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 21, 1996
---------------------
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, 1995.
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, 1996
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 21, 1996 on the financial statements of Alabama
Power Company, included in this Form 8-K, into Alabama Power Company's
previously filed Registration Statement File Nos. 33-49653 and 33-61845.
/s/ Arthur Andersen LLP
Birmingham, Alabama
February 28, 1996
<PAGE>
<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
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,056,004
<OTHER-PROPERTY-AND-INVEST> 154,756
<TOTAL-CURRENT-ASSETS> 871,292
<TOTAL-DEFERRED-CHARGES> 662,308
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 8,744,360
<COMMON> 224,358
<CAPITAL-SURPLUS-PAID-IN> 1,304,791
<RETAINED-EARNINGS> 1,161,225
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,690,374
0
440,400
<LONG-TERM-DEBT-NET> 2,450,667
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 390,016
<LONG-TERM-DEBT-CURRENT-PORT> (83,797)
0
<CAPITAL-LEASE-OBLIGATIONS> 8,963
<LEASES-CURRENT> (885)
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,848,622
<TOT-CAPITALIZATION-AND-LIAB> 8,744,360
<GROSS-OPERATING-REVENUE> 3,024,774
<INCOME-TAX-EXPENSE> 230,982
<OTHER-OPERATING-EXPENSES> 2,168,474
<TOTAL-OPERATING-EXPENSES> 2,399,456
<OPERATING-INCOME-LOSS> 625,318
<OTHER-INCOME-NET> 532
<INCOME-BEFORE-INTEREST-EXPEN> 625,850
<TOTAL-INTEREST-EXPENSE> 237,887
<NET-INCOME> 387,963
27,069
<EARNINGS-AVAILABLE-FOR-COMM> 360,894
<COMMON-STOCK-DIVIDENDS> 285,000
<TOTAL-INTEREST-ON-BONDS> 174,568
<CASH-FLOW-OPERATIONS> 709,960
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99
Management's Report
Alabama Power Company 1995 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
February 21, 1996
1
<PAGE>
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, 1995 and 1994, and the related
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1995. 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 10-27) referred to above
present fairly, in all material respects, the financial position of Alabama
Power Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the periods stated, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Birmingham, Alabama
February 21, 1996
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Alabama Power Company 1995 Annual Report
RESULTS OF OPERATIONS
Earnings
Alabama Power Company's 1995 net income after dividends on preferred stock was
$361 million, representing a $4.6 million (1.3 percent) increase from the prior
year. This improvement can be attributed to an increase in retail energy sales
of 4.7 percent from 1994 levels. This was primarily due to the extreme summer
weather during 1995, especially when compared to the mild weather of 1994. This
improvement was partially offset by a 2.6 percent increase in operating costs.
In 1994, earnings were $356 million, representing a 2.8 percent increase
from the prior year. This increase was due to lower operating expenses which
decreased 3.0 percent from the previous year. This improvement was partially
offset by reduced capacity sales to nonterritorial utilities. Net income was
also impacted by the mild weather in 1994.
The return on average common equity for 1995 was 13.61 percent compared to
13.86 percent in 1994, and 13.94 percent in 1993.
Revenues
Total revenues for 1995 were $3.0 billion, reflecting a 3.1 percent increase
from 1994. The following table summarizes the principal factors that affected
operating revenues for the past three years:
Increase (Decrease)
From Prior Year
----------------------------------------
1995 1994 1993
------------- ------------ -------------
(in thousands)
Retail --
Change in
base rates $ 990 $ -- $ --
Unbilled
adjustment -- 28,000 --
Sales growth 18,174 45,304 24,960
Weather 54,888 (39,964) 58,536
Fuel cost recovery
and other 35,235 (84,344) 96,437
---------------------------------------------------------------
Total retail 109,287 (51,004) 179,933
---------------------------------------------------------------
Sales for Resale --
Non-affiliates 15,380 (9,345) (43,686)
Affiliates (37,032) (17,213) 23,887
---------------------------------------------------------------
Total sales for resale (21,652) (26,558) (19,799)
Other operating
revenues 1,997 5,095 635
---------------------------------------------------------------
Total operating
revenues $89,632 $(72,467) $160,769
---------------------------------------------------------------
Percent change 3.1% (2.4)% 5.6%
---------------------------------------------------------------
Retail revenues of $2.5 billion in 1995 increased $109 million (4.6 percent)
from the prior year, compared with a decrease of $51 million (2.1 percent) in
1994. The hot weather during the summer of 1995 and higher fuel cost recovery
were the primary reasons for the increase in retail revenues over 1994. The mild
weather during 1994 and lower fuel cost recovery contributed to the decrease in
retail revenues from 1993. Fuel revenues, which increased in 1995, generally
represent the direct recovery of fuel expense, including the fuel component of
purchased energy, and therefore have no effect on net income.
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
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1995 Annual Report
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:
1995 1994 1993
-------------------------------------------
(in thousands)
Capacity $158,825 $165,063 $187,062
Energy 209,376 222,579 233,253
----------------------------------------------------------
Total $368,201 $387,642 $420,315
----------------------------------------------------------
Capacity revenues from non-affiliates remained relatively constant in 1995
and 1994. 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.
Kilowatt-hour (KWH) sales for 1995 and the percent change by year were as
follows:
KWH Percent Change
-------------------------------------------
1995 1995 1994 1993
-------------------------------------------
(millions)
Residential 14,383 9.1% (1.7)% 9.2%
Commercial 10,043 4.1 3.4 6.4
Industrial 19,863 2.0 3.2 1.8
Other 187 0.5 1.1 2.8
----------
Total retail 44,476 4.7 3.3 5.1
Sales for resale -
Non-affiliates 8,046 18.8 (5.2) (14.8)
Affiliates 6,705 (20.5) 4.3 12.1
----------
Total 59,227 2.6% 2.4% 3.0%
- -----------------------------------------------------------------
The rate of increase in 1995 retail energy sales was fostered by the impact
of weather. Residential energy sales surged upward as a result of
hotter-than-normal summer weather in 1995, compared with the mild summer of
1994. The gains in commercial and industrial sales reflect the strength of
business and economic conditions in the company's service area.
Expenses
Total operating expenses of $2.4 billion for 1995 were up $60 million or 2.6
percent compared with 1994. The major components of this increase include $27
million in purchased power, $43 million in other operation expenses, $11 million
in depreciation and amortization, and $7 million in income taxes offset by
decreases in fuel costs and maintenance expenses of $10 million and $19 million,
respectively.
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.
