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======================================================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
----------------------------------------------
<S> <C> <C>
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-3526 The Southern Company 58-0690070
(A Delaware Corporation)
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(770) 393-0650
1-3164 Alabama Power Company 63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35291
(205) 250-1000
1-6468 Georgia Power Company 58-0257110
(A Georgia Corporation)
333 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
(404) 526-6526
0-2429 Gulf Power Company 59-0276810
(A Maine Corporation)
500 Bayfront Parkway
Pensacola, Florida 32520
(904) 444-6111
0-6849 Mississippi Power Company 64-0205820
(A Mississippi Corporation)
2992 West Beach
Gulfport, Mississippi 39501
(601) 864-1211
1-5072 Savannah Electric and Power Company 58-0418070
(A Georgia Corporation)
600 East Bay Street
Savannah, Georgia 31401
(912) 644-7171
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Securities registered pursuant to Section 12(b) of the Act:*
Each of the following classes or series of securities registered pursuant to
Section 12(b) of the Act is registered on the New York Stock Exchange.
<S> <C>
Title of each class Registrant
Common Stock, $5 par value The Southern Company
-------------------------------------------------
Class A preferred, cumulative, $25 stated capital Alabama Power Company 7.60%
(First 1992 Series)6.80% Series 7.60% (Second 1992 Series)6.40% Series
Adjustable Rate (1993 Series)
First mortgage bonds
9 1/4% Series due 2021
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.375% Trust Preferred Securities**
-------------------------------------------------
Preferred stock, cumulative, $100 stated value Georgia Power Company
$7.72 Series
Class A preferred, cumulative, $25 stated value
$1.90 Series $1.9375 Series
$1.9875 Series Adjustable Rate (First 1993 Series)
$1.925 Series Adjustable Rate (Second 1993 Series)
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
9% Monthly Income Preferred Securities, Series A***
7.75% Trust Preferred Securities****
First mortgage bonds
6 1/8% Series due 1999 6 7/8% Series due 2002
----------------------------------------------------
* As of December 31, 1996.
** Issued by Alabama Power Capital Trust I and guaranteed by Alabama Power Company.
*** Issued by Georgia Power Capital, L.P. and guaranteed by Georgia Power Company.
**** Issued by Georgia Power Capital Trust I and guaranteed by Georgia Power Company.
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<S> <C>
Depositary preferred shares, each representing one-fourth Mississippi Power Company
of a share of preferred stock, cumulative, $100 par value
7.25% Series 6.32% Series
6.65% Series
-----------------------------------------------------
Preferred stock, cumulative, $25 par value Savannah Electric and Power Company
6.64% Series
Securities registered pursuant to Section 12(g) of the Act:*
Title of each class Registrant
Preferred stock, cumulative, $100 par value Alabama Power Company
4.20% Series 4.64% Series 5.96% Series
4.52% Series 4.72% Series 6.88% Series
4.60% Series 4.92% Series
Class A preferred, cumulative, $100,000 stated capital
Auction (1993 Series)
Class A preferred, cumulative, $100 stated capital
Auction (1988 Series)
--------------------------------------------------------
Preferred stock, cumulative, $100 stated value Georgia Power Company
$4.60 Series $4.72 Series $5.64 Series
$4.60 Series (1962) $4.92 Series $6.48 Series
$4.60 Series (1963) $4.96 Series $6.60 Series
$4.60 Series (1964) $5.00 Series
--------------------------------------------------------
Preferred stock, cumulative, $100 par value Gulf Power Company
4.64% Series 5.44% Series 7.88% Series
5.16% Series 7.52% Series
Class A preferred, cumulative, $10 par value, $25 stated capital
6.72% Series 7.00% Series 7.30% Series
Adjustable Rate (1993 Series)
--------------------------------------------------------
Preferred stock, cumulative, $100 par value Mississippi Power Company
4.40% Series 4.60% Series 4.72% Series
7.00% Series
* As of December 31, 1996.
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Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants' knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
Aggregate market value of voting stock held by non-affiliates of
The Southern Company at February 28, 1997: $14.7 billion. Each of such other
registrants is a wholly-owned subsidiary of The Southern Company and has no
voting stock other than its common stock. A description of registrants' common
stock follows:
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<CAPTION>
Description of Shares Outstanding
Registrant Common Stock at February 28, 1997
<S> <C> <C>
The Southern Company Par Value $5 Per Share 677,838,862
Alabama Power Company Par Value $40 Per Share 5,608,955
Georgia Power Company No Par Value 7,761,500
Gulf Power Company No Par Value 992,717
Mississippi Power Company Without Par Value 1,121,000
Savannah Electric and Power Company Par Value $5 Per Share 10,844,635
Documents incorporated by reference: specified portions of The Southern Company's Proxy Statement relating to the 1997
Annual Meeting of Stockholders are incorporated by reference into PART III.
This combined Form 10-K is separately filed by The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah
Electric and Power Company. Information contained herein relating to any individual company is filed by such company on its
own behalf. Each company makes no representation as to information relating to the other companies.
===============================================================================================================
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Table of Contents
Page
PART I
<S> <C> <C>
Item 1 Business
The SOUTHERN System.................................................................. I-1
New Business Development............................................................. I-2
Certain Factors Affecting the Industry............................................... I-3
Construction Programs................................................................ I-3
Financing Programs................................................................... I-5
Fuel Supply.......................................................................... I-7
Territory Served..................................................................... I-8
Competition.......................................................................... I-12
Regulation........................................................................... I-13
Rate Matters......................................................................... I-16
Employee Relations................................................................... I-17
Item 2 Properties............................................................................. I-19
Item 3 Legal Proceedings...................................................................... I-24
Item 4 Submission of Matters to a Vote of Security Holders.................................... I-24
Executive Officers of SOUTHERN......................................................... I-25
PART II
Item 5 Market for Registrants' Common Equity and Related Stockholder Matters.................. II-1
Item 6 Selected Financial Data................................................................ II-2
Item 7 Management's Discussion and Analysis of Results of Operations
and Financial Condition.............................................................. II-2
Item 8 Financial Statements and Supplementary Data............................................ II-3
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................................................. II-4
PART III
Item 10 Directors and Executive Officers of the Registrants................................... III-1
Item 11 Executive Compensation................................................................ III-13
Item 12 Security Ownership of Certain Beneficial Owners and
Management.......................................................................... III-30
Item 13 Certain Relationships and Related Transactions........................................ III-36
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K......................................................................... IV-1
i
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DEFINITIONS
When used in Items 1 through 5 and Items 10 through 14, the
following terms will have the meanings indicated. Other defined
terms specific only to Item 11 are found on page III-13.
Term Meaning
<S> <C>
AEC................................. Alabama Electric Cooperative, Inc.
AFUDC............................... Allowance for Funds Used During Construction
ALABAMA............................. Alabama Power Company
Alicura............................. Hidroelectrica Alicura, S.A. (Argentina)
AMEA................................ Alabama Municipal Electric Authority
CEPA................................ Consolidated Electric Power Asia
Clean Air Act....................... Clean Air Act Amendments of 1990
Dalton.............................. City of Dalton, Georgia
DOE................................. United States Department of Energy
Edelnor............................. Empresa Electrica del Norte Grande, S.A. (Chile)
Energy Act.......................... Energy Policy Act of 1992
EMF................................. Electromagnetic field
EWG................................. Exempt wholesale generator
EPA................................. United States Environmental Protection Agency
FERC................................ Federal Energy Regulatory Commission
FPC................................. Florida Power Corporation
FP&L................................ Florida Power & Light Company
Freeport............................ Freeport Power Company (Bahamas)
FUCO................................ Foreign utility company
GEORGIA............................. Georgia Power Company
GULF................................ Gulf Power Company
Gulf States......................... Gulf States Utilities Company
Holding Company Act................. Public Utility Holding Company Act of 1935, as amended
IBEW................................ International Brotherhood of Electrical Workers
IRS................................. Internal Revenue Service
JEA................................. Jacksonville Electric Authority
MEAG................................ Municipal Electric Authority of Georgia
MISSISSIPPI......................... Mississippi Power Company
Mobile Energy....................... Mobile Energy Services Company, L.L.C.
NRC................................. Nuclear Regulatory Commission
OPC................................. Oglethorpe Power Corporation
operating affiliates................ ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
PSC................................. Public Service Commission
RUS................................. Rural Utility Service (formerly Rural Electrification Administration)
SAVANNAH............................ Savannah Electric and Power Company
SCS................................. Southern Company Services, Inc.
SEC................................. Securities and Exchange Commission
SEGCO............................... Southern Electric Generating Company
SEPA................................ Southeastern Power Administration
SERC................................ Southeastern Electric Reliability Council
SMEPA............................... South Mississippi Electric Power Association
SOUTHERN............................ The Southern Company
Southern Communications............. Southern Communications Services, Inc.
Southern Development................ The Southern Development and Investment Group, Inc.
Southern Energy..................... Southern Energy, Inc. (formerly Southern Electric International, Inc.)
Southern Nuclear.................... Southern Nuclear Operating Company, Inc.
SOUTHERN system..................... SOUTHERN, the operating affiliates, SEGCO, Southern Energy,
Southern Nuclear, SCS, Southern Communications,
Southern Development and other subsidiaries
SWEB................................ South Western Electricity plc (United Kingdom)
TVA................................. Tennessee Valley Authority
ii
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<PAGE>
PART I
Item 1. BUSINESS
SOUTHERN was incorporated under the laws of Delaware on November 9, 1945.
SOUTHERN is domesticated under the laws of Georgia and is qualified to do
business as a foreign corporation under the laws of Alabama. SOUTHERN owns all
the outstanding common stock of ALABAMA, GEORGIA, GULF, MISSISSIPPI and
SAVANNAH, each of which is an operating public utility company. ALABAMA and
GEORGIA each own 50% of the outstanding common stock of SEGCO. The operating
affiliates supply electric service in the states of Alabama, Georgia, Florida,
Mississippi and Georgia, respectively, and SEGCO owns generating units at a
large electric generating station which supplies power to ALABAMA and GEORGIA.
More particular information relating to each of the operating affiliates is as
follows:
ALABAMA is a corporation organized under the laws of the State of Alabama
on November 10, 1927, by the consolidation of a predecessor Alabama Power
Company, Gulf Electric Company and Houston Power Company. The predecessor
Alabama Power Company had had a continuous existence since its
incorporation in 1906.
GEORGIA was incorporated under the laws of the State of Georgia on June
26, 1930, and admitted to do business in Alabama on September 15, 1948.
GULF is a corporation which was organized under the laws of the State of
Maine on November 2, 1925, and admitted to do business in Florida on
January 15, 1926, in Mississippi on October 25, 1976 and in Georgia on
November 20, 1984.
MISSISSIPPI was incorporated under the laws of the State of Mississippi on
July 12, 1972, was admitted to do business in Alabama on November 28,
1972, and effective December 21, 1972, by the merger into it of the
predecessor Mississippi Power Company, succeeded to the business and
properties of the latter company. The predecessor Mississippi Power
Company was incorporated under the laws of the State of Maine on November
24, 1924, and was admitted to do business in Mississippi on December 23,
1924, and in Alabama on December 7, 1962.
SAVANNAH is a corporation existing under the laws of the State of Georgia;
its charter was granted by the Secretary of State on August 5, 1921.
SOUTHERN also owns all the outstanding common stock of Southern Energy,
Southern Communications, Southern Nuclear, SCS (the system service company),
Southern Development and other direct and indirect subsidiaries. Southern Energy
designs, builds, owns and operates power production and delivery facilities and
provides a broad range of energy-related services in the United States and
international markets. A further description of Southern Energy's business and
organization follows later in this section under "New Business Development."
Southern Communications provides digital wireless communications services to
SOUTHERN's operating affiliates and also markets these services to the public
within the Southeast. Southern Nuclear provides services to the Southern
electric system's nuclear plants. Southern Development develops new business
opportunities related to energy products and services.
SEGCO owns electric generating units with an aggregate capacity of 1,019,680
kilowatts at Plant Gaston on the Coosa River near Wilsonville, Alabama, and
ALABAMA and GEORGIA are each entitled to one-half of SEGCO's capacity and
energy. ALABAMA acts as SEGCO's agent in the operation of SEGCO's units and
furnishes coal to SEGCO as fuel for its units. SEGCO also owns three 230,000
volt transmission lines extending from Plant Gaston to the Georgia state line at
which point connection is made with the GEORGIA transmission line system.
The SOUTHERN System
The transmission facilities of each of the operating affiliates and SEGCO are
connected to the respective company's own generating plants and other sources of
power and are interconnected with the transmission facilities of the other
operating affiliates and SEGCO by means of heavy-duty high voltage lines. (In
the case of GEORGIA's integrated transmission system, see Item 1 - BUSINESS -
"Territory Served" herein.)
Operating contracts covering arrangements in effect with principal
neighboring utility systems provide for capacity exchanges, capacity purchases
and sales, transfers of economy energy and other similar transactions.
I-1
<PAGE>
Additionally, the operating affiliates have entered into voluntary reliability
agreements with the subsidiaries of Entergy Corporation, Florida Electric Power
Coordinating Group and TVA and with Carolina Power & Light Company, Duke Power
Company, South Carolina Electric & Gas Company and Virginia Electric and Power
Company, each of which provides for the establishment and periodic review of
principles and procedures for planning and operation of generation and
transmission facilities, maintenance schedules, load retention programs,
emergency operations, and other matters affecting the reliability of bulk power
supply. The operating affiliates have joined with other utilities in the
Southeast (including those referred to above) to form the SERC to augment
further the reliability and adequacy of bulk power supply. Through the SERC, the
operating affiliates are represented on the National Electric Reliability
Council.
An intra-system interchange agreement provides for coordinating operations
of the power producing facilities of the operating affiliates and SEGCO and the
capacities available to such companies from non-affiliated sources and for the
pooling of surplus energy available for interchange. Coordinated operation of
the entire interconnected system is conducted through a central power supply
coordination office maintained by SCS. The available sources of energy are
allocated to the operating affiliates to provide the most economical sources of
power consistent with good operation. The resulting benefits and savings are
apportioned among the operating affiliates.
SCS has contracted with SOUTHERN, each operating affiliate, Southern Energy,
various of the other subsidiaries, Southern Nuclear and SEGCO to furnish, at
cost and upon request, the following services: general executive and advisory
services, power pool operations, general engineering, design engineering,
purchasing, accounting, finance and treasury, taxes, insurance and pensions,
corporate, rates, budgeting, public relations, employee relations, systems and
procedures and other services with respect to business and operations. Southern
Energy, Southern Development and Southern Communications have also secured from
the operating affiliates certain services which are furnished at cost.
Southern Nuclear has contracted with ALABAMA to operate its Farley Nuclear
Plant, as authorized by amendments to the plant operating licenses. Effective
March 22, 1997, Southern Nuclear, pursuant to a contract with GEORGIA, assumed
responsibility for the operation of plants Hatch and Vogtle, as authorized by
amendments to the operating licenses for both plants. See Item 1 BUSINESS -
"Regulation - Atomic Energy Act of 1954" herein.
New Business Development
SOUTHERN continues to consider new business opportunities, particularly those
which allow use of the expertise and resources developed through its regulated
utility experience. These endeavors began in 1981 and are conducted through
Southern Energy and other subsidiaries. SOUTHERN presently has authorization
from the SEC (the "SEC Order") which in effect will allow it to use the proceeds
from financings to increase its aggregate investment in EWGs and FUCOs up to an
amount not exceeding 100% of SOUTHERN's consolidated retained earnings. A
consumer group that had sought to intervene in the SEC proceeding has filed an
appeal with U.S. Court of Appeals for the 11th Circuit seeking judicial review
of the SEC Order. At December 31, 1996, SOUTHERN's consolidated retained
earnings amounted to $3,764 million, and its aggregate investment in EWGs and
FUCOs, after giving effect to the CEPA acquisition discussed below, amounted to
$2,524 million.
Southern Energy develops, builds, owns and operates both cogeneration and
independent power production and delivery facilities in the North American and
international market. Southern Energy's trading and marketing subsidiary
provides power marketing and energy trading services to wholesale and retail
customers in North America.
Reference is made to Note 15 to the financial statements of SOUTHERN in Item
8 herein for additional information regarding SOUTHERN's business segments and
geographic areas.
In 1995, SOUTHERN acquired SWEB, one of the United Kingdom's 12 regional
electric distribution companies, for approximately $1.8 billion. SWEB is, to
some extent, involved in power generation and certain non-regulated activities
which include gas supply and telecommunications. In early 1997, SOUTHERN
acquired an 80% interest in CEPA for a total net investment of $2.1 billion.
I-2
<PAGE>
CEPA is engaged in the business of developing, constructing, owning and
operating electric power generation facilities. Its current operations include
installed operating capacity of approximately 3,995 megawatts, with projects
either completed or under development in the Philippines, the People's Republic
of China, Indonesia and Pakistan. For additional information regarding the
acquisitions of SWEB and CEPA, reference is made to Note 14 to SOUTHERN's
financial statements in Item 8 herein.
See Item 2 - PROPERTIES - "Other Electric Generation Facilities" herein for
additional information regarding Southern Energy projects.
Southern Energy and Southern Development render consulting services and
market SOUTHERN system expertise in the United States and throughout the world.
They contract with other public utilities, commercial concerns and government
agencies for the rendition of services and the licensing of intellectual
property. More specifically, Southern Development is focusing on new and
existing programs to enhance customer satisfaction and efficiency and
stockholder value, such as: Good Cents, an energy efficiency program for
electric utility customers; EnerLink, a group of energy management products and
services for large commercial and industrial electricity users; Flywheel, an
energy storage device; PowerCall Security, a home security system; other energy
management programs under development; and telecommunications operations related
to energy management programs.
In 1995, Southern Communications began serving SOUTHERN's operating
affiliates and marketing its services to non-affiliates within the Southeast.
The system covers 122,000 square miles and combines the functions of two-way
radio dispatch, cellular phone, short text and numeric messaging and wireless
data transfer.
These continuing efforts to invest in and develop new business opportunities
offer the potential of earning returns which may exceed those of rate-regulated
operations. However, these activities also involve a higher degree of risk.
SOUTHERN expects to make substantial investments over the period 1997-1999 in
these and other new businesses.
Certain Factors Affecting the Industry
Various factors are currently affecting the electric utility industry in
general, including increasing competition and the regulatory changes related
thereto, costs required to comply with environmental regulations, and the
potential for new business opportunities (with their associated risks) outside
of traditional rate-regulated operations. The effects of these and other factors
on the SOUTHERN system are described herein; particular reference is made to
Item 1 - BUSINESS - "New Business Development," "Competition" and "Environmental
Regulation."
Construction Programs
The subsidiary companies of SOUTHERN are engaged in continuous construction
programs to accommodate existing and estimated future loads on their respective
systems. Construction additions or acquisitions of property during 1997 through
1999 by the operating affiliates, SEGCO, SCS, Southern Nuclear, Southern
Communications and Southern Energy are estimated as follows: (in millions)
---------------------------- -------- --------- ---------
1997 1998 1999
-------- --------- ---------
ALABAMA $ 425 $ 519 $ 622
GEORGIA 490 479 464
GULF 47 49 46
MISSISSIPPI 57 58 116
SAVANNAH 26 22 24
SEGCO 6 3 -
SCS 9 6 9
Southern Nuclear 1 1 1
Southern
Communications 78 31 12
Southern Energy* 250 132 120
========================= =========== ========= =========
SOUTHERN system $1,389 $1,300 $1,414
========================= =========== ========= =========
*These construction estimates do not include amounts which may be expended
by Southern Energy on future power production projects or by any subsidiaries
created to effect such future projects. (See Item 1 - BUSINESS - "New Business
Development" herein.)
I-3
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Estimated construction costs in 1997 are expected to be apportioned approximately as follows: (in millions)
- ----------------------------------------------------------------------------------------------------------------------------------
SOUTHERN
system* ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
--------------- --------------- ---------------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Combustion turbines $ 10 $ 6 $ 15 $ - $ 3 $ -
Other generating
facilities including
associated plant 333 85 66 7 12 6
substations
New business 319 122 154 19 12 12
Transmission 134 63 54 4 12 1
Joint line and substation 22 - 21 1 - -
Distribution 233 60 36 9 12 4
Nuclear fuel 110 39 71 - - -
General plant 228 50 73 7 6 3
--------------- --------------- ---------------- ----------- ---------------- -----------------
$1,389 $425 $490 $47 $57 $26
=============== =============== ================ =========== ================ =================
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*Southern Communications, SCS and Southern Nuclear plan capital additions to
general plant in 1997 of $78 million, $9 million and $1 million, respectively,
while SEGCO plans capital additions of $6 million to generating facilities.
Southern Energy plans capital additions of $137 million to generating
facilities, $112 million to distribution facilities, and $1 million to general
plant. These estimates do not reflect the possibility of Southern Energy's
securing a contract(s) to buy or build additional generating facilities. (See
Item 1 - BUSINESS - "New Business Development" herein.)
The construction programs are subject to periodic review and revision, and
actual construction costs may vary from the above estimates because of numerous
factors. These factors include changes in business conditions; revised load
projections; changes in environmental regulations; changes in existing nuclear
plants to meet new regulatory requirements; increasing costs of labor, equipment
and materials; and cost of capital.
The operating affiliates do not have any new traditional baseload generating
plants under construction. However, within the service area, the construction of
combustion turbine peaking units with an aggregate capacity of approximately 600
megawatts is planned to be completed by 1998. In addition, significant
construction related to transmission and distribution facilities and the
upgrading and extension of the useful lives of generating plants will continue.
(See Item 2 - PROPERTIES - "Other Electric Generation Facilities" herein for
additional information relating to facilities under development.)
In 1991, the Georgia legislature passed legislation which requires GEORGIA
and SAVANNAH each to file an Integrated Resource Plan for approval by the
Georgia PSC. Under the plan rules, the Georgia PSC must pre-certify the
construction of new power plants and new purchase power contracts. (See Item 1 -
BUSINESS - "Rate Matters - Integrated Resource Planning" herein.)
See Item 1 - BUSINESS - "Regulation - Environmental Regulation" herein for
information with respect to certain existing and proposed environmental
requirements and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for
additional information concerning ALABAMA's and GEORGIA's joint ownership of
certain generating units and related facilities with certain non-affiliated
utilities.
I-4
<PAGE>
Financing Programs
SOUTHERN plans to issue additional equity capital in 1997. The amount and timing
of additional equity capital to be raised in 1997, as well as subsequent years,
will be contingent on SOUTHERN's investment opportunities, primarily through
Southern Energy. Equity capital can be provided from any combination of public
offerings, private placements, or SOUTHERN's stock plans. The operating
affiliates' construction programs are expected to be financed primarily from
internal sources. Short-term debt will be utilized as appropriate at SOUTHERN
and the operating affiliates. The operating affiliates may issue additional
long-term debt and preferred securities primarily for the purposes of debt
maturities and for redeeming higher-cost securities if market conditions permit.
In order to issue first mortgage bonds and preferred stock, each of the
operating affiliates must comply with earnings coverage requirements contained
in its respective mortgage and charter. These provisions require, for the
issuance of additional first mortgage bonds, a minimum, before income tax,
earnings coverage of twice the pro forma annual interest charges on first
mortgage bonds and indebtedness secured by prior or equal ranking lien and, for
the issuance of additional preferred stock, a minimum, after income tax,
earnings coverage of one and one-half times pro forma annual interest charges
and preferred stock dividends, in each case for a period of twelve consecutive
calendar months within the fifteen calendar months immediately preceding the
proposed new issue. The ability to issue securities in the future will depend on
coverages at that time. Currently each of the operating affiliates expects to
have adequate coverage ratios for anticipated requirements through at least
1999.
The amounts of securities representing short-term unsecured indebtedness
allowable under the respective charters, and the maximum amounts of short-term
or term-loan indebtedness authorized by the appropriate regulatory authorities,
are shown in the following table:
------------------------------------------------------
Short-Term Unsecured Indebtedness
------------------------------------------------------
Allowable
Under Charter
at December 31, 1996
Percent of
Secured
Indebtedness
and Other
Amount Capital (2)
------------- -------------------
(Millions)
ALABAMA $ 1,111 20%
GEORGIA 1,549 20
GULF 90 10
MISSISSIPPI 141 20
SAVANNAH 70 20
SOUTHERN (1) (1)
----------------- ------------- -- -------------------
------------------------------------------------------
Short-Term or Term-Loan Indebtedness
------------------------------------------------------
Maximum Regulatory
Authorization
Outstanding at
Amount December 31, 1996
------------ ---------------------
(Millions)
ALABAMA $ 750 (3) $365
GEORGIA 1,700 (4) 430
GULF 300 (3) 76
MISSISSIPPI 350 (3) 80
SAVANNAH 90 (4) 35
SOUTHERN 2,000 (3) 67
------------------------------------------------------
Notes:
(1) No limitation.
(2) Under the provisions of the respective charters, GEORGIA's,
MISSISSIPPI's and SAVANNAH's preferred stockholders have approved increases in
the amounts of securities representing short-term unsecured indebtedness which
the companies may have outstanding until July 1 in 2003, 1999 and 1999,
respectively. Such limitations were increased from 10% of secured indebtedness
and other capital to 20% thereof. These approved increases are reflected in the
above table.
I-5
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(3) ALABAMA's authority is based on authorization received from the Alabama
PSC, which expires December 31, 1998. No SEC authorization is required for
ALABAMA. GULF, MISSISSIPPI and SOUTHERN have received SEC authorization to issue
from time to time short-term and/or term-loan notes to banks and commercial
paper to dealers in the amounts shown through December 31, 2003, December 31,
2002 and March 31, 2001, respectively.
(4) GEORGIA and SAVANNAH have received SEC authorization to issue from time
to time short-term and term-loan notes to banks and commercial paper to dealers
in the amounts shown through December 31, 2002. Authorization for term-loan
indebtedness is also required by and has been received from the Georgia PSC.
Currently, GEORGIA and SAVANNAH have remaining authority from the Georgia PSC of
$471 million and $110 million expiring December 31, 1997 and December 31, 1998,
respectively.
Reference is made to Note 5 to the financial statements for SOUTHERN,
ALABAMA, GULF, MISSISSIPPI and SAVANNAH and Note 9 to the financial statements
for GEORGIA in Item 8 herein for information regarding the registrants' credit
arrangements.
I-6
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Fuel Supply
The operating affiliates' and SEGCO's supply of electricity is derived
predominantly from coal. The sources of generation for the years 1994 through
1996 and the estimates for 1997 are shown below:
Oil and
ALABAMA Coal Nuclear Hydro Gas
--------- ---------- --------- ---------
1994 68% 23% 9% *
1995 73 19 8 *
1996 72 20 8 *
1997 74 19 7 *
GEORGIA
1994 75 22 3 *
1995 74 22 3 1
1996 74 22 3 1
1997 77 21 2 *
GULF
1994 100 ** ** *
1995 99 ** ** 1
1996 99 ** ** 1
1997 99 ** ** 1
MISSISSIPPI
1994 85 ** ** 15
1995 79 ** ** 21
1996 85 ** ** 15
1997 83 ** ** 17
SAVANNAH
1994 91 ** ** 9
1995 80 ** ** 20
1996 90 ** ** 10
1997 92 ** ** 8
SEGCO
1994 100 ** ** *
1995 100 ** ** *
1996 100 ** ** *
1997 100 ** ** *
SOUTHERN system***
1994 75 19 5 1
1995 77 17 4 2
1996 77 17 4 2
1997 78 17 4 1
-------- ------- --------- ---------- --------- ---------
*Less than 0.5%.
**Not applicable.
***Amounts shown for the SOUTHERN system are weighted
averages of the operating affiliates and SEGCO.
The average costs of fuel in cents per net kilowatt-hour generated for 1994
through 1996 are shown below:
Oil and Weighted
ALABAMA Coal Nuclear Gas Average
--------- ---------- ----------- -----------
1994 1.92 0.49 * 1.56
1995 1.71 0.50 * 1.48
1996 1.71 0.50 * 1.46
GEORGIA
1994 1.67 0.63 * 1.44
1995 1.67 0.60 4.68 1.44
1996 1.55 0.55 5.50 1.35
GULF
1994 2.00 ** * 2.01
1995 2.08 ** 3.56 2.09
1996 1.99 ** 6.41 2.02
MISSISSIPPI
1994 1.67 ** 2.60 1.71
1995 1.58 ** 2.33 1.64
1996 1.43 ** 4.32 1.57
SAVANNAH
1994 2.19 ** 4.72 2.42
1995 1.77 ** 3.80 2.18
1996 1.76 ** 8.41 2.42
SEGCO
1994 1.83 ** * 1.83
1995 1.87 ** * 1.87
1996 1.72 ** * 1.72
SOUTHERN system***
1994 1.80 0.56 3.99 1.56
1995 1.73 0.56 3.37 1.53
1996 1.65 0.52 5.20 1.48
-------- -------- ------------ ---------- ---------- -----------
*Not meaningful because of minimal generation from fuel
source.
**Not applicable.
***Amounts shown for the SOUTHERN system are weighted
averages of the operating affiliates and SEGCO.
See SELECTED FINANCIAL DATA in Item 6 herein for each registrant's source
of energy supply.
I-7
<PAGE>
As of February 14, 1997, the operating affiliates and SEGCO had stockpiles
of coal on hand at their respective coal-fired plants which represented an
estimated 23 days of recoverable supply for bituminous coal and 30 days for
sub-bituminous coal. It is estimated that approximately 61.3 million tons of
coal will be consumed in 1997 by the operating affiliates and SEGCO (including
those units GEORGIA owns jointly with OPC, MEAG and Dalton and operates for FP&L
and JEA and the units ALABAMA owns jointly with AEC). The operating affiliates
and SEGCO currently have 39 coal contracts. These contracts cover remaining
terms of up to 15 years. Approximately 22% of 1997 estimated coal requirements
will be purchased in the spot market. Management has set a goal whereby the spot
market should be utilized, absent the transition from coal contract expirations,
for 20 to 30% of the SOUTHERN system's coal supply. Additionally, it has been
determined that approximately 30 days of recoverable supply is the appropriate
level for coal stockpiles. During 1996, the operating affiliates' and SEGCO's
average price of coal delivered was approximately $38 per ton.
The typical sulfur content of coal purchased under contracts ranges from
approximately 0.49% to 2.76% sulfur by weight. Fuel sulfur restrictions and
other environmental limitations have increased significantly and may increase
further the difficulty and cost of obtaining an adequate coal supply. See Item 1
- - BUSINESS - "Regulation - Environmental Regulation" herein.
Changes in fuel prices are generally reflected in fuel adjustment clauses
contained in rate schedules. See Item 1 - BUSINESS - "Rate Matters - Rate
Structure" herein.
ALABAMA owns coal lands and mineral rights in the Warrior Coal Field,
located northwest of Birmingham in the vicinity of its Gorgas Steam Plant. SEGCO
also owns coal reserves in the Warrior Coal Field and in the Cahaba Coal Field,
which is located southwest of Birmingham. ALABAMA has agreements with
non-affiliated industrial and mining firms to mine coal from ALABAMA's reserves,
as well as their own reserves, for supply to ALABAMA's generating units.
The operating affiliates have renegotiated, bought out or otherwise
terminated various coal supply contracts. For more information on certain of
these transactions, see Note 5 to the financial statements of GULF in Item 8
herein.
ALABAMA and GEORGIA have numerous contracts covering a portion of their
nuclear fuel needs for uranium, conversion services, enrichment services and
fuel fabrication. These contracts have varying expiration dates and most are
short to medium term (less than 10 years). Management believes that sufficient
capacity for nuclear fuel supplies and processing exists to preclude the
impairment of normal operations of the SOUTHERN system's nuclear generating
units.
ALABAMA and GEORGIA have contracts with the DOE that provide 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 2003 at Plant
Hatch, into 2008 at Plant Vogtle, and into 2010 and 2013 at Plant Farley units 1
and 2, respectively. Activities for adding dry cask storage capacity at Plant
Hatch by as early as 1999 are in progress.
The Energy Act imposed upon utilities with nuclear plants, including ALABAMA
and GEORGIA, obligations for the decontamination and decommissioning of federal
nuclear fuel enrichment facilities. See Note 1 to SOUTHERN's, ALABAMA's and
GEORGIA's financial statements in Item 8 herein.
Territory Served
The territory in which the operating affiliates provide electric service
comprises most of the states of Alabama and Georgia together with the
northwestern portion of Florida and southeastern Mississippi. In this territory
there are non-affiliated electric distribution systems which obtain some or all
of their power requirements either directly or indirectly from the operating
affiliates. The territory has an area of approximately 120,000 square miles and
an estimated population of approximately 11 million.
I-8
<PAGE>
ALABAMA is engaged, within the State of Alabama, in the generation and
purchase of electricity and the distribution and sale of such electricity at
retail in over 1,000 communities (including Anniston, Birmingham, Gadsden,
Mobile, Montgomery and Tuscaloosa) and at wholesale to 15 municipally-owned
electric distribution systems, 11 of which are served indirectly through sales
to AMEA, and two rural distributing cooperative associations. ALABAMA also
supplies steam service in downtown Birmingham. ALABAMA owns coal reserves near
its steam-electric generating plant at Gorgas and uses the output of coal from
these reserves in some of its generating plants. ALABAMA also sells, and
cooperates with dealers in promoting the sale of, electric appliances.
GEORGIA is engaged in the generation and purchase of electricity and the
distribution and sale of such electricity within the State of Georgia at retail
in over 600 communities (including Athens, Atlanta, Augusta, Columbus, Macon,
Rome and Valdosta), as well as in rural areas, and at wholesale currently to 39
electric cooperative associations through OPC, a corporate cooperative of
electric membership cooperatives in Georgia, and to 50 municipalities, 48 of
which are served through MEAG, a public corporation and an instrumentality of
the State of Georgia.
GULF is engaged, within the northwestern portion of Florida, in the
generation and purchase of electricity and the distribution and sale of such
electricity at retail in 71 communities (including Pensacola, Panama City and
Fort Walton Beach), as well as in rural areas, and at wholesale to a
non-affiliated utility and a municipality. GULF also sells electric appliances.
MISSISSIPPI is engaged in the generation and purchase of electricity and the
distribution and sale of such energy within the 23 counties of southeastern
Mississippi, at retail in 123 communities (including Biloxi, Gulfport,
Hattiesburg, Laurel, Meridian and Pascagoula), as well as in rural areas, and at
wholesale to one municipality, six rural electric distribution cooperative
associations and one generating and transmitting cooperative.
SAVANNAH is engaged, within a five-county area in eastern Georgia, in the
generation and purchase of electricity and the distribution and sale of such
electricity at retail and, as a member of the SOUTHERN system power pool, the
transmission and sale of wholesale energy.
The sources of revenues for the SOUTHERN system and each of SOUTHERN's
operating affiliates are shown in Item 6 herein. For the year ended December 31,
1996, the registrants derived their respective industrial revenues as shown in
the following table.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
SOUTHERN
system ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Textiles 13% 10% 18% *% 4% -%
Chemical 11 16 6 19 14 32
Paper 10 10 11 10 5 31
Primary metal 8 14 5 1 2 -
Stone, clay, glass
and concrete 7 7 8 2 1 4
Utility services 9 9 9 3 10 5
Food 5 4 6 1 5 9
Government 5 2 4 41 10 -
2
Transportation equipment 3 2 4 1 6 10
21
Lumber and wood products 4 5 3 2 9 2
Other** 25 21 26 20 34 7
======================================================================================================== ==================
100% 100% 100% 100% 100% 100%
======================================================================================================== ==================
*Less than 0.5%.
**Other major sources (5% or more) of industrial revenues were: ALABAMA, coal
mining (5%); GULF, oil and gas extraction (9%); and MISSISSIPPI, petroleum
refining (20%) and electric machinery (5%).
</TABLE>
I-9
<PAGE>
A portion of the area served by SOUTHERN's operating affiliates adjoins the
area served by TVA and its municipal and cooperative distributors. An Act of
Congress limits the distribution of TVA power, unless otherwise authorized by
Congress, to specified areas or customers which generally were those served
on July 1, 1957.
The RUS has authority to make loans to cooperative associations or
corporations to enable them to provide electric service to customers in rural
sections of the country. There are 71 electric cooperative organizations
operating in the territory in which the operating affiliates provide electric
service at retail or wholesale.
One of these, AEC, is a generating and transmitting cooperative selling
power to several distributing cooperatives, municipal systems and other
customers in south Alabama and northwest Florida. AEC owns generating units with
approximately 840 megawatts of nameplate capacity, including an undivided
ownership interest in ALABAMA's Plant Miller Units 1 and 2. AEC's facilities
were financed with RUS loans secured by long-term contracts requiring
distributing cooperatives to take their requirements from AEC to the extent such
energy is available. Two of the 14 distributing cooperatives operating in
ALABAMA's service territory obtain a portion of their power requirements
directly from ALABAMA.
Four electric cooperative associations, financed by the RUS, operate within
GULF's service area. These cooperatives purchase their full requirements from
AEC and SEPA. A non-affiliated utility also operates within GULF's service area
and purchases a portion of its requirements from GULF.
ALABAMA and GULF have entered into separate agreements with AEC involving
interconnection between the respective systems and, in the case of ALABAMA, the
delivery of capacity and energy from AEC to certain distributing cooperatives.
The rates for the various services provided by ALABAMA and GULF to AEC are based
on formulary approaches which result in the charges by each company being
updated annually, subject to FERC approval. See Item 2 - PROPERTIES -
"Jointly-Owned Facilities" herein for details of ALABAMA's joint-ownership with
AEC of a portion of Plant Miller.
Another of the 71 electric cooperatives is SMEPA, also a generating and
transmitting cooperative. SMEPA has a generating capacity of 739,000 kilowatts
and a transmission system estimated to be 1,357 miles in length. MISSISSIPPI has
an interchange agreement with SMEPA pursuant to which various services are
provided, including the furnishing of protective capacity by MISSISSIPPI to
SMEPA.
There are 43 electric cooperative organizations operating in, or in areas
adjoining, territory in the State of Georgia in which GEORGIA provides electric
service at retail or wholesale. Three of these organizations obtain their power
from TVA and one from other sources. Since July 1, 1975, OPC has supplied the
requirements of the remaining 39 of these cooperative organizations from
self-owned generation acquired from GEORGIA and, until September 1991, through
partial requirements purchases from GEORGIA. GEORGIA entered into an agreement
with OPC pursuant to which, effective in September 1991, OPC ceased to be a
partial requirements wholesale customer of GEORGIA. Instead, OPC began the
purchase of 1,250 megawatts of capacity from GEORGIA through 1999, subject to
reduction or extension by OPC, and may satisfy the balance of its needs through
purchases from others. Beginning in September 1996, OPC decreased its purchases
of capacity by 250 megawatts and has notified GEORGIA of its intent to decrease
purchases of capacity by an additional 250 megawatts in September 1997, and an
additional 250 megawatts in September 1998. Under the amended 1995 Integrated
Resource Plan approved by the Georgia PSC on March 4, 1997, these resources will
be used to meet the needs of GEORGIA's retail customers through 2004.
There are 65 municipally-owned electric distribution systems operating in
the territory in which SOUTHERN's operating affiliates provide electric service
at retail or wholesale.
AMEA was organized under an act of the Alabama legislature and is comprised
of 11 municipalities. In 1986, ALABAMA entered into a firm power purchase
contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum
of 100 megawatts) for a period of 15 years commencing September 1, 1986. In
October 1991, ALABAMA entered into a second firm power purchase contract with
I-10
<PAGE>
AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80
megawatts) for a period of 15 years commencing October 1, 1991. In both
contracts the power will be sold to AMEA for its member municipalities that
previously were served directly by ALABAMA as wholesale customers. Under the
terms of the contracts, ALABAMA received payments from AMEA representing the net
present value of the revenues associated with the respective capacity
entitlements. See Note 7 to ALABAMA's financial statements in Item 8 herein for
further information on these contracts.
Forty-seven municipally-owned electric distribution systems formerly served
on a full requirements wholesale basis by GEORGIA and one county-owned system
now receive their requirements through MEAG, which was established by a state
statute in 1975. MEAG serves these requirements from self-owned generation
facilities acquired from GEORGIA and through purchases of capacity and energy
from GEORGIA under partial requirements rates. On January 10, 1997, GEORGIA and
MEAG reached an agreement to enter into a new power supply relationship which
would replace in their entirety the partial requirements tariff and the
scheduling services agreement between GEORGIA and MEAG. The agreement required
the parties to formalize a new contractual relationship and file the new
contract with the FERC for approval. Similarly, since 1977 Dalton has filled its
requirements from generation facilities acquired from GEORGIA and through
partial requirements purchases. One municipally-owned electric distribution
system's full requirements are served under a market-based contract by GEORGIA.
(See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.)
GULF and MISSISSIPPI provide wholesale requirements for one municipal system
each.
GEORGIA has entered into substantially similar agreements with OPC, MEAG and
Dalton providing for the establishment of an integrated transmission system to
carry the power and energy of each. The agreements require an investment by each
party in the integrated transmission system in proportion to its respective
share of the aggregate system load. (See Item 2 - PROPERTIES - "Jointly-Owned
Facilities" herein.)
SCS, acting on behalf of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
also has a contract with SEPA (a federal power marketing agency) providing for
the use of those companies' facilities at government expense to deliver to
certain cooperatives and municipalities, entitled by federal statute to
preference in the purchase of power from SEPA, quantities of power equivalent to
the amounts of power allocated to them by SEPA from certain United States
Government hydroelectric projects.
The retail service rights of all electric suppliers in the State of Georgia
are regulated by the 1973 State Territorial Electric Service Act. Pursuant to
the provisions of this Act, all areas within existing municipal limits were
assigned to the primary electric supplier therein on March 29, 1973 (451
municipalities, including Atlanta, Columbus, Macon, Augusta, Athens, Rome and
Valdosta, to GEORGIA; 115 to electric cooperatives; and 50 to publicly-owned
systems). Areas outside of such municipal limits were either to be assigned or
to be declared open for customer choice of supplier by action of the Georgia PSC
pursuant to standards set forth in the Act. Consistent with such standards, the
Georgia PSC has assigned substantially all of the land area in the state to a
supplier. Notwithstanding such assignments, the Act provides that any new
customer locating outside of 1973 municipal limits and having a connected load
of at least 900 kilowatts may receive electric service from the supplier of its
choice. (See also Item 1 - BUSINESS - "Competition" herein.)
Under and subject to the provisions of its franchises and concessions and
the 1973 State Territorial Electric Service Act, SAVANNAH has the full but
nonexclusive right to serve the City of Savannah, the Towns of Bloomingdale,
Pooler, Garden City, Guyton, Newington, Oliver, Port Wentworth, Rincon, Tybee
Island, Springfield, Thunderbolt, Vernonburg, and in conjunction with a
secondary supplier, the Town of Richmond Hill. In addition, SAVANNAH has been
assigned certain unincorporated areas in Chatham, Effingham, Bryan, Bulloch and
Screven Counties by the Georgia PSC. (See also Item 1 - BUSINESS - "Competition"
herein.)
I-11
<PAGE>
Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather
Certificates" of convenience and necessity to MISSISSIPPI and to six
distribution rural cooperatives operating in southeastern Mississippi, then
served in whole or in part by MISSISSIPPI, authorizing them to distribute
electricity in certain specified geographically described areas of the state.
The six cooperatives serve approximately 300,000 retail customers in a
certificated area of approximately 10,300 square miles. In areas included in a
"Grandfather Certificate," the utility holding such certificate may, without
further certification, extend its lines up to five miles; other extensions
within that area by such utility, or by other utilities, may not be made except
upon a showing of, and a grant of a certificate of, public convenience and
necessity. Areas included in such a certificate which are subsequently annexed
to municipalities may continue to be served by the holder of the certificate,
irrespective of whether it has a franchise in the annexing municipality. On the
other hand, the holder of the municipal franchise may not extend service into
such newly annexed area without authorization by the Mississippi PSC.
Long-Term Power Sales Agreements
Reference is made to Note 7 to the financial statements for SOUTHERN, ALABAMA,
GEORGIA, GULF and MISSISSIPPI in Item 8 herein for information regarding
contracts for the sales of capacity and energy to non-territorial customers.
Competition
The electric utility industry in general has become, and is expected to continue
to be, increasingly competitive as the result of factors including regulatory
and technological developments. The Energy Act, enacted in 1992, was intended to
foster competition in the wholesale market by, among other things, facilitating
participation by independent power producers. The Energy Act includes provisions
authorizing the FERC under certain conditions to order utilities owning
transmission facilities to provide wholesale transmission services for other
utilities or entities that generate energy.
Various federal and state initiatives designed to promote wholesale and
retail competition include, among other things, proposals that would allow
customers to choose their electricity provider. As the initiatives materialize,
the structure of the utility industry could radically change. Certain
initiatives could result in a change in the ownership and/or operation of
generation and transmission facilities. Numerous issues must be resolved,
including significant ones relating to transmission pricing and recovery of
stranded investments. Being a low-cost producer could provide significant
opportunities to increase market share and profitability in markets that evolve
with changing regulation. Unless SOUTHERN remains a low-cost producer and
provides quality service, SOUTHERN's retail energy sales could be limited, and
this could significantly erode earnings. Reference is made to each registrant's
"Management's Discussion and Analysis - Future Earnings Potential" in Item 7
herein for further discussion of competition.
In order to adapt to the increasingly competitive environment in which they
operate, SOUTHERN and the operating affiliates will evaluate and consider a wide
array of potential business strategies. These may include business combinations
or acquisitions involving other utility or non-utility businesses or properties,
internal restructurings or reorganizations involving SOUTHERN, the operating
affiliates or some combination thereof or dispositions of currently owned
properties or currently operated business units. In addition to power marketing
activities, SOUTHERN and the operating affiliates may engage in other new
business ventures which arise from competitive and regulatory changes in the
utility industry. Pursuit of any of the above strategies, or any combination
thereof, may significantly affect the business operations and financial
condition of SOUTHERN and the operating affiliates. (See Item 1 - BUSINESS -
"New Business Development" herein.)
As a result of the foregoing factors, SOUTHERN has experienced increasing
competition for available off-system sales of capacity and energy from
I-12
<PAGE>
neighboring utilities and alternative sources of energy. Additionally, the
future effect of cogeneration and small-power production facilities on the
SOUTHERN system cannot currently be determined but may be adverse.
ALABAMA currently has cogeneration contracts in effect with nine industrial
customers. Under the terms of these contracts, ALABAMA purchases excess
generation of such companies. During 1996, ALABAMA purchased approximately 77
million kilowatt-hours from such companies at a cost of $1.2 million. ALABAMA
has entered into agreements with two of its industrial customers to construct
cogeneration facilities at their premises. For additional information, reference
is made to ALABAMA's "Management's Discussion and Analysis - Capital
Requirements" in Item 7 herein.
GEORGIA currently has cogeneration contracts in effect with seven industrial
customers. Under the terms of these contracts, GEORGIA purchases excess
generation of such companies. During 1996, GEORGIA purchased 5 million
kilowatt-hours from such companies at a cost of $119,000. GEORGIA has entered
into a 30-year purchase power agreement, scheduled to begin in June 1998, for
electricity during peaking periods from a planned 300-megawatt cogeneration
facility. Payments are subject to reductions for failure to meet minimum
capacity output. Reference is made to Note 4 to the financial statements for
GEORGIA in Item 8 herein for information regarding purchase power commitments.
GULF currently has cogeneration agreements for "as available" energy in
effect with two industrial customers. During 1996, GULF purchased 82 million
kilowatt-hours from such companies for $1.8 million.
MISSISSIPPI entered into agreements to purchase summer peaking power and
options for power for the years 1996 through 2000. Also, the Company has
purchased options from power marketers. Reference is made to Note 5 to the
financial statements for MISSISSIPPI in Item 8 herein for information regarding
fuel and purchased power commitments.
SAVANNAH currently has cogeneration contracts in effect with four industrial
customers. Under the terms of these contracts, SAVANNAH purchases excess
generation of such companies. During 1996, SAVANNAH purchased 2 million
kilowatt-hours from such companies at a cost of $56,000.
The competition for retail energy sales among competing suppliers of energy
is influenced by various factors, including price, availability, technological
advancements and reliability. These factors are, in turn, affected by, among
other influences, regulatory, political and environmental considerations,
taxation and supply.
The operating affiliates have experienced, and expect to continue to
experience, competition in their respective retail service territories in
varying degrees as the result of self-generation (as described above) and fuel
switching by customers and other factors. (See also Item 1 - BUSINESS -
"Territory Served" herein for information concerning suppliers of electricity
operating within or near the areas served at retail by the operating
affiliates.)
Regulation
State Commissions
The operating affiliates and SEGCO are subject to the jurisdiction of their
respective state regulatory commissions, which have broad powers of supervision
and regulation over public utilities operating in the respective states,
including their rates, service regulations, sales of securities (except for the
Mississippi PSC) and, in the cases of the Georgia PSC and Mississippi PSC, in
part, retail service territories. (See Item 1 - BUSINESS - "Rate Matters" and
"Territory Served" herein.)
Holding Company Act
SOUTHERN is registered as a holding company under the Holding Company Act, and
it and its subsidiary companies are subject to the regulatory provisions of said
Act, including provisions relating to the issuance of securities, sales and
acquisitions of securities and utility assets, services performed by SCS and
Southern Nuclear, and the activities of certain of SOUTHERN's special purpose
subsidiaries.
I-13
<PAGE>
In June 1995, the Division of Investment Management of the SEC issued a
report on its study of the regulation of public-utility holding companies.
Concluding that significant changes in the current regulatory system are needed,
the report offers various legislative and administrative recommendations for
reform. The legislative option preferred by the Division in the report is repeal
of the Holding Company Act coupled with new provisions for state access to books
and records of holding company system companies and for federal audit authority
and oversight of intrasystem transactions. However, the prospects for
legislative reform of the Holding Company Act are uncertain at this time.
Federal Power Act
The Federal Power Act subjects the operating affiliates and SEGCO to regulation
by the FERC as companies engaged in the transmission or sale at wholesale of
electric energy in interstate commerce, including regulation of accounting
policies and practices.
ALABAMA and GEORGIA are also subject to the provisions of the Federal Power
Act or the earlier Federal Water Power Act applicable to licensees with respect
to their hydroelectric developments. Among the hydroelectric projects subject to
licensing by the FERC are 14 existing ALABAMA generating stations having an
aggregate installed capacity of 1,582,725 kilowatts and 18 existing GEORGIA
generating stations having an aggregate installed capacity of 1,074,696
kilowatts.
The FERC granted three of GEORGIA's hydroelectric projects, the Lloyd
Shoals, Langdale and Riverview new 30-year licenses that expire on January 1,
2024. The North Georgia Project was issued a new 40-year license effective
October 1, 1996. There are numerous articles in this new license which require
releases from some of the dams. These releases include those for minimum flows,
aesthetics, and whitewater recreation. Reservoir level fluctuation limitations
are also present. Additionally, the FERC has issued an order granting a
combined, 40-year license for ALABAMA's Yates and Thurlow projects. As a part of
the application for the combined, 40-year license for the Yates and Thurlow
projects, ALABAMA agreed to expand the capacity of these units by a total of
approximately 10 megawatts.
The FERC granted GEORGIA a new license, effective May 1, 1996, for Sinclair
Dam. The license articles contain requirements to modify operational and minimum
flows to enhance the environment for the robust redhorse (a threatened or
endangered candidate species). License articles also cover issues such as:
operation of spillway gates, establishment of flow monitoring committees, and
recreational enhancements.
GEORGIA filed, in September, 1996, with the FERC, a notice of its intent to
seek a new license for the Flint River Project. Currently GEORGIA is awaiting a
decision from the FERC as to whether or not the FERC has jurisdiction over this
station. If the FERC determines it does not, then dam safety responsibilities
shift to the State of Georgia and GEORGIA would not incur relicensing costs
other than those incurred to date.
GEORGIA and OPC also have a license, expiring in 2027, for the Rocky
Mountain Plant, a pure pumped storage facility of 847,800 kilowatt capacity
which began commercial operation in 1995. (See Item 2 - PROPERTIES -
"Jointly-Owned Facilities" herein and Note 3 to SOUTHERN's and GEORGIA's
financial statements in Item 8 herein for additional information.)
Licenses for all projects, excluding those discussed above, expire in the
period 2007-2023 in the case of ALABAMA's projects and in the period 2005-2020
in the case of GEORGIA's projects.
Upon or after the expiration of each license, the United States Government,
by act of Congress, may take over the project, or the FERC may relicense the
project either to the original licensee or to a new licensee. In the event of
takeover or relicensing to another, the original licensee is to be compensated
in accordance with the provisions of the Federal Power Act, such compensation to
reflect the net investment of the licensee in the project, not in excess of the
fair value of the property taken, plus reasonable damages to other property of
the licensee resulting from the severance therefrom of the property taken.
Atomic Energy Act of 1954
ALABAMA, GEORGIA and Southern Nuclear are subject to the provisions of the
Atomic Energy Act of 1954, as amended, which vests jurisdiction in the NRC over
I-14
<PAGE>
the construction and operation of nuclear reactors, particularly with regard to
certain public health and safety and antitrust matters. The National
Environmental Policy Act has been construed to expand the jurisdiction of the
NRC to consider the environmental impact of a facility licensed under the Atomic
Energy Act of 1954, as amended.
Reference is made to Notes 1 and 13 to SOUTHERN's, Notes 1 and 12 to
ALABAMA's and Notes 1 and 5 to GEORGIA's financial statements in Item 8 herein
for information on nuclear decommissioning costs and nuclear insurance.
Additionally, Note 3 to GEORGIA's financial statements contains information
regarding nuclear performance standards imposed by the Georgia PSC that may
impact retail rates.
Environmental Regulation
The operating affiliates and SEGCO are subject to federal, state and local
environmental requirements which, among other things, control emissions of
particulates, sulfur dioxide and nitrogen oxides into the air; the use,
transportation, storage and disposal of hazardous and toxic waste; and
discharges of pollutants, including thermal discharges, into waters of the
United States. The operating affiliates and SEGCO expect to comply with such
requirements, which generally are becoming increasingly stringent, through
technical improvements, the use of appropriate combinations of low-sulfur fuel
and chemicals, addition of environmental control facilities, changes in control
techniques and reduction of the operating levels of generating facilities.
Failure to comply with such requirements could result in the complete shutdown
of individual facilities not in compliance as well as the imposition of civil
and criminal penalties.
Reference is made to each registrant's "Management's Discussion and
Analysis" in Item 7 herein for a discussion of the Clean Air Act and other
environmental legislation and proceedings.
Possible adverse health effects of EMFs from various sources, including
transmission and distribution lines, have been the subject of
a number of studies and increasing public discussion. The scientific research
currently is inconclusive as to whether EMFs may cause adverse health effects.
However, there is the possibility of passage of legislation and promulgation of
rulemaking that would require measures to mitigate EMFs, with resulting
increases in capital and operating costs. In addition, the potential exists for
public liability with respect to lawsuits brought by plaintiffs alleging damages
caused by EMFs.
The operating affiliates' and SEGCO's estimated capital expenditures for
environmental quality control facilities for the years 1997, 1998 and 1999 are
as follows: (in millions)
---------------------------------------------------------
1997 1998 1999
-------------------------------------
ALABAMA $16.7 $31.0 $52.1
GEORGIA 9.0 10.0 12.0
GULF 3.1 0.9 -
MISSISSIPPI 2.0 0.2 1.9
SAVANNAH 2.6 0.8 3.3
SEGCO 1.7 - -
-------------------------------------
SOUTHERN
system $35.1 $42.9 $69.3
=========================================================
*The foregoing estimates are included in the current construction programs.
(See Item 1 - BUSINESS - "Construction Programs" herein.)
Additionally, each operating affiliate and SEGCO have incurred costs for
environmental remediation of various sites. Reference is made to each
registrant's "Management's Discussion and Analysis" in Item 7 herein for
information regarding the registrants' environmental remediation efforts. Also,
see Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for
information regarding the identification of sites that may require environmental
remediation by GEORGIA and Note 3 to MISSISSIPPI's financial statements in Item
8 herein for information regarding a site that may require environmental
remediation by MISSISSIPPI.
The operating affiliates and SEGCO are unable to predict at this time what
additional steps they may be required to take as a result of the implementation
of existing or future quality control requirements for air, water and hazardous
or toxic materials, but such steps could adversely affect system operations and
result in substantial additional costs.
I-15
<PAGE>
The outcome of the matters mentioned above under "Regulation" cannot now be
determined, except that these developments may result in delays in obtaining
appropriate licenses for generating facilities, increased construction and
operating costs, or reduced generation, the nature and extent of which, while
not determinable at this time, could be substantial.
Rate Matters
Rate Structure
The rates and service regulations of the operating affiliates are uniform for
each class of service throughout their respective service areas. Rates for
residential electric service are generally of the block type based upon
kilowatt-hours used and include minimum charges.
Residential and other rates contain separate customer charges. Rates for
commercial service are presently of the block type and, for large customers, the
billing demand is generally used to determine capacity and minimum bill charges.
These large customers' rates are generally based upon usage by the customer
including those with special features to encourage off-peak usage. Additionally,
the operating affiliates are allowed by their respective PSCs to negotiate the
terms and compensation of service to large customers. Such terms and
compensation of service, however, are subject to final PSC approval. With
respect to MISSISSIPPI's retail rates, fuel and purchased power costs above base
levels included in the various rate schedules are billed to such customers under
the fuel and energy adjustment clause. GULF and SAVANNAH recover from retail
customers fuel and net purchased power costs through provisions which are
adjusted to reflect increases or decreases in such costs. ALABAMA and GEORGIA
are allowed by state law to recover fuel and net purchased energy costs through
fuel cost recovery provisions which are adjusted to reflect increases or
decreases in such costs. GULF's recovery of fuel costs is based upon a
projection for six-months - any over/under recovery during such period is
reflected in a subsequent six-month period with interest. GULF's recovery of
purchased power capacity costs is based upon an annual projection - any
over/under recovery during such period is reflected in a subsequent annual
period with interest. The adjustment factors for MISSISSIPPI's retail and
wholesale rates are levelized based on the estimated energy cost for the year,
adjusted for any actual over/under collection from the previous year. Revenues
are adjusted for differences between recoverable fuel costs and amounts actually
recovered in current rates.
Rate Proceedings
Reference is made to Note 3 to each registrant's financial statements in Item 8
herein for a discussion of rate matters. For each registrant (except SAVANNAH),
such Note 3 includes a discussion of proceedings initiated by the FERC
concerning the reasonableness of the Southern electric system's wholesale rate
schedules and contracts that have a return on equity of 13.75% or greater.
For information regarding GEORGIA's Rocky Mountain Plant, including a joint
ownership agreement with OPC and the uncertain recovery of GEORGIA's costs in
this plant, reference is made to Note 3 to SOUTHERN's and to GEORGIA's financial
statements in Item 8 herein.
In September 1996, the Florida PSC approved GULF's new optional
Commercial/Industrial Service Rider, which is applicable to the rate schedules
for GULF's largest existing and potential customers who are able to show they
have viable alternatives to purchasing GULF's energy services. For additional
information, reference is made to GULF's "Management's Discussion and Analysis -
Future Earnings Potential" in Item 7 herein.
Integrated Resource Planning
In 1991, the Georgia legislature passed certain legislation under which both
GEORGIA and SAVANNAH must file Integrated Resource Plans for approval by the
Georgia PSC. The plans must specify how GEORGIA and SAVANNAH each intends to
meet the future electrical needs of their customers through a combination of
demand-side and supply-side resources. The Georgia PSC must pre-certify these
new resources. Once certified, all prudently incurred construction costs and
purchased power costs will be recoverable through rates.
I-16
<PAGE>
By orders issued in 1992 and by amended orders issued in 1995, the Georgia
PSC approved Integrated Resource Plans for both GEORGIA and SAVANNAH. (See Note
3 to GEORGIA's and SAVANNAH's financial statements in Item 8 herein for
information regarding demand-side option programs.)
On March 4, 1997, the Georgia PSC approved amendments to GEORGIA's 1995
Integrated Resource Plan. Pursuant to the amended plan, the Georgia PSC
certified a five-year purchase power agreement scheduled to begin in June 2000
for approximately 215 megawatts. Capacity and fixed operation and maintenance
payments over the five-year period are estimated to be approximately $39
million.
The Florida PSC set energy conservation goals for GULF, beginning in 1995,
that require programs to reduce 154 megawatts of summer peak demand and 65,000
kilowatt-hours of sales by the year 2004. For additional information, reference
is made to GULF's "Management's Discussion and Analysis - Future Earnings
Potential" in Item 7 herein.
Environmental Cost Recovery Plans
GULF and MISSISSIPPI both have retail rate mechanisms that provide for recovery
of environmental compliance costs. For a description of these plans, see Note 3
to GULF's and MISSISSIPPI's financial statements in Item 8 herein.
Employee Relations
The companies of the SOUTHERN system had a total of 29,246 employees on their
payrolls at December 31, 1996.
------------------------------------------------------------
Employees
at
December 31, 1996
-------------------------
ALABAMA 6,865
GEORGIA 10,346
GULF 1,384
MISSISSIPPI 1,363
SAVANNAH 571
SCS 3,021
Southern Communications 129
Southern Development 72
Southern Energy* 4,212
Southern Nuclear 1,283
------------------------------------------------------------
Total 29,246
============================================================
*Includes 3,710 employees on international payrolls.
The operating affiliates have separate agreements with local unions of the
IBEW generally covering wages, working conditions and procedures for handling
grievances and arbitration. These agreements apply with certain exceptions to
operating, maintenance and construction employees.
ALABAMA has agreements with the IBEW on a three-year contract extending to
August 15, 1998. Upon notice given at least 60 days prior to that date,
negotiations may be initiated with respect to agreement terms to be effective
after such date.
GEORGIA has an agreement with the IBEW covering wages and working
conditions, which is in effect through June 30, 1999. GEORGIA also has a
contract with the United Plant Guard Workers of America with respect to Plant
Hatch which extends through September 30, 1998.
GULF has an agreement with the IBEW on a three-year contract extending to
August 15, 1998.
MISSISSIPPI has an agreement with the IBEW on a three-year contract
extending to August 16, 1998.
I-17
<PAGE>
SAVANNAH has three-year labor agreements with the IBEW and the Office and
Professional Employees International Union that expire April 16, 1999 and
December 1, 1999, respectively.
Southern Energy has agreements with local unions of the IBEW and the United
Paperworkers International Union which covers employees of Mobile Energy. These
agreements extend to May 31, 1997. Southern Energy is currently in negotiations
with the IBEW and the United Paperworkers International Union.
Southern Nuclear has an agreement with the IBEW on a three-year contract
extending to August 15, 1998. Upon notice given at least 60 days prior to that
date, negotiations may be initiated with respect to agreement terms to be
effective after such date.
The agreements also subject the terms of the pension plans for the companies
discussed above to collective bargaining with the unions at five-year intervals.
I-18
<PAGE>
Item 2. PROPERTIES
Electric Properties
The operating affiliates and SEGCO, at December 31, 1996, operated 33
hydroelectric generating stations, 32 fossil fuel generating stations and three
nuclear generating stations. The amounts of capacity owned by each company are
shown in the table below.
----------------------- -------------------------------------
Nameplate
Generating Station Location Capacity (1)
----------------------- ------------------- -----------------
(Kilowatts)
Fossil Steam
Gadsden Gadsden, AL 120,000
Gorgas Jasper, AL 1,221,250
Barry Mobile, AL 1,525,000
Chickasaw Chickasaw, AL 40,000
Greene County Demopolis, AL 300,000 (2)
Gaston Unit 5 Wilsonville, AL 880,000
Miller Birmingham, AL 2,532,288 (3)
---------
ALABAMA Total 6,618,538
---------
Arkwright Macon, GA 160,000
Atkinson Atlanta, GA 180,000
Bowen Cartersville, GA 3,160,000
Branch Milledgeville, GA 1,539,700
Hammond Rome, GA 800,000
McDonough Atlanta, GA 490,000
McManus Brunswick, GA 115,000
Mitchell Albany, GA 170,000
Scherer Macon, GA 750,924 (4)
Wansley Carrollton, GA 925,550 (5)
Yates Newnan, GA 1,250,000
---------
GEORGIA Total 9,541,174
---------
Crist Pensacola, FL 1,045,000
Lansing Smith Panama City, FL 305,000
Scholz Chattahoochee, FL 80,000
Daniel Pascagoula, MS 500,000 (6)
Scherer Unit 3 Macon, GA 204,500 (4)
-----------
GULF Total 2,134,500
---------
Eaton Hattiesburg, MS 67,500
Sweatt Meridian, MS 80,000
Watson Gulfport, MS 1,012,000
Daniel Pascagoula, MS 500,000 (6)
Greene County Demopolis, AL 200,000 (2)
-----------
MISSISSIPPI Total 1,859,500
-----------
--------------------------------------------------------------
Nameplate
Generating Station Location Capacity
-----------------------------------------------------------------
(Kilowatts)
McIntosh Effingham County, GA 163,117
Kraft Port Wentworth, GA 281,136
Riverside Savannah, GA 102,278
-----------
SAVANNAH Total 546,531
-----------
Gaston Units 1-4 Wilsonville, AL
(SEGCO) 1,000,000 (7)
-----------
Total Fossil Steam 21,700,243
-----------
Nuclear Steam
Farley Dothan, AL
(ALABAMA) 1,720,000
-----------
Hatch Baxley, GA 840,250 (8)
Vogtle Augusta, GA 1,060,240 (9)
-----------
GEORGIA Total 1,900,490
----------
Total Nuclear Steam 3,620,490
-----------
Combustion Turbines
Greene County Demopolis, AL
(ALABAMA) 720,000
-----------
Arkwright Macon, GA 30,580
Atkinson Atlanta, GA 78,720
Bowen Cartersville, GA 39,400
McDonough Atlanta, GA 78,800
McIntosh
Units 1,2,3,4,7,8 Effingham County, GA 480,000
McManus Brunswick, GA 481,700
Mitchell Albany, GA 118,200
Robins Warner Robins, GA 160,000
Wilson Augusta, GA 354,100
Wansley Carrollton, GA 26,322 (5)
-----------
GEORGIA Total 1,847,822
---------
Lansing Smith
Unit A (GULF) Panama City, FL 39,400
Chevron Cogenerating
Station Pascagoula, MS 147,292 (10)
Sweatt Meridian, MS 39,400
Watson Gulfport, MS 39,360
---------
MISSISSIPPI Total 226,052
----------
Boulevard Savannah, GA 59,100
Kraft Port Wentworth, GA 22,000
McIntosh
Units 5&6 Effingham County, GA 160,000
SAVANNAH Total 241,100
----------------------------------------------- -----------------
I-19
<PAGE>
------------------------- -------------------- -----------------
Nameplate
Generating Station Location Capacity
------------------------- -------------------- -----------------
(Kilowatts)
Gaston (SEGCO) Wilsonville, AL 19,680 (7)
---------
Total Combustion Turbines 3,094,054
---------
Hydroelectric Facilities
Weiss Leesburg, AL 87,750
Henry Ohatchee, AL 72,900
Logan Martin Vincent, AL 128,250
Lay Clanton, AL 177,000
Mitchell Verbena, AL 170,000
Jordan Wetumpka, AL 100,000
Bouldin Wetumpka, AL 225,000
Harris Wedowee, AL 135,000
Martin Dadeville, AL 154,200
Yates Tallassee, AL 32,000
Thurlow Tallassee, AL 58,000
Lewis Smith Jasper, AL 157,500
Bankhead Holt, AL 45,125
Holt Holt, AL 40,000
-----------
ALABAMA Total 1,582,725
----------
Barnett Shoals
(Leased) Athens, GA 2,800
Bartletts Ferry Columbus, GA 173,000
Goat Rock Columbus, GA 26,000
Lloyd Shoals Jackson, GA 14,400
Morgan Falls Atlanta, GA 16,800
North Highlands Columbus, GA 29,600
Oliver Dam Columbus, GA 60,000
Rocky Mountain Rome, GA 215,256 (11)
Sinclair Dam Milledgeville, GA 45,000
Tallulah Falls Clayton, GA 72,000
Terrora Clayton, GA 16,000
Tugalo Clayton, GA 45,000
Wallace Dam Eatonton, GA 321,300
Yonah Toccoa, GA 22,500
6 Other Plants 18,080
-----------
GEORGIA Total 1,077,736
----------
Total Hydroelectric Facilities 2,660,461
-----------
Total Generating Capacity 31,075,248
---------------------------------------------- -----------------
Notes:
(1) For additional information regarding facilities jointly-owned with
non-affiliated parties, see Item 2 - PROPERTIES - "Jointly-Owned
Facilities" herein.
(2) Owned by ALABAMA and MISSISSIPPI as
tenants in common in the proportions of 60% and 40%, respectively.
(3) Excludes the capacity owned by AEC.
(4) Capacity shown for GEORGIA is 8.4% of Units 1 and 2 and 75% of Unit 3.
Capacity shown for GULF is 25% of Unit 3.
(5) Capacity shown is GEORGIA's portion (53.5%) of total plant capacity.
(6) Represents 50% of the plant which is owned as tenants in common by
GULF and MISSISSIPPI.
(7) SEGCO is jointly-owned by ALABAMA and GEORGIA. (See Item 1 - BUSINESS
herein.)
(8) Capacity shown is GEORGIA's portion (50.1%) of total plant capacity.
(9) Capacity shown is GEORGIA's portion (45.7%) of total plant capacity.
(10) Generation is dedicated to a single industrial customer.
(11) Capacity shown is GEORGIA's portion (25.4%) of total plant capacity.
OPC operates the plant.
Except as discussed below under "Titles to Property," the principal plants
and other important units of the operating affiliates and SEGCO are owned in
fee by the respective companies. It is the opinion of management of each such
company that its operating properties are adequately maintained and are
substantially in good operating condition.
MISSISSIPPI owns a 79-mile length of 500-kilovolt transmission line which is
leased to Gulf States. The line, completed in 1984, extends from Plant Daniel to
the Louisiana state line. Gulf States is paying a use fee over a forty-year
period covering all expenses and the amortization of the original $57 million
cost of the line. At December 31, 1996, the unamortized portion of this cost was
$39 million.
The all-time maximum demand on the operating affiliates and SEGCO was
27,419,700 kilowatts and occurred in August 1995. This amount excludes demand
served by capacity retained by MEAG and Dalton and excludes demand associated
with power purchased from OPC and SEPA by its preference customers. At that
time, 29,596,100 kilowatts were supplied by SOUTHERN system generation and
2,176,400 kilowatts (net) were sold to other parties through net purchased and
interchanged power. The reserve margin for the operating affiliates and SEGCO
at that time was 9.4%. For additional information on peak demands, reference is
made to Item 6 SELECTED FINANCIAL DATA herein.
I-20
<PAGE>
ALABAMA and GEORGIA will incur significant costs in decommissioning their
nuclear units at the end of their useful lives. (See Item 1 - BUSINESS
"Regulation - Atomic Energy Act of 1954" and Note 1 to SOUTHERN's, ALABAMA's and
GEORGIA's financial statements in Item 8 herein.)
