SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 15, 1995
---------------------
ALABAMA POWER COMPANY
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Alabama 1-3164 63-0004250
- ---------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 North 18th Street, Birmingham, Alabama 35291
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 250-1000
------------------
N/A
- ---------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
99 - Audited Financial Statements of Alabama
Power Company as of December 31, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALABAMA POWER COMPANY
By /s/ Wayne Boston
Wayne Boston
Assistant Secretary
Date: March 1, 1995
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 15, 1995 on the financial statements of Alabama
Power Company, included in this Form 8-K, into Alabama Power Company's
previously filed Registration Statement File No. 33-49653.
/s/ Arthur Andersen LLP
Birmingham, Alabama
March 1, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from
the financial statements filed as Exhibit 99 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000003153
<NAME> ALABAMA POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,873,577
<OTHER-PROPERTY-AND-INVEST> 114,969
<TOTAL-CURRENT-ASSETS> 816,948
<TOTAL-DEFERRED-CHARGES> 653,723
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 8,459,217
<COMMON> 224,358
<CAPITAL-SURPLUS-PAID-IN> 1,304,791
<RETAINED-EARNINGS> 1,085,256
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,614,405
0
440,400
<LONG-TERM-DEBT-NET> 2,446,055
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 179,882
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 9,754
<LEASES-CURRENT> (796)
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,769,517
<TOT-CAPITALIZATION-AND-LIAB> 8,459,217
<GROSS-OPERATING-REVENUE> 2,935,142
<INCOME-TAX-EXPENSE> 224,280
<OTHER-OPERATING-EXPENSES> 2,114,858
<TOTAL-OPERATING-EXPENSES> 2,339,138
<OPERATING-INCOME-LOSS> 596,004
<OTHER-INCOME-NET> (3,464)
<INCOME-BEFORE-INTEREST-EXPEN> 592,540
<TOTAL-INTEREST-EXPENSE> 209,967
<NET-INCOME> 382,573
26,235
<EARNINGS-AVAILABLE-FOR-COMM> 356,338
<COMMON-STOCK-DIVIDENDS> 268,000
<TOTAL-INTEREST-ON-BONDS> 183,592
<CASH-FLOW-OPERATIONS> 703,900
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
1
MANAGEMENT'S REPORT
Alabama Power Company 1994 Annual Report
The management of Alabama Power Company has prepared -- and is responsible for
- -- the financial statements and related information included in this report.
These statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts that
are based on the best estimates and judgments of management. Financial
information throughout this annual report is consistent with the financial
statements.
The company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that the books and records
reflect only authorized transactions of the company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The company's system of internal accounting controls is evaluated on an
ongoing basis by the company's internal audit staff. The company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of directors who are
not employees, provides a broad overview of management's financial reporting and
control functions. Periodically, this committee meets with management, the
internal auditors and the independent public accountants to ensure that these
groups are fulfilling their obligations and to discuss auditing, internal
controls, and financial reporting matters. The internal auditors and independent
public accountants have access to the members of the audit committee at any
time.
Management believes that its policies and procedures provide reasonable
assurance that the company's operations are conducted according to a high
standard of business ethics. In management's opinion, the financial statements
present fairly, in all material respects, the financial position, results of
operations and cash flows of Alabama Power Company in conformity with generally
accepted accounting principles.
/s/ Elmer B. Harris
Elmer B. Harris
President
and Chief Executive Officer
/s/ William B. Hutchins, III
William B. Hutchins, III
Executive Vice President
and Chief Financial Officer
<PAGE>
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Alabama Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Alabama Power Company (an Alabama corporation and wholly owned subsidiary of
The Southern Company) as of December 31, 1994 and 1993, and the related
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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, the financial statements (pages 10-28) referred to above
present fairly, in all material respects, the financial position of Alabama
Power Company as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the periods stated, in conformity with
generally accepted accounting principles.
As explained in Notes 2 and 8 to the financial statements, effective January
1, 1993, the company changed its methods of accounting for postretirement
benefits other than pensions and for income taxes.
/s/ Arthur Andersen LLP
Birmingham, Alabama
February 15, 1995
<PAGE>
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Alabama Power Company 1994 Annual Report
RESULTS OF OPERATIONS
Earnings
Alabama Power Company's 1994 net income after dividends on preferred stock was
$356 million, representing a $10 million (2.8 percent) increase from the prior
year. This improvement can be attributed to lower operating expenses which
decreased 3.0 percent from the previous year as a result of the company's
strategy to remain a low-cost producer of electricity. This improvement was
partially offset by reduced capacity sales to nonterritorial utilities. Net
income was also impacted by the mild weather in 1994.
In 1993, earnings were $346 million, representing a 2.3 percent increase
over the prior year. This increase was due to higher retail energy sales and
lower financing costs. These positive factors were partially offset by higher
operating costs and a scheduled reduction in capacity sales to non-affiliated
utilities.
The return on average common equity for 1994 was 13.86 percent compared to
13.94 percent in 1993, and 14.02 percent in 1992.
Revenues
The following table summarizes the principal factors that affected operating
revenues for the past three years:
===============================================================
Increase (Decrease)
From Prior Year
-------------------------------------
1994 1993 1992
-------------------------------------
(in thousands)
Retail --
Change in
base rates $ -- $ -- $ 36,348
Unbilled
adjustment 28,000 -- --
Sales growth 45,304 24,960 36,237
Weather (39,964) 58,536 (42,709)
Fuel cost recovery
and other (84,344) 96,437 (31,318)
- ----------------------------------------------------------------
Total retail (51,004) 179,933 (1,442)
- ----------------------------------------------------------------
Sales for Resale --
Non-affiliates (9,345) (43,686) (121)
Affiliates (17,213) 23,887 (1,287)
- ----------------------------------------------------------------
Total sales for resale (26,558) (19,799) (1,408)
Other operating
revenues 5,095 635 2,896
- ----------------------------------------------------------------
Total operating
revenues $(72,467) $160,769 $ 46
================================================================
Percent change (2.4)% 5.6% -- %
================================================================
Retail revenues of $2.4 billion in 1994 decreased $51 million (2.1 percent)
from the prior year, compared with an increase of $180 million (8.0 percent) in
1993. The mild weather during the summer of 1994 and lower fuel cost recovery
were the primary reasons for the decrease in retail revenues from 1993. The
extreme weather during 1993 and sales growth contributed to the increase in
retail revenues over 1992. Fuel revenues, which decreased substantially in 1994,
generally represent the direct recovery of fuel expense, including the fuel
component of purchased energy, and therefore have no effect on net income. In
September 1994, the company recorded an additional $28 million (679 million
kilowatt-hours) in estimated unbilled revenues due to a change in the estimating
procedure for unbilled kilowatt-hours (KWHs) and associated revenues. For
additional information concerning unbilled revenues and an offsetting expense,
see Note 3 under "Retail Rate Adjustment Procedures."
<PAGE>
4
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1994 Annual Report
Revenues from sales to utilities outside the service area under
long-term contracts consist of capacity and energy components. Capacity revenues
reflect the recovery of fixed costs and a return on investment under the
contracts. Energy is generally sold at variable cost. These capacity and energy
components, as well as the components of the sales to affiliated companies,
were:
============================================================
1994 1993 1992
------------------------------------------
(in thousands)
Capacity $165,063 $187,062 $216,113
Energy 222,579 233,253 239,622
- ------------------------------------------------------------
Total $387,642 $420,315 $455,735
============================================================
Capacity revenues from non-affiliates remained relatively constant in 1994
but decreased in 1993 due to a scheduled reduction in capacity dedicated to unit
power sales customers for the first five months of the year. Capacity revenues
from sales to affiliates decreased $22 million in 1994. Sales to affiliated
companies within the Southern electric system will vary from year to year
depending on demand, the availability, and the variable production cost of
generating resources at each company.
KWH sales for 1994 and the percent change by year were as follows:
===============================================================
KWH Percent Change
-----------------------------------------
1994 1994 1993 1992
-----------------------------------------
(millions)
Residential 12,955 (1.7)% 9.2% (2.1)%
Commercial 9,495 3.4 6.4 1.2
Industrial 19,181 3.2 1.8 4.3
Unbilled
adjustment 679 - - -
Other 184 1.1 2.8 1.2
---------
Total retail 42,494 3.3 5.1 1.6
Sales for resale -
Non-affiliates 6,775 (5.2) (14.8) (4.9)
Affiliates 8,433 4.3 12.1 (7.4)
---------
Total 57,702 2.4% 3.0% (0.7)%
===============================================================
Expenses
Total operating expenses of $2.3 billion for 1994 were down 3.0 percent compared
with the prior year. The decrease was mainly due to less coal-fired generation
and a lower average cost of fuel consumed. Coal-fired generation decreased
because it was displaced with lower cost nuclear and hydro generation.
Total operating expenses for 1993 were up 7.0 percent over those recorded in
1992. The increase was mainly attributable to higher production expenses of $95
million to meet increased energy demands.
Fuel costs are the single largest expense for the company. The mix of fuel
sources for generation of electricity is determined primarily by system load,
the unit cost of fuel consumed, and the availability of hydro and nuclear
generating units. Fuel expense decreased in 1994 by $75 million (8.6 percent)
from the previous year. This decrease is attributable to the increase in
availability of nuclear and hydro generation and a decrease in the cost of fuel.
Fuel expense increased in 1993 as a result of increased energy demands during
the summer. Fuel cost per KWH generated was 1.56 cents in 1994, 1.73 cents in
1993 and 1.64 cents in 1992.
Purchased power consists primarily of purchases from the affiliates of the
Southern electric system. Purchased power transactions among the company and its
affiliates will vary from period to period depending on demand, the
availability, and the variable production cost of generating resources at each
company. Purchased capacity from affiliates increased $5 million in 1994. KWH
purchases from affiliates decreased 27 percent from the prior year.
Other operation expenses decreased 2.5 percent in 1994 following a 5.6
percent increase in 1993. The increase in 1993 was primarily the result of
environmental cleanup costs, net expenses of a March snowstorm, and the one-time
cost of a transportation fleet reduction program, which together totaled $16.1
million.
Maintenance expenses increased 3.8 percent in 1994 over the previous year
due to the establishment of a Natural Disaster Reserve. For additional
information concerning the Natural Disaster Reserve, see Note 3 under "Retail
Rate Adjustment Procedures."
Depreciation and amortization expense remained virtually unchanged from the
previous year. This is the result of lower average depreciation rates effective
January 1994 offset by growth in depreciable plant in service. Depreciation and
<PAGE>
5
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1994 Annual Report
amortization expense increased 3.4 percent in 1993 due principally to growth in
depreciable plant in service.
Income taxes increased in 1994 by $17 million (8.2 percent). This is due to
higher taxable income. The increase in income tax expense of 2.6 percent for
1993 was primarily attributable to a one percent increase in the corporate
federal income tax rate effective January 1, 1993.