Fuel costs constitute 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. The amount and sources of generation and the average cost of
fuel per net kilowatt-hour generated were as follows:
--------------------------
1995 1994 1993
-------------------------
Total generation
(billions of kilowatt-hours) 58 57 55
Sources of generation
(percent) --
Coal 73 68 70
Nuclear 19 23 22
Hydro 8 9 8
Average cost of fuel per net
kilowatt-hour generated
(cents) --
Coal 1.71 1.92 2.11
Nuclear 0.50 0.49 0.51
Total 1.48 1.56 1.73
- --------------------------------------------------------------
Note: Oil & Gas comprise less than 0.5% of generation.
Fuel expense decreased in 1995 by $10 million or 1.3 percent. This decrease
resulted from lower average cost of fuel consumed. 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.
The increase in purchased power is primarily attributable to the
exceptionally hot summer weather. Purchased power consists primarily of
purchases from the affiliates of the Southern electric system. Purchased power
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1995 Annual Report
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. KWH purchases from affiliates increased
18 percent from the prior year.
Other operation expenses increased 9.4 percent in 1995 following a 2.5
percent decrease in 1994. This increase over 1994 is primarily attributable to
the 1995 expenses not reflecting the positive impact of the amortization of the
Gulf States Utilities settlement which expired in 1994.
The decrease in maintenance expenses for 1995 reflects the establishment in
September 1994 of a Natural Disaster Reserve. This also caused the increase in
1994 maintenance expenses over 1993. See Note 1 to the financial statements
under "Natural Disaster Reserve" for additional information.
Depreciation and amortization expense increased 3.6 percent in 1995. This
increase reflects additions to utility plant. The amount for 1994 was virtually
unchanged from the previous year because of lower average depreciation rates
effective January 1994 and offsetting growth in depreciable plant in service.
Income tax expense increased 3.0 percent and 8.2 percent in 1995 and 1994,
respectively. These increases are primarily attributable to higher taxable
income.
The company contributed $11.5 million to the Alabama Power Foundation, Inc.
in 1995, which represents a decrease of $2.0 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 rose in 1995 to
$265 million, an increase of 12.2 percent. This increase results from (i)
interest on interim obligations which rose due to higher average interest rates
on an increased average amount of short-term debt outstanding and (ii)
amortization of debt discount, premium, and expense, net pursuant to an APSC
order. See Note 3 to the financial statements under "Retail Rate Adjustment
Procedures" for additional details. The decline in net interest charges in 1994
by $23 million (9.0 percent) reflects the benefits from refinancing.
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 energy sales growth 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 weather, competition, changes in contracts with neighboring utilities,
energy conservation practiced by customers, the elasticity of demand, 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 positioning 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 enhances 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.
Also, electricity sales for resale rates are being driven down by wholesale
transmission access and numerous potential new energy suppliers, including power
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1995 Annual Report
marketers and brokers. The company is aggressively working to maintain and
expand its share of wholesale sales in the Southeastern power markets.
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. New federal legislation is being discussed,
and legislation allowing customer choice has already been introduced in Florida
and Georgia. In order to address these initiatives, numerous questions must be
resolved, with the most complex ones relating to transmission pricing and
recovery of stranded investments. 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 by seeking new markets
that evolve with the changing regulation.
The addition of four combustion turbine generating units 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
periodically within certain limitations based on earned retail rate of return
compared with an allowed return. In June 1995, the APSC issued an order granting
the company's request for gradual adjustments to move toward parity among
customer classes. This order also calls for a moratorium on any periodic retail
rate increases (but not decreases) until 2001.
In December 1995, the APSC issued an order authorizing the company to reduce
balance sheet items
- -- such as plant and deferred charges -- at any time the company's actual base
rate revenues exceed the budgeted revenues. See Note 3 to the financial
statements for information about this and other regulatory matters.
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 Financial Accounting
Standards Board (FASB) has decided to review the accounting for liabilities
related to closure and removal of long-lived assets, including nuclear
decommissioning. If the FASB issues new accounting rules, the estimated costs of
closing and removing the company's nuclear and other facilities may be required
to be recorded as liabilities in the Balance Sheets. Also, the annual provisions
for such costs could increase. Because of the company's current ability to
recover closure and removal costs through rates, these changes should not have a
significant adverse effect on results of operations. See Note 1 to the financial
statements under "Depreciation and Nuclear Decommissioning" 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."
The company is subject to the provisions of 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, and determine if any other assets have been impaired. See Note 1 to
the financial statements under "Regulatory Assets and Liabilities" for
additional information.
New Accounting Standards
The FASB has issued Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of. This statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount for an asset may not
be recoverable. This statement also imposes stricter criteria for regulatory
assets by requiring that such assets be probable of future recovery at each
balance sheet date. The company adopted the new rules January 1, 1996, with no
material effect on the financial statements. However, this conclusion may change
in the future as competitive factors influence wholesale and retail pricing in
the utility industry.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1995 Annual Report
FINANCIAL CONDITION
Overview
The company's financial condition remained stable in 1995. 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 $552 million in 1995. The
majority of funds needed for gross property additions for the last several years
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 -- including
short-term debt -- was 45.0 percent in 1995, compared with 45.9 percent in 1994,
and 46.5 percent in 1993.
In 1995, the company issued through public authorities, $131.5 million of
pollution control revenue refunding bonds. Composite financing rates as of
year-end for 1993 through 1995 were as follows:
1995 1994 1993
--------------------------------
Composite interest rate on
long-term debt 7.02% 7.39% 7.35%
Composite dividend rate on
preferred stock 6.04% 6.23% 5.80%
----------------------------------------------------------------
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
------------------------------------------------------------
Capital Requirements
Capital expenditures are estimated to be $491 million for 1996, $446 million for
1997, and $479 million for 1998. The total is $1.4 billion for the three years.
Actual capital costs may vary from this estimate because of factors such as
changes in business conditions; revised load growth projections; changes in
environmental regulations; changes in the existing nuclear plant to meet new
regulatory requirements; increasing cost of labor, equipment, and materials; and
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 addition of combustion
turbine peaking units of approximately 320 megawatts of capacity is planned in
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 $110
million will be required by the end of 1998 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 if 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 -- has significantly
impacted the Southern electric system. Specific reductions in sulfur dioxide and
nitrogen oxide emissions from fossil-fired generating plants are required in two
phases. Phase I compliance began in 1995 and affected 28 generating units in the
Southern electric system. As a result of The Southern Company's compliance
strategy, an additional 22 generating units were brought into compliance with
Phase I requirements. Phase II compliance is required in 2000, and all
fossil-fired generating plants will be affected.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1995 Annual Report
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 achieved Phase I sulfur dioxide compliance at the
affected plants by switching to low-sulfur coal, which required some equipment
upgrades. This compliance strategy resulted in unused emission allowances being
banked for later use. Compliance with nitrogen oxide emission limits was
achieved by the installation of new control equipment at 22 of the original 28
affected generating units. Construction expenditures for Phase I compliance
totaled approximately $320 million through 1995 for The Southern Company, of
which the company's portion was approximately $32 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 Phase II limits.