Other Electric Generation Facilities
Through special purpose subsidiaries, SOUTHERN owns interests in or operates
independent power production facilities and foreign utility companies. The
generating capacity of these utilities (or facilities) at December 31, 1996, was
as follows:
<TABLE>
<CAPTION>
Facilities in Operation
-------------------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity Percent
Facility Location Units Owned Operated Ownership Type
------------------- --------------------------- --------- ------------ ------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Alicura' Argentina 4 551 (1) 1,000 55.14 (1) Hydro
Birchwood Virginia 1 111 222 50.00 Coal (2)
Edelnor Chile 1 104 160 65.00 Coal
Edelnor Chile 27 55 86 65.00 Oil
Edelnor Chile 2 7 10 65.00 Hydro
Freeport Grand Bahamas 5 71 113 62.50 Oil & Gas
UDG-Niagara New York 1 - 50 - Coal (2)
Mobile Energy Alabama 3 111 111 100.00 Waste/Biomass (2)
Penal Trinidad and Tobago 5 92 236 39.00 Gas
Port of Spain Trinidad and Tobago 6 120 308 39.00 Gas
Pt. Lisas Trinidad and Tobago 10 247 634 39.00 Gas
SWEB United Kingdom 8 108 - 5.78 Gas
SWEB United Kingdom 21 19 21 75.00 Oil & Gas
SWEB United Kingdom 3 6 - 28.70 Wind
===============================================================================================================================
Total Capacity 1,602 2,951
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Facilities Under Development
------------------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity Percent
Facility Location Own Operate Ownership Type
------------------- --------------------------- ------------ ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Edelnor Chile 104 160 65.00 Coal
State Line (3) Indiana 490 490 100.00 Coal
===============================================================================================================================
Total Capacity 594 650
===============================================================================================================================
Notes: (1) Represents megawatts of capacity under a concession agreement expiring in the year 2023.
(2) Cogeneration facility.
(3) The proposed purchase of this facility is subject to regulatory approval.
</TABLE>
I-21
<PAGE>
Jointly-Owned Facilities
ALABAMA and GEORGIA have sold and GEORGIA has purchased undivided interests in
certain generating plants and other related facilities to or from non-affiliated
parties. The percentages of ownership resulting from these transactions are as
follows:
<TABLE>
<CAPTION>
Percentage Ownership
Total ---------------- -------- ------------ -------- --------- ------------ --------
Capacity ALABAMA AEGEORGIA OPC MEAG DALTON FPC
-------------- ---------------- -------- ------------ -------- --------- ------------ --------
(Megawatts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Plant Miller
Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -%
Plant Hatch 1,677 - - 50.1 30.0 17.7 2.2 -
Plant Vogtle 2,320 - - 45.7 30.0 22.7 1.6 -
Plant Scherer
Units 1 and 2 1,636 - - 8.4 60.0 30.2 1.4 -
Plant Wansley 1,779 - - 53.5 30.0 15.1 1.4 -
Rocky Mountain 848 - - 25.4 74.6 - - -
Intercession City, FL 150 - - 33.3 - - - 66.7
--------------------------- -------------- -- ---------------- -------- ------------ -------- --------- ------------ --------
</TABLE>
ALABAMA and GEORGIA have contracted to operate and maintain the respective
units in which each has an interest (other than Rocky Mountain and Intercession
City, as described below) as agent for the joint owners.
In connection with the joint ownership arrangements for Plant Vogtle,
GEORGIA made commitments to purchase declining fractions of OPC's and MEAG's
capacity and energy from this plant. The declining commitments were in effect
during periods of up to seven years following commercial operation and ended in
1996. The commitments regarding a portion of a 5 percent interest in Plant
Vogtle owned by MEAG are in effect until the later of retirement of the plant or
the latest stated maturity date of MEAG's bonds issued to finance such ownership
interest. The payments for capacity are required whether any capacity is
available. The energy cost is a function of each unit's variable operating
costs. Except for the portion of the capacity payments related to the 1987 and
1990 write-offs of Plant Vogtle costs, the cost of such capacity and energy is
included in purchased power from non-affiliates in GEORGIA's Statements of
Income in Item 8 herein.
In December 1988, GEORGIA and OPC entered into a joint ownership agreement
for the Rocky Mountain plant under which GEORGIA agreed to retain its present
investment in the project and OPC agreed to finance, complete and operate the
facility. In 1995, the plant went into commercial operation.
GEORGIA's net investment in the plant is approximately $175 million, and
GEORGIA's ownership is 25.4 percent. Reference is made to Note 3 to SOUTHERN's
and GEORGIA's financial statements in Item 8 herein for additional information
regarding the Rocky Mountain plant.
In 1994, GEORGIA and FPC entered into a joint ownership agreement regarding
the Intercession City combustion turbine unit. The unit began commercial
operation in January 1997, and is operated by FPC. GEORGIA owns a one-third
interest in the 150-megawatt unit, with use of 100% of the capacity from June
through September. FPC has the capacity the remainder of the year. GEORGIA's
investment in the unit is approximately $13 million.
Sale of Property
Reference is made to Note 6 to GEORGIA's financial statements in Item 8 herein
for information regarding the sale completed in 1995 of GEORGIA's remaining
ownership interest in Plant Scherer Unit 4.
I-22
<PAGE>
Titles to Property
The operating affiliates' and SEGCO's interests in the principal plants (other
than certain pollution control facilities, one small hydroelectric generating
station leased by GEORGIA and the land on which five combustion turbine
generators of MISSISSIPPI are located, which is held by easement) and other
important units of the respective companies are owned in fee by such companies,
subject only to the liens of applicable mortgage indentures (except for SEGCO)
and to excepted encumbrances as defined therein. The operating affiliates own
the fee interests in certain of their principal plants as tenants in common.
(See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) Properties such
as electric transmission and distribution lines and steam heating mains are
constructed principally on rights-of-way which are maintained under franchise or
are held by easement only. A substantial portion of lands submerged by
reservoirs is held under flood right easements. In substantially all of its coal
reserve lands, SEGCO owns or will own the coal only, with adequate rights for
the mining and removal thereof.
Property Additions and Retirements
During the period from January 1, 1992 to December 31, 1996, the operating
affiliates, SEGCO, SCS, Southern Nuclear, Southern Communications and Southern
Energy recorded gross property additions and retirements as follows:
----------------------------------------------------------
Gross Property
Additions Retirements
--------------- -------------
(in millions)
ALABAMA (1) $2,318 $ 383
GEORGIA (2) 2,730 1,633
GULF 347 130
MISSISSIPPI 441 86
SAVANNAH 189 16
SEGCO 60 9
SCS 108 122
Southern Nuclear 7 5
Southern
Communications 194 -
Southern Energy 318 22
----------------------------------------------------------
SOUTHERN system $6,712 $2,406
==========================================================
Notes:
(1) Includes approximately $62 million attributable to sale of 8.2% interest in
Plant Miller Units 1 and 2 to AEC in 1992.
(2) Includes approximately $446 million attributable to 1992 through 1996
sales of Plant Scherer Unit 4 to FP&L and JEA.
I-23
<PAGE>
Item 3. LEGAL PROCEEDINGS
(1) Stepak v. certain SOUTHERN officials
(U.S. District Court for the Southern District of Georgia)
Reference is made to Note 3 to SOUTHERN's financial statements in Item 8
herein under the caption "Stockholder Suit Concluded."
(2) SOUTHERN and Subsidiaries v. Commissioner of the IRS
(U.S. Tax Court)
In June 1994, a tax deficiency notice was received from the IRS for the
years 1984 through 1987 with regard to the tax accounting by GEORGIA for
the sale in 1984 of an interest in Plant Vogtle and related capacity and
energy buyback commitments. The potential tax deficiency and interest
arising from this issue currently amount to approximately $25 million and
$32 million, respectively. The tax deficiency relates to a timing issue
as to when taxes are paid; therefore, only the interest portion could
affect future income. Management believes that the IRS position is
incorrect, and GEORGIA has filed a petition with the U.S. Tax Court
challenging the IRS's position. In order to minimize additional interest
charges should the IRS's position prevail, GEORGIA made a payment to the
IRS related to the potential tax deficiency in September 1994. In
conjunction with this matter, SOUTHERN has filed certain refund claims
related to the years 1984 through 1987. SOUTHERN and the IRS have entered
into negotiations on all issues, the outcome of which is currently
uncertain.
(3) Frost v. ALABAMA
(Circuit Court of Jefferson County, Alabama)
Reference is made to Note 3 to SOUTHERN's and ALABAMA's financial
statements in Item 8 herein under the captions "Alabama Power Appliance
Warranty Litigation" and "Appliance Warranty Litigation", respectively.
(4) GEORGIA has been designated as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act with
respect to a site in Brunswick, Georgia.
Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial
statements in Item 8 herein under the captions "Georgia Power Potentially
Responsible Party Status" and "Certain Environmental Contingencies,"
respectively.
See Item 1 - BUSINESS - "Construction Programs," "Fuel Supply," "Regulation
- - Federal Power Act" and "Rate Matters" as well as Note 3 to each registrant's
financial statements in Item 8 herein for a description of certain other
administrative and legal proceedings discussed therein.
Additionally, each of the operating affiliates, Southern Energy, SCS,
Southern Nuclear, Southern Development and Southern Communications are, in the
normal course of business, engaged in litigation or administrative proceedings
that include, but are not limited to, acquisition of property, injuries and
damages claims, and complaints by present and former employees.
Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
None.
I-24
<PAGE>
EXECUTIVE OFFICERS OF SOUTHERN
(Identification of executive officers of SOUTHERN is inserted in Part I in
accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the
officers set forth below are as of December 31, 1996.
A. W. Dahlberg
Chairman, President and Chief Executive Officer
Age 56
Elected in 1985; President and Chief Executive
Officer of GEORGIA from 1988 through 1993. He was elected President of SOUTHERN
effective January 1994. He was elected Chairman and Chief Executive Officer
effective March 1995.
Paul J. DeNicola
Executive Vice President and Director
Age 48
Elected in 1989; Executive Vice President of SOUTHERN since 1991. Elected
President and Chief Executive Officer of SCS effective January 1994. He
previously served as Executive Vice President of SCS from 1991 to 1993.
H. Allen Franklin
Executive Vice President and Director
Age 52
Elected in 1988; President and Chief Executive Officer
of SCS from 1988 through 1993 and, beginning 1991, Executive Vice President of
SOUTHERN. He was elected President and Chief Executive Officer of GEORGIA
effective January 1994.
Elmer B. Harris
Executive Vice President and Director
Age 57
Elected in 1989; President and Chief Executive Officer
of ALABAMA since 1989 and, beginning 1991, Executive Vice President of SOUTHERN.
David M. Ratcliffe
Senior Vice President
Age 48
Elected in 1995; President and Chief Executive Officer of MISSISSIPPI from 1991
to 1995. He also serves as Executive Vice President of SCS beginning in 1995.
W. L. Westbrook
Financial Vice President, Chief Financial Officer and Treasurer
Age 57
Elected in 1986; responsible primarily for all aspects of financing for
SOUTHERN. He has served as Executive Vice President of SCS since 1986.
Thomas G. Boren
Vice President
Age 47
Elected in 1995; President and Chief Executive Officer of Southern Energy since
1992. He previously served as Senior Vice President of GEORGIA from 1989 to
1992.
Bill M. Guthrie
Vice President
Age 63
Elected in 1991; serves as Chief Production Officer for the SOUTHERN system.
Senior Executive Vice President of SCS effective January 1994 and Executive Vice
President of ALABAMA since 1988. He also serves as Executive Vice President of
GEORGIA and Vice President of GULF, MISSISSIPPI and SAVANNAH.
W. G. Hairston, III
Age 52
President and Chief Executive Officer of Southern Nuclear since 1993. He has
also served as Executive Vice President of GEORGIA since 1989.
Each of the above is currently an officer of SOUTHERN, serving a term
running from the last annual meeting of the directors (May 22, 1996) for one
year until the next annual meeting or until his successor is elected and
qualified.
I-25
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The common stock of SOUTHERN is listed and traded on the New York
Stock Exchange. The stock is also traded on regional exchanges across
the United States. High and low stock prices, per the New York Stock
Exchange Composite Tape during each quarter for the past two years
were as follows:
-----------------------------------------------------
High Low
----------- --------
1996
First Quarter $25-7/8 $22-3/8
Second Quarter 24-5/8 21-1/4
Third Quarter 24-5/8 21-3/4
Fourth Quarter 23-1/8 21-1/8
1995
First Quarter $21-1/2 $19-3/8
Second Quarter 22-7/8 20-1/8
Third Quarter 24 21-1/8
Fourth Quarter 25 22-3/4
-----------------------------------------------------
There is no market for the other registrants' common stock, all of
which is owned by SOUTHERN. On February 28, 1997, the closing price
of SOUTHERN's common stock was $21-3/4.
(b) Number of SOUTHERN's common stockholders at December 31, 1996:
215,246
Each of the other registrants have one common stockholder, SOUTHERN.
(c) Dividends on each registrant's common stock are payable at the
discretion of their respective board of directors. The dividends on
common stock paid and/or declared by SOUTHERN and the operating
affiliates to their stockholder(s) for the past two years were as
follows: (in thousands)
----------------------------------------------------
Registrant Quarter 1996 1995
----------------------------------------------------
SOUTHERN First $211,081 $201,866
Second 211,272 203,060
Third 212,200 203,061
Fourth 212,201 203,178
ALABAMA First 76,000 71,900
Second 76,400 69,500
Third 76,400 69,300
Fourth 118,700 74,300
GEORGIA First 121,500 113,900
Second 122,100 110,200
Third 122,100 109,700
Fourth 109,800 117,700
GULF First 12,300 11,700
Second 12,400 11,300
Third 12,400 11,300
Fourth 21,200 12,100
MISSISSIPPI First 10,600 9,900
Second 10,700 9,600
Third 10,600 9,600
Fourth 12,000 10,300
SAVANNAH First 4,800 4,400
Second 4,800 4,300
Third 4,800 4,300
Fourth 5,200 4,600
----------------------------------------------------
The dividend paid per share by SOUTHERN was 30.5(cent) for each quarter of
1995 and 31.5(cent) for each quarter of 1996. The dividend paid on SOUTHERN's
common stock for the first quarter of 1997 was raised to 32.5(cent) per share.
II-1
<PAGE>
The amount of dividends on their common stock that may be paid by the
subsidiary registrants is restricted in accordance with their respective first
mortgage bond indenture and charter. The amounts of earnings retained in the
business and the amounts restricted against the payment of cash dividends on
common stock at December 31, 1996, were as follows:
----------------------------------------------------------
Retained Restricted
Earnings Amount
------------------ --------------
(in millions)
ALABAMA $1,185 $ 796
GEORGIA 1,675 897
GULF 179 127
MISSISSIPPI 166 118
SAVANNAH 109 68
Consolidated 3,764 2,008
- --------------------------------------------------------
Item 6. SELECTED FINANCIAL DATA
SOUTHERN. Reference is made to information under the heading "Selected
Consolidated Financial and Operating Data," contained herein at pages II-37
through II-52.
ALABAMA. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages
II-80 through II-93.
GEORGIA. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages
II-126 through II-140.
GULF. Reference is made to information under the heading "Selected Financial
and Operating Data," contained herein at pages II-168 through
II-181.
MISSISSIPPI. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages
II-208 through II-221.
SAVANNAH. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages
II-243 through II-255.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SOUTHERN. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-8 through II-14.
ALABAMA. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-56 through II-61.
GEORGIA. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-97 through II-103.
GULF. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-144 through II-150.
MISSISSIPPI. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-185 through II-191.
SAVANNAH. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-225 through II-229.
II-2
<PAGE>
<TABLE>
<CAPTION>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO 1996 FINANCIAL STATEMENTS
Page
The Southern Company and Subsidiary Companies:
<S> <C>
Report of Independent Public Accountants....................................................................... II-7
Consolidated Statements of Income for the Years Ended December 31, 1996, 1995 and 1994......................... II-15
Consolidated Statements of Retained Earnings for the Years Ended
December 31, 1996, 1995 and 1994.......................................................................... II-15
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994..................... II-16
Consolidated Balance Sheets at December 31, 1996 and 1995...................................................... II-17
Consolidated Statements of Capitalization at December 31, 1996 and 1995........................................ II-19
Consolidated Statements of Paid-In Capital for the Years Ended December 31, 1996, 1995 and 1994................ II-20
Notes to Financial Statements.................................................................................. II-21
ALABAMA:
Report of Independent Public Accountants ..................................................................... II-55
Statements of Income for the Years Ended December 31, 1996, 1995 and 1994...................................... II-62
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.................................. II-63
Balance Sheets at December 31, 1996 and 1995 .................................................................. II-64
Statements of Capitalization at December 31, 1996 and 1995 .................................................... II-66
Statements of Retained Earnings for the Years Ended December 31, 1996, 1995 and 1994........................... II-67
Notes to Financial Statements.................................................................................. II-68
GEORGIA:
Report of Independent Public Accountants....................................................................... II-96
Statements of Income for the Years Ended December 31, 1996, 1995 and 1994...................................... II-104
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.................................. II-105
Balance Sheets at December 31, 1996 and 1995 .................................................................. II-106
Statements of Capitalization at December 31, 1996 and 1995 .................................................... II-108
Statements of Retained Earnings for the Years Ended December 31, 1996, 1995 and 1994........................... II-109
Statements of Paid-In Capital for the Years Ended December 31, 1996, 1995 and 1994............................. II-109
Notes to Financial Statements.................................................................................. II-110
GULF:
Report of Independent Public Accountants....................................................................... II-143
Statements of Income for the Years Ended December 31, 1996, 1995 and 1994...................................... II-151
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.................................. II-152
Balance Sheets at December 31, 1996 and 1995 .................................................................. II-153
Statements of Capitalization at December 31, 1996 and 1995 .................................................... II-155
Statements of Retained Earnings for the Years Ended December 31, 1996, 1995 and 1994........................... II-157
Statements of Paid-In Capital for the Years Ended December 31, 1996, 1995 and 1994............................. II-157
Notes to Financial Statements.................................................................................. II-158
II-3
<PAGE>
Page
MISSISSIPPI:
Report of Independent Public Accountants....................................................................... II-184
Statements of Income for the Years Ended December 31, 1996, 1995 and 1994...................................... II-192
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.................................. II-193
Balance Sheets at December 31, 1996 and 1995 .................................................................. II-194
Statements of Capitalization at December 31, 1996 and 1995 .................................................... II-196
Statements of Retained Earnings for the Years Ended December 31, 1996, 1995 and 1994........................... II-197
Statements of Paid-In Capital for the Years Ended December 31, 1996, 1995 and 1994............................. II-197
Notes to Financial Statements.................................................................................. II-198
SAVANNAH:
Report of Independent Public Accountants....................................................................... II-224
Statements of Income for the Years Ended December 31, 1996, 1995 and 1994...................................... II-230
Statements of Retained Earnings for the Years Ended December 31, 1996, 1995 and 1994........................... II-230
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.................................. II-231
Balance Sheets at December 31, 1996 and 1995 .................................................................. II-232
Statements of Capitalization at December 31, 1996 and 1995 .................................................... II-234
Notes to Financial Statements.................................................................................. II-235
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
</TABLE>
II-4
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
FINANCIAL SECTION
II-5
<PAGE>
MANAGEMENT'S REPORT
Southern Company and Subsidiary Companies 1996 Annual Report
The management of Southern Company has prepared -- and is responsible for -- the
consolidated 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 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 five 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 consolidated financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of Southern Company and its subsidiary companies in conformity
with generally accepted accounting principles.
/s/ A. W. Dahlberg
A. W. Dahlberg
Chairman, President, and Chief Executive Officer
/s/ W. L. Westbrook
W. L. Westbrook
Financial Vice President, Chief Financial Officer,
and Treasurer
February 12, 1997
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and to the Stockholders of Southern Company:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of Southern Company (a Delaware corporation) and
subsidiary companies as of December 31, 1996 and 1995, and the related
consolidated statements of income, retained earnings, paid-in capital, and cash
flows for each of the three years in the period ended December 31, 1996. 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 consolidated financial statements (pages II-15 through
II-36) referred to above present fairly, in all material respects, the financial
position of Southern Company and subsidiary companies as of December 31, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
II-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Southern Company and Subsidiary Companies 1996 Annual Report
RESULTS OF OPERATIONS
Earnings and Dividends
Southern Company's 1996 financial results exceeded the strong performance
recorded in 1995. The traditional core business of selling electricity in the
Southeast remained strong, while non-traditional business results reflected a
full year of South Western Electricity's (SWEB) operations. The acquisition of
SWEB in late 1995 by Southern Energy, Inc. (Southern Energy) made a significant
positive impact on non-traditional earnings. Net income of over $1.1 billion
and earnings per share of $1.68 for 1996 both established record highs. Net
income increased $24 million compared with the amount reported for 1995.
Continued cost controls, steady demand for electricity, and growth in the
non-traditional business were the dominant forces that favorably affected
1996 earnings.
Costs related to work force reduction programs decreased earnings by $53
million or 8 cents per share and $17 million or 2 cents per share in 1996 and
1995, respectively. These costs are expected to be recovered through future
savings in approximately two years following each program's implementation.
In 1995, earnings were $1.1 billion or $1.66 per share -- up 14 cents from
the per share amount reported in 1994. Earnings in 1995 were affected by a
reduction in costs related to work force reduction programs, and much hotter
temperatures when compared with 1994 results.
Dividends paid on common stock during 1996 were $1.26 per share or 31 1/2
cents per quarter. During 1995 and 1994, dividends paid per share were $1.22 and
$1.18, respectively. In January 1997, the Southern Company board of directors
raised the quarterly dividend to 32 1/2 cents per share or an annual rate of
$1.30 per share.
Acquisitions
Southern Energy owns and manages international and domestic non-traditional
electric power production and delivery facilities for Southern Company. Southern
Energy's acquisition of Consolidated Electric Power Asia (CEPA) closed in
January 1997, and is not included in Southern Company's 1996 results. Southern
Energy did acquire several businesses in late 1995 and 1994. These businesses
have been included in the consolidated financial statements since the date of
acquisition and are not reflected in prior periods. Therefore, changes in
revenues and expenses for 1996 and for 1995 reflect significant amounts related
to acquisitions, which were not fully reflected in each year being compared. To
facilitate discussing the results of operations, Southern Energy's variances are
shown separately and are predominantly acquisition related.
Revenues
Operating revenues increased in 1996 and 1995 as a result of the following
factors:
Increase (Decrease)
From Prior Year
---------------------------------
1996 1995 1994
----------------------------------
Retail -- (in millions)
Change in base rates $ (18) $ - $ 3
Sales growth 142 177 153
Weather (64) 143 (177)
Fuel cost recovery and
other 2 134 (107)
---------------------------------------------------------------
Total retail 62 454 (128)
---------------------------------------------------------------
Sales for resale --
Within service area 10 39 (87)
Outside service area 14 (90) (108)
---------------------------------------------------------------
Total sales for resale 24 (51) (195)
Southern Energy 1,040 458 131
Other operating revenues 52 22 -
---------------------------------------------------------------
Total operating revenues $1,178 $883 $192)
===============================================================
Percent change 12.8% 10.6% (2.3)%
---------------------------------------------------------------
Retail revenues of $7.7 billion in 1996 increased 0.8 percent from last
year, compared with an increase of 6.4 percent in 1995. Under fuel cost recovery
provisions, fuel revenues generally equal fuel expense -- including the fuel
component of purchased energy -- and do not affect net income.
Sales for resale revenues within the service area were $409 million in 1996,
up 2.5 percent from the prior year. Revenues from sales for resale within the
service area were $399 million in 1995, up 11 percent from the prior year. This
increase in 1995 resulted primarily from the prolonged hot summer weather, which
increased the demand for electricity.
II-8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
Revenues from sales to utilities outside the service area under long-term
contracts consist of capacity and energy components. Capacity revenues reflect
the recovery of fixed costs and a return on investment under the contracts.
Energy is generally sold at variable cost.
1996 1995 1994
----------------------------------
(in millions)
Capacity $217 $237 $276
Energy 176 151 176
-------------------------------------------------------
Total $393 $388 $452
=======================================================
Capacity revenues decreased in 1996 because the amount of capacity under
contract declined slightly in 1996 and by 100 megawatts in 1995. Additional
declines in capacity are not scheduled until after 1999.
Changes in traditional core business revenues are influenced heavily by the
amount of energy sold each year. Kilowatt-hour sales for 1996 and the percent
change by year were as follows:
(billions of
kilowatt-hours) Amount Percent Change
------------- ----------------------------
1996 1996 1995 1994
------------- ----------------------------
Residential 40.1 2.5% 9.2% (2.6)%
Commercial 38.0 5.7 5.5 3.8
Industrial 52.8 2.2 2.7 3.2
Other 0.9 5.7 2.1 3.8
-------------
Total retail 131.8 3.3 5.4 1.6
Sales for resale --
Within service area 10.9 15.4 16.2 (38.5)
Outside service area 10.8 17.9 (15.1) (13.5)
-------------
Total 153.5 5.0 4.4 (3.4)
===================================================================
The rate of increase in 1996 retail energy sales continued to be strong. The
number of customers served increased by nearly 71,000 during the year.
Residential energy sales experienced only moderate gains as a result of milder
summer weather in 1996, compared with the extremely hot summer of 1995.
Commercial and industrial sales continue to show slight gains in excess of the
national average. This reflects the strength of business and economic conditions
in Southern Company's traditional service area. Energy sales to retail customers
are projected to increase at an average annual rate of 2.1 percent during the
period 1997 through 2007.
Energy sales for resale outside the service area are predominantly unit
power sales under long-term contracts to Florida utilities. Economy sales and
amounts sold under short-term contracts are also sold for resale outside the
service area. Sales to customers outside the service area increased in 1996 and
declined in 1995 when compared with the prior year. However, these fluctuations
in energy sales have minimal effect on earnings because Southern Company is paid
for dedicating specific amounts of its generating capacity to these utilities
outside the service area.
Expenses
Total operating expenses of $8.5 billion for 1996 increased $1.2 billion
compared with the prior year. Traditional core business expenses increased $240
million. Southern Energy's expenses increased $970 million. The large increase
for Southern Energy resulted primarily from SWEB, which was acquired in late
1995. The costs to produce and deliver electricity for the traditional core
business in 1996 increased by $79 million to meet higher energy demands. Also,
costs related to work force reduction programs increased expenses by $58
million. Depreciation expenses and property taxes increased by $50 million as a
result of additional utility plant being placed into service. The amortization
of deferred expenses related to Plant Vogtle increased by $13 million in 1996
when compared with the prior year.
In 1995, operating expenses of $7.3 billion increased 11 percent compared
with 1994. Traditional core business expenses increased $322 million. Southern
Energy's expenses increased $390 million. Total production costs for the core
business were up $120 million. Depreciation expense and taxes other than income
taxes increased $78 million. Also, the amortization of deferred Plant Vogtle
expenses increased $49 million compared with the amount in 1994.
Fuel costs constitute the single largest expense for Southern Company. The
mix of fuel sources for generation of electricity is determined primarily by
II-9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
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 -- within the core business service
area -- were as follows:
1996 1995 1994
----------------------------
Total generation
(billions of kilowatt-hours) 156 147 142
Sources of generation
(percent) --
Coal 77 77 75
Nuclear 17 17 19
Hydro 4 4 5
Oil and gas 2 2 1
Average cost of fuel per net
kilowatt-hour generated
(cents) --
Coal 1.65 1.73 1.80
Nuclear 0.52 0.56 0.56
Oil and gas 5.20 3.37 3.99
Total 1.48 1.53 1.56
- ---------------------------------------------------------------
Fuel and purchased power costs of $3.3 billion in 1996 increased $731 million
compared with 1995. Traditional core business increased $49 million and Southern
Energy increased $682 million because of the acquisition of SWEB in late 1995.
The traditional core business's customer demand for electricity rose by 7.9
billion kilowatt-hours more than in 1995. The additional cost to meet the demand
was offset slightly by a lower average cost of fuel per net kilowatt-hour
generated. Fuel and purchased power expenses of $2.6 billion in 1995 increased
$282 million compared with the prior year. Traditional core business accounted
for $73 million of the increase because of higher energy sales.
For 1996, total income taxes decreased $12 million compared with the prior
year. Traditional core business income taxes decreased $47 million, and Southern
Energy increased $35 million. The decrease was attributable to less taxable
income from core business operations. For 1995, income taxes rose $84 million
above the amount reported for 1994. Traditional core business increased $65
million and Southern Energy accounted for the remainder.
Total gross interest charges and preferred stock dividends increased $19
million from amounts reported in the previous year. These costs for core
business continued to decline by $71 million, but Southern Energy's interest
charges increased. The decline in costs for core business was attributable to
lower interest rates and continued refinancing activities in 1996. In 1995,
these costs for core business decreased $12 million. As a result of favorable
market conditions, $574 million in 1996, $1.1 billion in 1995, and $1.0 billion
in 1994 of senior securities were issued for the primary purpose of retiring
higher-cost securities.
Effects of Inflation
Southern 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
Southern 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, with non-traditional business becoming more
significant.
Work force reduction programs have reduced earnings by $53 million, $17
million, and $61 million for the years 1996, 1995, and 1994, respectively. These
actions will assist in efforts to control growth in future operating expenses.
Future earnings in the near term will depend upon growth in energy 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 having 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. Southern
Company is positioning its business to meet the challenge of this major change
II-10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
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 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
marketers and brokers. Southern Company is aggressively working to maintain and
expand its share of wholesale sales in the Southeastern power markets.
Various federal and state initiatives designed to promote wholesale
and retail competition, among other things, include proposals that would allow
customers to choose their electricity provider. As the initiatives materialize,
the structure of the utility industry could radically change. Certain
initiatives could result in a change in the ownership and/or operation of
generation and transmission facilities. Numerous issues must be resolved,
including significant ones relating to transmission pricing and recovery of
stranded investments. Being a low-cost producer could provide significant
opportunities to increase market share and profitability in markets that evolve
with changing regulation. Unless Southern 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.
The Energy Act amended the Public Utility Holding Company Act of 1935
(PUHCA). The amendment allows holding companies to form exempt wholesale
generators and foreign utility companies to sell power largely free of
regulation under PUHCA. These entities are able to sell power to affiliates --
under certain restrictions -- and to own and operate power generating facilities
in other domestic and international markets. To take advantage of existing and
evolving opportunities, Southern Energy-- founded in 1981 -- is focusing on
international and domestic cogeneration, the independent power market, and the
privatization of generating and distribution facilities in the international
market. As the marketplace evolves, Southern Energy is positioning the company
to become a major competitor for providing energy-related services, including
energy trading and marketing. Also, Southern Energy is expanding the business
through acquisitions. In late 1995, SWEB was acquired for approximately $1.8
billion. In July 1996, a 25 percent interest in SWEB was sold. The acquisition
of an 80 percent interest in CEPA for a total net investment of some $2.1
billion was completed in early 1997. For additional information on these
acquisitions, see Note 14 to the financial statements.
The CEPA acquisition is expected to be slightly dilutive in the near term.
However, Southern Energy's investments should increase the opportunities for
long-term future earnings growth. At December 31, 1996, Southern Energy's total
assets amounted to $4.9 billion, and with the inclusion of CEPA assets will be
nearly $10 billion.
Rates to retail customers served by the system operating companies are
regulated by the respective state public service commissions in Alabama,
Florida, Georgia, and Mississippi. Rates for Alabama Power and Mississippi Power
are adjusted periodically within certain limitations based on earned retail rate
of return compared with an allowed return. See Note 3 to the financial
statements for information about other retail and wholesale regulatory matters.
The staff of the Securities and Exchange Commission has questioned certain of
the current accounting practices of the electric utility industry -- including
Southern Company's -- 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 Southern Company's nuclear and other facilities may be required to be
recorded as liabilities in the Consolidated Balance Sheets. Also, the annual
provisions for such costs could change. Because of the company's current ability
to recover closure and removal costs through rates, these changes would 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.
Southern Company is involved in various matters being litigated. See Note 3
to the financial statements for information regarding material issues that could
possibly affect future earnings.
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."
II-11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
The operating companies are 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 a 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.
FINANCIAL CONDITION
Overview
Southern Company's financial condition continues to remain strong. Earnings per
share set a record high in 1996. Net income continued to increase in 1996 and
exceeded $1.1 billion. Based on this performance, in January 1997, the Southern
Company board of directors increased the common stock dividend for the sixth
consecutive year.
Gross property additions to utility plant were $1.2 billion. The majority of
funds needed for gross property additions since 1993 have been provided from
operating activities, principally from earnings and non-cash charges to income
such as depreciation and deferred income taxes. The Consolidated Statements of
Cash Flows provide additional details.
Southern Company uses financial derivatives on a limited basis to mitigate
business risks. At December 31, 1996, the credit and price risks for derivatives
outstanding were not material to the financial statements. See Note 1 to the
financial statements under "Financial Instruments" for additional information.
Capital Structure
Southern Company achieved a ratio of common equity to total capitalization --
including short-term debt -- of 45.1 percent in 1996, compared with 42.4 percent
in 1995, and 44.4 percent in 1994. The company's goal is to maintain the common
equity ratio generally within a range of 40 percent to 45 percent.
During 1996, the subsidiary companies sold $85 million of first mortgage
bonds and, through public authorities, $167 million of pollution control revenue
bonds. Preferred securities of $322 million were issued in 1996. The companies
continued to reduce financing costs by retiring higher-cost bonds and preferred
stock. Retirements, including maturities, of bonds totaled $600 million during
1996, $1.3 billion during 1995, and $973 million during 1994. Retirements of
preferred stock totaled $179 million during 1996, and $1 million a year during
1995 and 1994. As a result, the composite interest rate on long-term debt
decreased from 7.6 percent at December 31, 1993, to 6.9 percent at December 31,
1996. During this same period, the composite dividend rate on preferred stock
declined from 6.4 percent to 6.2 percent.
In 1996, Southern Company raised $171 million from the issuance of new
common stock under the company's various stock plans. At the close of 1996, the
company's common stock had a market value of 22 5/8 per share, compared with a
book value of $13.61 per share. The market-to-book value ratio was 166 percent
at the end of 1996, compared with 188 percent at year-end 1995, and 160 percent
at year-end 1994.
Capital Requirements for Construction
The construction program of Southern Company is budgeted at $1.4 billion for
1997, $1.3 billion for 1998, and $1.4 billion for 1999. The total is $4.1
billion for the three years. Actual construction costs may vary from this
estimate because of changes in such factors as: business conditions;
environmental regulations; nuclear plant regulations; load projections; the cost
and efficiency of construction labor, equipment, and materials; and the cost of
capital. In addition, there can be no assurance that costs related to capital
expenditures for the operating companies will be fully recovered.
The operating companies do not have any traditional baseload generating
plants under construction, and current energy demand forecasts do not require
any traditional baseload facilities until well into the future. Significant
construction of transmission and distribution facilities and upgrading of
generating plants will be continuing.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately $1.2
billion will be required by the end of 1999 for present sinking fund
requirements and maturities of long-term debt. Also, the subsidiaries will
continue to retire higher-cost debt and preferred stock and replace these
obligations with lower-cost capital if market conditions permit.
II-12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
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 -- impacts Southern
Company. 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 initially affected 28 generating units of Southern Company. As
a result of the 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.
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 sulfur dioxide emission allowance program is expected to
minimize the cost of compliance. Southern Company's sulfur dioxide compliance
strategy is designed to use allowances as a compliance option.
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. Construction expenditures for Phase I compliance totaled
approximately $310 million.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as required
to meet Phase II limits. Therefore, current compliance strategy could require
total Phase II estimated construction expenditures of approximately $80 million,
of which $60 million remains to be spent. 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 revenue requirements from
customers could be necessary to fully recover the 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.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: revisions to the ambient air quality
standards for ozone and particulate matter; emission control strategies for
ozone non-attainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
Southern 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 subsidiaries could incur substantial costs to clean up
properties. The subsidiaries conduct studies to determine the extent of any
required cleanup costs and have recognized in their respective financial
statements costs to clean up known sites. These costs for Southern Company
amounted to $8 million a year for 1995 and 1994. In 1996, the company was
reimbursed $6 million for amounts previously expensed. Additional sites may
require environmental remediation for which the subsidiaries may be liable for a
portion or all required cleanup costs. See Note 3 to the financial statements
for information regarding Georgia Power's potentially responsible party status
at a site in Brunswick, Georgia.
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 Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. The impact of new legislation -- if
II-13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
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
Southern Company plans to issue additional equity capital in 1997. The amount
and timing of additional equity capital to be raised in 1997 -- as well as in
subsequent years -- will be contingent on Southern Company's investment
opportunities. Equity capital can be provided from any combination of public
offerings, private placements, or the company's stock plans. Any portion of the
common stock required during 1997 for the company's stock plans that is not
provided from the issuance of new stock will be acquired on the open market in
accordance with the terms of such plans.
The operating companies plan to obtain the funds required for construction
and other purposes from sources similar to those used in the past, which was
primarily from internal sources. However, the type and timing of any financings
- -- if needed -- will depend on market conditions and regulatory approval.
To meet short-term cash needs and contingencies, Southern Company had
approximately $445 million of cash and cash equivalents and $4.1 billion of
unused credit arrangements with banks at the beginning of 1997.
To issue additional first mortgage bonds and preferred stock, the operating
companies must comply with certain earnings coverage requirements designated in
their mortgage indentures and corporate charters. The ability to issue
securities in the future will depend on coverages at that time. Currently, each
of the operating companies expects to have adequate coverage ratios for
anticipated requirements through at least 1999.
II-14
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995, and 1994
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
(in millions)
Operating Revenues $10,358 $9,180 $8,297
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,245 2,126 2,058
Purchased power 1,103 491 277
Other 1,860 1,626 1,505
Maintenance 782 683 660
Depreciation and amortization 996 904 821
Amortization of deferred Plant Vogtle costs, net 137 124 75
Taxes other than income taxes 634 535 475
Income taxes 747 805 711
- -------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 8,504 7,294 6,582
- -------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,854 1,886 1,715
Other Income:
Allowance for equity funds used during construction 4 5 11
Interest income 54 38 32
Other, net 42 (65) (28)
Income taxes applicable to other income (10) 36 26
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,944 1,900 1,756
- -------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 530 557 568
Allowance for debt funds used during construction (19) (20) (18)
Interest on notes payable 107 63 33
Amortization of debt discount, premium, and expense, net 33 44 30
Other interest charges 46 43 47
Minority interest in subsidiaries 13 13 20
Distributions on preferred securities of subsidiary companies 22 9 -
Preferred dividends of subsidiary companies 85 88 87
- -------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 817 797 767
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 1,127 $1,103 $ 989
===============================================================================================================================
Common Stock Data:
Average number of shares of common stock outstanding (in millions) 673 665 650
Earnings per share of common stock $1.68 $1.66 $1.52
Cash dividends paid per share of common stock $1.26 $1.22 $1.18
- -------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1996, 1995, and 1994
- -------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
(in millions)
Balance at Beginning of Year $3,483 $3,191 $2,968
Consolidated net income 1,127 1,103 989
- -------------------------------------------------------------------------------------------------------------------------------
4,610 4,294 3,957
Cash dividends on common stock 846 811 766
Balance at End of Year (Note 9) $3,764 $3,483 $3,191
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
II-15
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995, and 1994
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
(in millions)
Operating Activities:
Consolidated net income $ 1,127 $ 1,103 $ 989
Adjustments to reconcile consolidated net income
to net cash provided by operating activities --
Depreciation and amortization 1,201 1,134 1,050
Deferred income taxes and investment tax credits 57 117 (4)
Allowance for equity funds used during construction (4) (5) (11)
Amortization of deferred Plant Vogtle costs, net 137 124 75
Gain on asset sales (59) (33) (52)
Other, net 79 (52) 45
Changes in certain current assets and liabilities --
Receivables, net (92) (109) 114
Fossil fuel stock 57 28 (110)
Materials and supplies 47 11 (18)
Accounts payable 19 (138) 81
Other (168) 135 (48)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,401 2,315 2,111
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,229) (1,401) (1,536)
Southern Energy business acquisitions - (1,416) (405)
Sales of property 211 287 171
Other (275) 153 (87)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (1,293) (2,377) (1,857)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds --
Common stock 171 277 279
Preferred securities 322 - 100
First mortgage bonds 85 375 185
Other long-term debt 1,570 1,805 1,188
Retirements --
Preferred stock (179) (1) (1)
First mortgage bonds (426) (538) (241)
Other long-term debt (1,754) (902) (1,039)
Increase (decrease) in notes payable, net (268) 727 37
Payment of common stock dividends (846) (811) (766)
Miscellaneous (110) (237) (35)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (1,435) 695 (293)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (327) 633 (39)
Cash and Cash Equivalents at Beginning of Year 772 139 178
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 445 $ 772 $ 139
===========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $677 $622 $618
Income taxes $652 $645 $716
Southern Energy business acquisitions --
Fair value of assets acquired $- $2,745 $604
Less cash paid for common stock - 1,416 405
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities assumed $- $1,329 $199
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-16
<PAGE>
CONSOLIDATED BALANCE SHEETS
At December 31, 1996 and 1995
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Assets 1996 1995
- ------------------------------------------------------------------------------------------------------------------
(in millions)
Utility Plant:
Plant in service (Note 1) $33,260 $31,878
Less accumulated provision for depreciation 10,921 10,067
- ------------------------------------------------------------------------------------------------------------------
22,339 21,811
Nuclear fuel, at amortized cost 246 225
Construction work in progress (Note 4) 684 990
- ------------------------------------------------------------------------------------------------------------------
Total 23,269 23,026
- ------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Argentine operating concession, being amortized 416 431
Goodwill (Note 14) 318 344
Nuclear decommissioning trusts 279 201
Miscellaneous 488 317
- ------------------------------------------------------------------------------------------------------------------
Total 1,501 1,293
- ------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 445 772
Special deposits 44 156
Receivables, less accumulated provisions for uncollectible accounts
of $32 million in 1996 and $37 million in 1995 1,458 1,366
Fossil fuel stock, at average cost 270 327
Materials and supplies, at average cost 510 552
Prepayments 253 266
Vacation pay deferred 77 74
- ------------------------------------------------------------------------------------------------------------------
Total 3,057 3,513
- ------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 1,302 1,386
Deferred Plant Vogtle costs 171 308
Debt expense, being amortized 78 68
Premium on reacquired debt, being amortized 289 295
Miscellaneous 625 633
- ------------------------------------------------------------------------------------------------------------------
Total 2,465 2,690
- ------------------------------------------------------------------------------------------------------------------
Total Assets $30,292 $30,522
==================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-17
<PAGE>
CONSOLIDATED BALANCE SHEETS
At December 31, 1996 and 1995
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Capitalization and Liabilities 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
(in millions)
Capitalization (See accompanying statements):
Common stock equity $ 9,216 $ 8,772
Preferred stock of subsidiaries 980 1,332
Subsidiary obligated mandatorily redeemable preferred securities 422 100
Long-term debt 7,935 8,274
- ----------------------------------------------------------------------------------------------------------------------
Total 18,553 18,478
- ----------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Amount of securities due within one year 364 509
Notes payable 1,483 1,670
Accounts payable 788 785
Customer deposits 132 216
Taxes accrued-
Federal and state income 12 93
Other 193 179
Interest accrued 187 199
Vacation pay accrued 104 100
Miscellaneous 535 530
- ----------------------------------------------------------------------------------------------------------------------
Total 3,798 4,281
- ----------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 4,738 4,611
Deferred credits related to income taxes (Note 8) 879 936
Accumulated deferred investment tax credits 788 820
Employee benefits provisions 439 431
Minority interest 375 231
Prepaid capacity revenues 122 131
Department of Energy assessments 81 86
Disallowed Plant Vogtle capacity buyback costs 57 59
Storm damage reserves 35 31
Miscellaneous 427 427
- ----------------------------------------------------------------------------------------------------------------------
Total 7,941 7,763
- ----------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, 7, 13, and 14)
Total Capitalization and Liabilities $30,292 $30,522
======================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-18
<PAGE>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31, 1996 and 1995
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
Common Stock Equity:
Common stock, par value $5 per share --
Authorized -- 1 billion shares
Outstanding -- 1996: 677 million shares
1995: 670 million shares $3,385 $3,348
Paid-in capital 2,067 1,941
Retained earnings (Note 9) 3,483
- ------------------------------------------------------------------------------------------------------------------------
Total common stock equity 9,216 8,772 49.7% 47.5%
- ------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock of Subsidiaries:
$100 par or stated value --
4.20% to 5.96% 199 199
6.32% to 7.88% 130 205
$25 par or stated value --
$1.90 to $2.125 191 295
6.40% to 7.60% 323 323
Auction rates -- at January 1, 1997:
4.01% to 4.09% 70 70
Adjustable rates -- at January 1, 1997:
5.01% to 5.66% 240 240
- ------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $72 million) 1,153 1,332
Less amount due within one year 173 -
- ------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 980 1,332 5.3 7.2
- ------------------------------------------------------------------------------------------------------------------------
Subsidiary Obligated Mandatorily
Redeemable Preferred Securities (Note 10):
$25 liquidation value
7.375% 97 -
7.75% 225 -
9% 100 100
- ------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $34 million) 422 100 2.3 0.5
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-19
<PAGE>
CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1996 and 1995
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
Long-Term Debt of Subsidiaries:
First mortgage bonds --
Maturity Interest Rates
1996 4 1/2 % - 60
1996 4 3/4 % - 150
1996 8.665% - 6
1997 5 7/8 % 25 25
1997 8.665% 7 7
1998 5% to 8.665% 238 238
1999 6 1/8% to 8.665% 373 373
2000 6% to 8.665% 349 349
2001 8.665% 9 9
2002 through 2006 6.07% to 8.665% 1,017 962
2007 through 2011 6 7/8% to 9% 292 293
2012 through 2016 8.665% 85 85
2017 through 2021 8.665% to 9 1/4% 228 376
2022 through 2026 6 7/8% to 9% 1,497 1,528
- -----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 4,120 4,461
Other long-term debt (Note 11) 4,084 4,403
Unamortized debt premium (discount), net (78) (81)
- -----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $564 million) 8,126 8,783
Less amount due within one year (Note 12) 191 509
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 7,935 8,274 42.7 44.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $18,553 $18,478 100.0% 100.0%
===================================================================================================================================
CONSOLIDATED STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1996, 1995, and 1994
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions)
Balance at Beginning of Year $1,941 $1,712 $1,503
Proceeds from sales of common stock over the par value -- 7.5 million,
13.0 million, and 13.9 million shares in 1996, 1995, and 1994, respectively 133 212 209
Miscellaneous (7) 17 -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year $2,067 $1,941 $1,712
===================================================================================================================================
</TABLE>
II-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Southern Company and Subsidiary Companies 1996 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Southern Company is the parent company of five operating companies, a system
service company, Southern Communications Services (Southern Communications),
Southern Energy, Inc. (Southern Energy), 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, Georgia Power, Gulf Power, Mississippi Power, and
Savannah Electric -- provide electric service in four southeastern states.
Contracts among the operating 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 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 Energy designs, builds, owns, and operates power production
and delivery facilities and provides a broad range of energy related services in
the United States and international markets. Southern Nuclear provides services
to Southern Company's nuclear power plants. Southern Development develops new
business opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both the company and its subsidiaries are
subject to the regulatory provisions of the PUHCA. The operating companies also
are subject to regulation by the FERC and their respective state regulatory
commissions. The companies follow generally accepted accounting principles and
comply with the accounting policies and practices prescribed by their respective
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. All material intercompany items
have been eliminated in consolidation.
The consolidated financial statements reflect investments in majority-owned
or controlled subsidiaries on a consolidated basis and other investments on an
equity basis. Certain prior years' data presented in the consolidated financial
statements have been reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
The operating companies are 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
operating companies 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 Consolidated Balance Sheets at
December 31 relate to the following:
1996 1995
------------------------
(in millions)
Deferred income taxes $1,302 $1,386
Deferred Plant Vogtle costs 171 308
Premium on reacquired debt 289 295
Demand-side programs 44 79
Department of Energy assessments 69 73
Vacation pay 77 74
Deferred fuel charges 29 49
Postretirement benefits 38 53
Work force reduction costs 48 56
Deferred income tax credits (879) (936)
Storm damage reserves (32) (23)
Other, net 114 98
- -----------------------------------------------------------------
Total $1,270 $1,512
=================================================================
In the event that a portion of the operating companies' operations is no
longer subject to the provisions of Statement No. 71, the companies would be
required to write off related regulatory assets and liabilities. In addition,
the operating companies 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 operating companies accrue revenues for service rendered but unbilled at the
end of each fiscal period. Fuel costs are expensed as the fuel is used. The
operating companies' electric rates include provisions to adjust billings for
fluctuations in fuel and the energy component of purchased power costs. Revenues
II-21
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
are adjusted for differences between recoverable fuel costs and amounts actually
recovered in current rates.
The operating companies have a diversified base of customers. No single
customer or industry comprises 10 percent or more of revenues. In 1996,
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 $142
million in 1996, $140 million in 1995, and $152 million in 1994. Alabama Power
and Georgia Power have contracts with the U.S. Department of Energy (DOE) that
provide 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 2003 at Plant Hatch, into 2008 at Plant Vogtle, and into 2010 and
2013 at Plant Farley units 1 and 2, respectively. Activities for adding dry cast
storage capacity at Plant Hatch by as early as 1999 are in progress.
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 is being 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. Alabama Power and
Georgia Power -- based on its ownership interests -- estimate their respective
remaining liability at December 31, 1996, under this law to be approximately $37
million and $30 million, respectively. These obligations are recorded in the
Consolidated 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
3.3 percent in 1996, 3.3 percent in 1995, and 3.2 percent in 1994. 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 costs
of decommissioning nuclear facilities and removal of other facilities.
Georgia Power recorded additional depreciation of electric plant amounting
to $24 million in 1996 and $6 million in 1995. See Note 3 under "Georgia Power
Retail Accounting Order" for additional information.
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. Alabama
Power and Georgia Power have 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 periods approved by the
respective state public service commissions. 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.
Alabama Power and Georgia Power have 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 a specific facility as of
the site study year, and ultimate cost is the estimate to decommission a
specific facility as of retirement date. The estimated costs of decommissioning
II-22
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
- -- both site study costs and ultimate costs -- at December 31, 1996, for Alabama
Power's Plant Farley and Georgia Power's ownership interests in plants Hatch and
Vogtle were as follows:
Plant Plant Plant
Farley Hatch Vogtle
--------------------------------
Site study basis (year) 1993 1994 1994
Decommissioning periods:
Beginning year 2017 2014 2027
Completion year 2029 2027 2038
- -----------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $489 $294 $233
Non-radiated structures 89 41 52
- -----------------------------------------------------------------
Total $578 $335 $285
=================================================================
Ultimate costs:
Radiated structures $1,504 $781 $1,018
Non-radiated structures 274 111 230
- -----------------------------------------------------------------
Total $1,778 $892 $1,248
=================================================================
Plant Plant Plant
Farley Hatch Vogtle
---------------------------
(in millions)
Amount expensed in 1996 $18 $11 $9
Accumulated provisions:
Balance in external trust
funds $149 $ 79 $51
Balance in internal reserves 47 27 13
- ----------------------------------------------------------------
Total $196 $106 $64
================================================================
Significant assumptions:
Inflation rate 4.5% 4.4% 4.4%
Trust earning rate 7.0 6.0 6.0
- ----------------------------------------------------------------
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the respective state public service commissions. All of Alabama
Power's decommissioning costs are approved for ratemaking. For Georgia Power,
only the costs to decommission the radioactive portion of the plants are
included in cost of service. Alabama Power and Georgia Power expect their
respective state public service commissions to periodically review and adjust,
if necessary, the amounts collected in rates for the anticipated cost of
decommissioning.
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
Southern 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.
Plant Vogtle Phase-In Plans
In 1987, 1989, and 1991, the Georgia Public Service Commission (GPSC) ordered
that the allowed costs of Plant Vogtle, a two-unit nuclear facility of which
Georgia Power owns 45.7 percent, be phased into rates. Each GPSC order called
for recovery of deferred costs within 10 years. Under these plans, all allowed
costs will be recovered by 1999.
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 rates used by the operating companies to
calculate AFUDC during the years 1994 through 1996 ranged from a
before-income-tax rate of 5.1 percent to 9.8 percent. AFUDC, net of income tax,
as a percent of consolidated net income was 1.4 percent in 1996, 1.6 percent in
1995, and 2.3 percent in 1994.
Utility Plant
Utility plant is stated at original cost less regulatory disallowances. 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
II-23
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
charged to maintenance expense. The cost of replacements of property --
exclusive of minor items of property -- is charged to utility plant.
Cash and Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, temporary cash
investments are considered cash equivalents. Temporary cash investments are
securities with original maturities of 90 days or less.
Financial Instruments
Southern Company engages in price risk management activities for trading and
non-trading purposes. Activities for non-trading purposes consist of
transactions that are employed to mitigate Southern Company's risk related to
interest rate and foreign currency fluctuations. Gains and losses arising from
effective hedges of existing assets, liabilities, or firm commitments are
deferred and recognized when the offsetting gains and losses are recognized on
the related hedged items. At December 31, 1996, the credit risk for derivatives
outstanding was not material to the financial statements. Southern Company
regularly monitors its foreign currency exposure and ensures that hedge contract
amounts do not exceed the amount of underlying exposures. At December 31, 1996,
the status of outstanding non-trading related derivative contracts was as
follows:
Year Of
Maturity or Notional Unrealized
Type Termination Amount Gain (Loss)
- ---------------------------------- ---------------------------
(in millions)
Interest rate
swaps: 1999-2011 $158 $(7)
2001-2012 (pound)500 $(13)
Cross currency
swaps 2001-2006 (pound)405 $(38)
- -----------------------------------------------------------------
(pound) - Denotes British pound sterling.
During 1996, Southern Energy began trading activities by offering price risk
management services related to commodities associated with the domestic energy
industry -- electricity and natural gas. Southern Energy provides these services
through a variety of financial instruments. These transactions are accounted for
using the mark-to-market method of accounting. Under this method, unrealized
gains or losses resulting from the impact of price movements are recognized as
net gains or losses in the consolidated statements of income. The market prices
used to value these transactions reflect management's best estimates considering
various factors including: closing exchange quotations, over-the-counter
quotations, liquidity of the position, time value, and volatility factors
underlying the commitments. Net trading gains and losses were insignificant to
the financial statements for the year ended December 31, 1996. Also, outstanding
contracts at December 31, 1996, were not material to the financial statements.
South Western Electricity (SWEB)--a British distribution company owned by
Southern Energy--has contracts to mitigate its exposure to volatility in the
prices of electricity purchased through the wholesale electricity market. These
contracts are in place to hedge a portion of electricity purchases of
approximately 28 billion kilowatt-hours through the year 2008. This represents
approximately two years of electricity purchases for SWEB based on current
volumes. Accordingly, the gains or losses realized on such contracts are
deferred and recognized as electricity is purchased. It is not possible to
estimate the fair value of these contracts due to the absence of a trading
market.
Other Southern Company financial instruments for which the carrying amount
did not equal fair value at December 31 were as follows:
Carrying Fair
Amount Value
--------------------------
(in millions)
Long-term debt:
At December 31, 1996 $7,975 $8,122
At December 31, 1995 8,636 8,935
Preferred securities:
At December 31, 1996 422 427
At December 31, 1995 100 114
- -----------------------------------------------------------------
The fair values for long-term debt and preferred securities were 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.
II-24
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
2. RETIREMENT BENEFITS
Pension Plan
The system companies have defined benefit, trusteed, pension plans that cover
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 companies use 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
In the United States, Southern Company provides certain medical care and life
insurance benefits for retired employees. Substantially all these employees may
become eligible for such benefits when they retire. Trusts are funded to the
extent deductible under federal income tax regulations or to the extent required
by the operating companies' respective regulatory commissions. Amounts funded
are primarily invested in debt and equity securities.
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." In October 1993, the GPSC ordered
Georgia Power to phase in the adoption of Statement No. 106 to cost of service
over a five-year period, whereby one-fifth of the additional costs was expensed
in 1993 and the remaining costs were deferred. An additional one-fifth of the
costs is being expensed each succeeding year until the costs are fully reflected
in cost of service in 1997. The costs deferred during the five-year period will
be amortized to expense over a 15-year period beginning in 1998. For the other
operating companies, the cost of postretirement benefits is reflected in rates
on a current basis.
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
FASB Statement Nos. 87 and 106, respectively. The funded status of the
plans at December 31 was as follows:
Pension
-----------------------
1996 1995
-----------------------
(in millions)
Actuarial present value of benefit obligation:
Vested benefits $2,730 $2,643
Non-vested benefits 119 97
- ------------------------------------------------------------------
Accumulated benefit obligation 2,849 2,740
Additional amounts related to
projected salary increases 775 705
- ------------------------------------------------------------------
Projected benefit obligation 3,624 3,445
Less:
Fair value of plan assets 5,212 4,725
Unrecognized net gain (1,314) (1,025)
Unrecognized prior service cost 135 60
Unrecognized transition asset (114) (126)
- ------------------------------------------------------------------
Prepaid asset recognized in the
Consolidated Balance Sheets $ 295 $ 189
==================================================================
Postretirement Benefits
----------------------------
1996 1995
--------------- ------------
(in millions)
Actuarial present value of benefit obligation:
Retirees and dependents $409 $394
Employees eligible to retire 78 63
Other employees 383 392
- ------------------------------------------------------------------
Accumulated benefit obligation 870 849
Less:
Fair value of plan assets 260 205
Unrecognized net loss (gain) 79 85
Unrecognized prior service cost (5) (4)
Unrecognized transition
obligation 249 292
- -------------------------------------------------------------------
Accrued liability recognized in the
Consolidated Balance Sheets $287 $271
===================================================================
In 1995, the system companies announced a cost sharing program for
postretirement benefits. The program established limits on amounts the companies
will pay to provide future retiree postretirement benefits. This change reduced
the 1995 accumulated postretirement benefit obligation by approximately $186
million.
II-25
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
The weighted average rates assumed in the actuarial calculations were:
1996 1995 1994
---------------------------------
Discount 7.8% 7.3% 8.0%
Annual salary increase 5.3 4.8 5.5
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 9.3
percent for 1996, decreasing gradually to 5.8 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 at December 31, 1996, by $77 million and the aggregate of the service
and interest cost components of the net retiree cost by $8 million.
Components of the plans' net costs are shown below:
Pension
---------------------------
1996 1995 1994
---------------------------
(in millions)
Benefits earned during the year $ 99 $ 79 $ 77
Interest cost on projected
benefit obligation 267 193 160
Actual (return) loss on plan assets (564) (730) 75
Net amortization and deferral 152 412 (351)
- ------------------------------------------------------------------
Net pension cost (income) $ (46) $ (46) $ (39)
==================================================================
Of the above net pension income, $37 million in 1996, $30 million in 1995,
and $29 million in 1994 were recorded in operating expenses, and the remainder
was recorded in construction and other accounts.
Postretirement Benefits
---------------------------
1996 1995 1994
---------------------------
(in millions)
Benefits earned during the year $ 20 $ 28 $ 31
Interest cost on accumulated
benefit obligation 60 67 64
Amortization of transition
obligation 15 27 27
Actual (return) loss on plan
assets (17) (23) 2
Net amortization and deferral 6 12 (10)
- ------------------------------------------------------------------
Net postretirement costs $ 84 $111 $114
==================================================================
Of the above net postretirement costs, $64 million in 1996, $78 million in
1995, and $77 million in 1994 were charged to operating expenses. In addition,
$3 million in 1996, $11 million in 1995, and $18 million in 1994 were deferred,
and the remainder was charged to construction and other accounts.
Work Force Reduction Programs
The system companies have incurred additional costs for work force reduction
programs. The costs related to these programs were $85 million, $42 million, and
$112 million for the years 1996, 1995, and 1994, 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 million at December 31, 1996.
3. LITIGATION AND REGULATORY MATTERS
Stockholder Suit Concluded
In April 1991, two Southern Company stockholders filed a derivative action suit
in the U.S. District Court for the Southern District of Georgia against certain
current and former directors and officers of Southern Company. The suit alleges
violations of the Federal Racketeer Influenced and Corrupt Organizations Act
(RICO) by officers and breaches of fiduciary duty and gross negligence by all
defendants resulting from alleged fraudulent accounting for spare parts, illegal
political campaign contributions, violations of federal securities laws
involving misrepresentations and omissions in SEC filings, and concealment of
the foregoing acts. The complaint sought damages -- including treble damages
pursuant to RICO -- in an unspecified amount, which if awarded, would have been
payable to Southern Company. The court ruled the plaintiffs had failed to
present adequately their allegation that Southern Company board of directors'
refusal of an earlier demand by the plaintiffs was wrongful. In April 1994, the
U.S. Court of Appeals for the 11th Circuit reversed the dismissal and remanded
the case to the trial court, finding that allegations by the plaintiffs created
a reasonable doubt that the board validly exercised its business judgment in
refusing the earlier demand. In June 1995, for the second time, the trial court
dismissed the suit, and the plaintiffs appealed. A panel of the court of appeals
in May 1996 affirmed the trial court's dismissal. The plaintiffs' request for a
rehearing was denied. This matter is now concluded.
II-26
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
Alabama Power Appliance Warranty Litigation
In 1996, legal actions against Alabama Power were filed in several counties in
Alabama charging Alabama Power with fraud and non-compliance with regulatory
statutes relating to the offer, sale, and financing of "extended service
contracts" in connection with the sale of electric appliances. Some of these
suits were filed as class actions, while others were filed on behalf of multiple
individual plaintiffs. The plaintiffs seek damages for an unspecified amount.
Alabama Power has offered extended service agreements to its customers since
January 1984, and approximately 175,000 extended service agreements could be
involved in these proceedings. The final outcome of these cases cannot now be
determined.
Georgia Power Potentially Responsible Party Status
In January 1995, Georgia Power and four other unrelated entities were notified
by the Environmental Protection Agency (EPA) that they have been designated as
potentially responsible parties under the Comprehensive Environmental Response,
Compensation, and Liability Act with respect to a site in Brunswick, Georgia. As
of December 31, 1996, Georgia Power had recorded approximately $5 million in
expenses associated with the site. This represents Georgia Power's agreed upon
share of removal and remedial investigation and feasibility study costs.
The final outcome of this matter cannot now be determined. However, based on
the nature and extent of Georgia Power's activities relating to the site,
management believes that the company's portion of any remaining remediation
costs should not be material to the financial statements.
Georgia Power Investment in Rocky Mountain
In its 1985 financing order, the GPSC concluded that completion of the Rocky
Mountain pumped storage hydroelectric plant in 1991 as then planned was not
economically justifiable and reasonable and withheld authorization for Georgia
Power to spend funds from approved securities issuances on that plant. In 1988,
Georgia Power and Oglethorpe Power Corporation (OPC) entered into a joint
ownership agreement for OPC to assume responsibility for the construction and
operation of the plant. However, full recovery of Georgia Power's costs depends
on the GPSC's treatment of the plant's costs and the disposition of the plant's
capacity output. In June 1996, the GPSC initiated a review of this plant. In the
event the GPSC does not allow full recovery of the plant costs, then the portion
not allowed may have to be written off. In 1995, the plant went into commercial
operation. At December 31, 1996, Georgia Power's net investment in the plant was
approximately $175 million.
The final outcome of this matter cannot now be determined. Accordingly, no
provision for any write-down of the investment in the plant has been made.
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.
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. 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--as
well as to certain other contracts that reference these proceedings in
determining return on common equity--and if refunds were ordered, the amount of
refunds could range up to approximately $160 million at December 31, 1996.
However, management believes that rates are not excessive and that refunds are
not justified.
II-27
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
Alabama Power Rate Adjustment Procedures
In November 1982, the Alabama Public Service Commission (APSC) adopted rates
that provide for periodic adjustments based upon Alabama Power'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 Alabama Power'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 July 2001.
In December 1995, the APSC issued an order authorizing Alabama Power 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.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Georgia Power Retail Accounting Order
In February 1996, the GPSC approved an accounting order, which will be in effect
for three years beginning January 1, 1996. Under the accounting order, Georgia
Power's earnings are evaluated against a retail return on common equity range of
10 percent to 12.5 percent. Earnings in excess of 12.5 percent will be used to
accelerate the amortization of regulatory assets or to accelerate the
depreciation of electric plant. At its option, Georgia Power may also accelerate
amortization or depreciation of assets while within the range allowed on common
equity. Georgia Power is required to absorb cost increases of approximately $29
million annually during the three-year period, including $14 million annually of
accelerated depreciation of electric plant. Under the accounting order, Georgia
Power will not file for a general base rate increase unless its projected retail
return on common equity falls below 10 percent. On July 1, 1998, Georgia Power
is required to file a general rate case. In response, the GPSC would be expected
to either continue the provisions of the accounting order or adopt new ones.
A consumer group appealed the GPSC's decision to the Superior Court of
Fulton County, Georgia. In 1996, the court ruled that statutory requirements
applicable to rates cases were not followed and remanded the matter to the GPSC.
Both the GPSC and Georgia Power appealed the court's decision to the Georgia
Court of Appeals. Georgia Power is continuing to record expenses in accordance
with the accounting order pending the outcome of this matter.
4. CONSTRUCTION PROGRAM
The system companies are engaged in continuous construction programs, currently
estimated to total some $1.4 billion in 1997, $1.3 billion in 1998, and $1.4
billion in 1999. The construction programs are subject to periodic review and
revision, and actual construction costs may vary from the above estimates
because of numerous factors. These factors include: changes in business
conditions; revised load growth estimates; changes in environmental regulations;
changes in existing nuclear plants to meet new regulatory requirements;
increasing costs of labor, equipment, and materials; and cost of capital. At
December 31, 1996, significant purchase commitments were outstanding in
connection with the construction program. The operating companies do not have
any traditional baseload generating plants under construction. However,
significant construction will continue related to transmission and distribution
facilities and the upgrading of generating plants.
See Management's Discussion and Analysis under "Environmental Matters" for
information on the impact of the Clean Air Act Amendments of 1990 and other
environmental matters.
5. FINANCING, INVESTMENTS, AND COMMITMENTS
General
Southern Company plans to issue equity capital in 1997. The amount and timing of
additional equity capital to be raised in 1997 -- as well as in subsequent years
- -- will be contingent on Southern Company's investment opportunities. Equity
capital can be provided from any combination of public offerings, private
placements, or the company's stock plans.
The operating companies' construction programs are expected to be financed
primarily from internal sources. Short-term debt is often utilized and the
amounts available are discussed below. The companies may issue additional
II-28
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
long-term debt and preferred securities primarily for the purposes of debt
maturities and for redeeming higher-cost securities if market conditions permit.
Bank Credit Arrangements
At the beginning of 1997, unused credit arrangements with banks totaled $4.1
billion, of which approximately $1.7 billion expires at various times during
1997 and 1998; $1.0 billion in syndicated credit arrangements expires April 19,
2001; and the remaining $1.4 billion is under revolving credit agreements.
The revolving credit agreements are as follows:
Amount of Credit
-------------------------------------
Company Total Unused Expires
- ------------ -------------------- -------------
(in millions)
Georgia Power $ 60 $ 49 5-01-99
Mississippi Power 40 20 12-01-99
Savannah Electric 20 15 12-31-98
Southern Company 300 300 7-01-99
Southern Company 300 300 11-30-99
Southern Energy 520 215 11-05-99
Southern Energy 283 64 Various
Combined 400 400 6-30-99
- ----------------------------------------------
Total $1,923 $1,363
==============================================
Combined unused revolving credit agreements of $400 million expiring in 1999
are with several banks that provide Southern Company, Alabama Power, and Georgia
Power up to $100 million, $135 million, and $165 million, respectively, for
available credit to provide liquidity support for commercial paper programs.
Most of the revolving credit agreements allow short-term borrowings to be
converted 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.
Southern Company's $1.0 billion syndicated credit arrangement allows for
revolving loans and competitive bid loans, provided that the sum of the
aggregate amount of revolving loans outstanding plus the aggregate amount of
competitive bid loans outstanding shall not exceed the revolving loan commitment
of $1.0 billion. This agreement requires payment of commitment fees based on the
unused portion of the commitments. Southern Company also pays an agent fee in
connection with this arrangement.
In connection with all other lines of credit, the companies have the option
of paying fees or maintaining compensating balances, which are substantially all
the cash of the companies except for daily working funds and similar items.
These balances are not legally restricted from withdrawal.
A portion of the $4.1 billion unused credit arrangements with banks --
discussed earlier -- is allocated to provide liquidity support to the companies'
variable rate pollution control bonds. At December 31, 1996, the amount of
credit lines allocated was $829 million.
In addition, the companies from time to time borrow under uncommitted lines
of credit with banks and in the case of Southern Company, Alabama Power, and
Georgia Power, through commercial paper programs that have the liquidity support
of committed bank credit arrangements.
Assets Subject to Lien
Each of Southern Company's subsidiaries is organized as a legal entity,
separate, and apart from Southern Company and its other subsidiaries. The
subsidiary companies' mortgages, which secure the first mortgage bonds issued by
the companies, constitute a direct first lien on substantially all of the
companies' respective fixed property and franchises. There are no agreements or
other arrangements among the subsidiary companies under which the assets of one
company have been pledged or otherwise made available to satisfy obligations of
Southern Company or any of its subsidiaries.
Fuel and Purchased Power Commitments
To supply a portion of the fuel requirements of the generating plants, Southern
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.
II-29
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
Also, Southern Company has entered into various long-term commitments for the
purchase of electricity. Total estimated long-term obligations at December 31,
1996, were as follows:
Purchased
Year Fuel Power
- -------- ---------------------------------
(in millions)
1997 $ 1,908 $ 553
1998 1,674 249
1999 1,251 162
2000 794 167
2001 748 169
2002 and thereafter 4,797 1,845
- -------------------------------------------------------------
Total commitments $11,172 $3,145
=============================================================
Operating Leases
Southern Company has operating lease agreements with various terms and
expiration dates. These expenses totaled $23 million, $17 million, and $15
million, for 1996, 1995, and 1994, respectively. At December 31, 1996, estimated
minimum rental commitments for noncancelable operating leases were as follows:
Year Amounts
- -------- ---------------
(in millions)
1997 $ 25
1998 24
1999 25
2000 24
2001 23
2002 and thereafter 333
- -----------------------------------------------------------
Total minimum payments $454
===========================================================
6. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS
In 1992, Alabama Power sold an undivided interest in units 1 and 2 of Plant
Miller and related facilities to Alabama Electric Cooperative, Inc.
Since 1975, Georgia Power has sold undivided interests in plants Vogtle,
Hatch, Scherer, and Wansley in varying amounts, together with transmission
facilities, to OPC, the Municipal Electric Authority of Georgia, and the city of
Dalton, Georgia. In addition, Georgia Power has joint ownership agreements with
OPC for the Rocky Mountain project and with Florida Power Corporation (FPC) for
a combustion turbine unit at Intercession City, Florida.
At December 31, 1996, Alabama Power's and Georgia Power's ownership and
investment (exclusive of nuclear fuel) in jointly owned facilities with the
above entities were as follows:
Jointly Owned Facilities
-------------------------------------------------
Percent Amount of Accumulated
Ownership Investment Depreciation
---------------- -------------------------------
Plant Vogtle (in millions)
(nuclear) 45.7% $3,299 $843
Plant Hatch
(nuclear) 50.1 854 436
Plant Miller
(coal)
Units 1 and 2 91.8 714 296
Plant Scherer
(coal)
Units 1and 2 8.4 112 42
Plant Wansley
(coal) 53.5 301 134
Rocky Mountain
(pumped storage) 25.4 202 27
- -------------------------------------------------------------------
In 1994, Georgia Power and FPC entered into a joint ownership agreement
regarding the Intercession City combustion turbine unit. The unit went into
commercial operation in early 1997 and will be operated and maintained by FPC.
Georgia Power has an approximate interest of 33 percent in the 150-megawatt
unit, with retention of 100 percent of the capacity from June through September.
FPC has the capacity the remainder of the year. Georgia Power's investment in
the unit is $13 million.
Alabama Power and Georgia Power have contracted to operate and maintain the
jointly owned facilities -- except for the Rocky Mountain project and
Intercession City -- as agents for their respective co-owners. The companies'
proportionate share of their plant operating expenses is included in the
corresponding operating expenses in the Consolidated Statements of Income.