The company contributed $13.5 million to the Alabama Power Foundation, Inc.
in 1994, which represents an increase of $10.5 million from the previous year.
The Foundation makes distributions to qualified entities which are organized
exclusively for charitable, educational, literary, and scientific purposes.
Total net interest charges and preferred stock dividends continued to
decline from amounts reported in the previous year. The declines reflect the
significant refinancing activities in 1993 and 1992. In 1994, these costs were
$236 million -- down $23 million (9.0 percent). These costs decreased $7.5
million (2.8 percent) in 1993.
Effects of Inflation
The company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the company is recovering its costs of investments in dollars that have
less purchasing power. 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 long-lived utility plant. 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 and preferred stock. Any recognition of
inflation by regulatory authorities is reflected in the rate of return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
numerous factors ranging from growth in energy sales to a less regulated, more
competitive environment.
Future earnings in the near term will depend upon growth in electric sales,
which are subject to a number of factors. Traditionally, these factors have
included changes in contracts with neighboring utilities, energy conservation
practiced by customers, the elasticity of demand, weather, competition, and the
rate of economic growth in the company's service area. However, the Energy
Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the
future of the electric utility industry. The Energy Act promotes energy
efficiency, alternative fuel use, and increased competition for electric
utilities. The company is posturing the business to meet the challenge of this
major change in the traditional practice of selling electricity. The Energy Act
allows independent power producers (IPPs) to access a utility's transmission
network in order to sell electricity to other utilities. This may enhance the
incentive for IPPs to build cogeneration plants for a utility's large industrial
and commercial customers and sell excess energy generation to other utilities.
Although the Energy Act does not require transmission access to retail
customers, retail wheeling initiatives are rapidly evolving and becoming very
prominent issues in several states. In order to address these initiatives,
numerous questions must be resolved with the most complex ones relating to
transmission pricing, recovery of stranded investments, and developing rate
structures for different market segments that reflect the economic costs of
serving that market. As the initiatives become a reality, the structure of the
utility industry could radically change. Therefore, unless the company remains a
low-cost producer and provides quality service, the company's retail energy
sales growth could be limited, and this could significantly erode earnings.
Conversely, being the low-cost producer could provide significant opportunities
to increase market share and profitability.
The scheduled addition of five combustion turbine generating units in 1995
and four more in 1996 will increase related operation and maintenance expenses
and depreciation expenses. These additions are to ensure reliable service to its
customers during critical peak times.
Rates to retail customers served by the company are regulated by the Alabama
Public Service Commission (APSC). Rates for the company can be adjusted
<PAGE>
6
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1994 Annual Report
periodically within certain limitations based on earned retail rate of return
compared with an allowed return. See Note 3 to the financial statements for
information about other regulatory matters.
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. In the event that a portion of the company's operations is no longer
subject to these provisions, the company would be required to write off related
regulatory assets and liabilities. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry --
including the company -- regarding the recognition, measurement, and
classification of decommissioning costs for nuclear generating facilities in the
financial statements. In response to these questions, the FASB is currently
reviewing the accounting for nuclear decommissioning. If current electric
utility industry accounting practices for decommissioning are changed: (1)
Annual provisions for decommissioning could increase. (2) The estimated cost for
decommissioning may be required to be recorded as a liability in the Balance
Sheets. In management's opinion -- should these changes be required -- the
changes would not have a significant adverse effect on results of operations
because of the company's current and expected future ability to recover
decommissioning costs through rates. See Note 1 to the financial statements
under "Depreciation and Nuclear Decommissioning" for additional information.
The Federal Energy Regulatory Commission (FERC) regulates wholesale rate
schedules and power sales contracts that the company has with its sales for
resale customers. The FERC currently is reviewing the rate of return on common
equity included in these schedules and contracts and may require such returns to
be lowered, possibly retroactively. See Note 3 to the financial statements under
"FERC Reviews Equity Returns" for additional information.
Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air
Act) could affect earnings if such costs are not fully recovered. The Clean Air
Act and other important environmental items are discussed later under
"Environmental Matters."
FINANCIAL CONDITION
Overview
The company's financial condition remained stable in 1994. This stability is the
continuation over recent years of growth in energy sales and cost control
measures combined with a significant lowering of the cost of capital, achieved
through the refinancing and/or redemption of higher-cost long-term debt and
preferred stock.
The company had gross property additions of $537 million in 1994. The
majority of funds needed for gross property additions since 1991 have been
provided from operating activities, principally from earnings and non-cash
charges to income such as depreciation and deferred income taxes. The Statements
of Cash Flows provide additional details.
Capital Structure
The company's ratio of common equity to total capitalization was 47.4 percent in
1994 and 1993, compared to 47.6 percent in 1992.
In 1994, the company issued $150 million of first mortgage bonds and through
public authorities, $180 million of pollution control revenue refunding bonds.
Composite financing rates as of year-end for 1992 through 1994 were as follows:
================================================================
1994 1993 1992
------------------------------
Composite interest rate on
long-term debt 7.39% 7.35% 8.00%
Composite dividend rate on
preferred stock 6.23% 5.80% 6.76%
================================================================
The company's current securities ratings are as follows:
==============================================================
Duff & Standard
Phelps Moody's & Poor's
---------------------------------
First Mortgage Bonds A+ A1 A
Preferred Stock A- a2 A-
==============================================================
<PAGE>
7
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1994 Annual Report
Capital Requirements
Capital expenditures are estimated to be $604 million for 1995, $500 million for
1996, and $502 million for 1997. The total is $1.6 billion for the three years.
Actual capital costs may vary from this estimate because of factors such as
changes in environmental regulations; changes in the existing nuclear plant to
meet new regulations; revised 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.
The company does not have any baseload generating plants under construction,
and current energy demand forecasts do not require any additional baseload
generating units until well into the future. However, the construction of
combustion turbine peaking units of approximately 720 megawatts of capacity is
planned by 1996 to meet increased peak-hour demands. In addition, significant
construction of transmission and distribution facilities and upgrading of
generating plants will continue.
Other Capital Requirements
In addition to the funds needed for the capital budget, approximately $60
million will be required by the end of 1997 for maturities of first mortgage
bonds. Also, the company will continue to retire higher-cost debt and preferred
stock and replace these obligations with lower-cost capital, as market
conditions permit.
Environmental Matters
In November 1990, the Clean Air Act was signed into law. Title IV of the Clean
Air Act -- the acid rain compliance provision of the law -- will have a
significant impact on the Southern electric system. Specific reductions in
sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants
will be required in two phases. Phase I compliance began in 1995 and affected
eight generating plants -- some 10,000 megawatts of capacity or 35 percent of
total capacity -- in the Southern electric system. Phase II compliance is
required in 2000, and all fossil-fired generating plants in the Southern
electric system will be affected.
In 1995, the Environmental Protection Agency (EPA) began issuing annual
sulfur dioxide emission allowances through the allowance trading program. An
emission allowance is the authority to emit one ton of sulfur dioxide during a
calendar year. The method for issuing allowances is based on the fossil fuel
consumed from 1985 through 1987 for each affected generating unit. Emission
allowances are transferable and can be bought, sold, or banked and used in the
future.
The sulfur dioxide emission allowance program is expected to minimize the
cost of compliance. The Southern Company's sulfur dioxide compliance strategy is
designed to use allowances as a compliance option.
The Southern Company expects to achieve Phase I sulfur dioxide compliance at
the eight affected plants by switching to low-sulfur coal, which has required
some equipment upgrades. This compliance strategy is expected to result in
unused emission allowances being banked for later use. Additional construction
expenditures were required to install equipment for the control of nitrogen
oxide emissions at these eight plants. Also, continuous emissions monitoring
equipment will be installed on all fossil-fired units. Construction expenditures
for Phase I compliance are estimated to total approximately $300 million through
1995 for The Southern Company, of which the company's portion is approximately
$30 million.
For Phase II sulfur dioxide compliance, The Southern Company could use
emission allowances banked during Phase I, increase fuel switching, install flue
gas desulfurization equipment at selected plants, and/or purchase more
allowances, depending on the price and availability of allowances. Also, in
Phase II, equipment to control nitrogen oxide emissions will be installed on
additional system fossil-fired plants as required to meet anticipated Phase II
limits. Therefore, during the period 1996 to 2000, compliance could require
total estimated construction expenditures of $150 million for The Southern
Company, of which the company's portion is approximately $80 million. However,
the full impact of Phase II compliance cannot now be determined with certainty,
pending the continuing development of a market for emission allowances, the
completion of EPA regulations, and the possibility of new emission reduction
technologies.
<PAGE>
8
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1994 Annual Report
An average increase of up to 2 percent in annual revenue requirements from
customers could be necessary to fully recover the company's cost of compliance
for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs
include construction expenditures, increased costs for switching to low-sulfur
coal, and costs related to emission allowances.
Title III of the Clean Air Act requires a multi-year EPA study of power plant
emissions of hazardous air pollutants. The EPA is scheduled to submit a report
to Congress on the results of this study by November 1995. The report will
include a decision on whether additional regulatory control of these substances
is warranted. Compliance with any new control standards could result in
significant additional costs. The impact of new standards -- if any -- will
depend on the development and implementation of applicable regulations.
A significant portion of costs related to the acid rain provision of the
Clean Air Act is expected to be recovered through existing ratemaking
provisions. However, there can be no assurance that all Clean Air Act costs will
be recovered.
The EPA continues to evaluate the need for a new short-term ambient air
quality standard for sulfur dioxide. Preliminary results from an EPA study on
the impact of a new standard indicate that a number of plants could be required
to install sulfur dioxide controls. These controls would be in addition to the
controls already required to meet the acid rain provision of the Clean Air Act.
The EPA issued proposed rules in November 1994 and is required to take final
action on this issue in 1996. The impact of any new standard will depend on the
level chosen for the standard and cannot be determined at this time.
In addition, the EPA is evaluating the need to revise the ambient air quality
standards for particulate matter, nitrogen oxides, and ozone. The impact of any
new standard will depend on the level chosen for the standard and cannot be
determined at this time.
In 1995, the EPA may issue revised rules on air quality control regulations
related to stack height requirements of the Clean Air Act. The full impact of
the final rules cannot be determined at this time, pending their development and
implementation.
In 1993, the EPA issued a ruling confirming the non-hazardous status of coal
ash. However, the EPA has until 1998 to classify co-managed utility wastes --
coal ash and other utility wastes -- as either non-hazardous or hazardous. If
the EPA classifies the co-managed wastes as hazardous, then substantial
additional costs for the management of such wastes may be required. The full
impact of any change in the regulatory status will depend on the subsequent
development of co-managed waste requirements.
