unbilled fuel revenue Asset retirement obligations Other Total Total deferred tax liabilities, net Portion included in current liabilities, net Accumulated deferred income taxes in the balance sheets
$2,376 568 374 281 71 123 257 53 4,103 160 226 130 131 2 209 34 257 35 1,184 2,919 (69) $2,850
$2,303 568 243 365 69 156 242 75 4,021 123 226 138 131 9 84 27 242 41 1,021 3,000 (185) $2,815
At December 31, 2007, tax-related regulatory assets were $533 million and tax-related regulatory liabilities were $147 million. The assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. The liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. II-214
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report In accordance with regulatory requirements, 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 $13.0 million annually in 2007, 2006, and 2005. At December 31, 2007, all investment tax credits available to reduce federal income taxes payable had been utilized. Effective Tax Rate A reconciliation of the federal statutory income tax rate to the effective income tax rate was as follows:
2007 2006 2005
Federal statutory rate State income tax, net of federal deduction Non-deductible book depreciation AFUDC Equity Donations Other Effective income tax rate
35.0% 2.4 1.1 (1.9) (1.7) (1.7) 33.2%
35.0% 2.2 1.1 (0.9) (1.6) 35.8%
35.0% 3.1 1.2 (0.9) (0.9) 37.5%
The decrease in 2007's effective tax rate is the result of the tax benefits associated with donations and an increase in state tax credits and the federal manufacturer's tax deduction. In 2007, the Company donated 2,200 acres of land in the Tallulah Gorge State Park to the State of Georgia. The estimated value of this donation along with an increase in non-taxable AFUDC equity and available state tax credits as well as higher federal tax deductions caused a lower effective income tax rate for the year ended 2007, when compared to prior years. For additional information regarding litigation related to state tax credits, see Note 3 under "Income Tax Matters." The American Jobs Creation Act of 2004 created a tax deduction for the portion of income attributable to United States production activities as defined in Internal Revenue Code Section 199 (production activities deduction). The deduction is equal to a stated percentage of the taxpayer's qualified production activities income. The percentage is phased in over the years 2005 through 2010 with a 3% rate applicable to the years 2005 and 2006, a 6% rate applicable for years 2007 through 2009, and a 9% rate applicable for all years after 2009. This increase from 3% in 2006 to 6% was one of several factors that increased the Company's 2007 deduction by $18.6 million in tax deductions. The resulting tax benefit was $6.5 million. Unrecognized Tax Benefits On January 1, 2007, the Company adopted FIN 48 which requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. Prior to adoption of FIN 48, the Company had unrecognized tax benefits which were previously accrued under Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies" of approximately $62 million. Upon adoption of FIN 48, an additional $3 million of unrecognized tax benefits were recorded, which resulted in a total balance of $65 million. The $3 million relates to tax positions for which ultimate deductibility is highly certain, but for which there is uncertainty as to the timing of such deductibility. Of the total $65 million unrecognized tax benefits, $62 million would impact the Company's effective tax rate if recognized. For 2007, the total amount of unrecognized tax benefits increased by $24.2 million, resulting in a balance of $89.2 million as of December 31,2007. 11-215
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Changes during the year in unrecognized tax benefits were as follows:
2007
(in millions)
Unrecognized tax benefits as of adoption Tax positions from current periods Tax positions from prior periods Reductions due to settlements Reductions due to expired statute of limitations Balance at end of year Impact on the Company's effective tax rate, if recognized, is as follows:
$65.0 20.5 3.7
$89.2
2007 (in millions)
Tax positions impacting the effective tax rate Tax positions not impacting the effective tax rate Balance at end of year Accrued interest for unrecognized tax benefits:
$86.1 3.1 $89.2
2007
(in millions)
Interest accrued as of adoption Interest accrued during the year Balance at end of year
$2.7 4.4 $7.1
The Company classifies interest on tax uncertainties as interest expense. Net interest accrued for the year ended December 31, 2007 was $7.1 million. The Company did not accrue any penalties on uncertain tax positions. The IRS has audited and closed all tax returns prior to 2004. The audits for the state returns have either been concluded, or the statute of limitations has expired, for years prior to 2002. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly increase or decrease within the next 12 months. The possible settlement of the Georgia state tax credits litigation, production activities deduction methodology, and/or the conclusion or settlement of federal or state audits could impact the balances significantly. At this time, an estimate of the range of reasonably possible outcomes cannot be determined. See Note 3 under "Income Tax Matters" herein for additional information. 6. FINANCING Outstanding Classes of Capital Stock The Company currently has preferred stock, Class A preferred stock, preference stock, and common stock authorized. The Company has shares of its Class A preferred stock, preference stock, and common stock outstanding. The Company's Class A preferred stock ranks senior to the Company's preference stock and common stock with respect to payment of dividends and voluntary or involuntary dissolution. The Company's preference stock ranks senior to the common stock with respect to the payment of dividends and voluntary or involuntary dissolution. Certain series of the Class A preferred stock and preference stock are subject to redemption at the option of the Company on or after a specified date (typically 5 or 10 years after the date of issuance) at a redemption price equal to 100% of the liquidation amount of the stock. In addition, the Company may redeem the outstanding series of the preference stock at a redemption price equal to 100% of the liquidation amount plus a make-whole premium based on the present value of the liquidation amount and future dividends. 11-216
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Dividend Restrictions The Company can only pay dividends to Southern Company out of retained earnings or paid-in-capital. Long-Term Debt Payable to Affiliated Trusts The Company has formed certain wholly owned trust subsidiaries for the purpose of issuing preferred securities. The proceeds of the related equity investments and preferred security sales were loaned back to the Company through the issuance of junior subordinated notes totaling $206 million, which constitute substantially all of the assets of these trusts and are reflected in the balance sheets as "Long-term Debt." The Company considers that the mechanisms and obligations relating to the preferred securities issued for its benefit, taken together, constitute a full and unconditional guarantee by it of the respective trusts' payment obligations with respect to these securities. During 2007, the Company redeemed junior subordinated notes and the related trust preferred securities issued by Georgia Power Capital Trusts V and VI. At December 31, 2007, preferred securities of $200 million were outstanding. See Note 1 under "Variable Interest Entities" for additional information on the accounting treatment for these trusts and the related securities. Securities Due Within One Year A summary of the scheduled maturities and redemptions of securities due within one year at December 31 is as follows:
2007
(in millions)
2006
Capital lease Senior notes Total
4 195 $199
4 300 $304
Redemptions and/or maturities through 2012 applicable to total long-term debt are as follows: $199 million in 2008; $279 million in 2009; $4 million in 2010; $115 million in 2011; and $288 million in 2012. Pollution Control Bonds Pollution control obligations represent loans to the Company from public authorities of funds derived from sales by such authorities of revenue bonds issued to finance pollution control facilities. The Company is required to make payments sufficient for the authorities to meet principal and interest requirements of such bonds. The Company has incurred obligations in connection with the sale by public authorities of tax-exempt pollution control revenue bonds. The amount of tax-exempt pollution control revenue bonds outstanding at December 31, 2007 was $1.9 billion. Proceeds from certain issuances are restricted until the expenditures are incurred. Senior Notes The Company issued $1.5 billion aggregate principal amount of unsecured senior notes in 2007. The proceeds of the issuance were used to repay a portion of the Company's short term indebtedness, fund note maturities, redeem long-term debt payable to affiliated trusts, and fund the Company's continuous construction program. At December 31, 2007 and 2006, the Company had $4.0 billion and $2.8 billion of senior notes outstanding, respectively. These senior notes are effectively subordinated to all secured debt of the Company, which aggregated $71 million at December 31, 2007. Capital Leases Assets acquired under capital leases are recorded in the balance sheets as utility plant in service, and the related obligations are classified as long-term debt. At December 31, 2007 and 2006, the Company had a capitalized lease obligation for its corporate headquarters building of $69 million and $72 million, respectively, with an interest rate of 8.1%. For ratemaking purposes, the Georgia PSC has treated the lease as an operating lease and has allowed only the lease payments in cost of service. The difference between the accrued expense and the lease payments allowed for ratemaking purposes has been deferred and is being amortized to expense as ordered by the Georgia PSC. See Note I under "Regulatory Assets and Liabilities." At December 31, 2007 and 2006, the Company had capitalized lease obligations of $1.9 million for its vehicles and $4.1 million for its vehicles and the Plant Kraft coal unloading dock, respectively. However, for ratemaking purposes, these obligations are treated as operating leases and, as such, lease payments are charged to expense as incurred. The annual expense incurred for these leases in 2007, 2006, and 2005 was $9.2 million, $9.6 million, and $9.7 million, respectively. In March 2007, the Savannah Economic Development Authority Taxable Industrial II-217
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Revenue Bonds First Series 1996 were redeemed; therefore, as of December 31, 2007, the Company no longer has a capital lease obligation for the Plant Kraft unloading dock. Bank Credit Arrangements At the beginning of 2008, the Company had credit arrangements with banks totaling $1.2 billion, of which $8 million was used to support outstanding letters of credit. Of these facilities, $40 million expires during 2008, with the remaining $1.1 billion expiring in 2012. The facility that expires in 2008 provides the option of converting borrowings into a two-year term loan. The Company expects to renew its facilities, as needed, prior to expiration. The agreements contain stated borrowing rates. All the agreements require payment of commitment fees based on the unused portion of the commitments or the maintenance of compensating balances with the banks. Commitment fees are less than 1/8 of 1% for the Company. Compensating balances are not legally restricted from withdrawal. The credit arrangements contain covenants that limit the level of indebtedness to capitalization to 65%, as defined in the arrangements. For purposes of these definitions, indebtedness excludes the long-term debt payable to affiliated trusts and, in certain cases, other hybrid securities. In addition, the credit arrangements contain cross default provisions that would trigger an event of default if the Company defaulted on other indebtedness above a specified threshold. At December 31, 2007, the Company was in compliance with all such covenants. None of the arrangements contain material adverse change clauses at the time of borrowings. The $1.2 billion of unused credit arrangements provides liquidity support to the Company's variable rate pollution control bonds and its commercial paper borrowing. The amount of variable rate pollution control bonds outstanding requiring liquidity support as of December 31, 2007 was $301 million. In addition, the Company borrows under a commercial paper program and an extendible commercial note program. The amount of commercial paper outstanding at December 31, 2007, 2006, and 2005 was $616 million, $733 million, and $327 million, respectively. There were no outstanding extendible commercial notes at December 31, 2007. Commercial paper is included in notes payable on the balance sheets. During 2007, the peak amount of short-term debt outstanding was $1.1 billion and the average amount outstanding was $638 million. The average annual interest rate on short-term debt in 2007 was 5.3%. Financial Instruments The Company enters into energy-related derivatives to hedge exposures to electricity, gas, and other fuel price changes. However, due to cost-based rate regulations, the Company has limited exposure to market volatility in commodity fuel prices and prices of electricity. See Note 3 under "Retail Regulatory Matters - Fuel Hedging Program" for information on the Company's fuel hedging program. The Company also enters into hedges of forward electricity sales. There was no material ineffectiveness related to energy related derivatives recorded in earnings in any period presented. At December 31, 2007, the $0.4 million fair value of net losses of derivative energy contracts were reflected in the financial statements as regulatory assets. The fair value gain or loss for hedges that are recoverable through the regulatory fuel clauses are recorded in regulatory assets and liabilities and are recognized in earnings at the same time the hedged items affect earnings. The Company has energy-related hedges in place up to and including 2010. The Company enters into derivatives to hedge exposure to interest rate changes. Derivatives related to variable rate securities or forecasted transactions are accounted for as cash flow hedges. The derivatives employed as hedging instruments are structured to minimize ineffectiveness. As such, no material ineffectiveness has been recorded in earnings for any period presented. 11-218
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report At December 31, 2007, the Company had $539 million notional amounts of interest derivatives accounted for as cash flow hedges outstanding with net fair value gains/(losses) as follows:
Notional Amount
(in millions)
Variable Rate Received
Weighted Average Fixed Rate Paid
Hedge Maturity Date
Fair Value Gain/(Loss) December 31, 2007