II-30
<PAGE>
7. LONG-TERM POWER SALES AGREEMENTS
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
The operating companies have long-term contractual agreements for the sale of
capacity and energy to certain non-affiliated utilities located outside the
system's service area. These 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,
profitability is primarily affected by revenues from capacity sales. The
capacity revenues have been as follows:
Unit Other
Year Power Long-Term Total
----- ---------------------------------------
(in millions)
1996 $217 $ - $217
1995 237 - 237
1994 257 19 276
Unit power from specific generating plants is currently being sold to
Florida Power & Light Company (FP&L), FPC, Jacksonville Electric Authority
(JEA), and the city of Tallahassee, Florida. Under these agreements,
approximately 1,600 megawatts of capacity is scheduled to be sold annually
through 1999. Thereafter, these sales will decline to some 1,500 megawatts and
remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the
periods after 1999 with a minimum of three years notice -- until the expiration
of the contracts in 2010.
8. INCOME TAXES
At December 31, 1996, the tax- related regulatory assets and liabilities were
$1.3 billion and $879 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:
1996 1995 1994
-----------------------------
(in millions)
Total provision for income taxes:
Federal --
Currently payable $569 $567 $598
Deferred -- current year 116 184 67
-- reversal of
prior years (74) (111) (75)
Deferred investment tax
credits - 1 -
- -------------------------------------------------------------------
611 641 590
- -------------------------------------------------------------------
State --
Currently payable 82 90 86
Deferred -- current year 23 26 15
-- reversal of
prior years (9) (12) (11)
- -------------------------------------------------------------------
96 104 90
- -------------------------------------------------------------------
International 50 24 5
- -------------------------------------------------------------------
Total 757 769 685
Less income taxes charged
(credited) to other income 10 (36) (26)
- -------------------------------------------------------------------
Total income taxes charged
to operations $747 $805 $711
===================================================================
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:
1996 1995
---------- ------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $2,981 $2,795
Property basis differences 2,154 2,175
Deferred plant costs 54 100
Other 308 247
- -------------------------------------------------------------------
Total 5,497 5,317
- -------------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 110 107
Other property basis differences 253 273
Deferred costs 139 118
Pension and other benefits 68 66
Other 214 192
- -------------------------------------------------------------------
Total 784 756
- -------------------------------------------------------------------
Net deferred tax liabilities 4,713 4,561
Portion included in current assets, net 25 50
- -------------------------------------------------------------------
Accumulated deferred income taxes
in the Consolidated Balance Sheet $4,738 $4,611
===================================================================
II-31
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
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 Consolidated Statements of Income. Credits amortized in this
manner amounted to $33 million in 1996, $38 million in 1995, and $42 million in
1994. At December 31, 1996, 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:
1996 1995 1994
---------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 3.2 3.4 3.3
Non-deductible book
depreciation 1.8 1.6 1.8
Difference in prior years'
deferred and current tax rate (1.0) (1.1) (1.5)
Other (0.5) 0.3 0.3
- ------------------------------------------------------------------
Effective income tax rate 38.5% 39.2% 38.9%
==================================================================
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. COMMON STOCK
Shares Reserved
At December 31, 1996, a total of 59 million shares was reserved for issuance
pursuant to the Southern Investment Plan, the Employee Savings Plan, the Outside
Directors Stock Plan, and the Executive Stock Option Plan.
Executive Stock Option Plan
Southern Company's Executive Stock Option Plan authorizes the granting of
non-qualified stock options to key employees of Southern Company, including
officers. As of December 31, 1996, 249 current and former employees participated
in the plan. The maximum number of shares of common stock that may be issued
under the Executive Stock Option Plan may not exceed 6 million. The prices of
options granted to date have been at the fair market value of the shares on the
dates of grant. Options granted to date become exercisable pro rata over a
maximum period of four years from the date of grant. Options outstanding will
expire no later than 10 years after the date of grant, unless terminated earlier
by the board of directors in accordance with the plan. Stock option activity in
1995 and 1996 is summarized below:
Shares Average
Subject Option Price
To Option Per Share
----------------------------------
Balance at December 31, 1994 1,736,604 $17.39
Options granted 1,161,174 21.63
Options canceled (8,088) 21.63
Options exercised (413,391) 14.34
- --------------------------------------------------------------------
Balance at December 31, 1995 2,476,299 19.87
Options granted 1,460,731 23.00
Options canceled (16,862) 22.23
Options exercised (97,988) 17.94
- --------------------------------------------------------------------
Balance at December 31, 1996 3,822,180 $21.11
====================================================================
Shares reserved for future grants:
At December 31, 1994 3,268,001
At December 31, 1995 2,114,915
At December 31, 1996 671,046
- --------------------------------------------------------------------
Options exercisable:
At December 31, 1995 831,227
At December 31, 1996 1,276,846
- --------------------------------------------------------------------
The pro forma impact on net income of fair-value accounting for options
granted -- as required by FASB Statement No. 123, Accounting for Stock-Based
Compensation -- is not significant to the financial statements.
Common Stock Dividend Restrictions
The income of Southern Company is derived primarily from equity in earnings of
its subsidiaries. At December 31, 1996, consolidated retained earnings included
$3.3 billion of undistributed retained earnings of the subsidiaries. Of this
amount, $2.0 billion was restricted against the payment by the subsidiary
companies of cash dividends on common stock under terms of bond indentures or
charters.
10. PREFERRED SECURITIES
The subsidiary obligated mandatorily redeemable preferred securities were issued
by special purpose financing entities. Substantially all the assets of these
entities are $100 million and $335 million aggregate principal amount of Alabama
Power or Georgia Power junior subordinated debt, respectively. Alabama Power and
Georgia Power each considers that the mechanisms and obligations relating to the
preferred securities issued for its benefit, taken together, constitute a full
II-32
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
and unconditional guarantee, by the respective companies of the issuing
entities' payment obligations with respect to such preferred securities.
11. OTHER LONG-TERM DEBT
Details of other long-term debt at December 31 are as follows:
1996 1995
--------------------
(in millions)
Obligations incurred in connection
with the sale by public authorities
of tax-exempt pollution control
revenue bonds:
Collateralized --
4.375% to 9.375% due
2000-2026 $1,403 $1,466
Variable rates (3.2% to 5.25%
at 1/1/97) due 2011-2025 639 639
Non-collateralized --
7.25% due 2003 1 1
6.75% to 8.375% due 2015-2020 200 277
5.8% due 2022 10 10
Variable rates (4.65% to 5.25%
at 1/1/97) due 2021-2026 265 132
- ----------------------------------------------------------------
2,518 2,525
- ----------------------------------------------------------------
Capitalized lease obligations 151 147
- ----------------------------------------------------------------
Notes payable:
4.62% to 10% due 1996-1999 230 252
6.375% to 11% due 2000-2008 864 240
Adjustable rates (4% to 13% at
1/1/97) due 1996-1999 210 190
Adjustable rates (5.775% to
7.5625% at 1/1/97) due
2000-2002 96 938
Adjustable rate (7.38% at
1/1/97) due 2004-2006 15 111
- ----------------------------------------------------------------
1,415 1,731
- ----------------------------------------------------------------
Total $4,084 $4,403
================================================================
With respect to the collateralized pollution control revenue bonds, the
operating companies have authenticated and delivered to trustees a like
principal amount of first mortgage bonds as security for obligations under
installment sale or loan agreements. The principal and interest on the first
mortgage bonds will be payable only in the event of default under the
agreements.
Sinking fund requirements and/or serial maturities through 2001 applicable to
other long-term debt are as follows: $79 million in 1997; $96 million in 1998;
$279 million in 1999; $160 million in 2000; and $205 million in 2001.
12. 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:
1996 1995
----------------
(in millions)
Bond improvement fund requirements $ 40 $ 43
Less:
Portion to be satisfied by certifying
property additions 4 18
- -----------------------------------------------------------------
Cash sinking fund requirements 36 25
First mortgage bond maturities
and redemptions 76 220
Other long-term debt maturities
(Note 11) 79 264
- -----------------------------------------------------------------
Total $191 $509
=================================================================
The first mortgage bond improvement (sinking) fund requirements amount to 1
percent of each outstanding series of bonds authenticated under the indentures
prior to January 1 of each year, other than those issued to collateralize
pollution control and other obligations. The requirements may be satisfied by
depositing cash or reacquiring bonds, or by pledging additional property equal
to 166 2/3 percent of such requirements.
13. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988, Alabama Power and Georgia Power
maintain agreements of indemnity with the NRC that, together with private
insurance, cover third-party liability arising from any nuclear incident
occurring at the companies' nuclear power plants. The act provides funds up to
$8.9 billion for public liability claims that could arise from a single nuclear
incident. Each nuclear plant 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 that 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 Alabama Power and Georgia Power -- based on its ownership and buyback
II-33
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
interests -- is $159 million and $162 million, respectively, per incident, but
not more than an aggregate of $20 million per company to be paid for each
incident in any one year.
Alabama Power and Georgia Power are members 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. Alabama Power's and Georgia Power's maximum annual
assessments are limited to $9 million and $11 million, respectively, under
current policies.
Additionally, both companies have 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 costs 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 costs 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
that policy. The maximum annual assessments under current policies for Alabama
Power and Georgia Power for excess property damage would be $15 million and $16
million, respectively. The maximum replacement power assessments are $8 million
for Alabama Power and $12 million for Georgia 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.
Alabama Power and Georgia Power participate 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, Alabama Power and Georgia
Power could be subject to a maximum total assessment of approximately $6 million
each.
All retrospective assessments -- whether generated for liability, property,
or replacement power -- may be subject to applicable state premium taxes.
II-34
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
14. ACQUISITIONS
In 1995, Southern Energy acquired SWEB for approximately $1.8 billion. This
British utility distributes electricity to some 1.3 million customers.
The acquisition has been accounted for under the purchase method of
accounting. The acquisition cost exceeded the fair market value of net assets by
$287 million. This amount is considered goodwill and is being amortized on a
straight-line basis over 40 years. A preliminary estimate of $333 million of
goodwill was originally reported and later revised in 1996.
SWEB has been included in the consolidated financial statements since
September 1995. The following unaudited pro forma results of operations for the
years 1995 and 1994 have been prepared assuming the acquisition of SWEB,
effective January 1, 1994, and assuming 100 percent short-term debt financing.
The proforma results are not necessarily indicative of the actual results that
would have been realized had the acquisition occurred on the assumed date, nor
are they necessarily indicative of future results. Pro forma operating results
are for information purposes only and are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1995 1994
--------------------------------------------------------------------------
As Pro As Pro
Reported Forma Reported Forma
------------- ----------- -------------- ---------------
Operating revenues (in millions) $9,180 $10,013 $8,297 $9,493
Consolidated net income (in millions) $1,103 $1,144 $989 $1,053
Earnings per share $1.66 $1.72 $1.52 $1.62
On January 29, 1997, Southern Energy completed the acquisition of an 80 percent interest in Consolidated Electric Power Asia
(CEPA) for a total net investment of some $2.1 billion. CEPA is the largest independent power producer in Asia. CEPA is not
included in Southern Company's 1996 consolidated financial statements.
</TABLE>
15. SEGMENT INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Southern Company's principal business segment -- or its traditional core business -- is the five electric utility operating
companies, which provide electric service in four southeastern states. The other reportable business segment is Southern
Energy, which owns and operates power production and delivery facilities in the United States and various international markets.
Financial data for business segments and geographic areas are as follows:
Business Segments
Gross Depreciation
Operating Operating Total Property and
Year Revenues Income Assets Additions Amortization
- --------------------- -------------------------------------------------------------------------------------
(in millions)
1996
Traditional core business $ 8,675 $1,678 $25,368 $1,064 $1,081
Southern Energy 1,683 176 4,924 165 120
- --------------------------------------------------------------------------------------------------------------------------------
Consolidated $10,358 $1,854 $30,292 $1,229 $1,201
================================================================================================================================
1995
Traditional core business $8,537 $1,781 $25,500 $1,265 $1,075
Southern Energy 643 105 5,022 136 59
- --------------------------------------------------------------------------------------------------------------------------------
Consolidated $9,180 $1,886 $30,522 $1,401 $1,134
================================================================================================================================
1994
Traditional core business $8,112 $1,678 $25,466 $1,529 $1,026
Southern Energy 185 37 1,576 7 24
- --------------------------------------------------------------------------------------------------------------------------------
Consolidated $8,297 $1,715 $27,042 $1,536 $1,050
================================================================================================================================
</TABLE>
II-35
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
Geographic Areas
<S> <C> <C> <C> <C> <C>
Gross Depreciation
Operating Operating Total Property and
Year Revenues Income Assets Additions Amortization
- ------------------ -----------------------------------------------------------------------
(in millions)
1996
Domestic $ 8,836 $1,713 $25,869 $1,072 $1,094
International:
Europe 1,311 141 2,966 105 68
Other 211 - 1,457 52 39
- ---------------------------------------------------------------------------------------------------
Total $10,358 $1,854 $30,292 $1,229 $1,201
===================================================================================================
1995
Domestic $8,619 $1,813 $25,995 $1,278 $1,087
International:
Europe 372 38 3,385 33 16
Other 189 35 1,142 90 31
- ---------------------------------------------------------------------------------------------------
Total $9,180 $1,886 $30,522 $1,401 $1,134
===================================================================================================
1994
Domestic $8,116 $1,679 $25,875 $1,531 $1,028
International:
Europe - - - - -
Other 181 36 1,167 5 22
- ---------------------------------------------------------------------------------------------------
Total $8,297 $1,715 $27,042 $1,536 $1,050
===================================================================================================
</TABLE>
16. QUARTERLY FINANCIAL INFORMATION (Unaudited)
<TABLE>
<CAPTION>
Summarized quarterly financial data for 1996 and 1995 are as follows:
<S> <C> <C> <C> <C> <C> <C> <C>
Per Common Share
---------------------------------------------------
Operating Operating Consolidated Price Range
Quarter Ended Revenues Income Net Income Earnings Dividends High Low
- --------------- ------------------------------------------- ---------------------------------------------------
(in millions)
March 1996 $2,416 $418 $233 $0.35 $0.315 25 7/8 22 3/8
June 1996 2,538 468 287 0.43 0.315 24 5/8 21 1/4
September 1996 2,917 684 468 0.69 0.315 24 5/8 21 3/4
December 1996 2,487 284 139 0.21 0.315 23 1/8 21 1/8
March 1995 $1,929 $385 $206 $0.31 $0.305 21 1/2 19 3/8
June 1995 2,184 454 268 0.40 0.305 22 7/8 20 1/8
September 1995 2,759 673 469 0.71 0.305 24 21 1/8
December 1995 2,308 374 160 0.24 0.305 25 22 3/4
- ----------------------------------------------------------------------------------------------------------------------------------
The company's business is influenced by seasonal weather conditions.
</TABLE>
II-36
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1986 - 1996
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $10,358 $9,180 $8,297
Consolidated Net Income (in millions) $1,127 $1,103 $989
Earnings Per Share of Common Stock $1.68 $1.66 $1.52
Cash Dividends Paid Per Share of Common Stock $1.26 $1.22 $1.18
Return on Average Common Equity (percent) 12.53 13.01 12.47
Total Assets (in millions) $30,292 $30,522 $27,042
Gross Property Additions (in millions) $1,229 $1,401 $1,536
- -----------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $9,216 $8,772 $8,186
Preferred stock and securities 1,402 1,432 1,432
Long-term debt 7,935 8,274 7,593
- -----------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $18,553 $18,478 $17,211
=======================================================================================================================
Capitalization Ratios (percent):
Common stock equity 49.7 47.5 47.6
Preferred stock and securities 7.6 7.7 8.3
Long-term debt 42.7 44.8 44.1
- -----------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0
=======================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $13.61 $13.10 $12.47
Market price per share:
High 25 7/8 25 22
Low 21 1/8 19 3/8 17
Close 22 5/8 24 5/8 20
Market-to-book ratio (year-end) (percent) 166.2 188.0 160.4
Price-earnings ratio (year-end) (times) 13.5 14.8 13.2
Dividends paid (in millions) $846 $811 $766
Dividend yield (year-end) (percent) 5.6 5.0 5.9
Dividend payout ratio (percent) 75.1 73.5 77.5
Cash coverage of dividends (year-end) (times) 2.9 2.9 2.7
Proceeds from sales of stock (in millions) $171 $277 $279
Shares outstanding (in thousands):
Average 672,590 665,064 649,927
Year-end 677,036 669,543 656,528
Stockholders of record (year-end) 215,246 225,739 234,927
- -----------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $85 $375 $185
Retired 426 538 241
Preferred Stock and Securities (in millions):
Issued $322 $-- $100
Retired 179 1 1
- -----------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 3,157 3,100 3,046
Commercial 464 450 439
Industrial 17 17 17
Other 5 5 5
- -----------------------------------------------------------------------------------------------------------------------
Total 3,643 3,572 3,507
=======================================================================================================================
Employees (year-end):
Traditional core business 25,034 26,452 27,480
Southern Energy 4,212 5,430 1,400
- -----------------------------------------------------------------------------------------------------------------------
Total 29,246 31,882 28,880
=======================================================================================================================
</TABLE>
II-37
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1986 - 1996
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $8,489 $8,073 $8,050 $8,053
Consolidated Net Income (in millions) $1,002 $953 $876 $604
Earnings Per Share of Common Stock $1.57 $1.51 $1.39 $0.96
Cash Dividends Paid Per Share of Common Stock $1.14 $1.10 $1.07 $1.07
Return on Average Common Equity (percent) 13.43 13.42 12.74 8.85
Total Assets (in millions) $25,911 $20,038 $19,863 $19,955
Gross Property Additions (in millions) $1,441 $1,105 $1,123 $1,185
- ------------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $7,684 $7,234 $6,976 $6,783
Preferred stock and securities 1,333 1,359 1,333 1,358
Long-term debt 7,412 7,241 7,992 8,458
- ------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $16,429 $15,834 $16,301 $16,599
==============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 46.8 45.7 42.8 40.9
Preferred stock and securities 8.1 8.6 8.2 8.2
Long-term debt 45.1 45.7 49.0 50.9
- ------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0 100.0
==============================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $11.96 $11.43 $11.05 $10.74
Market price per share:
High 23 5/8 19 1/2 17 3/8 14 5/8
Low 18 3/8 15 1/8 12 7/8 11 1/2
Close 22 19 1/4 17 1/8 13 7/8
Market-to-book ratio (year-end) (percent) 183.9 168.4 155.5 129.7
Price-earnings ratio (year-end) (times) 14.0 12.7 12.4 14.6
Dividends paid (in millions) $726 $695 $676 $676
Dividend yield (year-end) (percent) 5.2 5.7 6.2 7.7
Dividend payout ratio (percent) 72.4 72.9 77.1 111.8
Cash coverage of dividends (year-end) (times) 2.9 2.8 2.5 2.8
Proceeds from sales of stock (in millions) $204 $30 $-- $--
Shares outstanding (in thousands):
Average 637,319 631,844 631,307 631,307
Year-end 642,662 632,917 631,307 631,307
Stockholders of record (year-end) 237,105 247,378 254,568 263,046
- ------------------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $2,185 $1,815 $380 $300
Retired 2,178 2,575 881 146
Preferred Stock and Securities (in millions):
Issued $426 $410 $100 $--
Retired 516 326 125 96
- ------------------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 2,996 2,950 2,903 2,865
Commercial 427 414 403 396
Industrial 18 18 18 18
Other 4 4 4 4
- ------------------------------------------------------------------------------------------------------------------------------
Total 3,445 3,386 3,328 3,283
==============================================================================================================================
Employees (year-end):
Traditional core business 28,516 28,872 30,144 30,087
Southern Energy 745 213 258 176
- ------------------------------------------------------------------------------------------------------------------------------
Total 29,261 29,085 30,402 30,263
==============================================================================================================================
</TABLE>
II-38A
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1986 - 1996
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $7,620 $7,287 $7,204 $7,033
Consolidated Net Income (in millions) $846 $846 $577 $903
Earnings Per Share of Common Stock $1.34 $1.36 $0.96 $1.56
Cash Dividends Paid Per Share of Common Stock $1.07 $1.07 $1.07 $1.0325
Return on Average Common Equity (percent) 12.49 13.03 9.27 15.61
Total Assets (in millions) $20,092 $19,731 $19,518 $18,483
Gross Property Additions (in millions) $1,346 $1,754 $1,853 $2,367
- ------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $6,861 $6,686 $6,307 $6,133
Preferred stock and securities 1,400 1,465 1,363 1,392
Long-term debt 8,575 8,433 8,333 7,812
- ------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $16,836 $16,584 $16,003 $15,337
========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 40.8 40.3 39.4 40.0
Preferred stock and securities 8.3 8.8 8.5 9.1
Long-term debt 50.9 50.9 52.1 50.9
- ------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0 100.0
========================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $10.87 $10.60 $10.28 $10.35
Market price per share:
High 14 7/8 12 1/8 14 1/2 13 5/8
Low 11 10 1/8 8 7/8 10 1/8
Close 14 1/2 11 1/8 11 1/8 12 5/8
Market-to-book ratio (year-end) (percent) 134.0 105.5 108.8 122.5
Price-earnings ratio (year-end) (times) 10.9 8.2 11.7 8.2
Dividends paid (in millions) $675 $661 $628 $583
Dividend yield (year-end) (percent) 7.3 9.6 9.6 8.4
Dividend payout ratio (percent) 79.8 78.1 108.9 64.6
Cash coverage of dividends (year-end) (times) 2.6 2.3 2.0 2.7
Proceeds from sales of stock (in millions) $4 $194 $247 $379
Shares outstanding (in thousands):
Average 631,303 622,292 601,390 580,252
Year-end 631,307 630,898 613,565 592,364
Stockholders of record (year-end) 273,751 290,725 296,079 297,302
- ------------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $280 $335 $700 $735
Retired 201 273 369 875
Preferred Stock and Securities (in millions):
Issued $-- $120 $125 $100
Retired 21 10 160 53
- ------------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 2,824 2,781 2,733 2,675
Commercial 392 384 374 362
Industrial 18 18 18 17
Other 4 4 4 4
- ------------------------------------------------------------------------------------------------------------------------
Total 3,238 3,187 3,129 3,058
========================================================================================================================
Employees (year-end):
Traditional core business 30,368 32,366 32,557 32,321
Southern Energy 162 157 55 37
- ------------------------------------------------------------------------------------------------------------------------
Total 30,530 32,523 32,612 32,358
========================================================================================================================
</TABLE>
II-38B
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1986 - 1996 (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,894 $2,840 $2,560
Commercial 2,559 2,485 2,357
Industrial 2,136 2,206 2,162
Other 76 72 70
- ------------------------------------------------------------------------------------------------------------------------
Total retail 7,665 7,603 7,149
Sales for resale within service area 409 399 360
Sales for resale outside service area 429 415 505
- ------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 8,503 8,417 8,014
Other revenues 1,855 763 283
- ------------------------------------------------------------------------------------------------------------------------
Total $10,358 $9,180 $8,297
========================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 40,117 39,147 35,836
Commercial 37,993 35,938 34,080
Industrial 52,798 51,644 50,311
Other 911 863 844
- ------------------------------------------------------------------------------------------------------------------------
Total retail 131,819 127,592 121,071
Sales for resale within service area 10,935 9,472 8,151
Sales for resale outside service area 10,777 9,143 10,769
- ------------------------------------------------------------------------------------------------------------------------
Total 153,531 146,207 139,991
========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.21 7.25 7.14
Commercial 6.74 6.91 6.92
Industrial 4.04 4.27 4.30
Total retail 5.81 5.96 5.90
Sales for resale 3.86 4.38 4.57
Total sales 5.54 5.76 5.72
Average Annual Kilowatt-Hour Use Per Residential Customer 12,824 12,722 11,851
Average Annual Revenue Per Residential Customer $925.12 $922.83 $846.48
Plant Nameplate Capacity Ratings (year-end) (megawatts) 31,076 30,733 29,932
Maximum Peak-Hour Demand (megawatts):
Winter 22,631 21,422 22,254
Summer 27,190 27,420 24,546
System Reserve Margin (at peak)(percent) 14.0 9.4 19.3
Annual Load Factor (percent) 62.3 59.5 63.5
Plant Availability (percent):
Fossil-steam 86.4 86.7 85.2
Nuclear 89.7 88.3 89.8
- ------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 73.3 72.5 70.8
Nuclear 16.7 16.4 17.9
Hydro 4.1 4.1 4.7
Oil and gas 1.5 1.7 0.9
Purchased power 4.4 5.3 5.7
- ------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,257 10,099 10,010
Cost of fuel per million BTU (cents) 144.02 151.70 155.81
Average cost of fuel per net kilowatt-hour generated (cents) 1.48 1.53 1.56
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-39
<PAGE>
SELECTED CONSOLIDARED FINANCIAL AND OPERATING DATA 1986-1996 (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,696 $2,402 $2,391 $2,342
Commercial 2,313 2,181 2,122 2,062
Industrial 2,200 2,126 2,088 2,085
Other 68 64 65 64
- ------------------------------------------------------------------------------------------------------------------------
Total retail 7,277 6,773 6,666 6,553
Sales for resale within service area 447 409 417 412
Sales for resale outside service area 613 797 884 977
- ------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 8,337 7,979 7,967 7,942
Other revenues 152 94 83 111
- ------------------------------------------------------------------------------------------------------------------------
Total $8,489 $8,073 $8,050 $8,053
========================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 36,807 33,627 33,622 33,118
Commercial 32,847 31,025 30,379 29,658
Industrial 48,738 47,816 46,050 45,974
Other 814 777 817 806
- ------------------------------------------------------------------------------------------------------------------------
Total retail 119,206 113,245 110,868 109,556
Sales for resale within service area 13,258 12,107 12,320 11,134
Sales for resale outside service area 12,445 16,632 19,839 24,402
- ------------------------------------------------------------------------------------------------------------------------
Total 144,909 141,984 143,027 145,092
========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.32 7.14 7.11 7.07
Commercial 7.04 7.03 6.99 6.96
Industrial 4.51 4.45 4.53 4.53
Total retail 6.10 5.98 6.01 5.98
Sales for resale 4.12 4.20 4.05 3.91
Total sales 5.75 5.62 5.57 5.47
Average Annual Kilowatt-Hour Use Per Residential Customer 12,378 11,490 11,659 11,637
Average Annual Revenue Per Residential Customer $906.60 $820.67 $829.18 $822.93
Plant Nameplate Capacity Ratings (year-end) (megawatts) 29,513 29,830 29,915 29,532
Maximum Peak-Hour Demand (megawatts):
Winter 19,432 19,121 19,166 17,629
Summer 25,937 24,146 25,261 25,981
System Reserve Margin (at peak)(percent) 13.2 14.3 16.5 14.0
Annual Load Factor (percent) 59.4 60.3 58.3 56.6
Plant Availability (percent):
Fossil-steam 87.9 88.6 91.3 91.9
Nuclear 85.9 85.2 83.4 83.0
- ------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 73.0 71.7 72.6 72.1
Nuclear 16.3 16.2 16.2 15.6
Hydro 3.9 4.6 4.4 4.4
Oil and gas 0.9 0.5 0.6 1.3
Purchased power 5.9 7.0 6.2 6.6
- ------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,994 9,976 10,022 10,065
Cost of fuel per million BTU (cents) 166.85 162.58 168.28 172.81
Average cost of fuel per net kilowatt-hour generated (cents) 1.67 1.62 1.69 1.74
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-40A
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATE 1986 - 1996 (continued)
Southern Company and Subsidiary Companies 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,194 $2,103 $2,042 $1,996
Commercial 1,965 1,835 1,692 1,613
Industrial 2,011 1,945 1,870 1,845
Other 60 56 54 52
- ---------------------------------------------------------------------------------------------------------------------------
Total retail 6,230 5,939 5,658 5,506
Sales for resale within service area 401 480 461 511
Sales for resale outside service area 928 777 1,028 957
- ---------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 7,559 7,196 7,147 6,974
Other revenues 61 91 57 59
- ---------------------------------------------------------------------------------------------------------------------------
Total $7,620 $7,287 $7,204 $7,033
===========================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 31,627 31,041 30,583 29,501
Commercial 28,454 27,005 25,593 24,166
Industrial 45,022 43,675 42,113 40,503
Other 787 763 737 723
- ---------------------------------------------------------------------------------------------------------------------------
Total retail 105,890 102,484 99,026 94,893
Sales for resale within service area 11,419 14,806 13,282 14,347
Sales for resale outside service area 24,228 15,860 22,905 16,909
- ---------------------------------------------------------------------------------------------------------------------------
Total 141,537 133,150 135,213 126,149
===========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.94 6.77 6.68 6.77
Commercial 6.91 6.79 6.61 6.67
Industrial 4.47 4.45 4.44 4.56
Total retail 5.88 5.80 5.71 5.80
Sales for resale 3.73 4.10 4.11 4.69
Total sales 5.34 5.40 5.29 5.53
Average Annual Kilowatt-Hour Use Per Residential Customer 11,287 11,255 11,307 11,157
Average Annual Revenue Per Residential Customer $782.90 $762.42 $754.96 $754.93
Plant Nameplate Capacity Ratings (year-end) (megawatts) 29,532 27,552 27,610 26,262
Maximum Peak-Hour Demand (megawatts):
Winter 20,772 18,685 18,185 19,665
Summer 24,399 23,641 23,194 23,255
System Reserve Margin (at peak) (percent) 21.0 15.0 16.2 11.4
Annual Load Factor (percent) 58.6 59.8 58.7 57.2
Plant Availability (percent):
Fossil-steam 92.2 91.3 91.2 90.3
Nuclear 87.0 78.4 84.5 74.2
- ---------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 71.5 77.7 77.8 79.4
Nuclear 15.7 14.5 13.1 11.5
Hydro 5.2 2.3 3.3 2.2
Oil and gas 1.1 0.7 0.6 0.9
Purchased power 6.5 4.8 5.2 6.0
- ---------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
===========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,086 10,094 10,122 10,171
Cost of fuel per million BTU (cents) 171.00 170.36 176.64 185.89
Average cost of fuel per net kilowatt-hour generated (cents) 1.72 1.72 1.78 1.89
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-40B
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED OPERATING AREA CAPABILITY, POWER SUPPLY AND
FUEL ECONOMY DATA
Southern Company and Subsidiary Companies
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
At Time of Peak 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Operating Area Capability (Megawatts)
Plants:
Fossil - Coal 22,512 22,514 22,668
- Gas & Oil 4,074 3,744 3,004
- -----------------------------------------------------------------------------------------------------------------------
Total 26,586 26,258 25,672
Nuclear 4,404 4,328 4,338
Hydro 2,744 2,780 2,567
- -----------------------------------------------------------------------------------------------------------------------
Plant Capability 33,734 33,366 32,577
Firm Capacity Purchases 791 196 391
- -----------------------------------------------------------------------------------------------------------------------
Total Operating Area Capability 34,525 33,562 32,968
=======================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Power Supply Data (Millions of Kilowatt-hour)
Generated:
Fossil - Coal 119,382 112,157 106,263
- Nuclear 27,119 25,351 26,902
- Gas 1,991 2,315 1,224
- Oil 364 385 106
- -----------------------------------------------------------------------------------------------------------------------
Total 148,856 140,208 134,495
Hydro 6,665 6,377 7,043
- -----------------------------------------------------------------------------------------------------------------------
Total Energy Generated 155,521 146,585 141,538
Purchased Power 7,227 8,259 8,612
- -----------------------------------------------------------------------------------------------------------------------
Total Energy Generated and Received 162,748 154,844 150,150
=======================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Fossil Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,139 9,915 9,807
Cost of Fuel per Million BTU (Cents) 166.84 176.46 184.60
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.69 1.75 1.81
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Nuclear Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,782 10,924 10,814
Cost of Fuel per Million BTU (Cents) 48.51 50.82 52.22
Fuel Cost per Net Kilowatt-hour Generated (Cents) 0.52 0.56 0.56
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,257 10,099 10,010
Cost of Fuel per Million BTU (Cents) 144.02 151.70 155.81
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.48 1.53 1.56
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
II-41
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED OPERATING AREA CAPABILITY, POWER SUPPLY AND
FUEL ECONOMY DATA
Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
At Time of Peak 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
Operating Area Capability (Megawatts)
Plants:
Fossil - Coal 22,770 22,708 24,191 23,807
- Gas & Oil 2,519 2,483 2,338 2,327
- ----------------------------------------------------------------------------------------------------------------------------
Total 25,289 25,191 26,529 26,134
Nuclear 4,317 4,260 5,356 5,385
Hydro 2,567 2,592 2,592 2,592
- ----------------------------------------------------------------------------------------------------------------------------
Plant Capability 32,173 32,043 34,477 34,111
Firm Capacity Purchases (1) (1,366) (1,041) (949)
- ----------------------------------------------------------------------------------------------------------------------------
Total Operating Area Capability 32,172 30,677 33,436 33,162
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
Power Supply Data (Millions of Kilowatt-hour)
Generated:
Fossil - Coal 111,912 107,537 109,674 110,442
- Nuclear 24,993 24,328 24,464 23,958
- Gas 1,106 727 962 1,776
- Oil 204 74 30 96
- ----------------------------------------------------------------------------------------------------------------------------
Total 138,215 132,666 135,130 136,272
Hydro 5,971 6,919 6,666 6,773
- ----------------------------------------------------------------------------------------------------------------------------
Total Energy Generated 144,186 139,585 141,796 143,045
Purchased Power 9,076 10,453 9,347 10,168
- ----------------------------------------------------------------------------------------------------------------------------
Total Energy Generated and Received 153,262 150,038 151,143 153,213
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
Fossil Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 9,790 9,755 9,811 9,869
Cost of Fuel per Million BTU (Cents) 195.75 191.22 195.09 197.53
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.92 1.87 1.91 1.95
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Nuclear Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,912 10,958 10,972 10,980
Cost of Fuel per Million BTU (Cents) 49.94 49.66 60.37 69.10
Fuel Cost per Net Kilowatt-hour Generated (Cents) 0.54 0.54 0.66 0.76
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 9,994 9,976 10,022 10,065
Cost of Fuel per Million BTU (Cents) 166.85 162.58 168.28 172.81
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.67 1.62 1.69 1.74
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-42A
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED OPERATING AREA CAPABILITY, POWER SUPPLY AND
FUEL ECONOMY DATA
Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
At Time of Peak 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------------
Operating Area Capability (Megawatts)
Plants:
Fossil - Coal 23,824 22,255 22,274 21,432
- Gas & Oil 2,324 2,295 2,338 2,335
- ---------------------------------------------------------------------------------------------------------------------------
Total 26,148 24,550 24,612 23,767
Nuclear 5,361 4,258 4,277 3,212
Hydro 2,592 2,592 2,591 2,591
- ---------------------------------------------------------------------------------------------------------------------------
Plant Capability 34,101 31,400 31,480 29,570
Firm Capacity Purchases (947) (923) (1,626) (1,004)
- ---------------------------------------------------------------------------------------------------------------------------
Total Operating Area Capability 33,154 30,477 29,854 28,566
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------------
Power Supply Data (Millions of Kilowatt-hour)
Generated:
Fossil - Coal 106,878 108,936 110,591 105,993
- Nuclear 23,471 20,368 18,572 15,313
- Gas 1,501 644 673 953
- Oil 91 200 134 250
- ---------------------------------------------------------------------------------------------------------------------------
Total 131,941 130,148 129,970 122,509
Hydro 7,851 3,285 4,697 2,888
- ---------------------------------------------------------------------------------------------------------------------------
Total Energy Generated 139,792 133,433 134,667 125,397
Purchased Power 9,670 6,694 7,436 8,047
- ---------------------------------------------------------------------------------------------------------------------------
Total Energy Generated and Received 149,462 140,127 142,103 133,444
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------------
Fossil Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 9,898 9,921 9,961 10,049
Cost of Fuel per Million BTU (Cents) 193.16 189.88 195.27 203.73
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.91 1.88 1.95 2.05
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Nuclear Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,951 11,027 11,086 11,019
Cost of Fuel per Million BTU (Cents) 78.61 75.67 76.28 71.99
Fuel Cost per Net Kilowatt-hour Generated (Cents) 0.86 0.83 0.85 0.79
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Total Fuel Economy Data:
BTU per Net Kilowatt-hour Generated 10,086 10,094 10,122 10,171
Cost of Fuel per Million BTU (Cents) 171.00 170.36 176.64 185.89
Fuel Cost per Net Kilowatt-hour Generated (Cents) 1.72 1.72 1.78 1.89
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-42B
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
The Southern Company and Subsidiary Companies
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- ----------------------------------------------------------------------------------------------------------------
Operating Revenues $ 10,358 $ 9,180 $ 8,297
- ----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,245 2,126 2,058
Purchased power 1,103 491 277
Proceeds from settlement of disputed contracts - - -
Other 1,860 1,626 1,505
Maintenance 782 683 660
Depreciation and amortization 996 904 821
Amortization of deferred Plant Vogtle costs, net 137 124 75
Taxes other than income taxes 634 535 475
Income taxes 747 805 711
- ----------------------------------------------------------------------------------------------------------------
Total operating expenses 8,504 7,294 6,582
- ----------------------------------------------------------------------------------------------------------------
Operating Income 1,854 1,886 1,715
Other Income:
Allowance for equity funds used during construction 4 5 11
Deferred return on Plant Vogtle - - -
Write-off of Plant Vogtle costs - - -
Income tax reduction for write-off of Plant Vogtle costs - - -
Interest income 54 38 32
Other, net 42 (65) (28)
Income taxes applicable to other income (10) 36 26
- ----------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,944 1,900 1,756
- ----------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 530 557 568
Allowance for debt funds used during construction (19) (20) (18)
Interest on notes payable 107 63 33
Amortization of debt discount, premium, and expense, net 33 44 30
Other interest charges 46 43 47
Minority interest in subsidiaries 13 13 20
Distributions on preferred securities of subsidiary companies 22 9 -
Preferred dividends of subsidiary companies 85 88 87
- ----------------------------------------------------------------------------------------------------------------
Interest charges and other, net 817 797 767
- ----------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 1,127 $ 1,103 $ 989
================================================================================================================
Earnings Per Share of Common Stock $1.68 $1.66 $1.52
Average Number of Shares of Common Stock Outstanding (Thousands) 672,590 665,064 649,927
================================================================================================================
</TABLE>
II-43
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- --------------------------------------------------------------------------------------------------------------------------------
Operating Revenues $ 8,489 $ 8,073 $ 8,050 $ 8,053
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,265 2,114 2,237 2,327
Purchased power 336 454 468 642
Proceeds from settlement of disputed contracts (3) (7) (181) -
Other 1,448 1,317 1,321 1,161
Maintenance 653 613 637 602
Depreciation and amortization 793 768 763 749
Amortization of deferred Plant Vogtle costs, net 36 (31) 16 31
Taxes other than income taxes 462 436 432 397
Income taxes 734 647 618 520
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 6,724 6,311 6,311 6,429
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,765 1,762 1,739 1,624
Other Income:
Allowance for equity funds used during construction 9 10 13 33
Deferred return on Plant Vogtle - - 35 83
Write-off of Plant Vogtle costs - - - (281)
Income tax reduction for write-off of Plant Vogtle costs - - - 63
Interest income 30 32 30 28
Other, net (34) (50) (57) (55)
Income taxes applicable to other income 57 39 21 36
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,827 1,793 1,781 1,531
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 595 684 757 788
Allowance for debt funds used during construction (13) (12) (18) (34)
Interest on notes payable 30 16 20 22
Amortization of debt discount, premium, and expense, net 26 14 9 10
Other interest charges 87 34 29 26
Minority interest in subsidiaries 7 - - -
Distributions on preferred securities of subsidiary companies - - - -
Preferred dividends of subsidiary companies 93 104 108 115
- --------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 825 840 905 927
- --------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 1,002 $ 953 $ 876 $ 604
================================================================================================================================
Earnings Per Share of Common Stock $1.57 $1.51 $1.39 $0.96
Average Number of Shares of Common Stock Outstanding (Thousands) 637,319 631,844 631,307 631,307
================================================================================================================================
</TABLE>
II-44A
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues $ 7,620 $ 7,287 $ 7,204 $ 7,033
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,241 2,213 2,303 2,316
Purchased power 575 562 552 386
Proceeds from settlement of disputed contracts - - - -
Other 1,103 1,167 1,219 1,045
Maintenance 542 547 574 576
Depreciation and amortization 698 632 563 510
Amortization of deferred Plant Vogtle costs, net (39) (8) (142) -
Taxes other than income taxes 356 362 349 315
Income taxes 525 412 517 672
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 6,001 5,887 5,935 5,820
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,619 1,400 1,269 1,213
Other Income:
Allowance for equity funds used during construction 71 138 190 312
Deferred return on Plant Vogtle 48 107 115 -
Write-off of Plant Vogtle costs - - (358) -
Income tax reduction for write-off of Plant Vogtle costs - - 129 -
Interest income 28 46 77 66
Other, net (50) (30) (59) (20)
Income taxes applicable to other income 30 23 19 -
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,746 1,684 1,382 1,571
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 791 784 776 782
Allowance for debt funds used during construction (63) (130) (157) (260)
Interest on notes payable 12 22 24 4
Amortization of debt discount, premium, and expense, net 11 10 8 6
Other interest charges 26 32 29 15
Minority interest in subsidiaries - - - -
Distributions on preferred securities of subsidiary companies - - - -
Preferred dividends of subsidiary companies 123 120 125 121
- ----------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 900 838 805 668
- ----------------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 846 $ 846 $ 577 $ 903
==================================================================================================================================
Earnings Per Share of Common Stock $1.34 $1.36 $0.96 $1.56
Average Number of Shares of Common Stock Outstanding (Thousands) 631,303 622,292 601,390 580,252
==================================================================================================================================
</TABLE>
II-44B
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
Operating Activities:
Consolidated net income $ 1,127 $ 1,103 $ 989
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 1,201 1,134 1,050
Deferred income taxes 57 116 (3)
Deferred investment tax credits - 1 (1)
Allowance for equity funds used during construction (4) (5) (11)
Amortization of deferred Plant Vogtle costs, net 137 124 75
Write-off of Plant Vogtle costs - - -
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 20 (85) (7)
Changes in certain current assets and liabilities --
Receivables (92) (109) 114
Inventories 104 39 (128)
Payables 19 (138) 81
Taxes accrued (69) - -
Other (99) 135 (48)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,401 2,315 2,111
- ---------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,229) (1,401) (1,536)
Southern Energy business acquisitions - (1,416) (405)
Sales of property 211 287 171
Other (275) 153 (87)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (1,293) (2,377) (1,857)
- ---------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Common stock 171 277 279
Preferred securities 322 - 100
Preferred stock - - -
First mortgage bonds 85 375 185
Pollution control bonds 167 731 749
Other long-term debt 1,403 1,074 439
Prepaid capacity revenues - - -
Retirements:
Preferred stock (179) (1) (1)
First mortgage bonds (426) (538) (241)
Pollution control bonds (174) (721) (732)
Other long-term debt (1,580) (181) (307)
Increase (decrease) in notes payable, net (268) 727 37
Payment of common stock dividends (846) (811) (766)
Miscellaneous (110) (237) (35)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (1,435) 695 (293)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (327) 633 (39)
Cash and Cash Equivalents at Beginning of Year 772 139 178
- ---------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 445 $ 772 $ 139
=====================================================================================================================
</TABLE>
( ) Denotes use of cash.
II-45
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
Operating Activities:
Consolidated net income $ 1,002 $ 953 $ 876 $ 604
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 1,011 969 968 982
Deferred income taxes 209 221 26 158
Deferred investment tax credits (20) (6) (11) -
Allowance for equity funds used during construction (9) (10) (13) (33)
Amortization of deferred Plant Vogtle costs, net 36 (31) (19) (52)
Write-off of Plant Vogtle costs - - - 281
Non-cash proceeds from settlement of disputed contracts - (7) (141) -
Other, net (45) (25) 45 (10)
Changes in certain current assets and liabilities --
Receivables (55) (10) 68 8
Inventories 136 (23) 20 (82)
Payables 43 35 (13) (41)
Taxes accrued 3 (62) 107 (5)
Other (64) (9) (46) (34)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,247 1,995 1,867 1,776
- ------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,441) (1,105) (1,123) (1,185)
Southern Energy business acquisitions (465) - - -
Sales of property 262 44 291 35
Other (37) 61 (45) 14
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (1,681) (1,000) (877) (1,136)
- ------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Common stock 205 30 - -
Preferred securities - - - -
Preferred stock 426 410 100 -
First mortgage bonds 2,185 1,815 380 300
Pollution control bonds 386 208 126 -
Other long-term debt 206 48 14 74
Prepaid capacity revenues - - 53 -
Retirements:
Preferred stock (516) (326) (125) (96)
First mortgage bonds (2,178) (2,575) (881) (146)
Pollution control bonds (351) (208) (130) (3)
Other long-term debt (99) (88) (70) (207)
Increase (decrease) in notes payable, net 114 525 180 78
Payment of common stock dividends (726) (695) (676) (676)
Miscellaneous (137) (148) (41) (8)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (485) (1,004) (1,070) (684)
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 81 (9) (80) (44)
Cash and Cash Equivalents at Beginning of Year 97 106 186 230
- ------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 178 $ 97 $ 106 $ 186
==============================================================================================================================
</TABLE>
( ) Denotes use of cash.
II-46A
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
Operating Activities:
Consolidated net income $ 846 $ 846 $ 577 $ 903
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 951 837 742 674
Deferred income taxes 225 206 198 465
Deferred investment tax credits (1) 27 20 132
Allowance for equity funds used during construction (71) (138) (190) (312)
Amortization of deferred Plant Vogtle costs, net (87) (115) (257) -
Write-off of Plant Vogtle costs - - 358 -
Non-cash proceeds from settlement of disputed contracts - - - -
Other, net (28) 46 87 15
Changes in certain current assets and liabilities --
Receivables (123) (21) (113) 38
Inventories 6 (47) (62) (37)
Payables (23) (6) 125 48
Taxes accrued (15) 29 (34) 24
Other 156 (40) 42 (56)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,836 1,624 1,493 1,894
- -------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (1,346) (1,754) (1,853) (2,367)
Southern Energy business acquisitions - - - -
Sales of property - - 12 -
Other 54 (2) 64 46
- -------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (1,292) (1,756) (1,777) (2,321)
- -------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Common stock 4 194 247 379
Preferred securities - - - -
Preferred stock - 120 125 100
First mortgage bonds 280 335 700 735
Pollution control bonds 104 73 228 386
Other long-term debt 74 68 81 367
Prepaid capacity revenues - - - 100
Retirements:
Preferred stock (21) (10) (160) (53)
First mortgage bonds (201) (273) (369) (875)
Pollution control bonds (55) (1) (122) (21)
Other long-term debt (83) (108) (56) (55)
Increase (decrease) in notes payable, net 27 (300) 313 (37)
Payment of common stock dividends (675) (661) (628) (583)
Miscellaneous (10) (20) (58) (82)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (556) (583) 301 361
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (12) (715) 17 (66)
Cash and Cash Equivalents at Beginning of Year 242 957 940 1,006
- -------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 230 $ 242 $ 957 $ 940
===========================================================================================================================
</TABLE>
( ) Denotes use of cash.
II-46B
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 8,706 $ 8,533 $ 8,778
Nuclear 5,982 5,956 5,942
Hydro 1,489 1,477 1,341
- ------------------------------------------------------------------------------------------------------------------
Total production 16,177 15,966 16,061
Transmission 3,596 3,452 3,504
Distribution 7,910 7,583 7,243
General 2,548 2,436 2,380
SEI utility plant 3,008 2,420 -
Construction work in progress 684 990 1,247
Nuclear fuel, at amortized cost 246 225 238
- ------------------------------------------------------------------------------------------------------------------
Total electric plant 34,169 33,072 30,673
- ------------------------------------------------------------------------------------------------------------------
Steam Heat Plant 21 21 21
- ------------------------------------------------------------------------------------------------------------------
Total utility plant 34,190 33,093 30,694
- ------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 10,909 10,056 9,567
Steam heat 12 11 10
- ------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 10,921 10,067 9,577
- ------------------------------------------------------------------------------------------------------------------
Total 23,269 23,026 21,117
- ------------------------------------------------------------------------------------------------------------------
Less property-related accumulated deferred income taxes - - -
- ------------------------------------------------------------------------------------------------------------------
Total 23,269 23,026 21,117
- ------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Argentine operating concession, being amortized 416 431 446
Goodwill 318 344 12
Nuclear decommissioning trusts 279 201 125
Miscellaneous 488 317 224
- ------------------------------------------------------------------------------------------------------------------
Total 1,501 1,293 807
- ------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 445 772 139
Investment securities - - -
Receivables, net 1,157 1,175 840
Accrued utility revenues 345 347 218
Fossil fuel stock, at average cost 270 327 354
Materials and supplies, at average cost 510 552 553
Prepayments 253 266 194
Vacation pay deferred 77 74 70
- ------------------------------------------------------------------------------------------------------------------
Total 3,057 3,513 2,368
- ------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 1,302 1,386 1,454
Deferred Plant Vogtle costs 171 308 432
Deferred fuel charges 13 34 47
Debt expense, being amortized 78 68 48
Premium on reacquired debt, being amortized 289 295 298
Miscellaneous 612 599 471
- ------------------------------------------------------------------------------------------------------------------
Total 2,465 2,690 2,750
- ------------------------------------------------------------------------------------------------------------------
Total Assets $30,292 $30,522 $27,042
==================================================================================================================
</TABLE>
II-47
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 8,006 $ 8,033 $ 7,997 $ 7,661
Nuclear 5,930 5,912 5,902 5,820
Hydro 1,263 1,253 1,247 1,222
- ---------------------------------------------------------------------------------------------------------------------------------
Total production 15,199 15,198 15,146 14,703
Transmission 3,224 3,093 2,955 2,824
Distribution 6,848 6,430 6,092 5,738
General 2,395 2,291 2,196 2,078
SEI utility plant - - - -
Construction work in progress 1,031 665 603 1,092
Nuclear fuel, at amortized cost 229 257 301 354
- ---------------------------------------------------------------------------------------------------------------------------------
Total electric plant 28,926 27,934 27,293 26,789
- ---------------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant 21 21 20 20
- ---------------------------------------------------------------------------------------------------------------------------------
Total utility plant 28,947 27,955 27,313 26,809
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 8,924 8,271 7,676 7,079
Steam heat 10 9 8 8
- ---------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 8,934 8,280 7,684 7,087
- ---------------------------------------------------------------------------------------------------------------------------------
Total 20,013 19,675 19,629 19,722
- ---------------------------------------------------------------------------------------------------------------------------------
Less property-related accumulated deferred income taxes - 3,186 3,020 2,911
- ---------------------------------------------------------------------------------------------------------------------------------
Total 20,013 16,489 16,609 16,811
- ---------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - 202 -
Argentine operating concession, being amortized 469 - - -
Goodwill 7 - - -
Nuclear decommissioning trusts 88 52 26 2
Miscellaneous 172 75 83 83
- ---------------------------------------------------------------------------------------------------------------------------------
Total 736 127 311 85
- ---------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 178 97 106 186
Investment securities - 199 - -
Receivables, net 962 742 723 793
Accrued utility revenues 185 177 160 151
Fossil fuel stock, at average cost 254 392 445 467
Materials and supplies, at average cost 535 533 457 456
Prepayments 148 220 222 193
Vacation pay deferred 73 70 70 64
- ---------------------------------------------------------------------------------------------------------------------------------
Total 2,335 2,430 2,183 2,310
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 1,546 - - -
Deferred Plant Vogtle costs 507 383 375 364
Deferred fuel charges 70 89 106 126
Debt expense, being amortized 33 28 23 23
Premium on reacquired debt, being amortized 288 222 126 99
Miscellaneous 383 270 130 137
- ---------------------------------------------------------------------------------------------------------------------------------
Total 2,827 992 760 749
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $25,911 $20,038 $19,863 $19,955
=================================================================================================================================
</TABLE>
II-48A
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 7,565 $ 6,226 $ 6,157 $ 5,415
Nuclear 5,976 4,995 4,987 2,490
Hydro 1,215 1,197 1,192 1,184
- ---------------------------------------------------------------------------------------------------------------------------------
Total production 14,756 12,418 12,336 9,089
Transmission 2,683 2,500 2,388 2,254
Distribution 5,365 4,944 4,510 4,131
General 2,026 1,865 1,674 1,504
SEI utility plant - - - -
Construction work in progress 1,006 3,071 2,519 5,162
Nuclear fuel, at amortized cost 402 481 479 520
- ---------------------------------------------------------------------------------------------------------------------------------
Total electric plant 26,238 25,279 23,906 22,660
- ---------------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant 20 20 20 35
- --------------------------------------------------------------------------------------------------------------------------------
Total utility plant 26,258 25,299 23,926 22,695
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 6,492 5,885 5,355 4,879
Steam heat 7 6 6 13
- ---------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 6,499 5,891 5,361 4,892
- ---------------------------------------------------------------------------------------------------------------------------------
Total 19,759 19,408 18,565 17,803
- ---------------------------------------------------------------------------------------------------------------------------------
Less property-related accumulated deferred income taxes 2,759 2,559 2,371 2,212
- ---------------------------------------------------------------------------------------------------------------------------------
Total 17,000 16,849 16,194 15,591
- ---------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - - -
Argentine operating concession, being amortized - - - -
Goodwill - - - -
Nuclear decommissioning trusts - - - -
Miscellaneous 85 88 70 69
- ---------------------------------------------------------------------------------------------------------------------------------
Total 85 88 70 69
- ---------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 230 242 957 940
Investment securities - - - -
Receivables, net 765 687 687 657
Accrued utility revenues 189 148 139 83
Fossil fuel stock, at average cost 427 490 513 501
Materials and supplies, at average cost 413 348 278 228
Prepayments 192 174 136 70
Vacation pay deferred 65 63 59 56
- ---------------------------------------------------------------------------------------------------------------------------------
Total 2,281 2,152 2,769 2,535
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - - -
Deferred Plant Vogtle costs 322 270 173 -
Deferred fuel charges 143 157 112 121
Debt expense, being amortized 24 24 25 24
Premium on reacquired debt, being amortized 103 102 95 70
Miscellaneous 134 89 80 73
- ---------------------------------------------------------------------------------------------------------------------------------
Total 726 642 485 288
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $20,092 $19,731 $19,518 $18,483
=================================================================================================================================
</TABLE>
II-48B
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 3,385 $ 3,348 $ 3,283
Paid-in capital 2,067 1,941 1,712
Retained Earnings 3,764 3,483 3,191
- ----------------------------------------------------------------------------------------------------------------------------
Total common stock equity 9,216 8,772 8,186
Preferred stock 980 1,332 1,332
Preferred stock subject to mandatory redemption - - -
Subsidiary obligated mandatorily redeemable preferred securities 422 100 100
Long-term debt 7,935 8,274 7,593
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 18,553 18,478 17,211
- ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable 828 445 575
Commercial paper 655 1,225 403
Preferred stock due within one year 173 - 1
Long-term debt due within one year 191 509 228
Accounts payable 788 785 806
Customer deposits 132 216 102
Taxes accrued 205 272 153
Interest accrued 187 199 190
Vacation pay accrued 104 100 87
Miscellaneous 535 530 233
- ----------------------------------------------------------------------------------------------------------------------------
Total 3,798 4,281 2,778
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,738 4,611 4,007
Deferred credits related to income taxes 879 936 987
Accumulated deferred investment tax credits 788 820 858
Minority interest 375 231 267
Prepaid capacity revenues 122 131 138
Disallowed Plant Vogtle capacity buyback costs 57 59 60
Miscellaneous 982 975 736
- ----------------------------------------------------------------------------------------------------------------------------
Total 7,941 7,763 7,053
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $30,292 $30,522 $27,042
============================================================================================================================
</TABLE>
II-49
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 3,213 $ 1,582 $ 1,578 $ 1,578
Paid-in capital 1,503 2,931 2,908 2,909
Retained Earnings 2,968 2,721 2,490 2,296
- ----------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 7,684 7,234 6,976 6,783
Preferred stock 1,332 1,351 1,207 1,207
Preferred stock subject to mandatory redemption 1 8 126 151
Subsidiary obligated mandatorily redeemable preferred securities - - - -
Long-term debt 7,412 7,241 7,992 8,458
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 16,429 15,834 16,301 16,599
- ----------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable 865 567 302 122
Commercial paper 76 260 - -
Preferred stock due within one year 1 65 7 7
Long-term debt due within one year 156 188 217 308
Accounts payable 698 646 585 616
Customer deposits 103 99 95 91
Taxes accrued 206 172 215 144
Interest accrued 186 191 221 246
Vacation pay accrued 90 86 84 75
Miscellaneous 190 242 229 233
- ----------------------------------------------------------------------------------------------------------------------------------
Total 2,571 2,516 1,955 1,842
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 3,979 - - -
Deferred credits related to income taxes 1,051 - - -
Accumulated deferred investment tax credits 900 957 1,004 1,063
Minority interest - - - -
Prepaid capacity revenues 144 148 149 100
Disallowed Plant Vogtle capacity buyback costs 63 72 110 136
Miscellaneous 774 511 344 215
- ----------------------------------------------------------------------------------------------------------------------------------
Total 6,911 1,688 1,607 1,514
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $25,911 $20,038 $19,863 $19,955
==================================================================================================================================
</TABLE>
II-50A
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
The Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 1,578 $ 1,577 $ 1,534 $1,481
Paid-in capital 2,909 2,906 2,755 2,563
Retained Earnings 2,374 2,203 2,018 2,089
- -----------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 6,861 6,686 6,307 6,133
Preferred stock 1,209 1,259 1,139 1,214
Preferred stock subject to mandatory redemption 191 206 224 177
Subsidiary obligated mandatorily redeemable preferred securities - - - -
Long-term debt 8,575 8,433 8,333 7,813
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 16,836 16,584 16,003 15,337
- -----------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable 44 17 317 4
Commercial paper - - - -
Preferred stock due within one year 61 17 9 15
Long-term debt due within one year 169 190 192 251
Accounts payable 676 728 747 737
Customer deposits 89 83 86 82
Taxes accrued 181 203 221 259
Interest accrued 233 240 233 221
Vacation pay accrued 75 74 68 66
Miscellaneous 252 104 110 111
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,780 1,656 1,983 1,746
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - - -
Deferred credits related to income taxes - - - -
Accumulated deferred investment tax credits 1,111 1,161 1,180 1,208
Minority interest - - - -
Prepaid capacity revenues 102 81 104 101
Disallowed Plant Vogtle capacity buyback costs 73 104 79 -
Miscellaneous 190 145 169 91
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,476 1,491 1,532 1,400
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $20,092 $19,731 $19,518 $18,483
===================================================================================================================================
</TABLE>
II-50B
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED INCOME TAXES
Southern Company and Subsidiary Companies
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- ---------------------------------------------------------------------------------------------------------------------
Total Provision for Income Taxes:
Federal $569 $567 $598
State 82 90 86
Deferred - Current Year - Federal 116 184 67
- State 23 26 15
Deferred - Reversal of Prior Years - Federal (74) (111) (75)
- State (9) (12) (11)
Investment Tax Credits:
Deferred - 1 -
Amortization - Plant Costs Written Off - - -
Foreign Taxes 50 24 5
- ---------------------------------------------------------------------------------------------------------------------
Total Income Taxes 757 769 685
Less Income Taxes Charged (Credited) to -
Other Income 10 (36) (26)
Disallowed Plant Costs - - -
- ---------------------------------------------------------------------------------------------------------------------
Income Taxes Charged to Electric Operations $747 $805 $711
=====================================================================================================================
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
Effective Federal Income Tax Rate Before Effect of Timing Differences 34.3% 34.6% 34.2%
=====================================================================================================================
RECONCILIATION OF FEDERAL INCOME TAXES
Southern Company and Subsidiary Companies
=====================================================================================================================
For the Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- --------------------------------------------------------------------------------------------------------------------
Total Provision for Federal and Foreign Income Taxes:
Permanent Reductions in Tax Expense Resulting from Statutory $661 $665 $595
Exclusions from Taxable Income-
Effect of Foreign Operations, Including Foreign Tax Credit (1) (1) -
Equity Component of Allowance for Funds Used During
Construction and Deferred Return on Plant Vogtle 2 2 4
Amortization of Investment Tax Credits:
Deferred 12 14 15
Plant Costs Written Off - - -
Deductible Portion of Preferred Stock Dividends 1 1 1
Difference in Depreciation Basis (35) (33) (32)
Plant Costs Written Off - - -
Depletion of Coal Reserves Minded - - -
Other 2 (6) (11)
- ---------------------------------------------------------------------------------------------------------------------
Effective Federal Income Taxes Before Effect of Timing Differences 642 642 572
Reversal of Prior Year Timing Differences - Not Normalized:
Excess of Tax Gain over Book Profit on Sales of Utility Properties (1) (7) (7)
Difference in Depreciation Basis and Rates (5) (6) (7)
Other - - -
Reversal of Prior Year Timing Differences - Normalized 20 21 27
Miscellaneous - - -
- ---------------------------------------------------------------------------------------------------------------------
Statutory Federal Income Taxes $656 $650 $585
=====================================================================================================================
</TABLE>
II-51
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED INCOME TAXES
Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Provision for Income Taxes:
Federal $421 $343 $506 $231
State 64 50 76 32
Deferred - Current Year - Federal 224 225 139 142
- State 39 46 23 24
Deferred - Reversal of Prior Years - Federal (51) (41) (121) (11)
- State (3) (9) (15) 3
Investment Tax Credits:
Deferred (20) (6) (11) 4
Amortization - Plant Costs Written Off - - - (4)
Foreign Taxes 3 - - -
- --------------------------------------------------------------------------------------------------------------------------------
Total Income Taxes 677 608 597 421
Less Income Taxes Charged (Credited) to -
Other Income (57) (39) (21) (36)
Disallowed Plant Costs - - - (63)
- --------------------------------------------------------------------------------------------------------------------------------
Income Taxes Charged to Electric Operations $734 $647 $618 $520
================================================================================================================================
Statutory Federal Income Tax Rate 35.0% 34.0% 34.0% 34.0%
Effective Federal Income Tax Rate Before Effect of Timing Differences 34.8% 32.9% 33.4% 30.8%
================================================================================================================================
RECONCILIATION OF FEDERAL INCOME TAXES
Southern Company and Subsidiary Companies
================================================================================================================================
For the Years Ended December 31, 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- --------------------------------------------------------------------------------------------------------------------------------
Total Provision for Federal and Foreign Income Taxes:
Permanent Reductions in Tax Expense Resulting from Statutory $577 $521 $513 $362
Exclusions from Taxable Income-
Effect of Foreign Operations, Including Foreign Tax Credit - - - -
Equity Component of Allowance for Funds Used During
Construction and Deferred Return on Plant Vogtle 3 3 11 26
Amortization of Investment Tax Credits:
Deferred 13 14 16 16
Plant Costs Written Off - - - 4
Deductible Portion of Preferred Stock Dividends 1 1 1 1
Difference in Depreciation Basis (33) (36) (46) (40)
Plant Costs Written Off - - - (42)
Depletion of Coal Reserves Minded - - - -
Other 20 16 6 6
- --------------------------------------------------------------------------------------------------------------------------------
Effective Federal Income Taxes Before Effect of Timing Differences 581 519 501 333
Reversal of Prior Year Timing Differences - Not Normalized:
Excess of Tax Gain over Book Profit on Sales of Utility Properties (12) - (12) 1
Difference in Depreciation Basis and Rates (7) (7) (3) (3)
Other - - - -
Reversal of Prior Year Timing Differences - Normalized 23 25 23 37
Miscellaneous - - - -
- --------------------------------------------------------------------------------------------------------------------------------
Statutory Federal Income Taxes $585 $537 $509 $368
================================================================================================================================
</TABLE>
II-52A
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED INCOME TAXES
Southern Company and Subsidiary Companies
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- --------------------------------------------------------------------------------------------------------------------------------
Total Provision for Income Taxes:
Federal $237 $138 $133 $58
State 34 18 18 17
Deferred - Current Year - Federal 221 328 294 498
- State 35 53 25 54
Deferred - Reversal of Prior Years - Federal (32) (159) (118) (82)
- State 1 (16) (3) (5)
Investment Tax Credits:
Deferred (1) 27 40 132
Amortization - Plant Costs Written Off - - (20) -
Foreign Taxes - - - -
- --------------------------------------------------------------------------------------------------------------------------------
Total Income Taxes 495 389 369 672
Less Income Taxes Charged (Credited) to -
Other Income (30) (23) (19) -
Disallowed Plant Costs - - (129) -
- --------------------------------------------------------------------------------------------------------------------------------
Income Taxes Charged to Electric Operations $525 $412 $517 $672
================================================================================================================================
Statutory Federal Income Tax Rate 34.0% 34.0% 40.0% 46.0%
Effective Federal Income Tax Rate Before Effect of Timing Differences 31.5% 31.5% 40.6% 46.6%
================================================================================================================================
RECONCILIATION OF FEDERAL INCOME TAXES
Southern Company and Subsidiary Companies
================================================================================================================================
For the Years Ended December 31, 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars)
- --------------------------------------------------------------------------------------------------------------------------------
Total Provision for Federal and Foreign Income Taxes:
Permanent Reductions in Tax Expense Resulting from Statutory $425 $334 $329 $606
Exclusions from Taxable Income-
Effect of Foreign Operations, Including Foreign Tax Credit - - - -
Equity Component of Allowance for Funds Used During
Construction and Deferred Return on Plant Vogtle 29 67 100 145
Amortization of Investment Tax Credits:
Deferred 16 16 19 18
Plant Costs Written Off - - 20 -
Deductible Portion of Preferred Stock Dividends 1 1 1 1
Difference in Depreciation Basis (39) (28) (30) (19)
Plant Costs Written Off - - (24) -
Depletion of Coal Reserves Minded - - - 2
Other 7 20 4 7
- --------------------------------------------------------------------------------------------------------------------------------
Effective Federal Income Taxes Before Effect of Timing Differences 439 410 419 760
Reversal of Prior Year Timing Differences - Not Normalized:
Excess of Tax Gain over Book Profit on Sales of Utility Properties - - - 1
Difference in Depreciation Basis and Rates (3) (4) (4) (13)
Other - - (2) 1
Reversal of Prior Year Timing Differences - Normalized 38 36 (1) 2
Miscellaneous - - (1) (1)
- --------------------------------------------------------------------------------------------------------------------------------
Statutory Federal Income Taxes $474 $442 $411 $750
================================================================================================================================
</TABLE>
II-52B
<PAGE>
ALABAMA POWER COMPANY
FINANCIAL SECTION
II-53
<PAGE>
MANAGEMENT'S REPORT
Alabama Power Company 1996 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 12, 1997
II-54
<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 a wholly owned subsidiary
of Southern Company) as of December 31, 1996 and 1995, and the related
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1996. 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 II-62 through II-79)
referred to above present fairly, in all material respects, the financial
position of Alabama Power Company as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Birmingham, Alabama
February 12, 1997
II-55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Alabama Power Company 1996 Annual Report
RESULTS OF OPERATIONS
Earnings
Alabama Power Company's 1996 net income after dividends on preferred stock was
$371 million, representing a $10.6 million (2.9 percent) increase from the prior
year. This improvement can be attributed to an increase in retail energy sales
of 2.7 percent from 1995 levels and lower net interest charges compared to the
prior year. This improvement was partially offset by a 4.4 percent increase in
operating costs.
In 1995, earnings were $361 million, representing a 1.3 percent increase
from the prior year. This increase was due to an increase in retail energy sales
of 4.7 percent, brought about by extreme summer weather. This improvement was
partially offset by a 2.6 percent increase in operating costs.
The return on average common equity for 1996 was 13.75 percent compared to
13.61 percent in 1995, and 13.86 percent in 1994.
Revenues
Total revenues for 1996 were $3.1 billion, reflecting a 3.2 percent increase
from 1995. The following table summarizes the principal factors that affected
operating revenues for the past three years:
Increase (Decrease)
From Prior Year
----------------------------------------
1996 1995 1994
----------------------------------------
(in thousands)
Retail --
Change in
base rates $(19,380) $ 990 $ --
Unbilled
adjustment -- -- 28,000
Sales growth 61,765 18,174 45,304
Weather (29,660) 54,888 (39,964)
Fuel cost recovery
and other (30,846) 35,235 (84,344)
---------------------------------------------------------------
Total retail (18,121) 109,287 (51,004)
---------------------------------------------------------------
Sales for resale --
Non-affiliates 21,529 15,380 (9,345)
Affiliates 88,890 (37,032) (17,213)
---------------------------------------------------------------
Total sales for resale 110,419 (21,652) (26,558)
Other operating
revenues 3,703 1,997 5,095
---------------------------------------------------------------
Total operating
revenues $ 96,001 $ 89,632 $(72,467)
---------------------------------------------------------------
Percent change 3.2% 3.1% (2.4)%
---------------------------------------------------------------
Retail revenues of $2.5 billion in 1996 decreased $18 million (0.7 percent)
from the prior year, compared with an increase of $109 million (4.6 percent) in
1995. Lower fuel cost recovery was the primary reason for the decrease in 1996
retail revenues as compared to 1995. 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. Fuel revenues 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
contracts. Energy is generally sold at variable cost. These capacity and energy
II-56
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1996 Annual Report
components, as well as the components of the sales to affiliated companies,
were:
1996 1995 1994
-------------------------------------------
(in thousands)
Capacity $159,488 $158,825 $165,063
Energy 315,925 209,376 222,579
----------------------------------------------------------
Total $475,413 $368,201 $387,642
----------------------------------------------------------
Capacity revenues from non-affiliates remained relatively constant over the
past three years. 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 1996 and the percent change by year were as
follows:
KWH Percent Change
-------------------------------------------
1996 1996 1995 1994
-------------------------------------------
(millions)
Residential 14,594 1.5% 9.1% (1.7)%
Commercial* 10,904 8.6 4.1 3.4
Industrial* 19,999 0.7 2.0 3.2
Other 193 3.1 0.5 1.1
----------
Total retail 45,690 2.7 4.7 3.3
Sales for resale -
Non-affiliates 9,491 18.0 18.8 (5.2)
Affiliates 10,292 53.5 (20.5) 4.3
----------
Total 65,473 10.5% 2.6% 2.4%
- -----------------------------------------------------------------
*The KWH sales for 1996 reflect a reclassification of approximately 200
customers from industrial to commercial, which resulted in a shift of 473
million KWH. Absent the reclassification, the percentage change in KWH sales for
commercial and industrial would have been 3.9% and 3.1%, respectively.
The increase in 1996 retail energy sales was primarily due to the strength
of business and economic conditions in the company's service area. The 1995
retail sales growth was the result of hotter-than-normal summer weather and a
strong economy in the company's service territory. Assuming normal weather,
sales to retail customers are projected to grow approximately 2.7 percent
annually on average during 1997 through 2002.
Expenses
Total operating expenses of $2.5 billion for 1996 were up $105 million or 4.4
percent compared with 1995. The major components of this increase include $85
million in fuel costs, $15 million in maintenance expense, and $17 million in
depreciation and amortization offset by a decrease in purchased power of $15
million.
Total operating expenses of $2.4 billion for 1995 were up 2.6 percent
compared with the prior year. This increase was primarily due to higher other
operation expenses and increased purchased power. This was somewhat offset by
decreases in fuel costs and maintenance expenses.
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 KWH generated were as follows:
----------------------------
1996 1995 1994
----------------------------
Total generation
(billions of KWHs) 65 58 57
Sources of generation
(percent) --
Coal 72 73 68
Nuclear 20 19 23
Hydro 8 8 9
Average cost of fuel per net
KWH generated
(cents) --
Coal 1.71 1.71 1.92
Nuclear 0.50 0.50 0.49
Total 1.46 1.48 1.56
- --------------------------------------------------------------
Note: Oil & Gas comprise less than 0.5% of generation.