The company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the company could incur costs to clean up properties currently or
previously owned. The company conducts studies to determine the extent of any
required cleanup costs and has recognized in the financial statements costs to
clean up known sites.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Water Act;
the Comprehensive Environmental Response, Compensation, and Liability Act; the
Resource Conservation and Recovery Act; and the Endangered Species Act. Changes
to these laws could affect many areas of The Southern Company's operations. The
full impact of these requirements cannot be determined at this time, pending the
development and implementation of applicable regulations.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect the Southern electric system. The impact of new
legislation -- if any -- will depend on the subsequent development and
implementation of applicable regulations. In addition, the potential exists for
liability as the result of lawsuits alleging damages caused by electromagnetic
fields.
Sources of Capital
It is anticipated that the funds required will be derived from sources in form
and quantity similar to those used in the past. To issue additional first
mortgage bonds and preferred stock, the company must comply with certain
earnings coverage requirements designated in its mortgage indenture and
<PAGE>
9
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1994 Annual Report
corporate charter. The company's coverages are at a level that would permit any
necessary amount of security sales at current interest and dividend rates.
As required by the Nuclear Regulatory Commission and as ordered by the APSC,
the company has established external trust funds for nuclear decommissioning
costs. In 1994, the company also established an external trust fund for
postretirement benefits as ordered by the APSC. The cumulative effect of funding
these items over a long period will diminish internally funded capital and may
require capital from other sources. For additional information concerning
nuclear decommissioning costs, see Note 1 to the financial statements under
"Depreciation and Nuclear Decommissioning."
<PAGE>
10
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1994, 1993, and 1992
Alabama Power Company 1994 Annual Report
====================================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues (Notes 1, 3 and 7):
Revenues $2,770,380 $2,825,634 $2,688,752
Revenues from affiliates 164,762 181,975 158,088
- ----------------------------------------------------------------------------------------------------
Total operating revenues 2,935,142 3,007,609 2,846,840
- ----------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 801,948 877,099 794,438
Purchased power from non-affiliates 15,158 15,230 14,242
Purchased power from affiliates 100,888 120,330 107,230
Other 458,917 470,815 445,836
Maintenance 262,102 252,506 237,071
Depreciation and amortization 292,420 290,310 280,881
Taxes other than income taxes 183,425 178,997 172,095
Federal and state income taxes (Note 8) 224,280 207,210 201,925
- ----------------------------------------------------------------------------------------------------
Total operating expenses 2,339,138 2,412,497 2,253,718
- ----------------------------------------------------------------------------------------------------
Operating Income 596,004 595,112 593,122
Other Income (Expense):
Allowance for equity funds used during construction (Note 1) 3,239 3,260 2,071
Income from subsidiary (Note 6) 3,588 4,127 4,635
Charitable foundation (13,500) (3,000) (6,887)
Interest income 16,944 20,775 14,804
Other, net (30,569) (24,420) (11,019)
Income taxes applicable to other income 16,834 10,239 8,947
- ----------------------------------------------------------------------------------------------------
Income Before Interest Charges 592,540 606,093 605,673
- ----------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 178,045 184,861 206,871
Allowance for debt funds used during construction (Note 1) (3,548) (2,992) (2,416)
Interest on interim obligations 5,939 3,760 3,704
Amortization of debt discount, premium, and expense, net 9,623 8,937 4,392
Other interest charges 19,908 35,474 19,381
- ----------------------------------------------------------------------------------------------------
Net interest charges 209,967 230,040 231,932
- ----------------------------------------------------------------------------------------------------
Net Income 382,573 376,053 373,741
Dividends on Preferred Stock 26,235 29,559 35,186
- ----------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 356,338 $ 346,494 $ 338,555
====================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993, and 1992
Alabama Power Company 1994 Annual Report
=============================================================================================
1994 1993 1992
- ---------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 382,573 $ 376,053 $ 373,741
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 359,791 356,499 338,421
Deferred income taxes and investment tax credits (32,613) 32,994 23,514
Allowance for equity funds used during construction (3,239) (3,260) (2,071)
Other, net 28,656 36,493 (3,298)
Changes in certain current assets and liabilities --
Receivables, net 19,390 19,215 (11,010)
Inventories (38,946) 51,630 12,704
Payables (21,240) 31,544 2,158
Taxes accrued 6,856 (9,959) (21,120)
Energy cost recovery, retail 16,907 (56,128) 45,509
Other (14,235) (21,110) 10,629
- ---------------------------------------------------------------------------------------------
Net cash provided from operating activities 703,900 813,971 769,177
- ---------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (536,785) (435,843) (367,463)
Sale of property - - 43,556
Other (26,632) (741) (13,379)
- ---------------------------------------------------------------------------------------------
Net cash used for investing activities (563,417) (436,584) (337,286)
- ---------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock - 158,000 150,000
First mortgage bonds 150,000 860,000 745,000
Other long-term debt 208,720 180,314 48,382
Retirements:
Preferred stock - (207,000) (145,000)
First mortgage bonds (20,387) (699,788) (931,797)
Other long-term debt (305,380) (181,329) (54,223)
Interim obligations, net 139,882 (156,917) 120,917
Payment of preferred stock dividends (25,431) (32,099) (35,704)
Payment of common stock dividends (268,000) (252,900) (273,300)
Miscellaneous (8,444) (56,064) (53,697)
- ---------------------------------------------------------------------------------------------
Net cash used for financing activities (129,040) (387,783) (429,422)
- ---------------------------------------------------------------------------------------------
Net Change in Cash 11,443 (10,396) 2,469
Cash at Beginning of Year 3,233 13,629 11,160
- ---------------------------------------------------------------------------------------------
Cash at End of Year $ 14,676 $ 3,233 $ 13,629
=============================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $ 183,445 $ 176,805 $ 219,263
Income taxes 231,831 175,591 197,693
- ---------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1994 and 1993
Alabama Power Company 1994 Annual Report
===============================================================================================
ASSETS 1994 1993
- -----------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Utility Plant:
Plant in service, at original cost (Note 1) $10,052,772 $9,757,141
Less accumulated provision for depreciation 3,598,604 3,384,156
- -----------------------------------------------------------------------------------------------
6,454,168 6,372,985
Nuclear fuel, at amortized cost 101,630 93,551
Construction work in progress 317,779 225,786
- -----------------------------------------------------------------------------------------------
Total 6,873,577 6,692,322
- -----------------------------------------------------------------------------------------------
Other Property and Investments:
Southern Electric Generating Company, at equity (Note 6) 26,985 29,201
Nuclear decommissioning trusts (Note 1) 71,014 49,550
Miscellaneous 16,970 20,434
- -----------------------------------------------------------------------------------------------
Total 114,969 99,185
- -----------------------------------------------------------------------------------------------
Current Assets:
Cash 14,676 3,233
Receivables-
Customer accounts receivable 308,561 312,090
Other accounts and notes receivable 22,547 48,808
Affiliated companies 29,303 40,216
Accumulated provision for uncollectible accounts (2,297) (2,632)
Refundable income taxes 16,011 11,940
Fossil fuel stock, at average cost 119,555 88,481
Materials and supplies, at average cost 184,600 176,728
Prepayments-
Income taxes 19,196 18,980
Other 84,354 60,227
Vacation pay deferred 20,442 22,680
- -----------------------------------------------------------------------------------------------
Total 816,948 780,751
- -----------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 451,886 469,010
Debt expense, being amortized 7,370 7,064
Premium on reacquired debt, being amortized 101,851 102,634
Uranium enrichment decontamination and decommissioning fund (Note 1) 42,996 45,554
Miscellaneous 49,620 52,163
- -----------------------------------------------------------------------------------------------
Total 653,723 676,425
- -----------------------------------------------------------------------------------------------
Total Assets $8,459,217 $8,248,683
===============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
13
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1994 and 1993
Alabama Power Company 1994 Annual Report
===============================================================================================
CAPITALIZATION AND LIABILITIES 1994 1993
- -----------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Capitalization (See accompanying statements):
Common stock equity $2,614,405 $2,526,348
Preferred stock 440,400 440,400
Long-term debt 2,455,013 2,362,852
- -----------------------------------------------------------------------------------------------
Total 5,509,818 5,329,600
- -----------------------------------------------------------------------------------------------
Current Liabilities:
Long-term debt due within one year (Note 10) 796 58,998
Notes payable to banks - 40,000
Commercial paper 179,882 -
Accounts payable-
Affiliated companies 60,334 62,507
Other 258,657 272,491
Customer deposits 30,245 31,198
Taxes accrued-
Federal and state income 6,848 25,730
Other 15,589 14,414
Interest accrued 52,516 52,809
Vacation pay accrued 20,442 22,680
Miscellaneous 57,047 50,426
- -----------------------------------------------------------------------------------------------
Total 682,356 631,253
- -----------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 1,181,342 1,165,127
Accumulated deferred investment tax credits 317,018 329,909
Prepaid capacity revenues, net (Note 7) 138,421 143,762
Uranium enrichment decontamination and decommissioning fund (Note 1) 39,413 39,644
Deferred credits related to income taxes (Note 8) 405,256 440,945
Natural disaster reserve 28,750 -
Miscellaneous 156,843 168,443
- -----------------------------------------------------------------------------------------------
Total 2,267,043 2,287,830
- -----------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 3, 4, 5, 6, 7, and 11)
Total Capitalization and Liabilities $8,459,217 $8,248,683
===============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
14
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1994 and 1993
Alabama Power Company 1994 Annual Report
=================================================================================================
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
Common Stock Equity:
Common stock, par value $40 per share --
Authorized -- 6,000,000 shares
Outstanding -- 5,608,955 shares in
1994 and 1993 $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645
Premium on preferred stock 146 146
Retained earnings (Note 12) 1,085,256 997,199
- -------------------------------------------------------------------------------------------------
Total common stock equity 2,614,405 2,526,348 47.4 % 47.4 %
- -------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$1 par value --
Authorized -- 27,500,000 shares
Outstanding -- 12,020,200 shares
$25 stated capital --
6.40% 50,000 50,000
6.80% 38,000 38,000
7.60% 150,000 150,000
Adjustable rate
6.26% - at January 1, 1995 50,000 50,000
$100 stated capital --
Auction rate - at January 1, 1995: 4.59% 50,000 50,000
$100,000 stated capital --
Auction rate - at January 1, 1995: 4.64% 20,000 20,000
$100 par value --
Authorized -- 3,850,000 shares
Outstanding -- 824,000 shares
4.20% to 4.52% 41,400 41,400
4.60% to 4.92% 29,000 29,000
5.96% to 6.88% 12,000 12,000
- -------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $27,421,000) 440,400 440,400 8.0 8.3
- -------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
-------- --------------
March 1, 1996 4 1/2% 60,000 60,000
February 1, 1998 5 1/2% 50,000 50,000
August 1, 1999 6 3/8% 170,000 170,000
2000 through 2003 6% to 7% 500,000 500,000
2007 7 1/4% 175,000 175,000
2017 10 5/8% - 15,243
2021 through 2024 7.30% to 9 1/4% 1,044,856 900,000
- -------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,999,856 1,870,243
Pollution control obligations 476,140 476,140
Other long-term debt 9,754 106,414
Unamortized debt premium (discount), net (29,941) (30,947)
- -------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $183,592,000) 2,455,809 2,421,850
Less amount due within one year (Note 10) 796 58,998
- -------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 2,455,013 2,362,852 44.6 44.3
- -------------------------------------------------------------------------------------------------
Total Capitalization $5,509,818 $5,329,600 100.0 % 100.0 %
=================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
15
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1994, 1993, and 1992
Alabama Power Company 1994 Annual Report
=====================================================================================
1994 1993 1992
- -------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $ 997,199 $ 914,148 $ 857,734
Net income after dividends on preferred stock 356,338 346,494 338,555
Cash dividends on common stock (268,000) (252,900) (273,300)
Preferred stock transactions, net (118) (10,587) (8,732)
Other adjustments to retained earnings (163) 44 (109)
- -------------------------------------------------------------------------------------
Balance at End of Year (Note 12) $1,085,256 $ 997,199 $ 914,148
=====================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
16
NOTES TO FINANCIAL STATEMENTS
Alabama Power Company 1994 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Alabama Power Company (the company) is a wholly owned subsidiary of The Southern
Company, which is the parent company of five operating companies, a system
service company, Southern Communications Services (Southern Communications),
Southern Electric International (Southern Electric), Southern Nuclear Operating
Company (Southern Nuclear), and The Southern Development and Investment Group
(SDIG). The operating companies (Alabama Power Company, Georgia Power Company,
Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power
Company) provide electric service in four Southeastern states. Contracts among
the companies -- dealing with jointly-owned generating facilities,
interconnecting transmission lines, and the exchange of electric power -- are
regulated by the Federal Energy Regulatory Commission (FERC) or the Securities
and Exchange Commission (SEC). The system service company provides, at cost,
specialized services upon request to The Southern Company and to the subsidiary
companies. Southern Communications, beginning in mid-1995, will provide digital
wireless communications services -- over the 800-megahertz frequency band -- to
The Southern Company's subsidiaries and also will market these services to the
public within the Southeast. Southern Electric designs, builds, owns and
operates power production facilities and provides a broad range of technical
services to industrial companies and utilities in the United States and a number
of international markets. Southern Nuclear provides services to The Southern
Company's nuclear power plants. SDIG develops new business opportunities related
to energy products and services.