(in millions)
$100 $ 14 $225 $100 $100 * **
1-month LIBOR* SIFMA Index ** 3-month LIBOR 3-month LIBOR 3-month LIBOR
3.85% 2.50% 5.26% 5.12% 5.28%
January 2008 January 2008 March 2018 June 2018 February 2019
$ $ (10.4) (3.3) (3.6)
Interest rate collar with variable rate based on a percentage of one-month LIBOR (showing rate cap) Hedged using the Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA), (Formerly the Bond Market Association/PSA Municipal Swap Index)
Subsequent to December 31, 2007, the Company entered into $601 million notional amounts of interest rate swaps related to variable rate debt through December 2009. The fair value gain or loss for cash flow hedges is recorded in other comprehensive income and is reclassified into earnings at the same time the hedged items affect earnings. In 2007, 2006, and 2005, the Company settled gains/(losses) totaling $12.1 million, $(3.9) million, and $0.9 million, respectively, upon termination of certain interest derivatives at the same time it issued debt. The effective portion of these gains/(losses) have been deferred in other comprehensive income and will be amortized to interest expense over the life of the original interest derivative. Amounts reclassified from other comprehensive income to interest expense were immaterial for all periods presented. For 2008, pre-tax losses of approximately $3 million are expected to be reclassified from other comprehensive income to interest expense. The Company has interest related hedges in place through 2019 and has realized gains/ (losses) that are being amortized through 2037. 7. COMMITMENTS Construction Program The Company currently estimates property additions to be approximately $2.0 billion, $2.0 billion, and $1.8 billion, in 2008, 2009, and 2010, respectively. These amounts include $116 million, $138 million, and $128 million in 2008, 2009, and 2010, respectively, for construction expenditures related to contractual purchase commitments for uranium and nuclear fuel conversion, enrichment, and fabrication services included under "Fuel Commitments." The construction program is subject to periodic review and revision, and actual construction costs may vary from estimates because of numerous factors, including, but not limited to, changes in business conditions, changes in FERC rules and regulations, revised load growth estimates, changes in environmental regulations, changes in existing nuclear plants to meet new regulatory requirements, increasing costs of labor, equipment, and materials, and cost of capital. At December 31, 2007, significant purchase commitments were outstanding in connection with the construction program. Long-Term Service Agreements The Company has entered into a Long-Term Service Agreement (LTSA) with General Electric (GE) for the purpose of securing maintenance support for the combustion turbines at the Plant McIntosh combined cycle facility. In summary, the LTSA stipulates that GE will perform all planned inspections on the covered equipment, which includes the cost of all labor and materials. GE is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to a limit specified in each contract. In general, this LTSA is in effect through two major inspection cycles per unit. Scheduled payments to GE, which are subject to price escalation, are made quarterly based on actual operating hours of the respective units. Total payments to GE under this agreement are currently estimated at $187.7 million over the remaining term of the agreement, which is currently projected to be approximately 10 years. However, the LTSA contains various cancellation provisions at the option of the Company. The Company has also entered into an LTSA with GE through 2014 for neutron monitoring system parts and electronics at Plant Hatch. Total remaining payments to GE under this agreement are currently estimated at $9.2 million. The contract contains 11-219
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report cancellation provisions at the option of the Company. Payments made to GE prior to the performance of any work are recorded as a prepayment in the balance sheets. Work performed by GE is capitalized or charged to expense as appropriate net of any joint owner billings, based on the nature of the work. The Company has entered into a LTSA with Mitsubishi Power Systems Americas, Inc. (MPS) for the purpose of providing certain parts and maintenance services for the three combined cycle units under construction at Plant McDonough, which are scheduled to go into service in February 2011. June 2011, and June 2012, respectively. The LTSA stipulates that MPS will perform all planned maintenance on each covered unit which includes the cost of all materials and services. MPS is also obligated to cover costs of unplanned maintenance on the gas turbines subject to limits specified in the LTSA. This LTSA will commence in 2011 and is in effect through two major inspection cycles per covered unit. Periodic payments to MPS are to be made quarterly and will also be made based on the scheduled inspections for the respective covered units. Payments to MPS under this agreement, which are subject to price escalation, are currently estimated to be $536.8 million for the term of the agreement which is expected to be between 12 and 13 years. However, the LTSA contains various termination provisions at the option of the Company. Limestone Commitments As part of the Company's program to reduce sulfur dioxide emissions from certain of its coal plants, the Company is constructing certain equipment and has entered into various long-term commitments for the procurement of limestone to be used in such equipment. Contracts are structured with tonnage minimums and maximums in order to account for changes in coal burn and sulfur content. The Company has a minimum contractual obligation of 3.8 million tons, equating to approximately $114.6 million through 2019. Estimated expenditures over the next five years are $4.5 million in 2008, $10.2 million in 2009, $19.2 million in 2010, $14.6 million in 2011, and $14.9 million in 2012. 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. Coal commitments include forward contract purchases for sulfur dioxide emission allowances. Natural gas purchase commitments contain fixed volumes with prices based on various indices at the time of delivery. Amounts included in the chart below represent estimates based on New York Mercantile Exchange future prices at December 31, 2007. Total estimated minimum long-term obligations at December 31, 2007 were as follows:
Commitments
Natural Gas
Coal (in millions)
Nuclear Fuel
2008 2009 2010 2011 2012 2013 and thereafter Total
$ 684 503 229 375 386 2,803 $4,980
$1,653 1.070 449 82 47 21 $3,322
$116 138 128 110 110 125 $727
Additional commitments for fuel will be required to supply the Company's future needs. Total charges for nuclear fuel included in fuel expense were $79 million, $71 million and $70 million for the years 2007, 2006, and 2005, respectively. SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. The creditworthiness of Southern Power is currently inferior to the creditworthiness of the traditional operating companies. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure they will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements. 11-220
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Purchased Power Commitments The Company has commitments regarding a portion of a 5% interest in Plant Vogtle owned by MEAG that are in effect until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest. The payments for capacity are required whether or not any capacity is available. The energy cost is a function of each unit's variable operating costs. Portions of the capacity payments relate to costs in excess of Plant Vogtle's allowed investment for ratemaking purposes. The present value of these portions at the time of the disallowance was written off. Generally, the cost of such capacity and energy is included in purchased power from non-affiliates in the statements of income. Capacity payments totaled $46 million, $49 million, and $54 million in 2007, 2006, and 2005, respectively. The Company also has entered into other various long-term power purchase agreements (PPAs). Estimated total long-term obligations under these commitments at December 31, 2007 were as follows:
Vogtle Capacity Payments Affiliated PPA (in millions) Non-Affiliated PPA
2008 2009 2010 2011 2012 2013 and thereafter Total Operating Leases
$ 49 53 53 51 49 139 $394
$ 209 209 153 119 107 702 $1,499
84 90 132 148 107 1,504 $2,065
The Company has entered into various operating leases with various terms and expiration dates. Rental expenses related to these operating leases totaled $31 million for 2007, $33 million for 2006, and $39 million for 2005. At December 31, 2007, estimated minimum lease payments for these noncancelable operating leases were as follows:
Minimum Lease Payments
Rail Cars
Other (in millions)
Total
2008 2009 2010 2011 2012 2013 and thereafter Total
$ 18 17 16 16 9 24 $100
$11 9 7 6 3 5 $41
$ 29 26 23 22 12 29 $141
In addition to the rental commitments above, the Company has obligations upon expiration of certain rail car leases with respect to the residual value of the leased property. These leases expire in 2011 and the Company's maximum obligation is $40.7 million. At the termination of the leases, at the Company's option, the Company may either exercise its purchase option or the property can be sold to a third party. The Company expects that the fair market value of the leased property would substantially reduce or eliminate the Company's payments under the residual value obligation. A portion of the rail car lease obligations is shared with the joint owners of Plants Scherer and Wansley. A majority of the rental expenses related to the rail car leases are fully recoverable through the fuel cost recovery clause as ordered by the Georgia PSC and the remaining portion is recovered through base rates. II-221
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report Guarantees Alabama Power 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. Alabama Power has also guaranteed $50 million in senior notes issued by SEGCO. The Company has agreed to reimburse Alabama Power for the pro rata portion of such obligations corresponding to the Company's then proportionate ownership of stock of SEGCO if Alabama Power is called upon to make such payment under its guaranty. As discussed earlier in this Note under "Operating Leases," the Company has entered into certain residual value guarantees related to rail car leases. 8. STOCK OPTION PLAN Southern Company provides non-qualified stock options to a large segment of the Company's employees ranging from line management to executives. As of December 31, 2007, 1,658 current and former employees of the Company participated in the stock option plan. The maximum number of shares of Southern Company common stock that may be issued under this plan may not exceed 40 million. The prices of options granted to date have been at the fair market value of the shares on the dates of grant. Options granted to date become exercisable pro rata over a maximum period of three years from the date of grant. The Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however for employees who are eligible for retirement the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the stock option plan. For certain stock option awards a change in control will provide accelerated vesting. The Company's activity in the stock option plan for 2007 is summarized below:
Shares Subject to Option Weighted Average Exercise Price
Outstanding at December 31, 2006 Granted Exercised Cancelled Outstanding at December 31, 2007 Exercisable at December 31, 2007
7,830,583 1,432,410 (1,717,486) (7,398) 7,538,109 4,837,923
$28.42 36.42 25.59 30.13 $30.59 $28.13
The number of stock options vested, and expected to vest in the future, as of December 31, 2007 was not significantly different from the number of stock options outstanding at December 31, 2007 as stated above. At December 31, 2007, the weighted average remaining contractual term for the options outstanding and options exercisable was 6.4 years and 5.2 years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable was $61.5 million and $51.4 million, respectively. As of December 31, 2007, there was $2.3 million of total unrecognized compensation cost related to stock option awards not yet vested. That cost is expected to be recognized over a weighted-average period of approximately 10 months. The total intrinsic value of options exercised during the years ended December 31, 2007, 2006, and 2005 was $17.4 million, $10.3 million, and $24.2 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises totaled $6.7 million, $4.0 million, and $9.4 million, respectively, for the years ended December 31, 2007, 2006, and 2005. 9. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act (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 the Company's Plants Hatch and Vogtle. The Act provides funds up to $10.8 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $300 million by American Nuclear Insurers (ANI), with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. The Company could be assessed up to $101 million per incident for each licensed reactor it operates but not more than an 11-222
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report aggregate of $15 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, based on its ownership and buyback interests, is $203 million, per incident, but not more than an aggregate of $30 million to be paid for each incident in any one year. Both the maximum assessment per reactor and the maximum yearly assessment are adjusted for inflation at least every five years. The next scheduled adjustment is due on or before August 31, 2008. The Company is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. Additionally, the Company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.3 billion for losses in excess of the $500 million primary coverage. This excess insurance is also provided by NEIL. NEIL also covers the additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can purchase this coverage, subject to a deductible waiting period of up to 26 weeks, with a maximum per occurrence per unit limit of $490 million. After the deductible period, weekly indemnity payments would be received until either the unit is operational or until the limit is exhausted in approximately three years. The Company purchases the maximum limit allowed by NEIL, subject to ownership limitations. Each facility has elected a 12week waiting period. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The current maximum annual assessments for the Company under the NEIL policies would be $51 million. Claims resulting from terrorist acts are covered under both the ANI and NEIL policies (subject to normal policy limits). The aggregate, however, that NEIL will pay for all claims resulting from terrorist acts in any 12 month period is $3.2 billion plus such additional amounts NEIL can recover through reinsurance, indemnity, or other sources. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the Company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. All retrospective assessments, whether generated for liability, property, or replacement power, may be subject to applicable state premium taxes. 11-223
Table of Contents NOTES (continued) Georgia Power Company 2007 Annual Report 10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial information for 2007 and 2006 is as follows:
Operating Revenues Net Income After Operating Dividends on Preferred Income and Preference Stock (in millions)
Quarter Ended
March 2007 June 2007 September 2007 December 2007 March 2006 June 2006 September 2006 December 2006 The Company's business is influenced by seasonal weather conditions. 11-224
$1,657 1,844 2,444 1,627 $1,584 1,808 2,275 1,579
$279 361 688 189 $288 386 662 174
$131 188 400 117 $132 197 382 76
Table of Contents SELECTED FINANCIAL AND OPERATING DATA 2003-2007 Georgia Power Company 2007 Annual Report
2007 2006 2005 2004 2003
Operating Revenues (in thousands) Net Income after Dividends on Preferred and Preference Stock (in thousands) Cash Dividends on Common Stock (in thousands) Return on Average Common Equity (percent) Total Assets (in thousands) Gross Property Additions (in thousands) Capitalization (in thousands): Common stock equity Preferred and preference stock Mandatorily redeemable preferred securities Long-term debt Total (excluding amounts due within one year) Capitalization Ratios (percent): Common stock equity Preferred and preference stock Mandatorily redeemable preferred securities Long-term debt Total (excluding amounts due within one year) Security Ratings: Preferred and Preference Stock Moody's Standard and Poor's Fitch Unsecured Long-Term Debt Moody's Standard and Poor's Fitch Customers (year-end): Residential Commercial Industrial Other Total Employees (year-end) N/A = Not Applicable.
$ 7,571,652 $ $ 836,136 689,900 13.50 $20,822,761 $ 1,862,449 $ 6,435,420 265,957 -5,937,792 $12,639,169 50.9 2.1 47.0 100.0
$ 7,245,644 $ $ 787,225 630,000 13.80 $19,308,730 $ 1,276,889 $ 5,956,251 44,991 5,211,912 $11,213,154 53.1 0.4 46.5 100.0
$ 7,075,837 744,373 582,800 14.08 $17,898,445 $ 958,563 S $ S 5,452,083 43,909 5,365,323 $10,861,315 50.2 0.4 49.4 100.0
$ 5,727,768 $ $ 682,793 588,700 13.87 $16,598,778 $ 1,252,197 $ 5,123,276 58,547 4,916,694 $10,098,517 50.7 0.6 48.7 100.0
$ 5,228,625 $ $ 654,036 588,800 14.01 $15,527,223 $ 783,053 $ 4,723,299 14,569 940,000 3,984,825 $ 9,662,693 48.9 0.2 9.7 41.2 100.0
Baal BBB+ A A2 A A+ 2,024,520 295,478 8,240 4,807 2,333,045 9,270
Baal BBB+ A A2 A A+ 1,998,643 294,654 8,008 4,371 2,305,676 9,278
Baal BBB+ A A2 A A+ 1,960,556 289,009 8,290 4,143 2,261,998 9.273
Baal BBB+ A A2 A A+ 1,926,215 283,507 7,765 4,015 2,221,502 9,294
Baal BBB4 A A2 A A+ 1,890,790 275,378 7,989 3,940 2,178,097 9,263
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Table of Contents SELECTED FINANCIAL AND OPERATING DATA 2003-2007 (continued) Georgia Power Company 2007 Annual Report
2007 2006 2005 2004 2003
Operating Revenues (in thousands): Residential Commercial Industrial Other Total retail Wholesale - non-affiliates Wholesale - affiliates Total revenues from sales of electricity Other revenues Total Kilowatt-Hour Sales (in thousands): Residential Commercial Industrial Other Total retail Sales for resale - non-affiliates Sales for resale - affiliates Total Average Revenue Per Kilowatt-Hour (cents): Residential Commercial Industrial Total retail Wholesale Total sales Residential Average Annual Kilowatt-Hour Use Per Customer Residential Average Annual Revenue Per Customer Plant Nameplate Capacity Ratings (year-end) (megawatts) Maximum Peak-Hour Demand (megawatts): Winter Summer Annual Load Factor (percent) Plant Availability (percent): Fossil-steam Nuclear Source of Energy Supply (percent): Coal Nuclear Hydro Oil and gas Purchased power From non-affiliates From affiliates Total
2,442,501 2,576,058 1,403,852 75,592 6,498,003 537,913 277,832 7,313,748 257,904 7,571,652 26,840,275 33,056,632 25,490,035 697,363 86,084,305 10,577,969 5,191,903 101,854,177 9.10 7.79 5.51 7.55 5.17 7.18 13,315 1,212 15,995 13,817 17,974 57.5 90.8 92.4 61.5 14.6 0.5 5.5 3.8 14.1 100.0
2,326,190 2,423,568 1,382,213 73.649 6,205,620 551,731 252,556 7,009,907 235,737 7,245,644 26,206,170 32,112,430 25,577,006 660,285 84,555,891 10,685,456 5,463,463 100,704,810 8.88 7.55 5.40 7.34 4.98 6.96 13,216 1,173 15,995 13,528 17,159 61.8 91.4 90.7 59.0 14.4 0.9 5.0 3.8 16.9 100.0
$ 2,227,137 2,357,077 1,406,295 73,854 6,064,363 524,800 275,525 6,864,688 211,149 $ 7,075,837 25,508,472 31,334,182 25,832,265 737,343 83,412,262 10,588,891 5,033,165 99,034,318 8.73 7.52 5.44 7.27 5.12 6.93 13,119 1,145 15,995 14,360 16,925 59.4 90.0 89.3 60.7 14.5 1.9 3.0 4.6 15.3 100.0
$ 1,900,961 1,933,004 1,217,536 67,250 5,118,751 251,581 172,375 5,542,707 185,061 $ 5,727,768 24,829,833 29,553,893 27,197,843 744,935 82,326,504 5,429,911 4,925,744 92,682,159 7.66 6.54 4.48 6.22 4.09 5.98 13,002 995 14,743 13,087 16,129 61.0 87.1 94.8 57.6 16.5 1.5 0.2 6.0 18.2 100.0
$ 1,726,543 1,767,487 1,051,034 63,715 4,608,779 265,029 181,355 5,055,163 173,462 $ 5,228,625 23,532,467 28,401,764 26,564,261 732,900 79,231,392 8,353,046 6,029,398 93,613,836 7.34 6.22 3.96 5.82 3.10 5.40 12,555 921 14,768 13,929 15,575 61.6 85.9 94.1 58.7 16.2 2.0 0.4 6.1 16.6 100.0
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Georgia Power Company We have audited the accompanying balance sheets and statements of capitalization of Georgia Power Company (the "Company") (a wholly owned subsidiary of Southern Company) as of December 31, 2006 and 2005, and the related statements of income, comprehensive income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2006. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such financial statements (pages 11-160 to II-191) present fairly, in all material respects, the financial position of Georgia Power Company at December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2 to the financial statements, in 2006 Georgia Power Company changed its method of accounting for the funded status of defined benefit pension and other postretirement plans. /s/ Deloitte & Touche LLP Atlanta, Georgia February 26, 2007
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Table of Contents MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Georgia Power Company 2006 Annual Report
OVERVIEW Business Activities Georgia Power Company (the Company) operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Effective July 1, 2006, Savannah Electric and Power Company (Savannah Electric), which was also a wholly owned subsidiary of Southern Company, was merged into the Company. The Company has accounted for the merger in a manner similar to a pooling of interests, and the Company's financial statements included herein now reflect the merger as though it had occurred on January 1, 2004. The supplemental selected financial and operating data reflect the merger as though it had occurred on January 1,2002. See FUTURE EARNINGS POTENTIAL - "Merger" and Note 3 to the financial statements under "Retail Regulatory Matters Merger" for additional information. Many factors affect the opportunities, challenges, and risks of the Company's primary business of selling electricity. These factors include the ability to maintain a stable regulatory environment, to achieve energy sales growth, and to effectively manage and secure timely recovery of rising costs. These costs include those related to growing demand, increasingly stringent environmental standards, and fuel prices. In December 2004, the Company completed a major retail rate proceeding (2004 Retail Rate Plan) that has provided earnings stability. This regulatory action also enabled the recovery of substantial capital investments to facilitate the continued reliability of the transmission and distribution network and continued environmental improvements at the generating plants. Appropriately balancing environmental expenditures with customer prices will continue to challenge the Company for the foreseeable future. The Company is required to file a general rate case by July 1, 2007, which will determine whether the 2004 Retail Rate Plan should be continued, modified, or discontinued. The Company also received regulatory orders to increase its fuel cost recovery rate effective June 1, 2005, July 1, 2006, and March 1, 2007. Key Performance Indicators In striving to maximize shareholder value while providing cost-effective energy to more than two million customers, the Company continues to focus on several key indicators. These indicators include customer satisfaction, plant availability, system reliability, and net income after dividends on preferred stock. The Company's financial success is directly tied to the satisfaction of its customers. Key elements of ensuring customer satisfaction include outstanding service, high reliability, and competitive prices. Management uses customer satisfaction surveys and reliability indicators to evaluate the Company's results. Peak season equivalent forced outage rate (Peak Season EFOR) is an indicator of fossil/hydro plant availability and efficient generation fleet operations during the months when generation needs are greatest. The rate is calculated by dividing the number of hours of forced outages by total generation hours. The 2006 Peak Season EFOR of 0.99 percent is above target, a significant improvement over 2005 Peak Season EFOR of 1.42 percent. Transmission and distribution system reliability performance is measured by the frequency and duration of outages. Performance targets for reliability are set internally based on historical performance, expected weather conditions, and expected capital expenditures. 2006 performance exceeded all targets on these reliability measures. Net income is the primary component of the Company's contribution to Southern Company's earnings per share goal. The Company's 2006 results compared to its targets for some of these indicators are reflected in the following chart. Key Performance Indicator Customer Satisfaction Peak Season EFOR Net Income 2006 Target Performance Top quartile in customer surveys 2.75% or less $770 million 2006 Actual Performance Top quartile in customer surveys 0.99% $787 million
See RESULTS OF OPERATIONS herein for additional information on the Company's financial performance. The financial performance achieved in 2006 reflects the continued emphasis that management places on these indicators, as well as the commitment shown by employees in achieving or exceeding management's expectations. Earnings The Company's 2006 net income after dividends on preferred stock totaled $787 million representing a
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

