What is the main financial impact of the Georgia PSC's order on Georgia Power?

The main financial impact is the approval for Georgia Power to amortize a significant portion of its regulatory liability for cost of removal obligations. This amortization will be recognized as a reduction to operating expenses over a defined period, potentially improving near-term reported earnings, but is subject to conditions and limitations on future rate filings and achieved returns.

Under what conditions can Georgia Power accelerate its amortization of the regulatory liability?

The full amortization schedule depends on Georgia Power's decision to file for a retail base rate increase. If Georgia Power files for a rate increase before July 1, 2010, the amortization amount for 2010 will be reduced. Specifically, it would be reduced by one-sixth for each month such a rate case is filed prior to July 1, 2010.

What are the implications of the delay in the fuel cost recovery case filing?

The delay in filing the fuel cost recovery case, pushed to no later than December 15, 2009, with potential new rates effective April 1, 2010, provides Georgia Power with more flexibility. It allows the company to defer rate adjustments related to fuel costs, potentially aligning better with current economic conditions or other regulatory strategies. This could impact the timing of cost pass-throughs to customers and the company's cash flow.

How does the ROE cap affect Georgia Power's ability to earn profits?

The return on equity (ROE) caps (9.75% for 2009 and 10.15% for 2010) limit the amount of the regulatory liability that Georgia Power can amortize. If Georgia Power's projected ROE, after considering the amortization, would exceed these caps, the company can only amortize up to the amount that keeps its ROE at or below the specified limit. This protects customers from excessive returns while ensuring the company meets certain profitability thresholds.

SOUTHERN CO 8-K SEC Disclosure

Summary

This Form 8-K filing from Southern Company (SO) and its subsidiary Georgia Power Company primarily concerns regulatory matters impacting Georgia Power's financial performance and rate-setting. The key event is the Georgia Public Service Commission's (PSC) approval of a stipulation allowing Georgia Power to amortize a significant regulatory liability related to cost of removal obligations. This amortization is tied to specific conditions, including not filing for a retail base rate increase in 2009 and limitations based on achieving certain return on equity (ROE) targets. Additionally, the filing details a delay in Georgia Power's fuel cost recovery case, as requested by the Georgia PSC and subsequently approved. This postponement, with new rates potentially effective April 1, 2010, provides flexibility in managing fuel costs and regulatory filings. Investors should note that these regulatory decisions directly influence Georgia Power's reported earnings and future rate adjustments.

Key Highlights

1Georgia PSC approved a stipulation allowing Georgia Power to amortize approximately $324 million of its regulatory liability related to other cost of removal obligations.
2The amortization of the regulatory liability is phased, with up to one-third ($108 million) allowed in 2009 and up to two-thirds ($216 million) in 2010, contingent on Georgia Power not filing for a retail base rate increase in 2009.
3Amortization is capped to ensure Georgia Power's retail ROE does not exceed 9.75% in 2009 and 10.15% in 2010.
4Georgia Power is restricted from filing for a base rate increase before July 1, 2010, unless economic conditions necessitate it and projected retail ROE falls below 9.25%.
5Georgia PSC approved a delay in Georgia Power's fuel cost recovery case filing from September 4, 2009, to no later than December 15, 2009, with new rates potentially effective April 1, 2010.
6The filing addresses regulatory accounting orders and fuel cost recovery mechanisms, which are crucial for the financial health and predictability of earnings for Georgia Power.

SOUTHERN CO 8-K Report, Corporate Update (Aug 27, 2009)

Summary

Key Highlights

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