The Southern Company is registered as a holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its
subsidiaries are subject to the regulatory provisions of the PUHCA. The company
is also regulated by the FERC and the Alabama Public Service Commission (APSC).
The company follows generally accepted accounting principles and complies with
the accounting policies and practices prescribed by the respective regulatory
commissions.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
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. Regulatory assets represent probable future revenues to the company
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 to be credited to
customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to:
================================================================
1994 1993
--------------------
(in thousands)
Deferred income taxes $451,886 $469,010
Premium on reacquired debt 101,620 102,216
Department of Energy assessments 42,996 45,554
Vacation pay 20,442 22,680
Work force reduction costs 3,664 5,468
Deferred income tax credits (405,256) (440,945)
Natural disaster reserve (28,750) -
Other, net 45,956 26,824
- ----------------------------------------------------------------
Total $232,558 $230,807
================================================================
In the event that a portion of the company's operations are no longer
subject to the provisions of Statement No. 71, the company would be required to
write off related regulatory assets and liabilities. In addition, the company
would be required to determine any impairment to other assets, including plant,
and write down the assets to their fair value.
Revenues and Fuel Costs
The company accrues revenues for services rendered but unbilled at the end of
each fiscal period. For additional information concerning unbilled revenues, see
Note 3 under "Retail Rate Adjustment Procedures."
The company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1994, uncollectible
<PAGE>
17
NOTES (continued)
Alabama Power Company 1994 Annual Report
accounts continued to average less than 1 percent of revenues.
Fuel costs are expensed as the fuel is used. The company's electric rates
include provisions to adjust billings for fluctuations in fuel and the energy
component of purchased power costs. Revenues are adjusted for differences
between recoverable fuel costs and amounts actually recovered in current rates.
Fuel expense 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 $65
million in 1994, $62 million in 1993, and $48 million in 1992. The company has a
contract with the U.S. Department of Energy (DOE) that provides for the
permanent disposal of spent nuclear fuel, which was scheduled to begin in 1998.
However, the actual year this service will begin is uncertain. Sufficient
storage capacity currently is available to permit operation into 2012 and 2014
at Plant Farley units 1 and 2, respectively.
Also, the Energy Policy Act of 1992 required the establishment in 1993 of a
Uranium Enrichment Decontamination and Decommissioning Fund, which is to be
funded in part by a special assessment on utilities with nuclear plants. This
assessment will be paid over a 15- year period, which began in 1993. 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. The company
estimates its remaining liability at December 31, 1994, under this law to be
approximately $43 million. This obligation is recognized in the accompanying
Balance Sheets.
Depreciation and Nuclear Decommissioning
Depreciation of the original cost of depreciable utility plant in service is
provided primarily by using composite straight-line rates, which approximated
3.2 percent in 1994 and 3.3 percent in both 1993 and 1992. When property subject
to depreciation is retired or otherwise disposed of in the normal course of
business, its cost -- together with the cost of removal, less salvage -- is
charged to the accumulated provision for depreciation. Minor items of property
included in the original cost of the plant are retired when the related property
unit is retired. Depreciation expense includes an amount for the expected cost
of decommissioning nuclear facilities.
In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations
requiring all licensees operating commercial power reactors to establish a plan
for providing, with reasonable assurance, funds for decommissioning. The company
has established external trust funds to comply with the NRC's regulations.
Amounts previously recorded in internal reserves are being transferred into the
external trust funds over set periods of time as approved by the APSC. Earnings
on the trust fund are considered in determining decommissioning expense. The
NRC's minimum external funding requirements are based on a generic estimate of
the cost to decommission 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.
Site study cost is the estimate to decommission the facility as of the
site study year, and ultimate cost is the estimate to decommission the facility
as of retirement date. The estimated cost of decommissioning -- both site study
costs and ultimate costs -- at December 31, 1994, for Plant Farley were as
follows:
==============================================================
Plant
Farley
-------------
Site study basis (year) 1993
Decommissioning periods:
Beginning year 2017
Completion year 2029
- --------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $409
Non-radiated structures 75
Other 94
- --------------------------------------------------------------
Total $578
==============================================================
(in millions)
Ultimate costs:
Radiated structures $1,258
Non-radiated structures 231
Other 289
- --------------------------------------------------------------
Total $1,778
==============================================================
<PAGE>
18
NOTES (continued)
Alabama Power Company 1994 Annual Report
(in millions)
Amount expensed in 1994 $18
- --------------------------------------------------------------
Accumulated provisions:
Balance in external trust funds $ 71
Balance in internal reserves 51
- --------------------------------------------------------------
Total $122
==============================================================
Assumed in ultimate costs:
Inflation rate 4.5%
Trust earning rate 7.0
- --------------------------------------------------------------
Annual provisions for nuclear decommissioning are based on an annuity --
sinking fund -- method as approved by the APSC. The decommissioning costs
approved for ratemaking are $578 million for Plant Farley.
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 regulatory requirements, changes in technology, and
changes in costs of labor, materials, and equipment.
Income Taxes
The company 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.
Effective January 1, 1993, the company adopted FASB Statement No. 109,
Accounting for Income Taxes. Statement No. 109 required, among other things,
conversion to the liability method of accounting for accumulated deferred income
taxes. See Note 8 for additional information about Statement No. 109.
Allowance For Funds Used During Construction (AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new 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 composite rate used to determine the amount of
allowance was 7.9 percent in 1994, 7.8 percent in 1993, and 7.9 percent in 1992.
AFUDC, net of income tax, as a percent of net income after dividends on
preferred stock was 1.5 percent in both 1994 and 1993 and 1.1 percent in 1992.
Utility Plant
Utility plant is stated at original cost. 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
estimated cost of funds used during construction. The cost of maintenance,
repairs and replacement of minor items of property is charged to maintenance
expense. The cost of replacements of property (exclusive of minor items of
property) is charged to utility plant.
Financial Instruments
In accordance with FASB Statement No. 107, Disclosure About Fair Value of
Financial Instruments, the company's only financial instrument that the carrying
amount did not approximate fair value at December 31 was as follows:
==============================================================
Long-Term Debt
-------------------------
Carrying Fair
Year Amount Value
------------- ----------
(in millions)
1994 $2,446 $2,323
1993 2,315 2,439
==============================================================
The fair value for long-term debt was based on either closing market price
or closing price of comparable instruments.
Materials and Supplies
Generally, materials and supplies include the cost 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.
Vacation Pay
The company's employees earn their vacation in one year and take it in the
subsequent year. However, for ratemaking purposes, vacation pay is recognized as
<PAGE>
19
NOTES (continued)
Alabama Power Company 1994 Annual Report
an allowable expense only when paid. Consistent with this ratemaking treatment,
the company accrues a current liability for earned vacation pay and records a
current regulatory asset representing future recoverability of this cost. The
amount was $20 million and $23 million at December 31, 1994 and 1993,
respectively. In 1995, an estimated 64 percent of the 1994 deferred vacation
cost will be expensed and the balance will be charged to construction and other
accounts.
Natural Disaster Reserve
In September 1994, in response to a request by the company, the APSC issued
an order allowing the company to establish a Natural Disaster Reserve. As of
December 31, 1994, the accumulated provision amounted to $28.8 million.
Regulatory treatment by the APSC allows the company to accrue $250 thousand per
month until the maximum accumulated provision of $32 million is attained. For
additional information concerning the Natural Disaster Reserve, see Note 3 under
"Retail Rate Adjustment Procedures."
2. RETIREMENT BENEFITS
Pension Plan
The company has a defined benefit, trusteed, non-contributory pension plan that
covers substantially all regular employees. Benefits are based on the greater of
amounts resulting from two different formulas: years of service and final
average pay or years of service and a flat-dollar benefit. The company uses the
"entry age normal method with a frozen initial liability" actuarial method for
funding purposes, subject to limitations under federal income tax regulations.
Amounts funded to the pension trusts are primarily invested in equity and
fixed-income securities. FASB Statement No. 87, Employers' Accounting for
Pensions, requires use of the "projected unit credit" actuarial method for
financial reporting purposes.
Postretirement Benefits
The company also provides certain medical care and life insurance benefits for
retired employees. Substantially all employees may become eligible for these
benefits when they retire. Qualified trusts are funded to the extent deductible
under federal income tax regulations. Amounts funded are primarily invested in
debt and equity securities. In December 1993, the APSC issued an accounting
policy statement which requires the company to externally fund net annual
postretirement benefits.