$43 million, or 5.8 percent, increase over 2005. Operating income increased in 2006 due to higher base retail revenues and wholesale non-fuel revenues, partially offset by higher non-fuel operating expenses and higher financing costs. The Company's 2005 earnings totaled $744 million representing a $61 million, or 9.0 percent, increase over 2004. Operating income increased in 2005 due to higher base retail revenues resulting from retail rate increases effective January 1, 2005 and June 1, 2005 and more favorable weather, as well as higher wholesale revenues resulting from new contracts effective January 1, 2005, partially offset by increased non-fuel operating expenses. The Company's 2004 earnings totaled $683 million representing a $29 million, or 4.4 percent, increase over 2003. Operating income increased in 2004 due to higher base retail revenues attributable to more favorable weather and customer growth during the year, partially offset by higher non-fuel operating expenses. In addition, lower depreciation and amortization expense resulting from a three-year retail rate plan approved by the Georgia Public Service Commission (PSC) in 2001 (2001 Retail Rate Plan) significantly offset increased purchased power capacity expenses. RESULTS OF OPERATIONS A condensed income statement for the Company is as follows: Amount 2006 Operating revenues Fuel Purchased power Other operations and maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating income Total other income and (expense) Income taxes Net income Dividends on preferred stock Net income after dividends on preferred stock $7,246 2,233 1,145 1,560 499 299 5,736 1,510 (276) 442 792 5 $ 787 Increase (Decrease) From Prior Year 2005 $1,348 649 215 86 230 33 1,213 135 (19) 54 62 1 $ 61
2006 $ 170 296 (171) (11) (28) 23 109 61 (22) (5) 44 1 $ 43
2004 $499 129 237 154 (74) 16 462 37 5 12 30 1 $ 29
(in millions)
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Revenues Operating revenues in 2006, 2005, and 2004 and the percent of change from the prior year are as follows: Amount 2005
(in millions)
2006 Retail - prior year Change in Base rates Sales growth Weather Fuel cost recovery Retail - current year Sales for resale Non-affiliates Affiliates Total sales for resale Other operating revenues Total operating revenues Percent change $6,065 3 (4) 7 134 6,205 552 253 805 236 $7,246 2.4%
2004 $4,609
$5,119 201 136 23 586 6,065 525 275 800 211 $7,076 23.5%
161 32 317 5,119 252 172 424 185 $5,728 9.5%
Retail base revenues of $3.8 billion in 2006 increased $7.0 million, or 0.2 percent, from 2005 primarily due to customer growth of 1.9 percent and more favorable weather, partially offset by lower market-driven rates to large commercial and industrial customers. Retail base revenues of $3.8 billion in 2005 increased by $360 million, or 10.6 percent, from 2004 primarily due to the retail rate increases effective January 1, 2005 and June 1, 2005, sustained economic strength, customer growth, more favorable weather, and generally higher prices to large business customers. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" for additional information. Retail base revenues of $3.4 billion in 2004 increased by $192 million, or 6.0 percent, from 2003 primarily due to an improved economy, customer growth, generally higher prices to the Company's large business customers, and more favorable weather. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses, including the fuel component of purchased power, and do not affect net income. See FUTURE EARNINGS POTENTIAL "PSC Matters Fuel Cost Recovery" herein for additional information. Wholesale revenues from sales to non-affiliated utilities were: 2006 Unit power sales -Capacity Energy Other power sales -Capacity and other Energy Total 2005
(in millions)
2004
$ 33 38 165 316 $552
$ 33 32 155 305 $525
$ 31 34 75 112 $252
Revenues from unit power sales contracts remained relatively constant in 2006, 2005, and 2004. Revenues from other non-affiliated sales increased $21 million, or 4.6 percent, and $273 million, or 146.0 percent, in 2006 and 2005, respectively, and decreased $13 million, or 6.5 percent, in 2004. The increase in 2006 was due to a 9.5 percent increase in the demand for kilowatt-hour (KWH) energy sales due to a new contract with an electrical membership corporation (EMC) that went into effect in April 2006. The increase in 2005 was primarily due to contracts with 30 EMCs that went into effect in January 2005 which increased the demand for energy. The capacity component of these transactions increased $1 million and $73.2 million in 2006 and 2005, respectively. Revenues from sales to affiliated companies within the Southern Company system will vary from year to year depending on demand and the availability and cost of generating resources at each company. These affiliated sales and purchases are made in accordance with the Intercompany Interchange Contract (IIC), as approved by the Federal Energy Regulatory Commission (FERC). In 2006 and 2005, KWH energy sales to affiliates increased 9.2 percent and 2.2 percent, respectively,
due to higher demand. However, revenues from these sales decreased by 8.3 percent in 2006 due to reduced cost per KWH delivered. Revenues increased 59.8 percent in 2005 due to higher fuel prices. In 2004, KWH energy sales to affiliates decreased 18.3 percent due to lower demand. However, the decline in associated revenues was only 5.0 percent due to higher fuel prices. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost. Other operating revenues increased $24.6 million, or 11.6 percent, in 2006 primarily due to increased revenues of $14.1 million related to work performed for the other owners of the integrated transmission system (ITS) in the State of Georgia, higher customer fees of $4.6 million, and higher outdoor lighting revenues of $6.1 million due II-142
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to a 5.5 percent increase in customers. Other operating revenues increased $26.1 million, or 14.1 percent, in 2005 from 2004, primarily due to higher transmission revenues of $16 million related to work performed for the other owners of the ITS, higher revenues under the open access tariff agreement, higher outdoor lighting revenues of $5.4 million, and higher customer fees that went into effect in 2005 of $5.9 million. The increased transmission revenues in 2006 and 2005 did not have an impact on earnings since they were offset by associated transmission expenses. Other operating revenues increased $11.6 million, or 6.7 percent, in 2004 over 2003 primarily due to higher revenues from outdoor lighting of $4.2 million and pole attachment rentals of $4.9 million and higher gains on sales of emission allowances of $2 million. Energy Sales Changes in revenues are influenced heavily by the volume of energy sold each year. KWH sales for 2006 and the percent change by year were as follows: KWH 2006 (inbillions) Residential Commercial Industrial Other Total retail Sales for resale Non-affiliates Affiliates Total sales for resale Total sales 26.2 32.1 25.6 0.7 84.6 12.3 5.5 17.8 102.4 2006 2.7% 2.5 (1.0) (10.5) 1.4 8.8 9.2 8.9 2.6 Percent Change 2005 2.7% 6.0 (5.0) (1.0) 1.3 85.5 2.2 48.3 6.9 2004 5.5% 4.1 2.4 1.6 3.9 (32.2) (18.3) (26.6) (1.0)
Residential KWH sales increased 2.7 percent in 2006 over 2005 due to customer growth of 1.9 percent and more favorable weather. Commercial KWH sales increased 2.5 percent in 2006 over 2005 due to customer growth of 2.0 percent and a reclassification of customers from industrial to commercial to be consistent with the rate structure approved by the Georgia PSC. Industrial KWH sales decreased 1.0 percent due to a 3.4 percent decrease in the number of customers as a result of this reclassification. Residential KWH sales increased 2.7 percent in 2005 over 2004 due to more favorable weather, customer growth of 1.8 percent, and a 0.9 percent increase in the average energy consumption per customer. Commercial KWH sales increased 6.0 percent in 2005 when compared to 2004 due to more favorable weather, sustained economic strength, customer growth of 1.9 percent, and a reclassification of customers from industrial to commercial to be consistent with the rate structure approved by the Georgia PSC. Industrial sales decreased 5.0 percent primarily due to this reclassification of customers. Residential KWH sales increased 5.5 percent in 2004 from 2003 due to more favorable weather and a 1.9 percent increase in residential customers. Commercial KWH sales increased 4.1 percent in 2004 due to an improved economy and a 3.0 percent increase in commercial customers. Industrial sales increased 2.4 percent in 2004 due to the improved economy. Fuel and Purchased Power Expenses Fuel costs constitute the single largest expense for the Company. The mix of fuel sources for generation of electricity is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. Details of the Company's generation, fuel, and purchased power are as follows: 2006 Total generation (billions of KWH) Total purchased power (billions of KWH) Sources of generation
(percent)
2005 82.7 21.7
2004 73.6 24.5
83.7 23.7
Coal Nuclear Gas Hydro Cost of fuel, generated
74.4 18.2 6.2 1.2
75.7 18.2 3.8 2.3
76.0 21.8 0.3 1.9
(cents per net KWH)
Coal Nuclear Gas Average cost of fuel, generated