Therefore, during the period 1996 to 2000, current compliance strategy could
require total estimated construction expenditures of approximately $150 million
for The Southern Company, of which the company's portion is approximately $96
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.
An average increase of up to 1 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.
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.
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 during 1996. 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.
The EPA is evaluating the need to revise the ambient air quality standards
for particulate matter 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 1996, 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
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1995 Annual Report
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. 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 Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control 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
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."
9
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994, and 1993
Alabama Power Company 1995 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues (Notes 1, 3 and 7):
Revenues $ 2,897,044 $ 2,770,380 $ 2,825,634
Revenues from affiliates 127,730 164,762 181,975
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,024,774 2,935,142 3,007,609
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 791,819 801,948 877,099
Purchased power from non-affiliates 30,065 15,158 15,230
Purchased power from affiliates 112,826 100,888 120,330
Other 501,876 458,917 470,815
Maintenance 243,218 262,102 252,506
Depreciation and amortization 303,050 292,420 290,310
Taxes other than income taxes 185,620 183,425 178,997
Federal and state income taxes (Note 8) 230,982 224,280 207,210
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,399,456 2,339,138 2,412,497
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 625,318 596,004 595,112
Other Income (Expense):
Allowance for equity funds used during construction (Note 1) 1,649 3,239 3,260
Income from subsidiary (Note 6) 4,051 3,588 4,127
Charitable foundation (11,542) (13,500) (3,000)
Interest income 13,768 16,944 20,775
Other, net (21,536) (30,569) (24,420)
Income taxes applicable to other income 14,142 16,834 10,239
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 625,850 592,540 606,093
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 180,714 178,045 184,861
Allowance for debt funds used during construction (Note 1) (7,067) (3,548) (2,992)
Interest on interim obligations 16,917 5,939 3,760
Amortization of debt discount, premium, and expense, net 20,259 9,623 8,937
Other interest charges 27,064 19,908 35,474
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 237,887 209,967 230,040
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 387,963 382,573 376,053
Dividends on Preferred Stock 27,069 26,235 29,559
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 360,894 $ 356,338 $ 346,494
================================================================================================================================
The accompanying notes are an integral part of these statements.
10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994, and 1993
Alabama Power Company 1995 Annual Report
================================================================================================================================
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 387,963 $ 382,573 $ 376,053
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 371,382 359,791 356,499
Deferred income taxes and investment tax credits 32,627 (32,613) 32,994
Allowance for equity funds used during construction (1,649) (3,239) (3,260)
Other, net 33,244 28,656 36,493
Changes in certain current assets and liabilities --
Receivables, net (54,209) 19,390 19,215
Inventories 18,425 (38,946) 51,630
Payables (63,656) (21,240) 31,544
Taxes accrued 551 6,856 (9,959)
Energy cost recovery, retail 1,177 16,907 (56,128)
Other (15,895) (14,235) (21,110)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 709,960 703,900 813,971
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (551,781) (536,785) (435,843)
Other (53,321) (26,632) (741)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (605,102) (563,417) (436,584)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock - - 158,000
First mortgage bonds - 150,000 860,000
Other long-term debt 131,500 208,720 180,314
Retirements:
Preferred stock - - (207,000)
First mortgage bonds - (20,387) (699,788)
Other long-term debt (132,291) (305,380) (181,329)
Interim obligations, net 210,134 139,882 (156,917)
Payment of preferred stock dividends (27,118) (25,431) (32,099)
Payment of common stock dividends (285,000) (268,000) (252,900)
Miscellaneous (4,143) (8,444) (56,064)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (106,918) (129,040) (387,783)
- --------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash (2,060) 11,443 (10,396)
Cash at Beginning of Year 14,676 3,233 13,629
- --------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 12,616 $ 14,676 $ 3,233
================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) 189,268 $ 183,445 $ 176,805
Income taxes 172,777 231,831 175,591
- --------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1995 and 1994
Alabama Power Company 1995 Annual Report
================================================================================================================================
ASSETS 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
<S> <C> <C>
Plant in service, at original cost (Note 1) $10,430,792 $10,052,772
Less accumulated provision for depreciation 3,838,093 3,598,604
- --------------------------------------------------------------------------------------------------------------------------------
6,592,699 6,454,168
Nuclear fuel, at amortized cost 100,537 101,630
Construction work in progress 362,768 317,779
- --------------------------------------------------------------------------------------------------------------------------------
Total 7,056,004 6,873,577
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Southern Electric Generating Company, at equity (Note 6) 27,232 26,985
Nuclear decommissioning trusts (Note 1) 108,368 71,014
Miscellaneous 19,156 16,970
- --------------------------------------------------------------------------------------------------------------------------------
Total 154,756 114,969
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash 12,616 14,676
Receivables-
Customer accounts receivable 355,833 308,561
Other accounts and notes receivable 28,082 22,547
Affiliated companies 41,819 29,303
Accumulated provision for uncollectible accounts (1,212) (2,297)
Refundable income taxes 2,635 16,011
Fossil fuel stock, at average cost 106,627 119,555
Materials and supplies, at average cost 179,103 184,600
Prepayments-
Income taxes - 19,196
Other 116,331 84,354
Vacation pay deferred 29,458 20,442
- --------------------------------------------------------------------------------------------------------------------------------
Total 871,292 816,948
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 436,837 451,886
Debt expense, being amortized 7,648 7,370
Premium on reacquired debt, being amortized 89,967 101,851
Uranium enrichment decontamination and decommissioning fund (Note 1) 40,282 42,996
Miscellaneous 87,574 49,620
- --------------------------------------------------------------------------------------------------------------------------------
Total 662,308 653,723
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $8,744,360 $8,459,217
================================================================================================================================
The accompanying notes are an integral part of these balance sheets.