Effective January 1, 1993, the company adopted FASB Statement No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, on a
prospective basis. Statement No. 106 requires that medical care and life
insurance benefits for retired employees be accounted for on an accrual basis
using a specified actuarial method, "benefit/years-of-service." Because the
adoption of Statement No. 106 was reflected in rates, it did not have a material
impact on net income.
Prior to 1993, the company recognized these benefit costs on an accrual
basis using the "aggregate cost" actuarial method, which spreads the expected
cost of such benefits over the remaining periods of employees' service as a
level percentage of payroll costs. The total costs of such benefits recognized
by the company in 1992 were $15.2 million.
Funded Status and Cost of Benefits
Shown in the following tables are actuarial results and assumptions for pension
and postretirement medical and life insurance benefits as computed under the
requirements of Statement Nos. 87 and 106, respectively. The funded status of
the plans at December 31 was as follows:
============================================================
Pension
------------------
1994 1993
------------------
(in millions)
Actuarial present value of
benefit obligations:
Vested benefits $ 522 $ 523
Non-vested benefits 18 20
- ------------------------------------------------------------
Accumulated benefit obligation 540 543
Additional amounts related to
projected salary increases 174 153
- ------------------------------------------------------------
Projected benefit obligation 714 696
Less:
Fair value of plan assets 1,059 1,121
Unrecognized net gain (251) (349)
Unrecognized prior service cost 23 25
Unrecognized transition asset (51) (56)
============================================================
Prepaid asset recognized in the
Balance Sheets $ 66 $ 45
============================================================
<PAGE>
20
NOTES (continued)
Alabama Power Company 1994 Annual Report
===========================================================
Postretirement
Medical
-------------------
1994 1993
-------------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $ 69 $ 67
Employees eligible to retire 22 21
Other employees 90 95
- -----------------------------------------------------------
Accumulated benefit obligation 181 183
Less:
Fair value of plan assets 56 39
Unrecognized net loss 6 18
Unrecognized transition
obligation 96 102
- -----------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $ 23 $ 24
===========================================================
===========================================================
Postretirement
Life
------------------
1994 1993
------------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $ 27 $ 27
Other employees 29 29
- -----------------------------------------------------------
Accumulated benefit obligation 56 56
Less:
Fair value of plan assets 5 1
Unrecognized net gain (6) (4)
Unrecognized transition
obligation 24 26
- -----------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $ 33 $ 33
===========================================================
The weighted average rates assumed in the actuarial calculations were:
===========================================================
1994 1993 1992
----------------------------
Discount 8.0% 7.5% 8.0%
Annual salary increase 5.5 5.0 6.0
Long-term return on
plan assets 8.5 8.5 8.5
===========================================================
An additional assumption used in measuring the accumulated postretirement
medical benefit obligation was a weighted average medical care cost trend rate
of 10.5 percent for 1994, decreasing gradually to 6.0 percent through the year
2000 and remaining at that level thereafter. An annual increase in the assumed
medical care cost trend rate of 1.0 percent would increase the accumulated
medical benefit obligation as of December 31, 1994, by $33 million and the
aggregate of the service and interest cost components of the net retiree medical
cost by $4 million.
Components of the plans' net income are shown below:
==================================================================
Pension
- ------------------------------------------------------------------
1994 1993 1992
-----------------------------
(in millions)
Benefits earned during
the year $ 20.8 $ 20.6 $ 20.6
Interest cost on projected
benefit obligation 51.2 50.4 48.2
Actual (return) loss on plan
assets 23.5 (146.3) (45.8)
Net amortization and deferral (116.2) 63.3 (29.3)
- ------------------------------------------------------------------
Net pension cost (income) $ (20.7)$ (12.0) $ (6.3)
==================================================================
Of the above net pension amounts, $(15.7) million in 1994, $(8.9)
million in 1993, and $(5.1) million in 1992 were recorded in operating expenses,
and the remainder was recorded in construction and other accounts.
============================================================
Postretirement
Medical
------------------
1994 1993
------------------
(in millions)
Benefits earned during the year $ 6 $ 5
Interest cost on accumulated
benefit obligation 14 12
Amortization of transition
obligation 5 5
Actual (return) loss on plan
assets 1 (5)
Net amortization and deferral (4) 2
- ------------------------------------------------------------
Net postretirement cost $22 $19
============================================================
<PAGE>
21
NOTES (continued)
Alabama Power Company 1994 Annual Report
=============================================================
Postretirement
Life
------------------
1994 1993
------------------
(in millions)
Benefits earned during the year $2 $2
Interest cost on accumulated
benefit obligation 4 4
Amortization of transition
obligation 1 1
- -------------------------------------------------------------
Net postretirement cost $7 $7
=============================================================
Of the above net postretirement medical and life insurance costs recorded in
1994 and 1993, $23 million and $22 million, respectively, were charged to
operating expenses and the remainder was charged to construction and other
accounts.
Work Force Reduction Programs
The company has incurred additional costs for work force reduction programs. The
costs related to these programs were $8.2 million, $16.1 million and $13.4
million for the years 1994, 1993 and 1992, respectively. A portion of the cost
of these programs was deferred and is being amortized in accordance with
regulatory treatment. The unamortized balance of these costs was $3.7 million at
December 31, 1994.
3. LITIGATION AND REGULATORY MATTERS
Retail Rate Adjustment Procedures
In November 1982, the APSC adopted rates that provide for periodic adjustments
based upon the company's earned return on end-of-period retail common equity.
The rates also provide for adjustments to recognize the placing of new
generating facilities in retail service. Both increases and decreases have been
placed into effect since the adoption of these rates. The last rate adjustment
was effective in January 1992. The rate adjustment procedures allow a return on
common equity range of 13.0 percent to 14.5 percent and limit increases or
decreases in rates to 4 percent in any calendar year.
In February 1993, the APSC ordered - at the company's request - a moratorium
on rate increases for the first two quarters of 1993, which facilitated the
transition of an accounting change. This accounting change permitted the accrual
of estimated operation and maintenance expenses related to nuclear refueling
outages during the period between outages rather than at the time the expenses
are incurred.
Also, in 1994, the APSC issued an order - at the company's request -
allowing the company to establish a natural disaster reserve not to exceed $32
million and to change the estimating procedure for unbilled kilowatt-hours and
associated revenues for service rendered but unbilled at the end of each month.
This change in estimate resulted in an increase in unbilled revenues for
September 1994 of $28 million, which offset the initial accrual for the natural
disaster reserve for the same amount. Additional monthly accruals of $250
thousand will be made until the reserve maximum is attained. In addition, a
moratorium on rate increases through the third quarter of 1995 was approved.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Heat Pump Financing Suit
In September 1990, two customers of the company filed a civil complaint in the
Circuit Court of Shelby County, Alabama, against the company seeking to
represent all persons who, prior to June 23, 1989, entered into agreements with
the company for the financing of heat pumps and other merchandise purchased from
vendors other than the company. The plaintiffs contended that the company was
required to obtain a license under the Alabama Consumer Finance Act to engage in
the business of making consumer loans. The plaintiffs were seeking an order
declaring these agreements null and void and requiring the company to refund all
payments -- principal and interest -- made under these agreements. The aggregate
amount under these agreements, together with interest paid, currently is
estimated to be $40 million.
In June 1993, the court ordered the company to refund or forfeit interest of
approximately $10 million because of the company's failure to obtain such
license. However, the court's order did not require any refund or forfeiture
with respect to any principal payments under the agreements at issue. The
company has appealed the court's order to the Supreme Court of Alabama.
The final outcome of this matter cannot now be determined; however, in
management's opinion, the final outcome will not have a material effect on the
<PAGE>
22
NOTES (continued)
Alabama Power Company 1994 Annual Report
company's financial statements.
FERC Reviews Equity Returns
In May 1991, the FERC ordered that hearings be conducted concerning the
reasonableness of the Southern electric system's wholesale rate schedules and
contracts that have a return on common equity of 13.75 percent or greater. The
contracts that could be affected by the hearings include substantially all of
the transmission, unit power, long-term power and other similar contracts. Any
changes in the rate of return on common equity that may require refunds as a
result of this proceeding would be substantially for the period beginning in
July 1991 and ending in October 1992.
In August 1992, a FERC administrative law judge issued an opinion that
changes in rate schedules and contracts were not necessary and that the FERC
staff failed to show how any changes were in the public interest. The FERC staff
has filed exceptions to the administrative law judge's opinion, and the matter
remains pending before the FERC.
In August 1994, the FERC instituted another proceeding based on
substantially the same issues as in the 1991 proceeding. The second period under
review for possible refunds began in October 1994 and is scheduled to continue
until January 1996.
If the rates of return on common equity recommended by the FERC staff were
applied to all of the schedules and contracts involved in both proceedings, and
refunds were ordered, the amount of refunds could range up to approximately $34
million at December 31, 1994. Although the final outcome of this matter cannot
now be determined; in management's opinion, the final outcome will not have a
material effect on the company's financial statements.
4. CAPITAL BUDGET
The company's capital expenditures are currently estimated to total $604 million
in 1995, $500 million in 1996, and $502 million in 1997. The estimates include
AFUDC of $10 million in 1995 and $9 million in both 1996 and 1997. The
estimates for property additions for the three-year period includes $42.5
million committed to meeting the requirements of the Clean Air Act. The capital
budget is subject to periodic review and revision, and actual capital cost
incurred may vary from the above estimates because of numerous factors. These
factors include changes in business conditions; revised load growth projections;
changes in environmental regulations; changes in the existing nuclear plant to
meet new regulatory requirements; increasing costs of labor, equipment, and
materials; and cost of capital. At December 31, 1994, significant purchase
commitments were outstanding in connection with the construction program. The
company does not have any new baseload generating plants under construction.
However, the construction of combustion turbine peaking units of approximately
720 megawatts is planned to be completed by 1996. In addition, significant
construction will continue related to transmission and distribution facilities
and the upgrading and extension of the useful lives of generating plants.
5. FINANCING, INVESTMENT, AND
COMMITMENTS
General
To the extent possible, the company's construction program is expected to be
financed primarily from internal sources. Short-term debt will be utilized at
appropriate levels. The amounts available are discussed below. The company may
issue additional long-term debt and preferred stock for the purposes of debt
maturities, redeeming higher-cost securities, and meeting additional capital
requirements.
Financing
The ability of the company to finance its capital budget depends on the amount
of funds generated internally and the funds it can raise by external financing.
The company's primary sources of external financing are sales of first mortgage
bonds and preferred stock to the public and receipt of additional paid-in
capital from The Southern Company. In order to issue additional first mortgage
bonds and preferred stock, the company must comply with certain earnings
coverage requirements contained in its mortgage indenture and corporate charter.