(cents per net KWH )
2.58 0.47 5.76

2.39
1.91 0.47 14.03

2.12
1.89 0.46 8.04

1.58
Average cost of purchased power (cents per net KWH)
5.90
7.10
5.09
Fuel and purchased power expenses were $3.4 billion in 2006, an increase of $124 million, or 3.8 percent, above prior year costs. This increase was driven by a $181 million increase related to total KWH generated and purchased, partially offset by a $57 million decrease in the cost of fuel. Fuel and purchased power expenses were $3.3 billion in 2005, an increase of $863 million, or 36.1 percent, above prior year costs. This increase was the result of an
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$868 million increase in the cost of fuel and a $5 million decrease related to total KWH generated and purchased. Fuel and purchased power expenses were $2.4 billion in 2004, an increase of $365 million, or 18 percent, above prior year costs. This increase was the result of a $20 million increase in the cost of fuel and a $345 million increase related to total KWH generated and purchased. The Company has entered into three power purchase agreements (PPAs) to purchase a total of approximately 1,000 megawatts (MW) annually from June 2009 through May 2024. These agreements were approved by the Georgia PSC on October 2, 2006. These agreements satisfy approximately 550 MW of growth, replace an existing 450 MW agreement that expires in May 2009, and are expected to result in higher operations and maintenance expenses that will be subject to recovery through future base rates. While prices have moderated somewhat in 2006, a significant upward trend in the cost of coal and natural gas has emerged since 2003, and volatility in these markets is expected to continue. Increased coal prices have been influenced by a worldwide increase in demand as a result of rapid economic growth in China, as well as by increases in mining and fuel transportation costs. Higher natural gas prices in the United States are the result of increased demand and slightly lower gas supplies despite increased drilling activity. Natural gas production and supply interruptions, such as those caused by the 2004 and 2005 hurricanes result in an immediate market response; however, the long-term impact of this price volatility may be reduced by imports of liquefied natural gas if new liquefied gas facilities are built. Fuel expenses generally do not affect net income, since they are offset by fuel revenues under the Company's fuel cost recovery provisions. See FUTURE EARNINGS POTENTIAL - "PSC MATTERS - Fuel Cost Recovery." Other Operations and Maintenance Expenses In 2006, other operations and maintenance expenses decreased $11 million, or 0.7 percent, from the prior year. Maintenance for generating plants decreased $20.0 million in 2006 as a result of scheduled outages in 2005 offset by an increase of $18.2 million for transmission and distribution expenses related to load dispatching and overhead line maintenance. Also contributing to the decrease were decreased employee benefit expenses related to medical benefits and lower workers compensation expense of $23.2 million, partially offset by lower pension income of $13.7 million. In 2005, other operations and maintenance expenses increased $86 million, or 5.8 percent. Maintenance for generating plant and transmission and distribution increased $27.5 million and $15.9 million, respectively, as a result of scheduled outages and, to a lesser extent, certain flexible projects planned for other periods. Increased employee benefit expense of $18.9 million related to pension and medical benefits and higher property insurance costs of $4.6 million resulting from storm damage also contributed to the increase. Customer assistance expense and uncollectible account expense also increased an additional $9.3 million in 2005 over 2004, primarily as a result of promotional expenses related to an energy efficiency program and an increased number of customer bankruptcies. In 2004, other operations and maintenance expenses increased $155 million, or 11.6 percent, in part due to the timing of generating plant maintenance of $37.6 million and transmission and distribution maintenance of $39.6 million. Increased employee benefit expense of $30 million related to pension and medical benefits and higher workers compensation expense of $8 million also contributed to the increase. Depreciation and Amortization Expenses Depreciation and amortization decreased $27.9 million, or 5.3 percent, in 2006 from the prior year due to the amortization of a regulatory liability related to the inclusion of certified PPAs in retail rates as ordered by the Georgia PSC under the terms of the 2004 Retail Rate Plan. This decrease was partially offset by a $15.9 million, or 3.2 percent, increase in depreciation expense in 2006 over 2005 due to an increase in plant in service. Depreciation and amortization increased $230 million, or 77.5 percent, in 2005 over 2004 primarily due to the expiration at the end of 2004 of certain provisions of the 2001 Retail Rate Plan. In accordance with the 2001 Retail Rate Plan, the Company amortized an accelerated cost recovery liability as a credit to amortization expense and recognized new Georgia PSC-certified purchased power costs in rates evenly over the three years ended December 31, 2004. This treatment resulted in a credit to amortization expense of $187.1 million in 2004 and a total decrease in depreciation and amortization of $74 million in 2004. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" for additional infonration. Taxes Other Than Income Taxes Taxes other than income taxes increased $22.8 million, or 8.3 percent, in 2006 primarily due to higher property taxes of $13.3 million as a result of an increase in property values and higher municipal gross receipts taxes of $9.1 million as a result of increased retail operating
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revenues. Taxes other than income taxes increased $33 million, or 13.6 percent, in 2005 primarily due to higher municipal gross receipts taxes of $18.1 million resulting from increased retail operating revenues and higher property taxes of $14.0 million. Taxes other than income taxes increased $15.6 million, or 6.8 percent, in 2004 primarily due to higher municipal gross receipts taxes associated with increased retail operating revenues.
Allowance For Equity Funds Used During Construction
Allowance for equity funds used during construction (AFUDC) remained relatively constant in 2006 and 2005 and increased $18.1 million in 2004, primarily due to the construction of the Plant McIntosh combined cycle units 10 and 11 which were placed in service in June 2005.
Interest Income
Interest income decreased $4.1 million in 2006 primarily due to interest on a favorable state tax settlement of $3.8 million in 2005. Interest income remained relatively constant in 2005. Interest income decreased $9 million in 2004 when compared to the prior year primarily due to interest on a favorable income tax settlement of $14.5 million in 2003.
Interest Expense
Interest expense increased $22.5 million, or 9.5 percent, in 2006 primarily due to generally higher interest rates on variable rate debt and commercial paper, the issuance of additional senior notes during 2005, and higher average balances on shortterm debt. Interest expense increased $40.6 million, or 15.9 percent, in 2005 from 2004 primarily due to the issuance of additional senior notes in 2005 and generally higher interest rates on variable rate debt and commercial paper. Variable rates on pollution control bonds are highly correlated with the Bond Market Association Municipal Swap Index, which averaged 2.5 percent in 2005 and 1.2 percent in 2004. Variable rates on commercial paper and senior notes are highly correlated with the one-month London Interbank Offer Rate, which averaged 3.4 percent in 2005 and 1.5 percent in 2004. Interest expense remained relatively constant in 2004. The Company refinanced or retired $324 million, $635 million, and $470 million of securities in 2006, 2005, and 2004, respectively. Interest capitalized increased in 2005 and 2004 due to the Plant Mclntosh construction referenced above.
Other Income and (Expense), net
Other income and (expense), net increased $1.9 million, or 26.7 percent, in 2006 primarily due to reduced expenses of $2.9 million and $5.0 million related to the employee stock ownership plan and charitable donations, respectively, and increased revenues of $3.6 million, $5.4 million, and $3.4 million related to a residential pricing program, customer contracting, and customer facilities charges, respectively. These increases were partially offset by net financial gains on gas hedges of $18.6 million in 2005. Other income and (expense), net increased $21.5 million in 2005 from 2004 primarily due to $16.8 million of additional gas hedge gains. Other income and (expense), net decreased in 2004 primarily due to a
$15.5 million disallowance of Plant McIntosh construction costs in December 2004, partially offset by a $7.5 million decrease in donations and $3.4 million in increased income from a customer pricing program. See Note 3 to the financial
statements under "Retail Regulatory Matters - Rate Plans" and "- Fuel Hedging Program" for additional information.
Effects of Inflation The Company is subject to rate regulation that is based on the recovery of historical costs. When historical costs are included, or when inflation exceeds projected costs used in rate regulation, the effects of inflation can create an economic loss since the recovery of costs could be in dollars that have less purchasing power. In addition, income tax laws are based on historical costs. 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 utility plant with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt, preferred stock, and preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed in the Company's approved electric rates. FUTURE EARNINGS POTENTIAL General The Company operates as a vertically integrated utility providing electricity to retail customers within its traditional service territory located within the State of Georgia and to wholesale customers in the Southeast. Prices for electricity provided by the Company to retail customers are set by the Georgia PSC under cost-based regulatory principles. Prices for electricity relating to PPAs, interconnecting transmission lines, and the exchange of electric power are set by the FERC. Retail
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2006 Annual Report
rates and revenues are reviewed and adjusted periodically with certain limitations. See ACCOUNTING POLICIES "Application of Critical Accounting Policies and Estimates - Electric Utility Regulation" herein and Note 3 to the financial statements under "Retail Regulatory Matters" and "FERC Matters" for additional information about regulatory matters.
The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of
the Company's future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Company's business of selling electricity. These factors include the ability of the Company to maintain a stable regulatory
environment that continues to allow for the recovery of all prudently incurred costs during a time of increasing costs. Future
earnings in the near term will depend, in part, upon growth in energy sales, which is subject to a number of factors. These factors include weather, competition, new energy contracts with neighboring utilities, energy conservation practiced by customers, the price of electricity, the price elasticity of demand, and the rate of economic growth in the Company's service area. Assuming nonnal weather, retail sales growth is expected to be approximately 2.1 percent on average from 2007 to
2011. Environmental Matters Compliance costs related to the Clean Air Act and other environmental regulations could affect earnings if such costs cannot be fully recovered in rates on a timely basis. Environmental compliance spending over the next several years may exceed amounts estimated. Some of the factors driving the potential for such an increase are higher commodity costs, market demand for labor, and scope additions and clarifications. The timing, specific requirements, and estimated costs could also change as environmental regulations are modified. See Note 3 to the financial statements under "Environmental Matters" for additional information. New Source Review Actions In November 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S. District Court for the Northern District of Georgia against certain Southern Company subsidiaries, including the Company and Alabama Power, alleging that these subsidiaries had violated the New Source Review (NSR) provisions of the Clean Air Act and related state laws at certain coal-fired generating facilities, including the Company's Plants Bowen and Scherer. Through subsequent amendments and other legal procedures, the EPA filed a separate action in January 2001 against Alabama Power in the U.S. District Court for the Northern District of Alabama after Alabama Power was dismissed from the original action. In these lawsuits, the EPA alleged that NSR violations occurred at eight coal-fired generating facilities operated by Alabama Power and the Company (including a facility formerly owned by Savannah Electric). The civil actions request penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. On June 19, 2006, the U.S. District Court for the Northern District of Alabama entered a consent decree between Alabama Power and the EPA, resolving the alleged NSR violations at Plant Miller. The consent decree required Alabama Power to pay $100,000 to resolve the government's claim for a civil penalty and to donate $4.9 million of sulfur dioxide emission allowances to a nonprofit charitable organization and formalized specific emissions reductions to be accomplished by Alabama Power, consistent with other Clean Air Act programs that require emissions reductions. On August 14, 2006, the district court in Alabama granted Alabama Power's motion for summary judgment and entered final judgment in favor of Alabama Power on the EPA's claims related to Plants Barry, Gaston, Gorgas, and Greene County. The plaintiffs have appealed this decision to the U.S. Court of Appeals for the Eleventh Circuit and on November 14, 2006, the Eleventh Circuit granted plaintiffs' request to stay the appeal, pending the U.S. Supreme Court's ruling in a similar NSR case filed by the EPA against Duke Energy. The action against the Company has been administratively closed since the spring of 2001, and none of the parties has sought to reopen the case. The Company believes that it complied with applicable laws and the EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to $32,500 per day, per violation at each generating unit, depending on the date of the alleged violation. An adverse outcome in this matter could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties. Such expenditures could affect future results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. The EPA has issued a series of proposed and final revisions to its NSR regulations under the Clean Air Act, many of
which have been subject to legal challenges by environmental groups and states. On June 24, 2005, the U.S. Court of
Appeals for the District of Columbia Circuit upheld, in part, the EPA's revisions to NSR
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regulations that were issued in December 2002 but vacated portions of those revisions addressing the exclusion of certain pollution control projects. These regulatory revisions have been adopted by the State of Georgia. On March 17, 2006, the U.S. Court of Appeals for the District of Columbia Circuit also vacated an EPA rule which sought to clarify the scope of the existing Routine Maintenance, Repair, and Replacement exclusion. In October 2005 and September 2006, the EPA also published proposed rules clarifying the test for determining when an emissions increase subject to the NSR permitting requirements has occurred. The impact of these proposed rules will depend on adoption of the final rules by the EPA and the State of Georgia's implementation of such rules, as well as the outcome of any additional legal challenges, and, therefore, cannot be determined at this time. Carbon Dioxide Litigation In July 2004, attorneys general from eight states, each outside of Southern Company's service territory, and the corporation counsel for New York City filed a complaint in the U.S. District Court for the Southern District of New York against Southern Company and four other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court. The complaints allege that the companies' emissions of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs assert is a public nuisance. Under common law public and private nuisance theories, the plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for creating, contributing to, and/or maintaining global warming and (2) requiring each of the defendants to cap its emissions of carbon dioxide and then reduce those emissions by a specified percentage each year for at least a decade. Plaintiffs have not, however, requested that damages be awarded in connection with their claims. Southern Company believes these claims are without merit and notes that the complaint cites no statutory or regulatory basis for the claims. In September 2005, the U.S. District Court for the Southern District of New York granted Southern Company's and the other defendants' motions to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit in October 2005. The ultimate outcome of these matters cannot be determined at this time. Plant Wansley Environmental Litigation In December 2002, the Sierra Club, Physicians for Social Responsibility, Georgia Forestwatch, and one individual filed a civil suit in the U.S. District Court for the Northern District of Georgia against the Company for alleged violations of the Clean Air Act at four of the units at Plant Wansley. The civil action requested injunctive and declaratory relief, civil penalties, a supplemental environmental project, and attorneys' fees. In January 2007, following the March 2006 reversal and remand by the U.S. Court of Appeals for the Eleventh Circuit, the district court ruled for the Company on all remaining allegations in this case. The only issue remaining for resolution by the district court is the appropriate remedy for two isolated, short-term, technical violations of the plant's Clean Air Act operating permit. The court has asked the parties to submit a joint proposed remedy or individual proposals in the event the parties cannot agree. Although the ultimate outcome of this matter cannot currently be determined, the resulting liability associated with the two events is not expected to have a material impact on the Company's financial statements. Environmental Statutes and Regulations General The Company's operations are subject to extensive regulation by state and federal environmental agencies under a variety of statutes and regulations governing environmental media, including air, water, and land resources. Applicable statutes 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; the Emergency Planning & Community Right-to-Know Act; and the Endangered Species Act. Compliance with these environmental requirements involves significant capital and operating costs, a major portion of which is expected to be recovered through existing ratemaking provisions. Through 2006, the Company had invested approximately $1.5 billion in capital projects to comply with these requirements, with annual totals of $351 million, $117 million, and $47 million for 2006, 2005, and 2004, respectively. The Company expects that capital expenditures to assure compliance with existing and new regulations will be an additional $955 million, $637 million, and $316 million for 2007, 2008, and 2009, respectively. Because the Company's compliance strategy is impacted by changes to existing environmental laws and regulations, the cost, availability, and existing inventory of emission allowances, and the Company's fuel mix, the ultimate outcome cannot be determined at this time. Environmental costs that are known and estimable at this time are included in capital expenditures discussed under FINANCIAL CONDITION AND LIQUIDITY - "Capital Requirements and Contractual Obligations" herein.
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Compliance with possible additional federal or state legislation or regulations related to global climate change, air quality, or other environmental and health concerns could also significantly affect the Company. New environmental legislation or regulations, or changes to existing statutes or regulations, could affect many areas of the Company's operations; however, the full impact of any such changes cannot be determined at this time. Air Quality Compliance with the Clean Air Act and resulting regulations has been and will continue to be a significant focus for the Company. Through 2006, the Company had spent approximately $1.3 billion in reducing sulfur dioxide (SO 2) and nitrogen oxide (NO x) emissions and in monitoring emissions pursuant to the Clean Air Act. Additional controls have been announced and are currently being installed at several plants to further reduce SO 2, NO x, and mercury emissions, maintain compliance with existing regulations, and meet new requirements. Approximately $700 million of the expenditures related to reducing NO x emissions pursuant to state and federal requirements were in connection with the EPA's one-hour ozone air quality standard and the 1998 regional NO x reduction rules. In 2005, the EPA revoked the one-hour ozone air quality standard and published the second of two sets of final rules for implementation of the new, more stringent eight-hour ozone standard. Areas within the Company's service area that were designated as nonattainment under the eight-hour ozone standard include Macon and a 20-county area within metropolitan Atlanta. Macon is in the process of seeking redesignation by the EPA as an attainment area and is preparing a maintenance plan for approval. On December 22, 2006, the U.S. Court of Appeals for the District of Columbia Circuit vacated the first set of implementation rules adopted in 2004 and remanded the rules to the EPA for further refinement. The impact of this decision, if any, cannot be determined at this time and will depend on subsequent legal action and/or rulemaking activity. State implementation plans, including new emission control regulations necessary to bring ozone nonattainment areas into attainment, are currently required for Georgia by June 2007. These state implementation plans could require further reductions in NO x emissions from power plants. During 2005, the EPA's fine particulate matter nonattainment designations became effective for several areas within the Company's service area and the EPA proposed a rule for the implementation of the fine particulate matter standard. The EPA is expected to publish its final rule for implementation of the existing fine particulate matter standard in early 2007. State plans for addressing the nonattainment designations under the existing standard are required by April 2008 and could require further reductions in SO 2 and NO x emissions from power plants. On September 21, 2006, the EPA published a final rule lowering the 24-hour fine particulate matter air quality standard even further and plans to designate nonattainment areas based on the new standard by December 2009. The final outcome of this matter cannot be determined at this time. The EPA issued the final Clean Air Interstate Rule in March 2005. This cap-and-trade rule addresses power plant SO 2 and NO x emissions that were found to contribute to nonattainment of the eight-hour ozone and fine particulate matter standards in downwind states. Twenty-eight eastern states, including the State of Georgia, are subject to the requirements of the rule. The rule calls for additional reductions of NO x and/or SO 2 to be achieved in two phases, 2009/2010 and 2015. These reductions will be accomplished by the installation of additional emission controls at the Company's coal-fired facilities or by the purchase of emission allowances from a cap-and-trade program. The Clean Air Visibility Rule (formerly called the Regional Haze Rule) was finalized in July 2005. The goal of this rule is to restore natural visibility conditions in certain areas (primarily national parks and wilderness areas) by 2064. The rule involves (1) the application of Best Available Retrofit Technology (BART) to certain sources built between 1962 and 1977 and (2) the application of any additional emissions reductions which may be deemed necessary for each designated area to achieve reasonable progress toward the natural conditions goal by 2018. Thereafter, for each 10-year planning period, additional emissions reductions will be required to continue to demonstrate reasonable progress in each area during that period. For power plants, the Clean Air Visibility Rule allows states to determine that the Clean Air Interstate Rule satisfies BART requirements for SO 2 and NO x. However, additional BART requirements for particulate matter could be imposed and the reasonable progress provisions could result in requirements for additional SO 2 controls. By December 17, 2007, states must submit implementation plans that contain strategies for BART and any other control measures required to achieve the first phase of reasonable progress. In March 2005, the EPA published the final Clean Air Mercury Rule, a cap-and-trade program for the reduction of mercury emissions from coal-fired power plants. The rule sets caps on mercury emissions to be implemented in two phases, 2010 and 2018, and provides
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for an emission allowance trading market. The Company anticipates that emission controls installed to achieve compliance with the Clean Air Interstate Rule and the eight-hour ozone and fine-particulate air quality standards will also result in mercury emission reductions. However, the long-term capability of emission control equipment to reduce mercury emissions is still being evaluated, and the installation of additional control technologies may be required. The impacts of the eight-hour ozone ard the fine particulate matter nonattainment designations, the Clean Air Interstate Rule, the Clean Air Visibility Rule, and the Clean Air Mercury Rule on the Company will depend on the development and implementation of rules at the state level. States implementing the Clean Air Mercury Rule and the Clean Air Interstate Rule, in particular, have the option not to participate in the national cap-and-trade programs and could require reductions greater than those mandated by the federal rules. Impacts will also depend on resolution of pending legal challenges to these rules. Therefore, the full effects of these regulations on the Company cannot be determined at this time. The Company has developed and continually updates a comprehensive environmental compliance strategy to comply with the continuing and new environmental requirements discussed above. As part of this strategy, the Company plans to install additional SO 2, NO x, and mercury emission controls within the next several years to assure continued compliance with applicable air quality requirements. Water Quality In July 2004, the EPA published its final technology- based regulations under the Clean Water Act for the purpose of reducing impingement and entrainment of fish, shellfish, and other forms of aquatic life at existing power plant cooling water intake structures. The rules require baseline biological information and, perhaps, installation offish protection technology near some intake structures at existing power plants. On January 25, 2007, the U.S. Court of Appeals for the Second Circuit overturned and remanded several provisions of the rule to the EPA for revisions. Among other things, the court rejected the EPA's use of "cost-benefit" analysis and suggested some ways to incorporate cost considerations. The full impact of these regulations will depend on subsequent legal proceedings, further rulemaking by the EPA, results of studies and analyses performed as part of the rules' implementation, and the actual requirements established by the State of Georgia and therefore, cannot now be determined. The Company is retrofitting a closed-loop recirculating cooling tower at one facility under the Clean Water Act to cool water prior to discharge and is considering undertaking similar work at an additional facility. The total estimated capital cost for this project is $96 million. EnvironmentalRemediation The Company must comply with other environmental laws and regulations that cover the handling and disposal of waste and release of hazardous substances. Under these various laws and regulations, the Company could incur substantial costs to clean up properties. The Company conducts studies to determine the extent of any required cleanup and has recognized in its financial statements the costs to clean up known sites. Amounts for cleanup and ongoing monitoring costs were not material for any year presented. The Company may be liable for some or all required cleanup costs for additional sites that may require environmental remediation. See Note 3 to the financial statements under "Environmental Matters - Environmental Remediation" for additional information. Global Climate Issues Domestic efforts to limit greenhouse gas emissions have been spurred by international negotiations under the Framework Convention on Climate Change and specifically the Kyoto Protocol, which proposes a binding limitation on the emissions of greenhouse gases for industrialized countries. The Bush Administration has not supported U.S. ratification of the Kyoto Protocol or other mandatory carbon dioxide reduction legislation; however, in 2002, it did announce a goal to reduce the greenhouse gas intensity of the U.S. economy, the ratio of greenhouse gas emissions to the value of U.S. economic output, by 18 percent by 2012. Southern Company is participating in the voluntary electric utility sector climate change initiative, known as Power Partners, under the Bush Administration's Climate VISION program. The utility sector pledged to reduce its greenhouse gas emissions rate by 3 percent to 5 percent by 2010-2012. Southern Company continues to evaluate future energy and emission profiles relative to the Power Partners program and is participating in voluntary programs to support the industry initiative. In addition, Southern Company is participating in the Bush Administration's Asia Pacific Partnership on Clean Development and Climate, a public/private partnership to work together to meet goals for energy security, national air pollution reduction, and climate change in ways that promote sustainable
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economic growth and poverty reduction. Legislative proposals that would impose mandatory restrictions on carbon dioxide emissions continue to be considered in Congress. The ultimate outcome cannot be determined at this time; however, mandatory restrictions on the Company's carbon dioxide emissions could result in significant additional compliance costs that could affect future results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates. FERC Matters Market-Based Rate Authority The Company has authorization from the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate. In December 2004, the FERC initiated a proceeding to assess Southern Company's generation dominance within its retail service territory. The ability to charge market-based rates in other markets is not an issue in that proceeding. Any new market-based rate sales by the Company in Southern Company's retail service territory entered into during a 15-month refund period beginning February 27, 2005 could be subject to refund to the level of the default cost-based rates, pending the outcome of the proceeding. Such sales through May 27, 2006, the end of the refund period, were approximately $5.8 million for the Company. In the event that the FERC's default mitigation measures for entities that are found to have market power are ultimately applied, the Company may be required to charge cost-based rates for certain wholesale sales in the Southern Company retail service territory, which may be lower than negotiated market-based rates. The final outcome of this matter will depend on the form in which the final methodology for assessing generation market power and mitigation rules may be ultimately adopted and cannot be determined at this time. In addition, in May 2005, the FERC started an investigation to determine whether Southern Company satisfies the other three parts of the FERC's market-based rate analysis: transmission market power, barriers to entry, and affiliate abuse or reciprocal dealing. The FERC established a new 15-month refund period related to this expanded investigation. Any new market-based rate sales involving any Southern Company subsidiary, including the Company, could be subject to refund to the extent the FERC orders lower rates as a result of this new investigation. Such sales through October 19, 2006, the end of the refund period, were approximately $18.8 million for the Company, of which $3.9 million relates to sales inside the retail service territory discussed above. The FERC also directed that this expanded proceeding be held in abeyance pending the outcome of the proceeding on the IIC discussed below. On January 3, 2007, the FERC issued an order noting settlement of the IIC proceeding and seeking comment identifying any remaining issues and the proper procedure for addressing any such issues. The Company believes that there is no meritorious basis for these proceedings and is vigorously defending itself in this matter. However, the final outcome of this matter, including any remedies to be applied in the event of an adverse ruling in these proceedings, cannot now be determined. Intercompany Interchange Contract The Company's generation fleet is operated under the IIC, as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine (1) the provisions of the IIC among Alabama Power, the Company, Gulf Power, Mississippi Power, Savannah Electric, Southern Power, and Southern Company Services, Inc. (SCS), as agent, under the terms of which the power pool of Southern Company is operated, and, in particular, the propriety of the continued inclusion of Southern Power as a party to the TIC, (2) whether any parties to the IIC have violated the FERC's standards of conduct applicable to utility companies that are transmission providers, and (3) whether Southern Company's code of conduct defining Southern Power as a "system company" rather than a "marketing affiliate" is just and reasonable. In connection with the formation of Southern Power, the FERC authorized Southern Power's inclusion in the IIC proceeding in 2000. The FERC also previously approved Southern Company's code of conduct. On October 5, 2006, the FERC issued an order accepting a settlement resolving the proceeding subject to Southern Company's agreement to accept certain modifications to the settlement's terms. On October 20, 2006, Southern Company notified the FERC that it accepted the modifications. The modifications largely involve functional separation and information restrictions related to marketing activities conducted on behalf of Southern Power. Southern Company filed with the FERC on November 6, 2006 an implementation plan to comply with the modifications set forth in the order. The impact of the modifications is not expected to have a material impact on the Company's financial statements.
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Generation Interconnection Agreements In July 2003, the FERC issued its final rule on the standardization of generation interconnection agreements and procedures (Order 2003). Order 2003 shifts much of the financial burden of new transmission investment from the generator to the transmission provider. The FERC has indicated that Order 2003, which was effective January 20, 2004, is to be applied prospectively to new generating facilities interconnecting to a transmission system. Order 2003 was affirmed by the U.S. Court of Appeals for the District of Columbia Circuit on January 12, 2007. The cost impact resulting from Order 2003 will vary on a case-by-case basis for each new generator interconnecting to the transmission system. On November 22, 2004, generator company subsidiaries of Tenaska, Inc. (Tenaska), as counterparties to three previously executed interconnection agreements with subsidiaries of Southern Company, including the Company, filed complaints at the FERC requesting that the FERC modify the agreements and that the Company refund a total of $7.9 million previously paid for interconnection facilities, with interest. Southern Company has also received requests for similar modifications from other entities, though no other complaints are pending with the FERC. On January 19, 2007, the FERC issued an order granting Tenaska's requested relief. Although the FERC's order requires the modification of Tenaska's interconnection agreements, the order reduces the amount of the refund that had been requested by Tenaska. As a result, the Company estimates indicate that no refund is due Tenaska. Southern Company has requested rehearing of the FERC's order. The final outcome of this matter cannot now be determined. Transmission In December 1999, the FERC issued its final rule on Regional Transmission Organizations (RTOs). Since that time, there have been a number of additional proceedings at the FERC designed to encourage further voluntary formation of RTOs or to mandate their formation. However, at the current time, there are no active proceedings that would require the Company to participate in an RTO. Current FERC efforts that may potentially change the regulatory and/or operational structure of transmission include rules related to the standardization of generation interconnection, as well as an inquiry into, among other things, market power by vertically integrated utilities. See "Market-Based Rate Authority" and "Generation Interconnection Agreements" above for additional information. The final outcome of these proceedings cannot now be determined. However, the Company's financial condition, results of operations, and cash flows could be adversely affected by future changes in the federal regulatory or operational structure of transmission. PSC Matters Merger Effective July 1, 2006, Savannah Electric was merged into the Company. Prior to the merger, Southern Company was the sole common shareholder of both the Company and Savannah Electric. At the time of the merger, each outstanding share of Savannah Electric common stock was cancelled and Southern Company was issued an additional 1,500,000 shares of the Company's common stock, no par value per share. In addition, at the time of the merger, each outstanding share of Savannah Electric's preferred stock was cancelled and converted into the right to receive one share of the Company's 6 ' / s percent Series Class A Preferred Stock, Non-Cumulative, Par Value $25 Per Share, resulting in the issuance by the Company of stock of the Company consists of 9,261,500 shares of common stock, all of which are held by Southern Company, and 1,800,000 shares of Class A Preferred Stock.
1,800,000 shares of such Class A Preferred Stock in July 2006. Following completion of the merger, the outstanding capital
With respect to the merger, the Georgia PSC voted on June 15, 2006 to set a Merger Transition Adjustment (MTA) applicable to customers in the former Savannah Electric service territory so that the fuel rate that became effective on July 1, 2006 plus the MTA equals the applicable fuel rate paid by such customers as of June 30, 2006. See "Fuel Cost Recovery" herein for additional information. Amounts collected under the MTA are being credited to customers in the original Georgia Power service territory through a Merger Transition Credit (MTC). The MTA and the MTC will be in effect until December 31, 2007, when the Company's base rates are scheduled to be adjusted.
Rate Plans
In December 2004, the Georgia PSC approved the 2004 Retail Rate Plan. Under the terms of the 2004 Retail Rate Plan, earnings are being evaluated annually against a retail return on common equity (ROE) range of 10.25 percent to 12.25 percent. Two-thirds of any earnings above 12.25 percent are applied to rate refunds, with the remaining one-third retained by the Company. Retail rates increased by approximately $194 million and customer fees increased by approximately $9 million effective January 1, 2005 to cover the higher costs of 11-151
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purchased power; operations and maintenance expenses; environmental compliance; and continued investment in new generation, transmission and distribution facilities to support growth and ensure reliability. In 2007, the Company will refund 2005 earnings above 12.25 percent retail ROE. No refund is anticipated for 2006. The Company is required to file a general rate case by July 1, 2007, in response to which the Georgia PSC would be expected to determine whether the 2004 Retail Rate Plan should be continued, modified, or discontinued. See Note 3 to the financial statements under "Retail Regulatory Matters - Rate Plans" for additional information. Fuel Cost Recovery The Company has established fuel cost recovery rates approved by the Georgia PSC. In March 2006, the Company and Savannah Electric filed a combined request for fuel cost recovery rate changes with the Georgia PSC to be effective July I, 2006, concurrent with the merger of the companies. On June 15, 2006, the Georgia PSC ruled on the request and approved an increase in the Company's total annual billings of approximately $400 million. The Georgia PSC order provided for a combined ongoing fuel forecast but reduced the requested increase related to such forecast by $200 million. The order also required the Company to file for a new fuel cost recovery rate on a semi-annual basis, beginning in September 2006. Accordingly, on September 15, 2006, the Company filed a request to recover fuel costs incurred through August 2006 by increasing the fuel cost recovery rate. On November 13, 2006, under agreement with the Georgia PSC staff, the Company filed a supplementary request reflecting a forecast of annual fuel costs, as well as updated information for previously incurred fuel costs. On February 6, 2007, the Georgia PSC approved an increase in the Company's total annual billings of approximately $383 million. The order reduced the Company's requested increase in the forecast of annual fuel costs by $40 million and disallowed $4 million of previously incurred fuel costs. The order also requires the Company to file for a new fuel cost recovery rate no later than March 1, 2008. The new rates will become effective on March 1, 2007. Estimated under recovered fuel costs through February 2007 are to be recovered through May 2009 for customers in the original Georgia Power territory and through November 2009 for customers in the former Savannah Electric territory. As of December 31, 2006, the Company had an under recovered fuel balance of approximately $898 million, of which approximately $544 million is included in deferred charges and other assets in the balance sheets. Fuel cost recovery revenues as recorded on the financial statements are adjusted for differences in actual recoverable costs and amounts billed in current regulated rates. Accordingly, a change in the billing factor has no significant effect on the Company's revenues or net income, but does impact annual cash flow. In accordance with Georgia PSC order, a portion of the under recovered regulatory clause revenues for the Company is included in deferred charges and other assets in the balance sheets. See Note 1 to the financial statements under "Revenues" and Note 3 to the financial statements under "Retail Regulatory Matters" for additional information. Nuclear On August 15, 2006, as part of a potential expansion of Plant Vogtle, the Company and Southern Nuclear Operating Company, Inc. (SNC) filed an application with the Nuclear Regulatory Commission (NRC) for an early site permit (ESP) on behalf of the owners of Plant Vogtle. In addition, the Company and SNC notified the NRC of their intent to apply for a combined construction and operating license (COL) in 2008. Ownership agreements have been signed with each of the existing Plant Vogtle co-owners. See Note 4 to the financial statements for additional information on these co-owners. In June 2006, the Georgia PSC approved the Company's request to establish an accounting order that would allow the Company to defer for future recovery the ESP and COL costs, of which the Company's portion is estimated to total approximately $51 million over the next four years. At this point, no final decision has been made regarding actual construction. Any new generation resource must be certified by the Georgia PSC in a separate proceeding. Other Matters The Company is involved in various other matters being litigated, regulatory matters, and certain tax-related issues that could affect future earnings. See Note 3 to the financial statements for information regarding material issues. ACCOUNTING POLICIES Application of Critical Accounting Policies and Estimates The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. Significant accounting policies are described in Note 1 to the financial statements. In the application of these policies, certain estimates are made that may have a material impact on the Company's results of operations and related disclosures. Different
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assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. Senior management has reviewed and discussed the following critical accounting policies and estimates with the Audit Committee of Southern Company's Board of Directors. Electric Utility Regulation The Company is subject to retail regulation by the Georgia PSC and wholesale regulation by the FERC. These regulatory agencies set the rates the Company is permitted to charge customers based on allowable costs. As a result, the Company applies FASB Statement No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), which requires the financial statements to reflect the effects of rate regulation. Through the ratemaking process, the regulators may require the inclusion of costs or revenues in periods different than when they would be recognized by a non-regulated company. This treatment may result in the deferral of expenses and the recording of related regulatory assets based on anticipated future recovery through rates or the deferral of gains or creation of liabilities and the recording of related regulatory liabilities. The application of SFAS No. 71 has a further effect on the Company's financial statements as a result of the estimates of allowable costs used in the ratemaking process. These estimates may differ from those actually incurred by the Company; therefore, the accounting estimates inherent in specific costs such as depreciation, nuclear decommissioning, and pension and postretirement benefits have less of a direct impact on the Company's results of operations than they would on a nonregulated company. As reflected in Note I to the financial statements significant regulatory assets and liabilities have been recorded. Management reviews the ultimate recoverability of these regulatory assets and liabilities based on applicable regulatory guidelines and accounting principles generally accepted in the United States. However, adverse legislative, judicial, or regulatory actions could materially impact the amounts of such regulatory assets and liabilities and could adversely impact the Company's financial statements. Contingent Obligations The Company is subject to a number of federal and state laws and regulations, as well as other factors and conditions that potentially subject it to environmental, litigation, income tax, and other risks. See FUTURE EARNINGS POTENTIAL herein and Note 3 to the financial statements for more information regarding certain of these contingencies. The Company periodically evaluates its exposure to such risks and records reserves for those matters where a loss is considered probable and reasonably estimable in accordance with generally accepted accounting principles. The adequacy of reserves can be significantly affected by external events or conditions that can be unpredictable; thus, the ultimate outcome of such matters could materially affect the Company's financial statements. These events or conditions include the following: * Changes in existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances, hazardous and solid wastes, and other environmental matters. * Changes in existing income tax regulations or changes in Internal Revenue Service (IRS) or Georgia Department of Revenue interpretations of existing regulations. * Identification of additional sites that require environmental remediation or the filing of other complaints in which the Company may be asserted to be a potentially responsible party. * Identification and evaluation of other potential lawsuits or complaints in which the Company may be named as a defendant. * Resolution or progression of existing matters through the legislative process, the court systems, the IRS, or the EPA. Unbilled Revenues Revenues related to the sale of electricity are recorded when electricity is delivered to customers. However, the determination of KWH sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, amounts of electricity delivered to customers, but not yet metered and billed, are estimated. Components of the unbilled revenue estimates include total KWH territorial supply, total KWH billed, estimated total electricity lost in delivery, and customer usage. These components can fluctuate as a result of a number of factors including weather, generation patterns, power delivery volume, and other operational constraints. These factors can be unpredictable and can vary from historical trends. As a result, the overall estimate of unbilled revenues could be significantly affected, which could have a material impact on the Company's results of operations.
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New Accounting Standards Stock Options On January 1, 2006, the Company adopted FASB Statement No. 123(R), "Share-Based Payment" (SFAS No. 123(R)), using the modified prospective method. As a result, compensation cost relating to share-based payment transactions must now be recognized in the Company's financial statements. That cost is measured based on the grant date fair value of the equity or liability instruments issued. Although the compensation expense required under the revised statement differs slightly, the impacts on the Company's financial statements are similar to the pro forna disclosures included in Note 1 to the financial statements under "Stock Options." Pensions and Other Postretirement Plans On December 31, 2006, the Company adopted FASB Statement No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" (SFAS No. 158), which requires recognition of the funded status of its defined benefit postretirement plans in its balance sheet. With the adoption of SFAS No. 158, the Company recorded an additional prepaid pension asset of $218 million with respect to its overfunded defined benefit plan and additional liabilities and deferred credits of$13 million and $255 million, respectively, related to its underfunded non-qualified pension plans and retiree benefit plans. Additionally, SFAS No. 158 will require the Company to change the measurement date for its defined benefit postretirement plan assets and obligations from September 30 to December 31 beginning with the year ending December 31, 2008. See Note 2 to the financial statements for additional information. Guidance on Considering the Materiality ofMisstatements In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using both a balance sheet and an income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to beginning of year retained earnings. The provisions of SAB 108 were effective for the Company for the year ended December 31, 2006. The adoption of SAB 108 did not have a material impact on the Company's financial statements. Income Taxes In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48). This interpretation requires that tax benefits must be "more likely than not" of being sustained in order to be recognized. The Company adopted FIN 48 effective January 1, 2007 with no material impact on the Company's financial statements. Fair Value Measurement The FASB issued FASB Statement No. 157, "Fair Value Measurements" (SFAS No. 157) in September 2006. SFAS No. 157 provides guidance on how to measure fair value where it is permitted or required under other accounting pronouncements. SFAS No. 157 also requires additional disclosures about fair value measurements. The Company plans to adopt SFAS No. 157 on January 1, 2008 and is currently assessing its impact. Fair Value Option In February 2007, the FASB issued FASB Statement No. 159, "Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115" (SFAS No. 159). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. The Company plans to adopt SFAS No. 159 on January 1, 2008 and is currently assessing its impact. FINANCIAL CONDITION AND LIQUIDITY Overview The Company's financial condition remained stable at December 31, 2006. Cash flow from operations increased $117 million in 2006, resulting primarily from increased retail operating revenues partially offset by higher fuel inventories and an increase in under recovered deferred fuel costs. In 2005, cash flow from operations increased $58 million resulting primarily from increased retail operating revenues, partially offset by the increase in under recovered deferred fuel costs. In 2004, cash flow from operations decreased $246 million resulting primarily from the increase in under recovered deferred
fuel costs.
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In 2006, gross property additions were $1.2 billion. These additions were primarily related to transmission and distribution facilities, nuclear fuel, and equipment to comply with environmental standards. The majority of funds needed for gross property additions for the last several years have been provided from operating activities and capital contributions from Southern Company and the issuance of short-term debt. The statements of cash flows provide additional details. The Company's ratio of common equity to total capitalization - including short-term debt - was 48.6 percent in 2006, 47.9 percent in 2005, and 47.5 percent in 2004. The Company has received investment grade ratings from the major rating agencies with respect to debt, preferred securities, and preferred stock. Sources of Capital The Company plans to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from operating cash flows. However, the type and timing of any future financings, if needed, will depend on market conditions, regulatory approvals, and other factors. The issuance of long-term securities by the Company is subject to the approval of the Georgia PSC. In addition, the issuance of short-term debt securities by the Company is subject to regulatory approval by the FERC. Additionally, with respect to the public offering of securities, the Company files registration statements with the SEC under the Securities Act of 1933, as amended (1933 Act). The amounts of securities authorized by the Georgia PSC, as well as the amounts, if any, registered under the 1933 Act, are continuously monitored and appropriate filings are made to ensure flexibility in the capital markets. The Company obtains financing separately without credit support from any affiliate. See Note 6 to the financial statements under "Bank Credit Arrangements" for additional information. The Southern Company system does not maintain a centralized cash or money pool. Therefore, funds of the Company are not commingled with funds of any other company. The Company's current liabilities frequently exceed current assets because of the continued use of short-term debt as a funding source for under recovered fuel costs and to meet cash needs which can fluctuate significantly due to the seasonality of the business. To meet short-term cash needs and contingencies, the Company had credit arrangements with banks totaling $910 million, of which $904 million was unused, at the beginning of 2007. See Note 6 to the financial statements under "Bank Credit Arrangements" for additional information. At the beginning of 2007, bank credit arrangements were as follows: Total $910 Unused $904 2007 $40 Expires 2008
(in millions)
2011 $870
$-
The credit arrangements that expire in 2007 allow for the execution of term loans for an additional two-year period. The Company may also meet short-term cash needs through a Southern Company subsidiary organized to issue and sell commercial paper and extendible commercial notes at the request and for the benefit of the Company and the other traditional operating companies. Proceeds from such issuances for the benefit of the Company are loaned directly to the Company and are not commingled with proceeds from issuances for the benefits of any other operating company. The obligations of each company under these arrangements are several; there is no cross affiliate credit support. As of December 31, 2006, the Company had outstanding $733 million of commercial paper and no extendible commercial notes. Financing Activities During 2006, the Company issued $150 million of senior notes and incurred $154 million of obligations related to the issuance of pollution control bonds. The issuances were used to reduce the Company's short-term indebtedness and refund $154 million of higher interest rate obligations related to pollution control bonds, respectively. In addition, $20 million of first mortgage bonds matured. Credit Rating Risk The Company does not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change to BBB- or Baa3 or below. Generally, collateral may be provided for by a Southern Company guaranty, letter of credit, or cash. These contracts are primarily for physical electricity purchases and sales. At December 31, 2006, the maximum potential collateral requirements at a BBB- or Baa3 rating were approximately $7.8 million. The maximum potential
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collateral requirements at a rating below BBB- or Baa3 were approximately $250 million. The Company is also party to certain derivative agreements that could require collateral and/or accelerated payment in the event of a credit rating change to below investment grade for the Company and/or Alabama Power. These agreements are primarily for natural gas and power price risk management activities. At December 31, 2006, the Company's exposure related to these agreements was approximately $27.4 million. Market Price Risk Due to cost-based rate regulation, the Company has limited exposure to market rate volatility in interest rates, commodity fuel prices, and prices of electricity. To manage the volatility attributable to these exposures, the Company nets the exposures to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the Company's policies in areas such as counterparty exposure and hedging practices. The Company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress tests, and sensitivity analysis. To mitigate future exposure to changes in interest rates, the Company has entered into forward starting interest rate swaps that have been designated as hedges. These swaps have a notional amount of $525 million and are related to anticipated debt issuances over the next two years. Subsequent to December 31, 2006, the Company entered into hedges totaling $375 million, also related to anticipated debt issuances over the next two years. The weighted average interest rate on outstanding variable long-term debt that has not been hedged at January 1, 2007 was 4.6 percent. If the Company sustained a 100 basis point change in interest rates for all unhedged variable rate long-term debt, the change would affect annualized interest expense by approximately $5 million at January 1, 2007. For further information, see Notes 1 and 6 to the financial statements under "Financial Instruments" for additional information. To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, into similar contracts for gas purchases. The Company has implemented a fuel hedging program at the instruction of the Georgia PSC. The changes in fair value of energy-related derivative contracts and year-end valuations were as follows at December 31: Changes in Fair Value 2006 2005
(in millions)
Contracts beginning of year Contracts realized or settled New contracts at inception Changes in valuation techniques Current period changes(a) Contracts end of year
$ 35.3 40.2
$ 7.2 (46.8)
(113.5) $ (38.0)
74.9 $ 35.3
(a) Current period changes also include the changes in fair value of new contracts entered into during the period. Source of 2006 Year-End Valuation Prices Total Fair Value Actively quoted External sources Models and other methods Contracts end of year $(38.9) 0.9 $(38.0)
Year 1
(in millions)
Maturity 1-3 Years $(3.0)
$(35.9) 0.9 $(35.0)
$(3.0)
Unrealized gains and losses from mark to market adjustments on derivative contracts related to the Company's fuel hedging programs are recorded as regulatory assets and liabilities. Realized gains and losses from these programs are included in fuel expense and are recovered through the Company's fuel cost recovery mechanism. Of the net financial gains, the Company was allowed to retain 25 percent in earnings through June 30, 2006. In 2005, the Company had a total net gain of $74.6 million of which the Company retained $18.6 million. There were no net financial gains in 2006 and 2004. Effective July 1, 2006, the Georgia PSC ordered the suspension of the profit sharing framework related to the fuel hedging program. New profit sharing arrangements as well as other charges to the fuel hedging program are currently under development. See Note 3 to the financial statements under "Retail Regulatory Matters Fuel Hedging Program" for additional information.
Gains and losses on derivative contracts that are not designated as hedges are recognized in the statements of income as incurred. At December 31, 2006, the fair value gains/(losses) of energy-related derivative 11-156
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contracts were reflected in the financial statements as follows: Amounts