Fuel expense increased in 1996 by $85 million or 10.8 percent. This increase
can be attributed to higher generation. Fuel expense decreased in 1995 by $10
million or 1.3 percent. This decrease resulted from lower average cost of fuel
consumed.
Purchased power consists primarily of purchases from the affiliates of the
Southern electric system. Purchased power transactions among the company and its
affiliates will vary from period to period depending on demand, the
II-57
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1996 Annual Report
availability, and the variable production cost of generating resources at each
company. Total KWH purchases declined 9.3 percent from the prior year.
The increase in maintenance expenses for 1996 is due to increased nuclear
expenses, primarily outage related accruals. The decrease in 1995 over 1994
reflects the establishment in 1994 of the Natural Disaster Reserve. See Note 1
to the financial statements under "Natural Disaster Reserve" for additional
information.
Depreciation and amortization expense increased 5.6 percent in 1996 and 3.6
percent in 1995. These increases reflect additions to utility plant.
The company contributed $6.8 million to the Alabama Power Foundation, Inc.
in 1996, which represents a decrease of $4.7 million from the previous year. The
Foundation makes distributions to qualified entities which are organized
exclusively for charitable, educational, literary, and scientific purposes.
The decline in net interest charges in 1996 by $11 million (4.5 percent) was
due primarily to a charge of $10 million in 1995 to the amortization of debt
discount, premium, and expense net, pursuant to an Alabama Public Service
Commission (APSC) order. See Note 3 to the financial statements under "Retail
Rate Adjustment Procedures" for additional details. Total net interest charges
and preferred stock dividends increased 12.2 percent in 1995. 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 such order.
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 having 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
marketers and brokers. The company is aggressively working to maintain and
expand its share of wholesale business in the Southeastern power markets.
Various federal and state initiatives designed to promote wholesale and
retail competition, among other things, include proposals that would allow
customers to choose their electricity provider. As the initiatives
materialize, the structure of the utility industry could radically change.
Certain initiatives could result in a change in the ownership and/or
operation of generation and transmission facilities. Numerous issues must be
resolved, including significant ones relating to transmission pricing and
recovery of stranded investments. Being a low-cost producer could provide
significant opportunities to increase market share and profitability in
markets that evolve with changing regulation. 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.
II-58
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1996 Annual Report
new markets that evolve with the changing regulation. Conversely, 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.
The addition of four combustion turbine generating units in May 1996
increased related operation and maintenance expenses and depreciation expenses.
These additions are to ensure reliable service to customers during critical peak
times.
Rates to retail customers served by the company are regulated by the 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 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 change. Because of the company's current ability to recover
closure and removal costs through rates, these changes would 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.
FINANCIAL CONDITION
Overview
The company's financial condition remained stable in 1996. 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 $425 million in 1996. 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 45.3 percent in 1996, compared with 45.0 percent in 1995,
and 45.9 percent in 1994.
In January 1996, Alabama Power Capital Trust I (Trust I), of which the
company owns all of the common securities, issued $97 million of 7.375 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust I are $100 million aggregate principal amount of the company's 7.375
percent junior subordinated notes due March 31, 2026. Additionally, in November
II-59
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1996 Annual Report
1996, the company issued through public authorities $21 million of pollution
control revenue refunding bonds.
In January 1997, Alabama Power Capital Trust II (Trust II), of which the
company owns all of the common securities, issued $200 million of 7.60 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust II are $206 million aggregate principal amount of the company's 7.60
percent junior subordinated notes due December 31, 2036. A portion of the
proceeds of the January 1997 issuance will be used for the redemption of $100
million of preferred stock in February 1997.
The company's current securities ratings are as follows:
Duff & Standard
Phelps Moody's & Poor's
----------------------------------
First Mortgage Bonds AA- A1 A+
Company Obligated
Mandatorily
Redeemable
Preferred Securities A+ a2 A
Preferred Stock A+ a2 A
------------------------------------------------------------
Capital Requirements
Capital expenditures are estimated to be $425 million for 1997, $519 million for
1998, and $622 million for 1999. The total is $1.6 billion for the three years.
Actual capital costs may vary from this estimate because of factors such as
changes in 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 has entered into agreements with two of its industrial customers
to locate cogeneration facilities at their premises. These facilities will
provide process steam to the respective customers concurrent with the production
of electricity for use on the company's electric system. Each facility, which is
primarily composed of a combustion turbine, will have approximately 100
megawatts of electric capacity and will serve as a base load resource for the
company. These facilities are expected to be placed in service in 1999 at a
total cost of approximately $90 million. 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 $220
million will be required by the end of 1999 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 -- impacts Southern
Company. 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 of Southern Company. As a result
of 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.
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 sulfur dioxide emission allowance program is expected to
minimize the cost of compliance. Southern Company's sulfur dioxide compliance
strategy is designed to use allowances as a compliance option.
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. Construction expenditures for Phase I compliance totaled
approximately $25 million for the company.
For Phase II sulfur dioxide compliance, the company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
II-60
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1996 Annual Report
equipment at selected plants. Also equipment to control nitrogen oxide emissions
will be installed on additional system fossil-fired units as required to meet
Phase II limits. Therefore, the current compliance strategy could require total
Phase II estimated construction expenditures of approximately $40 million, of
which $30 million remains to be spent. 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.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: revisions to the ambient air standards for
ozone and particulate matter; emission control strategies for ozone
nonattainment areas; additional controls for hazardous air pollutant emissions;
and hazardous waste disposal requirements. The impact of new standards will
depend on the development and implementation of applicable regulations.
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 Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. 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."
II-61
<PAGE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995, and 1994
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
=======================================================================================================================
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues (Notes 1, 3 and 7):
Revenues $2,904,155 $2,897,044 $2,770,380
Revenues from affiliates 216,620 127,730 164,762
- -----------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,120,775 3,024,774 2,935,142
- -----------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 877,076 791,819 801,948
Purchased power from non-affiliates 36,813 30,065 15,158
Purchased power from affiliates 91,500 112,826 100,888
Other 505,884 501,876 458,917
Maintenance 258,482 243,218 262,102
Depreciation and amortization 320,102 303,050 292,420
Taxes other than income taxes 186,172 185,620 183,425
Federal and state income taxes (Note 8) 228,108 230,982 224,280
- -----------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,504,137 2,399,456 2,339,138
- -----------------------------------------------------------------------------------------------------------------------
Operating Income 616,638 625,318 596,004
Other Income (Expense):
Allowance for equity funds used during construction (Note 1) - 1,649 3,239
Income from subsidiary (Note 6) 3,851 4,051 3,588
Charitable foundation (6,800) (11,542) (13,500)
Interest income 28,318 13,768 16,944
Other, net (39,053) (21,536) (30,569)
Income taxes applicable to other income 22,400 14,142 16,834
- ----------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges and Other 625,354 625,850 592,540
- -----------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 169,390 180,714 178,045
Allowance for debt funds used during construction (Note 1) (6,480) (7,067) (3,548)
Interest on interim obligations 20,617 16,917 5,939
Amortization of debt discount, premium, and expense, net 9,508 20,259 9,623
Other interest charges 27,510 27,064 19,908
Distributions on preferred securities of
Alabama Power Capital Trust I (Note 9) 6,717 - -
- -----------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 227,262 237,887 209,967
- -----------------------------------------------------------------------------------------------------------------------
Net Income 398,092 387,963 382,573
Dividends on Preferred Stock 26,602 27,069 26,235
- -----------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 371,490 $ 360,894 $ 356,338
=======================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-62
<PAGE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995, and 1994
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
================================================================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 398,092 $ 387,963 $ 382,573
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 383,438 371,382 359,791
Deferred income taxes and investment tax credits 16,585 32,627 (32,613)
Allowance for equity funds used during construction - (1,649) (3,239)
Other, net 21,563 33,244 28,656
Changes in certain current assets and liabilities --
Receivables, net 3,958 (54,209) 19,390
Inventories 36,234 18,425 (38,946)
Payables 1,006 (63,656) (21,240)
Taxes accrued (5,756) 551 6,856
Energy cost recovery, retail 25,771 1,177 16,907
Other (7,111) (15,895) (14,235)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 873,780 709,960 703,900
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (425,024) (551,781) (536,785)
Other (61,119) (53,321) (26,632)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (486,143) (605,102) (563,417)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Company obligated mandatorily redeemable preferred securities 97,000 - -
First mortgage bonds - - 150,000
Other long-term debt 21,000 131,500 208,720
Retirements:
First mortgage bonds (83,797) - (20,387)
Other long-term debt (21,907) (132,291) (305,380)
Interim obligations, net (25,163) 210,134 139,882
Payment of preferred stock dividends (26,665) (27,118) (25,431)
Payment of common stock dividends (347,500) (285,000) (268,000)
Miscellaneous (3,634) (4,143) (8,444)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (390,666) (106,918) (129,040)
- --------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash (3,029) (2,060) 11,443
Cash at Beginning of Year 12,616 14,676 3,233
- --------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 9,587 $ 12,616 $ 183,445
================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest and other (net of amount capitalized) $ 193,871 $ 189,268 $ 183,445
Income taxes 195,214 172,777 231,831
- --------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
II-63
<PAGE>
BALANCE SHEETS
At December 31, 1996 and 1995
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
==========================================================================================
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service, at original cost (Note 1) $10,806,921 $10,430,792
Less accumulated provision for depreciation 4,113,622 3,838,093
------------------------------------------------------------------------------------------
6,693,299 6,592,699
Nuclear fuel, at amortized cost 123,862 100,537
Construction work in progress 256,802 362,768
------------------------------------------------------------------------------------------
Total 7,073,963 7,056,004
- ------------------------------------------------------------------------------------------
Other Property and Investments:
Southern Electric Generating Company, at equity (Note 6) 26,032 27,232
Nuclear decommissioning trusts (Note 1) 148,760 108,368
Miscellaneous 20,243 19,156
- ------------------------------------------------------------------------------------------
Total 195,035 154,756
- ------------------------------------------------------------------------------------------
Current Assets:
Cash 9,587 12,616
Receivables-
Customer accounts receivable 334,150 355,833
Other accounts and notes receivable 28,524 28,082
Affiliated companies 47,630 41,819
Accumulated provision for uncollectible accounts (1,171) (1,212)
Refundable income taxes 5,856 2,635
Fossil fuel stock, at average cost 81,704 106,627
Materials and supplies, at average cost 167,792 179,103
Prepayments 131,870 116,331
Vacation pay deferred 28,369 29,458
- ------------------------------------------------------------------------------------------
Total 834,311 871,292
- ------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 410,010 436,837
Debt expense, being amortized 7,398 7,648
Premium on reacquired debt, being amortized 84,149 89,967
Uranium enrichment decontamination and decommissioning fund (Note 1) 37,490 40,282
Miscellaneous 91,490 87,574
- ------------------------------------------------------------------------------------------
Total 630,537 662,308
- ------------------------------------------------------------------------------------------
Total Assets $ 8,733,846 $ 8,744,360
==========================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-64
<PAGE>
BALANCE SHEETS
At December 31, 1996 and 1995
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
============================================================================================
CAPITALIZATION AND LIABILITIES 1996 1995
- --------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $2,714,277 $2,690,374
Preferred stock 340,400 440,400
Company obligated mandatorily redeemable preferred securities of
Alabama Power
Capital Trust I holding Company Junior
Subordinated Notes (Note 9) 97,000 -
Long-term debt 2,354,006 2,374,948
- --------------------------------------------------------------------------------------------
Total 5,505,683 5,505,722
- --------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 11) 100,000 -
Long-term debt due within one year (Note 11) 20,753 84,682
Commercial paper 364,853 390,016
Accounts payable-
Affiliated companies 64,307 76,326
Other 182,563 182,401
Customer deposits 32,003 30,353
Taxes accrued-
Federal and state income 35,638 13,599
Other 15,271 18,158
Interest accrued 51,941 53,527
Vacation pay accrued 28,369 29,458
Miscellaneous 96,485 70,543
- --------------------------------------------------------------------------------------------
Total 992,183 949,063
- --------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 1,177,687 1,191,591
Accumulated deferred investment tax credits 294,071 305,372
Prepaid capacity revenues, net (Note 7) 122,496 131,186
Uranium enrichment decontamination and decommissioning fund (Note 1) 33,741 36,620
Deferred credits related to income taxes (Note 8) 364,792 386,038
Natural disaster reserve (Note 1) 20,757 17,959
Miscellaneous 222,436 220,809
- --------------------------------------------------------------------------------------------
Total 2,235,980 2,289,575
- --------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 3, 4, 5, 6, 7, and 12)
Total Capitalization and Liabilities $8,733,846 $8,744,360
============================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-65
<PAGE>
STATEMENTS OF CAPITALIZATION
At December 31, 1996 and 1995
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
===================================================================================================================================
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, par value $40 per share --
Authorized -- 6,000,000 shares
Outstanding -- 5,608,955 shares in
1996 and 1995 $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645
Premium on preferred stock 146 146
Retained earnings (Note 13) 1,185,128 1,161,225
- -----------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 2,714,277 2,690,374 49.3% 48.9%
- -----------------------------------------------------------------------------------------------------------------------------------
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
5.17% - at January 1, 1997 50,000 50,000
$100 stated capital --
Auction rate - 4.09% at January 1, 1997 50,000 50,000
$100,000 stated capital --
Auction rate - 4.01% at January 1, 1997 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 cumulative preferred stock (annual dividend
requirement -- $26,500,000) 440,400 440,400
Less amount due within one year (Note 11) 100,000 -
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock excluding amount due within one year 340,400 440,400 6.2 8.0
- -----------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 7.375% 97,000 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $7,154,000) 97,000 - 1.7 -
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
March 1, 1996 4 1/2% - 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
2002 through 2007 6 3/4% to 7 1/4% 575,000 575,000
2021 through 2024 7.30% to 9 1/4% 1,021,059 1,044,856
- -----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,916,059 1,999,856
Pollution control obligations 476,140 476,140
Other long-term debt 8,056 8,963
Unamortized debt premium (discount), net (25,496) (25,329)
- -----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $171,420,000) 2,374,759 2,459,630
Less amount due within one year (Note 11) 20,753 84,682
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 2,354,006 2,374,948 42.8 43.1
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $5,505,683 $5,505,722 100.0% 100.0%
===================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-66
<PAGE>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1996, 1995, and 1994
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
========================================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $1,161,225 $1,085,256 $ 997,199
Net income after dividends on preferred stock 371,490 360,894 356,338
Cash dividends on common stock (347,500) (285,000) (268,000)
Preferred stock transactions, net (7) - (118)
Other adjustments to retained earnings (80) 75 (163)
- --------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 13) $1,185,128 $1,161,225 $1,085,256
========================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Alabama Power Company 1996 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Alabama Power Company (the company) is a wholly owned subsidiary of Southern
Company, which is the parent company of five operating companies, a system
service company, Southern Communications Services (Southern Communications),
Southern Energy, Inc. (Southern Energy), 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 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 Energy designs,
builds, owns and operates power production and delivery facilities and provides
a broad range of energy related services in the United States and international
markets. Southern Nuclear provides services to Southern Company's nuclear power
plants. Southern Development develops new business opportunities related to
energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both 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:
1996 1995
-------------------------
(in thousands)
Deferred income taxes $ 410,010 $ 436,837
Premium on reacquired debt 84,149 89,967
Department of Energy assessments 37,490 40,282
Vacation pay 28,369 29,458
Work force reduction costs 45,969 48,402
Deferred income tax credits (364,792) (386,038)
Natural disaster reserve (20,757) (17,959)
Other, net 45,521 39,172
- ----------------------------------------------------------------
Total $ 265,959 $ 280,121
================================================================
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.
The company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1996, uncollectible
accounts continued to average less than 1 percent of revenues.
II-68
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
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 $64
million in 1996, $54 million in 1995, and $65 million in 1994. 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 2010 and 2013
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, 1996, under this law to be
approximately $37 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
3.3 percent in 1996 and 3.2 percent in 1995 and 1994. 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 periods 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, 1996, for Plant Farley were as
follows:
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
===========================================================
(in millions)
Amount expensed in 1996 $ 18
-----------------------------------------------------------
Accumulated provisions:
Balance in external trust funds $ 149
Balance in internal reserves 47
-----------------------------------------------------------
Total $ 196
===========================================================
Significant assumptions:
Inflation rate 4.5%
Trust earning rate 7.0
-----------------------------------------------------------
Annual provisions for nuclear decommissioning are based on an annuity
method as approved by the APSC. All of the company's decommissioning costs are
approved for ratemaking.
The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
II-69
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
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 5.8 percent in 1996, 7.1 percent in 1995, and 7.9 percent in 1994.
AFUDC, net of income tax, as a percent of net income after dividends on
preferred stock was 1.1 percent in 1996, 1.7 percent in 1995 and 1.5 percent in
1994.
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
The company's only financial instruments for which the carrying amount did not
approximate fair value at December 31 are as follows:
Carrying Fair
Amount Value
-------------------------
(in millions)
Long-term debt:
At December 31, 1996 $2,367 $2,420
At December 31, 1995 $2,451 $2,577
Preferred Securities:
At December 31, 1996 97 94
At December 31, 1995 - -
------------------------------------------------------------
The fair value for long-term debt and preferred securities was based on
either closing market prices or closing prices 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. Regulatory
treatment allows the 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.
II-70
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
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. 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
-------------------
1996 1995
--------------------
(in millions)
Actuarial present value of
benefit obligations:
Vested benefits $ 603 $ 604
Non-vested benefits 30 25
- ---------------------------------------------------------------
Accumulated benefit obligation 633 629
Additional amounts related to
projected salary increases 180 173
- ---------------------------------------------------------------
Projected benefit obligation 813 802
Less:
Fair value of plan assets 1,334 1,256
Unrecognized net gain (413) (331)
Unrecognized prior service cost 46 21
Unrecognized transition asset (40) (45)
- ---------------------------------------------------------------
Prepaid asset recognized in the
Balance Sheets $ 114 $ 99
===============================================================
Postretirement
Benefits
----------------------
1996 1995
----------------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $116 $103
Employees eligible to retire 28 31
Other employees 98 104
-----------------------------------------------------------
Accumulated benefit obligation 242 238
Less:
Fair value of plan assets 108 89
Unrecognized net loss 15 23
Unrecognized transition
obligation 65 72
-----------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $ 54 $ 54
===========================================================
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.
II-71
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
The weighted average rates assumed in the actuarial calculations were:
1996 1995 1994
-------------------------------
Discount 7.8% 7.3% 8.0%
Annual salary increase 5.3 4.8 5.5
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 9.3
percent for 1996, decreasing gradually to 5.8 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, 1996, by $20 million and the aggregate of the
service and interest cost components of the net retiree cost by $2 million.
Components of the plans' net cost are shown below:
Pension
----------------------------------------------------------------
1996 1995 1994
-------------------------------
(in millions)
Benefits earned during
the year $ 21.5 $ 21.2 $ 20.8
Interest cost on projected
benefit obligation 59.5 54.3 51.2
Actual (return) loss on plan
assets (148.9) (236.3) 23.5
Net amortization and deferral 43.8 136.9 (116.2)
----------------------------------------------------------------
Net pension cost (income) $ (24.1) $ (23.9) $ (20.7)
================================================================
Of the above net pension income, $20.3 million in 1996, $17.1 million
in 1995, and $15.7 million in 1994 were recorded as credits to operating
expenses, and the remainder was recorded as credits to construction and other
accounts.
Postretirement
Benefits
--------------------
1996 1995 1994
--------------------
(in millions)
Benefits earned during the year $ 5 $ 7 $ 8
Interest cost on accumulated
benefit obligation 17 18 18
Amortization of transition
obligation 4 7 6
Actual (return) loss on plan
assets (7) (10) 1
Net amortization and deferral 2 5 (4)
- -------------------------------------------------------------
Net postretirement costs $21 $27 $29
=============================================================
Of the above net postretirement costs recorded, $17.8 million in 1996, $22.7
million in 1995, and $23 million in 1994 were charged to operating expenses and
the remainder was charged to construction and other accounts.
Work Force Reduction Programs
The company has incurred costs for work force reduction programs. The costs
related to these programs were $26.7 million, $14.3 million and $8.2 million for
the years 1996, 1995 and 1994, 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 $46.0 million at December
31, 1996.
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
II-72
<PAGE>
NOTES (continued)
Alabama Power Company 1996 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.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Appliance Warranty Litigation
In 1996, legal actions against the company were filed in several counties in
Alabama charging the company with fraud and non-compliance with regulatory
statutes relating to the offer, sale, and financing of "extended service
contracts" in connection with the sale of electric appliances. Some of these
suits were filed as class actions, while others were filed on behalf of multiple
individual plaintiffs. The plaintiffs seek damages for an unspecified amount.
The company has offered extended service agreements to its customers since
January 1984, and approximately 175,000 extended service agreements could be
involved in these proceedings. The final outcome of these cases cannot now be
determined.
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.
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. 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, as
well as certain other contracts that reference these proceedings in determining
return on common equity, and if refunds were ordered, the amount of refunds
could range up to approximately $160 million at December 31, 1996 for Southern
Company, of which the company's portion would be approximately $76 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 $425 million
in 1997, $519 million in 1998, and $622 million in 1999. 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, 1996, significant purchase
commitments were outstanding in connection with the construction program. The
company has entered into agreements with two of its industrial customers to
locate cogeneration facilities at their premises. These facilities will provide
process steam to the respective customers concurrent with the production of
electricity for use on the company's electric system. Each facility, which is
primarily composed of a combustion turbine, will have approximately 100
megawatts of electric capacity and will serve as a base load resource for the
company. These facilities are expected to be placed in service in 1999 at a
total cost of approximately $90 million. In addition, significant construction
will continue related to transmission and distribution facilities and the
upgrading of generating plants.
II-73
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
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 is often utilized and
the amounts available are discussed below. The company may issue additional
long-term debt and preferred securities for the purposes of debt maturities,
redeeming higher-cost securities, and meeting additional capital requirements.
Financing
The ability of the company to finance its capital budget depends on the amount
of funds generated internally and the funds it can raise by external financing.
The company's primary sources of external financing are sales of first mortgage
bonds and preferred stock to the public and receipt of additional paid-in
capital from 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 currently 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 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, 1999. 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. However, the allocations can be changed among the
borrowers by notifying the respective banks. 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 $680 million (including $208 million of such lines under which borrowings may
be made only to fund purchase obligations relating to variable rate pollution
control bonds) which expire at various times during 1997 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, 1996, the company had regulatory approval to have
outstanding up to $750 million of short-term borrowings.
Assets Subject to Lien
The company's mortgage, as amended and supplemented, securing the first mortgage
bonds issued by the company, constitutes a direct lien on substantially all of
the company's fixed property and franchises.
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants, the
company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels and other financial commitments.
Total estimated long-term obligations at December 31, 1996, were as follows:
Year Amounts
- ---- -------------------
(in millions)
1997 $ 808
1998 770
1999 569
2000 300
2001 317
2002 - 2013 2,594
- ------------------------------------------------
Total commitments $5,358
================================================
II-74
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
Operating Leases
The company has entered into coal rail car rental agreements with various terms
and expiration dates. At December 31, 1996, estimated minimum rental commitments
for noncancellable operating leases were as follows:
Amounts
Year ----------------
(in millions)
1997 $ 3
1998 3
1999 3
2000 3
2001 3
2002- 2017 53
- ---------------------------------------------------------
Total minimum payments $68
==========================================================
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 1,020 megawatts, 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 $75 million in
1996, $71 million in 1995 and $74 million in 1994, 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, 1996, the capitalization of SEGCO consisted of $52 million
of equity and $76 million of long-term debt on which the annual interest
requirement is $4.7 million. SEGCO paid dividends totaling $10.1 million in
1996, $7.6 million in 1995, and $11.6 million in 1994, of which one-half of each
was paid to the company. SEGCO's net income was $7.7 million, $8.1 million, and
$7.2 million for 1996, 1995 and 1994, respectively.
The company's percentage ownership and investment in jointly-owned
generating plants at December 31, 1996, 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 $ 40
Plant Miller
Units 1 and 2 714 296
--------------------------------------------------------
7. LONG-TERM POWER SALES AGREEMENTS
General
The company and the operating affiliates of 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, profitability is primarily affected by revenues from capacity
sales. The company's capacity revenues have been as follows:
Unit Other
Year Power Long-Term Total
----------------------------------------------------------
(in millions)
1996 $151 $ - $151
1995 157 - 157
1994 152 7 159
----------------------------------------------------------
II-75
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
Unit power from Plant Miller is being sold to Florida Power Corporation
(FPC), Florida Power & Light Company (FP&L), Jacksonville Electric Authority
(JEA) and the City of Tallahassee, Florida. Under these agreements,
approximately 1,200 megawatts of capacity 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 with a minimum of three years
notice -- 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,
1996, $128.2 million of such bonds was held by the escrow agent under the
contracts.
8. INCOME TAXES
At December 31, 1996, the tax-related regulatory assets and liabilities were
$410 million and $365 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:
1996 1995 1994
-------------------------------------------
(in thousands)
Total provision for income
taxes:
Federal --
Currently payable $172,911 $166,105 $219,494
Deferred--
current year (6,309) 43,493 (48,153)
reversal of prior years 18,948 (15,817) 15,932
Deferred investment tax
credits - (75) (1)
- ----------------------------------------------------------------------------
185,550 193,706 187,272
- ----------------------------------------------------------------------------
State--
Currently payable 16,212 18,108 20,565
Deferred--
current year 697 5,117 (4,067)
reversal of prior years 3,249 (91) 3,676
- ----------------------------------------------------------------------------
20,158 23,134 20,174
- ----------------------------------------------------------------------------
Total 205,708 216,840 207,446
Less income taxes credited
to other income (22,400) (14,142) (16,834)
- ----------------------------------------------------------------------------
Total income taxes
charged to operations $228,108 $230,982 $224,280
============================================================================
The tax effects of temporary differences between the carrying amounts of
II-76
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
1996 1995
------------------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $ 816 $ 780
Property basis differences 466 491
Premimum on reacquired debt 31 31
Other 51 42
- ----------------------------------------------------------------------
Total 1,364 1,344
- ----------------------------------------------------------------------
Deferred tax assets:
Capacity prepayments 34 35
Other deferred costs 27 26
Postretirement benefits 21 25
Unbilled revenue 15 13
Other 54 43
- ----------------------------------------------------------------------
Total 151 142
- ----------------------------------------------------------------------
Net deferred tax liabilities 1,213 1,202
Portion included in current assets
(liabilities), net (35) (10)
- ----------------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $1,178 $1,192
======================================================================
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 $11 million in 1996, $12 million in 1995, and $13 million in 1994.
At December 31, 1996, 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:
1996 1995 1994
--------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 2.2 2.5 2.2
Non-deductible book
depreciation 1.5 1.6 1.6
Differences in prior years'
deferred and current tax rates (1.6) (1.8) (2.9)
Other (3.0) (1.4) (0.7)
--------------------------------------------------------------
Effective income tax rate 34.1% 35.9% 35.2%
==============================================================
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. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
In January 1996, Alabama Power Capital Trust I (Trust I), of which the company
owns all of the common securities, issued $97 million of 7.375 percent
mandatorily redeemable preferred securities. Substantially all of the assets
of Trust I are $100 million aggregate principal amount of the company's 7.375
percent junior subordinated notes due March 31, 2026.
In January 1997, Alabama Power Capital Trust II (Trust II), of which the
company also owns all of the common securities, issued $200 million of 7.60
percent mandatorily redeemable preferred securities. Substantially all of the
assets of Trust II are $206 million aggregate principal amount of the company's
7.60 percent junior subordinated notes due December 31, 2036. A portion of the
proceeds of the January 1997 issuance will be used for the redemption of $100
million of preferred stock in February 1997.
II-77
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
10. OTHER LONG-TERM DEBT
Details of other long-term debt at December 31 are as follows:
1996 1995
--------------------------
(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 (4.15%
to 5.0% at 1/1/97)
due 2015-2017 89,800 89,800
Non-collateralized -
7.25% due 2003 1,000 1,000
7.4% due 2016 - 21,000
5.8% due 2022 9,800 9,800
Variable rates (4.65%
to 5.1% at 1/1/97)
due 2021 - 2022 152,500 131,500
- --------------------------------------------------------------
476,140 476,140
Capitalized lease obligations 8,056 8,963
- --------------------------------------------------------------
Total $484,196 $485,103
==============================================================
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.
The estimated aggregate annual maturities of other long-term debt through
2001 are as follows: $1.0 million in 1997, $1.0 million in 1998, $1.2 million in
1999, $1.1 million in 2000 and $1.0 million in 2001.
11. SECURITIES DUE WITHIN ONE YEAR
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt and preferred stock due within one year at
December 31 is as follows:
1996 1995
---------------------------
(in thousands)
Bond improvement fund
requirements $ 19,410 $20,047
First mortgage bond maturities
and redemptions 391 63,750
Other long-term debt maturities
(Note 10) 952 885
---------------------------------------------------------------
Total long-term debt due within
one year 20,753 84,682
---------------------------------------------------------------
Preferred stock to be reacquired 100,000 -
---------------------------------------------------------------
Total $120,753 $84,682
===============================================================
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 1997 requirement of $19.4 million was
satisfied by the deposit of cash in 1997, all of which was used for the
redemption of outstanding first mortgage bonds. Also in early 1997, the company
redeemed $391 thousand first mortgage bonds and announced the February 1997
redemption of $100 million preferred stock. The preferred stock will be redeemed
with a portion of the proceeds from the January 1997 Trust II security issuance.
Scheduled maturities amount to $952 thousand in connection with capitalized
office building leases and a street light lease.
12. 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
II-78
<PAGE>
NOTES (continued)
Alabama Power Company 1996 Annual Report
reactors. The 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 $9 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
that policy. The maximum annual assessments per incident under current policies
for the company would be $15 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.
13. 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, 1996, retained earnings of $796 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.
14. QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized quarterly financial data for 1996 and 1995 are as follows:
Net Income
After
Dividends
Quarter Operating Operating on Preferred
Ended Revenues Income Stock
------------------- -----------------------------------------
(in thousands)
March 1996 $732,809 $142,052 $ 73,159
June 1996 779,587 151,673 95,778
September 1996 913,308 222,523 152,589
December 1996 695,071 100,390 49,964
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
----------------------------------------------------------------
The company's business is influenced by seasonal weather conditions.
II-79
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
===========================================================================================================================
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $3,120,775 $3,024,774 $2,935,142
Net Income after Dividends
on Preferred Stock (in thousands) $371,490 $360,894 $356,338
Cash Dividends on Common Stock (in thousands) $347,500 $285,000 $268,000
Return on Average Common Equity (percent) 13.75 13.61 13.86
Total Assets (in thousands) $8,733,846 $8,744,360 $8,459,217
Gross Property Additions (in thousands) $425,024 $551,781 $536,785
- ---------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,714,277 $2,690,374 $2,614,405
Preferred stock 340,400 440,400 440,400
Preferred stock subject to mandatory redemption - - -
Subsidiary obligated mandatorily redeemable preferred securities 97,000 - -
Long-term debt 2,354,006 2,374,948 2,455,013
- ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,505,683 $5,505,722 $5,509,818
===========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 49.3 48.9 47.4
Preferred stock 6.2 8.0 8.0
Company obligated mandatorily redeemable preferred securities 1.7 - -
Long-term debt 42.8 43.1 44.6
- ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===========================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 150,000
Retired 83,797 - 20,387
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued 97,000 - -
Preferred Stock (in thousands):
Issued - - -
Retired - - -
- ---------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A
Duff & Phelps AA- 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 1,073,559 1,058,197 1,042,974
Commercial 171,827 166,480 162,239
Industrial 5,100 5,338 5,341
Other 732 725 716
- ---------------------------------------------------------------------------------------------------------------------------
Total 1,251,218 1,230,740 1,211,270
===========================================================================================================================
Employees (year-end) 6,865 7,261 7,996
</TABLE>
II-80
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
============================================================================================================================
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $3,007,609 $2,846,840 $2,846,794
Net Income after Dividends
on Preferred Stock (in thousands) $346,494 $338,555 $339,666
Cash Dividends on Common Stock (in thousands) $252,900 $273,300 $232,900
Return on Average Common Equity (percent) 13.94 14.02 14.55
Total Assets (in thousands) $8,248,683 $6,593,618 $6,549,462
Gross Property Additions (in thousands) $435,843 $367,463 $397,011
- ----------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,526,348 $2,443,493 $2,387,198
Preferred stock 440,400 489,400 484,400
Preferred stock subject to mandatory redemption - - -
Subsidiary obligated mandatorily redeemable preferred securities - - -
Long-term debt 2,362,852 2,202,473 2,382,635
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,329,600 $5,135,366 $5,254,233
============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.4 47.6 45.4
Preferred stock 8.3 9.5 9.2
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 44.3 42.9 45.4
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
============================================================================================================================
First Mortgage Bonds (in thousands):
Issued 860,000 745,000 250,000
Retired 699,788 931,797 227,695
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - - -
Preferred Stock (in thousands):
Issued 158,000 150,000 -
Retired 207,000 145,000 17,500
- ----------------------------------------------------------------------------------------------------------------------------
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 1,027,130 1,012,294 997,585
Commercial 157,337 152,530 148,228
Industrial 5,391 5,434 5,496
Other 713 704 697
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,190,571 1,170,962 1,152,006
============================================================================================================================
Employees (year-end) 8,009 8,116 8,513
</TABLE>
II-81A
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
=============================================================================================================================
1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $2,722,424 $2,629,354 $2,476,626
Net Income after Dividends
on Preferred Stock (in thousands) $312,803 $311,146 $283,475
Cash Dividends on Common Stock (in thousands) $220,800 $217,300 $212,700
Return on Average Common Equity (percent) 14.00 14.53 14.03
Total Assets (in thousands) $6,362,293 $6,279,431 $6,180,945
Gross Property Additions (in thousands) $444,680 $459,199 $643,892
- -----------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,280,590 $2,188,811 $2,094,815
Preferred stock 484,400 484,400 484,400
Preferred stock subject to mandatory redemption 12,500 17,500 22,500
Subsidiary obligated mandatorily redeemable preferred securities - - -
Long-term debt 2,397,931 2,435,129 2,496,492
- -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,175,421 $5,125,840 $5,098,207
=============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 44.1 42.7 41.1
Preferred stock 9.6 9.8 9.9
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 46.3 47.5 49.0
- -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 150,000
Retired 33,122 75,650 42,445
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - - -
Preferred Stock (in thousands):
Issued - - 100,000
Retired 5,000 5,000 2,500
- -----------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A A A
Duff & Phelps A A 6
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A- A- A-
Duff & Phelps A- A- 7
- -----------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 985,566 974,622 964,581
Commercial 144,340 141,265 137,955
Industrial 5,322 5,200 5,120
Other 690 684 678
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,135,918 1,121,771 1,108,334
=============================================================================================================================
Employees (year-end) 9,473 9,698 10,302
</TABLE>
II-81B
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
=========================================================================================================
1987 1986
- ---------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $2,574,634 $2,549,574
Net Income after Dividends
on Preferred Stock (in thousands) $257,239 $273,456
Cash Dividends on Common Stock (in thousands) $201,100 $191,300
Return on Average Common Equity (percent) 13.56 15.12
Total Assets (in thousands) $5,912,000 $5,570,653
Gross Property Additions (in thousands) $600,589 $553,767
- ---------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $1,946,747 $1,847,608
Preferred stock 384,400 384,400
Preferred stock subject to mandatory redemption 27,500 30,000
Subsidiary obligated mandatorily redeemable preferred securities - -
Long-term debt 2,386,258 2,210,108
- ---------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $4,744,905 $4,472,116
=========================================================================================================
Capitalization Ratios (percent):
Common stock equity 41.0 41.3
Preferred stock 8.7 9.3
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 50.3 49.4
- ---------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
=========================================================================================================
First Mortgage Bonds (in thousands):
Issued 200,000 125,000
Retired 108,082 405,765
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - -
Preferred Stock (in thousands):
Issued - -
Retired 5,000 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 950,101 934,798
Commercial 134,533 130,540
Industrial 4,955 4,725
Other 713 697
- ---------------------------------------------------------------------------------------------------------
Total 1,090,302 1,070,760
=========================================================================================================
Employees (year-end) 10,457 10,367
</TABLE>
II-81C
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
==============================================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $998,806 $997,069 $913,146
Commercial 696,453 670,453 647,202
Industrial 759,628 805,596 803,587
Other 13,729 13,619 13,515
- --------------------------------------------------------------------------------------------------------------
Total retail 2,468,616 2,486,737 2,377,450
Sales for resale - non-affiliates 391,669 370,140 354,760
Sales for resale - affiliates 216,620 127,730 164,762
- --------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 3,076,905 2,984,607 2,896,972
Other revenues 43,870 40,167 38,170
- --------------------------------------------------------------------------------------------------------------
Total $3,120,775 $3,024,774 $2,935,142
==============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 14,593,761 14,383,231 13,183,147
Commercial 10,904,476 10,043,220 9,645,798
Industrial 19,999,258 19,862,577 19,479,364
Other 192,573 186,848 185,876
- --------------------------------------------------------------------------------------------------------------
Total retail 45,690,068 44,475,876 42,494,185
Sales for resale - non-affiliates 9,491,237 8,046,189 6,775,176
Sales for resale - affiliates 10,292,066 6,705,174 8,432,533
- --------------------------------------------------------------------------------------------------------------
Total 65,473,371 59,227,239 57,701,894
==============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.84 6.93 6.93
Commercial 6.39 6.68 6.71
Industrial 3.80 4.06 4.13
Total retail 5.40 5.59 5.59
Sales for resale 3.07 3.38 3.42
Total sales 4.70 5.04 5.02
Residential Average Annual Kilowatt-Hour
Use Per Customer 13,705 13,686 12,746
Residential Average Annual Revenue
Per Customer $937.95 $948.71 $882.88
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 11,151 10,831 10,431
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 8,413 7,958 8,217
Summer 9,912 10,090 9,028
Annual Load Factor (percent) (Note 2) 61.3 59.2 62.2
Plant Availability (percent):
Fossil-steam 86.6 88.3 86.9
Nuclear 90.5 81.1 92.5
- --------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 67.0 67.1 62.9
Nuclear 18.5 17.1 21.7
Hydro 7.1 7.0 8.4
Oil and gas 0.4 0.4 *
Purchased power -
From non-affiliates 2.4 2.7 1.3
From affiliates 4.6 5.7 5.7
- --------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==============================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,035 10,025 9,961
Cost of fuel per million BTU (cents) 147.09 148.68 157.62
Average cost of fuel per net kilowatt-hour generated (cents) 1.48 1.49 1.57
==============================================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
II-82
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
===================================================================================================================================
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $947,277 $845,660 $864,347
Commercial 634,895 589,816 582,730
Industrial 832,938 800,311 790,224
Other 13,344 12,734 12,662
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 2,428,454 2,248,521 2,249,963
Sales for resale - non-affiliates 364,105 407,791 407,912
Sales for resale - affiliates 181,975 158,088 159,375
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,974,534 2,814,400 2,817,250
Other revenues 33,075 32,440 29,544
- -----------------------------------------------------------------------------------------------------------------------------------
Total $3,007,609 $2,846,840 $2,846,794
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 13,185,062 12,069,268 12,324,898
Commercial 9,185,462 8,629,869 8,526,131
Industrial 18,595,237 18,260,274 17,511,579
Other 181,673 176,798 174,760
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 41,147,434 39,136,209 38,537,368
Sales for resale - non-affiliates 7,143,672 8,382,571 8,810,442
Sales for resale - affiliates 8,081,324 7,210,697 7,784,285
- -----------------------------------------------------------------------------------------------------------------------------------
Total 56,372,430 54,729,477 55,132,095
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.18 7.01 7.01
Commercial 6.91 6.83 6.83
Industrial 4.48 4.38 4.51
Total retail 5.90 5.75 5.84
Sales for resale 3.59 3.63 3.42
Total sales 5.28 5.14 5.11
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,936 12,017 12,435
Residential Average Annual Revenue
Per Customer $929.36 $842.00 $872.04
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,431 10,431 10,539
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 7,152 7,077 6,586
Summer 9,457 8,801 8,627
Annual Load Factor (percent) (Note 2) 58.6 59.6 59.9
Plant Availability (percent):
Fossil-steam 89.7 88.9 93.1
Nuclear 86.6 80.2 87.0
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.9 64.3 61.5
Nuclear 20.1 19.0 20.8
Hydro 6.9 8.5 8.2
Oil and gas * * *
Purchased power -
From non-affiliates 1.1 1.2 1.6
From affiliates 8.0 7.0 7.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,003 10,000 9,985
Cost of fuel per million BTU (cents) 173.66 164.57 170.49
Average cost of fuel per net kilowatt-hour generated (cents) 1.74 1.65 1.70
===================================================================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
II-83A
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
=============================================================================================================
1990 1989 1988
- -------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $825,645 $781,982 $761,805
Commercial 551,634 533,487 510,910
Industrial 777,580 762,274 738,755
Other 12,103 11,743 11,255
- -------------------------------------------------------------------------------------------------------------
Total retail 2,166,962 2,089,486 2,022,725
Sales for resale - non-affiliates 434,996 409,202 355,362
Sales for resale - affiliates 93,473 104,488 76,691
- -------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,695,431 2,603,176 2,454,778
Other revenues 26,993 26,178 21,848
- -------------------------------------------------------------------------------------------------------------
Total $2,722,424 $2,629,354 $2,476,626
=============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 11,996,794 11,346,736 11,332,285
Commercial 8,201,534 7,915,685 7,711,092
Industrial 17,713,153 17,360,791 16,881,342
Other 170,420 166,485 165,122
- -------------------------------------------------------------------------------------------------------------
Total retail 38,081,901 36,789,697 36,089,841
Sales for resale - non-affiliates 10,277,060 10,292,329 7,905,750
Sales for resale - affiliates 4,519,275 5,048,743 3,551,142
- -------------------------------------------------------------------------------------------------------------
Total 52,878,236 52,130,769 47,546,733
=============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.88 6.89 6.72
Commercial 6.73 6.74 6.63
Industrial 4.39 4.39 4.38
Total retail 5.69 5.68 5.60
Sales for resale 3.57 3.35 3.77
Total sales 5.10 4.99 5.16
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,256 11,717 11,839
Residential Average Annual Revenue
Per Customer $843.50 $807.50 $795.84
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 9,879 9,879 9,279
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,293 7,264 6,377
Summer 8,878 8,256 7,991
Annual Load Factor (percent) (Note 2) 57.4 59.5 59.6
Plant Availability (percent):
Fossil-steam 92.2 90.7 91.3
Nuclear 86.5 83.1 91.9
- -------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 57.0 54.1 53.9
Nuclear 21.6 21.0 26.1
Hydro 8.7 11.0 4.8
Oil and gas 0.1 0.1 0.1
Purchased power -
From non-affiliates 0.9 1.8 0.5
From affiliates 11.7 12.0 14.6
- -------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=============================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,072 10,061 10,137
Cost of fuel per million BTU (cents) 171.55 172.20 168.21
Average cost of fuel per net kilowatt-hour generated (cents) 1.73 1.73 1.71
=============================================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
II-83B
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
====================================================================================================================
1987 1986
- --------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $759,957 $738,864
Commercial 501,088 481,676
Industrial 721,298 705,395
Other 10,968 10,811
- --------------------------------------------------------------------------------------------------------------------
Total retail 1,993,311 1,936,746
Sales for resale - non-affiliates 443,880 472,938
Sales for resale - affiliates 118,746 120,911
- --------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,555,937 2,530,595
Other revenues 18,697 18,979
- --------------------------------------------------------------------------------------------------------------------
Total $2,574,634 $2,549,574
====================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 11,149,225 10,606,698
Commercial 7,476,924 7,015,589
Industrial 15,969,075 15,025,806
Other 159,422 153,282
- --------------------------------------------------------------------------------------------------------------------
Total retail 34,754,646 32,801,375
Sales for resale - non-affiliates 10,523,554 9,064,049
Sales for resale - affiliates 4,963,997 4,456,360
- --------------------------------------------------------------------------------------------------------------------
Total 50,242,197 46,321,784
====================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.82 6.97
Commercial 6.70 6.87
Industrial 4.52 4.69
Total retail 5.74 5.90
Sales for resale 3.63 4.39
Total sales 5.09 5.46
Residential Average Annual Kilowatt-Hour
Use Per Customer 11,848 11,457
Residential Average Annual Revenue
Per Customer $807.61 $798.09
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 9,337 9,337
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,138 6,257
Summer 7,886 7,892
Annual Load Factor (percent) (Note 2) 58.3 56.2
Plant Availability (percent):
Fossil-steam 90.2 88.5
Nuclear 83.3 83.8
- --------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 52.5 58.8
Nuclear 21.7 23.8
Hydro 6.3 4.2
Oil and gas 0.2 0.1
Purchased power -
From non-affiliates 0.2 2.0
From affiliates 19.1 11.1
- --------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0
====================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,214 10,209
Cost of fuel per million BTU (cents) 176.72 179.65
Average cost of fuel per net kilowatt-hour generated (cents) 1.80 1.83
====================================================================================================================
Notes:
(1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO.
(2) Includes Southeastern Power Administration allotment.
* Less than one-tenth of one percent.
</TABLE>
II-83C
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Alabama Power Company
<S> <C> <C> <C>
================================================================================================================================
For the Years Ended December 31, 1996* 1995* 1994*
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $2,904,155 $2,897,044 $2,770,380
Revenues from affiliates 216,620 127,730 164,762
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,120,775 3,024,774 2,935,142
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 877,076 791,819 801,948
Purchased power from non-affiliates 36,813 30,065 15,158
Purchased power from affiliates 91,500 112,826 100,888
Proceeds from settlement of disputed contracts - - -
Other 505,884 501,876 458,917
Maintenance 258,482 243,218 262,102
Depreciation and amortization 320,102 303,050 292,420
Taxes other than income taxes 186,172 185,620 183,425
Federal and state income taxes 228,108 230,982 224,280
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,504,137 2,399,456 2,339,138
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 616,638 625,318 596,004
Other Income (Expense):
Allowance for equity funds used during construction - 1,649 3,239
Income from subsidiary 3,851 4,051 3,588
Charitable foundation (6,800) (11,542) (13,500)
Interest income 28,318 13,768 16,944
Other, net (39,053) (21,536) (30,569)
Income taxes applicable to other income 22,400 14,142 16,834
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 625,354 625,850 592,540
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 169,390 180,714 178,045
Allowance for debt funds used during construction (6,480) (7,067) (3,548)
Interest on interim obligations 20,617 16,917 5,939
Amortization of debt discount, premium, and expense, net 9,508 20,259 9,623
Other interest charges 27,510 27,064 19,908
Distributions on preferred securities of
Alabama Power Capital Trust I 6,717 - -
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 227,262 237,887 209,967
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 398,092 387,963 382,573
Dividends on Preferred Stock 26,602 27,069 26,235
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 371,490 $ 360,894 $ 356,338
================================================================================================================================
* Includes the effect of recognizing, beginning in 1987, retail service
rendered but not yet billed to customers.
</TABLE>
II-84
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Alabama Power Company
<S> <C> <C> <C> <C>
================================================================================================================================
For the Years Ended December 31, 1993* 1992* 1991* 1990*
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $2,825,634 $2,688,752 $2,687,419 $2,628,951
Revenues from affiliates 181,975 158,088 159,375 93,473
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,007,609 2,846,840 2,846,794 2,722,424
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 877,099 794,438 812,667 756,501
Purchased power from non-affiliates 15,230 14,242 21,080 11,185
Purchased power from affiliates 120,330 107,230 119,602 165,982
Proceeds from settlement of disputed contracts (2,568) (641) (14,819) -
Other 473,383 446,477 435,908 411,559
Maintenance 252,506 237,071 229,114 215,304
Depreciation and amortization 290,310 280,881 271,433 262,817
Taxes other than income taxes 178,997 172,095 169,639 163,567
Federal and state income taxes 207,210 201,925 200,612 185,954
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,412,497 2,253,718 2,245,236 2,172,869
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 595,112 593,122 601,558 549,555
Other Income (Expense):
Allowance for equity funds used during construction 3,260 2,071 2,368 25,487
Income from subsidiary 4,127 4,635 4,576 4,182
Charitable foundation (3,000) (6,887) (6,500) (17,500)
Interest income 20,775 14,804 14,356 12,006
Other, net (24,420) (11,019) (9,926) (8,235)
Income taxes applicable to other income 10,239 8,947 7,523 11,081
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 606,093 605,673 613,955 576,576
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 184,861 206,871 214,107 221,527
Allowance for debt funds used during construction (2,992) (2,416) (6,903) (23,339)
Interest on interim obligations 3,760 3,704 13,385 10,252
Amortization of debt discount, premium, and expense, net 8,937 4,392 2,634 3,706
Other interest charges 35,474 19,381 14,927 13,115
Distributions on preferred securities of
Alabama Power Capital Trust I - - - -
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 230,040 231,932 238,150 225,261
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 376,053 373,741 375,805 351,315
Dividends on Preferred Stock 29,559 35,186 36,139 38,512
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 346,494 $ 338,555 $ 339,666 $ 312,803
================================================================================================================================
* Includes the effect of recognizing, beginning in 1987, retail service
rendered but not yet billed to customers.
</TABLE>
II-85A
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Alabama Power Company
<S> <C> <C> <C> <C>
==================================================================================================================================
For the Years Ended December 31, 1989* 1988* 1987* 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $2,524,866 $2,399,935 $2,455,888 $2,428,663
Revenues from affiliates 104,488 76,691 118,746 120,911
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 2,629,354 2,476,626 2,574,634 2,549,574
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 712,453 676,423 696,763 738,367
Purchased power from non-affiliates 28,272 8,407 6,703 23,889
Purchased power from affiliates 163,267 185,390 257,052 156,091
Proceeds from settlement of disputed contracts - - - -
Other 380,536 400,879 410,575 350,671
Maintenance 202,633 197,225 199,617 203,972
Depreciation and amortization 247,973 225,123 212,072 201,803
Taxes other than income taxes 154,398 148,681 141,422 135,248
Federal and state income taxes 188,507 143,614 190,575 255,400
---------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,078,039 1,985,742 2,114,779 2,065,441
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 551,315 490,884 459,855 484,133
Other Income (Expense):
Allowance for equity funds used during construction 29,515 39,047 27,663 27,455
Income from subsidiary 3,750 3,302 3,440 2,967
Charitable foundation (25,000) - - -
Interest income 10,871 9,914 7,044 11,422
Other, net (4,313) (13,694) (816) (3,738)
Income taxes applicable to other income 13,629 8,034 849 185
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 579,767 537,487 498,035 522,424
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 230,046 225,522 205,824 226,110
Allowance for debt funds used during construction (27,627) (31,830) (24,235) (24,334)
Interest on interim obligations 9,098 5,714 7,221 1,159
Amortization of debt discount, premium, and expense, net 4,469 4,411 4,405 3,313
Other interest charges 13,112 13,715 14,662 8,695
Distributions on preferred securities of
Alabama Power Capital Trust I - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 229,098 217,532 207,877 214,943
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 350,669 319,955 290,158 307,481
Dividends on Preferred Stock 39,523 36,480 32,919 34,025
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 311,146 $ 283,475 $ 257,239 $ 273,456
==================================================================================================================================
* Includes the effect of recognizing, beginning in 1987, retail service
rendered but not yet billed to customers.
</TABLE>
II-85B
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Alabama Power Company
<S> <C> <C> <C>
=====================================================================================================================
For the Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 398,092 $ 387,963 $ 382,573
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 383,438 371,382 359,791
Deferred income taxes, net 16,585 32,702 (32,612)
Deferred investment tax credits, net - (75) (1)
Allowance for equity funds used during construction - (1,649) (3,239)
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 21,563 33,244 28,656
Changes in certain current assets and liabilities --
Receivables, net 3,958 (54,209) 19,390
Inventories 36,234 18,425 (38,946)
Payables 1,006 (63,656) (21,240)
Taxes accrued (5,756) 551 6,856
Energy cost recovery, retail 25,771 1,177 16,907
Other (7,111) (15,895) (14,235)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 873,780 709,960 703,900
- ---------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (425,024) (551,781) (536,785)
Sales of property - - -
Other (61,119) (53,321) (26,632)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (486,143) (605,102) (563,417)
- ---------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Company obligated mandatorily redeemable preferred securities 97,000 - -
Preferred stock - - -
First mortgage bonds - - 150,000
Pollution control bonds 21,000 131,500 179,750
Other long-term debt - - 28,970
Capital contributions from parent company - - -
Prepaid capacity revenues - - -
Retirements:
Preferred stock - - -
First mortgage bonds (83,797) - (20,387)
Pollution control bonds (21,000) (131,500) (179,750)
Other long-term debt (907) (791) (125,630)
Interim obligations, net (25,163) 210,134 139,882
Payment of preferred stock dividends (26,665) (27,118) (25,431)
Payment of common stock dividends (347,500) (285,000) (268,000)
Miscellaneous (3,634) (4,143) (8,444)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (390,666) (106,918) (129,040)
- ---------------------------------------------------------------------------------------------------------------------
Net Change in Cash (3,029) (2,060) 11,443
Cash at Beginning of Year 12,616 14,676 3,233
- ---------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 9,587 $ 12,616 $ 14,676
=====================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-86
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Alabama Power Company
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 376,053 $ 373,741 $ 375,805 $ 351,315
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 356,499 338,421 337,978 331,858
Deferred income taxes, net 35,100 23,514 (5,779) 64,480
Deferred investment tax credits, net (2,106) - (1,089) 132
Allowance for equity funds used during construction (3,260) (2,071) (2,368) (25,487)
Non-cash proceeds from settlement of disputed contracts - (641) (13,750) -
Other, net 36,493 (2,657) 26,614 19,899
Changes in certain current assets and liabilities --
Receivables, net 19,215 (11,010) 9,178 12,005
Inventories 51,630 12,704 (17,374) (40,901)
Payables 31,544 2,158 28,889 6,597
Taxes accrued (9,959) (21,120) 24,828 (6,167)
Energy cost recovery, retail (56,128) 45,509 (12,304) (42,535)
Other (21,110) 10,629 (37,906) 14,144
-----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 813,971 769,177 712,722 685,340
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (435,843) (367,463) (397,011) (444,680)
Sales of property - 43,556 - -
Other (741) (13,379) (36,083) 6,935
-----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (436,584) (337,286) (433,094) (437,745)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Company obligated mandatorily redeemable preferred securities - - - -
Preferred stock 158,000 150,000 - -
First mortgage bonds 860,000 745,000 250,000 -
Pollution control bonds 144,436 - - -
Other long-term debt 35,878 48,382 12,906 54,831
Capital contributions from parent company - - - -
Prepaid capacity revenues - - 52,900 -
Retirements:
Preferred stock (207,000) (145,000) (17,500) (5,000)
First mortgage bonds (699,788) (931,797) (227,695) (33,122)
Pollution control bonds (135,315) (335) (250) (250)
Other long-term debt (46,014) (53,888) (48,428) (56,895)
Interim obligations, net (156,917) 120,917 (13,500) 59,500
Payment of preferred stock dividends (32,099) (35,704) (36,829) (38,245)
Payment of common stock dividends (252,900) (273,300) (232,900) (220,800)
Miscellaneous (56,064) (53,697) (17,732) (293)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (387,783) (429,422) (279,028) (240,274)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash (10,396) 2,469 600 7,321
Cash at Beginning of Year 13,629 11,160 10,560 3,239
- -----------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 3,233 $ 13,629 $ 11,160 $ 10,560
===================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-87A
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Alabama Power Company
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 350,669 $ 319,955 $ 290,158 $ 307,481
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 322,042 296,234 270,492 292,569
Deferred income taxes, net 31,715 37,952 107,824 135,364
Deferred investment tax credits, net 6,917 15,019 23,477 19,736
Allowance for equity funds used during construction (29,515) (39,047) (27,663) (27,455)
Non-cash proceeds from settlement of disputed contracts - - - -
Other, net (5,297) 16,106 67,445 4,251
Changes in certain current assets and liabilities --
Receivables, net (10,436) 8,822 (133,468) 15,238
Inventories 20,408 (23,182) (26,255) (2,040)
Payables 16,259 (12,957) 39,645 (56,720)
Taxes accrued 1,547 (7,754) 516 (1,487)
Energy cost recovery, retail 39,164 - - -
Other 28,701 (18,658) 4,464 (35,293)
---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 772,174 592,490 616,635 651,644
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (459,199) (643,892) (600,589) (553,767)
Sales of property - - - -
Other 3,768 23,161 17,010 10,115
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (455,431) (620,731) (583,579) (543,652)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Company obligated mandatorily redeemable preferred securities - - - -
Preferred stock - 100,000 - -
First mortgage bonds - 150,000 200,000 125,000
Pollution control bonds 53,700 - 432 26,232
Other long-term debt 55,176 62,515 69,786 95,017
Capital contributions from parent company - 79,500 43,000 -
Prepaid capacity revenues - - - 100,000
Retirements:
Preferred stock (5,000) (2,500) (5,000) (42,224)
First mortgage bonds (75,650) (42,445) (108,082) (405,765)
Pollution control bonds (53,950) - - (21,000)
Other long-term debt (57,316) (56,748) (32,500) (43,561)
Interim obligations, net 30,000 (15,000) 15,000 -
Payment of preferred stock dividends (40,105) (35,362) (32,837) (36,014)
Payment of common stock dividends (217,300) (212,700) (201,100) (191,300)
Miscellaneous (4,576) (5,581) (2,581) (38,052)
---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (315,021) 21,679 (53,882) (431,667)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash 1,722 (6,562) (20,826) (323,675)
Cash at Beginning of Year 1,517 8,079 28,905 352,580
- ----------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 3,239 $ 1,517 $ 8,079 $ 28,905
==================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-87B
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
Alabama Power Company
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
At December 31, 1996* 1995* 1994*
- --------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,326,628 $ 3,221,250 $ 3,027,956
Nuclear 1,884,567 1,874,111 1,866,750
Hydro 844,609 834,790 836,256
- --------------------------------------------------------------------------------------------------------------------------
Total production 6,055,804 5,930,151 5,730,962
Transmission 1,208,636 1,132,336 1,087,452
Distribution 2,657,327 2,522,051 2,366,477
General 864,321 825,417 847,111
Construction work in progress 256,758 362,722 317,745
Nuclear fuel, at amortized cost 123,862 100,537 101,630
- --------------------------------------------------------------------------------------------------------------------------
Total electric plant 11,166,708 10,873,214 10,451,377
- --------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant:
Plant in service 20,833 20,837 20,770
Construction work in progress 44 46 34
- --------------------------------------------------------------------------------------------------------------------------
Total steam heat plant 20,877 20,883 20,804
- --------------------------------------------------------------------------------------------------------------------------
Total utility plant 11,187,585 10,894,097 10,472,181
- --------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 4,102,070 3,827,123 3,588,363
Steam heat 11,552 10,970 10,241
- --------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 4,113,622 3,838,093 3,598,604
- --------------------------------------------------------------------------------------------------------------------------
Total 7,073,963 7,056,004 6,873,577
Less property-related accumulated deferred income taxes - - -
- --------------------------------------------------------------------------------------------------------------------------
Total 7,073,963 7,056,004 6,873,577
- --------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Nuclear decommissioning trusts 148,760 108,368 71,014
Miscellaneous 46,275 46,388 43,955
- --------------------------------------------------------------------------------------------------------------------------
Total 195,035 154,756 114,969
- --------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 9,587 12,616 14,676
Investment securities - - -
Receivables, net 414,989 427,157 374,125
Fossil fuel stock, at average cost 81,704 106,627 119,555
Materials and supplies, at average cost 167,792 179,103 184,600
Prepayments 131,870 116,331 103,550
Vacation pay deferred 28,369 29,458 20,442
- --------------------------------------------------------------------------------------------------------------------------
Total 834,311 871,292 816,948
- --------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 410,010 436,837 451,886
Debt expense, being amortized 7,398 7,648 7,370
Premium on reacquired debt, being amortized 84,149 89,967 101,851
Uranium enrichment decontamination and decommissioning fund 37,490 40,282 42,996
Miscellaneous 91,490 87,574 49,620
- --------------------------------------------------------------------------------------------------------------------------
Total 630,537 662,308 653,723
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $ 8,733,846 $ 8,744,360 $ 8,459,217
==========================================================================================================================
*Includes the effect of recognizing, beginning in 1987, retail service rendered
but not yet billed to customers.
</TABLE>
II-88
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
Alabama Power Company
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993* 1992* 1991* 1990*
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 2,987,010 $ 2,953,683 $ 2,991,876 $ 2,462,100
Nuclear 1,860,842 1,860,832 1,851,317 1,794,540
Hydro 819,848 818,363 814,301 809,578
- ----------------------------------------------------------------------------------------------------------------------------------
Total production 5,667,700 5,632,878 5,657,494 5,066,218
Transmission 1,051,130 1,013,464 977,239 925,368
Distribution 2,206,834 2,072,165 1,947,972 1,815,265
General 810,551 751,652 713,948 660,217
Construction work in progress 225,743 164,555 148,564 654,055
Nuclear fuel, at amortized cost 93,551 101,128 109,259 143,711
- ----------------------------------------------------------------------------------------------------------------------------------
Total electric plant 10,055,509 9,735,842 9,554,476 9,264,834
- ----------------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant:
Plant in service 20,926 20,924 20,214 20,091
Construction work in progress 43 33 181 74
- ----------------------------------------------------------------------------------------------------------------------------------
Total steam heat plant 20,969 20,957 20,395 20,165
- ----------------------------------------------------------------------------------------------------------------------------------
Total utility plant 10,076,478 9,756,799 9,574,871 9,284,999
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 3,374,310 3,122,332 2,913,385 2,676,957
Steam heat 9,846 9,211 8,492 7,861
- ----------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 3,384,156 3,131,543 2,921,877 2,684,818
- ----------------------------------------------------------------------------------------------------------------------------------
Total 6,692,322 6,625,256 6,652,994 6,600,181
Less property-related accumulated deferred income taxes - 1,170,982 1,140,303 1,106,664
- ----------------------------------------------------------------------------------------------------------------------------------
Total 6,692,322 5,454,274 5,512,691 5,493,517
- ----------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - 69,550 -
Nuclear decommissioning trusts 49,550 32,390 15,864 -
Miscellaneous 49,635 49,892 48,254 40,604
- ----------------------------------------------------------------------------------------------------------------------------------
Total 99,185 82,282 133,668 40,604
- ----------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 3,233 13,629 11,160 10,560
Investment securities - 64,832 - -
Receivables, net 410,422 344,934 349,599 346,473
Fossil fuel stock, at average cost 88,481 134,328 154,798 144,960
Materials and supplies, at average cost 176,728 182,511 174,745 167,209
Prepayments 79,207 108,254 95,832 50,364
Vacation pay deferred 22,680 21,879 21,691 22,845
- ----------------------------------------------------------------------------------------------------------------------------------
Total 780,751 870,367 807,825 742,411
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 469,010 - - -
Debt expense, being amortized 7,064 6,118 5,957 6,083
Premium on reacquired debt, being amortized 102,634 74,835 40,174 26,504
Uranium enrichment decontamination and decommissioning fund 45,554 47,730 - -
Miscellaneous 52,163 58,012 49,147 53,174
- ----------------------------------------------------------------------------------------------------------------------------------
Total 676,425 186,695 95,278 85,761
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 8,248,683 $ 6,593,618 $ 6,549,462 $ 6,362,293
==================================================================================================================================
*Includes the effect of recognizing, beginning in 1987, retail service rendered
but not yet billed to customers.
</TABLE>
II-89A
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
Alabama Power Company
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989* 1988* 1987* 1986
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 2,428,146 $ 1,820,966 $ 1,787,979 $ 1,748,226
Nuclear 1,786,877 1,769,093 1,765,854 1,749,981
Hydro 803,901 789,617 788,046 784,445
- ---------------------------------------------------------------------------------------------------------------------------------
Total production 5,018,924 4,379,676 4,341,879 4,282,652
Transmission 882,933 844,003 817,065 773,142
Distribution 1,692,426 1,587,690 1,481,845 1,384,576
General 646,523 613,498 535,148 506,228
Construction work in progress 557,150 1,023,019 750,907 497,491
Nuclear fuel, at amortized cost 147,997 174,130 191,493 205,768
- ---------------------------------------------------------------------------------------------------------------------------------
Total electric plant 8,945,953 8,622,016 8,118,337 7,649,857
- ---------------------------------------------------------------------------------------------------------------------------------
Steam Heat Plant:
Plant in service 20,083 20,076 20,217 19,508
Construction work in progress 71 58 89 123
- ---------------------------------------------------------------------------------------------------------------------------------
Total steam heat plant 20,154 20,134 20,306 19,631
- ---------------------------------------------------------------------------------------------------------------------------------
Total utility plant 8,966,107 8,642,150 8,138,643 7,669,488
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 2,458,747 2,257,696 2,068,176 1,877,124
Steam heat 7,154 6,456 5,938 5,261
- ---------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 2,465,901 2,264,152 2,074,114 1,882,385
- ---------------------------------------------------------------------------------------------------------------------------------
Total 6,500,206 6,377,998 6,064,529 5,787,103
Less property-related accumulated deferred income taxes 1,051,877 1,001,173 933,932 857,081
- ---------------------------------------------------------------------------------------------------------------------------------
Total 5,448,329 5,376,825 5,130,597 4,930,022
- ---------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - - -
Nuclear decommissioning trusts - - - -
Miscellaneous 34,710 29,677 31,402 30,735
- ---------------------------------------------------------------------------------------------------------------------------------
Total 34,710 29,677 31,402 30,735
- ---------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 3,239 1,517 8,079 28,905
Investment securities - - - -
Receivables, net 355,107 344,671 353,493 220,025
Fossil fuel stock, at average cost 131,942 173,858 164,671 152,640
Materials and supplies, at average cost 139,326 117,818 103,823 89,599
Prepayments 54,613 28,412 10,595 12,320
Vacation pay deferred 22,021 21,871 21,317 20,002
- ---------------------------------------------------------------------------------------------------------------------------------
Total 706,248 688,147 661,978 523,491
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - - -
Debt expense, being amortized 6,491 6,831 6,695 6,308
Premium on reacquired debt, being amortized 28,778 27,329 30,767 34,170
Uranium enrichment decontamination and decommissioning fund - - - -
Miscellaneous 54,875 52,136 50,561 45,927
- ---------------------------------------------------------------------------------------------------------------------------------
Total 90,144 86,296 88,023 86,405
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 6,279,431 $ 6,180,945 $ 5,912,000 $ 5,570,653
=================================================================================================================================
*Includes the effect of recognizing, beginning in 1987, retail service rendered
but not yet billed to customers.
</TABLE>
II-89B
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
Alabama Power Company
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
At December 31, 1996* 1995* 1994*
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 224,358 $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645 1,304,645
Premium on preferred stock 146 146 146
Earnings retained in the business 1,185,128 1,161,225 1,085,256
- ------------------------------------------------------------------------------------------------------------------------------
Total common equity 2,714,277 2,690,374 2,614,405
Preferred stock 340,400 440,400 440,400
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes 97,000 - -
Long-term debt 2,354,006 2,374,948 2,455,013
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 5,505,683 5,505,722 5,509,818
- ------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - -
Commercial paper 364,853 390,016 179,882
Preferred stock due within one year 100,000 - -
Long-term debt due within one year 20,753 84,682 796
Accounts payable 246,870 258,727 318,991
Customer deposits 32,003 30,353 30,245
Taxes accrued 50,909 31,757 22,437
Interest accrued 51,941 53,527 52,516
Vacation pay accrued 28,369 29,458 20,442
Miscellaneous 96,485 70,543 57,047
- ------------------------------------------------------------------------------------------------------------------------------
Total 992,183 949,063 682,356
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,177,687 1,191,591 1,181,342
Accumulated deferred investment tax credits 294,071 305,372 317,018
Prepaid capacity revenues, net 122,496 131,186 138,421
Deferred revenues from settlement of disputed contracts - - -
Uranium enrichment decontamination and decommissioning fund 33,741 36,620 39,413
Deferred credits related to income taxes 364,792 386,038 405,256
Natural disaster reserve 20,757 17,959 28,750
Miscellaneous 222,436 220,809 156,843
- ------------------------------------------------------------------------------------------------------------------------------
Total 2,235,980 2,289,575 2,267,043
- ------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $8,733,846 $8,744,360 $8,459,217
==============================================================================================================================
*Includes the effect of recognizing, beginning in 1987, retail service rendered
but not yet billed to customers.
</TABLE>
II-90
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
Alabama Power Company
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993* 1992* 1991* 1990*
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 224,358 $ 224,358 $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645 1,304,645 1,304,645
Premium on preferred stock 146 342 461 461
Earnings retained in the business 997,199 914,148 857,734 751,126
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 2,526,348 2,443,493 2,387,198 2,280,590
Preferred stock 440,400 489,400 484,400 484,400
Preferred stock subject to mandatory redemption - - - 12,500
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes - - - -
Long-term debt 2,362,852 2,202,473 2,382,635 2,397,931
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 5,329,600 5,135,366 5,254,233 5,175,421
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 40,000 71,000 76,000 89,500
Commercial paper - 125,917 - -
Preferred stock due within one year - - - 5,000
Long-term debt due within one year 58,998 67,379 85,077 83,989
Accounts payable 334,998 296,731 295,333 271,776
Customer deposits 31,198 31,286 30,165 29,571
Taxes accrued 40,144 24,373 45,493 20,665
Interest accrued 52,809 41,675 49,288 49,820
Vacation pay accrued 22,680 21,879 21,691 22,845
Miscellaneous 50,426 93,836 37,699 64,547
- --------------------------------------------------------------------------------------------------------------------------------
Total 631,253 774,076 640,746 637,713
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,165,127 - - -
Accumulated deferred investment tax credits 329,909 344,707 362,672 379,990
Prepaid capacity revenues, net 143,762 147,658 149,534 99,835
Deferred revenues from settlement of disputed contracts 19,871 46,721 59,937 -
Uranium enrichment decontamination and decommissioning fund 39,644 44,548 - -
Deferred credits related to income taxes 440,945 - - -
Natural disaster reserve - - - -
Miscellaneous 148,572 100,542 82,340 69,334
- --------------------------------------------------------------------------------------------------------------------------------
Total 2,287,830 684,176 654,483 549,159
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $8,248,683 $6,593,618 $6,549,462 $6,362,293
================================================================================================================================
*Includes the effect of recognizing, beginning in 1987, retail service rendered
but not yet billed to customers.