The most restrictive of these provisions requires, for the issuance of
additional first mortgage bonds, that before-income-tax earnings, as defined,
cover pro forma annual interest charges on outstanding first mortgage bonds at
<PAGE>
23
NOTES (continued)
Alabama Power Company 1994 Annual Report
least twice; and for the issuance of additional preferred stock, that gross
income available for interest cover pro forma annual interest charges and
preferred stock dividends at least one and one-half times. The company's
coverages are at a level that would permit any necessary amount of security
sales at current interest and dividend rates.
Bank Credit Arrangements
The company, along with The Southern Company and Georgia Power Company, has
entered into agreements with several banks outside the service area to provide
$400 million of revolving credit to the companies through June 30, 1997. To
provide liquidity support for commercial paper programs, the company and Georgia
Power Company have exclusive right to $135 million and $165 million,
respectively, of the available credit. The companies have the option of
converting the short-term borrowings into term loans, payable in 12 equal
quarterly installments, with the first installment due at the end of the first
calendar quarter after the applicable termination date or at an earlier date at
the companies' option. In addition, these agreements provide for payment of
commitment fees based on the unused portions of the commitments or the
maintenance of compensating balances with the banks.
Additionally, the company maintains committed lines of credit in the amount
of $349 million which expire at various times during 1995 and, in certain cases,
provide for average annual compensating balances. Because the arrangements are
based on an average balance, the company does not consider any of its cash
balances to be restricted as of any specific date. Moreover, the company borrows
from time to time pursuant to arrangements with banks for uncommitted lines of
credit.
At December 31, 1994, the company had regulatory approval to have
outstanding up to $530 million of short-term borrowings.
Assets Subject to Lien
The company's mortgage, as amended and supplemented, securing the first mortgage
bonds issued by the company, constitutes a direct
lien on substantially all of the company's fixed property and franchises.
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.
Total estimated long-term obligations through year 2013 were approximately $9.4
billion at December 31, 1994. Additional commitments for coal and for nuclear
fuel will be required in the future to supply the company's fuel needs.
Operating Leases
The company has entered into coal rail car rental agreements with various terms
and expiration dates. At December 31, 1994, estimated minimum rental commitments
for noncancellable operating leases were as follows:
============================================================
Year Amounts
- ---- ---------------
(in millions)
1995 $ 0.5
1996 2.8
1997 2.8
1998 2.8
1999 2.8
2000 and thereafter 59.5
- ------------------------------------------------------------
Total minimum payments $71.2
============================================================
6. FACILITY SALES AND JOINT OWNERSHIP
AGREEMENTS
The company and Georgia Power Company own equally all of the outstanding capital
stock of Southern Electric Generating Company (SEGCO), which owns electric
generating units with a total rated capacity of 1,019,680 kilowatts, together
with associated transmission facilities. The capacity of these units is sold
equally to the company and Georgia Power Company under a contract which, in
substance, requires payments sufficient to provide for the operating expenses,
taxes, interest expense and a return on equity, whether or not SEGCO has any
capacity and energy available. The company's share of expenses totaled $74
million in 1994, $86 million in 1993 and $73 million in 1992, and is included in
"Purchased power from affiliates" in the Statements of Income.
<PAGE>
24
NOTES (continued)
Alabama Power Company 1994 Annual Report
In addition, the company 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. Georgia
Power Company has agreed to reimburse the company for the pro rata portion of
such obligation corresponding to its then proportionate ownership of stock of
SEGCO if the company is called upon to make such payment under its guaranty.
At December 31, 1994, the capitalization of SEGCO consisted of $54 million
of equity and $78 million of long-term debt on which the annual interest
requirement is $5.1 million. SEGCO paid dividends totaling $11.6 million in
1994, $11.3 million in 1993, and $12.0 million in 1992, of which one-half of
each was paid to the company. SEGCO's net income was $7.2 million, $8.3 million,
and $9.3 million for 1994, 1993 and 1992, respectively.
The company's percentage ownership and investment in jointly-owned
generating plants at December 31, 1994, follows:
================================================================
Total
Megawatt Company
Facility (Type) Capacity Ownership
- --------------------- -------- ---------
Greene County 500 60.00% (1)
(coal)
Plant Miller
Units 1 and 2 1,320 91.84% (2)
(coal)
================================================================
(1) Jointly owned with an affiliate, Mississippi Power Company.
(2) Jointly owned with Alabama Electric Cooperative, Inc.
================================================================
Company Accumulated
Facility Investment Depreciation
- ---------------------- ---------- -------------
(in millions)
Greene County $ 89 $ 39
Plant Miller
Units 1 and 2 $708 $264
- ----------------------------------------------------------------
7. LONG-TERM POWER SALES AGREEMENTS
General
The company and the operating affiliates of The Southern Company have entered
into long-term contractual agreements for the sale of capacity and energy to
certain non-affiliated utilities located outside the system's service area. The
agreements for non-firm capacity expired in 1994. Other agreements -- expiring
at various dates discussed below -- are firm and pertain to capacity related to
specific generating units. Because the energy is generally sold at cost under
these agreements, revenues from capacity sales primarily affect profitability.
The company's capacity revenues have been as follows:
================================================================
Unit Other
Year Power Long-Term Total
- ----------------------------------------------------------------
(in millions)
1994 $152 $ 7 $159
1993 144 15 159
1992 177 9 186
================================================================
Unit power from Plant Miller is being sold to Florida Power Corporation
(FPC), Florida Power & Light Company (FP&L), Jacksonville Electric Authority
(JEA) and the City of Tallahassee, Florida. Under these agreements,
approximately 1,200 megawatts of capacity, a slight increase over 1994, is
scheduled to be sold during 1995 and will remain at that approximate level --
unless reduced by FP&L, FPC, and JEA for the periods after 1999 -- until the
expiration of the contracts in 2010.
Alabama Municipal Electric Authority (AMEA) Capacity Contracts
In August 1986, the company entered into a firm power purchase contract with
AMEA entitling AMEA to scheduled amounts of capacity (to a maximum 100
megawatts) for a period of 15 years commencing September 1, 1986 (1986
Contract). In October 1991, the company entered into a second firm power
purchase contract with AMEA entitling AMEA to scheduled amounts of additional
capacity (to a maximum 80 megawatts) for a period of 15 years commencing October
1, 1991 (1991 Contract). In both contracts the power will be sold to AMEA for
its member municipalities that previously were served directly by the company as
<PAGE>
25
NOTES (continued)
Alabama Power Company 1994 Annual Report
wholesale customers. Under the terms of the contracts, the company received
payments from AMEA representing the net present value of the revenues associated
with the respective capacity entitlements, discounted at effective annual rates
of 9.96 percent and 11.19 percent for the 1986 and 1991 Contracts, respectively.
These payments are being recognized as operating revenues and the discounts are
being amortized to other interest expense as scheduled capacity is made
available over the terms of the contracts.
In order to secure AMEA's advance payments and the company's performance
obligation under the contracts, the company issued and delivered to an escrow
agent first mortgage bonds representing the maximum amount of liquidated damages
payable by the company in the event of a default under the contracts. No
principal or interest is payable on such bonds unless and until a default by the
company occurs. As the liquidated damages decline under the contracts, a portion
of the bonds equal to the decreases are returned to the company. At December 31,
1994, $146 million of such bonds was held by the escrow agent under the
contracts.
8. INCOME TAXES
Effective January 1, 1993, the company adopted FASB Statement No. 109,
Accounting for Income Taxes. The adoption resulted in the recording of
additional deferred income taxes and related regulatory assets and liabilities.
At December 31, 1994, the tax-related regulatory assets and liabilities were
$452 million and $405 million, respectively. These assets are attributable to
tax benefits flowed through to customers in prior years and to taxes applicable
to capitalized AFUDC. These liabilities are attributable to deferred taxes
previously recognized at rates higher than current enacted tax law and to
unamortized investment tax credits.
Details of the federal and state income tax provisions are as follows:
=================================================================
1994 1993 1992
-------------------------------
(in thousands)
Total provision for income taxes:
Federal --
Currently payable $219,494 $149,680 $152,481
Deferred --
current year (48,153) 9,636 27,760
reversal of prior years 15,932 19,653 (7,827)
Deferred investment tax
credits (1) (2,106) -
- -----------------------------------------------------------------
187,272 176,863 172,414
- -----------------------------------------------------------------
State --
Currently payable 20,565 14,297 16,983
Deferred --
current year (4,067) 1,898 6,387
reversal of prior years 3,676 3,913 (2,806)
- -----------------------------------------------------------------
20,174 20,108 20,564
- -----------------------------------------------------------------
Total 207,446 196,971 192,978
Less income taxes credited
to other income (16,834) (10,239) (8,947)
- -----------------------------------------------------------------
Federal and state income
taxes charged to operations $224,280 $207,210 $201,925
=================================================================
<PAGE>
26
NOTES (continued)
Alabama Power Company 1994 Annual Report
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:
===============================================================
1994 1993
--------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $ 734 $ 697
Property basis differences 513 536
Premium on reacquired debt 38 38
Fuel clause underrecovered 4 11
Other 26 17
- ---------------------------------------------------------------
Total 1,315 1,299
- ---------------------------------------------------------------
Deferred tax assets:
Capacity prepayments 36 44
Other deferred costs 27 8
Postretirement benefits 24 15
Accrued nuclear outage costs 7 7
Unbilled revenue 13 7
Other 44 39
- ---------------------------------------------------------------
Total 151 120
- ---------------------------------------------------------------
Net deferred tax liabilities 1,164 1,179
Portion included in current assets
(liabilities), net 17 (14)
- ---------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $1,181 $1,165
===============================================================
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 million in 1994 and 1993 and $18 million in 1992. At December
31, 1994, all investment tax credits available to reduce federal income taxes
payable had been utilized.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
==============================================================
1994 1993 1992
--------------------------
Federal statutory rate 35.0% 35.0% 34.0%
State income tax,
net of federal deduction 2.2 2.3 2.4
Non-deductible book
depreciation 1.6 1.6 1.6
Differences in prior years'
deferred and current tax rates (2.9) (1.6) (1.9)
Other (0.7) (2.9) (2.0)
- --------------------------------------------------------------
Effective income tax rate 35.2% 34.4% 34.1%
==============================================================
The Southern Company and its subsidiaries file a consolidated federal income tax
return. Under a joint consolidated income tax agreement, each company's current
and deferred tax expense is computed on a stand-alone basis, and consolidated
tax savings are allocated to each company based on its ratio of taxable income
to total consolidated taxable income.
