What is the main impact of the PSC's fuel cost recovery decision on Southern Company's financial statements?

The PSC's decision to adjust fuel cost recovery rates is expected to increase Georgia Power's total annual billing by approximately $400 million. While this will increase cash flow, it is not expected to have a significant effect on Georgia Power's overall revenues or net income because fuel cost recovery mechanisms in regulated utilities adjust for differences between actual fuel costs and amounts billed to customers.

Will customers see an immediate increase in their bills?

Yes, Georgia Power's total annual billing increase under the PSC order will be approximately $400 million. This increase includes the recovery of estimated under-recovered fuel costs over a period of 35 to 41 months, depending on the customer territory, and reflects updated fuel cost forecasts.

What is the significance of the Merger Transition Adjustment (MTA) and Merger Transition Credit (MTC)?

The MTA and MTC are mechanisms approved by the PSC to manage the differing fuel rates between Georgia Power and Savannah Electric customers during the transition period following their merger. The MTA will apply to customers in the former Savannah Electric territory, ensuring their new fuel rate plus the MTA equals their previous rate. The MTC will credit customers in the existing Georgia Power territory. Both are set to be in effect until December 31, 2007, when Georgia Power's base rates are scheduled for adjustment.

When is the merger between Georgia Power and Savannah Electric expected to be completed?

With the approval of the remaining matters by the PSC and prior receipt of other necessary regulatory and shareholder approvals, the merger between Georgia Power and Savannah Electric is expected to be completed by July 1, 2006.

SOUTHERN CO 8-K SEC Disclosure

Summary

This 8-K filing from Southern Company, Georgia Power Company, and Savannah Electric and Power Company announces a significant decision by the Georgia Public Service Commission (PSC) regarding fuel cost recovery rates and the proposed merger of Georgia Power and Savannah Electric. The PSC approved a combined fuel cost forecast for Georgia Power and Savannah Electric, though it reduced the requested increase by $200 million. Importantly, there were no disallowances of previously incurred fuel costs, and the companies are allowed to recover under-recovered fuel costs over 35-41 months. This decision is expected to increase annual billing by approximately $400 million and will positively impact cash flow without significantly affecting revenues or net income due to the nature of regulated fuel cost recovery mechanisms. The PSC also approved key merger-related adjustments, establishing a Merger Transition Adjustment (MTA) for former Savannah Electric customers and a corresponding Merger Transition Credit (MTC) for existing Georgia Power customers. These adjustments are designed to maintain existing fuel rate parity until a base rate adjustment in December 2007. The PSC's approval on these matters, alongside previous approvals, paves the way for the completion of the Georgia Power and Savannah Electric merger, anticipated by July 1, 2006.

Key Highlights

1Georgia PSC approved a combined fuel cost recovery rate for Georgia Power and Savannah Electric, reducing the requested increase by $200 million.
2No disallowances of previously incurred fuel costs were made by the PSC.
3Companies allowed to recover under-recovered fuel costs over 35 months (Georgia Power territory) and 41 months (former Savannah Electric territory).
4Annual billing increase for Georgia Power customers is estimated at $400 million, with approximately $100 million related to fuel used since June 2005.
5PSC requires Georgia Power to file for new fuel cost recovery rates semi-annually, starting September 30, 2006.
6Merger of Georgia Power and Savannah Electric approved by PSC, with completion expected by July 1, 2006.
7Merger Transition Adjustment (MTA) and Credit (MTC) established to manage fuel rate differences for former Savannah Electric customers and existing Georgia Power customers, in effect until December 31, 2007.

SOUTHERN CO 8-K Report, Corporate Update (Jun 23, 2006)

Summary

Key Highlights

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