12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1995 and 1994
Alabama Power Company 1995 Annual Report
================================================================================================================================
CAPITALIZATION AND LIABILITIES 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
<S> <C> <C>
Common stock equity $2,690,374 $2,614,405
Preferred stock 440,400 440,400
Long-term debt 2,374,948 2,455,013
- --------------------------------------------------------------------------------------------------------------------------------
Total 5,505,722 5,509,818
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Long-term debt due within one year (Note 10) 84,682 796
Commercial paper 390,016 179,882
Accounts payable-
Affiliated companies 76,326 60,334
Other 182,401 258,657
Customer deposits 30,353 30,245
Taxes accrued-
Federal and state income 13,599 6,848
Other 18,158 15,589
Interest accrued 53,527 52,516
Vacation pay accrued 29,458 20,442
Miscellaneous 70,543 57,047
- --------------------------------------------------------------------------------------------------------------------------------
Total 949,063 682,356
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 1,191,591 1,181,342
Accumulated deferred investment tax credits 305,372 317,018
Prepaid capacity revenues, net (Note 7) 131,186 138,421
Uranium enrichment decontamination and decommissioning fund (Note 1) 36,620 39,413
Deferred credits related to income taxes (Note 8) 386,038 405,256
Natural disaster reserve (Note 1) 17,959 28,750
Miscellaneous 220,809 156,843
- --------------------------------------------------------------------------------------------------------------------------------
Total 2,289,575 2,267,043
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 3, 4, 5, 6, 7, and 11)
Total Capitalization and Liabilities $8,744,360 $8,459,217
================================================================================================================================
The accompanying notes are an integral part of these balance sheets.
13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1995 and 1994
Alabama Power Company 1995 Annual Report
================================================================================================================================
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C>
Common Stock Equity:
Common stock, par value $40 per share--
Authorized -- 6,000,000 shares
Outstanding -- 5,608,955 shares in
1995 and 1994 $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645
Premium on preferred stock 146 146
Retained earnings (Note 12) 1,161,225 1,085,256
- --------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 2,690,374 2,614,405 48.9% 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
4.82% - at January 1, 1996 50,000 50,000
$100 stated capital --
Auction rate - at January 1, 1996: 4.43% 50,000 50,000
$100,000 stated capital --
Auction rate - at January 1, 1996: 4.53% 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 -- $26,599,000) 440,400 440,400 8.0 8.0
- --------------------------------------------------------------------------------------------------------------------------------
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
March 1, 2000 6% 100,000 100,000
2003 through 2007 6 3/4% to 7 1/4% 575,000 575,000
2021 through 2024 7.30% to 9 1/4% 1,044,856 1,044,856
- --------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,999,856 1,999,856
Pollution control obligations 476,140 476,140
Other long-term debt 8,963 9,754
Unamortized debt premium (discount), net (25,329) (29,941)
- --------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $174,568,000) 2,459,630 2,455,809
Less amount due within one year (Note 10) 84,682 796
- --------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 2,374,948 2,455,013 43.1 44.6
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 5,505,722 $ 5,509,818 100.0% 100.0%
================================================================================================================================
The accompanying notes are an integral part of these statements.
14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1995, 1994, and 1993
Alabama Power Company 1995 Annual Report
================================================================================================================================
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $ 1,085,256 $ 997,199 $ 914,148
Net income after dividends on preferred stock 360,894 356,338 346,494
Cash dividends on common stock (285,000) (268,000) (252,900)
Preferred stock transactions, net - (118) (10,587)
Other adjustments to retained earnings 75 (163) 44
- --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 12) $ 1,161,225 $ 1,085,256 $ 997,199
================================================================================================================================
The accompanying notes are an integral part of these statements.
15
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Alabama Power Company 1995 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), The Southern Development and Investment Group
(Southern Development), and other direct and indirect subsidiaries. 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 to The Southern Company and subsidiary companies. Southern
Communications provides digital wireless communications services to the
operating companies and also markets these services to the public within the
Southeast. Southern Electric designs, builds, owns and operates power production
and delivery 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. Southern Development 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 subject to regulation 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. The preparation of financial statements in
conformity with generally accepted accounting principles requires the use of
estimates, and the actual results may differ from those estimates.
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:
1995 1994
-----------------------
(in thousands)
Deferred income taxes $436,837 $451,886
Premium on reacquired debt 89,967 101,620
Department of Energy assessments 40,282 42,996
Vacation pay 29,458 20,442
Work force reduction costs 48,402 3,664
Deferred income tax credits (386,038) (405,256)
Natural disaster reserve (17,959) (28,750)
Other, net 39,172 45,956
================================================================
Total $280,121 $232,558
================================================================
In the event that a portion of the company's operations is 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, if impaired, to their fair value.
Revenues and Fuel Costs
The company accrues revenues for services rendered but unbilled at the end of
each fiscal period. 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.
16
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
The company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1995, uncollectible
accounts continued to average less than 1 percent of revenues.
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 $54
million in 1995, $65 million in 1994, and $62 million in 1993. The company has a
contract with the U.S. Department of Energy (DOE) that provides for the
permanent disposal of spent nuclear fuel. Although disposal was scheduled to
begin in 1998, 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, 1995, under this law to be
approximately $40 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 1995 and 1994, and 3.3 percent in 1993. 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 and removal of other 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. 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 costs of decommissioning -- both site study
costs and ultimate costs -- at December 31, 1995, 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 $ 489
Non-radiated structures 89
===========================================================
Total $ 578
===========================================================
(in millions)
Ultimate costs:
Radiated structures $ 1,504
Non-radiated structures 274
===========================================================
Total $ 1,778
===========================================================
17
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
(in millions)
Amount expensed in 1995 $ 18
-----------------------------------------------------------
Accumulated provisions:
Balance in external trust funds $108
Balance in internal reserves 49
===========================================================
Total $157
===========================================================
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 NRC requirements, or changes in the assumptions used
in making estimates.
Income Taxes
The company uses the liability method of accounting for deferred income taxes
and 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.
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 7.1 percent in 1995, 7.9 percent in 1994, and 7.8 percent in 1993.
AFUDC, net of income tax, as a percent of net income after dividends on
preferred stock was 1.7 percent in 1995 and 1.5 percent in both 1994 and 1993.
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 for which the
carrying amount did not approximate fair value at December 31 was as follows:
Long-Term Debt
-------------------------
Carrying Fair
Year Amount Value
----------- ----------
(in millions)
1995 $2,451 $2,577
1994 2,446 2,323
------------------------------------------------------------
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.
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, 1995, the accumulated provision amounted to $18.0 million. This
balance is down from the December 31, 1994 balance of $28.8 million, due to
charges related primarily to Hurricane Opal, somewhat offset by a $10 million
accrual to partially replenish the reserve. Regulatory treatment allows the
18
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
company to accrue $250 thousand per month, until the maximum accumulated
provision of $32 million is attained. However, in December 1995, the APSC
approved higher accruals to restore the reserve to its authorized level whenever
the balance in the reserve declines below $22.4 million.
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 one of the
following formulas: years of service and final average pay or years of service
and a flat-dollar benefit. Primarily, 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. 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.
FASB Statement No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions, 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."