</TABLE>
II-91A
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet
Alabama Power Company
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989* 1988* 1987* 1986
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 224,358 $ 224,358 $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645 1,225,145 1,182,145
Premium on preferred stock 461 461 461 461
Earnings retained in the business 659,347 565,351 496,783 440,644
- -----------------------------------------------------------------------------------------------------------------------------------
Total common equity 2,188,811 2,094,815 1,946,747 1,847,608
Preferred stock 484,400 484,400 384,400 384,400
Preferred stock subject to mandatory redemption 17,500 22,500 27,500 30,000
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes - - - -
Long-term debt 2,435,129 2,496,492 2,386,258 2,210,108
- -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 5,125,840 5,098,207 4,744,905 4,472,116
- -----------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 30,000 - 15,000 -
Commercial paper - - - -
Preferred stock due within one year 5,000 5,000 2,500 5,000
Long-term debt due within one year 81,031 96,242 95,140 142,394
Accounts payable 267,645 259,443 273,613 238,606
Customer deposits 28,450 25,964 32,220 30,333
Taxes accrued 26,832 25,285 72,118 50,757
Interest accrued 49,926 50,174 49,489 47,648
Vacation pay accrued 22,021 21,871 21,317 20,002
Miscellaneous 91,022 28,944 24,660 25,567
- -----------------------------------------------------------------------------------------------------------------------------------
Total 601,927 512,923 586,057 560,307
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - - -
Accumulated deferred investment tax credits 399,097 412,771 418,370 418,275
Prepaid capacity revenues, net 102,346 104,211 103,947 101,143
Deferred revenues from settlement of disputed contracts - - - -
Uranium enrichment decontamination and decommissioning fund - - - -
Deferred credits related to income taxes - - - -
Natural disaster reserve - - - -
Miscellaneous 50,221 52,833 58,721 18,812
- -----------------------------------------------------------------------------------------------------------------------------------
Total 551,664 569,815 581,038 538,230
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $6,279,431 $6,180,945 $5,912,000 $5,570,653
===================================================================================================================================
*Includes the effect of recognizing, beginning in 1987, retail service rendered
but not yet billed to customers.
</TABLE>
II-91B
<PAGE>
ALABAMA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1993 $ 50,000 5-1/2% $ 50,000 2/1/98
1992 170,000 6-3/8% 170,000 8/1/99
1993 100,000 6% 100,000 3/1/00
1992 100,000 6.85% 100,000 8/1/02
1993 125,000 7% 125,000 1/1/03
1993 175,000 6-3/4% 175,000 2/1/03
1992 175,000 7-1/4% 175,000 8/1/07
1991 100,000 9-1/4% 74,951 5/1/21
1991 150,000 8-3/4% 148,500 12/1/21
1992 200,000 8-1/2% 198,000 5/1/22
1992 100,000 8.30% 99,608 7/1/22
1993 100,000 7-3/4% 100,000 2/1/23
1993 150,000 7.45% 150,000 7/1/23
1993 100,000 7.30% 100,000 11/1/23
1994 150,000 9% 150,000 12/1/24
========== ==========
$1,945,000 $1,916,059
========== ==========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1978 5,600 7-1/4% $ 1,000 5/1/03
1993 12,100 Variable 12,100 8/1/17
1993 12,000 Variable 12,000 8/1/17
1993 12,000 Variable 12,000 8/1/17
1993 96,990 6.05% 96,990 5/1/23
1993 9,800 5.80% 9,800 6/1/22
1994 24,400 5-1/2% 24,400 1/1/24
1994 53,700 Variable 53,700 6/1/15
1994 101,650 6-1/2% 101,650 9/1/23
1995 50,000 Variable 50,000 5/1/22
1995 81,500 Variable 81,500 10/1/22
1996 21,000 Variable 21,000 11/1/21
========== ==========
$ 480,740 $ 476,140
========== ==========
Company Obligated Mandatorily Redeemable Preferred Securities
of Alabama Power Capital Trust I Holding Junior Subordinated Notes
Preferred Securities Interest Amount
Series Outstanding Rate Outstanding
- ------------------------------------------------------------------------------------------------
(Thousands)
1996 3,880,000(1) 7.375% $ 97,000(1)
(1) Issued by Alabama Power Capital Trust I and guaranteed to the extent
Alabama Power Capital Trust I has funds by ALABAMA.
II-92
</TABLE>
<PAGE>
ALABAMA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1996 (Continued)
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
----------------------------------------------------------------------
(Thousands)
1946-1952 364,000 4.20% $ 36,400
1950 100,000 4.60% 10,000
1961 80,000 4.92% 8,000
1963 50,000 4.52% 5,000
1964 60,000 4.64% 6,000
1965 50,000 4.72% 5,000
1966 70,000 5.96% 7,000
1968 50,000 6.88% 5,000
1988 500,000 Auction 50,000
1992 4,000,000 7.60% 100,000
1992 2,000,000 7.60% 50,000
1993 1,520,000 6.80% 38,000
1993 2,000,000 6.40% 50,000
1993 200 Auction 20,000
1993 2,000,000 Adjustable 50,000
========== ========
12,844,200 $440,400
========== ========
SECURITIES RETIRED DURING 1996
First Mortgage Bonds
Principal Interest
Series Amount Rate
----------------------------------------------------------------------
(Thousands)
1991 $ 23,797 9-1/4%
1993 60,000 4-1/2%
===========
$ 83,797
===========
Pollution Control Bonds
Principal Interest
Series Amount Rate
----------------------------------------------------------------------
(Thousands)
1986 $ 21,000 7.40%
===========
$ 21,000
===========
II-93
GEORGIA POWER COMPANY
FINANCIAL SECTION
II-94
<PAGE>
MANAGEMENT'S REPORT
Georgia Power Company 1996 Annual Report
The management of Georgia Power Company has prepared this annual report and is
responsible for the financial statements and related information. 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 based upon the recognition that the cost of the
system should not exceed its benefits. The Company believes that 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, which is composed of six
directors who are not employees, provides a broad overview of management's
financial reporting and control functions. At least three times a year 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 control and financial reporting matters. The
internal auditors and the 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 with 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 Georgia Power Company in conformity with generally accepted accounting
principles.
/s/ Allen Franklin
H. Allen Franklin
President and Chief Executive Officer
/s/ Warren Y. Jobe
Warren Y. Jobe
Executive Vice President, Treasurer and
Chief Financial Officer
February 12, 1997
II-95
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Georgia Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Georgia Power Company (a Georgia corporation and a wholly owned subsidiary of
Southern Company) as of December 31, 1996 and 1995, and the related statements
of income, retained earnings, paid-in capital, and cash flows for each of the
three years in the period ended December 31, 1996. 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 II-104 through II-125)
referred to above present fairly, in all material respects, the financial
position of Georgia Power Company as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
II-96
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Georgia Power Company 1996 Annual Report
RESULTS OF OPERATIONS
Earnings
Georgia Power Company's 1996 earnings totaled $580 million, representing a $29
million (4.7 percent) decrease from 1995. Earnings for 1995 included an
after-tax gain of approximately $12 million from the completion of the sale of
Plant Scherer Unit 4. The remaining decrease in 1996 earnings was primarily due
to increased operating and maintenance expenses, partially offset by lower
interest charges compared to the prior year. The Company's 1995 earnings
increased 15.9 percent over 1994. Earnings for 1994 were reduced by a $55
million after-tax charge related to work force reduction programs. Excluding the
charge related to 1994 work force reduction programs, earnings for 1995
increased 4.8 percent over 1994 primarily due to higher retail energy sales and
lower interest charges, partially offset by higher operating expenses.
Revenues
The following table summarizes the factors impacting operating revenues for the
1994-1996 period:
Increase (Decrease)
From Prior Year
-----------------------------------
1996 1995 1994
-----------------------------------
Retail - (in millions)
Sales growth $ 58 $110 $ 67
Weather (25) 69 (128)
Fuel cost recovery 28 66 (35)
Demand-side programs (10) 36 (12)
------------------------------------------------------------------
Total retail 51 281 (108)
- ------------------------------------------------------------------
Sales for resale -
Non-affiliates (9) (61) (183)
Affiliates (41) 16 (1)
- ------------------------------------------------------------------
Total sales for resale (50) (45) (184)
- ------------------------------------------------------------------
Other operating revenues 10 7 3
- ------------------------------------------------------------------
Total operating revenues $ 11 $243 ($289)
- ------------------------------------------------------------------
Percent change 0.3% 5.8% (6.5)%
- ------------------------------------------------------------------
Retail revenues of $4.0 billion in 1996 increased $51 million (1.3 percent)
over the prior year primarily due to strong economic growth and an increase in
sales to existing customers. Retail revenues increased in 1995 over the prior
year primarily due to the continued expansion of Georgia's economy and the hot
summer of 1995. Milder-than-normal weather occurred during the summer of 1994.
Fuel revenues generally represent the direct recovery of fuel expense,
including the fuel component of purchased energy, and do not affect net income.
Revenues from demand-side option programs generally represent the direct
recovery of program costs. See Note 3 to the financial statements under
"Demand-Side Conservation Programs" for further information on these programs.
Revenues from sales to non-affiliated utilities decreased in both 1996 and
1995. Revenues from sales to non-affiliated utilities outside the service area
under long-term contracts consist of capacity and energy components. Capacity
revenues reflect the recovery of fixed costs and a return on investment under
the contracts. Energy is generally sold at variable cost. The capacity and
energy components were as follows:
1996 1995 1994
-------------------------------
(in millions)
Capacity $41 $53 $ 84
Energy 43 45 82
- --------------------------------------------------------------
Total $84 $98 $166
==============================================================
Contractual unit power sales to Florida utilities for 1996 and 1995 are down
primarily due to scheduled reductions that corresponded with the sales to these
utilities of portions of Plant Scherer Unit 4 in June 1995 and June 1994. The
amount of capacity under these contracts declined by 75 megawatts and 155
megawatts in 1996 and 1995, respectively. In 1997, the contracted capacity will
decline another 14 megawatts.
Revenues from other sales to non-affiliated utilities outside the service
area in 1996 increased $14 million over the prior year due to a 74.5 percent
increase in sales. Revenues for 1995 decreased by $27 million due to a 51.9
percent decrease in sales. These sales are primarily energy sales generally sold
at variable cost.
Revenues from municipalities and cooperatives in Georgia decreased in 1996
primarily due to the recognition of an agreement to refund $14 million to these
customers and a decrease of approximately $8 million in capacity revenues under
II-97
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1996 Annual Report
a power supply agreement with Oglethorpe Power Corporation (OPC). See Note 3 to
the financial statements under "Wholesale Litigation" for additional information
on the refund agreement. Beginning in September 1996, OPC decreased its
purchases of capacity by 250 megawatts and has notified the Company of its
intent to decrease purchases of capacity by an additional 250 megawatts in
September 1997, and an additional 250 megawatts in September 1998. This decrease
in revenues discussed above was partially offset by revenues from increased
sales compared to the prior year due to higher demand. Sales increased in 1995
primarily due to higher summer demand resulting from the hot weather.
Revenues from sales to affiliated companies within the Southern electric
system will vary from year to year depending on demand and the availability and
cost of generating resources at each company. Sales to affiliated companies do
not have a significant impact on earnings.
Kilowatt-hour (KWH) sales for 1996 and the percent change by year were as
follows:
Percent Change
----------------------------
1996
KWH 1996 1995 1994
--------- ------------------------------
(in billions)
Residential 17.8 3.0% 10.4% (5.8)%
Commercial 20.8 4.9 5.9 2.5
Industrial 26.2 3.6 3.9 3.0
Other 0.5 8.6 2.0 5.0
-------
Total retail 65.3 3.9 6.2 0.4
-------
Sales for resale -
Non-affiliates 7.9 19.4 (17.3) (44.3)
Affiliates 1.2 (56.9) (10.4) 0.9
-------
Total sales for resale 9.1 (3.0) (15.4) (36.4)
-------
Total sales 74.4 3.0 2.8 (8.0)
=======
Residential, commercial and industrial energy sales growth in 1996 reflected
strong economic growth and an increase in sales to existing customers. The 1995
sales growth was the result of favorable weather conditions in addition to
increased customers and economic growth.
Expenses
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:
1996 1995 1994
--------------------------
Total generation
(billions of kilowatt-hours) 63.7 64.3 62.4
Sources of generation
(percent) --
Coal 74.3 73.7 74.8
Nuclear 22.4 22.6 21.9
Hydro 2.7 3.0 3.1
Oil and gas 0.6 0.7 0.2
Average cost of fuel per net
kilowatt-hour generated
(cents) --
Coal 1.55 1.67 1.67
Nuclear 0.55 0.60 0.63
Oil and gas * * *
Total 1.35 1.44 1.44
- --------------------------------------------------------------
* Not meaningful because of minimal generation from
fuel source.
Fuel expense decreased 7.3 percent in 1996 because of a decrease in
generation resulting from the timing of maintenance at nuclear plants and a
lower average cost of fuel. Fuel expense increased 3.5 percent in 1995 because
of higher generation which stemmed from greater demand.
Purchased power expense increased $72 million (22.8 percent) in 1996
primarily due to increased purchases from affiliated companies as a result of
the timing of maintenance at nuclear plants discussed above. The increase in
1996 was partially offset by a decrease in energy purchases from wholesale
customers within the service areas and a decline in contractual capacity
purchases from the co-owners of Plant Vogtle. Purchased power expense decreased
$36 million in 1995, reflecting the declining Plant Vogtle contractual capacity
purchases and decreased purchases from affiliated companies. The declines in
II-98
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1996 Annual Report
Plant Vogtle contractual capacity purchases did not have a significant impact on
earnings in 1996 and 1995 since these costs are being levelized over six years
under the terms of the 1991 Georgia Public Service Commission (GPSC) retail rate
order. The levelization is reflected in the amortization of deferred Plant
Vogtle costs in the Statements of Income. See Note 1 to the financial statements
under "Plant Vogtle Phase-In Plans" for additional information.
The Company has incurred expenses for separation benefits associated with
its work force reduction programs. These expenses were $39 million in 1996, $11
million in 1995, and $82 million in 1994.
Other operation and maintenance (O&M) expenses, excluding the provision for
separation benefits, increased 2.9 percent in 1996 primarily as a result of
initiatives to reduce fossil generation materials inventory levels, an
adjustment to deferred postretirement benefits to reflect changes in the retiree
benefits plan, and increased costs under a three-year retail accounting order
effective January 1, 1996. See Note 3 to the financial statements under "Retail
Accounting Order" for additional information. Other O&M expenses increased 12.2
percent in 1995 primarily as a result of the recognition of costs associated
with demand-side option programs and increased maintenance expenses. The
demand-side option program costs were offset in part by increases in retail
revenues. During 1995, the Company expensed an additional $58 million of
demand-side option program and other related costs, as compared to 1994, of
which approximately $29 million was not collected through rate riders. See Note
3 to the financial statements under "Demand-Side Conservation Programs" for
additional information on the recovery of these program costs.
Depreciation and amortization increased $11 million in 1996 primarily due to
accelerated depreciation of generating plant pursuant to the retail accounting
order effective January 1996 discussed above, and an increase in
plant-in-service. Depreciation and amortization increased $43 million in 1995
primarily due to additional plant investment, accelerated amortization of
software costs, and an increase in nuclear decommissioning expenses.
Taxes other than income taxes increased 1.2 percent in 1996 and 5.2 percent
in 1995, primarily reflecting higher franchise taxes paid to municipalities as a
result of increased sales.
Other, net decreased $35 million in 1996 primarily due to expenses in
connection with activities related to the 1996 Summer Olympic games and the
completion of the sale, in June 1995, of Plant Scherer Unit 4, which resulted in
an after-tax gain of approximately $12 million. An increase in charitable
contributions resulted in the decrease in other income (expense), net in 1995.
Interest expense decreased $52 million (17.4 percent) and $51 million (14.6
percent) in 1996 and 1995, respectively. Dividends on preferred stock also
decreased $3 million in 1996. These reductions are primarily due to the
refinancing of securities. The Company refinanced or retired $510 million and
$1.0 billion of securities in 1996 and 1995, respectively. The retirements
included the redemption of $264 million of long-term debt with the proceeds from
the 1995 and 1994 Plant Scherer Unit 4 sales.
The Company has deferred certain expenses and recorded a deferred return
related to Plant Vogtle under phase-in plans. See Note 1 to the financial
statements under "Plant Vogtle Phase-In Plans" for information regarding the
deferral and subsequent amortization of costs related to Plant Vogtle.
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. The level of future earnings depends on numerous
factors including regulatory matters and energy sales.
II-99
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1996 Annual Report
On January 1, 1996, the Company began operating under a three-year retail
accounting order. Under the order, which was approved by the GPSC on February
16, 1996, the Company's earnings are evaluated against a retail return on common
equity range of 10 percent to 12.5 percent. Earnings in excess of 12.5 percent
will be used to accelerate the amortization of regulatory assets or depreciation
of electric plant. At its option, the Company may also recognize accelerated
amortization or depreciation of assets within the allowed return on common
equity range. The Company is required to absorb cost increases of approximately
$29 million annually during the order's three-year operation, including $14
million annually of accelerated depreciation of electric plant. During the
order's operation, the Company will not file for a general base rate increase
unless its projected retail return on common equity falls below 10 percent.
Under the order, on July 1, 1998 the Company will make a general rate case
filing in response to which the GPSC would be expected either to continue
provisions of the accounting order or adopt different ones. The Company's 1996
retail return on common equity was within the 10 percent to 12.5 percent range.
In November 1996, on appeal by a consumer group, the Superior Court of Fulton
County (Georgia) reversed the GPSC's order and remanded the matter to the GPSC.
The court found that statutory requirements applicable to rate cases should have
been, but were not, followed. The Company and the GPSC have appealed the court's
decision. The Company is continuing to recognize expenses in accordance with the
accounting order while it is under appeal.
Growth in energy sales is subject to a number of factors which traditionally
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, initiatives to increase sales to existing customers, and the rate
of economic growth in the Company's service area. Assuming normal weather,
retail sales growth is projected to be approximately 2 percent annually on
average during 1997 through 1999.
The Company has entered into a four-year purchase power agreement to meet
peaking needs. Beginning in 1996, the Company purchased 400 megawatts of
capacity. In 1997, this amount will decline to 300 megawatts and in 1998 and
1999 to 200 megawatts. Capacity payments are projected to be $5 million in 1997
and $3 million in 1998 and 1999. The Company has also entered into a 30-year
purchase power agreement whereby the Company will buy electricity during peak
periods from a planned 300 megawatt cogeneration facility starting in June 1998.
Capacity and fixed O&M payments are projected to be $13 million in 1998 and $15
million in 1999.
The amortization of Plant Vogtle costs deferred under phase-in plans will
decline by $16 million in 1997, $89 million in 1998, $12 million in 1999, and
$19 million in 2000. These costs will be fully amortized by September 1999. See
Note 1 to the financial statements under "Plant Vogtle Phase-In Plans" for
additional information. Additionally, work force reduction programs implemented
in the past three years will assist in efforts to control growth in future
operating expenses.
As discussed in Note 3 to the financial statements, regulatory uncertainties
exist related to the Rocky Mountain pumped storage hydroelectric plant. In the
event the GPSC does not allow full recovery of the plant's costs, then the
portion not allowed may have to be written off. The Company's net investment in
the plant as of December 1996 is approximately $175 million.
Beginning in September 1996, OPC decreased its purchases of capacity under a
power supply agreement by 250 megawatts and has notified the Company of its
intent to decrease purchases of capacity by an additional 250 megawatts in
September 1997, and an additional 250 megawatts in September 1998. As a result,
the Company's capacity revenues declined approximately $8 million in 1996, and
will decline an additional $24 million in 1997, an additional $26 million in
1998, and an additional $19 million in 1999.
The Federal Energy Regulatory Commission (FERC) regulates wholesale rate
schedules and power sales contracts that the Company has with its sales for
resale customers. The FERC currently is reviewing the rate of return on common
equity included in these schedules and contracts and may require such returns to
be lowered, possibly retroactively. See Note 3 to the financial statements under
"FERC Review of Equity Returns" for additional information.
Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air
Act) could affect earnings if such costs are not fully recovered. The Clean Air
Act and other environmental issues are discussed later under "Environmental
Issues."
II-100
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1996 Annual Report
The Energy Policy Act of 1992 (Energy Act) is having 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
marketers and brokers. The Company is aggressively working to maintain and
expand its share of wholesale sales in the Southeastern power markets.
The Company continues to compete with other electric suppliers within the
state. In Georgia, most new retail customers with at least 900 kilowatts of
connected load may choose their electricity supplier. Various federal and state
initiatives designed to promote wholesale and additional retail competition,
among other things, include proposals that would allow customers to choose
their electricity provider. As the initiatives materialize, the structure of
the utility industry could radically change. Certain initiatives could result
in a change in the ownership and/or operation of generation and transmission
facilities. Numerous issues must be resolved, including significant ones
relating to transmission pricing and recovery of stranded investments. Being
a low-cost producer could provide significant opportunities to increase market
share and profitability in markets that evolve with changing regulation.
Unless the Company remains a low-cost producer and provides quialty service,
the Company's retail energy sales growth could be limited, and this could
significantly erode earnings.
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities, and determine if any other assets have been
impaired. See Note 1 to the financial statements under "Regulatory Assets and
Liabilities" for additional information.
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry --
including the Company's -- regarding the recognition, measurement, and
classification of decommissioning costs for nuclear generating facilities in the
financial statements. In response to these questions, the 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 change.
Because of the Company's current ability to recover closure and removal costs
through rates, these changes would 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.
FINANCIAL CONDITION
Plant Additions
In 1996 gross utility plant additions were $428 million. These additions were
primarily related to transmission and distribution facilities and to the
purchase of nuclear fuel. The funds needed for gross property additions are
currently provided from operations. The Statements of Cash Flows provide
additional details.
Financing Activities
In 1996, the Company continued to lower its financing costs by refinancing
higher-cost issues. New issues during 1994 through 1996 totaled $1.6 billion and
retirement or repayment of securities totaled $2.2 billion. The retirements
included the redemption of $131 million and $133 million in 1995 and 1994,
respectively, of first mortgage bonds with the proceeds from the Plant Scherer
Unit 4 sales. Composite financing rates for long-term debt
II-101
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1996 Annual Report
and preferred stock for the years 1994 through 1996, as of year-end, were as
follows:
1996 1995 1994
---------------------------------
Composite interest rate
on long-term debt 6.39% 6.57% 7.14%
Composite preferred
stock dividend rate 6.34 6.73 7.11
- ----------------------------------------------------------------
The Company's current securities ratings are as follows:
Duff & Standard &
Phelps Moody's Poor's
------------------------------------
First Mortgage Bonds AA- A1 A+
Preferred Stock A+ a2 A
Unsecured Bonds A+ A2 A
Commercial Paper D1+ P1 A1
- -----------------------------------------------------------------
In August 1996, Georgia Power Capital Trust I (Trust I), of which the
Company owns all the common securities, issued $225 million of 7.75 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust I are $232 million aggregate principal amount of the Company's 7.75
percent Junior Subordinated Notes due June 30, 2036. In January 1997, Georgia
Power Capital Trust II (Trust II), of which the Company owns all the common
securities, issued $175 million of 7.60 percent mandatorily redeemable preferred
securities. Substantially all of the assets of Trust II are $180 million
aggregate principal amount of the Company's 7.60 percent Junior Subordinated
Notes due December 31, 2036.
Liquidity and Capital Requirements
Cash provided from operations decreased by $31 million in 1996, primarily due to
higher operating and maintenance expenses.
The Company estimates that construction expenditures for the years 1997
through 1999 will total $490 million, $479 million and $464 million,
respectively. Investments in transmission and distribution facilities,
enhancements to existing generating plants, additions of a co-owned combustion
turbine generating plant, and equipment to comply with the provisions of the
Clean Air Act are planned.
Cash requirements for improvement fund requirements, redemptions announced,
and maturities of long-term debt and preferred stock are expected to total $436
million during 1997 through 1999.
As a result of requirements by the Nuclear Regulatory Commission, the
Company has established external trust funds for the purpose of funding nuclear
decommissioning costs. For 1997 through 1999, the amount to be funded totals $24
million annually. For additional information concerning nuclear decommissioning
costs, see Note 1 to the financial statements under "Depreciation and Nuclear
Decommissioning."
Sources of Capital
The Company expects to meet future capital requirements primarily using funds
generated from operations and, if needed, by the issuance of new debt and equity
securities, term loans, and short-term borrowings. To meet short-term cash needs
and contingencies, the Company had approximately $1.1 billion of unused credit
arrangements with banks at the beginning of 1997. See Note 9 to the financial
statements under "Bank Credit Arrangements" for additional information.
The Company is required to meet certain coverage requirements specified in
its mortgage indenture and corporate charter to issue new first mortgage bonds
and preferred stock. The Company's ability to satisfy all coverage requirements
is such that it could issue new first mortgage bonds and preferred stock to
provide sufficient funds for all anticipated requirements.
Environmental Issues
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 -- is having a
significant impact on the operating companies of Southern Company, including
Georgia Power. 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 initially affected 28 generating units in the
Southern electric system. As a result of 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 in the Southern electric system will be affected.
II-102
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1996 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 sulfur dioxide emission allowance program is expected to
minimize the cost of compliance. Southern Company's sulfur dioxide compliance
strategy is designed to use allowances as a compliance option.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
units by switching to low-sulfur coal, which has required some equipment
upgrades. This compliance strategy resulted in unused emission allowances being
banked for later use. Construction expenditures for Georgia Power's Phase I
compliance totaled approximately $163 million.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as required
to meet Phase II limits. Therefore, current compliance strategy could require
total Phase II estimated construction expenditures, for the Company, of
approximately $29 million of which $21 million remains to be spent. 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 increase of up to 1 percent in Georgia Power's annual revenue
requirements from customers could be necessary to fully recover the 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.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: revisions to the ambient air quality
standards for ozone and particulate matter; emission control strategies for
ozone nonattainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. The Company conducts studies to determine the extent of any
required clean-up costs and has recognized in the financial statements costs to
clean up known sites. These costs for the Company amounted to $2 million, $8
million and $8 million, in 1996, 1995, and 1994, respectively. Additional sites
may require environmental remediation for which the Company may be liable for a
portion of or all required clean-up costs. See Note 3 to the financial
statements under "Certain Environmental Contingencies" for information regarding
the Company's potentially responsible party status at a site in Brunswick,
Georgia and the status of sites listed on the State of Georgia's hazardous site
inventory.
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 Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields and other environmental and health concerns could
significantly affect the Company. 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.
II-103
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995, and 1994
Georgia Power Company 1996 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
<S> <C> <C> <C>
Revenues $ 4,380,893 $ 4,328,432 $ 4,101,504
Revenues from affiliates 35,886 76,906 60,899
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,416,779 4,405,338 4,162,403
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 835,194 900,973 870,653
Purchased power from non-affiliates 157,308 183,009 193,130
Purchased power from affiliates 229,324 131,740 158,063
Provision for separation benefits 39,099 10,607 82,238
Other 741,383 735,918 643,375
Maintenance 315,934 292,029 272,818
Depreciation and amortization 432,940 421,850 379,158
Amortization of deferred Plant Vogtle costs, net (Note 1) 136,650 124,454 74,888
Taxes other than income taxes 207,098 204,675 194,566
Federal and state income taxes 435,904 449,204 399,413
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,530,834 3,454,459 3,268,302
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 885,945 950,879 894,101
Other Income (Expense):
Allowance for equity funds used during construction 3,144 2,734 5,663
Equity in earnings of unconsolidated subsidiary (Note 4) 3,851 4,051 3,588
Interest income 5,333 5,524 3,254
Other, net (43,502) (8,973) 10,626
Income taxes applicable to other income 18,581 3,022 7,975
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 873,352 957,237 925,207
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 207,851 254,607 306,473
Allowance for debt funds used during construction (11,416) (12,081) (11,571)
Interest on interim obligations 15,478 21,463 17,529
Amortization of debt discount, premium, and expense, net 14,790 15,835 15,743
Other interest charges 6,338 11,399 23,183
Distributions on preferred securities of subsidiary companies 14,958 9,000 300
- ----------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 247,999 300,223 351,657
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 625,353 657,014 573,550
Dividends on Preferred Stock 45,026 48,152 48,006
==================================================================================================================================
Net Income After Dividends on Preferred Stock $ 580,327 $ 608,862 $ 525,544
==================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-104
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995, and 1994
Georgia Power Company 1996 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
<S> <C> <C> <C>
Net income $ 625,353 $ 657,014 $ 573,550
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 521,086 527,310 484,032
Deferred income taxes and investment tax credits, net 35,700 37,150 33,567
Allowance for equity funds used during construction (3,144) (2,734) (5,663)
Amortization of deferred Plant Vogtle costs, net 136,650 124,454 74,888
Non-cash portion of separation benefits - - 68,599
Loss (gain) on asset sales 3,766 (23,588) (22,717)
Other, net 49,649 23,722 (72,597)
Changes in certain current assets and liabilities --
Receivables, net 9,421 (59,370) 67,218
Inventories 55,753 30,761 (63,545)
Payables (35,651) 45,882 5,409
Taxes accrued 11,766 11,373 (60,474)
Energy cost recovery, retail 679 42,576 55,505
Other (24,040) 3,473 (706)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,386,988 1,418,023 1,137,066
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (428,220) (480,449) (638,426)
Sales of property 3,319 131,099 132,644
Other (16,468) (42,579) (41,273)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (441,369) (391,929) (547,055)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds --
Preferred securities 225,000 - 100,000
First mortgage bonds 10,000 75,000 -
Pollution control bonds 112,825 504,700 527,210
Retirements --
Preferred stock (179,148) - -
First mortgage bonds (210,860) (505,789) (133,559)
Pollution control bonds (119,665) (504,810) (510,320)
Other long-term debt - (37,000) (10,187)
Interim obligations, net 30,166 (24,472) (57,425)
Special deposits -- redemption funds (44,454) - -
Capital distribution to parent company (250,000) - -
Payment of preferred stock dividends (46,911) (48,419) (47,147)
Payment of common stock dividends (475,500) (451,500) (429,300)
Miscellaneous (10,646) (17,413) (22,640)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (959,193) (1,009,703) (583,368)
- ----------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (13,574) 16,391 6,643
Cash and Cash Equivalents at Beginning of Year 28,930 12,539 5,896
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 15,356 $ 28,930 $ 12,539
============================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) 249,434 $ 298,482 336,155
Income taxes (net of refunds) 373,886 404,129 386,653
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
II-105
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1996 and 1995
Georgia Power Company 1996 Annual Report
- ---------------------------------------------------------------------------------------------------------------
ASSETS 1996 1995
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
<S> <C> <C>
Plant in service $ 14,769,573 $ 14,538,595
Less accumulated provision for depreciation 4,793,638 4,417,120
- ---------------------------------------------------------------------------------------------------------------
9,975,935 10,121,475
Nuclear fuel, at amortized cost 121,840 124,849
Construction work in progress (Note 4) 256,141 236,715
- ---------------------------------------------------------------------------------------------------------------
Total 10,353,916 10,483,039
- ---------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Southern Electric Generating Company, at equity (Note 4) 26,032 27,232
Nuclear decommissioning trusts, at market 130,178 92,273
Miscellaneous 103,787 120,383
- ---------------------------------------------------------------------------------------------------------------
Total 259,997 239,888
- ---------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 15,356 28,930
Receivables-
Customer accounts receivable 392,328 418,749
Other accounts receivable 159,499 102,953
Affiliated companies 20,095 15,482
Accumulated provision for uncollectible accounts (4,000) (5,000)
Fossil fuel stock, at average cost 117,382 145,151
Materials and supplies, at average cost 258,820 286,804
Prepayments 109,771 107,764
Vacation pay deferred 39,965 35,543
- ---------------------------------------------------------------------------------------------------------------
Total 1,109,216 1,136,376
- ---------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 818,418 871,783
Deferred Plant Vogtle costs (Note 1) 170,988 307,638
Premium on reacquired debt, being amortized 166,670 174,018
Debt expense, being amortized 32,693 27,227
Miscellaneous 159,153 230,306
- ---------------------------------------------------------------------------------------------------------------
Total 1,347,922 1,610,972
- ---------------------------------------------------------------------------------------------------------------
Total Assets $ 13,071,051 $ 13,470,275
===============================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-106
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1996 and 1995
Georgia Power Company 1996 Annual Report
- -------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
<S> <C> <C>
Common stock equity $ 4,154,281 $ 4,299,012
Preferred stock 464,611 692,787
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes (Note 9) 325,000 100,000
Long-term debt 3,200,419 3,315,460
- -------------------------------------------------------------------------------------------------------------------
Total 8,144,311 8,407,259
- -------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 9) 49,028 -
Long-term debt due within one year (Note 9) 60,622 150,446
Notes payable to banks (Note 9) 207,300 178,000
Commercial paper (Note 9) 223,196 222,330
Accounts payable-
Affiliated companies 66,821 72,878
Other 263,093 316,278
Customer deposits 64,901 53,145
Taxes accrued-
Federal and state income 15,497 7,759
Other 100,661 96,633
Interest accrued 79,936 96,162
Vacation pay accrued 38,597 34,233
Miscellaneous 114,530 137,184
- -------------------------------------------------------------------------------------------------------------------
Total 1,284,182 1,365,048
- -------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 2,522,945 2,510,458
Accumulated deferred investment tax credits 415,477 432,184
Deferred credits related to income taxes (Note 8) 382,381 410,016
Employee benefits provisions 186,319 182,082
Disallowed Plant Vogtle capacity buyback costs (Note 4) 57,250 58,514
Miscellaneous 78,186 104,714
- -------------------------------------------------------------------------------------------------------------------
Total 3,642,558 3,697,968
- -------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1 through 7)
Total Capitalization and Liabilities $ 13,071,051 $ 13,470,275
===================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-107
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1996 and 1995
Georgia Power Company 1996 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, without par value --
Authorized -- 15,000,000 shares
<S> <C> <C> <C>
Outstanding -- 7,761,500 shares $ 344,250 $ 344,250
Paid-in capital 2,134,886 2,384,444
Premium on preferred stock 371 413
Retained earnings (Note 9) 1,674,774 1,569,905
- ----------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 4,154,281 4,299,012 51.0% 51.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock, without par value:
Authorized -- 55,000,000 shares
Outstanding -- 16,111,964 shares
$100 stated value --
4.60% to 6.60% 117,787 117,787
7.72% to 7.80% 30,000 105,000
$25 stated value --
$1.90 to $2.125 190,852 295,000
Adjustable rate -- at January 1, 1997:
5.20% 100,000 100,000
5.66% 75,000 75,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock (annual dividend
requirement -- $32,580,000) 513,639 692,787
Less amount due within one year (Note 9) 49,028 -
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock excluding amount due within one year 464,611 692,787 5.7 8.2
- ----------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 9% 100,000 100,000
$25 liquidation value -- 7.75% 225,000 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $26,438,000) 325,000 100,000 4.0 1.2
- ----------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
March 1, 1996 4 3/4% - 150,000
April 1, 1998 5 1/2% 100,000 100,000
September 1, 1999 6 1/8% 195,000 195,000
March 1, 2000 6% 100,000 100,000
October 1, 2000 7% 100,000 100,000
2002 through 2005 6.07% to 6 7/8% 435,000 425,000
2008 6 7/8% 50,000 50,000
2022 through 2025 7.55% to 8 5/8% 534,508 595,368
- ----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,514,508 1,715,368
Pollution control obligations (Note 9) 1,671,190 1,678,030
Other long-term debt (Note 9) 87,114 87,400
Unamortized debt discount, net (11,771) (14,892)
- ----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $209,047,000) 3,261,041 3,465,906
Less amount due within one year (Note 9) 60,622 150,446
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 3,200,419 3,315,460 39.3 39.5
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 8,144,311 $ 8,407,259 100.0% 100.0%
==================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-108
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1996, 1995, and 1994
Georgia Power Company 1996 Annual Report
- ----------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Period $ 1,569,905 $ 1,412,543 $ 1,316,447
Net income after dividends on preferred stock 580,327 608,862 525,544
Cash dividends on common stock (475,500) (451,500) (429,300)
Preferred stock transactions, net 42 - (148)
- ----------------------------------------------------------------------------------------------------------------
Balance at End of Period (Note 9) $ 1,674,774 $ 1,569,905 $ 1,412,543
================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1996, 1995, and 1994
Georgia Power Company 1996 Annual Report
- ----------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Period $ 2,384,444 $ 2,384,348 $ 2,384,348
Capital distribution to parent company (250,000) - -
Contributions to capital by parent company 442 96 -
- ----------------------------------------------------------------------------------------------------------------------
Balance at End of Period $ 2,134,886 $ 2,384,444 $ 2,384,348
======================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-109
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Georgia Power Company 1996 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The Company is a wholly owned subsidiary of Southern Company, which is the
parent company of five operating companies, Southern Company Services (SCS), a
system service company, Southern Communications Services (Southern
Communications), Southern Energy, Inc. (Southern Energy), 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
operating 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). SCS provides, at cost, specialized services to
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 Energy
designs, builds, owns, and operates power production and delivery facilities and
provides a broad range of energy related services in the United States and
international markets. Southern Nuclear provides services to Southern Company's
nuclear power plants. Southern Development develops new business opportunities
related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of this act. The Company is also
subject to regulation by the FERC and the Georgia Public Service Commission
(GPSC). The Company follows generally accepted accounting principles (GAAP) and
complies with the accounting policies and practices prescribed by the respective
regulatory commissions. The preparation of financial statements in conformity
with GAAP requires the use of estimates, and the actual results may differ from
these estimates.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are to be credited to
customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Company's Balance Sheets at December 31 relate to the
following:
1996 1995
--------------------
(in millions)
--------------------
Deferred income taxes $ 818 $ 872
Deferred income tax credits (382) (410)
Deferred Plant Vogtle costs 171 308
Premium on reacquired debt 167 174
Corporate building lease 51 49
Demand-side program costs 44 79
Vacation pay 40 36
Postretirement benefits 38 53
Department of Energy assessments 32 33
Inventory conversions (18) (31)
Other, net 27 36
==============================================================
Total $ 988 $1,199
==============================================================
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.
II-110
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Revenues and Fuel Costs
The Company accrues revenues for service 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.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1996, 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 $78
million in 1996, $86 million in 1995, and $87 million in 1994. The Company has a
contract with the U.S. Department of Energy (DOE) that provides for the
permanent disposal of spent nuclear fuel, which was scheduled to begin in 1998.
However, the actual year this service will begin is uncertain. Sufficient
storage capacity currently is available to permit operation into 2003 at Plant
Hatch and into 2008 at Plant Vogtle. Activities for adding dry cast storage
capacity at Plant Hatch by as early as 1999 are in progress.
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
fund will be used by the DOE for the decontamination and decommissioning of its
nuclear fuel enrichment facilities. The assessment will be paid over a 15-year
period, which began in 1993. The law provides that utilities will recover these
payments in the same manner as any other fuel expense. The Company -- based on
its ownership interests -- estimates its remaining liability under this law at
December 31, 1996, to be approximately $30 million. This obligation is recorded
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
3.1 percent in 1996, 3.2 percent in 1995 and 3.1 percent in 1994. In addition,
the Company recorded accelerated depreciation of electric plant of $24 million
in 1996 and $6 million in 1995. The amount of such charges in the accumulated
provision for depreciation is $30 million at December 31, 1996. 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 costs
of decommissioning nuclear facilities and removal of other facilities.
In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations
requiring all licensees operating commercial nuclear 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 a set period of time as ordered
by the GPSC. Earnings on the trust funds are considered in determining
decommissioning expense. The NRC's minimum external funding requirements are
based on a generic estimate of the cost to decommission the radioactive portions
of a nuclear unit based on the size and type of reactor. The Company has filed
plans with the NRC to ensure that -- over time -- the deposits and earnings of
the external trust funds will provide the minimum funding amounts prescribed by
the NRC.
Site study cost is the estimate to decommission the facility as of the site
study year, and ultimate cost is the estimate to decommission the facility as of
the retirement
II-111
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
date. The estimated costs of decommissioning -- both site study costs and
ultimate costs at December 31, 1996 -- based on the Company's ownership
interests -- were as follows:
Plant Plant
Hatch Vogtle
--------------------
Site study basis (year) 1994 1994
Decommissioning periods:
Beginning year 2014 2027
Completion year 2027 2038
- ------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $294 $233
Non-radiated structures 41 52
============================================================
Total $335 $285
============================================================
(in millions)
Ultimate costs:
Radiated structures $781 $1,018
Non-radiated structures 111 230
- ------------------------------------------------------------
Total $892 $1,248
============================================================
(in millions)
Amount expensed in 1996 $ 11 $ 9
Accumulated provisions:
Balance in external trust funds $ 79 $ 51
Balance in internal reserves 27 13
============================================================
Total $106 $ 64
============================================================
Significant assumptions:
Inflation rate 4.4% 4.4%
Trust earnings rate 6.0 6.0
- ------------------------------------------------------------
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the GPSC. The decommissioning costs included in cost of service
are based on the higher of the costs to decommission the radioactive portions of
the plants based on 1994 site studies or the NRC minimum funding requirements.
The Company expects the GPSC to periodically review and adjust, if necessary,
the amounts collected in rates for the anticipated cost of decommissioning.
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, changes in the assumptions used in
making estimates, changes in regulatory requirements, changes in technology, and
changes in costs of labor, materials, and equipment.
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.
Plant Vogtle Phase-In Plans
In 1987 and 1989, the GPSC ordered that the allowed costs of Plant Vogtle, a
two-unit nuclear facility of which Georgia Power owns 45.7 percent, be phased
into rates. Pursuant to the orders, the Company recorded a deferred return under
phase-in plans until October 1991 when the allowed investment was fully
reflected in rates. In 1991, the GPSC levelized the remaining Plant Vogtle
declining capacity buyback expenses over a six-year period. In addition, the
Company deferred certain Plant Vogtle operating expenses and financing costs
under accounting orders issued by the GPSC. These GPSC orders provide for the
recovery of deferred costs within 10 years.
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. For the years 1996, 1995 and 1994, the average AFUDC rates
were 6.59 percent, 6.53 percent and 6.18 percent, respectively. AFUDC, net of
taxes, as a percentage of net income after dividends on preferred stock, was
less than 2.5 percent for 1996, 1995, and 1994.
II-112
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Utility Plant
Utility plant is stated at original cost with the exception of Plant Vogtle,
which is stated at cost less regulatory disallowances. Original cost includes:
materials; labor; payroll-related costs such as taxes, pensions, and other
benefits; and the 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.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
The Company's financial instruments for which the carrying amounts did not
approximate fair value at December 31 were as follows:
Carrying Fair
Amount Value
--------------------------
Long-term debt: (in millions)
At December 31, 1996 $3,174 $3,206
At December 31, 1995 3,378 3,487
Preferred Securities:
At December 31, 1996 325 333
At December 31, 1995 100 114
- ---------------------------------------------------------------
The fair values for securities were based on either closing market prices or
closing prices 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.
2. RETIREMENT BENEFITS
Pension Plan
The Company has a defined benefit, trusteed,
non-contributory pension plan covering 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. The Company uses the
"entry age normal method with a frozen initial liability" actuarial method for
funding purposes, subject to limitations under federal income tax regulations.
Amounts funded to the pension trusts are primarily invested in equity and
fixed-income securities. FASB Statement No. 87, Employers' Accounting for
Pensions, requires use of the "projected unit credit" actuarial method for
financial reporting purposes.
Postretirement Benefits
The Company also provides certain medical care and life insurance benefits for
retired employees. Substantially all employees may become eligible for these
benefits when they retire. Qualified trusts are funded to the extent deductible
under federal income tax regulations and to the extent required by the GPSC and
the FERC. During 1996 and 1995, the Company funded $25 million and $21 million,
respectively, to the qualified trusts. Amounts funded are primarily invested in
debt and equity securities.
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." In October 1993, the GPSC ordered
the Company to phase in the adoption of Statement No. 106 to cost of service
over a five-year period, whereby one-fifth of the additional cost was expensed
in 1993, and the remaining additional costs were deferred. An additional
one-fifth of the costs will be expensed each succeeding year until the costs are
fully reflected in cost of service in 1997. The cost deferred during the
five-year period will be amortized to expense over a 15-year period beginning in
1998.
II-113
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Funded Status and Cost of Benefits
The following tables show actuarial results and assumptions for pension and
postretirement benefits as computed under the requirements of FASB Statement
Nos. 87 and 106, respectively. The funded status of the plans at December 31 was
as follows:
Pension
---------------------
1996 1995
---------------------
(in millions)
---------------------
Actuarial present value of
benefit obligations:
Vested benefits $ 806 $ 830
Non-vested benefits 52 43
- --------------------------------------------------------------
Accumulated benefit obligation 858 873
Additional amounts related
to projected salary increases 314 290
- ---------------------------------------------------------------
Projected benefit obligation 1,172 1,163
Less:
Fair value of plan assets 1,797 1,688
Unrecognized net gain (591) (465)
Unrecognized prior service cost 56 26
Unrecognized transition asset (47) (52)
- ---------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 43 $ 34
===============================================================
Postretirement
Benefits
---------------------
1996 1995
---------------------
(in millions)
Actuarial present value of
benefit obligation:
Retirees and dependents $217 $214
Employees eligible to retire 29 16
Other employees 184 188
- ---------------------------------------------------------------
Accumulated benefit obligation 430 418
Less:
Fair value of plan assets 112 81
Unrecognized net loss 50 44
Unrecognized transition
obligation 157 186
- ---------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $111 $ 107
===============================================================
In 1995, the Company 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 $97 million.
The weighted average rates used in actuarial calculations were:
1996 1995 1994
- ----------------------------------------------------------------
Discount 7.8% 7.3% 8.0%
Annual salary increase 5.3 4.8 5.5
Long-term return on
plan assets 8.5 8.5 8.5
- ----------------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
medical benefit obligation was a weighted average medical care cost trend rate
of 9.3 percent for 1996, decreasing gradually to 5.8 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, 1996, by $42 million and the aggregate of the
service and interest cost components of the net postretirement cost by $4
million.
The components of the plans' net costs are shown below:
Pension
----------------------------
1996 1995 1994
----------------------------
(in millions)
Benefits earned during the year $ 35 $ 33 $ 34
Interest cost on projected
benefit obligation 86 78 71
Actual (return) loss on plan assets (202) (317) 35
Net amortization (deferral) 62 185 (160)
- -----------------------------------------------------------------
Net pension cost $ (19) $ (21) $ (20)
=================================================================
Net pension costs were negative in 1996, 1995 and 1994. Of net pension
amounts recorded, $14 million in 1996 and $15 million in 1995 and 1994 were
recorded as a reduction to operating expense, and the remainder was recorded as
a reduction to construction and other accounts.
II-114
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Postretirement Benefits
1996 1995 1994
-------------------------
(in millions)
Benefits earned during the year $ 9 $13 $15
Interest cost on accumulated
benefit obligation 30 34 33
Amortization of transition
obligation 9 16 15
Actual (return) loss on plan
assets (6) (8) 1
Net amortization (deferral) 3 4 (3)
- ---------------------------------------------------------------
Net postretirement cost $45 $59 $61
===============================================================
Of the above net postretirement benefit costs recorded, $29 million in 1996,
$33 million in 1995, and $28 million in 1994 were charged to operating expenses.
In addition, $3 million in 1996, $11 million in 1995, and $18 million in 1994
were deferred, and the remainder was charged to construction and other accounts.
During 1996, the Company expensed an additional $19 million due to an adjustment
to amounts previously deferred under the GPSC order as a result of changes in
the postretirement benefit plan.
Work Force Reduction Programs
The Company has incurred costs for work force reduction programs. The costs
related to these programs were $39 million in 1996, $11 million in 1995 and $82
million in 1994. Additionally, the Company recognized $9 million in 1996, $3
million in 1995, and $8 million in 1994 for its share of costs associated with
SCS's work force reduction programs.
3. REGULATORY AND LITIGATION MATTERS
Retail Accounting Order
On February 16, 1996, the GPSC approved a three-year accounting order for the
Company. Under the order, effective January 1, 1996, the Company's earnings are
evaluated against a retail return on common equity range of 10 percent to 12.5
percent. Earnings in excess of 12.5 percent will be used to accelerate the
amortization of regulatory assets or depreciation of electric plant. At its
option, the Company may also recognize accelerated amortization or depreciation
of assets within the allowed return on common equity range. The Company is
required to absorb cost increases of approximately $29 million annually during
the order's three-year operation, including $14 million annually of accelerated
depreciation of electric plant. During the order's operation, the Company will
not file for a general base rate increase unless its projected retail return on
common equity falls below 10 percent. Under the approved order, on July 1, 1998
the Company will make a general rate case filing in response to which the GPSC
would be expected either to continue the provisions of the accounting order or
adopt different ones. The Company's 1996 retail return on common equity was
within the 10 percent to 12.5 percent range.
In November 1996, on appeal by a consumer group, the Superior Court of
Fulton County, Georgia, reversed the GPSC's accounting order and remanded the
matter to the GPSC. The Court found that statutory requirements applicable to
rate cases should have been, but were not, followed. The GPSC subsequently
appealed the Superior Court's decision. In December 1996, the Company also filed
for an appeal. The Company is continuing to recognize expenses in accordance
with the accounting order while it is under appeal.
Rocky Mountain Plant Status
In its 1985 financing order, the GPSC concluded that completion of the Rocky
Mountain pumped storage hydroelectric plant in 1991, as then planned, was not
economically justifiable and reasonable and withheld authorization for the
Company to spend funds from approved securities issuances on that plant. AFUDC
accrued on the Rocky Mountain plant was not credited to income or included in
the plant's cost since December 1985. In 1988, the Company and OPC entered into
a joint ownership agreement for OPC to assume responsibility for the
construction and operation of the plant, as discussed in Note 6. In 1995, the
plant went into commercial operation. However, full recovery of the Company's
25.4 percent ownership interest depends on the GPSC's treatment of the plant's
costs and disposition of the plant's capacity output. In June 1996, the GPSC
initiated a review of the Rocky Mountain pumped storage hydroelectric plant. In
the event the GPSC does not allow full recovery of the plant's costs, then the
portion not allowed may have to be written off. At December 31, 1996, the
Company's net investment in the plant was approximately $175 million.
The final outcome of this matter cannot now be determined. Accordingly, no
provision for any write-down of the investment in the plant has been made.
II-115
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Demand-Side Conservation Programs
In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that
rate riders previously approved by the GPSC for recovery of the Company's costs
incurred in connection with demand-side conservation programs were unlawful. The
Company suspended collection of the demand-side conservation costs and appealed
the court's decision to the Georgia Court of Appeals. The Company deferred costs
related to these programs under an accounting order approved by the GPSC until
December 1994, when the Company resumed collection under the rate riders after
the Georgia Court of Appeals upheld their legality. In August 1995, the GPSC
ordered the Company to discontinue its current demand-side conservation programs
by the end of 1995. The rate riders will remain in effect until costs deferred
are collected, which is expected to be by the end of 1997.
Under the Retail Accounting Order approved February 16, 1996, the Company
will recognize approximately $29 million of deferred program costs over a
three-year period which will not be recovered through the riders.
FERC Review of Equity Returns
In May 1991, the FERC ordered that hearings be conducted concerning the
reasonableness of the Southern electric system's wholesale rate schedules and
contracts that have a return on common equity of 13.75 percent or greater. The
contracts that could be affected by the hearings include substantially all of
the transmission, unit power, long-term power, and other similar contracts.
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. 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 remains pending before the FERC.
If the rates of return on common equity recommended by the FERC staff were
applied to all the schedules and contracts involved in both proceedings, as well
as certain other contracts that reference these proceedings in determining
return on common equity and if refunds were ordered, the amount of refunds could
range up to approximately $61 million at December 31, 1996. However, management
believes that rates are not excessive, and that refunds are not justified.
Certain Environmental Contingencies
In January 1995, the Company and four other unrelated entities were notified by
the EPA that they have been designated as potentially responsible parties under
the Comprehensive Environmental Response, Compensation and Liability Act with
respect to a site in Brunswick, Georgia. As of December 31, 1996, the Company
has recognized approximately $5 million in expenses associated with this site.
This represents the Company's agreed upon share of removal and remedial
investigation and feasibility study costs. The final outcome of this matter
cannot now be determined. However, based on the nature and extent of the
Company's activities relating to the site, management believes that the
Company's portion of any remaining remediation costs should not be material.
In compliance with the Georgia Hazardous Site Response Act of 1993, the
State of Georgia was required to compile an inventory of all known or suspected
sites where hazardous wastes, constituents or substances have been disposed of
or released in quantities deemed reportable by the State. In developing this
list, the State identified several hundred properties throughout the State,
including 25 sites which may require environmental remediation that were either
previously or are currently owned by the Company. The majority of these sites
are electrical power substations and power generation facilities. The Company
has remediated seven electrical substations on the list at a cost of
approximately $1 million. In addition, the Company has recognized approximately
$16 million in expenses through December 31, 1996 for the assessment of the
remaining sites on the list and the anticipated clean-up cost for 13 sites that
the Company plans to remediate. The accrued costs for environmental remediation
obligations are not discounted to their present value. Any cost of remediating
II-116
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
the remaining sites cannot presently be determined until such studies are
completed for each site and the State of Georgia determines whether remediation
is required. If all listed sites were required to be remediated, the Company
could incur expenses of up to approximately $15 million in additional clean-up
costs and construction expenditures of up to approximately $65 million to
develop new waste management facilities or install additional pollution control
devices.
Wholesale Litigation
In July 1994, Oglethorpe Power Corporation (OPC) and the Municipal Electric
Authority of Georgia (MEAG) filed a joint complaint with the FERC seeking to
recover from the Company an aggregate of approximately $16.5 million in alleged
partial requirements rates overcharges, plus approximately $6.3 million in
interest. OPC and MEAG claimed that the Company improperly reflected in such
rates costs associated with capacity that had previously been sold to Gulf
States pursuant to a unit power sales contract or, alternatively, that they
should be allocated a portion of the proceeds received by the Company as a
result of a settlement with Gulf States of litigation arising out of such
contract. In November 1996, the Company reached a settlement with OPC, MEAG and
the City of Dalton to pay the parties an aggregate of $14 million. The
settlement has been approved by the FERC.
In May 1996, MEAG filed a complaint with the FERC seeking termination as of
December 31, 1996 of the partial requirements tariff pursuant to which the
Company currently sells wholesale energy to MEAG. The complaint also sought
refunds in an unspecified amount as a result of alleged overcharges by the
Company under the tariff for the years 1993 through 1996. In June 1996, the
Company filed a response with the FERC requesting that its partial requirements
service obligation to MEAG be terminated as of the date sought by MEAG. On
January 10, 1997, the Company and MEAG reached an agreement to enter into a new
power supply relationship which would replace in their entirety the partial
requirements tariff and the scheduling services agreement between the Company
and MEAG. The agreement required the parties to formalize a new contractual
relationship and within approximately 45 days file the new contract with the
FERC for approval. Under the agreement, the Company does not owe MEAG any
refunds for alleged overcharges for the years specified.
Nuclear Performance Standards
In October 1989, the GPSC adopted a nuclear performance standard for the
Company's nuclear generating units under which the performance of plants Hatch
and Vogtle will be evaluated every three years. The performance standard is
based on each unit's capacity factor as compared to the average of all
comparable U.S. nuclear units operating at a capacity factor of 50 percent or
higher during the three-year period of evaluation. Depending on the performance
of the units, the Company could receive a monetary reward or penalty under the
performance standards criteria.
The first evaluation was conducted in 1993 for performance during the
1990-92 period. The GPSC approved a performance reward of approximately $8.5
million for the Company. This reward was collected through the retail fuel cost
recovery provision and recognized in income over a 36-month period which ended
in October 1996. In January 1997, the GPSC approved a performance award of
approximately $11.7 million for performance during the 1993-95 period. This
reward will be collected through the retail fuel cost recovery provision and
recognized in income over a 36-month period beginning January 1997.
4. COMMITMENTS
Construction Program
While the Company has no traditional baseload generating plants under
construction, the construction of one jointly owned combustion turbine peaking
unit was completed in January 1997. In addition, significant construction of
transmission and distribution facilities, and projects to upgrade and extend the
useful life of generating plants will continue. The Company currently estimates
property additions to be approximately $490 million in 1997, $479 million in
1998, and $464 million in 1999. The estimates for property additions for the
three-year period include $31 million committed to meeting the requirements of
the Clean Air Act.
The construction program is subject to periodic review and revision, and
actual construction costs may vary from estimates because of numerous factors,
including, but not limited to, changes in business conditions, load growth
estimates, environmental regulations, and regulatory requirements.
II-117
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
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 fossil and nuclear fuel commitments at December 31,
1996 were as follows:
Minimum
Year Obligations
----------------------
(in millions)
1997 $ 833
1998 679
1999 512
2000 423
2001 358
2002 and beyond 1,722
- ---------------------------------------------------------------
Total minimum obligations $ 4,527
===============================================================
Additional commitments for coal and for nuclear fuel will be required in the
future to supply the Company's fuel needs.
Purchase Power Commitments
In connection with the joint ownership arrangement for Plant Vogtle, discussed
in Note 6, the Company has made commitments to purchase declining fractions of
OPC's and MEAG's capacity and energy from this plant. The declining commitments
were in effect during periods of up to seven years following commercial
operation and ended in 1996. The commitments regarding a portion of a 5 percent
interest in Plant Vogtle owned by MEAG are in effect until the latter of the
retirement of the plant or the latest stated maturity date of MEAG's bonds
issued to finance such ownership interest. The payments for capacity are
required whether or not any capacity is available. The energy cost is a function
of each unit's variable operating costs. Except as noted below, the cost of such
capacity and energy is included in purchased power from non-affiliates in the
Company's Statements of Income. Capacity payments totaled $68 million, $76
million, and $129 million in 1996, 1995, and 1994, respectively. The current
projected Plant Vogtle capacity payments are:
Year Amounts
----------------------
(in millions)
1997 $ 58
1998 60
1999 62
2000 63
2001 62
2002 and beyond 858
- ---------------------------------------------------------------
Total $ 1,163
==============================================================
Portions of the payments noted above relate to costs in excess of Plant
Vogtle's allowed investment for ratemaking purposes. The present value of these
portions was written off in 1987 and 1990.
As discussed in Note 1, the Plant Vogtle declining capacity buyback expense
is being levelized over a six-year period which began in October 1991.
The Company and an affiliate, Alabama 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 1,020 megawatts,
as well as associated transmission facilities. The capacity of the units has
been sold equally to the Company and Alabama Power under a contract which, in
substance, requires payments sufficient to provide for the operating expenses,
taxes, debt service and return on investment, whether or not SEGCO has any
capacity and energy available. The term of the contract extends automatically
for two-year periods, subject to either party's right to cancel upon two year's
notice. The Company's share of expenses included in purchased power from
affiliates in the Statements of Income, is as follows:
1996 1995 1994
---------------------------------
(in millions)
Energy $47 $44 $43
Capacity 30 29 33
- --------------------------------------------------------------
Total $77 $73 $76
==============================================================
Kilowatt-hours 2,780 2,391 2,429
- --------------------------------------------------------------
II-118
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
At December 31, 1996, the capitalization of SEGCO consisted of $52 million
of equity and $76 million of long-term debt on which the annual interest
requirement is $5 million.
The Company has entered into a 30-year purchase power agreement, scheduled
to begin in June 1998, for electricity during peaking periods from a planned 300
megawatt cogeneration facility. Capacity and fixed operation and maintenance
(O&M) payments are subject to reductions for failure to meet minimum capacity
output. Estimated capacity and fixed O&M payments are as follows:
Year Amounts
----------------------
(in millions)
1998 $ 13
1999 15
2000 15
2001 15
2002 and beyond 320
- ---------------------------------------------------------------
Total $ 378
===============================================================
Operating Leases
The Company has entered into coal rail car rental agreements with various terms
and expiration dates. These expenses totaled $11 million, $12 million, and $13
million for 1996, 1995, and 1994, respectively. At December 31, 1996, estimated
minimum rental commitments for these noncancelable operating leases were as
follows:
Year Amounts
----------------------
(in millions)
1997 $ 11
1998 10
1999 10
2000 10
2001 10
2002 and beyond 121
- ---------------------------------------------------------------
Total $ 172
===============================================================
5. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988, 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 the
Company's nuclear power plants. The act provides funds up to $8.9 billion for
public liability claims that could arise from a single nuclear incident. Each
nuclear plant 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 that could be assessed, after a nuclear incident, against
all owners of nuclear reactors. The 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 for the Company, excluding any applicable state
premium taxes, -- based on its ownership and buyback interests -- is $162
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 is limited to $11 million
under current policies.
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 costs 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 costs 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
that policy. The maximum annual assessments under the current policies for the
Company would be $16 million for excess property damage and $12 million for
replacement power.
II-119
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
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.
6. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS
The Company has sold undivided interests in plants Hatch, Wansley, Vogtle, and
Scherer Units 1 and 2, together with transmission facilities, to OPC, an
electric membership generation and transmission corporation; MEAG, a public
corporation and an instrumentality of the state of Georgia; and the City of
Dalton, Georgia. The Company has sold an interest in Plant Scherer Unit 3 to
Gulf Power Company, an affiliate. Additionally, in 1995 the Company completed
the last of four separate transactions to sell Unit 4 of Plant Scherer to
Florida Power & Light Company (FP&L) and Jacksonville Electric Authority (JEA)
for a total price of approximately $808 million. FP&L now owns approximately
76.4 percent of the unit, with JEA owning the remainder.
The Scherer Unit 4 transactions were as follows:
Closing Percent After-Tax
Date Capacity Ownership Amount Gain
- ---------------------------------------------------------------
(in megawatts) (in millions)
July 1991 290 35.46% $ 291 $ 14
June 1993 258 31.44 253 18
June 1994 135 16.55 133 11
June 1995 135 16.55 131 12
- ---------------------------------------------------------------
Total 818 100.00% $ 808 $ 55
===============================================================
Except as otherwise noted, the Company has contracted to operate and
maintain all jointly owned facilities. The Company includes its proportionate
share of plant operating expenses in the corresponding operating expenses in the
Statements of Income.
As discussed in Note 3, the Company owns 25.4 percent of the Rocky Mountain
pumped storage hydroelectric plant, which began commercial operation in 1995.
OPC owns the remainder, and is the operator of the plant.
The Company owns six of eight 80 megawatt combustion turbine generating
units and 75 percent of the related common facilities at Plant McIntosh.
Savannah Electric and Power Company, an affiliate, owns the remainder and
operates the plant. Four of the Company's six units began commercial operation
during 1994, and the remaining two units began commercial operation in 1995.
The Company and Florida Power Corporation (FPC) jointly own a 150 megawatt
combustion turbine unit at Intercession City, Florida, near Orlando. The unit
began commercial operation in January 1997, and is operated by FPC. The Company
owns a one-third interest in the unit, with use of 100 percent of the unit's
capacity from June through September. FPC has the capacity the remainder of the
year. The Company's investment in the unit is approximately $13 million.
At December 31, 1996, the Company's percentage ownership and investment
(exclusive of nuclear fuel) in
II-120
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
jointly owned facilities in commercial operation, were as follows:
Total
Nameplate Company
Facility (Type) Capacity Ownership
- -----------------------------------------------------------------
(megawatts)
Plant Vogtle (nuclear) 2,320 45.7%
Plant Hatch (nuclear) 1,630 50.1
Plant Wansley (coal) 1,779 53.5
Plant Scherer (coal)
Units 1 and 2 1,636 8.4
Unit 3 818 75.0
Plant McIntosh
Common Facilities N/A 75.0
(combustion-turbine)
Rocky Mountain 848 25.4
(pumped storage)
- -----------------------------------------------------------------
Accumulated
Facility (Type) Investment Depreciation
- ----------------------------------------------------------------
(in millions)
Plant Vogtle (nuclear) $3,299* $843
Plant Hatch (nuclear) 854 436
Plant Wansley (coal) 301 134
Plant Scherer (coal)
Units 1 and 2 112 42
Unit 3 542 150
Plant McIntosh
Common Facilities
(combustion-turbine) 19 1
Rocky Mountain
(pumped storage) 202 27
- ----------------------------------------------------------------
* Investment net of write-offs.
7. LONG-TERM POWER SALES AGREEMENTS
The Company and the operating subsidiaries of Southern Company have long-term
contractual agreements for the sale of capacity and energy to non-affiliated
utilities located outside the system's service area. These agreements consist of
firm unit power sales pertaining to capacity from specific generating units. The
Company also had agreements for non-firm sales, which expired in 1994, based on
the capacity of the Southern system. Because energy is generally sold at cost
under these agreements, it is primarily the capacity revenues that affect the
Company's profitability.
The Company's capacity revenues were as follows:
Year Unit Power Sales Non-firm Sales
- -----------------------------------------------------------------
(in millions) (megawatts) (in millions) (megawatts)
1996 $ 41 173 $ - -
1995 53 248 - -
1994 75 403 9 101
- -----------------------------------------------------------------
Unit power from specific generating plants is being sold to FP&L, FPC, JEA,
and the City of Tallahassee, Florida. Under these agreements, the Company sold
approximately 173 megawatts of capacity in 1996 and is scheduled to sell
approximately 159 megawatts of capacity in 1997 through 1999, and in 2000, 126
megawatts will be sold. After 2000, capacity sales will decline to approximately
103 megawatts -- unless reduced by FP&L, FPC, and JEA -- until the expiration of
the contracts in 2010.
Long-term non-firm power of 200 megawatts was sold by the Southern system in
1994 to FPC, of which the Company's share was 101 megawatts, under a contract
that expired at the end of 1994. Sales under these long-term non-firm power
sales agreements were made from available power pool energy, and the revenues
from the sales were shared by the operating affiliates.
8. INCOME TAXES
At December 31, 1996, tax-related regulatory assets were $818 million and
tax-related regulatory liabilities were $382 million. The assets are
attributable to tax benefits flowed through to customers in prior years and to
taxes applicable to capitalized AFUDC. The liabilities are attributable to
deferred taxes previously recognized at rates higher than current enacted tax
law and to unamortized investment tax credits.
II-121
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Details of the federal and state income tax provisions are as follows:
1996 1995 1994
-------------------------------
Total provision for income taxes: (in millions)
Federal:
Currently payable $ 325 $349 $306
Deferred -
Current year 70 84 86
Reversal of prior years (41) (55) (57)
Deferred investment tax
credits - 1 (1)
- -----------------------------------------------------------------
354 379 334
- -----------------------------------------------------------------
State:
Currently payable 56 60 52
Deferred -
Current year 12 15 15
Reversal of prior years (5) (8) (10)
- -----------------------------------------------------------------
63 67 57
- -----------------------------------------------------------------
Total 417 446 391
- -----------------------------------------------------------------
Less:
Income taxes credited
to other income (19) (3) (8)
=================================================================
Total income taxes
charged to operations $ 436 $449 $399
=================================================================
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:
1996 1995
-------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $ 1,736 $1,630
Property basis differences 1,038 1,074
Deferred Plant Vogtle costs 54 100
Premium on reacquired debt 67 70
Deferred regulatory costs 21 38
Other 32 29
- ----------------------------------------------------------------
Total 2,948 2,941
- ----------------------------------------------------------------
Deferred tax assets:
Other property basis differences 225 239
Federal effect of state deferred taxes 100 97
Other deferred costs 93 83
Disallowed Plant Vogtle buybacks 24 25
Accrued interest 10 13
Fuel clause overrecovered 8 6
Other 18 18
- ----------------------------------------------------------------
Total 478 481
- ----------------------------------------------------------------
Net deferred tax liabilities 2,470 2,460
Portion included in current assets 53 51
- ----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $ 2,523 $2,511
================================================================
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 $17 million in 1996, $22 million in 1995, and $25 million in 1994.
At December 31, 1996, all investment tax credits available to reduce federal
income taxes payable had been utilized.
A reconciliation of the federal statutory tax rate to the effective income
tax rate is as follows:
1996 1995 1994
-------------------------
Federal statutory rate 35% 35% 35%
State income tax, net of
federal deduction 4 4 4
Non-deductible book
depreciation 3 2 3
Difference in prior years'
deferred and current tax rate (1) (1) (1)
Other (1) - -
- -------------------------------------------------------------
Effective income tax rate 40% 40% 41%
=============================================================
II-122
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Southern Company and its subsidiaries file 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. CAPITALIZATION
First Mortgage Bond Indenture & Charter Restrictions
The Company's first mortgage bond indenture contains various restrictions that
remain in effect as long as the bonds are outstanding. At December 31, 1996,
$778 million of retained earnings and paid-in capital was unrestricted for the
payment of cash dividends or any other distributions under terms of the mortgage
indenture. Supplemental indentures in connection with future first mortgage bond
issues may contain more stringent restrictions than those currently in effect.
The Company's charter limits cash dividends on common stock to the lesser of
the retained earnings balance or 75 percent of net income available for such
stock during a prior period of 12 months if the ratio of common stock equity to
total capitalization, including retained earnings, adjusted to reflect the
payment of the proposed dividend, is below 25 percent, and to 50 percent of such
net income if such ratio is less than 20 percent. At December 31, 1996, the
ratio as defined was 50.3 percent.
Preferred Securities
In December 1994, Georgia Power Capital, L.P., of which the Company is the sole
general partner, issued $100 million of 9 percent mandatorily redeemable
preferred securities. Substantially all of the assets of Georgia Power Capital
are $103 million aggregate principal amount of Georgia Power's 9 percent Junior
Subordinated Deferrable Interest Debentures due December 19, 2024. In August
1996, Georgia Power Capital Trust I (Trust I), of which the Company owns all the
common securities, issued $225 million of 7.75 percent mandatorily redeemable
preferred securities. Substantially all of the assets of Trust I are $232
million aggregate principal amount of the Company's 7.75 percent Junior
Subordinated Notes due June 30, 2036. In January 1997, Georgia Power Capital
Trust II (Trust II), of which the Company owns all the common securities, issued
$175 million of 7.60 percent mandatorily redeemable preferred securities.
Substantially all of the assets of Trust II are $180 million aggregate principal
amount of the Company's 7.60 percent Junior Subordinated Notes due December 31,
2036.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of Georgia Power Capital's and Georgia Power Capital
Trusts' payment obligations with respect to the preferred securities.
Georgia Power Capital, L.P., Georgia Power Capital Trust I, and Georgia
Power Capital Trust II are subsidiaries of the Company, and accordingly are
consolidated in the Company's financial statements.
Pollution Control Bonds
The Company has incurred obligations in connection with the sale by public
authorities of tax-exempt pollution control revenue bonds. The Company has
authenticated and delivered to trustees an aggregate of $1.5 billion of its
first mortgage bonds, which are pledged as security for its obligations under
pollution control revenue contracts. No interest on these first mortgage bonds
is payable unless and until a default occurs on the installment purchase or loan
agreements. An aggregate of approximately $90 million of the pollution control
revenue bonds is secured by a subordinated interest in specific property of the
Company.
Details of pollution control bonds are as follows:
Interest Rates 1996 1995
Maturity
- --------------------------------------------------------------
(in millions)
2000 4.375% $ 50 $ 50
2004-2006 5% to 6.75% 143 145
2007-2011 6.375% to 6.40% 10 20
& Variable
2016 8% - 56
2017-2021 6% to 9.375% 235 287
2022-2026 5.40% to 6.75%
& Variable 1,233 1,120
- -------------------------------------------------------------
Total pollution control bonds $ 1,671 $1,678
=============================================================
II-123
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Bank Credit Arrangements
At the beginning of 1997, the Company had unused credit arrangements with banks
totaling $1.1 billion, of which $629.4 million expires at various times during
1997, $48.7 million expires at May 1, 1999, and $400 million expires at June 30,
1999.
The $400 million expiring June 30, 1999, is under revolving credit
arrangements with several banks providing the Company, Alabama Power Company,
and Southern Company up to a total credit amount of $400 million. To provide
liquidity support for commercial paper programs, $165 million, $135 million, and
$100 million are currently dedicated to the Company, Alabama Power Company, and
Southern Company, respectively. However, the allocations can be changed among
the borrowers by notifying the respective banks.
During the term of the agreements expiring in 1999, short-term borrowings
may be converted 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.
Of the Company's total $1.1 billion in unused credit arrangements, a portion
of the lines is dedicated to provide liquidity support to variable rate
pollution control bonds. The credit lines dedicated as of December 31, 1996,
were $589.7 million. In connection with all other lines of credit, the Company
has the option of paying fees or maintaining compensating balances. These
balances are not legally restricted from withdrawal.
In addition, the Company borrows under uncommitted lines of credit with
banks and through a $225 million commercial paper program that has the liquidity
support of committed bank credit arrangements. Average compensating balances
held under these committed facilities were not material in 1996.