(in millions)
Regulatory assets, net Net income Total fair value
$(38.0) $(38.0)
Unrealized gains (losses) recognized in income in 2006, 2005, and 2004 were not material. The Company is exposed to market price risk in the event of nonperformance by counterparties to the derivative energy contracts. The Company's policy is to enter into agreements with counterparties that have investment grade credit ratings by Moody's and Standard & Poor's or with counterparties who have posted collateral to cover potential credit exposure. Therefore, the Company does not anticipate market risk exposure from nonperformance by the counterparties. For additional information, see Notes 1 and 6 to the financial statements under "Financial Instruments." Capital Requirements and Contractual Obligations The construction program of the Company is currently estimated to be $1.9 billion for 2007, $1.8 billion for 2008, and $1.8 billion for 2009. Environmental expenditures included in these amounts are $955 million, $637 million, and $316 million for 2007, 2008, and 2009, respectively. Actual construction costs may vary from these estimates because of changes in such factors as: business conditions; environmental regulations; nuclear plant regulations; FERC rules and regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. As a result of requirements by the NRC, the Company has established external trust funds for nuclear decommissioning costs. For additional information, see Note 1 to the financial statements under "Nuclear Decommissioning." In addition, as discussed in Note 2 to the financial statements, the Company provides postretirement benefits to substantially all employees and funds trusts to the extent required by the Georgia PSC and the FERC. Other funding requirements related to obligations associated with scheduled maturities of long-term debt and preferred securities and the related interest, preferred stock dividends, leases, derivatives, and other purchase commitments are as follows. See Notes 1, 6, and 7 to the financial statements for additional information.
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Contractual Obligations 2007 Long-term debt (a) -Principal Interest Preferred stock dividends (b) Derivative obligations (c) Operating leases Purchase commitments (d) Capital e) Coal Nuclear fuel Natural gas () Purchased power Long-term service agreements Trusts -Nuclear decommissioning (g) Postretirement benefits (h) Total 20082009 20102011
(in millions)
After 2011
Total
$ 304 $ 328 $ 119 $ 4,768 $ 5,519 506 5,411 6,739 285 537 6 15 3 6 46 42 4 44 42 173 32 55 1,829 1,638 94 647 355 12 7 16 3,437 2,446 161 876 724 26 14 43 392 222 464 479 34 14 44 169 1,914 1,255 139 110 5,266 4,520 646 3,901 2,813 211 145 59 $30,053
$5,264 $8,657 $2,280 $13,852
(a) All amounts are reflected based on final maturity dates. The Company plans to continue to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of January 1, 2007, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest rate risk. (b) Preferred stock does not mature; therefore, amounts provided are for the next five years only. (c) For additional information see Notes 1 and 6 to the financial statements. (d) The Company generally does not enter into non-cancelable commitments for other operations and maintenance expenditures. Total other operations and maintenance expenses for the last three years were $1.6 billion, $1.6 billion, and $1.5 billion, respectively. (e) The Company forecasts capital expenditures over a three-year period. Amounts represent current estimates of total expenditures, excluding those amounts related to contractual purchase commitments for uranium and nuclear fuel conversion, enrichment, and fabrication services. At December 31, 2006, significant purchase commitments were outstanding in connection with the construction program. (f) Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected have been estimated based on the New York Mercantile Exchange future prices at December 31, 2006. (g) Projections of nuclear decommissioning trust contributions are based on the 2004 Retail Rate Plan. (h) The Company forecasts postretirement trust contributions over a three-year period. No contributions related to the Company's pension trust are currently expected during this period. See Note 2 to the financial statements for additional information related to the pension and postretirement plans, including estimated benefit payments. Certain benefit payments will be made through the related trusts. Other benefit payments will be made from the Company's corporate assets.
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Cautionary Statement Regarding Forward-Looking Statements The Company's 2006 Annual Report contains forward-looking statements. Forward-looking statements include, among other things, statements concerning retail sales growth, retail rates, fuel cost recovery, environmental regulations and expenditures, the Company's projections for postretirement benefit trust contributions, financing activities, access to sources of capital, the impacts of the adoption of new accounting rules, completion of construction projects, and estimated construction and other expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential," or "continue" or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include: * the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, and also changes in environmental, tax, and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; * current and future litigation, regulatory investigations, proceedings, or inquiries, including FERC matters and the pending EPA civil action against the Company; * the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates; * variations in demand for electricity, including those relating to weather, the general economy and population, and business growth (and declines); * available sources and costs of fuels; * ability to control costs; * investment performance of the Company's employee benefit plans; * advances in technology; * state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate cases related to fuel cost recovery; * internal restructuring or other restructuring options that may be pursued; * potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial. to the Company; * the ability of counterparties of the Company to make payments as and when due; * the ability to obtain new short- and long-term contracts with neighboring utilities; * the direct or indirect effect on the Company's business resulting from terrorist incidents and the threat of terrorist incidents; * interest rate fluctuations and financial market conditions and the results of financing efforts, including the Company's credit ratings; * the ability of the Company to obtain additional generating capacity at competitive prices; * catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, pandemic health events such as an avian influenza, or other similar occurrences; * the direct or indirect effects on the Company's business resulting from incidents similar to the August 2003 power outage in the Northeast; * the effect of accounting pronouncements issued periodically by standard-setting bodies; and * other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Company from time to time with the SEC. The Company expressly disclaims any obligation to update any forward-looking statements.
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STATEMENTS OF INCOME
For the Years Ended December 31, 2006, 2005, and 2004 Georgia Power Company 2006 Annual Report
2006 Operating Revenues: Retail revenues Sales for resale -Non-affiliates Affiliates Other revenues Total operating revenues Operating Expenses: Fuel Purchased power -Non-affiliates Affiliates Other operations Maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and (Expense): Allowance for equity funds used during construction Interest income Interest expense, net of amounts capitalized Interest expense to affiliate trusts Distributions on mandatorily redeemable preferred securities Other income (expense), net Total other income and (expense) Earnings Before Income Taxes Income taxes Net Income Dividends on Preferred Stock Net Income After Dividends on Preferred Stock The accompanying notes are an integral part of these financial statements.
2005
(in thousands)
2004
$6,205,620 551,731 252,556 235,737 7,245,644 2,233,029 332,606 812,433 1,025,848 534,621 498,754 298,824 5,736,115 1,509,529 31,524 2,459 (258,437) (59,510) 8,833 (275,131) 1,234,398 442,334 792,064 4,839 $ 787,225
$6,064,363 524,800 275,525 211,149 7,075,837 1,937,378 421,033 895,243 1,009,993 561,464 526,652 276,027 5,627,790 1,448,047
$5,118,751 251,581 172,375 185,061 5,727,768 1,288,491 316,390 785,359 962,390 522,945 296,740 243,051 4,415,366 1,312,402
29,145 29,038 6,537 6,865 (235,976) (194,415) (59,510) (44,565) -(15,948) 6,971 (14,512) (252,833) (233,537) 1,195,214 447,448 747,766 3,393 $ 744,373 1,078,865 393,902 684,963 2,170 $ 682,793
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STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2006, 2005, and 2004 Georgia Power Company 2006 Annual Report 2006 Operating Activities: Net income Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization Deferred income taxes and investment tax credits, net Deferred expenses -- affiliates Allowance for equity funds used during construction Pension, postretirement, and other employee benefits Stock option expense Tax benefit of stock options Other, net Changes in certain current assets and liabilities -Receivables Fossil fuel stock Materials and supplies Prepaid income taxes Other current assets Accounts payable Accrued taxes Accrued compensation Other current liabilities Net cash provided from operating activities Investing Activities: Property additions Nuclear decommissioning trust fund purchases Nuclear decommissioning trust fund sales Purchase of property from affiliates Cost of removal net of salvage Change in construction payables, net of joint owner portion Other Net cash used for investing activities Financing Activities: Increase in notes payable, net Proceeds -Senior notes Preferred stock Pollution control bonds Gross excess tax benefit of stock options Mandatorily redeemable preferred securities Capital contributions from parent company Other long term debt Redemptions -Pollution control bonds Capital leases Senior notes First mortgage bonds Preferred stock Mandatorily redeemable preferred securities Other long term debt Payment of preferred stock dividends Payment of common stock dividends Other Net cash provided from (used for) financing activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Supplemental Cash Flow Information: Cash paid during the period for -Interest (net of $12,530, $11,949, and $10.392 capitalized, respectively) Income taxes (net of refunds) The accompanying notes arc an integral part of these financial statements. 2005 (in thousands) $ 747,766 $ 2004
792,064
684.963
588,428 16,159 1,558 (31,524) 18,604 5,805 1,163 1,735 1,193 (194,256) 31,317 1,060 774 (85,189) 82,735 (10,328) (21,054) 1,200,244 (1,219,498) (464,274) 457,394 (33,620) 35,075 (16,005) (1,240,928) 406,768 150,000 153,910 2,796 312,544 (153,910) (136) (150,000) (20,000) (14,569) (2,958) (630,000) (8,049) 46,396 5,712 11,138 $ 16,850 $
616,963 257,501 1,268 (29,145) (13,335) 17,263 (8,201) (650,593) (2,898) (55,805) (38,975) 3,585 122,117 77,164 4,162 34,029 1,082,866 (891,314) (381,235) 372.536 (30,764) 4,190 (788) (927,375) 97,713 625,000 185,000 149,475
385.668 265,064 (10,563) (29,038) (11.002) 10,562 (27,519) (258,737) (48,668) (224) 10,624 (25,263) 142,136 (60,859) (6,704) 4,012 1,024,452 (788,828) (541,048) 532,349 (414,582) (22,642) 1,978 (5,101) (1,237,874) 91,523 635,000 45,000
200,000 307,323 10,000
(185,000) (1,095) (450,000)
(1,014) (200,000)
-(240,000) (3,246) (582,800) (21,760) (186,713) (31,222) 42,360 11,138 $ (30,000) (1,479) (588,700) (18,514) 209,139 (4,283) 46,643 42,360
317,536 398,735
$ 263,802 196,930
238,270 131,696
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BALANCE SHEETS
At December 31, 2006 and 2005 Georgia Power Company 2006 Annual Report
Assets
2006
(in thousands)
2005
Current Assets: Cash and cash equivalents