Funded Status and Cost of Benefits
The following tables show actuarial results and assumptions for pension and
postretirement 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
-----------------------
1995 1994
------------- ---------
(in millions)
Actuarial present value of
benefit obligations:
Vested benefits $ 604 $ 522
Non-vested benefits 25 18
- ------------------------------------------------------------------
Accumulated benefit obligation 629 540
Additional amounts related to
projected salary increases 173 174
- ------------------------------------------------------------------
Projected benefit obligation 802 714
Less:
Fair value of plan assets 1,256 1,059
Unrecognized net gain (331) (251)
Unrecognized prior service cost 21 23
Unrecognized transition asset (45) (51)
- ------------------------------------------------------------------
Prepaid asset recognized in the
Balance Sheets $ 99 $ 66
==================================================================
Postretirement
Benefits
----------------------
1995 1994
----------------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $ 103 $ 96
Employees eligible to retire 31 22
Other employees 104 119
-----------------------------------------------------------
Accumulated benefit obligation 238 237
Less:
Fair value of plan assets 89 61
Unrecognized net loss 23 -
Unrecognized transition
obligation 72 120
-----------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $ 54 $ 56
===========================================================
In 1995, the system companies announced a cost sharing program for
postretirement benefits. The program establishes limits on amounts the company
will pay to provide future retiree postretirement benefits. This change reduced
the 1995 accumulated postretirement benefit obligation by approximately $41
million.
19
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
The weighted average rates assumed in the actuarial calculations were:
1995 1994 1993
-------------------------------
Discount 7.3% 8.0% 7.5%
Annual salary increase 4.8 5.5 5.0
Long-term return on
plan assets 8.5 8.5 8.5
----------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 9.8
percent for 1995, decreasing gradually to 5.3 percent through the year 2005 and
remaining at that level thereafter. An annual increase in the assumed medical
care cost trend rate of 1 percent would increase the accumulated benefit
obligation as of December 31, 1995, by $20 million and the aggregate of the
service and interest cost components of the net retiree cost by $4 million.
Components of the plans' net income are shown below:
Pension
--------------------------------------------------------------
1995 1994 1993
-----------------------------
(in millions)
Benefits earned during
the year $ 21.2 $ 20.8 $ 20.6
Interest cost on projected
benefit obligation 54.3 51.2 50.4
Actual (return) loss on plan
assets (236.3) 23.5 (146.3)
Net amortization and deferral 136.9 (116.2) 63.3
==============================================================
Net pension income $(23.9) $(20.7) $(12.0)
==============================================================
Of the above net pension income, $(17.1) million in 1995, $(15.7)
million in 1994, and $(8.9) million in 1993 were recorded in operating expenses,
and the remainder was recorded in construction and other accounts.
Postretirement
Benefits
--------------------
1995 1994 1993
--------------------
(in millions)
Benefits earned during the year $ 7 $ 8 $ 7
Interest cost on accumulated
benefit obligation 18 18 16
Amortization of transition
obligation 7 6 6
Actual (return) loss on plan
assets (10) 1 (5)
Net amortization and deferral 5 (4) 2
=============================================================
Net postretirement costs $ 27 $ 29 $ 26
=============================================================
Of the above net postretirement costs recorded, $22.7 million in 1995, $23
million in 1994, and $22 million in 1993 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 $14.3 million, $8.2 million and $16.1
million for the years 1995, 1994 and 1993, respectively. In addition, certain
costs of these programs were deferred and are being amortized in accordance with
regulatory treatment. The unamortized balance of these costs was $48.4 million
at December 31, 1995.
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 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 June 1995, the APSC issued a rate order granting the company's request
for gradual adjustments to move toward parity among customer classes. This order
20
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
also calls for a moratorium on any periodic retail rate increases (but not
decreases) until July 2001.
In December 1995, the APSC issued an order authorizing the company to reduce
balance sheet items -- such as plant and deferred charges -- at any time the
company's actual base rate revenues exceed the budgeted revenues. In accordance
with this order, the company reduced the unamortized balance of Premium on
reacquired debt by $10 million in 1995.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
FERC Reviews Equity Returns
In May 1991, the FERC ordered that hearings be conducted concerning the
reasonableness of the operating companies' 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
change 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 was substantially from October 1994 through December
1995. In November 1995, a FERC administrative law judge issued an opinion that
the FERC staff failed to meet its burden of proof, and therefore, no change in
the equity return was necessary. The FERC staff has filed exceptions to the
administrative law judge's opinion, and the matter is pending before the FERC.
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 $120
million at December 31, 1995 for the Southern Company, of which the company's
portion would be approximately $53 million. However, management believes that
rates are not excessive, and that refunds are not justified.
4. CAPITAL BUDGET
The company's capital expenditures are currently estimated to total $491 million
in 1996, $446 million in 1997, and $479 million in 1998. The estimates include
AFUDC of $7 million in 1996, $6 million in 1997, and $9 million in 1998. 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, 1995, 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 320 megawatts is planned to be completed in 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.
21
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
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
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, 1998. 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 require 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 $353.5 million which expire at various times during 1996 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, 1995, the company had regulatory approval to have
outstanding up to $530 million of short-term borrowings. In February 1996, such
regulatory approval was increased to $750 million.
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 at December 31, 1995, were as follows:
Year Amounts
- ---- --------------
(in millions)
1996 $ 866
1997 852
1998 853
1999 672
2000 402
2001 - 2013 3,790
=========================================================
Total commitments $7,435
=========================================================
Operating Leases
The company has entered into coal rail car rental agreements with various terms
and expiration dates. At December 31, 1995, estimated minimum rental commitments
for noncancellable operating leases were as follows:
22
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
Year Amounts
- ---- --------------------
(in millions)
1996 $ 2.8
1997 2.8
1998 2.9
1999 2.9
2000 2.9
2001 and thereafter 56.5
===============================================================
Total minimum payments $70.8
===============================================================
6. 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 $71
million in 1995, $74 million in 1994 and $86 million in 1993, and is included in
"Purchased power from affiliates" in the Statements of Income.
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, 1995, the capitalization of SEGCO consisted of $54 million
of equity and $78 million of long-term debt on which the annual interest
requirement is $5.0 million. SEGCO paid dividends totaling $7.6 million in 1995,
$11.6 million in 1994, and $11.3 million in 1993, of which one-half of each was
paid to the company. SEGCO's net income was $8.1 million, $7.2 million, and $8.3
million for 1995, 1994 and 1993, respectively.
The company's percentage ownership and investment in jointly-owned
generating plants at December 31, 1995, 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 $ 90 $ 41
Plant Miller
Units 1 and 2 712 281
- -------------------------------------------------------------
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)
1995 $ 157 $ - $ 157
1994 152 7 159
1993 144 15 159
----------------------------------------------------------
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,
23
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
approximately 1,200 megawatts of capacity is scheduled to be sold through 1999.