Other Long-Term Debt
Assets acquired under capital leases are recorded in the Balance Sheets as
utility plant in service, and the related obligations are classified as
long-term debt. At December 31, 1996 and 1995, the Company had a capitalized
lease obligation for its corporate headquarters building of $87 million with an
interest rate of 8.1 percent. The lease agreement provides for payments that are
minimal in early years and escalate through the first 21 years of the lease. For
ratemaking purposes, the GPSC has treated the lease as an operating lease and
has allowed only the lease payments in cost of service. The difference between
the accrued expense and the lease payments allowed for ratemaking purposes is
being deferred as a cost to be recovered in the future as ordered by the GPSC.
At December 31, 1996, and 1995, the interest and lease amortization deferred on
the Balance Sheets are $51 million and $49 million, respectively.
Assets Subject to Lien
The Company's mortgage dated as of March 1, 1941, 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.
Securities Due Within One Year
The current portion of the Company's long-term debt and preferred stock is as
follows:
1996 1995
-------------------
(in millions)
First mortgage bonds $ 61 $150
Preferred stock 49 -
- ----------------------------------------------------------------
Total $ 110 $150
================================================================
The Company's first mortgage bond indenture includes an improvement fund
requirement that amounts to 1 percent of each outstanding series of bonds
authenticated under the indenture prior to January 1 of each year, other than
those issued to collateralize pollution control obligations. The requirement may
be satisfied by June 1 of each year by depositing cash, reacquiring bonds, or by
pledging additional property equal to 1 2/3 times the requirement. The 1997
requirement was met in the first quarter of the year by depositing cash with the
trustee. These funds, along with cash deposited previously with the trustee to
satisfy the 1995 and 1996 improvement fund requirements, were used to redeem
bonds.
II-124
<PAGE>
NOTES (continued)
Georgia Power Company 1996 Annual Report
Redemption of Securities
The Company plans to continue a program of redeeming or replacing debt and
preferred stock in cases where opportunities exist to reduce financing costs.
Issues may be repurchased in the open market or called at premiums as specified
under terms of the issue. They may also be redeemed at face value to meet
improvement fund and sinking fund requirements, to meet replacement provisions
of the mortgage, or through use of proceeds from the sale of property pledged
under the mortgage. In general, for the first five years a series is
outstanding, the Company is prohibited from redeeming for improvement fund
purposes more than 1 percent annually of the original issue amount.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for 1996 and 1995 is as follows:
Net Income
After
Dividends on
Operating Operating Preferred
Quarter Ended Revenues Income Stock
- -------------------------------------------------------------------
(in millions)
--------------------------------------------
March 1996 $ 1,029 $192 $ 114
June 1996 1,134 233 154
September 1996 1,311 339 256
December 1996 943 122 56
March 1995 $ 974 $207 $ 116
June 1995 1,075 230 149
September 1995 1,374 337 245
December 1995 982 177 99
- -------------------------------------------------------------------
Earnings in the fourth quarter of 1996, compared to the fourth quarter of
1995, declined primarily as a result of lower retail and wholesale revenues and
initiatives to reduce fossil generation materials inventory levels.
The Company's business is influenced by seasonal weather conditions.
II-125
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1996 Annual Report
- -------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $4,416,779 $4,405,338 $4,162,403
Net Income after Dividends
on Preferred Stock (in thousands) $580,327 $608,862 $525,544
Cash Dividends on Common Stock (in thousands) $475,500 $451,500 $429,300
Return on Average Common Equity (percent) 13.73 14.43 12.84
Total Assets (in thousands) $13,071,051 $13,470,275 $13,712,658
Gross Property Additions (in thousands) $428,220 $480,449 $638,426
- -------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $4,154,281 $4,299,012 $4,141,554
Preferred stock 464,611 692,787 692,787
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities 325,000 100,000 100,000
Long-term debt 3,200,419 3,315,460 3,757,823
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $8,144,311 $8,407,259 $8,692,164
===============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 51.0 51.1 47.6
Preferred stock 5.7 8.2 8.0
Company obligated mandatorily redeemable preferred securities 4.0 1.2 1.2
Long-term debt 39.3 39.5 43.2
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===============================================================================================================================
First Mortgage Bonds (in thousands):
Issued 10,000 75,000 -
Retired 210,860 505,789 133,559
Preferred Stock (in thousands):
Issued - - -
Retired 179,148 - -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued 225,000 - 100,000
- -------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A2
Standard and Poor's A+ A+ A
Duff & Phelps AA- AA- A+
Preferred Stock -
Moody's a2 a2 a3
Standard and Poor's A A A-
Duff & Phelps A+ A A-
- -------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,531,453 1,500,024 1,466,382
Commercial 205,087 198,624 193,648
Industrial 10,424 10,796 10,976
Other 2,645 2,568 2,426
- -------------------------------------------------------------------------------------------------------------------------------
Total 1,749,609 1,712,012 1,673,432
===============================================================================================================================
Employees (year-end) 10,346 11,061 11,765
</TABLE>
II-126
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1996 Annual Report
- ------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $4,451,181 $4,297,436 $4,301,428
Net Income after Dividends
on Preferred Stock (in thousands) $569,853 $520,538 $474,855
Cash Dividends on Common Stock (in thousands) $402,400 $384,000 $375,200
Return on Average Common Equity (percent) 14.37 13.60 12.76
Total Assets (in thousands) $13,736,110 $10,964,442 $10,842,538
Gross Property Additions (in thousands) $674,432 $508,444 $548,051
- ------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $4,045,458 $3,888,237 $3,766,551
Preferred stock 692,787 692,792 607,796
Preferred stock subject to mandatory redemption - 6,250 118,750
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 4,031,387 4,131,016 4,553,189
- ------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $8,769,632 $8,718,295 $9,046,286
========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 46.1 44.6 41.7
Preferred stock 7.9 8.0 8.0
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 46.0 47.4 50.3
- ------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
========================================================================================================================
First Mortgage Bonds (in thousands):
Issued 1,135,000 975,000 -
Retired 1,337,822 1,381,300 598,384
Preferred Stock (in thousands):
Issued 175,000 195,000 100,000
Retired 245,005 165,004 100,000
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - -
- ------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A3 A3 Baa1
Standard and Poor's A- A- BBB+
Duff & Phelps A+ A- BBB+
Preferred Stock -
Moody's baa1 baa1 baa1
Standard and Poor's BBB+ BBB+ BBB
Duff & Phelps A- BBB BBB-
- ------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,441,972 1,421,175 1,397,682
Commercial 188,820 183,784 179,933
Industrial 11,217 11,479 11,946
Other 2,322 2,269 2,190
- ------------------------------------------------------------------------------------------------------------------------
Total 1,644,331 1,618,707 1,591,751
========================================================================================================================
Employees (year-end) 12,528 12,600 13,700
</TABLE>
II-127A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1996 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $4,445,809 $4,145,240 $3,897,479
Net Income after Dividends
on Preferred Stock (in thousands) $208,066 $449,099 $479,532
Cash Dividends on Common Stock (in thousands) $389,600 $394,500 $386,600
Return on Average Common Equity (percent) 5.52 11.72 13.06
Total Assets (in thousands) $11,176,619 $11,372,346 $11,130,539
Gross Property Additions (in thousands) $558,727 $727,631 $929,019
- -----------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $3,673,913 $3,860,657 $3,806,070
Preferred stock 607,796 607,844 657,844
Preferred stock subject to mandatory redemption 125,000 155,000 162,500
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 5,000,225 5,054,001 4,861,378
- -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $9,406,934 $9,677,502 $9,487,792
=============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 39.1 39.9 40.1
Preferred stock 7.8 7.9 8.6
Company obligated mandatorily redeemable preferred securities - - -
Long-term debt 53.1 52.2 51.3
- -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=============================================================================================================================
First Mortgage Bonds (in thousands):
Issued 300,000 250,000 150,000
Retired 91,117 91,516 206,677
Preferred Stock (in thousands):
Issued - - -
Retired 83,750 7,500 3,750
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - -
- -----------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Baa1 Baa2 Baa2
Standard and Poor's BBB+ BBB+ BBB
Duff & Phelps BBB BBB 9
Preferred Stock -
Moody's baa1 baa2 baa2
Standard and Poor's BBB BBB BBB-
Duff & Phelps BBB- BBB- 10
- -----------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,378,888 1,355,211 1,329,173
Commercial 178,391 177,814 174,147
Industrial 12,115 12,311 12,353
Other 2,114 2,050 1,993
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,571,508 1,547,386 1,517,666
=============================================================================================================================
Employees (year-end) 13,746 13,900 15,110
</TABLE>
II-127B
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1996 Annual Report
- ------------------------------------------------------------------------------------------------------
1987 1986
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands) $3,786,485 $3,561,603
Net Income after Dividends
on Preferred Stock (in thousands) $240,057 $535,003
Cash Dividends on Common Stock (in thousands) $377,800 $325,500
Return on Average Common Equity (percent) 6.85 16.51
Total Assets (in thousands) $11,197,494 $10,465,063
Gross Property Additions (in thousands) $1,034,059 $1,598,309
- ------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $3,538,182 $3,469,201
Preferred stock 657,844 732,844
Preferred stock subject to mandatory redemption 166,250 112,500
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 4,825,760 4,464,857
- ------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $9,188,036 $8,779,402
======================================================================================================
Capitalization Ratios (percent):
Common stock equity 38.5 39.5
Preferred stock 9.0 9.6
Company obligated mandatorily redeemable preferred securities - -
Long-term debt 52.5 50.9
- ------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
======================================================================================================
First Mortgage Bonds (in thousands):
Issued 500,000 500,000
Retired 217,949 377,538
Preferred Stock (in thousands):
Issued 125,000 100,000
Retired 150,000 7,500
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - -
- ------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Baa2 Baa1
Standard and Poor's BBB BBB+
Duff & Phelps 9 9
Preferred Stock -
Moody's baa2 baa1
Standard and Poor's BBB- BBB
Duff & Phelps 10 10
- ------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,303,721 1,268,983
Commercial 169,014 162,258
Industrial 12,307 12,315
Other 1,858 1,816
- ------------------------------------------------------------------------------------------------------
Total 1,486,900 1,445,372
======================================================================================================
Employees (year-end) 14,924 14,773
</TABLE>
II-127C
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1996 Annual Report
- -----------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C> <C>
Residential $1,371,033 $1,337,060 $1,180,358
Commercial 1,486,586 1,449,108 1,367,315
Industrial 1,118,633 1,141,766 1,100,995
Other 47,060 44,255 42,983
- -----------------------------------------------------------------------------------------------------------------------
Total retail 4,023,312 3,972,189 3,691,651
Sales for resale - non-affiliates 281,580 290,302 351,591
Sales for resale - affiliates 35,886 76,906 60,899
- -----------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,340,778 4,339,397 4,104,141
Other revenues 76,001 65,941 58,262
- -----------------------------------------------------------------------------------------------------------------------
Total $4,416,779 $4,405,338 $4,162,403
=======================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 17,826,451 17,307,399 15,680,709
Commercial 20,823,073 19,844,999 18,738,461
Industrial 26,191,831 25,286,340 24,337,632
Other 536,057 493,720 484,009
- -----------------------------------------------------------------------------------------------------------------------
Total retail 65,377,412 62,932,458 59,240,811
Sales for resale - non-affiliates 7,868,342 6,591,841 7,968,475
Sales for resale - affiliates 1,180,207 2,738,947 3,056,050
- -----------------------------------------------------------------------------------------------------------------------
Total 74,425,961 72,263,246 70,265,336
=======================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.69 7.73 7.53
Commercial 7.14 7.30 7.30
Industrial 4.27 4.52 4.52
Total retail 6.15 6.31 6.23
Sales for resale 3.51 3.94 3.74
Total sales 5.83 6.00 5.84
Residential Average Annual Kilowatt-Hour Use Per Customer 11,763 11,654 10,766
Residential Average Annual Revenue Per Customer $904.70 $900.28 $810.39
Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,367 14,344 13,943
Maximum Peak-Hour Demand (megawatts) (Note A):
Winter 10,410 9,819 10,509
Summer 12,914 12,828 11,758
Annual Load Factor (percent) 62.2 59.6 63.0
Plant Availability (percent):
Fossil-steam 85.2 85.8 83.1
Nuclear 89.3 91.8 88.4
- -----------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 60.4 63.0 61.3
Nuclear 18.2 19.3 18.0
Hydro 2.2 2.5 2.6
Oil and gas 0.5 0.6 0.1
Purchased power -
From non-affiliates 5.6 7.7 9.7
From affiliates 13.1 6.9 8.3
- -----------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=======================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,468 10,039 9,915
Cost of fuel per million BTU (cents) 128.72 143.85 145.33
Average cost of fuel per net kilowatt-hour generated (cents) 1.35 1.44 1.44
=======================================================================================================================
Note A: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand.
* Less than one-tenth of one percent.
</TABLE>
II-128
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1996 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C> <C>
Residential $1,291,035 $1,128,396 $1,111,358
Commercial 1,354,130 1,285,681 1,243,067
Industrial 1,113,067 1,083,856 1,057,702
Other 41,399 39,504 37,861
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 3,799,631 3,537,437 3,449,988
Sales for resale - non-affiliates 534,370 640,308 736,643
Sales for resale - affiliates 61,668 67,835 65,586
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,395,669 4,245,580 4,252,217
Other revenues 55,512 51,856 49,211
- ------------------------------------------------------------------------------------------------------------------------------
Total $4,451,181 $4,297,436 $4,301,428
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 16,649,859 14,939,172 14,815,089
Commercial 18,278,508 17,260,614 16,885,833
Industrial 23,635,363 22,978,312 22,298,062
Other 460,801 436,144 429,016
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 59,024,531 55,614,242 54,428,000
Sales for resale - non-affiliates 14,307,030 15,870,222 18,719,924
Sales for resale - affiliates 3,027,733 3,320,060 3,885,892
- ------------------------------------------------------------------------------------------------------------------------------
Total 76,359,294 74,804,524 77,033,816
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.75 7.55 7.50
Commercial 7.41 7.45 7.36
Industrial 4.71 4.72 4.74
Total retail 6.44 6.36 6.34
Sales for resale 3.44 3.69 3.55
Total sales 5.76 5.68 5.52
Residential Average Annual Kilowatt-Hour Use Per Customer 11,630 10,603 10,675
Residential Average Annual Revenue Per Customer $901.79 $800.88 $800.78
Plant Nameplate Capacity Ratings (year-end) (megawatts) 13,759 14,076 14,076
Maximum Peak-Hour Demand (megawatts) (Note A):
Winter 9,067 8,938 10,001
Summer 12,573 11,448 13,090
Annual Load Factor (percent) 58.5 60.5 55.2
Plant Availability (percent):
Fossil-steam 85.9 86.6 93.3
Nuclear 85.5 87.7 81.6
- ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 62.1 61.4 63.6
Nuclear 16.2 17.0 15.3
Hydro 2.3 2.5 2.3
Oil and gas 0.2 * *
Purchased power -
From non-affiliates 10.2 12.2 10.3
From affiliates 9.0 6.9 8.5
- ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,912 9,900 9,960
Cost of fuel per million BTU (cents) 153.62 153.08 157.97
Average cost of fuel per net kilowatt-hour generated (cents) 1.52 1.52 1.57
==============================================================================================================================
Note A: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand.
* Less than one-tenth of one percent.
</TABLE>
II-129A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1996 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------
1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C> <C>
Residential $1,109,165 $1,022,781 $979,047
Commercial 1,218,441 1,143,727 1,054,995
Industrial 1,061,830 1,006,416 983,822
Other 36,773 34,775 31,743
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 3,426,209 3,207,699 3,049,607
Sales for resale - non-affiliates 784,086 760,809 707,076
Sales for resale - affiliates 168,251 150,394 86,751
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,378,546 4,118,902 3,843,434
Other revenues 67,263 26,338 54,045
- ------------------------------------------------------------------------------------------------------------------------------
Total $4,445,809 $4,145,240 $3,897,479
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 14,771,648 14,134,195 13,800,038
Commercial 16,627,128 15,843,181 14,790,561
Industrial 22,126,604 21,801,404 21,412,845
Other 428,459 414,107 397,669
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 53,953,839 52,192,887 50,401,113
Sales for resale - non-affiliates 20,158,681 20,479,412 18,544,705
Sales for resale - affiliates 8,272,528 7,489,948 3,327,814
- ------------------------------------------------------------------------------------------------------------------------------
Total 82,385,048 80,162,247 72,273,632
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.51 7.24 7.09
Commercial 7.33 7.22 7.13
Industrial 4.80 4.62 4.59
Total retail 6.35 6.15 6.05
Sales for resale 3.35 3.26 3.63
Total sales 5.31 5.14 5.32
Residential Average Annual Kilowatt-Hour Use Per Customer 10,795 10,530 10,484
Residential Average Annual Revenue Per Customer $810.56 $761.96 $743.82
Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,366 14,366 13,018
Maximum Peak-Hour Demand (megawatts) (Note A):
Winter 8,977 10,101 9,866
Summer 13,196 12,735 12,295
Annual Load Factor (percent) 55.5 56.3 59.1
Plant Availability (percent):
Fossil-steam 92.5 93.0 94.5
Nuclear 81.3 89.2 69.4
- ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 65.1 64.0 72.0
Nuclear 13.7 14.1 9.6
Hydro 2.2 2.1 1.2
Oil and gas 0.1 0.1 0.1
Purchased power -
From non-affiliates 11.0 10.2 8.2
From affiliates 7.9 9.5 8.9
- ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,939 10,020 9,969
Cost of fuel per million BTU (cents) 166.22 164.27 166.28
Average cost of fuel per net kilowatt-hour generated (cents) 1.65 1.65 1.66
==============================================================================================================================
Note A: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand.
* Less than one-tenth of one percent.
</TABLE>
II-129B
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1996 Annual Report
- -------------------------------------------------------------------------------------------------------------
1987 1986
- -------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C>
Residential $904,218 $874,231
Commercial 915,540 854,755
Industrial 911,933 897,646
Other 29,350 27,948
- -------------------------------------------------------------------------------------------------------------
Total retail 2,761,041 2,654,580
Sales for resale - non-affiliates 822,696 780,049
Sales for resale - affiliates 159,998 91,753
- -------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 3,743,735 3,526,382
Other revenues 42,750 35,221
- -------------------------------------------------------------------------------------------------------------
Total $3,786,485 $3,561,603
=============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 13,675,730 13,234,248
Commercial 13,799,379 12,945,926
Industrial 20,884,454 20,339,235
Other 385,514 381,917
- -------------------------------------------------------------------------------------------------------------
Total retail 48,745,077 46,901,326
Sales for resale - non-affiliates 20,910,185 18,198,186
Sales for resale - affiliates 6,032,889 3,160,242
- -------------------------------------------------------------------------------------------------------------
Total 75,688,151 68,259,754
=============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.61 6.61
Commercial 6.63 6.60
Industrial 4.37 4.41
Total retail 5.66 5.66
Sales for resale 3.65 4.08
Total sales 4.95 5.17
Residential Average Annual Kilowatt-Hour Use Per Customer 10,623 10,577
Residential Average Annual Revenue Per Customer $702.36 $698.72
Plant Nameplate Capacity Ratings (year-end) (megawatts) 13,018 11,875
Maximum Peak-Hour Demand (megawatts) (Note A):
Winter 9,446 10,551
Summer 12,390 11,910
Annual Load Factor (percent) 56.1 57.5
Plant Availability (percent):
Fossil-steam 92.7 91.2
Nuclear 85.4 64.7
- ---------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 70.9 74.6
Nuclear 9.1 5.0
Hydro 1.7 1.2
Oil and gas 0.1 0.6
Purchased power -
From non-affiliates 8.5 8.9
From affiliates 9.7 9.7
- --------------------------------------------------------------------------------------------------------------
Total 100.0 100.0
==============================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,932 10,016
Cost of fuel per million BTU (cents) 168.81 175.81
Average cost of fuel per net kilowatt-hour generated (cents) 1.68 1.76
==============================================================================================================
Note A: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand.
* Less than one-tenth of one percent.
</TABLE>
II-129C
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Georgia Power Company
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $4,380,893 $4,328,432 $4,101,504
Revenues from affiliates 35,886 76,906 60,899
- -------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,416,779 4,405,338 4,162,403
- -------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 835,194 900,973 870,653
Purchased power from non-affiliates 157,308 183,009 193,130
Purchased power from affiliates 229,324 131,740 158,063
Provision for separation benefits 39,099 10,607 82,238
Proceeds from settlement of disputed contracts - - -
Other 741,383 735,918 643,375
Maintenance 315,934 292,029 272,818
Depreciation and amortization 432,940 421,850 379,158
Deferred Plant Vogtle expenses, net 136,650 124,454 74,888
Taxes other than income taxes 207,098 204,675 194,566
Federal and state income taxes 435,904 449,204 399,413
- -------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,530,834 3,454,459 3,268,302
- -------------------------------------------------------------------------------------------------------------------
Operating Income 885,945 950,879 894,101
Other Income (Expense):
Allowance for equity funds used during construction 3,144 2,734 5,663
Equity in earnings of unconsolidated subsidiary 3,851 4,051 3,588
Deferred return on Plant Vogtle - - -
Write-off of Plant Vogtle costs - - -
Income tax reduction for write-off of Plant Vogtle costs - - -
Interest income 5,333 5,524 3,254
Other, net (See note) (43,502) (8,973) 10,626
Income taxes applicable to other income 18,581 3,022 7,975
- -------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 873,352 957,237 925,207
- -------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 207,851 254,607 306,473
Allowance for debt funds used during construction (11,416) (12,081) (11,571)
Interest on interim obligations 15,478 21,463 17,529
Amortization of debt discount, premium, and expense, net 14,790 15,835 15,743
Other interest charges 6,338 11,399 23,183
Distributions on preferred securities of subsidiary companies 14,958 9,000 300
- -------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 247,999 300,223 351,657
- -------------------------------------------------------------------------------------------------------------------
Net Income 625,353 657,014 573,550
Dividends on Preferred Stock 45,026 48,152 48,006
- -------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 580,327 $ 608,862 $ 525,544
===================================================================================================================
Note: Reflects major sales of facilities to JEA, FP& L, OPC, MEAG, and Dalton. Increases in net income, after total
taxes, from these sales were $12,312,000 in 1995, $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991,
$6,336,000 in 1990, and $3,851,000 in 1987.
</TABLE>
II-130
<PAGE>
STATEMENTS OF INCOME
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $4,389,513 $4,229,601 $4,235,842 $4,277,558
Revenues from affiliates 61,668 67,835 65,586 168,251
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,451,181 4,297,436 4,301,428 4,445,809
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 951,507 929,780 998,701 1,120,933
Purchased power from non-affiliates 313,170 436,761 444,920 626,989
Purchased power from affiliates 194,024 158,306 193,114 173,716
Provision for separation benefits - 9,778 52,952 -
Proceeds from settlement of disputed contracts - (4,982) (142,183) -
Other 675,284 616,116 596,565 524,665
Maintenance 284,521 264,757 295,012 280,304
Depreciation and amortization 379,425 375,460 382,549 380,394
Deferred Plant Vogtle expenses, net 36,284 (30,804) 16,008 31,146
Taxes other than income taxes 192,671 179,460 172,893 151,124
Federal and state income taxes 452,122 377,542 349,284 270,561
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,479,008 3,312,174 3,359,815 3,559,832
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Income 972,173 985,262 941,613 885,977
Other Income (Expense):
Allowance for equity funds used during construction 3,168 5,855 9,083 6,985
Equity in earnings of unconsolidated subsidiary 4,127 4,635 4,576 4,182
Deferred return on Plant Vogtle - - 34,549 82,721
Write-off of Plant Vogtle costs - - - (281,254)
Income tax reduction for write-off of Plant Vogtle costs - - - 63,231
Interest income 3,806 12,475 10,563 7,552
Other, net (See note) 11,902 (30,527) 13,551 (21,199)
Income taxes applicable to other income 37,661 25,163 (7,522) 20,859
- ---------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 1,032,837 1,002,863 1,006,413 769,054
- ---------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 343,634 402,541 459,184 480,174
Allowance for debt funds used during construction (8,271) (8,310) (10,385) (9,325)
Interest on interim obligations 15,530 9,694 4,906 8,512
Amortization of debt discount, premium, and expense, net 14,024 8,033 6,214 6,100
Other interest charges 47,393 12,425 9,938 9,404
Distributions on preferred securities of subsidiary companies - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 412,310 424,383 469,857 494,865
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income 620,527 578,480 536,556 274,189
Dividends on Preferred Stock 50,674 57,942 61,701 66,123
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 569,853 $ 520,538 $ 474,855 $ 208,066
=================================================================================================================================
Note: Reflects major sales of facilities to JEA, FP& L, OPC, MEAG, and Dalton. Increases in net income, after total
taxes, from these sales were $12,312,000 in 1995, $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991,
$6,336,000 in 1990, and $3,851,000 in 1987.
</TABLE>
II-131A
<PAGE>
STATEMENTS OF INCOME
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $3,994,846 $3,810,728 $3,626,487 $3,469,850
Revenues from affiliates 150,394 86,751 159,998 91,753
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,145,240 3,897,479 3,786,485 3,561,603
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 1,078,586 1,023,173 1,064,552 1,012,949
Purchased power from non-affiliates 543,448 546,511 530,051 344,708
Purchased power from affiliates 195,355 164,873 199,831 192,297
Provision for separation benefits - - - -
Proceeds from settlement of disputed contracts - - - -
Other 504,743 541,975 575,182 513,974
Maintenance 233,680 246,877 274,672 275,533
Depreciation and amortization 346,091 306,492 254,929 215,763
Deferred Plant Vogtle expenses, net (39,211) (8,333) (141,977) -
Taxes other than income taxes 128,518 146,759 143,289 119,768
Federal and state income taxes 273,287 204,222 250,093 319,374
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,264,497 3,172,549 3,150,622 2,994,366
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Income 880,743 724,930 635,863 567,237
Other Income (Expense):
Allowance for equity funds used during construction 40,525 96,530 159,414 275,183
Equity in earnings of unconsolidated subsidiary 3,750 3,302 3,440 2,967
Deferred return on Plant Vogtle 48,096 107,310 115,028 -
Write-off of Plant Vogtle costs - - (357,821) -
Income tax reduction for write-off of Plant Vogtle costs - - 128,923 -
Interest income 10,333 28,445 55,388 44,615
Other, net (See note) (20,603) (3,746) (55,081) (28,464)
Income taxes applicable to other income 15,573 6,583 17,344 5,154
- ---------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 978,417 963,354 702,498 866,692
- ---------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 475,991 471,897 480,519 472,744
Allowance for debt funds used during construction (34,244) (95,818) (130,756) (225,897)
Interest on interim obligations 1,059 15,084 16,362 1,954
Amortization of debt discount, premium, and expense, net 5,865 5,466 3,573 2,681
Other interest charges 8,868 14,556 12,239 4,610
Distributions on preferred securities of subsidiary companies - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 457,539 411,185 381,937 256,092
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income 520,878 552,169 320,561 610,600
Dividends on Preferred Stock 71,779 72,637 80,504 75,597
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 449,099 $ 479,532 $ 240,057 $ 535,003
=================================================================================================================================
Note: Reflects major sales of facilities to JEA, FP& L, OPC, MEAG, and Dalton. Increases in net income, after total
taxes, from these sales were $12,312,000 in 1995, $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991,
$6,336,000 in 1990, and $3,851,000 in 1987.
</TABLE>
II-131B
<PAGE>
STATEMENTS OF CASH FLOWS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 625,353 $ 657,014 $ 573,550
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 521,086 527,310 484,032
Deferred income taxes, net 35,700 37,150 33,567
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (3,144) (2,734) (5,663)
Amortization of deferred Plant Vogtle costs, net 136,650 124,454 74,888
Write-off of Plant Vogtle costs - - -
Non-cash portion of separation benefits - - 68,599
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 53,415 134 (95,314)
Changes in certain current assets and liabilities:
Receivables, net 9,421 (59,370) 67,218
Inventories 55,753 30,761 (63,545)
Payables (35,651) 45,882 5,409
Other (11,595) 57,422 (5,675)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,386,988 1,418,023 1,137,066
- --------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (428,220) (480,449) (638,426)
Sales of property 3,319 131,099 132,644
Other (16,468) (42,579) (41,273)
- --------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (441,369) (391,929) (547,055)
- --------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities 225,000 - 100,000
Preferred stock - - -
First mortgage bonds 10,000 75,000 -
Pollution control bonds 112,825 504,700 527,210
Other long-term debt - - -
Capital contributions from parent company - - -
Retirements:
Preferred stock (179,148) - -
First mortgage bonds (210,860) (505,789) (133,559)
Pollution control bonds (119,665) (504,810) (510,320)
Other long-term debt - (37,000) (10,187)
Interim obligations, net 30,166 (24,472) (57,425)
Special deposits -- redemption funds (44,454) - -
Capital distribution to parent company (250,000) - -
Payment of preferred stock dividends (46,911) (48,419) (47,147)
Payment of common stock dividends (475,500) (451,500) (429,300)
Miscellaneous (10,646) (17,413) (22,640)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (959,193) (1,009,703) (583,368)
- --------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (13,574) 16,391 6,643
Cash and Cash Equivalents at Beginning of Year 28,930 12,539 5,896
====================================================================================================================
Cash and Cash Equivalents at End of Year $ 15,356 $ 28,930 $ 12,539
====================================================================================================================
</TABLE>
( ) Denotes use of cash.
II-132
<PAGE>
STATEMENTS OF CASH FLOWS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 620,527 $ 578,480 $ 536,556 $ 274,189
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 475,152 471,014 480,318 502,098
Deferred income taxes, net 169,009 194,955 53,219 88,667
Deferred investment tax credits, net (18,274) (5,704) (9,524) (52)
Allowance for equity funds used during construction (3,168) (5,855) (9,083) (6,985)
Amortization of deferred Plant Vogtle costs, net 36,284 (30,804) (18,541) (51,575)
Write-off of Plant Vogtle costs - - - 281,254
Non-cash portion of separation benefits - - - -
Non-cash proceeds from settlement of disputed contracts - (4,982) (103,846) -
Other, net (46,227) (9,768) (26,024) (50,804)
Changes in certain current assets and liabilities:
Receivables, net 27,088 (31,348) 23,920 1,444
Inventories 82,433 (65,621) 24,130 (23,498)
Payables 17,364 25,303 (23,075) (43,470)
Other (94,574) (85,961) 54,777 (9,991)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,265,614 1,029,709 982,827 961,277
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (674,432) (508,444) (548,051) (558,727)
Sales of property 261,687 46 291,075 34,573
Other (43,154) 42,892 931 1,937
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (455,899) (465,506) (256,045) (522,217)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities - - - -
Preferred stock 175,000 195,000 100,000 -
First mortgage bonds 1,135,000 975,000 - 300,000
Pollution control bonds 145,425 161,955 80,420 -
Other long-term debt 37,000 - - -
Capital contributions from parent company - - - -
Retirements:
Preferred stock (245,005) (165,004) (100,000) (83,750)
First mortgage bonds (1,337,822) (1,381,300) (598,384) (91,117)
Pollution control bonds (145,465) (160,205) (83,265) (535)
Other long-term debt (19,451) (567) (1,130) (114,452)
Interim obligations, net (51,444) 334,671 199,000 -
Special deposits -- redemption funds - - - -
Capital distribution to parent company - - - -
Payment of preferred stock dividends (53,123) (60,475) (60,766) (67,757)
Payment of common stock dividends (402,400) (384,000) (375,200) (389,600)
Miscellaneous (63,648) (70,986) (17,613) (7,663)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (825,933) (555,911) (856,938) (454,874)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (16,218) 8,292 (130,156) (15,814)
Cash and Cash Equivalents at Beginning of Year 22,114 13,822 143,978 159,792
==================================================================================================================================
Cash and Cash Equivalents at End of Year $ 5,896 $ 22,114 $ 13,822 $ 143,978
==================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-133A
<PAGE>
STATEMENTS OF CASH FLOWS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 520,878 $ 552,169 $ 320,561 $ 610,600
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 484,870 400,665 336,647 260,945
Deferred income taxes, net 184,490 160,774 76,445 236,822
Deferred investment tax credits, net (8,017) 11,605 (5,075) 106,407
Allowance for equity funds used during construction (40,525) (96,530) (159,414) (275,183)
Amortization of deferred Plant Vogtle costs, net (87,307) (115,643) (257,005) -
Write-off of Plant Vogtle costs - - 357,821 -
Non-cash portion of separation benefits - - - -
Non-cash proceeds from settlement of disputed contracts - - - -
Other, net (38,046) 6,983 (759) 5,554
Changes in certain current assets and liabilities:
Receivables, net (59,035) 11,225 (6,880) (7,474)
Inventories (33,123) (10,044) (72,540) (26,863)
Payables (38,976) (2,065) 74,341 133,044
Other 36,015 1,161 2,751 19,682
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 921,224 920,300 666,893 1,063,534
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (727,631) (929,019) (1,034,059) (1,598,309)
Sales of property - - 12,276 -
Other 47,260 35,328 45,801 168,518
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (680,371) (893,691) (975,982) (1,429,791)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities - - - -
Preferred stock - - 125,000 100,000
First mortgage bonds 250,000 150,000 500,000 500,000
Pollution control bonds 50,000 69,526 191,736 350,001
Other long-term debt - - - 113,000
Capital contributions from parent company - 175,000 228,000 250,000
Retirements:
Preferred stock (7,500) (3,750) (150,000) (7,500)
First mortgage bonds (91,516) (206,677) (217,949) (377,538)
Pollution control bonds (505) (475) (90,000) -
Other long-term debt (3,806) (2,878) (2,824) (108)
Interim obligations, net - (302,261) 302,261 (36,715)
Special deposits -- redemption funds - - - -
Capital distribution to parent company - - - -
Payment of preferred stock dividends (72,259) (72,931) (80,420) (73,665)
Payment of common stock dividends (394,500) (386,600) (377,800) (325,500)
Miscellaneous (4,742) (13,440) (51,745) (33,773)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (274,828) (594,486) 376,259 458,202
- ----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (33,975) (567,877) 67,170 91,945
Cash and Cash Equivalents at Beginning of Year 193,767 761,644 694,474 602,529
==================================================================================================================================
Cash and Cash Equivalents at End of Year $ 159,792 $ 193,767 $ 761,644 $ 694,474
==================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-133B
<PAGE>
BALANCE SHEETS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,140,069 $ 3,105,165 $ 3,077,470
Nuclear 4,097,192 4,082,098 4,075,339
Hydro 644,826 642,237 443,466
- ------------------------------------------------------------------------------------------------------------------------
Total production 7,882,087 7,829,500 7,596,275
Transmission 1,862,384 1,822,778 1,754,945
Distribution 4,090,262 3,949,238 3,777,279
General 934,840 937,079 926,418
Construction work in progress 256,141 236,715 541,889
Nuclear fuel, at amortized cost 121,840 124,849 136,425
- ------------------------------------------------------------------------------------------------------------------------
Total electric plant 15,147,554 14,900,159 14,733,231
Steam Heat Plant - - -
- ------------------------------------------------------------------------------------------------------------------------
Total utility plant 15,147,554 14,900,159 14,733,231
- ------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 4,793,638 4,417,120 4,054,986
Steam heat - - -
- ------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 4,793,638 4,417,120 4,054,986
- ------------------------------------------------------------------------------------------------------------------------
Total 10,353,916 10,483,039 10,678,245
Less property-related accumulated deferred income taxes - - -
- ------------------------------------------------------------------------------------------------------------------------
Total 10,353,916 10,483,039 10,678,245
- ------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Nuclear decommissioning trusts 130,178 92,273 54,297
Miscellaneous 129,819 147,615 116,527
- ------------------------------------------------------------------------------------------------------------------------
Total 259,997 239,888 170,824
- ------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 15,356 28,930 12,539
Investment securities - - -
Receivables, net 463,502 411,038 389,279
Accrued utility revenues 104,420 121,146 103,223
Fossil fuel stock, at average cost 117,382 145,151 169,252
Materials and supplies, at average cost 258,820 286,804 293,464
Prepayments 109,771 107,764 55,383
Vacation pay deferred 39,965 35,543 40,823
- ------------------------------------------------------------------------------------------------------------------------
Total 1,109,216 1,136,376 1,063,963
- ------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 818,418 871,783 919,750
Deferred Plant Vogtle costs 170,988 307,638 432,092
Debt expense, being amortized 32,693 27,227 26,223
Premium on reacquired debt, being amortized 166,670 174,018 164,676
Miscellaneous 159,153 230,306 256,885
- ------------------------------------------------------------------------------------------------------------------------
Total 1,347,922 1,610,972 1,799,626
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $13,071,051 $13,470,275 $13,712,658
========================================================================================================================
</TABLE>
II-134
<PAGE>
BALANCE SHEETS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 2,976,806 $ 3,144,405 $ 3,128,594 $ 3,350,018
Nuclear 4,069,299 4,051,020 4,051,043 4,025,862
Hydro 442,888 434,341 432,674 412,157
- ---------------------------------------------------------------------------------------------------------------------------------
Total production 7,488,993 7,629,766 7,612,311 7,788,037
Transmission 1,713,122 1,646,904 1,566,173 1,522,157
Distribution 3,600,115 3,413,681 3,252,111 3,056,825
General 941,291 923,010 896,477 876,989
Construction work in progress 584,013 405,606 390,437 370,243
Nuclear fuel, at amortized cost 135,742 155,194 191,726 210,320
- ---------------------------------------------------------------------------------------------------------------------------------
Total electric plant 14,463,276 14,174,161 13,909,235 13,824,571
Steam Heat Plant - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total utility plant 14,463,276 14,174,161 13,909,235 13,824,571
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 3,822,344 3,569,717 3,315,247 3,040,298
Steam heat - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 3,822,344 3,569,717 3,315,247 3,040,298
- ---------------------------------------------------------------------------------------------------------------------------------
Total 10,640,932 10,604,444 10,593,988 10,784,273
Less property-related accumulated deferred income taxes - 1,589,743 1,465,408 1,397,647
- ---------------------------------------------------------------------------------------------------------------------------------
Total 10,640,932 9,014,701 9,128,580 9,386,626
- ---------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - 107,993 -
Nuclear decommissioning trusts 37,937 20,311 10,007 -
Miscellaneous 61,142 55,463 71,880 78,895
- ---------------------------------------------------------------------------------------------------------------------------------
Total 99,079 75,774 189,880 78,895
- ---------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 5,896 22,114 13,822 143,978
Investment securities - 108,206 - -
Receivables, net 515,178 385,227 330,411 356,236
Accrued utility revenues 99,550 88,164 79,099 78,067
Fossil fuel stock, at average cost 111,620 197,332 200,248 225,966
Materials and supplies, at average cost 287,551 284,272 215,735 220,103
Prepayments 65,269 91,447 96,750 121,646
Vacation pay deferred 41,575 40,169 39,769 33,677
- ---------------------------------------------------------------------------------------------------------------------------------
Total 1,126,639 1,216,931 975,834 1,179,673
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 992,510 - - -
Deferred Plant Vogtle costs 506,980 383,025 375,028 364,446
Debt expense, being amortized 20,730 17,719 12,368 12,708
Premium on reacquired debt, being amortized 153,146 116,940 70,855 60,653
Miscellaneous 196,094 139,352 89,993 93,618
- ---------------------------------------------------------------------------------------------------------------------------------
Total 1,869,460 657,036 548,244 531,425
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $13,736,110 $10,964,442 $10,842,538 $11,176,619
=================================================================================================================================
</TABLE>
II-135A
<PAGE>
BALANCE SHEETS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Electric Plant:
Production-
Fossil $ 3,319,876 $ 2,638,725 $ 2,616,741 $ 2,138,511
Nuclear 4,189,723 3,225,945 3,220,632 739,835
Hydro 411,235 407,771 404,291 399,120
- ----------------------------------------------------------------------------------------------------------------------------------
Total production 7,920,834 6,272,441 6,241,664 3,277,466
Transmission 1,431,485 1,322,034 1,248,976 1,176,479
Distribution 2,863,011 2,598,714 2,318,185 2,096,498
General 859,013 737,621 657,258 578,236
Construction work in progress 403,365 1,963,283 1,710,769 4,430,152
Nuclear fuel, at amortized cost 254,101 307,109 287,492 314,225
- ----------------------------------------------------------------------------------------------------------------------------------
Total electric plant 13,731,809 13,201,202 12,464,344 11,873,056
Steam Heat Plant - - 7 15,266
- ----------------------------------------------------------------------------------------------------------------------------------
Total utility plant 13,731,809 13,201,202 12,464,351 11,888,322
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated Provision for Depreciation:
Electric 2,762,937 2,445,404 2,193,395 2,001,605
Steam heat - - (5) 7,841
- ----------------------------------------------------------------------------------------------------------------------------------
Total accumulated provision for depreciation 2,762,937 2,445,404 2,193,390 2,009,446
- ----------------------------------------------------------------------------------------------------------------------------------
Total 10,968,872 10,755,798 10,270,961 9,878,876
Less property-related accumulated deferred income taxes 1,313,626 1,178,291 1,077,747 1,020,271
- ----------------------------------------------------------------------------------------------------------------------------------
Total 9,655,246 9,577,507 9,193,214 8,858,605
- ----------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - - -
Nuclear decommissioning trusts - - - -
Miscellaneous 69,839 66,677 54,148 50,749
- ----------------------------------------------------------------------------------------------------------------------------------
Total 69,839 66,677 54,148 50,749
- ----------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 159,792 193,767 761,644 694,474
Investment securities - - - -
Receivables, net 347,899 320,018 342,315 374,590
Accrued utility revenues 93,786 66,265 68,370 55,513
Fossil fuel stock, at average cost 214,487 225,274 262,752 220,206
Materials and supplies, at average cost 208,084 164,174 116,652 86,658
Prepayments 116,342 121,840 113,381 44,800
Vacation pay deferred 35,238 34,418 30,100 29,800
- ----------------------------------------------------------------------------------------------------------------------------------
Total 1,175,628 1,125,756 1,695,214 1,506,041
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - - -
Deferred Plant Vogtle costs 322,116 269,958 172,990 -
Debt expense, being amortized 13,032 12,476 12,985 12,860
Premium on reacquired debt, being amortized 61,889 62,352 51,509 26,914
Miscellaneous 74,596 15,813 17,434 9,894
- ----------------------------------------------------------------------------------------------------------------------------------
Total 471,633 360,599 254,918 49,668
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $11,372,346 $11,130,539 $11,197,494 $10,465,063
==================================================================================================================================
</TABLE>
II-135B
<PAGE>
BALANCE SHEETS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 344,250 $ 344,250 $ 344,250
Paid-in capital 2,134,886 2,384,444 2,384,348
Premium on preferred stock 371 413 413
Earnings retained in the business 1,674,774 1,569,905 1,412,543
- -----------------------------------------------------------------------------------------------------------------------------
Total common equity 4,154,281 4,299,012 4,141,554
Preferred stock 464,611 692,787 692,787
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes 325,000 100,000 100,000
Long-term debt 3,200,419 3,315,460 3,757,823
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 8,144,311 8,407,259 8,692,164
- -----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 207,300 178,000 202,200
Commercial paper 223,196 222,330 222,602
Preferred stock due within one year 49,028 - -
Long-term debt due within one year 60,622 150,446 167,420
Accounts payable 329,914 389,156 355,067
Customer deposits 64,901 53,145 47,017
Taxes accrued 116,158 104,392 93,019
Interest accrued 79,936 96,162 110,256
Vacation pay accrued 38,597 34,233 39,720
Miscellaneous 114,530 137,184 70,006
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,284,182 1,365,048 1,307,307
- -----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,522,945 2,510,458 2,477,661
Accumulated deferred investment tax credits 415,477 432,184 453,121
Disallowed Plant Vogtle capacity buyback costs 57,250 58,514 60,490
Deferred credits related to income taxes 382,381 410,016 433,334
Miscellaneous 264,505 286,796 288,581
- -----------------------------------------------------------------------------------------------------------------------------
Total 3,642,558 3,697,968 3,713,187
- -----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $13,071,051 $13,470,275 $13,712,658
=============================================================================================================================
</TABLE>
<PAGE>
II-136
BALANCE SHEETS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 344,250 $ 344,250 $ 344,250 $ 344,250
Paid-in capital 2,384,348 2,384,140 2,383,800 2,383,800
Premium on preferred stock 413 467 489 1,089
Earnings retained in the business 1,316,447 1,159,380 1,038,012 944,774
- ----------------------------------------------------------------------------------------------------------------------------------
Total common equity 4,045,458 3,888,237 3,766,551 3,673,913
Preferred stock 692,787 692,792 607,796 607,796
Preferred stock subject to mandatory redemption - 6,250 118,750 125,000
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes - - - -
Long-term debt 4,031,387 4,131,016 4,553,189 5,000,225
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 8,769,632 8,718,295 9,046,286 9,406,934
- ----------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 406,700 400,200 199,000 -
Commercial paper 75,527 133,471 - -
Preferred stock due within one year - 63,750 6,250 -
Long-term debt due within one year 10,543 95,823 54,976 204,906
Accounts payable 324,044 317,351 275,932 310,676
Customer deposits 45,922 45,145 41,623 38,144
Taxes accrued 153,493 138,289 161,117 84,185
Interest accrued 110,497 132,319 151,171 175,959
Vacation pay accrued 40,060 38,694 38,531 33,677
Miscellaneous 64,527 89,355 106,810 135,392
- ----------------------------------------------------------------------------------------------------------------------------------
Total 1,231,313 1,454,397 1,035,410 982,939
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,479,720 - - -
Accumulated deferred investment tax credits 478,334 515,539 540,134 576,837
Disallowed Plant Vogtle capacity buyback costs 63,067 72,201 109,537 135,926
Deferred credits related to income taxes 452,819 - - -
Miscellaneous 261,225 204,010 111,171 73,983
- ----------------------------------------------------------------------------------------------------------------------------------
Total 3,735,165 791,750 760,842 786,746
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $13,736,110 $10,964,442 $10,842,538 $11,176,619
==================================================================================================================================
</TABLE>
<PAGE>
BALANCE SHEETS
Georgia Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 344,250 $ 344,250 $ 344,250 $ 344,250
Paid-in capital 2,383,800 2,383,800 2,208,800 1,980,800
Premium on preferred stock 1,089 1,089 1,089 3,074
Earnings retained in the business 1,131,518 1,076,931 984,043 1,141,077
- ----------------------------------------------------------------------------------------------------------------------------------
Total common equity 3,860,657 3,806,070 3,538,182 3,469,201
Preferred stock 607,844 657,844 657,844 732,844
Preferred stock subject to mandatory redemption 155,000 162,500 166,250 112,500
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes - - - -
Long-term debt 5,054,001 4,861,378 4,825,760 4,464,857
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 9,677,502 9,487,792 9,188,036 8,779,402
- ----------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - 302,261 -
Commercial paper - - - -
Preferred stock due within one year 53,750 3,750 3,750 7,500
Long-term debt due within one year 54,712 42,001 65,774 47,683
Accounts payable 372,968 429,807 446,004 488,910
Customer deposits 36,255 34,221 31,106 29,520
Taxes accrued 91,424 130,686 114,947 140,968
Interest accrued 162,513 170,090 162,439 150,145
Vacation pay accrued 35,238 34,418 30,100 29,800
Miscellaneous 130,546 51,289 62,364 70,595
- ----------------------------------------------------------------------------------------------------------------------------------
Total 937,406 896,262 1,218,745 965,121
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - - -
Accumulated deferred investment tax credits 601,248 632,111 640,694 665,447
Disallowed Plant Vogtle capacity buyback costs 73,111 80,585 79,376 -
Deferred credits related to income taxes - - - -
Miscellaneous 83,079 33,789 70,643 55,093
- ----------------------------------------------------------------------------------------------------------------------------------
Total 757,438 746,485 790,713 720,540
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $11,372,346 $11,130,539 $11,197,494 $10,465,063
==================================================================================================================================
</TABLE>
II-137B
<PAGE>
GEORGIA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1993 $ 100,000 5-1/2% $ 100,000 4/1/98
1992 195,000 6-1/8% 195,000 9/1/99
1993 100,000 6% 100,000 3/1/00
1992 100,000 7% 100,000 10/1/00
1992 150,000 6-7/8% 150,000 9/1/02
1993 200,000 6-5/8% 200,000 4/1/03
1993 75,000 6.35% 75,000 8/1/03
1993 50,000 6-7/8% 50,000 4/1/08
1992 100,000 8-5/8% 60,258 6/1/22
1993 160,000 7.95% 138,250 2/1/23
1993 100,000 7-5/8% 84,000 3/1/23
1993 75,000 7-3/4% 70,000 4/1/23
1993 125,000 7.55% 120,000 8/1/23
1995 75,000 7.70% 62,000 5/1/25
1996 10,000 6.07% 10,000 12/1/05
========== ==========
$1,615,000 $1,514,508
========== ==========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1995 $ 50,000 4-3/8% $ 50,000 11/1/00
1992 38,800 5.70% 38,800 9/1/04
1993 46,790 5-3/8% 46,790 3/1/05
1995 57,000 5% 57,000 9/1/05
1991 10,450 Variable 10,450 7/1/11
1987 90,000 8-3/8% 90,000 7/1/17
1987 50,000 9-3/8% 50,000 12/1/17
1993 26,700 6% 26,700 3/1/18
1989 50,000 6.35% 50,000 5/1/19
1991 8,500 6.25% 8,500 7/1/19
1991 10,125 6.25% 10,125 7/1/21
1992 13,155 Variable 13,155 5/1/22
1992 75,000 6.20% 75,000 8/1/22
1992 35,000 6.20% 35,000 9/1/22
1993 11,935 5-3/4% 11,935 9/1/23
1993 60,000 5-3/4% 60,000 9/1/23
1994 28,065 5.40% 28,065 1/1/24
1994 175,000 Variable 175,000 7/1/24
1994 125,000 6.60% 125,000 7/1/24
1994 60,000 6-3/8% 60,000 8/1/24
1994 43,420 6-3/4% 43,420 10/1/24
1994 20,000 Variable 20,000 10/1/24
1994 20,000 Variable 20,000 10/1/24
1994 38,725 6-5/8% 38,725 10/1/24
1994 10,000 5.90% 10,000 12/1/24
1994 7,000 5.90% 7,000 12/1/24
1995 73,535 6.10% 73,535 4/1/25
1995 75,000 Variable 75,000 4/1/25
1995 45,000 Variable 45,000 7/1/25
1995 40,000 Variable 40,000 7/1/25
1995 71,580 6% 71,580 7/1/25
1995 35,585 Variable 35,585 9/1/25
1995 30,000 Variable 30,000 9/1/25
1995 27,000 Variable 27,000 9/1/25
1996 51,345 Variable 51,345 6/1/23
1996 15,480 Variable 15,480 9/1/26
1996 46,000 Variable 46,000 9/1/26
========== ==========
$1,671,190 $1,671,190
========== ==========
</TABLE>
II-138
<PAGE>
GEORGIA POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1996 (Continued)
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiaries Substantially All of Whose
Assets Are Junior Subordinated Debentures or Notes
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Preferred Securities Interest Amount
Series Outstanding Rate Outstanding
-----------------------------------------------------------------------------
(Thousands)
1994 4,000,000(1) 9% $100,000(1)
1996 9,000,000(2) 7.75% 225,000(2)
---------- --------
13,000,000 $325,000
========== ========
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
-----------------------------------------------------------------------------
(Thousands)
(3) 14,090 $5.00 $ 1,409
1953 100,000 $4.92 10,000
1954 433,774 $4.60 43,378
1961 70,000 $4.96 7,000
1962 70,000 $4.60 7,000
1963 70,000 $4.60 7,000
1964 50,000 $4.60 5,000
1965 60,000 $4.72 6,000
1966 90,000 $5.64 9,000
1967 120,000 $6.48 12,000
1968 100,000 $6.60 10,000
1971 300,000 $7.72 30,000
1992 1,961,100 $1.90 49,028
1992 2,166,200 $1.9875 54,155
1992 2,350,300 $1.9375 58,757
1992 1,156,500 $1.925 28,912
1993 3,000,000 Adjustable 75,000
1993 4,000,000 Adjustable 100,000
----------- --------
16,111,964 $513,639
=========== ========
</TABLE>
(1) Issued by Georgia Power Capital, L.P., and guaranteed to the extent
Georgia Power Capital has funds by GEORGIA.
(2) Issued by Georgia Power Capital Trust I and guaranteed to the extent
Georgia Power Capital Trust I has funds by GEORGIA.
(3) Issued in exchange for $5.00 preferred outstanding at the time of company
formation.
II-139
<PAGE>
GEORGIA POWER COMPANY
SECURITIES RETIRED DURING 1996
First Mortgage Bonds
Principal Interest
Series Amount Rate
- --------------------------------------------------------------------------------
(Thousands)
1992 $ 110 8-5/8%
1993 150,000 4-3/4%
1993 21,750 7.95%
1993 16,000 7-5/8%
1993 5,000 7-3/4%
1993 5,000 7.55%
1995 13,000 7.70%
========
$210,860
========
Pollution Control Bonds
Principal Interest
Series Amount Rate
- -------------------------------------------------------------------------------
(Thousands)
1976 $ 1,920 6-3/4%
1977 1,940 6.40%
1978 8,060 6-3/8%
1986 56,400 8%
1991 51,345 7.25%
--------
$119,665
========
Preferred Stock
Principal Dividend
Series Amount Rate
- --------------------------------------------------------------------------------
(Thousands)
1972 $ 75,000 $7.80
1992 972 $1.90
1992 845 $1.9875
1992 1,243 $1.9375
1992 1,088 $1.925
1991 100,000 $2.125
--------
$179,148
========
II-140
GULF POWER COMPANY
FINANCIAL SECTION
II-141
<PAGE>
MANAGEMENT'S REPORT
Gulf Power Company 1996 Annual Report
The management of Gulf 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 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 Gulf Power Company in conformity with generally accepted accounting
principles.
/s/ Travis J. Bowden
Travis J. Bowden
President and Chief Executive Officer
/s/ Arlan E. Scarbrough
Arlan E. Scarbrough
Chief Financial Officer
February 12, 1997
II-142
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Gulf Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Gulf Power Company (a Maine corporation and a wholly owned subsidiary of
Southern Company) as of December 31, 1996 and 1995, and the related statements
of income, retained earnings, paid-in capital, and cash flows for each of the
three years in the period ended December 31, 1996. 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 II-151 through II-167)
referred to above present fairly, in all material respects, the financial
position of Gulf Power Company as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
II-143
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Gulf Power Company 1996 Annual Report
RESULTS OF OPERATIONS
Earnings
Gulf Power Company's 1996 net income after dividends on preferred stock was
$57.8 million, an increase of $0.6 million over the prior year. This improvement
is primarily attributable to higher retail revenues and lower costs related to
the work force reduction program implemented last year, offset somewhat by an
increase in other operating expenses.
In 1995, earnings were $57.2 million, representing an increase of $2 million
compared to the prior year. Earnings in 1995 were significantly affected by
higher retail revenues due to exceptionally hot summer weather and lower
interest charges on long-term debt.
The return on average common equity for 1996 and 1995 was 13.27 percent.
Revenues
Operating revenues increased in 1996 and 1995 as a result of the following
factors:
Increase (Decrease)
From Prior Year
-------------------------------------
1996 1995 1994
-------------------------------------
(in thousands)
Retail --
Sales growth $ 7,123 $ 3,647 $ 7,126
Weather (1,057) 9,749 (4,631)
Regulatory cost
recovery and other 5,649 22,502 8,938
- -----------------------------------------------------------------
Total retail 11,715 35,898 11,433
- -----------------------------------------------------------------
Sales for resale--
Non-affiliates 2,788 (5,698) (6,098)
Affiliates (857) 1,266 (5,813)
- -----------------------------------------------------------------
Total sales for resale 1,931 (4,432) (11,911)
Other operating
revenues 1,642 8,798 (3,851)
- -----------------------------------------------------------------
Total operating
revenues $15,288 $40,264 $(4,329)
=================================================================
Percent change 2.5% 7.0% (0.7)%
- -----------------------------------------------------------------
Retail revenues of $531 million in 1996 increased $11.7 million or 2.3
percent from last year, compared with an increase of 7.4 percent in 1995 and 2.4
percent in 1994. Residential and commercial revenues increased as a result of
customer growth in 1996. This increase was partially offset by milder summer
weather in 1996 compared to the hotter-than-normal summer weather of 1995.
The increase in regulatory cost recovery and other retail revenues is
primarily attributable to the recovery of increased purchased power capacity
costs from affiliated companies. Regulatory cost recovery and other includes
recovery provisions for fuel expense and the energy component of purchased power
costs; energy conservation costs; purchased power capacity costs; and
environmental compliance costs. The recovery provisions equal the related
expenses and have no material effect on net income. See Notes 1 and 3 to the
financial statements under "Revenues and Regulatory Cost Recovery Clauses" and
"Environmental Cost Recovery," respectively, for further information.
Sales for resale were $81 million in 1996, increasing $1.9 million or 2.4
percent from 1995. Revenues from sales to utilities outside the service area
under long-term contracts consist of capacity and energy components. Capacity
revenues reflect the recovery of fixed costs and a return on investment under
the contracts. Energy is generally sold at variable cost. The capacity and
energy components under these long-term contracts were as follows:
1996 1995 1994
-----------------------------------------
(in thousands)
Capacity $25,400 $25,870 $30,926
Energy 19,804 18,598 18,456
- -------------------------------------------------------------
Total $45,204 $44,468 $49,382
=============================================================
Capacity revenues decreased in 1996 and 1995, primarily reflecting the
decline in net plant investment.
Sales to affiliated companies vary from year to year depending on demand and
the availability and cost of generating resources at each company. These sales
have little impact on earnings.
II-144
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1996 Annual Report
The increase in other operating revenues for 1996 and 1995 is primarily due
to increased amounts collected to recover newly-imposed county franchise fees.
These fees are included in taxes other than income taxes and thus, there is no
impact on earnings. Other changes for 1996 and 1995 are primarily attributable
to adjustments in the regulatory cost recovery clauses for differences between
recoverable costs and the amounts actually reflected in revenues. See Notes 1
and 3 to the financial statements under "Revenues and Regulatory Cost Recovery
Clauses" and "Environmental Cost Recovery," respectively, for further
discussion.
Kilowatt-hour sales for 1996 and percent changes in sales since 1994 are
reported below.
KWH Percent Change
------------ ---------------------------
1996 1996 1995 1994
------------ ---------------------------
(millions)
Residential 4,160 3.6% 7.0% 1.1%
Commercial 2,809 3.7 6.3 4.8
Industrial 1,808 0.7 (2.8) (9.0)
Other 17 2.7 (0.1) -
------------
Total retail 8,794 3.0 4.5 (0.3)
Sales for resale
Non-affiliates 1,534 9.9 (1.6) (2.8)
Affiliates 710 (6.5) (13.1) (15.2)
------------
Total 11,038 3.3 2.2 (2.1)
==================================================================
Retail sales increased in 1996 due to customer growth of 2.7 percent in the
residential class and 4.6 percent in the commercial class. The increase in
energy sales to the industrial class is a result of the Real-Time-Pricing
program. The price structure of this program has successfully encouraged
participating industrial customers to lower their peak demand requirements and
increase their purchases of energy during off-peak periods. See "Future Earnings
Potential" for information on the Company's initiatives to remain competitive
and to meet conservation goals set by the Florida Public Service Commission
(FPSC). In 1995, retail sales increased from the prior year due to hot summer
weather and an increase in residential and commercial customers. Industrial
sales were lower due to the reclassification of a major customer from the
industrial to commercial class and temporary production delays of other
industrial customers.
In 1996, energy sales for resale to non-affiliates increased 9.9 percent and
are predominantly related to unit power sales under long-term contracts to other
Florida utilities and bulk power sales under short-term contracts to other
non-affiliated utilities. Energy sales to affiliated companies vary from year
to year as mentioned previously.
Expenses
Total operating expenses for 1996 increased $12.7 million or 2.4 percent from
1995. The increase is due to higher purchased power expenses, other operation
expenses, depreciation expenses, and taxes. In 1995, total operating expenses
increased $41.3 million or 8.5 percent from 1994 primarily due to higher fuel
and purchased power expenses, maintenance expenses, and taxes other than income
taxes, offset by lower depreciation and amortization expenses.
Fuel and purchased power expenses for 1996 increased $4 million or 1.8
percent from 1995. The change reflects the increase in purchased power from
affiliated companies due to scheduled maintenance outages at Plant Crist and
Plant Daniel during the first half of 1996. This increase was partially offset
by a slight decrease in fuel expense reflecting a lower cost of fuel. In 1995,
fuel and purchased power expenses increased $30.1 million or 15.5 percent from
1994 reflecting the increase in generation due to the extreme weather conditions
during the summer of 1995 and slightly higher fuel costs.
The amount and sources of generation and the average cost of fuel per net
kilowatt-hour generated were as follows:
1996 1995 1994
-----------------------------
Total generation
(millions of kilowatt-hours) 10,214 9,828 9,559
Sources of generation
(percent)
Coal 99.4 99.5 99.8
Oil and gas 0.6 0.5 0.2
Average cost of fuel per net
kilowatt-hour generated
(cents)
Coal 1.99 2.08 2.00
Oil and gas 6.41 3.56 6.93
Total 2.02 2.09 2.01
- ------------------------------------------------------------------
II-145
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1996 Annual Report
In 1996, other operation expenses increased $1.8 million or 1.5 percent from
the 1995 level. The increase is primarily attributable to an increase in
administrative and general expenses including costs associated with the approved
increase of the Company's annual accrual to the accumulated provision for
property damage to amortize deferred storm charges and restore the account
balance to a reasonable level. Higher costs related to the buyouts and
renegotiation of coal supply contracts and costs associated with the Company's
pro rata share of affiliated companies' workforce reduction costs were offset by
a decrease in costs related to the Company's work force reduction program
implemented in the prior year. In 1995, other operation expenses decreased $0.5
million due to a $9.4 million reduction in the amortization costs of coal
buyouts and renegotiation of coal supply contracts. This was offset by the $7
million accrual for benefits to be provided by the Company under the work force
reduction program implemented during the fourth quarter of 1995. These costs are
further discussed in Notes 2 and 5 to the financial statements under "Work Force
Reduction Programs" and "Fuel Commitments."
Maintenance expense in 1996 decreased $0.9 million or 1.7 percent from the
prior year. This is attributable to a decrease in scheduled maintenance of
production facilities. In 1995, maintenance expense increased $5.2 million or
11.2 percent from the prior year due to higher power production maintenance
related to non-recurring items and higher distribution maintenance.
Depreciation and amortization expenses increased $1.5 million or 2.8 percent
from 1995. This change is primarily due to an increase in depreciation expense
reflecting an increase in the average investment in distribution property as a
result of favorable growth in the Company's service area. In 1995, the decrease
in depreciation and amortization expenses of $1.5 million was attributable to
property which was fully amortized by December 1994.
Federal and state income taxes increased $3.8 million or 11 percent in 1996
primarily due to an increase in taxable income. Taxes other than income taxes
increased $2.4 million or 4.9 percent primarily due to an increase in county
franchise fees as mentioned previously. In 1995, other taxes increased $7.9
million or 18.9 percent primarily due to an increase in county franchise fees.
Franchise fees are billed and collected from customers and have no impact on
earnings.
In 1996, interest expense increased $0.9 million or 3.2 percent over the
prior year. The increase is attributable to the issuance of $30 million of new
first mortgage bonds in January 1996. The increase in interest on long-term debt
was partially offset by a decrease in interest on notes payable as a result of a
lower average amount of short-term notes outstanding. Interest expense in 1995
decreased $2.5 million or 7.8 percent under the prior year. The decrease was
attributable to lower interest on long-term debt reflecting a lower average
principal balance outstanding and the refinancing of $42 million of pollution
control bonds in December 1994.
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 cost 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 potentially less
regulated more competitive environment.
A work force reduction program was implemented in the fourth quarter of 1995.
The cost of the program reduced earnings by $0.7 million in 1996 and $4.3
million in 1995. The estimated savings from this program in 1996 were $2.7
million and will be approximately $3.9 million annually beginning in 1997.
II-146
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1996 Annual Report
In December 1995, the FPSC approved the Company's request to increase the
amount of its annual accrual to the accumulated provision for property damage
account from $1.2 million to $3.5 million due to significant hurricane-related
charges to the account during 1995. Refer to Note 1 to the financial statements
under "Provision for Property Damage" for further discussion.
Future earnings in the near term will depend upon growth in energy sales,
which is 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 having a dramatic effect on the future of the
electric utility industry. The Energy Act promotes energy efficiency,
alternative fuel use, and increased wholesale 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 the Company's transmission
network in order to sell electricity to other utilities. This enhances the
incentive for IPPs to build cogeneration plants for industrial and commercial
customers and sell energy generation to utilities. Also, electricity sales for
resale rates are being driven down by wholesale transmission access and numerous
potential new energy suppliers, including power marketers and brokers. The
Company is aggressively working to maintain and expand its share of wholesale
sales in the southeastern power markets.
Various federal and state initiatives designed to promote wholesale and
retail competition, among other things, include proposals that would allow
customers to choose their electricity provider. As the initiatives
materialize, the structure of the utility industry could radically change.
Certain initiatives could result in a change in the ownership and/or
operation of generation and transmission facilities. Numerous issues must be
resolved, including significant ones relating to transmission pricing and
recovery of stranded investments. Being a low-cost producer could provide
significant opportunities to increase market share and profitability in
markets that evolve with changing regulation. 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.
The FPSC set conservation goals for the Company, beginning in 1995, which
require programs to reduce 154 megawatts of summer peak demand and 65,000 KWH of
sales by the year 2004. In 1995, the FPSC approved the Company's programs to
accomplish these goals. The Company can experience net growth as long as the
filed programs achieve the intended reductions in peak demand and KWH sales. In
response to these goals and seeking to remain competitive with other electric
utilities, the Company has developed initiatives which emphasize price
flexibility and competitive offering of energy efficiency products and services.
These initiatives will enable customers to lower or alter their peak energy
requirements. Besides promoting energy efficiency, another benefit of these
initiatives could be the ability to defer the need to construct additional
generating capacity.
On September 3, 1996, the FPSC approved a new optional Commercial/Industrial
Service Rider (CISR), which is applicable to the rate schedules for the
Company's largest existing and potential customers who are able to show they
have viable alternatives to purchasing the Company's energy services. The CISR,
approved as a pilot program, provides the flexibility needed to enable the
Company to offer its services in a more competitive manner to these customers.
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." Also, state of Florida legislation adopted in 1993 that
provides for recovery of prudent environmental compliance costs is discussed in
Note 3 to the financial statements under "Environmental Cost Recovery."
The Company is subject to the provisions of Financial Accounting Standards
Board 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
II-147
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1996 Annual Report
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.
FINANCIAL CONDITION
Overview
The principal changes in the Company's financial condition during 1996 were
gross property additions of $61.4 million and a decrease of $55.5 million in
notes payable. Funds for the property additions and the net decrease in
short-term notes were provided by internal sources. See the Statements of Cash
Flows for further details.
Financing Activities
The Company continued to lower its financing costs by issuing new bonds and
other debt and retiring higher-cost issues in 1996. The Company sold $55 million
of first mortgage bonds, $33.3 million of pollution control bonds, and obtained
$49.1 million of long-term bank notes. Retirements, including maturities during
1996, totaled $50.9 million of first mortgage bonds, $33.3 million of pollution
control bonds, and $34.9 million of long-term bank notes. The refinancing of
$33.3 million in pollution control bonds and $49.2 million in first mortgage
bonds will result in savings of over $1 million annually. See the Statements of
Cash Flows for further details.
Composite financing rates for the years 1994 through 1996 as of year end were
as follows:
1996 1995 1994
------------------------------
Composite interest rate on
long-term debt 6.1% 6.5% 6.5%
Composite preferred stock
dividend rate 6.4% 6.4% 6.6%
- ----------------------------------------------------------------
The decrease in the composite interest rate on long-term debt from 1995 to
1996 reflects the Company's efforts to refinance higher-cost debt. The decrease
in the composite preferred stock dividend rate in 1995 was primarily due to a
decrease in dividends on the Company's adjustable rate preferred stock,
reflecting lower interest rates.
Capital Requirements for Construction
The Company's gross property additions, including those amounts related to
environmental compliance, are budgeted at $142 million for the three years
beginning in 1997 ($47 million in 1997, $49 million in 1998, and $46 million in
1999). Actual construction costs may vary from this estimate because of changes
in such factors as: business conditions; environmental regulations; load
projections; the cost and efficiency of construction labor, equipment, and
materials; and the cost of capital. In addition, there can be no assurance that
costs related to capital expenditures will be fully recovered. The Company does
not have any such generating plants under construction, and current energy
demand forecasts do not indicate a need for any such facilities until well into
the future. However, significant construction related to maintaining and
upgrading transmission and distribution facilities and generating plants will
continue.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately $121
million will be required by the end of 1999 in connection with maturities of
long-term debt. Also, the Company will continue to retire higher-cost debt and
preferred stock and replace these securities with lower-cost capital as market
conditions and terms of the instruments 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 -- impacts the Company.
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 initially affected 28 generating units of Southern Company. As
a result of 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.
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
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<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1996 Annual Report
calendar year. The sulfur dioxide emission allowance program is expected to
minimize the cost of compliance. Southern Company's sulfur dioxide compliance
strategy is designed to use allowances as a compliance option.
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. Construction expenditures for Phase I compliance totaled
approximately $310 million for Southern Company, including approximately $50
million for Gulf Power.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as required
to meet Phase II limits. Therefore, current compliance strategy could require
total Phase II estimated construction expenditures for Southern Company of
approximately $80 million, of which $60 million remains to be spent. Phase II
compliance is not expected to have a material impact on Gulf Power. 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.
Following adoption of legislation in April of 1992 allowing electric
utilities in Florida to seek FPSC approval of their Clean Air Act Compliance
Plans, Gulf Power filed its petition for approval. The FPSC approved the
Company's plan for Phase I compliance, deferring until a later date approval of
its Phase II Plan.
An average increase of up to 2 percent in revenue requirements from the
Company's customers could be necessary to fully recover the 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.
In 1993, the Florida Legislature adopted legislation that allows a utility to
petition the FPSC for recovery of prudent environmental compliance costs that
are not being recovered through base rates or any other recovery mechanism. The
legislation is discussed in Note 3 to the financial statements under
"Environmental Cost Recovery." Substantially all of the costs for the Clean Air
Act and other new environmental legislation discussed below are expected to be
recovered through the Environmental Cost Recovery Clause.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: revisions to the ambient air quality
standards for ozone and particulate matter; emission control strategies for
ozone nonattainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
Gulf Power must comply with other environmental laws and regulations, under
which the Company could incur costs to clean up contaminated properties
currently or previously owned. The Company conducts studies to determine the
extent of any required cleanup costs and has recognized in the financial
statements costs to clean up known sites. For additional information, see Note 3
to the financial statements under "Environmental Cost Recovery."
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 Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electric and magnetic fields, and other environmental health concerns
could significantly affect the Company. The impact of new legislation -- if any
- -- will depend on the subsequent development and implementation of applicable
II-149
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1996 Annual Report
regulations. In addition, the potential exists for liability as the result of
lawsuits alleging damages caused by electric and magnetic fields.
Sources of Capital
At December 31, 1996, the Company had $0.8 million of cash and cash equivalents
and $34.5 million of unused committed lines of credit with banks to meet its
short-term cash needs. See Note 5 to the financial statements under "Bank Credit
Arrangements" for additional information.