9. OTHER LONG-TERM DEBT
Details of other long-term debt at December 31 are as follows:
==============================================================
1994 1993
--------------------------
(in thousands)
Obligations incurred in
connection with the
sale of tax-exempt
pollution control
revenue bonds by
public authorities-
2003-2013--6% to
9.375% $ 1,000 $ 27,050
2014-2024--3.05%
to 10.875% 475,140 449,090
- --------------------------------------------------------------
476,140 476,140
- --------------------------------------------------------------
Capitalized lease obligations:
Nuclear fuel - 95,943
Office buildings 7,312 7,710
Street light 2,442 2,761
- --------------------------------------------------------------
9,754 106,414
- --------------------------------------------------------------
Total $485,894 $582,554
==============================================================
Pollution control obligations represent installment purchases of pollution
control facilities financed by funds derived from sales by public authorities of
revenue bonds. The company is required to make payments sufficient for the
authorities to meet principal and interest requirements of such bonds. With
respect to $312.8 million of such pollution control obligations, the company has
authenticated and delivered to the trustees a like principal amount of first
mortgage bonds as security for its obligations under the installment purchase
agreements. No principal or interest on these first mortgage bonds is payable
unless and until a default occurs on the installment purchase agreements.
<PAGE>
27
NOTES (continued)
Alabama Power Company 1994 Annual Report
The company has capitalized certain office building leases and a street light
lease. Monthly principal payments plus interest are required, and at December
31, 1994, the interest rate was 9.5 percent for office buildings and 13.0
percent for street lights. In December 1994, the company discontinued capital
leases pertaining to nuclear fuel.
The net book value of capitalized leases included in utility plant in service
was $6.2 million and $94.7 million at December 31, 1994 and 1993, respectively.
The estimated aggregate annual maturities of other long-term debt through 1999
are as follows: $0.8 million in 1995, $0.9 million in 1996, $1.0 million in
1997, $1.0 million in 1998 and $1.2 million in 1999.
10. LONG-TERM DEBT DUE WITHIN ONE YEAR
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:
=================================================================
1994 1993
------------------------
(in thousands)
Bond improvement fund
requirements $20,047 $20,135
Less:
Portion to be satisfied by
certifying property additions 20,047 -
- -----------------------------------------------------------------
Cash sinking fund requirements - $20,135
Other long-term debt maturities
(Note 9) 796 38,863
- -----------------------------------------------------------------
Total $ 796 $58,998
=================================================================
The annual first mortgage bond improvement fund requirement is one
percent of the aggregate principal amount of bonds of each series authenticated,
so long as a portion of that series is outstanding, and may be satisfied by the
deposit of cash and/or reacquired bonds, the certification of unfunded property
additions or a combination thereof. The 1995 requirement of $20.0 million was
satisfied by certification of property additions. In addition, maturing in 1995
are other long-term debt of $796 thousand consisting primarily of capitalized
office building leases and a street light lease.
11. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988 (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 Plant
Farley. The Act provides funds up to $8.9 billion for public liability claims
that could arise from a single nuclear incident. Plant Farley is insured against
this liability to a maximum of $200 million by private insurance, with the
remaining coverage provided by a mandatory program of deferred premiums which
could be assessed, after a nuclear incident, against all owners of nuclear
reactors. A company could be assessed up to $79 million per incident for each
licensed reactor it operates but not more than an aggregate of $10 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 is
$159 million per incident but not more than an aggregate of $20 million to be
paid for each incident in any one year.
The company is a member of Nuclear Mutual Limited (NML), a mutual insurer
established to provide property damage insurance in an amount up to $500 million
for members' nuclear generating facilities. The members are subject to a
retrospective premium assessment in the event that losses exceed accumulated
reserve funds. The company's maximum annual assessment per incident is limited
to $12 million under the current policy.
Additionally, the company has policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million NML
coverage. This excess insurance is provided by Nuclear Electric Insurance
Limited (NEIL), a mutual insurance company.
NEIL also covers the additional cost that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased cost of replacement power in an
amount up to $3.5 million per week (starting 21 weeks after the outage) for one
year and up to $2.8 million per week for the second and third years.
Under each of the NEIL policies, members are subject to assessments if
losses each year exceed the accumulated funds available to the insurer under
<PAGE>
28
NOTES (continued)
Alabama Power Company 1994 Annual Report
that policy. The maximum annual assessments per incident under current policies
for the company would be $27 million for excess property damage and $10 million
for replacement power.
For all on-site property damage insurance policies for commercial nuclear
power plants, the NRC requires that the proceeds of such policies issued or
renewed on or after April 2, 1991, 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 then, any further
remaining proceeds are to be paid either to the company or to its bond trustees
as may be appropriate under applicable trust indentures.
The company participates in an insurance program for nuclear workers that
provides coverage for worker tort claims filed for bodily injury caused at
commercial nuclear power plants. In the event that claims for this insurance
exceed the accumulated reserve funds, the company could be subject to a maximum
total assessment of $6.4 million.
All retrospective assessments, whether generated for liability, property
or replacement power may be subject to applicable state premium taxes.
12. COMMON STOCK DIVIDEND
RESTRICTIONS
The company's first mortgage bond indenture contains various common stock
dividend restrictions that remain in effect as long as the bonds are
outstanding. At December 31, 1994, $807 million of retained earnings was
restricted against the payment of cash dividends on common stock under terms of
the mortgage indenture. Supplemental indentures in connection with future first
mortgage bond issues may contain more stringent common stock dividend
restrictions than those currently in effect.
13. QUARTERLY FINANCIAL INFORMATION
(Unaudited)
Summarized quarterly financial data for 1994 and 1993 are as follows:
==================================================================
Net Income
After
Dividends
Quarter Operating Operating on Preferred
Ended Revenues Income Stock
- ------------------- --------- --------- --------------
(in thousands)
March 1994 $686,847 $128,623 $ 72,031
June 1994 759,399 162,696 98,668
September 1994 838,927 199,736 141,214
December 1994 649,969 104,949 44,425
March 1993 $635,559 $124,356 $ 57,856
June 1993 733,589 159,023 91,448
September 1993 919,934 205,151 150,818
December 1993 718,527 106,582 46,372
==================================================================
The company's business is influenced by seasonal weather conditions.
<PAGE>
29
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1994 Annual Report
=====================================================================================================
1994 1993 1992
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $2,935,142 $3,007,609 $2,846,840
Net Income after Dividends
on Preferred Stock (in thousands) $356,338 $346,494 $338,555
Cash Dividends on Common Stock (in thousands) $268,000 $252,900 $273,300
Return on Average Common Equity (percent) 13.86 13.94 14.02
Total Assets (in thousands) $8,459,217 $8,248,683 $6,593,618
Gross Property Additions (in thousands) $536,785 $435,843 $367,463
- -----------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,614,405 $2,526,348 $2,443,493
Preferred stock 440,400 440,400 489,400
Preferred stock subject to mandatory redemption - - -
Long-term debt 2,455,013 2,362,852 2,202,473
- -----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,509,818 $5,329,600 $5,135,366
=====================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.4 47.4 47.6
Preferred stock 8.0 8.3 9.5
Long-term debt 44.6 44.3 42.9
- -----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=====================================================================================================
First Mortgage Bonds (in thousands):
Issued 150,000 860,000 745,000
Retired 20,387 699,788 931,797
Preferred Stock (in thousands):
Issued - 158,000 150,000
Retired - 207,000 145,000
- -----------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A A A
Duff & Phelps A+ A+ A
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A- A- A-
Duff & Phelps A- A- A-
- -----------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,042,974 1,027,130 1,012,294
Commercial 162,239 157,337 152,530
Industrial 5,341 5,391 5,434
Other 716 713 704
- -----------------------------------------------------------------------------------------------------
Total 1,211,270 1,190,571 1,170,962
=====================================================================================================
Employees (year-end) 7,996 8,009 8,116
</TABLE>
<PAGE>
30A
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1994 Annual Report
=====================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $2,846,794 $2,722,424 $2,629,354
Net Income after Dividends
on Preferred Stock (in thousands) $339,666 $312,803 $311,146
Cash Dividends on Common Stock (in thousands) $232,900 $220,800 $217,300
Return on Average Common Equity (percent) 14.55 14.00 14.53
Total Assets (in thousands) $6,549,462 $6,362,293 $6,279,431
Gross Property Additions (in thousands) $397,011 $444,680 $459,199
- -----------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,387,198 $2,280,590 $2,188,811
Preferred stock 484,400 484,400 484,400
Preferred stock subject to mandatory redemption - 12,500 17,500
Long-term debt 2,382,635 2,397,931 2,435,129
- -----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,254,233 $5,175,421 $5,125,840
=====================================================================================================
Capitalization Ratios (percent):
Common stock equity 45.4 44.1 42.7
Preferred stock 9.2 9.6 9.8
Long-term debt 45.4 46.3 47.5
- -----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=====================================================================================================
First Mortgage Bonds (in thousands):
Issued 250,000 - -
Retired 227,695 33,122 75,650
Preferred Stock (in thousands):
Issued - - -
Retired 17,500 5,000 5,000
- -----------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A A A
Duff & Phelps A A A
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A- A- A-
Duff & Phelps A- A- A-
- -----------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 997,585 985,566 974,622
Commercial 148,228 144,340 141,265
Industrial 5,496 5,322 5,200
Other 697 690 684
- -----------------------------------------------------------------------------------------------------
Total 1,152,006 1,135,918 1,121,771
=====================================================================================================
Employees (year-end) 8,513 9,473 9,698
</TABLE>
<PAGE>
30B
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1994 Annual Report
=====================================================================================================
1988 1987 1986
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $2,476,626 $2,574,634 $2,549,574
Net Income after Dividends
on Preferred Stock (in thousands) $283,475 $257,239 $273,456
Cash Dividends on Common Stock (in thousands) $212,700 $201,100 $191,300
Return on Average Common Equity (percent) 14.03 13.56 15.12
Total Assets (in thousands) $6,180,945 $5,912,000 $5,570,653
Gross Property Additions (in thousands) $643,892 $600,589 $553,767
- -----------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,094,815 $1,946,747 $1,847,608
Preferred stock 484,400 384,400 384,400
Preferred stock subject to mandatory redemption 22,500 27,500 30,000
Long-term debt 2,496,492 2,386,258 2,210,108
- -----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,098,207 $4,744,905 $4,472,116
=====================================================================================================
Capitalization Ratios (percent):
Common stock equity 41.1 41.0 41.3
Preferred stock 9.9 8.7 9.3
Long-term debt 49.0 50.3 49.4
- -----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=====================================================================================================
First Mortgage Bonds (in thousands):
Issued 150,000 200,000 125,000
Retired 42,445 108,082 405,765
Preferred Stock (in thousands):
Issued 100,000 - -
Retired 2,500 5,000 42,224