Thereafter, these sales 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
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,
1995, $137.5 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, 1995, the tax-related regulatory assets and liabilities were
$437 million and $386 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:
1995 1994 1993
--------------------------------
(in thousands)
Total provision for income taxes:
Federal --
Currently payable $166,105 $219,494 $149,680
Deferred --
current year 43,493 (48,153) 9,636
reversal of prior years (15,817) 15,932 19,653
Deferred investment tax
credits (75) (1) (2,106)
----------------------------------------------------------------
193,706 187,272 176,863
----------------------------------------------------------------
State --
Currently payable 18,108 20,565 14,297
Deferred --
current year 5,117 (4,067) 1,898
reversal of prior years (91) 3,676 3,913
----------------------------------------------------------------
23,134 20,174 20,108
----------------------------------------------------------------
Total 216,840 207,446 196,971
Less income taxes credited
to other income (14,142) (16,834) (10,239)
----------------------------------------------------------------
Federal and state income
taxes charged to operations $230,982 $224,280 $207,210
================================================================
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:
24
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
1995 1994
- --------------------------------------------------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $ 780 $734
Property basis differences 491 513
Premium on reacquired debt 31 38
Fuel clause underrecovered 5 4
Other 37 26
- --------------------------------------------------------------
Total 1,344 1,315
- --------------------------------------------------------------
Deferred tax assets:
Capacity prepayments 35 36
Other deferred costs 26 27
Postretirement benefits 25 24
Accrued nuclear outage costs - 7
Unbilled revenue 13 13
Other 43 44
- --------------------------------------------------------------
Total 142 151
- --------------------------------------------------------------
Net deferred tax liabilities 1,202 1,164
Portion included in current assets
(liabilities), net (10) 17
- --------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $1,192 $1,181
==============================================================
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 $12 million in 1995 and $13 million in 1994 and 1993. At December
31, 1995, 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:
1995 1994 1993
--------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 2.5 2.2 2.3
Non-deductible book
depreciation 1.6 1.6 1.6
Differences in prior years'
deferred and current tax rates (1.8) (2.9) (1.6)
Other (1.4) (0.7) (2.9)
==============================================================
Effective income tax rate 35.9% 35.2% 34.4%
==============================================================
The Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis. Tax benefits from losses of the
parent company are allocated to each subsidiary based on the 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:
1995 1994
--------------------------
(in thousands)
Obligations incurred in
connection with the
sale of tax-exempt
pollution control revenue
bonds by public authorities-
Collateralized -
5.5% to 6.5 % due
2023-2024 $223,040 $223,040
Variable rates (5.0% to
6.0% at 1/1/96) due
2015-2017 89,800 89,800
Non-collateralized -
7.25% due 2003 1,000 1,000
7.4% to 9.375% due
2014-2016 21,000 152,500
5.8% due 2022 9,800 9,800
Variable rates (5.3% to
6.0% at 1/1/96) due
2022 131,500 -
- -------------------------------------------------------------
476,140 476,140
Capitalized lease obligations 8,963 9,754
=============================================================
Total $485,103 $485,894
=============================================================
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.
25
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
The company has capitalized certain office building leases and a street light
lease. 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 $5.6 million and $6.2 million at December 31, 1995 and 1994, respectively.
The estimated aggregate annual maturities of other long-term debt through 2000
are as follows: $0.9 million in 1996, $1.0 million in 1997, $1.0 million in
1998, $1.2 million in 1999 and $1.1 million in 2000.
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:
1995 1994
----------------------
(in thousands)
Bond improvement fund
requirements $20,047 $ 20,047
Less:
Portion to be satisfied by
certifying property additions - 20,047
------------------------------------------------------------
Cash sinking fund requirements $20,047 $ -
First mortgage bond maturities
and redemptions 63,750 -
Other long-term debt maturities
(Note 9) 885 796
============================================================
Total $84,682 $ 796
============================================================
The annual first mortgage bond improvement fund requirement is 1 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 1996 requirement of $20.0 million was
satisfied by the deposit of cash in 1996. Also in 1996 are first mortgage bond
maturities and redemptions of $64 million and maturities of $885 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 $10 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
26
<PAGE>
NOTES (continued)
Alabama Power Company 1995 Annual Report
that policy. The maximum annual assessments per incident under current policies
for the company would be $21 million for excess property damage and $8 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 any further remaining
proceeds are to be paid either to the company or to its bond trustees as may be
appropriate under the policies and 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 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, 1995, retained earnings of $807 million 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 1995 and 1994 are as follows:
Net Income
After
Dividends
Quarter Operating Operating on Preferred
Ended Revenues Income Stock
---------------- ----------------------------------------------
(in thousands)
March 1995 $646,771 $122,949 $ 65,328
June 1995 753,053 157,685 88,926
September 1995 938,284 233,322 167,938
December 1995 686,666 111,362 38,702
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
----------------------------------------------------------------
The company's business is influenced by seasonal weather conditions.