In January 1997, Gulf Power Capital Trust I, of which the Company owns all
the common securities, issued $40 million of 7.625 percent mandatorily
redeemable preferred securities. Substantially all of the assets of the Trust
are $41 million aggregate principal amount of the Company's 7.625 percent Junior
Subordinated Notes due December 31, 2036.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations; the sale of additional first mortgage bonds, pollution control
bonds, and preferred stock; bank notes; and capital contributions from Southern
Company. If the attractiveness of current short-term interest rates continues,
the Company may maintain a higher level of short-term indebtedness than has
historically been true. The Company is required to meet certain coverage
requirements specified in its mortgage indenture and corporate charter to issue
new first mortgage bonds and preferred stock. The Company's coverage ratios are
sufficient to permit, at present interest and preferred dividend levels, any
foreseeable security sales. The amount of securities which the Company will be
permitted to issue in the future will depend upon market conditions and other
factors prevailing at that time.
II-150
<PAGE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995, and 1994
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
Revenues $616,603 $600,458 $561,460
Revenues from affiliates 17,762 18,619 17,353
--------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 634,365 619,077 578,813
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation-
Fuel 184,500 185,274 161,168
Purchased power from non-affiliates 8,300 8,594 6,761
Purchased power from affiliates 35,076 29,966 25,819
Other 115,154 113,397 113,879
Maintenance 51,050 51,917 46,700
Depreciation and amortization 56,645 55,104 56,615
Taxes other than income taxes 52,027 49,598 41,701
Federal and state income taxes (Note 8) 37,821 34,065 33,957
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 540,573 527,915 486,600
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 93,792 91,162 92,213
Other Income (Expense):
Allowance for equity funds used during
construction (Note 1) 17 36 450
Interest income 1,921 2,877 1,429
Other, net (1,695) (1,261) (780)
Income taxes applicable to other income 248 (121) 95
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 94,283 92,693 93,407
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 24,691 23,294 27,124
Other interest charges 1,882 1,674 2,442
Interest on notes payable 2,071 2,931 1,509
Amortization of debt discount, premium, and expense, net 2,087 2,014 1,834
Allowance for debt funds used during
construction (Note 1) (58) (187) (656)
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 30,673 29,726 32,253
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 63,610 62,967 61,154
Dividends on Preferred Stock 5,765 5,813 5,925
===============================================================================================================================
Net Income After Dividends on Preferred Stock $ 57,845 $ 57,154 $ 55,229
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-151
<PAGE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995, and 1994
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 63,610 $ 62,967 $ 61,154
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 71,825 75,293 86,098
Deferred income taxes 2,157 390 (6,986)
Allowance for equity funds used during construction (17) (36) (450)
Accumulated provision for property damage 4,227 (19,024) 1,013
Deferred costs of 1995 coal contract renegotiation 10,931 (12,177) -
Other, net 2,134 4,664 3,885
Changes in certain current assets and liabilities --
Receivables, net 736 (12,210) 3,540
Inventories 12,957 (618) (13,901)
Payables (7,078) 18,258 (10,159)
Taxes accrued (441) (2,803) 2,548
Current costs of 1995 coal contract renegotiation (5,099) (9,859) -
Other 4,943 (4,894) (1,938)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 160,885 99,951 124,804
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (61,386) (63,113) (78,869)
Other (2,786) 4,401 (3,493)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (64,172) (58,712) (82,362)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
First mortgage bonds 55,000 - -
Pollution control bonds 33,275 - 42,000
Other long-term debt 49,148 - 32,108
Retirements:
Preferred stock - (1,000) (1,000)
First mortgage bonds (50,930) (1,750) (48,856)
Pollution control bonds (33,275) (125) (42,100)
Other long-term debt (34,923) (13,314) (24,240)
Notes payable, net (55,500) 27,000 47,447
Payment of preferred stock dividends (5,749) (5,813) (5,925)
Payment of common stock dividends (48,300) (46,400) (44,000)
Miscellaneous (5,332) (59) (2,550)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (96,586) (41,461) (47,116)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 127 (222) (4,674)
Cash and Cash Equivalents at Beginning of Year 680 902 5,576
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 807 $ 680 $ 902
===========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $26,050 $26,161 $30,139
Income taxes $25,858 $38,537 $43,089
- ---------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
II-152
<PAGE>
BALANCE SHEETS
At December 31, 1996 and 1995
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service (Notes 1 and 6) $1,734,510 $1,695,814
Less accumulated provision for depreciation 694,245 658,806
--------------------------------------------------------------------------------------------------------------------------------
1,040,265 1,037,008
Construction work in progress 23,465 26,301
- --------------------------------------------------------------------------------------------------------------------------------
Total 1,063,730 1,063,309
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 652 740
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 807 680
Receivables-
Customer accounts receivable 67,727 69,166
Other accounts and notes receivable 3,098 3,393
Affiliated companies 1,821 802
Accumulated provision for uncollectible accounts (789) (768)
Fossil fuel stock, at average cost 28,352 37,875
Materials and supplies, at average cost (Note 1) 30,252 33,686
Current portion of deferred coal contract costs (Note 5) 16,389 12,767
Regulatory clauses under recovery (Note 1) 4,144 3,432
Prepaid income taxes 353 4,232
Other prepayments 8,833 8,000
Vacation pay deferred 4,055 4,419
- --------------------------------------------------------------------------------------------------------------------------------
Total 165,042 177,684
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 28,313 29,093
Debt expense and loss, being amortized 23,308 20,459
Deferred coal contract costs (Note 5) 13,126 33,768
Deferred storm charges (Note 1) 3,275 7,502
Miscellaneous 10,920 9,304
- --------------------------------------------------------------------------------------------------------------------------------
Total 78,942 100,126
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $1,308,366 $1,341,859
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-153
<PAGE>
BALANCE SHEETS (continued)
At December 31, 1996 and 1995
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity (Note 11) $ 435,758 $ 436,242
Preferred stock 65,102 89,602
Long-term debt 331,880 323,376
- --------------------------------------------------------------------------------------------------------------------------------
Total 832,740 849,220
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 10) 24,500 -
Long-term debt due within one year (Note 10) 40,972 31,548
Notes payable 25,000 80,500
Accounts payable-
Affiliated companies 10,274 14,447
Other 22,496 27,196
Customer deposits 13,464 13,195
Taxes accrued 8,342 9,547
Interest accrued 7,629 5,719
Regulatory clauses over recovery (Note 1) 5,884 2,800
Vacation pay accrued 4,055 4,419
Dividends declared 11,453 1,437
Miscellaneous 5,668 5,919
- --------------------------------------------------------------------------------------------------------------------------------
Total 179,737 196,727
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 163,857 162,345
Deferred credits related to income taxes (Note 8) 64,354 67,481
Accumulated deferred investment tax credits 33,760 36,052
Accumulated provision for postretirement benefits (Note 2) 18,339 16,301
Miscellaneous 15,579 13,733
- --------------------------------------------------------------------------------------------------------------------------------
Total 295,889 295,912
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 7)
Total Capitalization and Liabilities $1,308,366 $1,341,859
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-154
<PAGE>
STATEMENTS OF CAPITALIZATION
At December 31, 1996 and 1995
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, without par value --
Authorized and outstanding --
992,717 shares in 1996 and 1995 $ 38,060 $ 38,060
Paid-in capital 218,438 218,438
Premium on preferred stock 81 81
Retained earnings (Note 11) 179,179 179,663
- ---------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 435,758 436,242 52.3% 51.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$10 par value --
Authorized -- 10,000,000 shares,
Outstanding -- 2,580,000 shares at December 31, 1996
$25 stated capital --
6.72% 20,000 20,000
7.00% 14,500 14,500
7.30% 15,000 15,000
Adjustable Rate -- at January 1, 1997: 5.01% 15,000 15,000
$100 par value --
Authorized -- 801,626 shares
Outstanding -- 251,026 shares at December 31, 1996
4.64% 5,102 5,102
5.16% 5,000 5,000
5.44% 5,000 5,000
7.52% 5,000 5,000
7.88% 5,000 5,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $5,742,000) 89,602 89,602
- ---------------------------------------------------------------------------------------------------------------------------------
Less amount due within one year (Note 10) 24,500 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 65,102 89,602 7.8 10.5
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-155
<PAGE>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1996 and 1995
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Long-term Debt:
First mortgage bonds --
Maturity Interest Rates
August 1, 1997 5.875% 25,000 25,000
April 1, 1998 5.55% 15,000 15,000
July 1, 1998 5.00% 30,000 30,000
July 1, 2003 6.125% 30,000 30,000
November 1, 2006 6.50% 25,000 -
September 1, 2008 9.00% - 930
December 1, 2021 8.75% - 50,000
January 1, 2026 6.875% 30,000 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 155,000 150,930
Pollution control obligations (Note 9) 169,630 169,630
Other long-term debt (Note 9) 51,299 37,074
Unamortized debt premium (discount), net (3,077) (2,710)
- ---------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $22,751,000) 372,852 354,924
Less amount due within one year (Note 10) 40,972 31,548
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 331,880 323,376 39.9 38.1
- ---------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $832,740 $849,220 100.0% 100.0%
=================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-156
<PAGE>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1996, 1995, and 1994
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $179,663 $168,951 $157,773
Net income after dividends on preferred stock 57,845 57,154 55,229
Dividends on common stock (58,300) (46,400) (44,000)
Preferred stock transactions, net (29) (42) (51)
===========================================================================================================================
Balance at End of Year (Note 11) $179,179 $179,663 $168,951
===========================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1996, 1995, and 1994
Gulf Power Company 1996 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $218,438 $218,380 $218,282
Contributions to capital by parent company - 58 98
===========================================================================================================================
Balance at End of Year $218,438 $218,438 $218,380
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-157
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Gulf Power Company 1996 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Gulf Power Company is a wholly owned subsidiary of Southern Company, which is
the parent company of five operating companies, a system service company,
Southern Communications Services (Southern Communications), Southern Energy,
Inc. (Southern Energy), 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,
Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric) provide
electric service in four southeastern states. Gulf Power Company provides
electric service to the northwest panhandle of Florida. Contracts among the
operating 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. The system service company provides, at cost,
specialized services to 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 Energy designs, builds, owns and operates power production
and delivery facilities and provides a broad range of energy related services in
the United States and international markets. Southern Nuclear provides services
to Southern Company's nuclear power plants. Southern Development develops new
business opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both 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 Florida Public Service Commission
(FPSC). The Company follows generally accepted accounting principles and
complies with the accounting policies and practices prescribed by the FPSC. 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.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are to be credited to
customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to the following:
1996 1995
-------------------------
(in thousands)
Current & deferred
coal contract costs $ 29,515 $ 46,535
Deferred income taxes 28,313 29,093
Deferred loss on reacquired debt 20,386 17,015
Environmental remediation 7,577 5,789
Vacation pay 4,055 4,419
Regulatory clauses (over) under
recovery, net (1,740) 632
Deferred income tax credits (64,354) (67,481)
Deferred storm charges 3,275 7,502
Other, net (1,202) (1,510)
- -----------------------------------------------------------------
Total $ 25,825 $ 41,994
=================================================================
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.
II-158
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
Revenues and Regulatory Cost Recovery Clauses
The Company accrues revenues for service rendered but unbilled at the end of
each fiscal period. The Company has a diversified base of customers and no
single customer or industry comprises 10 percent or more of revenues. In 1996,
uncollectible accounts continued to average significantly less than 1 percent of
revenues.
Fuel costs are expensed as the fuel is used. The Company's electric rates
include provisions to periodically adjust billings for fluctuations in fuel and
the energy component of purchased power costs. The Company also has similar cost
recovery clauses for energy conservation costs, purchased power capacity costs,
and environmental compliance costs. Revenues are adjusted monthly for
differences between recoverable costs and amounts actually reflected in current
rates.
Depreciation and Amortization
Depreciation of the original cost of depreciable utility plant in service is
provided primarily by using composite straight-line rates, which approximated
3.6 percent in 1996 and 1995 and 3.8 percent in 1994. 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. Also, the provision for depreciation expense includes an amount
for the expected cost of removal of facilities.
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. The Company is included
in the consolidated federal income tax return of Southern Company. See Note 8
for further information related to income taxes.
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 FPSC-approved composite rate used to calculate AFUDC
was 7.27 percent for 1996, 1995, and 1994. AFUDC amounts for 1996, 1995, and
1994 were $75 thousand, $223 thousand, and $1.1 million, respectively. The
decrease in 1996 and 1995 is primarily due to no long-term construction projects
being implemented in 1996 and due to the completion of major construction
projects at Plant Daniel at the end of 1994, respectively.
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.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
II-159
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
Financial Instruments
The carrying amounts and fair values of the Company's long-term debt are shown
in the table below:
Carrying Fair
Amount Value
----------------------------
(in thousands)
Long-term debt
At December 31, 1996 $372,852 $373,394
At December 31, 1995 $354,924 $365,305
- -------------------------------------------------------------
The fair values for long-term debt were based on either closing market prices
or closing prices 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.
Provision for Injuries and Damages
The Company is subject to claims and suits arising in the ordinary course of
business. As permitted by regulatory authorities, the Company provides for the
uninsured costs of injuries and damages by charges to income amounting to $1.2
million annually. The expense of settling claims is charged to the provision to
the extent available. The accumulated provision of $1.8 million and $1.7 million
at December 31, 1996 and 1995, respectively, is included in miscellaneous
current liabilities in the accompanying Balance Sheets.
Provision for Property Damage
The Company is self-insured for the full cost of storm and other damages to its
transmission and distribution property. At December 31, 1996, the accumulated
provision for property damage had a negative balance of $3.3 million, reflecting
the remaining deferred charges for expenses relating to Hurricanes Erin and Opal
during 1995. The negative balance was reclassified to deferred storm charges in
the accompanying Balance Sheets. In December 1995, the FPSC approved the
Company's request to increase the amount of its annual accrual to the
accumulated provision for property damage account from $1.2 million to $3.5
million. The FPSC approved this amount pending the results of a study it ordered
the Company to file addressing the appropriate reserve level and annual accrual
amount. The required study was filed with the FPSC, and in November 1996, the
FPSC reaffirmed an annual accrual of $3.5 million and approved a target level
for the accumulated provision account between $25.1 and $36 million. The FPSC
has also given the Company the flexibility to increase its annual accrual amount
above $3.5 million, when the Company believes it is in a position to do so,
until the account balance reaches $12 million. Therefore, during 1996, the
Company accrued $4.5 million to the accumulated provision for property damage.
The expense of repairing damages from major storms and other uninsured property
damages is charged to the provision account.
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. 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
trust fund 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.
II-160
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
Postretirement Benefits
The Company provides certain medical care and life insurance benefits for
retired employees. Substantially all employees may become eligible for these
benefits when they retire. Trusts are funded to the extent deductible under
federal income tax regulations or to the extent required by the Company's
regulatory commissions. Amounts funded are primarily invested in equity and
fixed-income securities. 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 FASB
Statement Nos. 87 and 106, respectively. The funded status of the plans at
December 31 was as follows:
Pension
--------------------------
1996 1995
---------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $ 87,245 $ 87,652
Non-vested benefits 5,101 4,284
- --------------------------------------------------------------------
Accumulated benefit obligation 92,346 91,936
Additional amounts related to
projected salary increases 31,121 29,073
- --------------------------------------------------------------------
Projected benefit obligation 123,467 121,009
Less:
Fair value of plan assets 191,152 180,980
Unrecognized net gain (58,900) (48,438)
Unrecognized prior service cost 5,618 2,578
Unrecognized transition asset (6,485) (7,187)
- --------------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 7,918 $ 6,924
====================================================================
Postretirement Benefits
---------------------------
1996 1995
---------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees and dependents $10,478 $ 9,759
Employees eligible to retire 5,484 4,921
Other employees 17,694 17,646
- ----------------------------------------------------------------
Accumulated benefit obligation 33,656 32,326
Less:
Fair value of plan assets 7,996 7,050
Unrecognized net loss 1,531 1,538
Unrecognized transition
obligation 5,790 7,437
- -----------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $18,339 $16,301
================================================================
In 1995, the Company 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 $7.1 million.
The weighted average rates assumed in the actuarial calculations were:
1996 1995 1994
--------------------------------
Discount 7.8% 7.3% 8.0%
Annual salary increase 5.3% 4.8% 5.5%
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 9.3
percent for 1996, decreasing gradually to 5.8 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 at December 31, 1996, by $2.6 million and the aggregate of the
service and interest cost components of the net retiree cost by $254 thousand.
II-161
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
Components of the plans' net costs are shown below:
Pension
-------------------------------------
1996 1995 1994
-------------------------------------
(in thousands)
Benefits earned during
the year $ 3,880 $ 3,867 $ 3,775
Interest cost on projected
benefit obligation 9,129 8,042 7,484
Actual (return) loss on
plan assets (21,021) (33,853) 3,721
Net amortization
and deferral 5,920 19,619 (17,054)
- -------------------------------------------------------------------
Net pension income $ (2,092) $ (2,325) $ (2,074)
===================================================================
Of the above net pension amounts, pension income of $1.5 million in 1996,
$1.8 million in 1995, and $1.5 million in 1994 were recorded in operating
expenses, and the remainder was recorded in construction and other accounts.
Postretirement Benefits
----------------------------------
1996 1995 1994
---------------------------------
(in thousands)
Benefits earned during the year $ 939 $1,259 $1,362
Interest cost on accumulated
benefit obligation 2,330 2,520 2,535
Amortization of transition
obligation 356 853 854
Actual (return) loss on plan assets (797) (1,268) 129
Net amortization and deferral 318 742 (591)
- ---------------------------------------------------------------------
Net postretirement cost $3,146 $4,106 $4,289
=====================================================================
Of the above net postretirement costs recorded, $2.3 million in 1996 and $3.1
million in 1995 and 1994 were charged to operating expenses, and the remainder
was recorded in construction and other accounts.
Work Force Reduction Programs
The Company implemented a voluntary work force reduction program in the fourth
quarter of 1995 and recorded $1.2 million in 1996 and $7 million in 1995 for the
total pre-tax cost related to the program. The Company has also incurred its pro
rata share for the costs of affiliated companies' programs. The costs related to
these programs were $2.1 million for 1996, $1 million for 1995, and $1.3 million
for 1994.
3. LITIGATION AND REGULATORY MATTERS
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.
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. 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 remains 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, as
well as certain other contracts that reference these proceedings in determining
return on common equity, and if refunds were ordered, the amount of refunds
could range up to approximately $160 million for Southern Company, including
approximately $10 million for the Company at December 31, 1996. However,
management believes that rates are not excessive and that refunds are not
justified.
II-162
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
Environmental Cost Recovery
In April 1993, the Florida Legislature adopted legislation for an Environmental
Cost Recovery Clause (ECRC), which allows a utility to petition the FPSC for
recovery of all prudent environmental compliance costs that are not being
recovered through base rates or any other recovery mechanism. Such environmental
costs include operation and maintenance expense, emission allowance expense,
depreciation, and a return on invested capital.
In January 1994, the FPSC approved the Company's initial petition under the
ECRC for recovery of environmental costs. Beginning with this initial period
through September 1996, recovery under the ECRC was determined semi-annually. In
August 1996, the FPSC approved annual recovery periods beginning with the
October 1996 through September 1997 period. Recovery includes a true-up of the
prior period and a projection of the ensuing period. During 1996 and 1995, the
Company recorded ECRC revenues of $11.0 million and $11.8 million, respectively.
At December 31, 1996, the Company's liability for the estimated costs of
environmental remediation projects for known sites was $7.6 million. These
estimated costs are expected to be expended during the period 1997 to 2001.
These projects have been approved by the FPSC for recovery through the ECRC
discussed above. Therefore, the Company recorded $1.9 million in current assets
and $5.7 million in deferred charges representing the future recoverability of
these costs.
4. CONSTRUCTION PROGRAM
The Company is engaged in a continuous construction program, the cost of which
is currently estimated to total $47 million in 1997, $49 million in 1998, and
$46 million in 1999. The construction program is subject to periodic review and
revision, and actual construction costs may vary from the above estimates
because of numerous factors. These factors include changes in business
conditions; revised load growth estimates; changes in environmental regulations;
increasing costs of labor, equipment and materials; and cost of capital. At
December 31, 1996, significant purchase commitments were outstanding in
connection with the construction program. The Company does not have any
generating plants under construction. However, significant construction will
continue related to transmission and distribution facilities and the upgrading
and extension of the useful lives of generating plants.
See Management's Discussion and Analysis under "Environmental Matters" for
information on the impact of the Clean Air Act Amendments of 1990 and other
environmental matters.
5. FINANCING AND COMMITMENTS
General
Current projections indicate that funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
primarily from internal sources. Requirements not met from internal sources will
be derived from the sale of additional first mortgage bonds, pollution control
bonds, and preferred stock; bank notes; and capital contributions from Southern
Company. In addition, the Company may issue additional long-term debt and
preferred stock primarily for the purposes of debt maturities and redemptions of
higher-cost securities.
Bank Credit Arrangements
At December 31, 1996, the Company had $5 million in revolving credit lines that
expire May 31, 1997, and $41.5 million of lines of credit with banks subject to
renewal June 1 of each year, of which $34.5 million remained unused. In
addition, the Company has a $20.3 million unused committed line of credit
established for liquidity support of its variable rate pollution control bonds.
In connection with these credit lines, the Company has agreed to pay commitment
fees and/or to maintain compensating balances with the banks. The compensating
balances, which represent substantially all of the cash of the Company except
for daily working funds and like items, are not legally restricted from
withdrawal. In addition, the Company has bid-loan facilities with twelve major
money center banks that total $230 million, of which $13 million was committed
at December 31, 1996.
II-163
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
Assets Subject to Lien
The Company's mortgage, which secures the first mortgage bonds issued by the
Company, constitutes a direct first 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 long-term commitments for the procurement of 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, 1996, were as follows:
Year Fuel
------- ----------------
(in millions)
1997 $125
1998 98
1999 79
2000 71
2001 73
2002 - 2007 481
--------------------------------------------------------
Total commitments $927
========================================================
In 1988, the Company made an advance payment of $60 million to a coal
supplier under an arrangement to lower the cost of future coal purchased under
an existing contract. This amount is being amortized to expense on a per ton
basis over a ten-year period. The remaining unamortized amount was $13.3
million at December 31, 1996.
In December 1995, the Company made another payment of $22 million to the same
coal supplier under an arrangement to lower the cost of future coal and/or to
suspend the purchase of coal under an existing contract for 25 months. This
amount is being amortized to expense on a per ton basis through the first
quarter of 1998. The remaining unamortized amount was $16.2 million at December
31, 1996.
The amortization expense of these contract buyouts and renegotiations is
being recovered through the fuel cost recovery clause discussed under "Revenues
and Regulatory Cost Recovery Clauses" in Note 1.
Lease Agreements
In 1989, the Company and Mississippi Power jointly entered into a twenty-two
year operating lease agreement for the use of 495 aluminum railcars. In 1994, a
second lease agreement for the use of 250 additional aluminum railcars was
entered into for twenty-two years. Both of these leases are for the
transportation of coal to Plant Daniel. The Company, as a joint owner of Plant
Daniel, is responsible for one half of the lease costs. The lease costs are
charged to fuel inventory and are allocated to fuel expense as the fuel is used.
The Company's share of the lease costs charged to fuel inventory was $1.7
million in 1996 and 1995 and $1.2 million in 1994. The Company's annual lease
payments for 1997 through 2001 will be approximately $1.7 million and after
2001, lease payments total approximately $20.7 million. The Company has the
option after three years from the date of the original contract on the second
lease agreement to purchase the railcars at the greater of the termination value
or the fair market value. Additionally, at the end of each lease term, the
Company has the option to renew the lease.
6. JOINT OWNERSHIP AGREEMENTS
The Company and Mississippi Power jointly own Plant Daniel, a steam-electric
generating plant located in Jackson County, Mississippi. In accordance with an
operating agreement, Mississippi Power acts as the Company's agent with respect
to the construction, operation, and maintenance of the plant.
The Company and Georgia Power jointly own Plant Scherer Unit No. 3. Plant
Scherer is a steam-electric generating plant located near Forsyth, Georgia. In
accordance with an operating agreement, Georgia Power acts as the Company's
agent with respect to the construction, operation, and maintenance of the unit.
The Company's pro rata share of expenses related to both plants is included
in the corresponding operating expense accounts in the Statements of Income.
II-164
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
At December 31, 1996, the Company's percentage ownership and its investment
in these jointly owned facilities were as follows:
Plant Scherer Plant
Unit No. 3 Daniel
(coal-fired) (coal-fired)
--------------------------------
(in thousands)
Plant In Service $185,742(1) $222,463
Accumulated Depreciation $54,079 $102,027
Construction Work in Progress $314 $33
Nameplate Capacity (2)
(megawatts) 205 500
Ownership 25% 50%
- -------------------------------------------------------------------
(1) Includes net plant acquisition adjustment.
(2) Total megawatt nameplate capacity:
Plant Scherer Unit No. 3: 818
Plant Daniel: 1,000
7. LONG-TERM POWER SALES AGREEMENTS
The Company and the other operating affiliates have 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. The unit power sales 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:
Other
Unit Long-
Year Power Term Total
- ---------- -------------------------------------
(in thousands)
1996 $25,400 $ - $25,400
1995 25,870 - 25,870
1994 29,653 1,273 30,926
- -----------------------------------------------------------
Unit power from specific generating plants of Southern Company is currently
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, 211 megawatts of net dependable capacity were
sold by the Company during 1996, and sales will remain at that level until the
expiration of the contracts in 2010, unless reduced by FPC, FP&L and JEA after
1999.
Capacity and energy sales to FP&L, the Company's largest single customer,
provided revenues of $27.2 million in 1996, $25.4 million in 1995, and $29.3
million in 1994, or 4.3 percent, 4.1 percent, and 5.1 percent of operating
revenues, respectively.
8. INCOME TAXES
At December 31, 1996, the tax-related regulatory assets to be recovered from
customers were $28.3 million. These assets are attributable to tax benefits
flowed through to customers in prior years and to taxes applicable to
capitalized AFUDC. At December 31, 1996, the tax-related regulatory liabilities
to be credited to customers were $64.4 million. 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:
1996 1995 1994
----------------------------------
(in thousands)
Total provision for
income taxes:
Federal--
Currently payable $31,022 $29,018 $34,941
Deferred--current year 26,072 23,172 18,556
--reversal of
prior years (24,780) (23,116) (24,787)
- ------------------------------------------------------------------
32,314 29,074 28,710
- ------------------------------------------------------------------
State--
Currently payable 4,394 4,778 5,907
Deferred--current year 3,904 3,313 2,549
--reversal of
prior years (3,039) (2,979) (3,304)
- ------------------------------------------------------------------
5,259 5,112 5,152
- ------------------------------------------------------------------
Total 37,573 34,186 33,862
Less income taxes charged
(credited) to other income (248) 121 (95)
- ------------------------------------------------------------------
Total income taxes charged
to operations $37,821 $34,065 $33,957
==================================================================
II-165
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
1996 1995
-----------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $151,664 $146,926
Property basis differences 21,028 19,976
Coal contract buyouts 3,700 3,838
Property insurance 1,248 3,039
Other 12,674 10,573
- -------------------------------------------------------------------
Total 190,314 184,352
- -------------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 9,773 10,212
Postretirement benefits 5,767 5,494
Other 7,814 6,313
- -------------------------------------------------------------------
Total 23,354 22,019
- -------------------------------------------------------------------
Net deferred tax liabilities 166,960 162,333
Less current portion, net 3,103 (12)
- -------------------------------------------------------------------
Accumulated deferred income
taxes in the Balance Sheets $163,857 $162,345
===================================================================
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 $2.3 million in 1996, 1995 and 1994. At December 31, 1996, 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:
1996 1995 1994
------------------- ---------
Federal statutory rate 35% 35% 35%
State income tax,
net of federal deduction 4 4 4
Non-deductible book
depreciation 1 1 1
Difference in prior years'
deferred and current tax rate (1) (3) (2)
Other (2) (2) (2)
- ---------------------------------------------------------------
Effective income tax rate 37% 35% 36%
===============================================================
The Company and the other subsidiaries of Southern Company file a
consolidated federal 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. POLLUTION CONTROL OBLIGATIONS AND OTHER LONG-TERM DEBT
Details of pollution control obligations and other long-term debt at December 31
are as follows:
1996 1995
--------------------------
(in thousands)
Obligations incurred in
connection with the sale by
public authorities of
tax-exempt pollution control
revenue bonds:
Collateralized
5.25% due 2006 $12,075 $ -
6% due 2006 - 12,075
8.25% due 2017 32,000 32,000
7.125% due 2021 - 21,200
6.75% due 2022 8,930 8,930
5.70% due 2023 7,875 7,875
5.80% due 2023 32,550 32,550
6.20% due 2023 13,000 13,000
6.30% due 2024 22,000 22,000
Variable Rate due 2024
Remarketable daily 20,000 20,000
5.50% due 2026 21,200 -
- ---------------------------------------------------------------
$169,630 $169,630
- ---------------------------------------------------------------
Other long-term debt:
4.69% due 1996 - 25,000
5.2125% due 1996-1998 16,823 -
6.44% due 1994-1998 7,476 12,074
Variable Rate due 1999 13,500 -
Variable Rate due 1999 13,500 -
- ---------------------------------------------------------------
51,299 37,074
- ---------------------------------------------------------------
Total $220,929 $206,704
===============================================================
Pollution control obligations represent installment purchases of pollution
control facilities financed by funds derived from sales by public authorities of
revenue bonds. With respect to the collateralized pollution control revenue
bonds, the Company has authenticated and delivered to trustees a like principal
amount of first mortgage bonds as security for obligations under collateralized
installment agreements. The principal and interest on the first mortgage bonds
will be payable only in the event of default under the agreements.
II-166
<PAGE>
NOTES (continued)
Gulf Power Company 1996 Annual Report
The estimated annual maturities of other long-term debt are as follows:
$16 million in 1997, $8.3 million in 1998, and $27 million in 1999.
10. CAPITALIZATION DUE WITHIN ONE YEAR
A summary of the improvement fund requirement and scheduled maturities and
redemptions of long-term debt and preferred stock due within one year at
December 31 is as follows:
1996 1995
----------------------
(in thousands)
Bond improvement fund requirement $ 1,550 $ 1,750
Less: Portion to be satisfied by
certifying property additions 1,550 -
- ---------------------------------------------------------------
Cash sinking fund requirement - 1,750
Maturities of first mortgage bonds 25,000 -
Current portion of other long-term
debt (Note 9) 15,972 29,598
Pollution control bond maturity - 200
Redemption of preferred stock 24,500 -
- ---------------------------------------------------------------
Total $65,472 $31,548
===============================================================
The first mortgage bond improvement (sinking) fund requirement amounts to 1
percent of each outstanding series of bonds authenticated under the indenture
prior to January 1 of each year, other than those issued to collateralize
pollution control obligations. The requirement may be satisfied by depositing
cash, reacquiring bonds, or by pledging additional property equal to 1 and 2/3
times the requirement.
11. COMMON STOCK DIVIDEND RESTRICTIONS
The Company's first mortgage bond indenture contains various common stock
dividend restrictions which remain in effect as long as the bonds are
outstanding. At December 31, 1996, retained earnings of $127 million were
restricted against the payment of cash dividends on common stock under the terms
of the mortgage indenture.
The Company's charter limits cash dividends on common stock to 50 percent of
net income available for such stock during a prior period of 12 months if the
capitalization ratio is below 20 percent and to 75 percent of such net income if
such ratio is 20 percent or more but less than 25 percent. The capitalization
ratio is defined as the ratio of common stock equity to total capitalization,
including retained earnings, adjusted to reflect the payment of the proposed
dividend. At December 31, 1996, the ratio was 47.6 percent.
12. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1996 and 1995 are as follows:
Net Income
After Dividends
Operating Operating on Preferred
Quarter Ended Revenues Income Stock
- ------------------------------------------------------------------
(in thousands)
March 31, 1996 $154,921 $20,201 $11,258
June 30, 1996 153,821 21,565 12,581
Sept. 30, 1996 179,619 32,568 23,721
Dec. 31, 1996 146,004 19,458 10,285
March 31, 1995 $140,918 $19,503 $10,880
June 30, 1995 153,057 23,390 14,096
Sept. 30, 1995 184,251 35,187 26,588
Dec. 31, 1995 140,851 13,082 5,590
- ------------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and the
timing of rate changes, among other factors.
II-167
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $634,365 $619,077 $578,813
Net Income after Dividends
on Preferred Stock (in thousands) $57,845 $57,154 $55,229
Dividends on Common Stock (in thousands) $58,300 $46,400 $44,000
Return on Average Common Equity (percent) 13.27 13.27 13.15
Total Assets (in thousands) $1,308,366 $1,341,859 $1,315,542
Gross Property Additions (in thousands) $61,386 $63,113 $78,869
- ---------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $435,758 $436,242 $425,472
Preferred stock 65,102 89,602 89,602
Preferred stock subject to mandatory redemption - - -
Long-term debt 331,880 323,376 356,393
- ---------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $832,740 $849,220 $871,467
- ---------------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 52.3 51.4 48.8
Preferred stock 7.8 10.5 10.3
Long-term debt 39.9 38.1 40.9
- ---------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=====================================================================================================================
First Mortgage Bonds (in thousands):
Issued 55,000 - -
Retired 50,930 1,750 48,856
Preferred Stock (in thousands):
Issued - - -
Retired - 1,000 1,000
- ---------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A2
Standard and Poor's A+ A+ A
Duff & Phelps AA- 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 291,196 283,421 280,859
Commercial 43,196 41,281 40,398
Industrial 278 278 283
Other 162 134 106
- ---------------------------------------------------------------------------------------------------------------------
Total 334,832 325,114 321,646
=====================================================================================================================
Employees (year-end) 1,384 1,501 1,540
</TABLE>
II-168
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $583,142 $570,902 $565,207 $567,825
Net Income after Dividends
on Preferred Stock (in thousands) $54,311 $54,090 $57,796 $38,714
Dividends on Common Stock (in thousands) $41,800 $39,900 $38,000 $37,000
Return on Average Common Equity (percent) 13.29 13.62 15.17 10.51
Total Assets (in thousands) $1,307,809 $1,062,699 $1,095,736 $1,084,579
Gross Property Additions (in thousands) $78,562 $64,671 $64,323 $62,462
- --------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $414,196 $403,190 $390,981 $371,185
Preferred stock 89,602 74,662 55,162 55,162
Preferred stock subject to mandatory redemption 1,000 2,000 7,500 9,250
Long-term debt 369,259 382,047 434,648 475,284
- --------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $874,057 $861,899 $888,291 $910,881
- --------------------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 47.4 46.8 44.0 40.8
Preferred stock 10.4 8.9 7.1 7.1
Long-term debt 42.2 44.3 48.9 52.1
- --------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
==========================================================================================================================
First Mortgage Bonds (in thousands):
Issued 75,000 25,000 50,000 -
Retired 88,809 117,693 32,807 6,455
Preferred Stock (in thousands):
Issued 35,000 29,500 - -
Retired 21,060 15,500 2,500 1,750
- --------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A2 A2 A2 A2
Standard and Poor's A A A A
Duff & Phelps A+ A A A
Preferred Stock -
Moody's a2 a2 a2 a2
Standard and Poor's A- A- A- A-
Duff & Phelps A A- A- A-
- --------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 274,194 267,591 261,210 256,111
Commercial 39,253 37,105 34,685 34,019
Industrial 274 270 264 252
Other 86 74 72 67
- --------------------------------------------------------------------------------------------------------------------------
Total 313,807 305,040 296,231 290,449
==========================================================================================================================
Employees (year-end) 1,565 1,613 1,598 1,615
</TABLE>
II-169A
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $527,821 $550,827 $587,860 $542,919
Net Income after Dividends
on Preferred Stock (in thousands) $37,361 $45,698 $42,217 $46,421
Dividends on Common Stock (in thousands) $37,200 $35,400 $34,200 $33,100
Return on Average Common Equity (percent) 10.32 13.41 13.23 15.06
Total Assets (in thousands) $1,093,430 $1,097,225 $1,051,182 $1,028,864
Gross Property Additions (in thousands) $70,726 $67,042 $97,511 $90,160
- -------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $365,471 $358,310 $323,012 $314,995
Preferred stock 55,162 55,162 55,162 55,162
Preferred stock subject to mandatory redemption 11,000 12,750 14,000 16,500
Long-term debt 484,608 497,069 474,640 482,869
- -------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $916,241 $923,291 $866,814 $869,526
- -------------------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 39.9 38.8 37.2 36.2
Preferred stock 7.2 7.4 8.0 8.3
Long-term debt 52.9 53.8 54.8 55.5
- -------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
=========================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 35,000 - 50,000
Retired 9,344 9,369 - 46,640
Preferred Stock (in thousands):
Issued - - - -
Retired 1,250 1,750 2,500 750
- -------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A A A A+
Duff & Phelps AA- 4 4 4
Preferred Stock -
Moody's a1 a1 a1 a1
Standard and Poor's A- A- A- A
Duff & Phelps A+ 5 5 5
- -------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 251,341 246,450 241,138 235,329
Commercial 33,678 33,030 32,139 31,142
Industrial 240 206 206 197
Other 67 61 61 62
- -------------------------------------------------------------------------------------------------------------------------
Total 285,326 279,747 273,544 266,730
=========================================================================================================================
Employees (year-end) 1,614 1,601 1,603 1,544
</TABLE>
II-169B
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $285,498 $276,155 $252,598
Commercial 164,181 159,260 146,394
Industrial 78,994 81,606 82,169
Other 2,056 1,993 1,955
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 530,729 519,014 483,116
Sales for resale - non-affiliates 63,201 60,413 66,111
Sales for resale - affiliates 17,762 18,619 17,353
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 611,692 598,046 566,580
Other revenues 22,673 21,031 12,233
- ----------------------------------------------------------------------------------------------------------------------------
Total $634,365 $619,077 $578,813
============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 4,159,924 4,014,142 3,751,932
Commercial 2,808,634 2,708,243 2,548,846
Industrial 1,808,086 1,794,754 1,847,114
Other 17,815 17,345 17,354
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 8,794,459 8,534,484 8,165,246
Sales for resale - non-affiliates 1,534,097 1,396,474 1,418,977
Sales for resale - affiliates 709,647 759,341 874,050
- ----------------------------------------------------------------------------------------------------------------------------
Total 11,038,203 10,690,299 10,458,273
============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.86 6.88 6.73
Commercial 5.85 5.88 5.74
Industrial 4.37 4.55 4.45
Total retail 6.03 6.08 5.92
Sales for resale 3.61 3.67 3.64
Total sales 5.54 5.59 5.42
Average Annual Kilowatt-Hour Use Per Residential Customer 14,457 14,148 13,486
Average Annual Revenue Per Residential Customer $992.17 $973.35 $907.92
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 2,136 1,732 1,801
Summer 1,961 2,040 1,795
Annual Load Factor (percent) 51.4 53.0 56.7
Plant Availability - Fossil-Steam (percent) 91.8 84.0 92.2
- ----------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 87.8 86.8 87.2
Oil and gas 0.5 0.4 0.2
Purchased power -
From non-affiliates 2.7 4.0 2.8
From affiliates 9.0 8.8 9.8
- ----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,484 10,609 10,614
Cost of fuel per million BTU (cents) 192.22 196.62 189.55
Average cost of fuel per net kilowatt-hour generated (cents) 2.02 2.09 2.01
============================================================================================================================
</TABLE>
II-170
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $244,967 $235,296 $231,220 $217,843
Commercial 137,308 133,071 130,691 124,066
Industrial 87,526 91,320 92,300 91,041
Other 1,882 1,784 1,860 1,805
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 471,683 461,471 456,071 434,755
Sales for resale - non-affiliates 72,209 70,078 69,636 73,855
Sales for resale - affiliates 23,166 24,075 29,343 38,563
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 567,058 555,624 555,050 547,173
Other revenues 16,084 15,278 10,157 20,652
- ----------------------------------------------------------------------------------------------------------------------------
Total $583,142 $570,902 $565,207 $567,825
============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,712,980 3,596,515 3,455,100 3,360,838
Commercial 2,433,382 2,369,236 2,272,690 2,217,568
Industrial 2,029,936 2,179,435 2,117,408 2,177,872
Other 16,944 16,649 17,118 18,866
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 8,193,242 8,161,835 7,862,316 7,775,144
Sales for resale - non-affiliates 1,460,105 1,430,908 1,550,018 1,775,703
Sales for resale - affiliates 1,029,787 1,208,771 1,236,223 1,435,558
- ----------------------------------------------------------------------------------------------------------------------------
Total 10,683,134 10,801,514 10,648,557 10,986,405
============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.60 6.54 6.69 6.48
Commercial 5.64 5.62 5.75 5.59
Industrial 4.31 4.19 4.36 4.18
Total retail 5.76 5.65 5.80 5.59
Sales for resale 3.83 3.57 3.55 3.50
Total sales 5.31 5.14 5.21 4.98
Average Annual Kilowatt-Hour Use Per Residential Customer 13,671 13,553 13,320 13,173
Average Annual Revenue Per Residential Customer $901.96 $886.66 $891.38 $853.86
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,571 1,533 1,418 1,310
Summer 1,898 1,828 1,740 1,778
Annual Load Factor (percent) 54.5 55.0 57.0 55.2
Plant Availability - Fossil-Steam (percent) 88.9 91.2 92.2 89.2
- ----------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 84.5 87.7 82.0 69.8
Oil and gas 0.5 0.1 0.1 0.5
Purchased power -
From non-affiliates 1.5 0.8 0.5 0.6
From affiliates 13.5 11.4 17.4 29.1
- ----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,390 10,347 10,636 10,765
Cost of fuel per million BTU (cents) 197.37 200.30 203.60 206.06
Average cost of fuel per net kilowatt-hour generated (cents) 2.05 2.07 2.17 2.22
============================================================================================================================
</TABLE>
II-171A
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1996 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $203,781 $184,036 $199,701 $200,725
Commercial 118,897 107,615 116,057 116,253
Industrial 84,671 72,634 80,295 79,873
Other 1,586 1,402 1,357 1,343
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 408,935 365,687 397,410 398,194
Sales for resale - non-affiliates 67,554 117,466 134,456 106,892
Sales for resale - affiliates 39,244 48,277 55,955 27,113
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 515,733 531,430 587,821 532,199
Other revenues 12,088 19,397 39 10,720
- -----------------------------------------------------------------------------------------------------------------------------------
Total $527,821 $550,827 $587,860 $542,919
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,293,750 3,154,541 3,055,041 2,963,502
Commercial 2,169,497 2,088,598 1,986,332 1,913,139
Industrial 2,094,670 1,968,091 1,839,931 1,745,074
Other 17,209 16,257 15,241 14,903
- -----------------------------------------------------------------------------------------------------------------------------------
Total retail 7,575,126 7,227,487 6,896,545 6,636,618
Sales for resale - non-affiliates 1,640,355 1,911,759 2,138,390 1,609,146
Sales for resale - affiliates 1,461,036 2,326,238 2,689,487 1,078,500
- -----------------------------------------------------------------------------------------------------------------------------------
Total 10,676,517 11,465,484 11,724,422 9,324,264
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.19 5.83 6.54 6.77
Commercial 5.48 5.15 5.84 6.08
Industrial 4.04 3.69 4.36 4.58
Total retail 5.40 5.06 5.76 6.00
Sales for resale 3.44 3.91 3.94 4.99
Total sales 4.83 4.64 5.01 5.71
Average Annual Kilowatt-Hour Use Per Residential Customer 13,173 12,883 12,763 12,729
Average Annual Revenue Per Residential Customer $815.00 $751.60 $834.31 $862.16
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 1,969
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,814 1,395 1,354 1,406
Summer 1,691 1,613 1,617 1,678
Annual Load Factor (percent) 52.6 56.5 54.4 50.5
Plant Availability - Fossil-Steam (percent) 89.1 88.2 92.8 90.5
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 78.3 93.2 93.5 85.8
Oil and gas 0.2 0.4 0.4 0.5
Purchased power -
From non-affiliates 0.4 0.4 0.4 1.9
From affiliates 21.1 6.0 5.7 11.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,621 10,461 10,512 10,639
Cost of fuel per million BTU (cents) 193.70 178.00 197.53 239.26
Average cost of fuel per net kilowatt-hour generated (cents) 2.06 1.86 2.08 2.55
===================================================================================================================================
</TABLE>
II-171B
<PAGE>
STATEMENTS OF INCOME
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $616,603 $600,458 $561,460
Revenues from affiliates 17,762 18,619 17,353
- ------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 634,365 619,077 578,813
- ------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 184,500 185,274 161,168
Purchased power from non-affiliates 8,300 8,594 6,761
Purchased power from affiliates 35,076 29,966 25,819
Proceeds from settlement of disputed contracts - - -
Other 115,154 113,397 113,879
Maintenance 51,050 51,917 46,700
Depreciation and amortization 56,645 55,104 56,615
Taxes other than income taxes 52,027 49,598 41,701
Federal and state income taxes 37,821 34,065 33,957
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 540,573 527,915 486,600
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 93,792 91,162 92,213
Other Income (Expense):
Allowance for equity funds used during construction 17 36 450
Interest income 1,921 2,877 1,429
Other, net (1,695) (1,261) (780)
Gain on sale of investment securities - - -
Income taxes applicable to other income 248 (121) 95
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 94,283 92,693 93,407
- ------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 24,691 23,294 27,124
Allowance for debt funds used during construction (58) (187) (656)
Interest on notes payable 2,071 2,931 1,509
Amortization of debt discount, premium, and expense, net 2,087 2,014 1,834
Other interest charges 1,882 1,674 2,442
- ------------------------------------------------------------------------------------------------------------------------------
Net interest charges 30,673 29,726 32,253
- ------------------------------------------------------------------------------------------------------------------------------
Net Income 63,610 62,967 61,154
Dividends on Preferred Stock 5,765 5,813 5,925
- ------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 57,845 $ 57,154 $ 55,229
==============================================================================================================================
</TABLE>
II-172
<PAGE>
STATEMENTS OF INCOME
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $559,976 $546,827 $535,864 $529,262
Revenues from affiliates 23,166 24,075 29,343 38,563
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 583,142 570,902 565,207 567,825
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 170,485 182,754 176,038 156,712
Purchased power from non-affiliates 4,386 1,394 896 1,427
Purchased power from affiliates 32,273 26,788 32,579 67,729
Proceeds from settlement of disputed contracts - (920) (20,385) -
Other 109,164 98,230 94,411 90,045
Maintenance 46,004 41,947 45,468 45,491
Depreciation and amortization 55,309 53,758 52,195 50,899
Taxes other than income taxes 40,204 37,898 42,359 39,110
Federal and state income taxes 32,730 32,078 33,893 24,780
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 490,555 473,927 457,454 476,193
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 92,587 96,975 107,753 91,632
Other Income (Expense):
Allowance for equity funds used during construction 512 14 54 -
Interest income 1,328 2,733 2,427 4,508
Other, net (1,238) (1,487) (3,484) (6,360)
Gain on sale of investment securities 3,820 - - -
Income taxes applicable to other income (921) 187 1,104 1,303
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 96,088 98,422 107,854 91,083
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 31,344 35,792 41,665 43,215
Allowance for debt funds used during construction (454) (46) (95) 1
Interest on notes payable 870 1,041 280 693
Amortization of debt discount, premium, and expense, net 1,412 1,032 699 603
Other interest charges 2,877 1,410 2,272 2,422
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 36,049 39,229 44,821 46,934
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 60,039 59,193 63,033 44,149
Dividends on Preferred Stock 5,728 5,103 5,237 5,435
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 54,311 $ 54,090 $ 57,796 $ 38,714
==================================================================================================================================
</TABLE>
II-173A
<PAGE>
STATEMENTS OF INCOME
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $488,577 $502,550 $531,905 $515,806
Revenues from affiliates 39,244 48,277 55,955 27,113
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 527,821 550,827 587,860 542,919
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 158,858 191,687 227,233 215,262
Purchased power from non-affiliates 1,251 1,468 1,792 4,533
Purchased power from affiliates 48,972 27,267 28,326 37,172
Proceeds from settlement of disputed contracts - - - -
Other 82,231 93,028 100,032 70,117
Maintenance 44,295 41,919 38,748 35,251
Depreciation and amortization 48,760 47,530 44,619 39,386
Taxes other than income taxes 30,718 27,087 26,246 24,854
Federal and state income taxes 23,621 26,239 31,703 39,948
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 438,706 456,225 498,699 466,523
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 89,115 94,602 89,161 76,396
Other Income (Expense):
Allowance for equity funds used during construction (446) 457 1,013 7,809
Interest income 3,271 2,858 4,507 2,445
Other, net (3,800) (3,491) (1,207) (1,077)
Gain on sale of investment securities - - - -
Income taxes applicable to other income 779 1,001 (642) (648)
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 88,919 95,427 92,832 84,925
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 43,265 42,538 43,689 39,479
Allowance for debt funds used during construction 242 (808) (1,004) (8,651)
Interest on notes payable 180 182 - 106
Amortization of debt discount, premium, and expense, net 613 600 555 488
Other interest charges 1,636 1,456 1,350 869
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 45,936 43,968 44,590 32,291
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 42,983 51,459 48,242 52,634
Dividends on Preferred Stock 5,622 5,761 6,025 6,213
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 37,361 $ 45,698 $ 42,217 $ 46,421
==================================================================================================================================
</TABLE>
II-173B
<PAGE>
STATEMENTS OF CASH FLOWS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 63,610 $ 62,967 $ 61,154
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 71,825 75,293 86,098
Deferred income taxes, net 2,157 390 (6,986)
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (17) (36) (450)
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 17,292 (26,537) 4,898
Changes in certain current assets and liabilities --
Receivables, net 736 (12,210) 3,540
Inventories 12,957 (618) (13,901)
Payables (7,078) 18,258 (10,159)
Other (597) (17,556) 610
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 160,885 99,951 124,804
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (61,386) (63,113) (78,869)
Other (2,786) 4,401 (3,493)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (64,172) (58,712) (82,362)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - - -
First mortgage bonds 55,000 - -
Pollution control bonds 33,275 - 42,000
Capital contributions from parent company - 58 98
Other long-term debt 49,148 - 32,108
Retirements:
Preferred stock - (1,000) (1,000)
First mortgage bonds (50,930) (1,750) (48,856)
Pollution control bonds (33,275) (125) (42,100)
Other long-term debt (34,923) (13,314) (24,240)
Notes payable, net (55,500) 27,000 47,447
Payment of preferred stock dividends (5,749) (5,813) (5,925)
Payment of common stock dividends (48,300) (46,400) (44,000)
Miscellaneous (5,332) (117) (2,648)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (96,586) (41,461) (47,116)
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 127 (222) (4,674)
Cash and Cash Equivalents at Beginning of Year 680 902 5,576
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 807 $ 680 $ 902
============================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-174
<PAGE>
STATEMENTS OF CASH FLOWS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 60,039 $ 59,193 $ 63,033 $ 44,149
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 72,111 68,021 65,584 63,650
Deferred income taxes, net 5,347 3,322 (3,392) 1,837
Deferred investment tax credits, net - - - -
Allowance for equity funds used during construction (512) (14) (54) -
Non-cash proceeds from settlement of disputed contracts - (920) (19,734) -
Other, net (864) 185 3,079 1,544
Changes in certain current assets and liabilities --
Receivables, net 12,867 (11,041) 12,421 (2,468)
Inventories 5,574 23,560 (2,397) (11,807)
Payables 5,386 1,580 (2,003) (3,440)
Other (9,504) (13,637) 8,012 5,781
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 150,444 130,249 124,549 99,246
- ---------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (78,562) (64,671) (64,323) (62,462)
Other (5,328) 3,970 (8,097) (1,597)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (83,890) (60,701) (72,420) (64,059)
- ---------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock 35,000 29,500 - -
First mortgage bonds 75,000 25,000 50,000 -
Pollution control bonds 53,425 8,930 21,200 -
Capital contributions from parent company 11 121 - 4,000
Other long-term debt 25,000 - - -
Retirements:
Preferred stock (21,060) (15,500) (2,500) (1,750)
First mortgage bonds (88,809) (117,693) (32,807) (6,455)
Pollution control bonds (40,650) (9,205) (21,250) (50)
Other long-term debt (7,736) (5,783) (7,981) (6,083)
Notes payable, net (37,947) 44,000 - -
Payment of preferred stock dividends (5,728) (5,103) (5,237) (5,435)
Payment of common stock dividends (41,800) (39,900) (38,000) (37,000)
Miscellaneous (6,888) (8,760) (3,715) 5
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (62,182) (94,393) (40,290) (52,768)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 4,372 (24,845) 11,839 (17,581)
Cash and Cash Equivalents at Beginning of Year 1,204 26,049 14,210 31,791
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 5,576 $ 1,204 $ 26,049 $ 14,210
=================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-175A
<PAGE>
STATEMENTS OF CASH FLOWS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 42,983 $ 51,459 $ 48,242 $ 52,634
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 59,955 56,260 51,672 41,619
Deferred income taxes, net 5,319 10,138 2,377 45,213
Deferred investment tax credits, net - - 868 1,634
Allowance for equity funds used during construction 446 (457) (1,013) (7,809)
Non-cash proceeds from settlement of disputed contracts - - - -
Other, net 3,827 11,449 12,913 5,860
Changes in certain current assets and liabilities --
Receivables, net 492 8,984 (8,849) (6,012)
Inventories 16,306 (16,160) 23,691 (1,342)
Payables 6,142 (5,340) 10,173 449
Other 4,466 (18,432) 6,208 (113)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 139,936 97,901 146,282 132,133
- -------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (70,726) (67,042) (97,511) (90,160)
Other 419 (62,782) (692) (55,652)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (70,307) (129,824) (98,203) (145,812)
- -------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - - - -
First mortgage bonds - 35,000 - 50,000
Pollution control bonds - 3,677 35,996 9,900
Capital contributions from parent company 7,000 25,000 - -
Other long-term debt - - - 60,663
Retirements:
Preferred stock (1,250) (1,750) (2,500) (750)
First mortgage bonds (9,344) (9,369) - (46,640)
Pollution control bonds (50) (50) (32,050) (50)
Other long-term debt (5,611) (5,175) (4,774) -
Notes payable, net - - - -
Payment of preferred stock dividends (5,622) (5,761) (6,025) (6,213)
Payment of common stock dividends (37,200) (35,400) (34,200) (33,100)
Miscellaneous (3) (233) (1,632) (6,064)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (52,080) 5,939 (45,185) 27,746
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 17,549 (25,984) 2,894 14,067
Cash and Cash Equivalents at Beginning of Year 14,242 40,226 37,332 23,265
- -------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 31,791 $ 14,242 $ 40,226 $ 37,332
===============================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-175B
<PAGE>
BALANCE SHEETS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 921,295 $ 905,784 $ 896,236
Transmission 161,634 156,786 155,967
Distribution 530,467 512,184 487,986
General 121,114 121,060 116,178
Construction work in progress 23,465 26,301 24,288
- ----------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,757,975 1,722,115 1,680,655
Accumulated provision for depreciation 694,245 658,806 622,911
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,063,730 1,063,309 1,057,744
Less property-related accumulated deferred income taxes - - -
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,063,730 1,063,309 1,057,744
- ----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Miscellaneous 652 740 7,997
- ----------------------------------------------------------------------------------------------------------------------------
Total 652 740 7,997
- ----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 807 680 902
Investment securities - - -
Receivables, net 71,857 72,593 60,384
Fossil fuel stock, at average cost 28,352 37,875 35,686
Materials and supplies, at average cost 30,252 33,686 35,257
Current portion of deferred coal contract costs 16,389 12,767 2,521
Regulatory clauses under recovery 4,144 3,432 5,002
Prepayments 9,186 12,232 4,354
Vacation pay deferred 4,055 4,419 4,172
- ----------------------------------------------------------------------------------------------------------------------------
Total 165,042 177,684 148,278
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 28,313 29,093 30,433
Debt expense, being amortized 2,922 3,444 3,625
Premium on reacquired debt, being amortized 20,386 17,015 18,494
Deferred coal contract costs 13,126 33,768 38,169
Miscellaneous 14,195 16,806 10,802
- ----------------------------------------------------------------------------------------------------------------------------
Total 78,942 100,126 101,523
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $1,308,366 $1,341,859 $1,315,542
============================================================================================================================
</TABLE>
II-176
<PAGE>
BALANCE SHEETS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 863,223 $ 841,489 $ 837,712 $ 817,490
Transmission 154,304 148,824 143,275 136,813
Distribution 464,182 443,352 419,228 400,016
General 129,995 127,826 125,330 123,059
Construction work in progress 34,591 29,564 13,684 16,868
- -----------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,646,295 1,591,055 1,539,229 1,494,246
Accumulated provision for depreciation 610,542 578,851 535,408 501,739
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,035,753 1,012,204 1,003,821 992,507
Less property-related accumulated deferred income taxes - 200,904 197,138 192,749
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,035,753 811,300 806,683 799,758
- -----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - 19,938 -
Miscellaneous 13,242 7,074 6,410 5,439
- -----------------------------------------------------------------------------------------------------------------------------
Total 13,242 7,074 26,348 5,439
- -----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 5,576 1,204 26,049 14,210
Investment securities - 22,322 - -
Receivables, net 63,924 60,047 49,006 61,427
Fossil fuel stock, at average cost 20,652 29,492 52,106 50,469
Materials and supplies, at average cost 36,390 33,124 34,070 33,310
Current portion of deferred coal contract costs 12,535 3,071 4,626 6,212
Regulatory clauses under recovery 3,244 1,680 - 7,008
Prepayments 2,160 1,395 1,410 2,168
Vacation pay deferred 4,022 3,779 3,776 3,631
- -----------------------------------------------------------------------------------------------------------------------------
Total 148,503 156,114 171,043 178,435
- -----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 31,334 - - -
Debt expense, being amortized 3,693 3,253 3,232 2,954
Premium on reacquired debt, being amortized 17,554 15,319 8,855 6,256
Deferred coal contract costs 52,884 63,723 74,502 87,102
Miscellaneous 4,846 5,916 5,073 4,635
- -----------------------------------------------------------------------------------------------------------------------------
Total 110,311 88,211 91,662 100,947
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $1,307,809 $1,062,699 $1,095,736 $1,084,579
=============================================================================================================================
</TABLE>
II-177A
<PAGE>
BALANCE SHEETS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 807,546 $ 796,052 $ 801,600 $ 608,340
Transmission 133,926 113,177 106,352 99,507
Distribution 375,521 343,421 325,037 295,052
General 119,779 115,273 102,664 66,092
Construction work in progress 10,166 29,572 10,113 188,966
- -----------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,446,938 1,397,495 1,345,766 1,257,957
Accumulated provision for depreciation 464,944 425,520 388,248 350,117
- -----------------------------------------------------------------------------------------------------------------------------
Total 981,994 971,975 957,518 907,840
Less property-related accumulated deferred income taxes 186,084 178,657 166,707 152,589
- -----------------------------------------------------------------------------------------------------------------------------
Total 795,910 793,318 790,811 755,251
- -----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - - -
Miscellaneous 6,933 6,756 2,932 2,619
- -----------------------------------------------------------------------------------------------------------------------------
Total 6,933 6,756 2,932 2,619
- -----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 31,791 14,242 40,226 37,332
Investment securities - - - -
Receivables, net 58,959 59,451 68,435 59,586
Fossil fuel stock, at average cost 37,526 55,286 43,290 69,785
Materials and supplies, at average cost 34,446 32,992 28,828 26,024
Current portion of deferred coal contract costs 5,534 6,194 2,642 -
Regulatory clauses under recovery 4,503 1,218 - -
Prepayments 2,490 3,577 677 788
Vacation pay deferred 3,425 3,340 3,200 3,000
- -----------------------------------------------------------------------------------------------------------------------------
Total 178,674 176,300 187,298 196,515
- -----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - - -
Debt expense, being amortized 3,117 3,281 3,203 2,736
Premium on reacquired debt, being amortized 6,574 6,892 7,210 -
Deferred coal contract costs 97,833 106,263 55,889 60,663
Miscellaneous 4,389 4,415 3,839 11,080
- -----------------------------------------------------------------------------------------------------------------------------
Total 111,913 120,851 70,141 74,479
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $1,093,430 $1,097,225 $1,051,182 $1,028,864
=============================================================================================================================
</TABLE>
II-177B
<PAGE>
BALANCE SHEETS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 38,060 $ 38,060 $ 38,060
Paid-in capital 218,438 218,438 218,380
Premium on preferred stock 81 81 81
Earnings retained in the business 179,179 179,663 168,951
- ----------------------------------------------------------------------------------------------------------------------------
Total common equity 435,758 436,242 425,472
Preferred stock 65,102 89,602 89,602
Preferred stock subject to mandatory redemption - - -
Long-term debt 331,880 323,376 356,393
- ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 832,740 849,220 871,467
- ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 25,000 80,500 53,500
Preferred stock due within one year 24,500 - 1,000
Long-term debt due within one year 40,972 31,548 13,439
Accounts payable 32,770 41,643 23,656
Customer deposits 13,464 13,195 13,609
Taxes accrued 8,342 9,547 13,465
Interest accrued 7,629 5,719 6,106
Regulatory clauses over recovery 5,884 2,800 3,960
Vacation pay accrued 4,055 4,419 4,172
Miscellaneous 17,121 7,356 7,828
- ----------------------------------------------------------------------------------------------------------------------------
Total 179,737 196,727 140,735
- ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 163,857 162,345 151,681
Deferred credits related to income taxes 64,354 67,481 71,964
Accumulated deferred investment tax credits 33,760 36,052 38,391
Miscellaneous 33,918 30,034 41,304
- ----------------------------------------------------------------------------------------------------------------------------
Total 295,889 295,912 303,340
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,308,366 $1,341,859 $1,315,542
============================================================================================================================
</TABLE>
II-178
<PAGE>
BALANCE SHEETS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 38,060 $ 38,060 $ 38,060 $ 38,060
Paid-in capital 218,282 218,271 218,150 218,150
Premium on preferred stock 81 88 399 399
Earnings retained in the business 157,773 146,771 134,372 114,576
- -------------------------------------------------------------------------------------------------------------------------------
Total common equity 414,196 403,190 390,981 371,185
Preferred stock 89,602 74,662 55,162 55,162
Preferred stock subject to mandatory redemption 1,000 2,000 7,500 9,250
Long-term debt 369,259 382,047 434,648 475,284
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 874,057 861,899 888,291 910,881
- -------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 6,053 44,000 - -
Preferred stock due within one year 1,000 1,000 1,000 1,750
Long-term debt due within one year 41,552 13,820 59,111 9,452
Accounts payable 38,699 33,461 25,315 27,447
Customer deposits 15,082 15,532 15,513 15,551
Taxes accrued 13,015 11,419 19,274 19,610
Interest accrued 5,420 6,370 9,720 10,820
Regulatory clauses over recovery 840 - 1,114 -
Vacation pay accrued 4,022 3,779 3,776 3,631
Miscellaneous 8,527 3,950 3,545 12,177
- -------------------------------------------------------------------------------------------------------------------------------
Total 134,210 133,331 138,368 100,438
- -------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 151,743 - 1,775 6,736
Deferred credits related to income taxes 76,876 - - -
Accumulated deferred investment tax credits 40,770 43,117 45,446 47,776
Miscellaneous 30,153 24,352 21,856 18,748
- -------------------------------------------------------------------------------------------------------------------------------
Total 299,542 67,469 69,077 73,260
- -------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,307,809 $1,062,699 $1,095,736 $1,084,579
===============================================================================================================================
</TABLE>
II-179A
<PAGE>
BALANCE SHEETS
Gulf Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 38,060 $ 38,060 $ 38,060 $ 38,060
Paid-in capital 214,150 207,150 182,150 182,150
Premium on preferred stock 399 399 399 399
Earnings retained in the business 112,862 112,701 102,403 94,386
- -------------------------------------------------------------------------------------------------------------------------------
Total common equity 365,471 358,310 323,012 314,995
Preferred stock 55,162 55,162 55,162 55,162
Preferred stock subject to mandatory redemption 11,000 12,750 14,000 16,500
Long-term debt 484,608 497,069 474,640 482,869
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 916,241 923,291 866,814 869,526
- -------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - - -
Preferred stock due within one year 1,750 1,250 1,750 1,750
Long-term debt due within one year 12,588 15,005 13,225 4,823
Accounts payable 34,764 29,595 34,500 24,014
Customer deposits 15,752 15,316 15,565 14,715
Taxes accrued 12,388 10,683 7,850 10,986
Interest accrued 10,105 10,247 9,584 11,024
Regulatory clauses over recovery - - 9,330 -
Vacation pay accrued 3,425 3,340 3,200 3,000
Miscellaneous 7,759 2,748 2,144 3,869
- -------------------------------------------------------------------------------------------------------------------------------
Total 98,531 88,184 97,148 74,181
- -------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 13,381 17,678 22,992 23,550
Deferred credits related to income taxes - - - -
Accumulated deferred investment tax credits 50,109 52,451 54,597 55,843
Miscellaneous 15,168 15,621 9,631 5,764
- -------------------------------------------------------------------------------------------------------------------------------
Total 78,658 85,750 87,220 85,157
- -------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,093,430 $1,097,225 $1,051,182 $1,028,864
===============================================================================================================================
</TABLE>
II-179B
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GULF POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1996
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- --------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1992 $ 25,000 5-7/8% $ 25,000 8/1/97
1993 15,000 5.55% 15,000 4/1/98
1993 30,000 5% 30,000 7/1/98
1993 30,000 6-1/8% 30,000 7/1/03
1996 30,000 6-7/8% 30,000 1/1/26
1996 25,000 6-1/2% 25,000 11/1/06
--------- --------
$155,000 $155,000
======== ========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- --------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1987 $ 32,000 8-1/4% $ 32,000 6/1/17
1992 8,930 6-3/4% 8,930 3/1/22
1993 13,000 6.20% 13,000 4/1/23
1993 32,550 5.80% 32,550 6/1/23
1993 7,875 5.70% 7,875 11/1/23
1994 22,000 6.30% 22,000 9/1/24
1994 20,000 Variable 20,000 9/1/24
1996 21,200 5-1/2% 21,200 2/1/26
1996 12,075 5.25% 12,075 4/1/06
====== ========
$169,630 $169,630
======== ========
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
- --------------------------------------------------------------------------------------------------
(Thousands)
1950 51,026 4.64% $ 5,102
1960 50,000 5.16% 5,000
1966 50,000 5.44% 5,000
1969 50,000 7.52% 5,000
1972 50,000 7.88% 5,000
1992 580,000 7% 14,500
1992 600,000 7.30% 15,000
1993 800,000 6.72% 20,000
1993 600,000 Adjustable 15,000
========= =======
2,831,026 $89,602
========= =======
</TABLE>
II-180
<PAGE>
GULF POWER COMPANY
SECURITIES RETIRED DURING 1996
First Mortgage Bonds
Principal Interest
Series Amount Rate
- ------------------------------------------------------------------------------
(Thousands)
1978 $ 930 9%
1991 50,000 8-3/4%
=======
$50,930
=======
Pollution Control Bonds
Principal Interest
Series Amount Rate
- ------------------------------------------------------------------------------
(Thousands)
1976 $12,075 6%
1991 21,200 7-1/8%
=======
$33,275
=======
II-181
MISSISSIPPI POWER COMPANY
FINANCIAL SECTION
II-182
<PAGE>
MANAGEMENT'S REPORT
Mississippi Power Company 1996 Annual Report
The management of Mississippi 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 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 books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based upon a recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting control maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the 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 four 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 Mississippi Power Company in conformity with generally accepted accounting
principles.
Dwight H. Evans
President and Chief Executive Officer
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
February 12, 1997
II-183
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Mississippi Power Company:
We have audited the accompanying balance sheets and statements of
capitalization of Mississippi Power Company (a Mississippi corporation and a
wholly owned subsidiary of Southern Company) as of December 31, 1996 and 1995,
and the related statements of income, retained earnings, paid-in capital, and
cash flows for each of the three years in the period ended December 31, 1996.
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 II-192 through 207)
referred to above present fairly, in all material respects, the financial
position of Mississippi Power Company as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Atlanta, Georgia
February 12, 1997
II-184
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Mississippi Power Company 1996 Annual Report
RESULTS OF OPERATIONS
Earnings
Mississippi Power Company's net income after dividends on preferred stock for
1996 was $52.7 million, an increase of 0.4 percent or $0.2 million over the
corresponding amount in 1995. Earnings reflect a modest increase in energy
sales, an annual retail rate decrease of $3.0 million under the Environmental
Compliance Overview Plan (ECO Plan), effective in April 1996, and an annual
retail rate increase of $4.5 million under the Performance Evaluation Plan
(PEP), effective October 1996.
A comparison of 1995 earnings to 1994 shows an increase of $3.4 million. The
increase was due to increased energy sales and an annual retail rate increase of
$3.7 million under the ECO Plan, effective in May 1995.
In April 1994, retail rates increased by $7.6 million annually under the ECO
Plan and wholesale rates increased by $3.6 million.
Revenues
The following table summarizes the factors impacting operating revenues for the
past three years:
Increase (Decrease)
from Prior Year
-----------------------------------
1996 1995 1994
-----------------------------------
(in thousands)
Retail --
Change in base
rates (PEP and
ECO Plan) $ (402) $ 2,694 $9,314
Sales growth 11,187 4,045 9,560
Weather (5,585) 4,513 1,752
Fuel cost
recovery
and other (1,255) 3,806 6,594
-------------------------------------------------------------
Total retail 3,945 15,058 27,220
-------------------------------------------------------------
Sales for resale --
Non-affiliates 7,776 3,698 4,611
Affiliates 14,139 (1,847) (5,981)
-------------------------------------------------------------
Total sales for
resale 21,915 1,851 (1,370)
Other operating
revenues 1,616 482 (1,571)
--------------------------------------------------------------
Total operating
revenues $27,476 $17,391 $24,279
==============================================================
Percent change 5.3% 3.5% 5.1%
-------------------------------------------------------------
In 1996, retail revenues were $414 million, a 1.0 percent increase above the
$410 million recorded in the prior year. This change in retail revenues was due
to a number of factors. These factors included modest growth in energy sales of
3.8 percent, 3.3 percent and 1.9 percent to industrial, commercial and
residential customers, respectively, and changes in retail revenues due to the
ECO Plan and PEP, as discussed earlier. Retail revenues in 1995 when compared to
1994 showed an increase of 3.8 percent resulting from an increase in energy
sales to commercial and residential customers, an increase in the number of
customers and a retail rate increase under the ECO Plan. Changes in base rates
reflect rate changes made under the PEP and ECO Plan.
Under the fuel cost recovery provision, recorded fuel revenues are equal to
recorded fuel expenses, including the fuel component and the operation and
maintenance component of purchased energy. Therefore, changes in recoverable
fuel expenses are offset with corresponding changes in fuel revenues and have no
effect on net income.
II-185
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1996 Annual Report
Energy sales to non-affiliates include economy sales and amounts sold under
short-term contracts. Sales for resale to non-affiliates are influenced by those
utilities' own customer demand, plant availability, and the cost of their
predominant fuels -- oil and natural gas.
Included in sales for resale to non-affiliates are revenues from rural
electric cooperative associations and municipalities located in southeastern
Mississippi. Energy sales to these customers increased 6.4 percent in 1996 and
13.1 percent in 1995 with the related revenues rising 7.1 percent and 16.7
percent, respectively. The customer demand experienced by these utilities is
determined by factors very similar to Mississippi Power's.
