8-KOther Events

SOUTHERN CO 8-K Report, Corporate Update (Jun 29, 2009)

Filed June 29, 2009For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

This 8-K filing from Southern Company and its subsidiary Georgia Power addresses a critical regulatory matter impacting Georgia Power's financial performance. Due to the economic recession significantly reducing revenues, Georgia Power's projected retail return on equity (ROE) is expected to fall below the 10.25% minimum threshold set by the Georgia Public Service Commission (PSC) for 2009 and 2010. Instead of seeking a rate increase, Georgia Power has filed a request with the PSC for an accounting order to amortize approximately $324 million of a regulatory liability related to other cost of removal obligations over an 18-month period. This action is intended to reduce operating expenses and help the company stay on track to file its next general base rate case by July 1, 2010, even though its ROE may remain below the allowed range.

Key Highlights

  • 1Georgia Power projects its retail ROE to fall below the allowed 10.25% minimum in 2009 and 2010 due to the economic recession.
  • 2Instead of requesting a customer rate increase, Georgia Power filed a request for an accounting order with the Georgia PSC.
  • 3The accounting order request seeks to amortize a $324 million regulatory liability related to 'other cost of removal obligations'.
  • 4This amortization would be spread over 18 months (July 1, 2009, to December 31, 2010) as a reduction to operating expenses.
  • 5The company aims to use this accounting adjustment to remain on schedule for its next general base rate case filing by July 1, 2010.
  • 6The accounting order is subject to review and approval by the Georgia PSC, and the outcome is uncertain.
  • 7The filing includes a cautionary notice highlighting numerous factors that could affect future results, including regulatory changes, economic conditions, and operational risks.

Frequently Asked Questions

The economic recession has significantly reduced Georgia Power's revenues, upon which its retail rates were based under the current rate plan. Despite cost-cutting measures, projections indicate that these revenue declines will lead to a retail ROE below the 10.25% minimum threshold for 2009 and 2010.

The Accounting Order Request is a filing made by Georgia Power with the Georgia PSC. Its purpose is to obtain approval to account for approximately $324 million of a regulatory liability related to 'other cost of removal obligations' by amortizing it over 18 months as a reduction to operating expenses. This is an alternative to seeking a rate increase to improve its ROE.

Even if approved as filed, Georgia Power currently expects its retail ROE to remain below the 10.25% low end of its allowed range in 2009 and 2010. However, the amortization is intended to help the company manage its financial reporting and stay on schedule for its next rate case filing.

The primary risk is that the Georgia PSC may not approve the Accounting Order Request, or it may require significant modifications. Additionally, the company faces numerous other forward-looking risks outlined in the filing, including economic uncertainty, regulatory changes, litigation, competition, fuel costs, and operational challenges, any of which could materially impact future results.