27
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1995 Annual Report
===================================================================================================================================
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $3,024,774 $2,935,142 $3,007,609
Net Income after Dividends
on Preferred Stock (in thousands) $360,894 $356,338 $346,494
Cash Dividends on Common Stock (in thousands) $285,000 $268,000 $252,900
Return on Average Common Equity (percent) 13.61 13.86 13.94
Total Assets (in thousands) $8,744,360 $8,459,217 $8,248,683
Gross Property Additions (in thousands) $551,781 $536,785 $435,843
- -----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,690,374 $2,614,405 $2,526,348
Preferred stock 440,400 440,400 440,400
Preferred stock subject to mandatory redemption - - -
Long-term debt 2,374,948 2,455,013 2,362,852
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,505,722 $5,509,818 $5,329,600
===================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 48.9 47.4 47.4
Preferred stock 8.0 8.0 8.3
Long-term debt 43.1 44.6 44.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===================================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 150,000 860,000
Retired - 20,387 699,788
Preferred Stock (in thousands):
Issued - - 158,000
Retired - - 207,000
- -----------------------------------------------------------------------------------------------------------------------------------
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 1,058,197 1,042,974 1,027,130
Commercial 166,480 162,239 157,337
Industrial 5,338 5,341 5,391
Other 725 716 713
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,230,740 1,211,270 1,190,571
===================================================================================================================================
Employees (year-end) 7,261 7,996 8,009
28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1995 Annual Report
===================================================================================================================================
1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $2,846,840 $2,846,794 $2,722,424
Net Income after Dividends
on Preferred Stock (in thousands) $338,555 $339,666 $312,803
Cash Dividends on Common Stock (in thousands) $273,300 $232,900 $220,800
Return on Average Common Equity (percent) 14.02 14.55 14.00
Total Assets (in thousands) $6,593,618 $6,549,462 $6,362,293
Gross Property Additions (in thousands) $367,463 $397,011 $444,680
- -----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,443,493 $2,387,198 $2,280,590
Preferred stock 489,400 484,400 484,400
Preferred stock subject to mandatory redemption - - 12,500
Long-term debt 2,202,473 2,382,635 2,397,931
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,135,366 $5,254,233 $5,175,421
===================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.6 45.4 44.1
Preferred stock 9.5 9.2 9.6
Long-term debt 42.9 45.4 46.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===================================================================================================================================
First Mortgage Bonds (in thousands):
Issued 745,000 250,000 -
Retired 931,797 227,695 33,122
Preferred Stock (in thousands):
Issued 150,000 - -
Retired 145,000 17,500 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 1,012,294 997,585 985,566
Commercial 152,530 148,228 144,340
Industrial 5,434 5,496 5,322
Other 704 697 690
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,170,962 1,152,006 1,135,918
===================================================================================================================================
Employees (year-end) 8,116 8,513 9,473
29A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1995 Annual Report
=================================================================================================================================
1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $2,629,354 $2,476,626 $2,574,634
Net Income after Dividends
on Preferred Stock (in thousands) $311,146 $283,475 $257,239
Cash Dividends on Common Stock (in thousands) $217,300 $212,700 $201,100
Return on Average Common Equity (percent) 14.53 14.03 13.56
Total Assets (in thousands) $6,279,431 $6,180,945 $5,912,000
Gross Property Additions (in thousands) $459,199 $643,892 $600,589
- ---------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,188,811 $2,094,815 $1,946,747
Preferred stock 484,400 484,400 384,400
Preferred stock subject to mandatory redemption 17,500 22,500 27,500
Long-term debt 2,435,129 2,496,492 2,386,258
- ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,125,840 $5,098,207 $4,744,905
=================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 42.7 41.1 41.0
Preferred stock 9.8 9.9 8.7
Long-term debt 47.5 49.0 50.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=================================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 150,000 200,000
Retired 75,650 42,445 108,082
Preferred Stock (in thousands):
Issued - 100,000 -
Retired 5,000 2,500 5,000
- ---------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A A A
Duff & Phelps A 6 6
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A- A- A-
Duff & Phelps A- 7 7
- ---------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 974,622 964,581 950,101
Commercial 141,265 137,955 134,533
Industrial 5,200 5,120 4,955
Other 684 678 713
- ---------------------------------------------------------------------------------------------------------------------------------
Total 1,121,771 1,108,334 1,090,302
=================================================================================================================================
Employees (year-end) 9,698 10,302 10,457
29B
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1995 Annual Report
===========================================================================================================================
1986 1985
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands) $2,549,574 $2,518,699
Net Income after Dividends
on Preferred Stock (in thousands) $273,456 $264,562
Cash Dividends on Common Stock (in thousands) $191,300 $185,700
Return on Average Common Equity (percent) 15.12 15.41
Total Assets (in thousands) $5,570,653 $5,722,263
Gross Property Additions (in thousands) $553,767 $568,073
- ---------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $1,847,608 $1,770,156
Preferred stock 384,400 384,400
Preferred stock subject to mandatory redemption 30,000 35,000
Long-term debt 2,210,108 2,349,373
- ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $4,472,116 $4,538,929
===========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 41.3 39.0
Preferred stock 9.3 9.3
Long-term debt 49.4 51.7
- ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
===========================================================================================================================
First Mortgage Bonds (in thousands):
Issued 125,000 -
Retired 405,765 39,460
Preferred Stock (in thousands):
Issued - -
Retired 42,224 -
- ---------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1
Standard and Poor's A A
Duff & Phelps 6 6
Preferred Stock -
Moody's a2 a2
Standard and Poor's A- A-
Duff & Phelps 7 7
- ---------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 934,798 918,777
Commercial 130,540 126,644
Industrial 4,725 4,619
Other 697 755
- ---------------------------------------------------------------------------------------------------------------------------
Total 1,070,760 1,050,795
===========================================================================================================================
Employees (year-end) 10,367 10,212
29C
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1995 Annual Report
===================================================================================================================================
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $997,069 $913,146 $947,277
Commercial 670,453 647,202 634,895
Industrial 805,596 803,587 832,938
Other 13,619 13,515 13,344
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 2,486,737 2,377,450 2,428,454
Sales for resale - non-affiliates 370,140 354,760 364,105
Sales for resale - affiliates 127,730 164,762 181,975
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,984,607 2,896,972 2,974,534
Other revenues 40,167 38,170 33,075
- -----------------------------------------------------------------------------------------------------------------------------------
Total $3,024,774 $2,935,142 $3,007,609
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 14,383,231 13,183,147 13,185,062
Commercial 10,043,220 9,645,798 9,185,462
Industrial 19,862,577 19,479,364 18,595,237
Other 186,848 185,876 181,673
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 44,475,876 42,494,185 41,147,434
Sales for resale - non-affiliates 8,046,189 6,775,176 7,143,672
Sales for resale - affiliates 6,705,174 8,432,533 8,081,324
- -----------------------------------------------------------------------------------------------------------------------------------
Total 59,227,239 57,701,894 56,372,430
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.93 6.93 7.18
Commercial 6.68 6.71 6.91
Industrial 4.06 4.13 4.48
Total retail 5.59 5.59 5.90
Sales for resale 3.38 3.42 3.59
Total sales 5.04 5.02 5.28
Residential Average Annual Kilowatt-Hour
Use Per Customer 13,686 12,746 12,936
Residential Average Annual Revenue
Per Customer $948.71 $882.88 $929.36
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,831 10,431 10,431
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 7,958 8,217 7,152
Summer 10,090 9,028 9,457
Annual Load Factor (percent) (Note 2) 59.2 62.2 58.6
Plant Availability (percent):
Fossil-steam 88.3 86.9 89.7
Nuclear 81.1 92.5 86.6
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 67.1 62.9 63.9
Nuclear 17.1 21.7 20.1
Hydro 7.0 8.4 6.9
Oil and gas 0.4 * *
Purchased power -
From non-affiliates 2.7 1.3 1.1
From affiliates 5.7 5.7 8.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,025 9,961 10,003
Cost of fuel per million BTU (cents) 148.68 157.62 173.66
Average cost of fuel per net kilowatt-hour generated (cents) 1.49 1.57 1.74
===================================================================================================================================
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.
