8-KOther Events

SOUTHERN CO 8-K Report, Corporate Update (Nov 18, 2013)

Filed November 18, 2013For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

Southern Company (SO) has filed an 8-K report detailing a significant settlement agreement reached by its subsidiary, Georgia Power, with the Georgia Public Service Commission's (PSC) Public Interest Advocacy Staff. This agreement, if approved, outlines a new Alternate Rate Plan (ARP) effective January 1, 2014, through December 31, 2016. The plan involves a multi-year increase in various tariff rates, including traditional base tariff rates, environmental compliance costs, demand-side management, and municipal franchise fees. The settlement also establishes a specific retail return on equity (ROE) for Georgia Power, set at 10.95%, with a performance range of 10.00% to 12.00%. Earnings above this range will be subject to customer refunds, while shortfalls below 10.00% may trigger an Interim Cost Recovery (ICR) tariff. While this settlement represents a potential resolution, the company acknowledges that the final outcome is subject to Georgia PSC approval and could differ materially from the current agreement. The cautionary note highlights numerous risks and uncertainties that could affect actual results, including regulatory changes, environmental regulations, litigation, and economic conditions.

Key Highlights

  • 1Georgia Power and the Georgia PSC's Public Interest Advocacy Staff have reached a settlement agreement for an Alternate Rate Plan (ARP) for 2014-2016.
  • 2The ARP, if approved, includes an approximate $110 million increase in base revenues effective January 1, 2014, through adjustments in traditional base tariff rates, Environmental Compliance Cost Recovery (ECCR), Demand-Side Management (DSM), and Municipal Franchise Fee (MFF) tariffs.
  • 3Additional rate adjustments are planned for 2015 and 2016, with estimated base revenue increases of $186.8 million in 2015 and $169.8 million in 2016 to recover generation capacity and environmental compliance costs.
  • 4The settlement sets Georgia Power's retail return on common equity (ROE) at 10.95%, with a performance range of 10.00% to 12.00%.
  • 5Earnings above 12.00% ROE will be shared with customers (two-thirds refund, one-third retained), while earnings below 10.00% may allow Georgia Power to petition for an Interim Cost Recovery (ICR) tariff.
  • 6The settlement is subject to final approval by the Georgia PSC, and the terms may change before final approval, with a PSC vote scheduled for December 17, 2013.
  • 7The filing includes a cautionary note detailing numerous forward-looking statements and risk factors that could impact future financial performance.

Frequently Asked Questions

This 8-K filing announces a settlement agreement between Georgia Power and the Georgia PSC's Public Interest Advocacy Staff regarding Georgia Power's retail rate plan for the years 2014 through 2016. It outlines proposed tariff rate increases and specific return on equity (ROE) targets.

The settlement anticipates an approximate $110 million increase in base revenues in 2014, with further estimated increases of $186.8 million in 2015 and $169.8 million in 2016. These increases are driven by adjustments to traditional base tariff rates and various cost recovery mechanisms like ECCR and DSM.

The settlement establishes a target retail ROE of 10.95%, with a band of 10.00% to 12.00%. If Georgia Power earns above 12.00%, two-thirds of the excess earnings will be refunded to customers. If earnings are projected to fall below 10.00%, Georgia Power may seek to implement an Interim Cost Recovery (ICR) tariff to adjust earnings back to the 10.00% level.

No, the settlement agreement is not final. It is subject to approval by the Georgia Public Service Commission (PSC). The PSC is scheduled to vote on the matter on December 17, 2013, and the terms of the final approved agreement may differ materially from the current settlement terms.