Receivables --
16,850 474,046 130,585 353,976 93,656 21,941 (10,030) 392,011 61,907

304,514 74,788 72,041 1,986,285
11,138 447,270 148,526 483,673 112,452 81,474 (9,563) 197,754 59,190

335,684 73,216 59,373 2,000,187
Customer accounts receivable Unbilled revenues Under recovered regulatory clause revenues Other accounts and notes receivable Affiliated companies Accumulated provision for uncollectible accounts Fossil fuel stock, at average cost Vacation pay
Materials and supplies, at average cost Prepaid expenses Other Total current assets Property, Plant, and Equipment: In service Less accumulated provision for depreciation Nuclear fuel, at amortized cost Construction work in progress Total property, plant, and equipment Other Property and Investments: Equity investments in unconsolidated subsidiaries Nuclear decommissioning trusts, at fair value Other Total other property and investments Deferred Charges and Other Assets: Deferred charges related to income taxes Prepaid pension costs Deferred under recovered regulatory clause revenues Other regulator), assets Other Total deferred charges and other assets Total Assets
The accompanying notes are an integral part of these financial statements.
21,279,792 8,343,309 12,936,483 180,129 923,948 14,040,560 70,879 544,013 58,848 673,740 510,531 688,671 544,152 629,003 235,788 2,608,145 $19,308,730
20,636,505 7,972,913 12,663,592 134,798 584,470 13,382,860 70,664 486,591 73,271 630,526 512,337 455,514 343,804 340,938 232,279 1,884,872 $17,898,445
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BALANCE SHEETS
Liabilities and Stockholder's Equity Current Liabilities: Securities due within one year Notes payable
Accounts payable --
2006
(in thousands)
2005
303,906 733,281 238,093 402,222 155,763 217,603 275,098 74,643 49,704 141,356 125,494 2,717,163
4,242,839 969,073
188,319 326,513 305,754 379,810 136,360 128,560 206,687 92,109 48,388 143,255 132,547 2,088,302
4,396,250 969,073
Affiliated Other Customer deposits

Accrued taxes --
Income taxes Other Accrued interest Accrued vacation pay Accrued compensation Other Total current liabilities
Long-term Debt (See accompanying statements) Long-term Debt Payable to Affiliated Trusts (See accompanying statements)
Deferred Credits and Other Liabilities: Accumulated deferred income taxes Deferred credits related to income taxes Accumulated deferred investment tax credits Employee benefit obligations Asset retirement obligations Other cost of removal obligations Other regulatory liabilities Other Total deferred credits and other liabilities Total Liabilities
Preferred Stock (See accompanying statements) Common Stockholder's Equity (See accompanying statements)
2,815,724 157,297 282,070 698,274 626,681 436,137 281,391 80,839 5,378,413 13,307,488
44,991 5,956,251
2,849,727 166,736 295,024 391,854 634,932 445,189 99,385 65,981 4,948,828 12,402,453
43,909 5,452,083
Total Liabilities and Stockholder's Equity