30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1995 Annual Report
===================================================================================================================================
1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $845,660 $864,347 $825,645
Commercial 589,816 582,730 551,634
Industrial 800,311 790,224 777,580
Other 12,734 12,662 12,103
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 2,248,521 2,249,963 2,166,962
Sales for resale - non-affiliates 407,791 407,912 434,996
Sales for resale - affiliates 158,088 159,375 93,473
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,814,400 2,817,250 2,695,431
Other revenues 32,440 29,544 26,993
- -----------------------------------------------------------------------------------------------------------------------------------
Total $2,846,840 $2,846,794 $2,722,424
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 12,069,268 12,324,898 11,996,794
Commercial 8,629,869 8,526,131 8,201,534
Industrial 18,260,274 17,511,579 17,713,153
Other 176,798 174,760 170,420
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 39,136,209 38,537,368 38,081,901
Sales for resale - non-affiliates 8,382,571 8,810,442 10,277,060
Sales for resale - affiliates 7,210,697 7,784,285 4,519,275
- -----------------------------------------------------------------------------------------------------------------------------------
Total 54,729,477 55,132,095 52,878,236
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.01 7.01 6.88
Commercial 6.83 6.83 6.73
Industrial 4.38 4.51 4.39
Total retail 5.75 5.84 5.69
Sales for resale 3.63 3.42 3.57
Total sales 5.14 5.11 5.10
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,017 12,435 12,256
Residential Average Annual Revenue
Per Customer $842.00 $872.04 $843.50
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,431 10,539 9,879
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 7,077 6,586 6,293
Summer 8,801 8,627 8,878
Annual Load Factor (percent) (Note 2) 59.6 59.9 57.4
Plant Availability (percent):
Fossil-steam 88.9 93.1 92.2
Nuclear 80.2 87.0 86.5
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 64.3 61.5 57.0
Nuclear 19.0 20.8 21.6
Hydro 8.5 8.2 8.7
Oil and gas * * 0.1
Purchased power -
From non-affiliates 1.2 1.6 0.9
From affiliates 7.0 7.9 11.7
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,000 9,985 10,072
Cost of fuel per million BTU (cents) 164.57 170.49 171.55
Average cost of fuel per net kilowatt-hour generated (cents) 1.65 1.70 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.
31A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1995 Annual Report
================================================================================================================================
1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $781,982 $761,805 $759,957
Commercial 533,487 510,910 501,088
Industrial 762,274 738,755 721,298
Other 11,743 11,255 10,968
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 2,089,486 2,022,725 1,993,311
Sales for resale - non-affiliates 409,202 355,362 443,880
Sales for resale - affiliates 104,488 76,691 118,746
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,603,176 2,454,778 2,555,937
Other revenues 26,178 21,848 18,697
- --------------------------------------------------------------------------------------------------------------------------------
Total $2,629,354 $2,476,626 $2,574,634
================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 11,346,736 11,332,285 11,149,225
Commercial 7,915,685 7,711,092 7,476,924
Industrial 17,360,791 16,881,342 15,969,075
Other 166,485 165,122 159,422
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 36,789,697 36,089,841 34,754,646
Sales for resale - non-affiliates 10,292,329 7,905,750 10,523,554
Sales for resale - affiliates 5,048,743 3,551,142 4,963,997
- --------------------------------------------------------------------------------------------------------------------------------
Total 52,130,769 47,546,733 50,242,197
================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.89 6.72 6.82
Commercial 6.74 6.63 6.70
Industrial 4.39 4.38 4.52
Total retail 5.68 5.60 5.74
Sales for resale 3.35 3.77 3.63
Total sales 4.99 5.16 5.09
Residential Average Annual Kilowatt-Hour
Use Per Customer 11,717 11,839 11,848
Residential Average Annual Revenue
Per Customer $807.50 $795.84 $807.61
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 9,879 9,279 9,337
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 7,264 6,377 6,138
Summer 8,256 7,991 7,886
Annual Load Factor (percent) (Note 2) 59.5 59.6 58.3
Plant Availability (percent):
Fossil-steam 90.7 91.3 90.2
Nuclear 83.1 91.9 83.3
- --------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 54.1 53.9 52.5
Nuclear 21.0 26.1 21.7
Hydro 11.0 4.8 6.3
Oil and gas 0.1 0.1 0.2
Purchased power -
From non-affiliates 1.8 0.5 0.2
From affiliates 12.0 14.6 19.1
- --------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,061 10,137 10,214
Cost of fuel per million BTU (cents) 172.20 168.21 176.72
Average cost of fuel per net kilowatt-hour generated (cents) 1.73 1.71 1.80
================================================================================================================================
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.
31B
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1995 Annual Report
===========================================================================================================================
1986 1985
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands):
Residential $738,864 $684,970
Commercial 481,676 453,651
Industrial 705,395 717,078
Other 10,811 10,129
- ---------------------------------------------------------------------------------------------------------------------------
Total retail 1,936,746 1,865,828
Sales for resale - non-affiliates 472,938 539,343
Sales for resale - affiliates 120,911 95,733
- ---------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,530,595 2,500,904
Other revenues 18,979 17,795
- ---------------------------------------------------------------------------------------------------------------------------
Total $2,549,574 $2,518,699
===========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 10,606,698 9,814,814
Commercial 7,015,589 6,593,645
Industrial 15,025,806 15,215,276
Other 153,282 146,119
- ---------------------------------------------------------------------------------------------------------------------------
Total retail 32,801,375 31,769,854
Sales for resale - non-affiliates 9,064,049 12,158,464
Sales for resale - affiliates 4,456,360 3,588,338
- ---------------------------------------------------------------------------------------------------------------------------
Total 46,321,784 47,516,656
===========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.97 6.98
Commercial 6.87 6.88
Industrial 4.69 4.71
Total retail 5.90 5.87
Sales for resale 4.39 4.03
Total sales 5.46 5.26
Residential Average Annual Kilowatt-Hour
Use Per Customer 11,457 10,781
Residential Average Annual Revenue
Per Customer $798.09 $752.43
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 9,337 9,337
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,257 6,191
Summer 7,892 7,570
Annual Load Factor (percent) (Note 2) 56.2 57.2
Plant Availability (percent):
Fossil-steam 88.5 90.5
Nuclear 83.8 81.0
- ---------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 58.8 55.7
Nuclear 23.8 22.4
Hydro 4.2 6.2
Oil and gas 0.1 0.1
Purchased power -
From non-affiliates 2.0 1.7
From affiliates 11.1 13.9
- ---------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0
===========================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,209 10,229
Cost of fuel per million BTU (cents) 179.65 185.74
Average cost of fuel per net kilowatt-hour generated (cents) 1.83 1.90
===========================================================================================================================
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.
31C
</TABLE>