- -----------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A A A
Duff & Phelps 6 6 6
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A- A- A-
Duff & Phelps 7 7 7
- -----------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 964,581 950,101 934,798
Commercial 137,955 134,533 130,540
Industrial 5,120 4,955 4,725
Other 678 713 697
- -----------------------------------------------------------------------------------------------------
Total 1,108,334 1,090,302 1,070,760
=====================================================================================================
Employees (year-end) 10,302 10,457 10,367
</TABLE>
<PAGE>
30C
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1994 Annual Report
=========================================================================================
1985 1984
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands) $2,518,699 $2,236,560
Net Income after Dividends
on Preferred Stock (in thousands) $264,562 $233,252
Cash Dividends on Common Stock (in thousands) $185,700 $161,900
Return on Average Common Equity (percent) 15.41 14.74
Total Assets (in thousands) $5,722,263 $5,496,197
Gross Property Additions (in thousands) $568,073 $575,173
- -----------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $1,770,156 $1,664,295
Preferred stock 384,400 424,400
Preferred stock subject to mandatory redemption 35,000 37,224
Long-term debt 2,349,373 2,402,713
- -----------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $4,538,929 $4,528,632
=========================================================================================
Capitalization Ratios (percent):
Common stock equity 39.0 36.7
Preferred stock 9.3 10.2
Long-term debt 51.7 53.1
- -----------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
=========================================================================================
First Mortgage Bonds (in thousands):
Issued - -
Retired 39,460 21,250
Preferred Stock (in thousands):
Issued - -
Retired - 810
- -----------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A2
Standard and Poor's A A-
Duff & Phelps 6 7
Preferred Stock -
Moody's a2 a3
Standard and Poor's A- BBB+
Duff & Phelps 7 8
- -----------------------------------------------------------------------------------------
Customers (year-end):
Residential 918,777 905,239
Commercial 126,644 123,561
Industrial 4,619 4,467
Other 755 759
- -----------------------------------------------------------------------------------------
Total 1,050,795 1,034,026
=========================================================================================
Employees (year-end) 10,212 10,144
</TABLE>
<PAGE>
31
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1994 Annual Report
=====================================================================================================
1994 1993 1992
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $913,146 $947,277 $845,660
Commercial 647,202 634,895 589,816
Industrial 803,587 832,938 800,311
Other 13,515 13,344 12,734
- -----------------------------------------------------------------------------------------------------
Total retail 2,377,450 2,428,454 2,248,521
Sales for resale - non-affiliates 354,760 364,105 407,791
Sales for resale - affiliates 164,762 181,975 158,088
- -----------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,896,972 2,974,534 2,814,400
Other revenues 38,170 33,075 32,440
- -----------------------------------------------------------------------------------------------------
Total $2,935,142 $3,007,609 $2,846,840
=====================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 13,183,147 13,185,062 12,069,268
Commercial 9,645,798 9,185,462 8,629,869
Industrial 19,479,364 18,595,237 18,260,274
Other 185,876 181,673 176,798
- -----------------------------------------------------------------------------------------------------
Total retail 42,494,185 41,147,434 39,136,209
Sales for resale - non-affiliates 6,775,176 7,143,672 8,382,571
Sales for resale - affiliates 8,432,533 8,081,324 7,210,697
- -----------------------------------------------------------------------------------------------------
Total 57,701,894 56,372,430 54,729,477
=====================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.93 7.18 7.01
Commercial 6.71 6.91 6.83
Industrial 4.13 4.48 4.38
Total retail 5.59 5.90 5.75
Sales for resale 3.42 3.59 3.63
Total sales 5.02 5.28 5.14
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,746 12,936 12,017
Residential Average Annual Revenue
Per Customer $882.88 $929.36 $842.00
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,431 10,431 10,431
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 8,217 7,152 7,077
Summer 9,028 9,457 8,801
Annual Load Factor (percent) (Note 2) 62.2 58.6 59.6
Plant Availability (percent):
Fossil-steam 86.9 89.7 88.9
Nuclear 92.5 86.6 80.2
- -----------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 62.9 63.9 64.3
Nuclear 21.7 20.1 19.0
Hydro 8.4 6.9 8.5
Oil and gas * * *
Purchased power -
From non-affiliates 1.3 1.1 1.2
From affiliates 5.7 8.0 7.0
- -----------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=====================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 9,961 10,003 10,000
Cost of fuel per million BTU (cents) 157.62 173.66 164.57
Average cost of fuel per net kilowatt-hour generated (cents) 1.57 1.74 1.65
=====================================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
<PAGE>
32A
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1994 Annual Report
=====================================================================================================
1991 1990 1989
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $864,347 $825,645 $781,982
Commercial 582,730 551,634 533,487
Industrial 790,224 777,580 762,274
Other 12,662 12,103 11,743
- -----------------------------------------------------------------------------------------------------
Total retail 2,249,963 2,166,962 2,089,486
Sales for resale - non-affiliates 407,912 434,996 409,202
Sales for resale - affiliates 159,375 93,473 104,488
- -----------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,817,250 2,695,431 2,603,176
Other revenues 29,544 26,993 26,178
- -----------------------------------------------------------------------------------------------------
Total $2,846,794 $2,722,424 $2,629,354
=====================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 12,324,898 11,996,794 11,346,736
Commercial 8,526,131 8,201,534 7,915,685
Industrial 17,511,579 17,713,153 17,360,791
Other 174,760 170,420 166,485
- -----------------------------------------------------------------------------------------------------
Total retail 38,537,368 38,081,901 36,789,697
Sales for resale - non-affiliates 8,810,442 10,277,060 10,292,329
Sales for resale - affiliates 7,784,285 4,519,275 5,048,743
- -----------------------------------------------------------------------------------------------------
Total 55,132,095 52,878,236 52,130,769
=====================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.01 6.88 6.89
Commercial 6.83 6.73 6.74
Industrial 4.51 4.39 4.39
Total retail 5.84 5.69 5.68
Sales for resale 3.42 3.57 3.35
Total sales 5.11 5.10 4.99
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,435 12,256 11,717
Residential Average Annual Revenue
Per Customer $872.04 $843.50 $807.50
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,539 9,879 9,879
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,586 6,293 7,264
Summer 8,627 8,878 8,256
Annual Load Factor (percent) (Note 2) 59.9 57.4 59.5
Plant Availability (percent):
Fossil-steam 93.1 92.2 90.7
Nuclear 87.0 86.5 83.1
- -----------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 61.5 57.0 54.1
Nuclear 20.8 21.6 21.0
Hydro 8.2 8.7 11.0
Oil and gas * 0.1 0.1
Purchased power -
From non-affiliates 1.6 0.9 1.8
From affiliates 7.9 11.7 12.0
- -----------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=====================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 9,985 10,072 10,061
Cost of fuel per million BTU (cents) 170.49 171.55 172.20
Average cost of fuel per net kilowatt-hour generated (cents) 1.70 1.73 1.73
=====================================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
<PAGE>
32B
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1994 Annual Report
=====================================================================================================
1988 1987 1986
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $761,805 $759,957 $738,864
Commercial 510,910 501,088 481,676
Industrial 738,755 721,298 705,395
Other 11,255 10,968 10,811
- -----------------------------------------------------------------------------------------------------
Total retail 2,022,725 1,993,311 1,936,746
Sales for resale - non-affiliates 355,362 443,880 472,938
Sales for resale - affiliates 76,691 118,746 120,911
- -----------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,454,778 2,555,937 2,530,595
Other revenues 21,848 18,697 18,979
- -----------------------------------------------------------------------------------------------------
Total $2,476,626 $2,574,634 $2,549,574
=====================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 11,332,285 11,149,225 10,606,698
Commercial 7,711,092 7,476,924 7,015,589
Industrial 16,881,342 15,969,075 15,025,806
Other 165,122 159,422 153,282
- -----------------------------------------------------------------------------------------------------
Total retail 36,089,841 34,754,646 32,801,375
Sales for resale - non-affiliates 7,905,750 10,523,554 9,064,049
Sales for resale - affiliates 3,551,142 4,963,997 4,456,360
- -----------------------------------------------------------------------------------------------------
Total 47,546,733 50,242,197 46,321,784
=====================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.72 6.82 6.97
Commercial 6.63 6.70 6.87
Industrial 4.38 4.52 4.69
Total retail 5.60 5.74 5.90
Sales for resale 3.77 3.63 4.39
Total sales 5.16 5.09 5.46
Residential Average Annual Kilowatt-Hour
Use Per Customer 11,839 11,848 11,457
Residential Average Annual Revenue
Per Customer $795.84 $807.61 $798.09
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 9,279 9,337 9,337
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,377 6,138 6,257
Summer 7,991 7,886 7,892
Annual Load Factor (percent) (Note 2) 59.6 58.3 56.2
Plant Availability (percent):
Fossil-steam 91.3 90.2 88.5
Nuclear 91.9 83.3 83.8
- -----------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 53.9 52.5 58.8
Nuclear 26.1 21.7 23.8
Hydro 4.8 6.3 4.2
Oil and gas 0.1 0.2 0.1
Purchased power -
From non-affiliates 0.5 0.2 2.0
From affiliates 14.6 19.1 11.1
- -----------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=====================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,137 10,214 10,209
Cost of fuel per million BTU (cents) 168.21 176.72 179.65
Average cost of fuel per net kilowatt-hour generated (cents) 1.71 1.80 1.83
=====================================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
<PAGE>
32C
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1994 Annual Report
=========================================================================================
1985 1984
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands):
Residential $684,970 $664,286
Commercial 453,651 430,400
Industrial 717,078 692,177
Other 10,129 9,615
- -----------------------------------------------------------------------------------------
Total retail 1,865,828 1,796,478
Sales for resale - non-affiliates 539,343 317,890
Sales for resale - affiliates 95,733 108,812
- -----------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,500,904 2,223,180
Other revenues 17,795 13,380
- -----------------------------------------------------------------------------------------
Total $2,518,699 $2,236,560
=========================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 9,814,814 9,634,285
Commercial 6,593,645 6,270,899
Industrial 15,215,276 15,134,188
Other 146,119 143,785
- -----------------------------------------------------------------------------------------
Total retail 31,769,854 31,183,157
Sales for resale - non-affiliates 12,158,464 8,587,936
Sales for resale - affiliates 3,588,338 4,270,493
- -----------------------------------------------------------------------------------------
Total 47,516,656 44,041,586
=========================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.98 6.90
Commercial 6.88 6.86
Industrial 4.71 4.57
Total retail 5.87 5.76
Sales for resale 4.03 3.32
Total sales 5.26 5.05
Residential Average Annual Kilowatt-Hour
Use Per Customer 10,781 10,755
Residential Average Annual Revenue
Per Customer $752.43 $741.58
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 9,337 8,580
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,191 5,696
Summer 7,570 6,946
Annual Load Factor (percent) (Note 2) 57.2 59.8
Plant Availability (percent):
Fossil-steam 90.5 91.2
Nuclear 81.0 86.5
- -----------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 55.7 51.5
Nuclear 22.4 26.1
Hydro 6.2 11.0
Oil and gas 0.1 *
Purchased power -
From non-affiliates 1.7 0.2
From affiliates 13.9 11.2
- -----------------------------------------------------------------------------------------
Total 100.0 100.0
=========================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,229 10,367
Cost of fuel per million BTU (cents) 185.74 179.40
Average cost of fuel per net kilowatt-hour generated (cents) 1.90 1.86
=========================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