Commitments and Contingent Matters (See notes)
$19,308,730
$17,898,445
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STATEMENTS OF CAPITALIZATION
2006
(in thousands)
2005
2006
2005
(percentof total)
Long-Term Debt: First mortgage bonds -- 6.9% due May 1, 2006 Long-term notes payable -6.20% due February 1, 2006 4.875% due July 15, 2007 6.55% due May 15, 2008 4.10% due August 15, 2009 Variable rate (5.54% at 1/1/07) due 2009 4.00% due 2011 4.90% to 6.00% due 2012-2045 Total long-term notes payable Other long-term debt -Pollution control revenue bonds: 2.83% to 5.45% due 2012-2036 Variable rate (3.50% to 4.05% at 1/1/07) due 2011-2041 Total other long-term debt Capitalized lease obligations Unamortized debt premium (discount), net Total long-term debt (annual interest requirement -$225.7 million) Less amount due within one year Long-term debt excluding amount due within one year Long-term Debt Payable to Affiliated Trusts: 4.88% to 7.13% due 2042-2044 (annual interest requirement -- $59.5 million) Preferred Stock: Cumulative preferred stock $100 stated value at 4.60% Authorized -- 5,000,000 shares Outstanding -- 2006: 0 shares -- 2005: 145,689 shares Non-cumulative preferred stock $25 par value -- 6.125% Authorized -- 50,000,000 shares Outstanding -- 1,800,000 shares (annual dividend requirement -- $2.8 million) Total preferred stock Less amount due within one year Total preferred stock excluding amount due within one year Common Stockholder's Equity: Common stock, without par value Authorized: 20,000,000 shares Outstanding: 9,261,500 shares Paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total common stockholder's equity Total Capitalization
$ -150,000 300,000 45,000 125,000 150,000 100,000 2,050,000 2,770,000
20,000
300,000 45,000 125,000 150,000 100,000 1,900,000 2,770,000
774,370 929,475 1,703,845 76,227 (3,327) 4,546,745 303,906 4,242,839
812,560 891,285 1,703,845 79,564 (3,449) 4,569,960 173,710 4,396,250 37.9% 40.5%
969,073
969,073
8.6
8.9
-14,609
44,991 44,991 44,991
43,909 58,518 14,609 43,909 0.4 0.4
398,473 3,039,845 2,529,826 (11,893) 5,956,251 $11,213,154
398,473 2,717,539 2,372,637 (36,566) 5,452,083 $10,861,315
53.1 100.0%
50.2 100.0%
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STATEMENTS OF COMMON STOCKHOLDER'S EQUITY

Common Stock Balance at December 31, 2003

Net income after dividends on preferred stock Capital contributions from parent company Other comprehensive income (loss) Cash dividends on common stock Other
Paid-In Capital
Retained Earnings
(in thousands)
Other Comprehensive Income (loss)
Total
$398,473 $2,232,956 $2,116,949

317,885 (40) 166,738 -322,306 --682,793 (588,700) -
$(25,079) $4,723,299
(11,961) -(40)
682,793 317,885 (11,961) (588,700)
Balance at December 31, 2004

Net income after dividends on preferred stock Capital contributions from parent company Other comprehensive income (loss) Cash dividends on common stock Other
398,473 2,550,801
2,211,042
744,373 (582,800) 22
(37,040) 5,123,276
474 744,373 166,738 474 (582,800) 22

Net income after dividends on preferred stock Capital contributions from parent company Other comprehensive income (loss)
398,473 2,717,539
2,372,637
787,225 -
(36,566)
5,184 19,489 -
5,452,083
787,225 322,306 5,184 19,489 (630,000) (36)
Adjustment to initially apply FASB Statement

No. 158, net of tax Cash dividends on common stock Other (630,000) (36)
$398,473 $3,039,845 $2,529,826
$(11,893) $5,956,251
STATEMENTS OF COMPREHENSIVE INCOME

2006 Net income after dividends on preferred stock Other comprehensive income (loss): Change in additional minimum pension liability, net of tax of $5,143, $(2,216) and $(4,115), respectively Change in fair value of marketable securities, net of tax of $(494), $317 and $(114), respectively Changes in fair value of qualifying hedges, net of tax of $(935), $1,522 and $(4,885), respectively Less: Reclassification adjustment for amounts included in net income, net of tax of $(441), $861 and $1,568, respectively Total other comprehensive income (loss) Comprehensive Income
2005
(in thousands)
2004 $682,793
$787,225
$744,373
8,155 (817) (1,454)
(3,512) 501 2,420
(6,523) (181) (7,744) 2,487 (11,961) $670,832
(700) 1,065 5,184 474 $792,409 $744,847
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NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Georgia Power Company (the Company) is a wholly owned subsidiary of Southern Company, which is the parent company of four traditional operating companies, Southern Power Company (Southern Power), Southern Company Services (SCS), Southern Communications Services (SouthernLINC Wireless), Southern Company Holdings (Southern Holdings), Southern Nuclear Operating Company (Southern Nuclear), Southern Telecom, and other direct and indirect subsidiaries. The traditional operating companies - Alabama Power, the Company, Gulf Power, and Mississippi Power- provide electric service in four Southeastern states. The Company operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the State of Georgia and to wholesale customers in the Southeast. Southern Power constructs, acquires, and manages generation assets and sells electricity at market-based rates in the wholesale market. SCS, the system service company, provides at cost, specialized services to Southern Company and its subsidiary companies. SouthernLINC Wireless provides digital wireless communications services to the traditional operating companies and also markets these services to the public within the Southeast. Southern Telecom provides fiber cable services within the Southeast. Southern Holdings is an intermediate holding company subsidiary for Southern Company's investments in synthetic fuels and leveraged leases and various other energy-related businesses. Southern Nuclear operates and provides services to Southern Company's nuclear power plants. On January 4, 2006, Southern Company completed the sale of substantially all the assets of Southern Company Gas, its competitive retail natural gas marketing subsidiary. Effective July 1, 2006, the Company merged with Savannah Electric. The Company has accounted for the merger in a manner similar to a pooling of interests, and the Company's financial statements now reflect the merger as though it had occurred on January 1, 2004. See Note 3 under "Retail Regulatory Matters - Merger" for additional information. The equity method is used for subsidiaries in which the Company has significant influence but does not control and for variable interest entities where the Company is not the primary beneficiary. Certain prior years' data presented in the financial statements have been reclassified to conform with the current year presentation. The Company is subject to regulation by the Federal Energy Regulatory Commission (FERC) and the Georgia Public Service Commission (PSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by its regulatory commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Affiliate Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at direct or allocated cost: general and design engineering, purchasing, accounting and statistical analysis, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, and other services with respect to business and operations and power pool operations. Costs for these services amounted to $386 million in 2006, $348 million in 2005, and $310 million in 2004. Cost allocation methodologies used by SCS were approved by the Securities and Exchange Commission prior to the repeal of the Public Utility Holding Company Act of 1935, as amended, and management believes they are reasonable. The FERC permits services to be rendered at cost by system service companies. The Company has an agreement with Southern Nuclear under which the following nuclear-related services are rendered to the Company at cost: general executive and advisory services, general operations, management and technical services, administrative services including procurement, accounting, employee relations, systems and procedures services, strategic planning and budgeting services, and other services with respect to business and operations. Costs for these services amounted to $348 million in 2006, $328 million in 2005, and $311 million in 2004. The Company has an agreement with Southern Power under which the Company operates and maintains Southern Power owned Plants Dahlberg, Franklin, and Wansley at cost. Billings under these agreements with Southern Power amounted to $5.4 million in 2006, $5.2 million in 2005, and $4.8 million in 2004. The Company has an agreement with SoutherLINC Wireless under which the Company receives digital wireless communications services and purchases digital equipment. Costs for these services amounted to $7.1 million in 2006, $7.7 million in 2005, and $8.0 million in 2004.
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NOTES (continued)
Southern Company's 30 percent ownership interest in Alabama Fuel Products, LLC (AFP), which produces synthetic fuel, was terminated July 1, 2006. The Company has an agreement with an indirect subsidiary of Southern Company that provides services for AFP. Under this agreement, the Company provides certain accounting functions, including processing and paying fuel transportation invoices, and the Company is reimbursed for its expenses. Amounts billed under this agreement totaled approximately $76 million in 2006, $61 million in 2005, and $53 million in 2004. In addition, the Company purchases synthetic fuel from AFP for use at Plant Branch. Fuel purchases totaled $146 million through June 30, 2006, $216 million in 2005, and $163 million in 2004. The Company has entered into several purchased power agreements (PPAs) with Southern Power for capacity and energy. Expenses associated with these PPAs were $407 million, $469 million, and $314 million in 2006, 2005, and 2004, respectively. Additionally, the Company had $28 million and $29 million of prepaid capacity expenses included in deferred charges and other assets in the balance sheets at December 31, 2006 and 2005, respectively. See Note 7 under "Purchased Power Commitments" for additional information. The Company has an agreement with Gulf Power under which Gulf Power jointly owns a portion of Plant Scherer. Under this agreement, the Company operates Plant Scherer, and Gulf Power reimburses the Company for its proportionate share of the related expenses which were $8.0 million in 2006, $4.3 million in 2005, and $6.8 million in 2004. See Note 4 for additional information. The Company provides incidental services to other Southern Company subsidiaries which are generally minor in duration and amount. However, with the hurricane damage experienced by Alabama Power, Gulf Power, and Mississippi Power in 2005, assistance provided to aid in storm restoration, including company labor, contract labor, and materials, caused an increase in these activities. The total amount of storm assistance provided to Alabama Power, Gulf Power, and Mississippi Power in 2005 was $4.3 million, $5.0 million, and $55.2 million, respectively. These activities were billed at cost. Also see Note 4 for information regarding the Company's ownership in and PPA with Southern Electric Generating Company (SEGCO) and Note 5 for information on certain deferred tax liabilities due to affiliates. The traditional operating companies, including the Company, and Southern Power may jointly enter into various types of wholesale energy, natural gas, and certain other contracts, either directly or through SCS as agent. Each participating company may be jointly and severally liable for the obligations incurred under these agreements. See Note 7 under "Fuel Commitments" for additional information. 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" (SFAS No. 71). Regulatory assets represent probable future revenues associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Company's balance sheets at December 31 relate to the following: 2006
(in millions)
2005 $ 513 177 59 52 18 53 12 30 71 (445) (167) (19) (33) (47) (4) $ 270
Note (a) (b) (c) (d) (d) (e) (f) (g) (d) (a) (a) (a) (h) (h) (f) (g) (d)
Deferred income tax charges Premium on reacquired debt Vacation pay Corporate building lease Postretirement benefits Generating plant outage costs Underfunded retiree benefit plans Fuel-hedging assets Other regulatory assets Asset retirement obligations Other cost of removal obligations Deferred income tax credits Environmental remediation Purchased power Overfunded retiree benefit plans Fuel-hedging liabilities Other regulatory liabilities Total
$ 511 171 62 51 15 56 310 58 27 53 (436) (157) (16) (19) (218) (6) (4) $ 458
Note: The recovery and amortization periods for these regulatory assets and (liabilities) are as follows: (a) Asset retirement and removal liabilities are recorded, deferred income tax assets are recovered, and deferred tax liabilities are amortized over the related property lives, which may range up to 60 years. Asset retirement and removal liabilities will be settled and trued up following completion of the related activities.
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NOTES (continued)
(b) Recovered over either the remaining life of the original issue or, if refinanced, over the life of the new issue which may range up to 50 years. (c) Recorded as earned by employees and recovered as paid, generally within one year. (d) Recorded and recovered or amortized as approved by the Georgia PSC. (e) See "Property, Plant, and Equipment" herein. (f) Recovered and amortized over the average remaining service period which may range up to 17 years. See Note 2 under "Retirement Benefits." (g) Fuel-hedging assets and liabilities are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed 42 months. Upon final settlement, costs are recovered through the fuel cost recovery clauses. (h) Amortized over a three-year period ending in 2007. See Note 3 under "Retail Regulatory Matters - Rate Plans." In the event that a portion of the Company's operations is no longer subject to the provisions of SFAS No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine if any impairment to other assets, including plant, exists and, write down the assets, if impaired, to their fair value. All regulatory assets and liabilities are reflected in rates. Revenues Energy and other revenues are recognized as services are provided. Unbilled revenues are accrued at the end of each fiscal period. Electric rates for the Company include provisions to adjust billings for fluctuations in fuel costs and the energy component of purchased power costs, and certain other costs. Revenues are adjusted for differences between the actual recoverable costs and amounts billed in current regulated rates. Retail fuel cost recovery rates require periodic filings with the Georgia PSC. The Company is required to file its next fuel case by March 1, 2008. See Note 3 under "Retail Regulatory Matters - Fuel Cost Recovery." The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts averaged less than 1 percent of revenues. Fuel Costs Fuel costs are expensed as the fuel is used. Fuel expense includes the cost of purchased emission allowances as they are used. Fuel expense also 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 $71 million in 2006, $70 million in 2005, and $73 million in 2004. Nuclear Fuel Disposal Costs The Company has contracts with the U.S. Department of Energy (DOE) that provide for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent nuclear fuel in 1998 as required by the contracts, and the Company is pursuing legal remedies against the government for breach of contract. Sufficient pool storage capacity for spent fuel is available at Plant Vogtle to maintain full-core discharge capability for both units into 2014. Construction of an on-site dry storage facility at Plant Vogtle is expected to begin in sufficient time to maintain pool full-core discharge capability. At Plant Hatch, an on-site dry storage facility is operational and can be expanded to accommodate spent fuel through the expected life of the plant. Also, the Energy Policy Act of 1992 established a Uranium Enrichment Decontamination and Decommissioning Fund, which has been funded in part by a special assessment on utilities with nuclear plants. This assessment was paid over a 15-year period; the final installment occurred in 2006. 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. State Tax Credits The State of Georgia provides a tax credit for qualified investment property to manufacturing companies that construct new facilities. The credit ranges from 1 percent to 8 percent of qualified construction expenditures depending upon the county in which the new facility is located. The Company's policy is to recognize these credits when management believes that they are more likely than not to be allowed by the Georgia Department of Revenue. State tax credits of $19.9 million, $9.4 million, and $13.1 million were recorded in 2006, 2005, and 2004, respectively. Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost, less regulatory disallowances and impairments. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-
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NOTES (continued)
related costs such as taxes, pensions, and other benefits; and the interest capitalized and/or cost of funds used during construction.
The Company's property, plant, and equipment consisted of the following at December 31 (in millions) 2006 Generation Transmission Distribution General Plant acquisition adjustment Total plant in service $10,064 3,331 6,652 1,205 28 $21,280 2005 $ 9,988 3,144 6,365 1,111 28 $20,636
The cost of replacements of property, exclusive of minor items of property, is capitalized. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense as incurred or performed with the exception of certain generating plant maintenance costs. As mandated by the Georgia PSC, the Company defers and amortizes nuclear refueling costs over the unit's operating cycle before the next refueling. The refueling cycles are 18 and 24 months for Plants Vogtle and Hatch, respectively. Also, in accordance with the Georgia PSC order, the Company defers the costs of certain significant inspection costs for the combustion turbines at Plant McIntosh and amortizes such costs over 10 years, which approximates the expected maintenance cycle. Income and Other 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. Taxes that are collected from customers on behalf of governmental agencies to be remitted to these agencies are presented net on the statements of income. Depreciation and Amortization Depreciation of the original cost of utility plant in service is provided primarily by using composite straight-line rates, which approximated 2.6 percent in each of 2006, 2005, and 2004. Depreciation studies are conducted periodically to update the composite rates that are approved by the Georgia PSC. Effective January 1, 2005, the Company's depreciation rates were revised by the Georgia PSC. The revised depreciation rates had no material impact on the Company's financial statements. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its original cost, together with the cost of removal, less salvage, is charged to accumulated depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Under the Company's retail rate plan for the three years ending December 31, 2007 (2004 Retail Rate Plan), the Company was ordered to recognize Georgia PSC - certified capacity costs in rates evenly over the three years covered by the 2004 Retail Rate Plan. The Company recorded a credit to amortization of $14 million in 2006 as well as $33 million in 2005. Under the retail rate plan for the Company ending December 31, 2004 (2001 Retail Rate Plan), the Georgia PSC ordered the Company to amortize $333 million, the cumulative balance of accelerated depreciation and amortization previously expensed, equally over three years as a credit to depreciation and amortization expense beginning January 2002. The Company also was ordered to recognize new certified capacity costs in rates evenly over the same three-year period under the 2001 Retail Rate Plan. As a result, the Company recorded a reduction in depreciation and amortization expense of $77 million in 2004. See Note 3 under "Retail Regulatory Matters Rate Plans" for additional information.
Asset Retirement Obligations
and Other Costs of Removal Effective January 1, 2003, the Company adopted FASB Statement No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143), which established new accounting and reporting standards for legal obligations associated with the ultimate costs of retiring long-lived assets. The present value of the ultimate costs for an asset's future retirement is recorded in the period in which the liability is incurred. The costs are capitalized as part of the related long-lived asset and depreciated over the asset's useful life. In addition, effective December 31, 2005, the Company adopted the provisions of FASB Interpretation No. 47, "Conditional Asset Retirement Obligations" (FIN 47), which requires that an asset retirement obligation be recorded even though the timing and/or method of settlement are conditional on future events. Prior to December 2005, the Company did not recognize asset retirement obligations for asbestos removal because the timing of their retirements was dependent on future events. The Company has received approval from the Georgia PSC allowing the
continued accrual of other future retirement costs for long-lived assets that the Company does not have a legal obligation 11-169
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NOTES (continued)
to retire. Accordingly, the accumulated removal costs for these obligations will continue to be reflected in the balance sheets as a regulatory liability. Therefore, the Company had no cumulative effect to net income resulting from the adoption of SFAS No. 143 or FIN 47. The liability recognized to retire long-lived assets primarily relates to the Company's nuclear facilities, which include the Company's ownership interests in Plants Hatch and Vogtle. The fair value of assets legally restricted for settling retirement obligations related to nuclear facilities as of December 31, 2006 was $544 million. In addition, the Company has retirement obligations related to various landfill sites, ash ponds, and underground storage tanks. In connection with the adoption of FIN 47, the Company also recorded additional asset retirement obligations (and assets) of approximately $95 million related to asbestos removal. The Company also has identified retirement obligations related to certain transmission and distribution facilities, leasehold improvements, equipment on customer property, and property associated with the Company's rail lines. However, liabilities for the removal of these assets have not been recorded because no reasonable estimate can be made regarding the timing of any related retirements. The Company will continue to recognize in the statements of income the allowed removal costs in accordance with its regulatory treatment. Any difference between costs recognized under SFAS No. 143 and FIN 47 and those reflected in rates are recognized as either a regulatory asset or liability in the balance sheets as ordered by the Georgia PSC. See "Nuclear Decommissioning" herein for further information on amounts included in rates. Details of the asset retirement obligations included in the balance sheets are as follows: 2006
(in millions)
2005 $510 95 (3) 33 $635
Balance beginning of year Liabilities incurred Liabilities settled Accretion Cash flow revisions Balance end of year Nuclear Decommissioning
$635 5 (2) 41 (52) $627
The Nuclear Regulatory Commission (NRC) requires licensees of commercial nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. The Company has external trust funds to comply with the NRC's regulations. Use of the funds is restricted to nuclear decommissioning activities and the funds are managed and invested in accordance with applicable requirements of various regulatory bodies, including the NRC, the FERC, and state PSCs, as well as the Internal Revenue Service (IRS). The trust funds are invested in a tax-efficient manner in a diversified mix of equity and fixed income securities and are classified as available-for-sale. The trust funds are included in the balance sheets at fair value, as obtained from quoted market prices for the same or similar investments. As the external trust funds are actively managed by unrelated parties with limited direction from the Company, the Company does not have the ability to choose to hold securities with unrealized losses until recovery. Through 2005, the Company considered other-than-temporary impairments to be immaterial. However, since the January 1, 2006 effective date of FASB Staff Position FAS 115-1/124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" (FSP No. 115-1), the Company considers all unrealized losses to represent other-than-temporary impairments. The adoption of FSP No. 115-1 had no impact on the results of operations, cash flows, or financial condition of the Company as all losses have been and continue to be recorded through a regulatory liability, whether realized, unrealized, or identified as other-than-temporary. Details of the securities held in these trusts at December 31 are as follows: Other-thanTemporary Impairments
(in millions)
2006 Equity Debt Other Total 2005
Unrealized Gains $106.9 3.0 -0.3 $109.9 Unrealized Gains
Fair Value $378.3 165.4 $544.0 Fair Value
$(5.0) (0.7) $(5.7) Unrealized Losses

(in millions)
Equity Debt Other Total
$76.7 2.8 $79.5
$(6.3) (0.8) $(7.1)
$325.5 135.3 25.8 $486.6
The contractual maturities of debt securities at December 31, 2006 are as follows: $6.8 million in 2007, $41.0 million in 2008-2011, $42.0 million in 2012-2016, and $75.3 million thereafter. 11-170
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Sales of the securities held in the trust funds resulted in proceeds of $457.4 million, $372.5 million, and $532.3 million in 2006, 2005, and 2004, respectively, all of which were re-invested. Realized gains and other-than-temporary impairment losses were $17.8 million and $12.1 million, respectively, in 2006. Net realized gains/(losses) were $12.6 million and $14.1 million in 2005 and 2004, respectively. Realized gains and other-than-temporary impairment losses are determined on a specific identification basis. In accordance with regulatory guidance, all realized and unrealized gains and losses are included in the regulatory liability for Asset Retirement Obligations in the balance sheets and are not included in net income or other comprehensive income. Unrealized gains and other-than-temporary impairment losses are considered non-cash transactions for purposes of the statements of cash flows. Unrealized losses were not material in any period presented and did not require the recognition of any impairment to the underlying investments. Amounts previously recorded in internal reserves are being transferred into the external trust funds over periods approved by the Georgia PSC. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission only 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. Annual provisions for nuclear decommissioning are based on an annuity method as approved by the Georgia PSC. The amount expensed in 2006 and the accumulated provisions for decommissioning at December 31, 2006 were as follows: Plant Hatch Amount expensed in 2006 Accumulated provisions: External trust funds, at fair value Internal reserves Total $ Plant Vogtle
(in millions)
$344 -1 $344
$200 $201
Site study cost is the estimate to decommission a specific facility as of the site study year. The estimated costs of decommissioning are based on the most current study performed in 2006, which will be filed with the Georgia PSC in 2007 as a part of the retail base rate case. The Company's ownership interests in Plants Hatch and Vogtle were as follows: Plant Hatch Decommissioning periods: Beginning year Completion year Site study costs: Radiated structures Non-radiated structures Total 2034 2061
(in millions)
Plant Vogtle 2027 2051
$544 46 $590
$507 67 $574
The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making these estimates. Under the 2004 Retail Rate Plan, effective January 1, 2005, the Georgia PSC decreased the annual decommissioning costs for ratemaking from $9 million to $7 million. This amount is based on the NRC generic estimate to decommission the radioactive portion of the facilities as of 2003. The estimates are $421 million and $326 million for Plants Hatch and Vogtle, respectively. Significant assumptions used to determine the costs for ratemaking include an estimated inflation rate of 3.1 percent and an estimated trust earnings rate of 5.1 percent. Another significant assumption used was the change in the operating license for Plant Hatch. In January 2002, the NRC granted the Company a 20-year extension of the licenses for both units at Plant Hatch which permits the operation of units 1 and 2 until 2034 and 2038, respectively. The Company plans to file an application with the NRC in June 2007 to extend the licenses for Plant Vogtle units 1 and 2 for an additional 20 years. The Company expects the Georgia PSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. Allowance for Funds Used During Construction (AFUDC) and Interest Capitalized In accordance with regulatory treatment, the Company records AFUDC, which represents the estimated debt and equity costs
of capital funds that are necessary to finance the construction of new regulated facilities. While cash is not realized currently from such allowance, it increases
11-171
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NOTES (continued)
the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. Interest related to the construction of new facilities not included in the Company's retail rates is capitalized in accordance with standard interest capitalization requirements. For the years 2006, 2005, and 2004, the average AFUDC rates were 8.3 percent, 8.0 percent, and 8.0 percent, respectively, and AFUDC capitalized was $44.1 million, $41.1 million, and $39.1 million, respectively. AFUDC and interest capitalized, net of taxes, were 5.0 percent, 4.9 percent, and 5.2 percent of net income after dividends on preferred stock for 2006, 2005, and 2004 respectively. Impairment of Long-Lived Assets and Intangibles The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on either a specific regulatory disallowance or an estimate ofundiscounted future cash flows attributable to the assets, as compared with the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined by either the amount of regulatory disallowance or by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. For assets identified as held for sale, the carrying value is compared to the estimated fair value less the cost to sell in order to determine if an impairment loss is required. Until the assets are disposed of, their estimated fair value is re-evaluated when circumstances or events change. See Note 3 under "Retail Regulatory Matters Rate Plans" for information regarding a regulatory disallowance by the Georgia PSC in December 2004. Storm Damage Reserve The Company maintains a reserve for property damage to cover the cost of damages from major storms to its transmission and distribution lines and the cost of uninsured damages to its generation facilities and other property as mandated by the Georgia PSC. The Company accrues $6.6 million annually that is recoverable through base rates. The Company expects the Georgia PSC to periodically review and adjust, if necessary, the amounts collected in rates for storm damage costs. Environmental Remediation Cost Recovery The Company continues to recover environmental costs through its base rates. Beginning in 2005, such rates include an annual accrual of $5.4 million for environmental remediation. Environmental remediation expenditures will be charged against the reserve as they are incurred. The annual accrual amount will be reviewed and adjusted in future regulatory proceedings. Under Georgia PSC ratemaking provisions, $22 million had previously been deferred in a regulatory liability account for use in meeting future environmental remediation costs of the Company and is being amortized over a three-year period that began in January 2005. Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the average costs of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Fuel Inventory Fuel inventory includes the average costs of oil, coal, natural gas, and emission allowances. Fuel is charged to inventory when purchased and then expensed as used and recovered by the Company through fuel cost recovery rates approved by the Georgia PSC. Emission allowances granted by the Environmental Protection Agency (EPA) are included in inventory at zero cost. Stock Options Southern Company provides non-qualified stock options to a large segment of the Company's employees ranging from line management to executives. Prior to January 1, 2006, the Company accounted for options granted in accordance with Accounting Principles Board Opinion No. 25; thus, no compensation expense was recognized because the exercise price of all options granted equaled the fair market value on the date of the grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), "Share-Based Payment" (SFAS No. 123(R)), using the modified prospective method. Under that method, compensation cost for the year ended December 31, 2006 is recognized as the requisite service is rendered and includes: (a) compensation cost
for the portion of share-based awards granted prior to and that were outstanding as of January 1, 2006, for which the
11-172
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NOTES (continued)
requisite service had not been rendered, based on the grant-date fair value of those awards as calculated in accordance with the original provisions of FASB Statement No. 123, "Accounting for Stock-based Compensation" (SFAS No. 123), and (b) compensation cost for all share-based awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Results for prior periods have not been restated. The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company's employees are recognized in the Company's financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company. For the Company, the adoption of SFAS No. 123(R) has resulted in a reduction in earnings before income taxes and net income of $6 million and $4 million, respectively, for the year ended December 31, 2006. Additionally, SFAS No. 123(R) requires the gross excess tax benefit from stock option exercises to be reclassified as a financing cash flow as opposed to an operating cash flow; the reduction in operating cash flows and increase in financing cash flows for the year ended December 31, 2006 was $3 million. For the years prior to the adoption of SFAS No. 123(R), the pro forma impact of fair-value accounting for options granted on net income is as follows: As Reported
(in millions)
Net Income 2005 2004
Options Impact After Tax $(3) $(4)
Pro Forma $741 $679
$744 $683
Because historical forfeitures have been insignificant and are expected to remain insignificant, no forfeitures are assumed in the calculation of compensation expense; rather they are recognized when they occur. The estimated fair values of stock options granted in 2006, 2005, and 2004 were derived using the Black-Scholes stock option pricing model. Expected volatility is based on historical volatility of Southern Company's stock over a period equal to the expected term. The Company uses historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options. The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted: Period ended December 31 Expected volatility Expected term (inyears) Interest rate Dividend yield Weighted average grant-date fair value Financial Instruments The Company uses derivative financial instruments to limit exposure to fluctuations in interest rates, the prices of certain fuel purchases, and electricity purchases and sales. All derivative financial instruments are recognized as either assets or liabilities and are measured at fair value. Substantially all of the Company's bulk energy purchases and sales contracts that meet the definition of a derivative are exempt from fair value accounting requirements and are accounted for under the accrual method. Other derivative contracts qualify as cash flow hedges of anticipated transactions or are recoverable through the Georgia PSC-approved fuel hedging program. This results in the deferral of related gains and losses in other comprehensive income or regulatory assets and liabilities, respectively, until the hedged transactions occur. Any ineffectiveness arising from cash flow hedges is recognized currently in net income. Other derivative contracts are marked to market through current period income and are recorded on a net basis in the statements of income. The Company is exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the Company's exposure to counterparty credit risk. 2006 16.9% 5.0 4.6% 4.4% $4.15 2005 17.9% 5.0 3.9% 4.4% $3.90 2004 19.6% 5.0 3.1% 4.8% $3.29
II-173
Ii
Table of Con(ents
NOTES (continued)
The Company's financial instruments for which the carrying amounts did not equal fair value at December 31 were as follows: Carrying Amount
(in millions)
Fair Value
Long-term debt: 2006 2005
$5,440 $5,460
$5,376 $5,427
The fair values were based on either closing market price or closing price of comparable instruments. Comprehensive Income The objective of comprehensive income is to report a measure of all changes in common stock equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income consists of net income, changes in the fair value of qualifying cash flow hedges and marketable securities, and changes in additional minimum pension liability less income taxes and reclassifications for amounts included in net income. Variable Interest Entities The primary beneficiary of a variable interest entity must consolidate the related assets and liabilities. The Company has established certain wholly-owned trusts to issue preferred securities. However, the Company is not considered the primary beneficiary of the trusts. Therefore, the investments in these trusts are reflected as Other Investments, and the related loans from the trusts are reflected as Long-term Debt Payable to Affiliated Trusts in the balance sheets. See Note 6 under "Mandatorily Redeemable Preferred Securities/Long-Term Debt Payable to Affiliated Trusts" for additional information. 2. RETIREMENT BENEFITS The Company has a defined benefit, trusteed pension plan covering substantially all employees. The plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the plan are expected for the year ending December 31, 2007. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these nonqualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds related trusts to the extent required by the Georgia PSC and the FERC. For the year ending December 31, 2007, postretirement trust contributions are expected to total approximately $16 million. On December 31, 2006, the Company adopted FASB Statement No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" (SFAS No. 158), which requires recognition of the funded status of its defined benefit postretirement plans in its balance sheet. Prior to the adoption of SFAS No. 158, the Company generally recognized only the difference between the benefit expense recognized and employer contributions to the plan as either a prepaid asset or as a liability. With respect to each of its underfunded non-qualified pension plans, the Company recognized an additional minimum liability representing the difference between each plan's accumulated benefit obligation and its assets. Upon the adoption of SFAS No. 158, the Company was required to recognize on its balance sheet assets and liabilities related to unrecognized prior service cost, unrecognized gains or losses (from changes in actuarial assumptions and the difference between actual and expected returns on plan assets), and any unrecognized transition amounts (resulting from the change from cash-basis accounting to accrual accounting). These amounts will continue to be amortized as a component of expense over the employees' remaining average service life. SFAS No. 158 did not change the recognition of pension and other postretirement benefit expense in the statement of income. Upon the adoption of SFAS No. 158, the Company recorded an additional prepaid pension asset of $218 million with respect to its overfunded defined benefit plan and additional liabilities and deferred credits of $13 million and $255 million, respectively, related to its underfunded non-qualified pension plans and retiree benefit plans. The incremental effect of applying
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SFAS No. 158 on individual line items in the balance sheet at December 31, 2006 follows: Before Prepaid pension costs Other regulatory assets Other property and investments Total assets Accumulated deferred income taxes Other regulatory liabilities Employee benefit obligations Total liabilities Accumulated other comprehensive income Total stockholders' equity $ 471 319 685 18,792 (2,803) (63) (431) (12,810) 31 (5,982) Adjustments
(in millions)
After $ 689 629 674 19,309 (2,816) (281) (698) (13,308) 12 (6,001)
$218 310 (11) 517 (13) (218) (267) (498) (19) (19)
Because of pension and postretirement benefit expenses are components of the Company's regulated rates, the Company recorded offsetting regulatory assets or regulatory liabilities under the provisions of SFAS No. 71. The measurement date for plan assets and obligations is September 30 for each year presented. Pursuant to SFAS No. 158, the Company will be required to change the measurement date for its defined benefit postretirement plans from September 30 to December 31 beginning with the year ending December 31, 2008. Pension Plans The total accumulated benefit obligation for the pension plans was $2.0 billion in 2006 and $2.0 billion in 2005. Changes during the year in the projected benefit obligations and the fair value of plan assets were as follows: 2006
(in millions)
2005
Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Benefits paid Plan amendments Actuarial (gain) loss Balance at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid Employee transfers Fair Value of plan assets at end of year Funded status at end of year Unrecognized transition amounts Unrecognized prior service cost Unrecognized net (gain) loss Fourth quarter contributions Prepaid pension asset, net
$2,172 53 117 (95) 2 (113) 2,136
$1,989 47 112 (90) 13 101 2,172
2,493 308 6 (95) (2) 2,710 574 -116 2 $ 576
2,229 346 8 (90) 2,493 321 (4) (27) 2 $ 408
At December 31, 2006, the projected benefit obligations for the qualified and non-qualified pension plans were $2.0 billion and $0.1 billion, respectively. All plan assets are related to the qualified plan. Pension plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). The Company's investment policy covers a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily as hedging tools but may also be used to gain efficient exposure to the various asset classes. The Company primarily minimizes the risk of large losses through diversification but also monitors and manages other aspects of risk. The
actual composition of the 11-175

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Georgia Power Company

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