Sales for resale to non-territorial utilities are primarily under long-term
contracts consisting of capacity and energy components. Capacity revenues
reflect the recovery of fixed costs and a return on investment under the
contracts. Energy is generally sold at variable cost. Under these long-term
contracts, the capacity and energy components were:
1996 1995 1994
-------------------------------------
(in thousands)
Capacity $ - $ 268 $ 1,965
Energy 3,761 3,627 8,473
==========================================================
Total $3,761 $3,895 $10,438
==========================================================
Capacity revenues for Mississippi Power varied due to changes in the
contracts and in the allocation of transmission capacity revenues throughout the
Southern electric system. Most of the Company's capacity revenues are derived
from transmission charges.
Sales to affiliated companies within the Southern electric system will vary
from year to year depending on demand and the availability and cost of
generating resources at each company. These sales have no material impact on
earnings.
Below is a breakdown of kilowatt-hour sales for 1996 and the percent change
for the last three years:
Amount Percent Change
(millions of ----------- ------------------------------
kilowatt-hours) 1996 1996 1995 1994
---------- ------------------------------
Residential 2,080 1.9% 6.2% (0.4)%
Commercial 2,316 3.3 6.7 8.6
Industrial 3,960 3.8 (0.9) 6.2
Other 39 1.9 1.1 (0.5)
----------
Total retail 8,395 3.2 2.9 5.1
Sales for
resale --
Non-affiliates 2,727 9.4 (2.4) 0.4
Affiliates 694 184.7 39.7 (59.2)
----------
Total 11,816 8.7% 2.2% 1.3%
================================================================
Total retail energy sales in 1996 increased over 1995 primarily due to
growth in the number of customers served by the Company. Total retail energy
sales in 1995, when compared to the previous year, increased due to weather
influences and the improving economy within the Company's service area.
The Company anticipates continued growth in energy sales as the economy
improves within its service area. The casino industry and ancillary services,
such as lodging, food, transportation, etc., are some of the factors which may
influence the economy of the Company's service area. Also, energy demand is
expected to grow as a result of a larger and more fully employed population.
Expenses
Total operating expenses for 1996 when compared to 1995 increased 6.6 percent
due to higher fuel expenses, higher maintenance expenses and higher depreciation
and amortization. A comparison of 1995 to 1994 operating expenses reflects an
increase that resulted from higher fuel expenses, increased other operation
expenses and increased depreciation and amortization.
Fuel costs are the single largest expense for the Company. In 1996, fuel
costs increased above those recorded in 1995 due to a 21.7 percent increase in
generation. The increase in generation can be attributed to the higher demand
for energy within the Company's service area and across the Southern electric
system. Further, this increased demand for energy resulted in higher purchased
power costs from non-affiliates and lower purchased power costs from the
II-186
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1996 Annual Report
affiliates of the Southern electric system. A comparison of 1995 fuel expenses
to 1994 fuel expenses reflects an increase in generation due to higher demand
for energy.
Purchased power consists mainly of energy purchases from the affiliates of
the Southern electric system. Purchased power transactions (both sales and
purchases) among Mississippi Power and its affiliates will vary from period to
period depending on demand and the availability and variable production cost at
each generating unit in the Southern electric system.
The amount and sources of energy supply, the average cost of fuel per net
kilowatt-hour generated, and the total average cost of energy supply (including
purchased power) were as follows:
1996 1995 1994
------------------------------
Total generation
(millions of
kilowatt-hours) 10,180 8,368 7,408
Sources of energy
supply (percent) --
Coal 70 58 56
Gas 12 15 10
Oil * * *
Purchased Power 18 27 34
Average cost of fuel per
net kilowatt-hour
generated (cents) --
Coal 1.43 1.58 1.67
Gas 4.24 2.32 2.56
Oil 5.71 6.21 4.15
Total average cost
of energy supply 1.56 1.53 1.55
- --------------------------------------------------------------
* Not meaningful because of minimal generation from the fuel source.
Other operation expenses in 1995 when compared to 1994, increased due to
higher generation, a $2.6 million charge for emission allowance expenditures and
work force reduction program costs. (See Note 2 to the financial statements
under "Work Force Reduction Programs" for additional information.)
In 1996, maintenance expenses rose above the amount recorded for 1995 due to
the timing of maintenance performed at Plants Daniel and Watson, as well as
other projects. A comparison of 1995 maintenance expenses to 1994 reflects a
decrease due to the timing of scheduled maintenance.
Depreciation and amortization in 1996, as compared to 1995, increased
primarily due to additional plant investment, higher depreciation rates
beginning in 1996, and increased amortization of regulatory assets. In 1995, as
compared to 1994, depreciation and amortization increased primarily due to
additional plant investments.
Taxes other than income taxes for 1996 increased from 1995 much like 1995
when compared to 1994, due to higher municipal franchise taxes resulting from
higher retail revenues.
The decrease in 1996 income taxes when compared to 1995, is a result of
lower operating income. The change in income taxes between 1995 and 1994 also
reflects the change in operating income.
Effects of Inflation
Mississippi Power 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 costs 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 regulatory matters to energy sales growth to a
less regulated more competitive environment. Expenses are subject to constant
review and cost control programs. Mississippi Power is also maximizing the
utility of invested capital and minimizing the need for capital by refinancing,
decreasing the average fuel stockpile, raising generating plant availability and
efficiency, and aggressively controlling the construction budget. Operating
II-187
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1996 Annual Report
revenues will be affected by any changes in rates under the PEP, the Company's
performance based ratemaking plan, and the ECO Plan. PEP has proven to be a
stabilizing force on electric rates, with only moderate changes in rates taking
place.
The ECO Plan provides for recovery of costs (including costs of capital)
associated with environmental projects approved by the Mississippi Public
Service Commission (MPSC), most of which are required to comply with Clean Air
Act Amendments of 1990 (Clean Air Act) regulations. The ECO Plan is operated
independently of PEP. The Clean Air Act and other important environmental items
are discussed later under "Environmental Matters."
The Federal Energy Regulatory Commission (FERC) regulates wholesale rate
schedules and power sales contracts that Mississippi Power has with its sales
for resale customers. The FERC is currently reviewing the rate of return on
common equity included in these schedules and contracts and may require such
returns to be lowered, possibly retroactively.
Further discussion of PEP, the ECO Plan, and proceedings before the FERC is
made in Note 3 to the financial statements herein.
Future earnings in the near term will depend upon growth in energy 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 Mississippi Power'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 its 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 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
marketers and brokers. The Company is aggressively working to maintain and
expand its share of wholesale sales in the Southeastern power markets.
Various federal and state initiatives designed to promote wholesale and
retail competition, among other things, include proposals that would allow
customers to choose their electricity provider. As the initiatives
materialize, the structure of the utility industry could radically change.
Certain initiatives could result in a change in the ownership and/or
operation of generation and transmission facilities. Numerous issues must be
resolved, including significant ones relating to transmission pricing and
recovery of stranded investments. Being a low-cost producer could provide
significant opportunities to increase market share and profitability in
markets that evolve with changing regulation. 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.
Mississippi Power is subject to the provisions of Financial Accounting
Standards Board 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.
II-188
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1996 Annual Report
FINANCIAL CONDITION
Overview
The principal changes in Mississippi Power's financial condition during 1996
were gross property additions to utility plant of $61 million. Funding for gross
property additions and other capital requirements have been provided from
operating activities, principally earnings and the non-cash charges to income of
depreciation and amortization, and other long-term debt. The Statements of Cash
Flows provide additional details.
Financing Activity
Retirements, including maturities during 1996, primarily related to other
long-term debt and first mortgage bonds, totaled some $100 million. In 1996, the
Company obtained $80 million of long-term bank notes. (See the Statements of
Cash Flows for further details.) Composite financing rates for the years 1994
through 1996 as of year-end were as follows:
1996 1995 1994
-----------------------------
Composite interest rate on
long-term debt 6.03% 6.63% 6.44%
Composite preferred stock
dividend rate 6.58% 6.58% 6.58%
-----------------------------------------------------------
The decrease in composite interest rate on long-term debt in 1996 is
primarily the result of the retirement of higher cost first mortgage bonds.
Capital Structure
At year-end 1996, the Company's ratio of common equity to total capitalization,
excluding long-term debt due within one year, was 48.9 percent, compared to 50.8
percent in 1995. The decrease in equity ratio in 1996 is attributed primarily to
a 13.0 percent increase in long-term debt, excluding amounts due in one year.
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$231 million ($57 million in 1997, $58 million in 1998, and $116 million in
1999). The major emphasis within the construction program will be on upgrading
existing facilities and the possible addition of a combined cycle unit.
Revisions may be necessary because of factors such as changes in business
conditions, revised load projections, the availability and cost of capital, and
changes in environmental regulations.
Other Capital Requirements
In addition to the funds required for the Company's construction program,
approximately $85.1 million will be required by the end of 1999 for present
sinking fund requirements and maturities of long-term debt. Mississippi Power
plans to continue, when economically feasible, 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 Mississippi Power and the other operating companies of Southern
Company. 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 initially affected 28 generating plants in the Southern
electric system. As a result of 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.
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 sulfur dioxide emission allowance program is expected to
minimize the cost of compliance. Southern Company's sulfur dioxide compliance
strategy is designed to take advantage of allowances as a compliance option.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which has required some equipment
upgrades. This compliance strategy resulted in unused emission allowances being
banked for later use. Construction expenditures for Phase I compliance totaled
approximately $65 million for Mississippi Power.
II-189
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1996 Annual Report
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired plants as required
to meet Phase II limits. Therefore, current compliance strategy for Mississippi
Power could require total Phase II estimated construction expenditures of
approximately $4 million, all of which remains to be spent. 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 2 percent in 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.
Mississippi Power's ECO Plan is designed to allow recovery of costs of
compliance with the Clean Air Act, as well as other environmental statutes and
regulations. The MPSC reviews environmental projects and the Company's
environmental policy through the ECO Plan. Under the ECO Plan, any increase in
the annual revenue requirement is limited to 2 percent of retail revenues.
Mississippi Power's management believes that the ECO Plan provides for recovery
of the Clean Air Act costs. See Note 3 to the financial statements under
"Environmental Compliance Overview Plan" for additional information.
A significant portion of costs related to the acid rain provision of the
Clean Air Act is expected to be recovered through existing ratemaking
provisions. However, there can be no assurance that all Clean Air Act costs will
be recovered.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: revisions to the ambient air quality
standards for ozone and particulate matter; emission control strategies for
ozone nonattainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. Upon identifying potential sites, the Company conducts
studies, when possible, to determine the extent of any required cleanup costs.
Should remediation be determined to be probable, reasonable estimates of costs
to clean up such sites are developed and recognized in the financial statements.
A currently owned site where manufactured gas plant operations were located
prior to the Company's ownership is being investigated for potential
remediation. See Note 3 to the financial statements under "Environmental
Compliance Overview Plan" for additional information.
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; and the Endangered
Species Act. Changes to these laws could affect many areas of the Company's
operations. The full impact of any such changes cannot be determined at this
time.
Compliance with possible new legislation related to global climate change,
electromagnetic fields, and other environmental and health concerns could
significantly affect the Company. 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.
II-190
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1996 Annual Report
Sources of Capital
At December 31, 1996, the Company had $76.3 million of unused committed credit
agreements. The Company had no short-term notes payable outstanding at year end
1996.
In February 1997, Mississippi Power Capital Trust I (Trust I), of which the
Company owns all the common securities, issued $35 million of 7.75 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust I are $36 million aggregate principal amount of the Company's 7.75 percent
junior subordinated notes due February 15, 2037.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations, the sale of additional first mortgage bonds, pollution control
obligations, and preferred stock, and the receipt of additional capital
contributions from Southern Company. Mississippi Power is required to meet
certain coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. The Company's
coverage ratios are sufficiently high enough to permit, at present interest rate
levels, any foreseeable security sales. The amount of securities which the
Company will be permitted to issue in the future will depend upon market
conditions and other factors prevailing at that time.
II-191
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995, and 1994
Mississippi Power Company 1996 Annual Report
=====================================================================================================================
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues (Notes 1 and 3):
<S> <C> <C> <C>
Revenues $ 522,199 $ 508,862 $ 489,624
Revenues from affiliates 21,830 7,691 9,538
- ---------------------------------------------------------------------------------------------------------------------
Total operating revenues 544,029 516,553 499,162
- ---------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 141,532 111,071 102,216
Purchased power from non-affiliates 17,960 6,019 2,711
Purchased power from affiliates 33,245 57,777 68,543
Other 106,061 107,296 97,988
Maintenance 47,091 39,627 45,785
Depreciation and amortization 44,906 39,224 35,716
Taxes other than income taxes 43,545 42,443 41,742
Federal and state income taxes (Note 8) 32,618 34,486 31,386
- ---------------------------------------------------------------------------------------------------------------------
Total operating expenses 466,958 437,943 426,087
- ---------------------------------------------------------------------------------------------------------------------
Operating Income 77,071 78,610 73,075
Other Income (Expense):
Allowance for equity funds used during construction 344 366 1,099
Interest income 239 199 87
Other, net 3,801 4,596 2,033
Income taxes applicable to other income (932) (1,006) (227)
- ---------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 80,523 82,765 76,067
- ---------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 19,898 21,898 19,725
Allowance for debt funds used during construction (713) (399) (1,039)
Interest on notes payable 1,416 1,141 1,442
Amortization of debt discount, premium, and expense, net 1,547 1,510 1,479
Other interest charges 753 1,185 404
- ---------------------------------------------------------------------------------------------------------------------
Net interest charges 22,901 25,335 22,011
- ---------------------------------------------------------------------------------------------------------------------
Net Income 57,622 57,430 54,056
Dividends on Preferred Stock 4,899 4,899 4,899
- ---------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 52,723 $ 52,531 $ 49,157
=====================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years ended December 31, 1996, 1995, and 1994
Mississippi Power Company 1996 Annual Report
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
<S> <C> <C> <C>
Net income $ 57,622 $ 57,430 $ 54,056
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 50,551 51,588 47,827
Deferred income taxes 74 (480) 1,563
Allowance for equity funds used during construction (344) (366) (1,099)
Other, net 9,787 5,704 5,230
Changes in certain current assets and liabilities --
Receivables, net 5,118 (8,758) 3,066
Inventories 4,973 3,962 (9,856)
Payables 2,077 17,421 (8,754)
Other 292 681 3,334
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 130,150 127,182 95,367
- ------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (61,314) (67,570) (104,014)
Other (2,258) (1,697) (14,087)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (63,572) (69,267) (118,101)
- ------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Capital contributions 27 - 25,000
First mortgage bonds - 30,000 35,000
Pollution control bonds - 10,600 -
Other long-term debt 80,000 - 85,310
Retirements:
First mortgage bonds (45,447) (1,625) (32,628)
Pollution control bonds (10) (10) (10)
Other long-term debt (55,000) (40,689) (9,299)
Notes payable, net - - (40,000)
Payment of preferred stock dividends (4,899) (4,899) (4,899)
Payment of common stock dividends (43,900) (39,400) (34,100)
Miscellaneous (2,932) (568) (1,201)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (72,161) (46,591) 23,173
- ------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (5,583) 11,324 439
Cash and Cash Equivalents at Beginning of Year 12,641 1,317 878
- ------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 7,058 $ 12,641 $ 1,317
========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $21,467 $23,308 $19,196
Income taxes 34,072 36,908 31,115
- ------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
II-193
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1996 and 1995
Mississippi Power Company 1996 Annual Report
- ------------------------------------------------------------------------------------------------------
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Utility Plant:
Plant in service, at original cost (Notes 1 and 6) $ 1,483,875 $ 1,434,327
Less accumulated provision for depreciation 526,776 499,308
- ------------------------------------------------------------------------------------------------------
957,099 935,019
Construction work in progress 35,100 41,210
- ------------------------------------------------------------------------------------------------------
Total 992,199 976,229
- ------------------------------------------------------------------------------------------------------
Other Property and Investments 3,054 4,160
- ------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 7,058 12,641
Receivables-
Customer accounts receivable 26,364 29,738
Regulatory clauses under recovery 7,300 7,975
Other accounts and notes receivable 7,468 5,616
Affiliated companies 6,329 9,213
Accumulated provision for uncollectible accounts (839) (802)
Fossil fuel stock, at average cost 12,168 15,666
Materials and supplies, at average cost 21,083 22,558
Current portion of deferred fuel charges (Note 5) - 1,546
Current portion of accumulated deferred income taxes (Note 8) 7,227 5,180
Prepayments 4,744 2,404
Vacation pay deferred 4,806 4,715
- ------------------------------------------------------------------------------------------------------
Total 103,708 116,450
- ------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense and loss, being amortized 12,220 10,039
Deferred charges related to income taxes (Note 8) 22,274 23,384
Deferred early retirement program costs (Note 2) - 7,286
Long-term notes receivable 3,737 3,821
Miscellaneous 5,135 7,584
- ------------------------------------------------------------------------------------------------------
Total 43,366 52,114
- ------------------------------------------------------------------------------------------------------
Total Assets $ 1,142,327 $ 1,148,953
======================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-194
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1996 and 1995
Mississippi Power Company 1996 Annual Report
- ----------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1996 1995
- ----------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Capitalization (See accompanying statements):
Common stock equity $ 383,734 $ 374,884
Preferred stock 74,414 74,414
Long-term debt 326,379 288,820
- ----------------------------------------------------------------------------------------------
Total 784,527 738,118
- ----------------------------------------------------------------------------------------------
Current Liabilities:
Long-term debt due within one year (Note 10) 10 57,229
Accounts payable-
Affiliated companies 4,136 13,646
Regulatory clauses over recovery 8,788 5,381
Other 38,720 31,748
Customer deposits 3,154 2,716
Taxes accrued-
Federal and state income - 97
Other 32,445 31,816
Interest accrued 4,384 4,701
Miscellaneous 13,942 13,453
- ----------------------------------------------------------------------------------------------
Total 105,579 160,787
- ----------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 133,437 129,711
Accumulated deferred investment tax credits 28,333 29,773
Deferred credits related to income taxes (Note 8) 40,568 43,266
Postretirement benefits 21,850 20,800
Accumulated provision for property damage (Note 1) 12,955 12,018
Miscellaneous 15,078 14,480
- ----------------------------------------------------------------------------------------------
Total 252,221 250,048
- ----------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 2, 3, 4, and 5)
Total Capitalization and Liabilities $ 1,142,327 $ 1,148,953
==============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-195
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1996 and 1995
Mississippi Power Company 1996 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
Common Stock Equity:
Common stock, without par value --
Authorized -- 1,130,000 shares
Outstanding -- 1,121,000 shares in
1996 and 1995 $ 37,691 $ 37,691
Paid-in capital 179,389 179,362
Premium on preferred stock 372 372
Retained earnings (Note 11) 166,282 157,459
- ---------------------------------------------------------------------------------------------------------------------------
Total common stock equity 383,734 374,884 48.9% 50.8%
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$100 par value --
Authorized -- 1,244,139 shares
Outstanding -- 744,139 shares in 1996
and 1995
4.40% 4,000 4,000
4.60% 2,010 2,010
4.72% 5,000 5,000
6.32% 15,000 15,000
6.65% 8,404 8,404
7.00% 5,000 5,000
7.25% 35,000 35,000
- ---------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $4,899,000) 74,414 74,414 9.5 10.1
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
March 1, 1998 5 3/8% 35,000 35,000
August 1, 2000 6 5/8% 40,000 40,000
March 1, 2004 6.60% 35,000 35,000
May 1, 2021 9 1/4% - 45,447
June 1, 2023 7.45% 35,000 35,000
December 1, 2025 6 7/8% 30,000 30,000
- ---------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 175,000 220,447
Pollution control obligations (Note 9) 73,735 73,745
Other long-term debt (Note 9) 80,000 55,000
Unamortized debt premium (discount), net (2,346) (3,143)
- ---------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement--$19,837,000) 326,389 346,049
Less amount due within one year (Note 10) 10 57,229
- ---------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 326,379 288,820 41.6 39.1
- ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 784,527 $ 738,118 100.0% 100.0%
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-196
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1996, 1995, and 1994
Mississippi Power Company 1996 Annual Report
- --------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Period $ 157,459 $ 144,328 $ 129,343
Net income after dividends on preferred stock 52,723 52,531 49,157
Cash dividends on common stock (43,900) (39,400) (34,100)
Preferred stock transactions and other, net - - (72)
==========================================================================================================================
Balance at End of Period (Note 11) $ 166,282 $ 157,459 $ 144,328
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Period $ 179,362 $ 179,362 $ 154,362
Contributions to capital by parent company 27 - 25,000
==========================================================================================================================
Balance at End of Period $ 179,389 $ 179,362 $ 179,362
==========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-197
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Mississippi Power Company 1996 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Mississippi Power Company is a wholly owned subsidiary of Southern Company,
which is the parent company of five operating companies, Southern Company
Services (SCS), Southern Communications Services (Southern Communications),
Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating Company
(Southern Nuclear), and 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. SCS provides, at cost, specialized services to Southern Company and
to the 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 Energy designs, builds,
owns, and operates power production and delivery facilities and provides a broad
range of energy related services in the United States and international markets.
Southern Nuclear provides services to Southern Company's nuclear power plants.
Southern Development develops new business opportunities related to energy
products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of the PUHCA. Mississippi Power is also
subject to regulation by the FERC and the Mississippi Public Service Commission
(MPSC). The Company follows generally accepted accounting principles and
complies with the accounting policies and practices prescribed by the respective
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.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
Mississippi Power 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 as of December 31 relate to:
1996 1995
-------------------------
(in thousands)
Deferred income taxes $22,274 $23,384
Vacation pay 4,806 4,715
Work force reduction costs 1,991 7,286
Deferred fuel charges - 1,546
Premium on reacquired debt 10,672 8,509
Deferred environmental costs 1,679 1,713
Property damage reserve (12,955) (12,018)
Deferred income tax credits (40,568) (43,266)
Other, net (2,882) (2,658)
- ----------------------------------------------------------------
Total $(14,983) $ (10,789)
================================================================
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 the related regulatory assets and liabilities. In addition, the Company
would be required to determine any impairment to other assets, including plant,
and, if impaired, to write down the assets to their fair value.
Revenues
Mississippi Power accrues revenues for service rendered but unbilled at the end
of each fiscal period. The Company's retail and wholesale rates include
provisions to adjust billings for fluctuations in fuel and the energy component
of purchased power. Retail rates also include provisions to adjust billings for
fluctuations in costs for ad valorem taxes and certain qualifying environmental
costs.
II-198
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
Revenues are adjusted for differences between actual allowable amounts
and the amounts included in rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1996, uncollectible
accounts continued to average less than 1 percent of revenues.
Depreciation
Depreciation of the original cost of depreciable utility plant in service is
provided by using composite straight-line rates which approximated 3.3 percent
in 1996, and 3.2 percent in both 1995 and 1994. 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 removal of facilities.
Income Taxes
Mississippi Power 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 rates used to capitalize the cost of funds
devoted to construction were 7.5 percent in 1996, 8.0 percent in 1995, and 6.9
percent in 1994. AFUDC (net of income taxes), as a percent of net income after
dividends on preferred stock, was 1.5 percent in 1996, 1.2 percent in 1995, and
3.5 percent in 1994.
Utility Plant
Utility plant is stated at original cost. This 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 except for the maintenance of coal cars and a portion of the railway
track maintenance, which are charged to fuel stock. The cost of replacements of
property (exclusive of minor items of property) is charged to utility plant.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
In accordance with FASB Statement No. 107, Disclosure About Fair Value of
Financial Instruments, all financial instruments of the Company for which the
carrying amount does not approximate fair value, must be disclosed. At December
31, 1996, the fair value of long-term debt was $324 million and the carrying
amount was $326 million. At December 31, 1995, the fair value of long-term debt
was $355 million and the carrying amount was $346 million. 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 used
or installed.
II-199
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
Provision for Property Damage
Mississippi Power is self-insured for the cost of storm, fire and other
uninsured casualty damage to its property, including transmission and
distribution facilities. As permitted by regulatory authorities, the Company
provided for such costs by charges to income of $1.5 million in both 1996 and
1995 and $1.1 million in 1994. The cost of repairing damage resulting from such
events that individually exceed $50 thousand is charged to the accumulated
provision to the extent it is available. Effective January 1995, regulatory
treatment by the MPSC allowed a maximum accumulated provision of $18 million. As
of December 31, 1996, the accumulated provision amounted to $13.0 million.
2. RETIREMENT BENEFITS
Pension Plan
Mississippi Power 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. 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 trust 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
Mississippi Power also provides certain medical care and life insurance benefits
for retired employees. Substantially all employees may become eligible for these
benefits when they retire. Trusts are funded to the extent required by the
Company's regulatory commissions. Amounts funded are primarily invested in debt
and equity securities.
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." The cost of postretirement
benefits is reflected in rates on a current basis.
Funded Status and Cost of Benefits
The following tables show actuarial results and assumptions for pension and
postretirement benefits as computed under the requirements of FASB Statement
Nos. 87 and 106, respectively. The funded status of the plans at December 31 was
as follows:
Pension
------------------------
1996 1995
------------------------
(in thousands)
Actuarial present value
of benefit obligation:
Vested benefits $92,091 $91,322
Non-vested benefits 5,191 4,264
--------------------------------------------------------------
Accumulated benefit obligation 97,282 95,586
Additional amounts related to
projected salary increases 30,552 28,545
--------------------------------------------------------------
Projected benefit obligation 127,834 124,131
Less:
Fair value of plan assets 179,658 170,481
Unrecognized net gain (56,674) (47,034)
Unrecognized prior service cost 6,422 2,868
Unrecognized transition asset (5,449) (6,001)
--------------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $3,877 $3,817
==============================================================
Postretirement Benefits
------------------------
1996 1995
------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees and dependents $20,841 $22,575
Employees eligible to retire 2,703 1,709
Other employees 17,564 17,908
------------------------------------------------------------
Accumulated benefit obligation 41,108 42,192
Less:
Fair value of plan assets 10,210 8,700
Unrecognized net loss 1,136 4,160
Unrecognized transition
obligation 5,911 7,044
--------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $23,851 $22,288
==============================================================
II-200
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
In 1995, Southern Company's subsidiaries announced a cost sharing program
for postretirement benefits. The program established limits on amounts the
companies will pay to provide future retiree postretirement benefits. This
change reduced the Company's 1995 accumulated postretirement benefit obligation
by approximately $10.5 million.
The weighted average rates assumed in the above actuarial calculations were:
1996 1995 1994
---------------------------------
Discount 7.8% 7.3% 8.0%
Annual salary increase 5.3 4.8 5.5
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 9.3
percent for 1996, decreasing gradually to 5.8 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, 1996, by $3.2 million and the aggregate of the
service and interest cost components of the net retiree cost by $0.3 million.
Components of the plans' net cost are shown below:
Pension
--------------------------------
1996 1995 1994
--------------------------------
(in thousands)
Benefits earned during
the year $ 3,842 $ 3,636 $ 3,780
Interest cost on
projected benefit
obligation 9,310 8,434 7,503
Actual (return) loss on
plan assets (20,438) (32,232) 3,244
Net amortization and
deferral 6,442 18,650 (16,048)
==============================================================
Net pension income $ (844) $ (1,512) $ (1,521)
==============================================================
Of the above net pension income, $(0.6) million in 1996,
and $(1.1) million in both 1995 and 1994 were recorded in operating expenses,
and the remainder was recorded in construction and other accounts.
Postretirement Benefits
------------------------------
1996 1995 1994
------------------------------
(in thousands)
Benefits earned during the year $ 958 $1,525 $1,760
Interest cost on accumulated
benefit obligation 2,830 3,442 3,251
Amortization of transition
obligation over 20 years 362 1,027 1,043
Actual (return) loss on
plan assets (990) (1,436) 132
Net amortization and deferral 312 851 (575)
================================================================
Net postretirement costs $3,472 $5,409 $5,611
================================================================
Of the above net postretirement costs recorded, $2.8 million in 1996, $3.9
million in 1995, and $4.4 million in 1994 were recorded in operating expenses,
and the remainder was recorded in construction and other accounts.
Work Force Reduction Programs
During 1994, Mississippi Power and SCS instituted work force reduction programs.
The costs of the SCS work force reduction program were apportioned among the
various entities that form the Southern electric system, with the Company's
portion amounting to $1.4 million. The Company instituted an early retirement
incentive program in April 1994 and deferred the related costs of approximately
$12.9 million. The Company received authority from the MPSC to defer these
costs, as well as its portion of the costs of the SCS program, and to amortize
over a period not to exceed 60 months, beginning no later than January 1995. The
Company expensed $5.3 million, $4.0 million and $3.0 million of the cost of
these programs in 1996, 1995 and 1994, respectively. In 1996, Mississippi Power
expensed its pro-rata share of the costs for affiliated companies' programs of
$1.9 million.
3. LITIGATION AND REGULATORY MATTERS
Retail Rate Adjustment Plans
Mississippi Power's retail base rates are set under a Performance Evaluation
Plan (PEP). In January 1994, the MPSC approved PEP-2. PEP-2 was designed with
the MPSC objectives that the plan would reduce the impact of rate changes on the
customer and provide incentives for Mississippi Power to keep customer prices
low. PEP-2 includes a mechanism for sharing rate adjustments based on the
Company's ability to maintain low rates for customers and on the Company's
II-201
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
performance as measured by three indicators that emphasize price and service to
the customer. PEP-2 provides for semiannual evaluations of Mississippi's
performance-based return on investment. Any change in rates is limited to 2
percent of retail revenues per evaluation period. PEP-2 will remain in effect
until the MPSC modifies or terminates the plan. During 1995 and 1994, there were
no changes under PEP-2. In September 1996, the MPSC under PEP-2 approved a
retail revenue increase of $4.5 million (1.06 percent of annual retail revenue)
which became effective in October 1996.
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 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,
including the Company's transmission facilities agreement discussed in Note 5
under "Lease Agreements."
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. 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 -- as
well as certain other contracts that reference these proceedings in determining
return on common equity -- and if refunds were ordered, the amount of refunds
could range up to approximately $3.4 million for Mississippi Power at December
31, 1996. However, management believes that rates are not excessive, and that
refunds are not justified.
Environmental Compliance Overview Plan
The MPSC approved Mississippi Power's ECO Plan in 1992. The plan establishes
procedures to facilitate the MPSC's overview of the Company's environmental
strategy and provides for recovery of costs (including costs of capital)
associated with environmental projects approved by the MPSC. In November 1995,
the MPSC ordered a change in accounting treatment allowing emission allowance
expenses to be recovered through the Company's fuel adjustment clause, and
emission allowance inventory costs to be recovered through PEP-2 rather than
through the ECO Plan. Under the ECO Plan any increase in the annual revenue
requirement is limited to 2 percent of retail revenues. However, the plan also
provides for carryover of any amount over the 2 percent limit into the next
year's revenue requirement. The ECO Plan had previously resulted in an annual
retail rate increase of $3.7 million, effective in May 1995 which included $1.6
million of 1994 carryover and an annual retail rate increase of $7.6 million,
effective in April 1994. The Company's 1996 annual filing under the ECO Plan
resulted in a $3.0 million decrease in retail rates, effective in April 1996. On
January 31, 1997, the Company filed with the MPSC under the ECO Plan a request
for an annual retail rate increase of $0.9 million.
Mississippi Power conducts studies, when possible, to determine the extent
of any required clean-up costs. Should remediation be determined to be probable,
reasonable estimates of costs to clean up such sites are developed and
recognized in the financial statements. A currently owned site where
manufactured gas plant operations were located prior to the Company's ownership
is being investigated for potential remediation. The remedial investigation is
near completion and is being conducted in conjunction with the Mississippi
Department of Environmental Quality. In recognition of probable further study
and remediation, the Company in 1995 recorded a liability and a deferred debit
(regulatory asset) of $1.8 million, including feasibility study costs. The
Company recognizes such costs as they are incurred and recovers them under the
ECO Plan as provided in the Company's 1995 ECO order. As of December 31, 1996,
the balance in the liability and regulatory asset accounts was $1.7 million,
including additional feasibility study costs. If this site were required to be
remediated, industry studies show the Company could incur cleanup costs ranging
from $1.5 million to $10 million before giving consideration to possible
recovery of clean-up costs from other parties.
II-202
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
4. CONSTRUCTION PROGRAM
Mississippi Power is engaged in continuous construction programs, the costs of
which are currently estimated to total $57 million in 1997, $58 million in 1998,
and $116 million in 1999.
The construction program is subject to periodic review and revision, and
actual construction costs may vary from
the above estimates because of numerous factors. These factors include changes
in business conditions; revised load growth estimates; changes in environmental
regulations; increasing costs of labor, equipment and materials; and cost of
capital. The Company does not currently have any new generating plants under
construction. However, significant construction will continue related to
transmission and distribution facilities, the upgrading of generating plants,
and the possible addition of a combined cycle unit.
5. FINANCING AND COMMITMENTS
Financing
Mississippi Power's construction program is expected to be financed from
internal and other sources, such as the issuance of additional long-term debt
and preferred stock and the receipt of capital contributions from Southern
Company.
The amounts of first mortgage bonds and preferred stock which can be issued
in the future will be contingent upon market conditions, adequate earnings
levels, regulatory authorizations and other factors.
At December 31, 1996, Mississippi Power had total committed credit
agreements with banks for $96.3 million. At year-end 1996, the unused portion of
these committed credit agreements was $76.3 million. These credit agreements
expire at various dates in 1997 and in 1999. Some of these agreements allow
short-term borrowings to be converted 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 Company's option. In connection with these credit arrangements, the Company
agrees to pay commitment fees based on the unused portions of the commitments or
to maintain compensating balances with the banks. At December 31, 1996, the
Company had no short-term borrowings outstanding.
Assets Subject to Lien
Mississippi Power's mortgage indenture dated as of September 1, 1941, as amended
and supplemented, which secures the first mortgage bonds issued by the Company,
constitutes a direct first lien on substantially all the Company's fixed
property and franchises.
Lease Agreements
In 1984, Mississippi Power and Gulf States Utilities Company (Gulf States)
entered into a forty-year transmission facilities agreement whereby Gulf States
began paying a use fee to the Company covering all expenses relative to
ownership and operation and maintenance of a 500 kV line, including amortization
of its original $57 million cost. For the three years ended 1996 use fees
collected under this agreement, net of related expenses, amounted to $3.7
million each year, and are included within Other Income, in the Statements of
Income.
In 1989, Mississippi Power entered into a twenty-two
year lease agreement for the use of 495 aluminum railcars. In 1994, a second
lease agreement for the use of 250 additional aluminum railcars was also entered
into for twenty-two years. Both of these leases, totaling 745 railcars, were for
the transport of coal at Plant Daniel. Gulf Power, as joint owner of Plant
Daniel, is responsible for one half of the lease cost. The Company's share (50%)
of the leases is charged to fuel inventory and allocated to fuel expense as the
fuel is consumed. The lease cost charged to inventory was $1.7 million in both
1996 and 1995, and $1.2 million in 1994. The Company's annual lease payments for
1997 through 2001 will be approximately $1.7 million and after 2001, lease
payments total in aggregate approximately $20.7 million. The Company has the
option to purchase the 745 railcars at the greater of the termination value or
the fair market value, or to renew the leases at the end of the lease term.
Fuel and Purchased Power Commitments
To supply a portion of the fuel requirements of its generating plants,
Mississippi Power has entered into various long-term commitments for the
procurement of fuel. In most cases, these contracts contain provisions for price
escalations, minimum production levels, and other financial commitments.
II-203
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
Total estimated obligations at December 31, 1996 were as follows:
Year Fuel
- -------------- --------------
(in millions)
1997 $129
1998 127
1999 91
- ------------------------------------------------------
Total commitments $347
- ------------------------------------------------------
Additional commitments for fuel will be required in the future to supply the
Company's fuel needs.
Mississippi Power entered into agreements to purchase summer peaking power
and options for power for the years 1996 through 2000. For June through
September of 1996, the Company entered into an agreement to buy 242 megawatts of
capacity and energy from another electric utility. For each June through
September period of 1997 through 2000, the Company has purchased options from
power marketers for up to 250 megawatts of peaking power in 1997; 300 megawatts
in 1998; 350 megawatts in 1999; and 400 megawatts in 2000. In June 1996, the
MPSC approved Mississippi Power's request that it be allowed to earn a return on
the capacity portion of these agreements.
6. JOINT OWNERSHIP AGREEMENTS
Mississippi Power and Alabama Power own as tenants in common Greene County
Electric Generating Plant (coal) located in Alabama; and Mississippi Power and
Gulf Power own as tenants in common Daniel Electric Generating Plant (coal)
located in Mississippi. At December 31, 1996, Mississippi Power's percentage
ownership and investment in these jointly owned facilities were as follows:
Company's
Generating Total Percent Gross Accumulated
Plant Capacity Ownership Investment Depreciation
---------- -------- ----------- ---------- ------------
(Megawatts) (in thousands)
Greene
County 500 40% $ 59,102 $ 33,010
Daniel 1,000 50% 221,211 97,910
----------------------------------------------------------------
Mississippi Power's share of plant operating expenses is included in the
corresponding operating expenses in the Statements of Income.
7. LONG-TERM POWER SALES AGREEMENTS
General
Mississippi Power and the other operating affiliates of Southern Company have
long-term contractual agreements for the sale of capacity and energy to certain
non-affiliated utilities located outside the system's service area. Some of
these agreements (unit power sales) are firm commitments and pertain to capacity
related to specific generating units. Mississippi Power's participation in firm
production capacity unit power sales ended in 1989. Because the energy is
generally sold at cost under these agreements, profitability is primarily
affected by revenues from capacity sales. The capacity revenues have been as
follows:
Other
Year Unit Power Long-Term Total
------------------------------------------------------------
(in thousands)
1996 $ - $ - $ -
1995 268 - 268
1994 660 1,305 1,965
8. INCOME TAXES
At December 31, 1996, the tax-related regulatory assets and liabilities were $22
million and $41 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.
II-204
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
Details of the federal and state income tax provisions are shown below:
1996 1995 1994
---------------------------------
(in thousands)
Total provision for
income taxes
Federal --
Currently payable $29,888 $32,546 $26,072
Deferred --current year 13,816 5,122 6,313
--reversal of
prior years (14,913) (7,039) (5,161)
---------------------------------------------------------------
28,791 30,629 27,224
---------------------------------------------------------------
State --
Currently payable 3,588 3,426 3,978
Deferred --current 4,727 2,270 1,669
--reversal of
prior years (3,556) (833) (1,258)
---------------------------------------------------------------
4,759 4,863 4,389
---------------------------------------------------------------
Total 33,550 35,492 31,613
Less income taxes charged
to other income 932 1,006 227
---------------------------------------------------------------
Federal and state
income taxes charged
to operations $32,618 $34,486 $31,386
===============================================================
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:
1996 1995
-----------------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $148,667 $145,093
Basis differences 10,507 10,815
Coal contract buyouts - 145
Other 19,285 16,478
-------------------------------------------------------------
Total 178,459 172,531
-------------------------------------------------------------
Deferred tax assets:
Other property
basis differences 24,434 25,951
Pension and
other benefits 8,750 7,356
Property insurance 4,955 4,551
Unbilled fuel 2,808 3,039
Other 11,302 7,103
-------------------------------------------------------------
Total 52,249 48,000
-------------------------------------------------------------
Net deferred tax
liabilities 126,210 124,531
Portion included in
current assets, net 7,227 5,180
-------------------------------------------------------------
Accumulated deferred
income taxes in the
Balance Sheets $133,437 $129,711
=============================================================
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 $1.4 million in 1996, and $1.5 million in 1995 and 1994. At December
31, 1996, 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:
1996 1995 1994
-----------------------------
Total effective tax rate 37% 38% 37%
State income tax, net of
federal income tax benefit (3) (3) (3)%
Tax rate differential 1 - 1
-------------------------------------------------------------
Statutory federal tax rate 35% 35% 35%
=============================================================
Mississippi Power and the subsidiaries of Southern Company file a
consolidated federal income tax return. Under a joint consolidated income tax
II-205
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
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 pollution control obligations and other long-term debt are as
follows:
December 31,
1996 1995
---------------------
(in thousands)
Obligations incurred in
connection with the sale by
public authorities of
tax-exempt pollution control
revenue bonds:
5.80% due 2007 $ 960 $ 970
Variable rate due 2020 6,550 6,550
Variable rate due 2022 16,750 16,750
6.20% due 2023 13,000 13,000
5.65% due 2023 25,875 25,875
Variable due 2025 10,600 10,600
- ---------------------------------------------------------------
73,735 73,745
- ---------------------------------------------------------------
Other long-term debt:
Variable rates due 1996 - 55,000
Variable rates (5.80797% to
5.88906% at 1/1/97) due 1999 50,000 -
Variable rate due 2000 30,000 -
- ---------------------------------------------------------------
80,000 55,000
- ---------------------------------------------------------------
Total $153,735 $128,745
===============================================================
Pollution control obligations represent installment or
lease purchases of pollution control facilities financed by application of funds
derived from sales by public authorities of tax-exempt revenue bonds.
Mississippi Power has authenticated and delivered to the Trustee a like
principal amount of first mortgage bonds as security for obligations under
collateralized installment agreements. The principal and interest on the first
mortgage bonds will be payable only in the event of default under these
agreements. The 5.80% series of pollution control obligations has a cash sinking
fund requirement of $10 thousand for 1997 and $20 thousand annually in 1998,
1999, 2000 and 2001.
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 is as follows:
1996 1995
--------------------
(in thousands)
Bond improvement
fund requirements $1,750 $ 2,219
Less:
Portion to be satisfied by
certifying property additions 1,750 -
-------------------------------------------------------------
Cash improvement fund
requirements - 2,219
Pollution control bond cash
sinking fund requirements (Note 9) 10 10
Current portion of notes
payable (Note 9) - 55,000
=============================================================
Total $ 10 $57,229
=============================================================
The first mortgage bond improvement fund requirement is one percent of each
outstanding series authenticated under the indenture of Mississippi Power prior
to January 1 of each year, other than first mortgage bonds issued as collateral
security for certain pollution control obligations. The requirement must be
satisfied by June 1 of each year by depositing cash or reacquiring bonds, or by
pledging additional property equal to 166-2/3 percent of such requirement.
11. COMMON STOCK DIVIDEND RESTRICTIONS
Mississippi Power's first mortgage bond indenture and the corporate charter
contain various common stock dividend restrictions. At December 31, 1996,
approximately $118 million of retained earnings was restricted against the
payment of cash dividends on common stock under the most restrictive terms of
the mortgage indenture or corporate charter.
II-206
<PAGE>
NOTES (continued)
Mississippi Power Company 1996 Annual Report
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 are as follows:
Net Income
After Dividends
Quarter Operating Operating On
Ended Revenues Income Preferred Stock
-------------------------------------------------------------------
March 1996 $126,954 $18,074 $11,695
June 1996 136,749 17,691 11,400
September 1996 156,603 27,670 21,784
December 1996 123,723 13,636 7,844
March 1995 $109,572 $15,729 $ 9,269
June 1995 128,504 22,193 14,737
September 1995 157,119 28,517 22,161
December 1995 121,358 12,171 6,364
Mississippi Power's business is influenced by seasonal weather conditions
and the timing of rate changes.
II-207
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1996 Annual Report
=================================================================================================
<S> <C> <C> <C>
1996 1995 1994
- -------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $544,029 $516,553 $499,162
Net Income after Dividends
on Preferred Stock (in thousands) $52,723 $52,531 $49,157
Cash Dividends on Common Stock (in thousands) $43,900 $39,400 $34,100
Return on Average Common Equity (percent) 13.9 14.26 14.38
Total Assets (in thousands) $1,142,327 $1,148,953 $1,123,711
Gross Property Additions (in thousands) $61,314 $67,570 $104,014
- -------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $383,734 $374,884 $361,753
Preferred stock 74,414 74,414 74,414
Preferred stock subject to mandatory redemption - - -
Long-term debt 326,379 288,820 306,522
- -------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $784,527 $738,118 $742,689
=================================================================================================
Capitalization Ratios (percent):
Common stock equity 48.9 50.8 48.7
Preferred stock 9.5 10.1 10.0
Long-term debt 41.6 39.1 41.3
- -------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=================================================================================================
First Mortgage Bonds (in thousands):
Issued - 30,000 35,000
Retired 45,447 1,625 32,628
Preferred Stock (in thousands):
Issued - - -
Retired - - -
- -------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Aa3 Aa3 Aa3
Standard and Poor's A+ A+ A+
Duff & Phelps AA- AA- A+
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A A A
Duff & Phelps A+ A+ A
- -------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 154,630 154,014 152,891
Commercial 30,366 29,903 29,276
Industrial 639 642 650
Other 200 194 189
- -------------------------------------------------------------------------------------------------
Total 185,835 184,753 183,006
=================================================================================================
Employees (year-end) 1,363 1,421 1,535
- -------------------------------------------------------------------------------------------------
</TABLE>
II-208
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1996 Annual Report
==============================================================================================================
<S> <C> <C> <C> <C>
1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $474,883 $434,447 $432,386 $446,871
Net Income after Dividends
on Preferred Stock (in thousands) $42,436 $36,790 $22,627 $34,176
Cash Dividends on Common Stock (in thousands) $29,000 $28,000 $28,500 $27,500
Return on Average Common Equity (percent) 14.09 13.27 8.17 12.36
Total Assets (in thousands) $1,050,334 $791,283 $790,641 $800,026
Gross Property Additions (in thousands) $139,976 $68,189 $53,675 $49,009
- --------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $321,768 $280,640 $273,855 $279,833
Preferred stock 74,414 74,414 39,414 39,414
Preferred stock subject to mandatory redemption - - - 3,750
Long-term debt 250,391 238,650 304,150 270,724
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $646,573 $593,704 $617,419 $593,721
==============================================================================================================
Capitalization Ratios (percent):
Common stock equity 49.8 47.3 44.4 47.1
Preferred stock 11.5 12.5 6.4 7.3
Long-term debt 38.7 40.2 49.2 45.6
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
==============================================================================================================
First Mortgage Bonds (in thousands):
Issued 70,000 40,000 50,000 -
Retired 51,300 104,703 - 4,000
Preferred Stock (in thousands):
Issued 23,404 35,000 - -
Retired 23,404 - 4,118 750
- --------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A+ A+ A+ A+
Duff & Phelps A+ A+ A+ A+
Preferred Stock -
Moody's a1 a1 a1 a1
Standard and Poor's A A A A
Duff & Phelps A A A A
- --------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 151,692 150,248 148,978 147,738
Commercial 28,648 28,056 27,441 27,134
Industrial 570 573 562 574
Other 190 189 400 411
- --------------------------------------------------------------------------------------------------------------
Total 181,100 179,066 177,381 175,857
==============================================================================================================
Employees (year-end) 1,586 1,619 1,630 1,842
- --------------------------------------------------------------------------------------------------------------
</TABLE>
II-209A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1996 Annual Report
==============================================================================================================
<S> <C> <C> <C> <C>
1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $442,650 $437,939 $455,843 $476,265
Net Income after Dividends
on Preferred Stock (in thousands) $38,576 $36,081 $35,200 $33,814
Cash Dividends on Common Stock (in thousands) $27,000 $27,600 $24,700 $23,700
Return on Average Common Equity (percent) 14.43 14.03 14.68 15.28
Total Assets (in thousands) $786,570 $779,319 $764,068 $767,110
Gross Property Additions (in thousands) $43,916 $54,550 $53,288 $62,488
- --------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $273,157 $261,473 $252,992 $226,601
Preferred stock 39,414 39,414 39,414 39,414
Preferred stock subject to mandatory redemption 4,500 5,250 6,750 8,250
Long-term debt 277,693 287,525 294,811 299,684
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $594,764 $593,662 $593,967 $573,949
==============================================================================================================
Capitalization Ratios (percent):
Common stock equity 45.9 44.1 42.6 39.5
Preferred stock 7.4 7.5 7.8 8.3
Long-term debt 46.7 48.4 49.6 52.2
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
==============================================================================================================
First Mortgage Bonds (in thousands):
Issued - - - 35,000
Retired 3,823 - 29,701 29,250
Preferred Stock (in thousands):
Issued - - - -
Retired 750 1,500 1,500 1,500
- --------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A+ A+ A+ A+
Duff & Phelps A+ 5 5 5
Preferred Stock -
Moody's a1 a1 a1 a1
Standard and Poor's A A A A
Duff & Phelps A 6 6 6
- --------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 147,308 146,750 146,273 145,809
Commercial 26,867 26,751 26,342 26,217
Industrial 525 478 438 393
Other 404 399 389 363
- --------------------------------------------------------------------------------------------------------------
Total 175,104 174,378 173,442 172,782
==============================================================================================================
Employees (year-end) 1,750 1,831 1,898 1,882
- --------------------------------------------------------------------------------------------------------------
</TABLE>
II-209B
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1996 Annual Report
=================================================================================================
<S> <C> <C> <C>
1996 1995 1994
- -------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $137,055 $134,286 $124,257
Commercial 131,734 131,034 124,716
Industrial 141,324 140,947 142,268
Other 4,013 3,914 3,882
- -------------------------------------------------------------------------------------------------
Total retail 414,126 410,181 395,123
Sales for resale - non-affiliates 99,596 91,820 88,122
Sales for resale - affiliates 21,830 7,691 9,538
- -------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 535,552 509,692 492,783
Other revenues 8,477 6,861 6,379
- -------------------------------------------------------------------------------------------------
Total $544,029 $516,553 $499,162
=================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 2,079,611 2,040,608 1,922,217
Commercial 2,315,860 2,242,163 2,100,625
Industrial 3,960,243 3,813,456 3,847,011
Other 39,297 38,559 38,147
- -------------------------------------------------------------------------------------------------
Total retail 8,395,011 8,134,786 7,908,000
Sales for resale - non-affiliates 2,726,993 2,493,519 2,555,914
Sales for resale - affiliates 693,510 243,554 174,342
- -------------------------------------------------------------------------------------------------
Total 11,815,514 10,871,859 10,638,256
=================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.59 6.58 6.46
Commercial 5.69 5.84 5.94
Industrial 3.57 3.70 3.70
Total retail 4.93 5.04 5.00
Total sales 4.53 4.69 4.63
Residential Average Annual Kilowatt-Hour Use Per Customer 13,469 13,307 12,611
Residential Average Annual Revenue Per Customer $887.66 $875.69 $815.21
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,086 2,086
Maximum Peak-Hour Demand (megawatts):
Winter 2,030 1,637 1,636
Summer 2,117 2,095 1,874
Annual Load Factor (percent) 80.3 60.0 63.4
Plant Availability - Fossil-Steam (percent) 91.8 92.1 85.4
- -------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 70.4 58.0 56.0
Oil and gas 12.0 15.2 10.2
Purchased power -
From non-affiliates 6.5 2.4 1.2
From affiliates 11.1 24.4 32.6
- -------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,038 10,249 10,295
Cost of fuel per million BTU (cents) 156.08 160.48 165.96
Average cost of fuel per net kilowatt-hour generated (cents) 1.57 1.64 1.71
- -------------------------------------------------------------------------------------------------
</TABLE>
II-210
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1996 Annual Report
==============================================================================================================
<S> <C> <C> <C> <C>
1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $118,793 $109,781 $103,820 $102,243
Commercial 115,152 107,131 103,666 103,352
Industrial 130,198 117,010 116,972 123,754
Other 3,760 3,533 5,869 6,078
- --------------------------------------------------------------------------------------------------------------
Total retail 367,903 337,455 330,327 335,427
Sales for resale - non-affiliates 83,511 80,213 78,826 86,194
Sales for resale - affiliates 15,519 10,055 18,044 20,157
- --------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 466,933 427,723 427,197 441,778
Other revenues 7,950 6,724 5,189 5,093
- --------------------------------------------------------------------------------------------------------------
Total $474,883 $434,447 $432,386 $446,871
==============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,929,835 1,804,858 1,832,266 1,804,838
Commercial 1,933,685 1,811,042 1,768,441 1,718,074
Industrial 3,623,543 3,536,634 3,297,247 3,311,460
Other 38,357 38,261 89,375 85,938
- --------------------------------------------------------------------------------------------------------------
Total retail 7,525,420 7,190,795 6,987,329 6,920,310
Sales for resale - non-affiliates 2,544,982 2,687,917 2,706,320 2,883,581
Sales for resale - affiliates 426,919 280,443 617,696 714,365
- --------------------------------------------------------------------------------------------------------------
Total 10,497,321 10,159,155 10,311,345 10,518,256
==============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.16 6.08 5.67 5.66
Commercial 5.96 5.92 5.86 6.02
Industrial 3.59 3.31 3.55 3.74
Total retail 4.89 4.69 4.73 4.85
Total sales 4.45 4.21 4.14 4.20
Residential Average Annual Kilowatt-Hour Use Per Customer 12,780 12,066 12,338 12,228
Residential Average Annual Revenue Per Customer $786.71 $733.90 $699.11 $692.70
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,011 2,011 2,011 1,998
Maximum Peak-Hour Demand (megawatts):
Winter 1,401 1,386 1,267 1,201
Summer 1,872 1,755 1,682 1,724
Annual Load Factor (percent) 60.0 60.8 61.5 59.0
Plant Availability - Fossil-Steam (percent) 88.0 92.0 89.8 93.3
- --------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.5 60.4 64.1 62.6
Oil and gas 7.6 5.8 8.1 14.0
Purchased power -
From non-affiliates 1.3 1.2 0.7 0.8
From affiliates 27.6 32.6 27.1 22.6
- --------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
==============================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,075 9,888 10,142 10,319
Cost of fuel per million BTU (cents) 170.13 162.27 177.52 183.27
Average cost of fuel per net kilowatt-hour generated (cents) 1.71 1.60 1.80 1.89
- --------------------------------------------------------------------------------------------------------------
</TABLE>
II-211A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1996 Annual Report
==============================================================================================================
<S> <C> <C> <C> <C>
1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $100,068 $96,711 $98,338 $101,984
Commercial 103,403 98,772 98,669 100,521
Industrial 128,983 123,038 129,004 134,501
Other 5,992 5,874 5,723 5,882
- --------------------------------------------------------------------------------------------------------------
Total retail 338,446 324,395 331,734 342,888
Sales for resale - non-affiliates 82,111 75,525 88,060 107,270
Sales for resale - affiliates 16,938 33,747 31,278 21,669
- --------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 437,495 433,667 451,072 471,827
Other revenues 5,155 4,272 4,771 4,438
- --------------------------------------------------------------------------------------------------------------
Total $442,650 $437,939 $455,843 $476,265
==============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,741,855 1,686,722 1,658,327 1,674,407
Commercial 1,686,302 1,607,988 1,555,044 1,544,899
Industrial 3,204,208 2,879,457 2,862,632 2,877,026
Other 87,611 86,049 81,153 81,352
- --------------------------------------------------------------------------------------------------------------
Total retail 6,719,976 6,260,216 6,157,156 6,177,684
Sales for resale - non-affiliates 2,798,086 2,280,341 2,615,058 2,382,443
Sales for resale - affiliates 527,970 1,100,808 955,303 704,461
- --------------------------------------------------------------------------------------------------------------
Total 10,046,032 9,641,365 9,727,517 9,264,588
==============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 5.74 5.73 5.93 6.09
Commercial 6.13 6.14 6.35 6.51
Industrial 4.03 4.27 4.51 4.68
Total retail 5.04 5.18 5.39 5.55
Total sales 4.35 4.50 4.64 5.09
Residential Average Annual Kilowatt-Hour Use Per Customer 11,842 11,499 11,356 11,498
Residential Average Annual Revenue Per Customer $680.32 $659.30 $673.41 $700.32
Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,998 1,966 1,966 1,966
Maximum Peak-Hour Demand (megawatts):
Winter 1,556 1,284 1,224 1,208
Summer 1,682 1,621 1,548 1,612
Annual Load Factor (percent) 58.8 57.6 59.0 56.8
Plant Availability - Fossil-Steam (percent) 94.0 93.0 93.5 93.2
- --------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.4 86.3 79.4 74.1
Oil and gas 13.5 4.8 5.3 5.1
Purchased power -
From non-affiliates 0.5 0.4 0.3 2.0
From affiliates 22.6 8.5 15.0 18.8
- --------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
==============================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,159 10,220 10,525 10,569
Cost of fuel per million BTU (cents) 178.38 185.13 194.46 224.63
Average cost of fuel per net kilowatt-hour generated (cents) 1.81 1.89 2.05 2.37
- --------------------------------------------------------------------------------------------------------------
</TABLE>
II-211B
<PAGE>
STATEMENTS OF INCOME
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $522,199 $508,862 $489,624
Revenues from affiliates 21,830 7,691 9,538
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 544,029 516,553 499,162
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 141,532 111,071 102,216
Purchased power from non-affiliates 17,960 6,019 2,711
Purchased power from affiliates 33,245 57,777 68,543
Proceeds from settlement of disputed contracts - - -
Other 106,061 107,296 97,988
Maintenance 47,091 39,627 45,785
Depreciation and amortization 44,906 39,224 35,716
Taxes other than income taxes 43,545 42,443 41,742
Federal and state income taxes 32,618 34,486 31,386
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 466,958 437,943 426,087
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 77,071 78,610 73,075
Other Income (Expense):
Allowance for equity funds used during construction 344 366 1,099
Interest income 239 199 87
Other, net 3,801 4,596 2,033
Income taxes applicable to other income (932) (1,006) (227)
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 80,523 82,765 76,067
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 19,898 21,898 19,725
Allowance for debt funds used during construction (713) (399) (1,039)
Interest on notes payable 1,416 1,141 1,442
Amortization of debt discount, premium, and expense, net 1,547 1,510 1,479
Other interest charges 753 1,185 404
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest charges 22,901 25,335 22,011
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations 57,622 57,430 54,056
- -----------------------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Loss from operations of discontinued subsidiary, net of taxes - - -
Loss on disposal of discontinued subsidiary, net of taxes - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net Loss From Discontinued Operations - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 57,622 57,430 54,056
Dividends on Preferred Stock 4,899 4,899 4,899
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 52,723 $ 52,531 $ 49,157
===================================================================================================================================
</TABLE>
II-212
<PAGE>
STATEMENTS OF INCOME
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $459,364 $424,392 $414,342 $426,714
Revenues from affiliates 15,519 10,055 18,044 20,157
- -----------------------------------------------------------------------------------------------------------------------------
Total operating revenues 474,883 434,447 432,386 446,871
- -----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 113,986 96,743 120,485 138,303
Purchased power from non-affiliates 2,198 1,337 851 1,406
Purchased power from affiliates 58,019 60,689 45,506 49,547
Proceeds from settlement of disputed contracts - (189) (4,205) -
Other 100,381 90,581 86,932 83,730
Maintenance 44,001 43,165 44,166 33,368
Depreciation and amortization 33,099 32,789 32,147 30,770
Taxes other than income taxes 37,145 34,664 35,414 32,709
Federal and state income taxes 22,668 16,378 13,976 17,144
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 411,497 376,157 375,272 386,977
- -----------------------------------------------------------------------------------------------------------------------------
Operating Income 63,386 58,290 57,114 59,894
Other Income (Expense):
Allowance for equity funds used during construction 1,010 642 728 307
Interest income 517 766 1,093 829
Other, net 3,971 5,501 3,845 6,297
Income taxes applicable to other income (1,158) (1,427) (863) (1,666)
- -----------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 67,726 63,772 61,917 65,661
- -----------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 17,688 22,357 23,656 22,221
Allowance for debt funds used during construction (788) (563) (584) (600)
Interest on notes payable 1,000 362 603 1,142
Amortization of debt discount, premium, and expense, net 1,262 630 377 359
Other interest charges 728 339 285 333
- -----------------------------------------------------------------------------------------------------------------------------
Net interest charges 19,890 23,125 24,337 23,455
- -----------------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations 47,836 40,647 37,580 42,206
- -----------------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Loss from operations of discontinued subsidiary, net of taxes - - (6,404) (4,669)
Loss on disposal of discontinued subsidiary, net of taxes - - (5,455) -
- -----------------------------------------------------------------------------------------------------------------------------
Net Loss From Discontinued Operations - - (11,859) (4,669)
- -----------------------------------------------------------------------------------------------------------------------------
Net Income 47,836 40,647 25,721 37,537
Dividends on Preferred Stock 5,400 3,857 3,094 3,361
- -----------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 42,436 $ 36,790 $ 22,627 $ 34,176
=============================================================================================================================
</TABLE>
II-213A
<PAGE>
STATEMENTS OF INCOME
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $425,712 $404,192 $424,565 $454,596
Revenues from affiliates 16,938 33,747 31,278 21,669
- -------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 442,650 437,939 455,843 476,265
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 133,671 165,912 167,165 183,515
Purchased power from non-affiliates 1,266 1,257 1,108 4,671
Purchased power from affiliates 47,066 19,270 36,114 46,322
Proceeds from settlement of disputed contracts - - - -
Other 84,820 83,542 81,331 70,009
Maintenance 35,658 33,412 33,974 31,368
Depreciation and amortization 28,001 26,610 26,210 30,293
Taxes other than income taxes 32,435 29,638 27,882 26,145
Federal and state income taxes 18,387 20,313 23,888 30,881
- -------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 381,304 379,954 397,672 423,204
- -------------------------------------------------------------------------------------------------------------------------------
Operating Income 61,346 57,985 58,171 53,061
Other Income (Expense):
Allowance for equity funds used during construction 903 850 608 1,030
Interest income 1,096 1,030 1,121 864
Other, net 6,013 6,399 7,065 8,983
Income taxes applicable to other income (1,392) (1,148) (2,507) (3,517)
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 67,966 65,116 64,458 60,421
- -------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 21,685 22,271 24,139 22,707
Allowance for debt funds used during construction (821) (595) (652) (770)
Interest on notes payable 689 341 558 252
Amortization of debt discount, premium, and expense, net 362 363 388 245
Other interest charges 566 522 601 283
- -------------------------------------------------------------------------------------------------------------------------------
Net interest charges 22,481 22,902 25,034 22,717
- -------------------------------------------------------------------------------------------------------------------------------
Net Income From Continuing Operations 45,485 42,214 39,424 37,704
- -------------------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Loss from operations of discontinued subsidiary, net of taxes (3,459) (2,549) (487) -
Loss on disposal of discontinued subsidiary, net of taxes - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Net Loss From Discontinued Operations (3,459) (2,549) (487) -
- -------------------------------------------------------------------------------------------------------------------------------
Net Income 42,026 39,665 38,937 37,704
Dividends on Preferred Stock 3,450 3,584 3,737 3,890
- -------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 38,576 $ 36,081 $ 35,200 $ 33,814
===============================================================================================================================
</TABLE>
II-213B
<PAGE>
STATEMENTS OF CASH FLOWS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 57,622 $ 57,430 $ 54,056
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 50,551 51,588 47,827
Deferred income taxes, net 74 (480) 1,563
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (344) (366) (1,099)
Non-cash proceeds from settlement of disputed contracts - - -
Other, net 9,787 5,704 5,230
Changes in certain current assets and liabilities --
Receivables, net 5,118 (8,758) 3,066
Inventories 4,973 3,962 (9,856)
Payables 2,077 17,421 (8,754)
Other 292 681 3,334
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 130,150 127,182 95,367
- -----------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (61,314) (67,570) (104,014)
Other (2,258) (1,697) (14,087)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (63,572) (69,267) (118,101)
- -----------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - - -
First mortgage bonds - 30,000 35,000
Pollution control bonds - 10,600 -
Other long-term debt 80,000 - 85,310
Capital contributions 27 - 25,000
Redemptions:
Preferred stock - - -
First mortgage bonds (45,447) (1,625) (32,628)
Pollution control bonds (10) (10) (10)
Other long-term debt (55,000) (40,689) (9,299)
Notes payable, net - - (40,000)
Payment of preferred stock dividends (4,899) (4,899) (4,899)
Payment of common stock dividends (43,900) (39,400) (34,100)
Miscellaneous (2,932) (568) (1,201)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (72,161) (46,591) 23,173
- -----------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (5,583) 11,324 439
Cash and Cash Equivalents at Beginning of Year 12,641 1,317 878
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 7,058 $ 12,641 $ 1,317
=======================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-214
<PAGE>
STATEMENTS OF CASH FLOWS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 47,836 $ 40,647 $ 25,721 $ 37,537
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 45,660 41,472 41,773 41,079
Deferred income taxes, net 5,039 (5,473) (11,869) 2,756
Deferred investment tax credits, net - - (2) (26)
Allowance for equity funds used during construction (1,010) (642) (728) (307)
Non-cash proceeds from settlement of disputed contracts - (189) (4,071) -
Other, net 3,005 8,093 (4,982) 7,257
Changes in certain current assets and liabilities --
Receivables, net (4,347) 1,002 35,343 (6,252)
Inventories 11,119 975 10,518 (8,922)
Payables 4,133 460 (4,949) (5,552)
Other (8,033) 6,095 11,433 (1,461)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 103,402 92,440 98,187 66,109
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (139,976) (68,189) (53,675) (49,009)
Other 7,562 4,235 2,148 4,481
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (132,414) (63,954) (51,527) (44,528)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock 23,404 35,000 - -
First mortgage bonds 70,000 40,000 50,000 -
Pollution control bonds 38,875 23,300 - -
Other long-term debt - - 844 -
Capital contributions 30,036 26 - -
Redemptions:
Preferred stock (23,404) - (4,118) (750)
First mortgage bonds (51,300) (104,703) - (4,000)
Pollution control bonds (25,885) (23,650) (300) (288)
Other long-term debt (8,170) (6,212) (8,958) (6,416)
Notes payable, net 9,000 26,500 (25,603) 17,146
Payment of preferred stock dividends (5,400) (3,857) (3,094) (3,361)
Payment of common stock dividends (29,000) (28,000) (28,500) (27,500)
Miscellaneous (5,683) (7,821) (839) 2
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 22,473 (49,417) (20,568) (25,167)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (6,539) (20,931) 26,092 (3,586)
Cash and Cash Equivalents at Beginning of Year 7,417 28,348 2,256 5,842
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 878 $ 7,417 $ 28,348 $ 2,256
===================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-215A
<PAGE>
STATEMENTS OF CASH FLOWS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 42,026 $ 39,665 $ 38,937 $ 37,704
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 35,878 34,440 33,971 33,432
Deferred income taxes, net (294) (3,053) 10,035 41,059
Deferred investment tax credits, net (38) 571 896 2,442
Allowance for equity funds used during construction (903) (850) (608) (1,030)
Non-cash proceeds from settlement of disputed contracts - - - -
Other, net 4,306 3,503 1,965 (14,162)
Changes in certain current assets and liabilities --
Receivables, net (18,506) 816 12,000 (1,708)
Inventories 3,687 283 13,708 (8,499)
Payables 1,307 (5,241) 7,487 (14,502)
Other 2,172 (2,294) (9,342) 11,546
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 69,635 67,840 109,049 86,282
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (43,916) (54,550) (53,288) (62,488)
Other 1,860 8,368 (1,461) (61,162)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (42,056) (46,182) (54,749) (123,650)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - - - -
First mortgage bonds - - - 35,000
Pollution control bonds - - - -
Other long-term debt 844 - 130 60,663
Capital contributions - - 16,000 400
Redemptions:
Preferred stock (750) (1,500) (1,500) (1,500)
First mortgage bonds (3,823) - (29,701) (29,250)
Pollution control bonds (62) (50) (50) (50)
Other long-term debt (5,919) (5,401) (4,974) (200)
Notes payable, net 6,457 6,500 - -
Payment of preferred stock dividends (3,450) (3,584) (3,737) (3,890)
Payment of common stock dividends (27,000) (27,600) (24,700) (23,700)
Miscellaneous - - (2,696) (2,929)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (33,703) (31,635) (51,228) 34,544
- -----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (6,124) (9,977) 3,072 (2,824)
Cash and Cash Equivalents at Beginning of Year 11,966 21,943 18,871 21,695
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 5,842 $ 11,966 $ 21,943 $ 18,871
===================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-215B
<PAGE>
BALANCE SHEETS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 722,183 $ 717,055 $ 705,043
Transmission 241,509 220,038 202,503
Distribution 356,305 335,163 313,345
General 163,878 162,071 164,141
Construction work in progress 35,100 41,210 44,838
- ------------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,518,975 1,475,537 1,429,870
Accumulated provision for depreciation 526,776 499,308 477,098
- ------------------------------------------------------------------------------------------------------------------------------
Total 992,199 976,229 952,772
Less property-related accumulated deferred income taxes - - -
- ------------------------------------------------------------------------------------------------------------------------------
Total 992,199 976,229 952,772
- ------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - -
Miscellaneous 3,054 4,160 3,353
- ------------------------------------------------------------------------------------------------------------------------------
Total 3,054 4,160 3,353
- ------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 7,058 12,641 1,317
Investment securities - - -
Receivables, net 34,288 39,358 25,424
Accrued utility revenues 12,334 12,382 14,428
Fossil fuel stock, at average cost 12,168 15,666 16,885
Materials and supplies, at average cost 21,083 22,558 25,301
Current portion of deferred fuel commitments - 1,546 1,068
Prepayments 11,971 7,584 11,189
Vacation pay deferred 4,806 4,715 4,588
- ------------------------------------------------------------------------------------------------------------------------------
Total 103,708 116,450 100,200
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 1,548 1,530 1,358
Premium on reacquired debt, being amortized 10,672 8,509 9,571
Deferred fuel commitments - - 9,000
Deferred charges related to income taxes 22,274 23,384 25,036
Miscellaneous 8,872 18,691 22,421
- ------------------------------------------------------------------------------------------------------------------------------
Total 43,366 52,114 67,386
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $1,142,327 $1,148,953 $1,123,711
==============================================================================================================================
II-216
</TABLE>
<PAGE>
BALANCE SHEETS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 597,425 $ 576,848 $ 567,588 $ 560,537
Transmission 188,375 173,278 162,379 151,949
Distribution 295,799 279,335 259,929 247,705
General 157,248 151,044 141,564 136,815
Construction work in progress 108,063 41,692 33,078 26,816
- --------------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,346,910 1,222,197 1,164,538 1,123,822
Accumulated provision for depreciation 462,725 440,777 415,135 392,440
- --------------------------------------------------------------------------------------------------------------------------------
Total 884,185 781,420 749,403 731,382
Less property-related accumulated deferred income taxes - 142,338 138,616 139,970
- --------------------------------------------------------------------------------------------------------------------------------
Total 884,185 639,082 610,787 591,412
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - 4,113 -
Miscellaneous 11,289 4,539 3,954 8,631
- --------------------------------------------------------------------------------------------------------------------------------
Total 11,289 4,539 8,067 8,631
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 878 7,417 28,348 2,256
Investment securities - 3,622 - -
Receivables, net 28,021 20,219 27,152 67,734
Accrued utility revenues 14,897 14,898 12,420 10,797
Fossil fuel stock, at average cost 11,185 21,341 22,373 29,812
Materials and supplies, at average cost 21,145 22,108 22,051 25,130
Current portion of deferred fuel commitments 440 1,861 933 1,430
Prepayments 8,971 5,869 6,137 11,392
Vacation pay deferred 4,797 4,651 4,406 3,955
- --------------------------------------------------------------------------------------------------------------------------------
Total 90,334 101,986 123,820 152,506
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 1,103 804 981 824
Premium on reacquired debt, being amortized 10,563 10,102 4,676 4,919
Deferred fuel commitments 17,520 25,255 31,039 39,020
Deferred charges related to income taxes 25,267 - - -
Miscellaneous 10,073 9,515 11,271 2,714
- --------------------------------------------------------------------------------------------------------------------------------
Total 64,526 45,676 47,967 47,477
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,050,334 $ 791,283 $ 790,641 $ 800,026
================================================================================================================================
</TABLE>
II-217A
<PAGE>
BALANCE SHEETS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 547,946 $ 529,742 $ 524,198 $ 509,128
Transmission 147,288 134,674 130,963 125,304
Distribution 229,238 221,327 207,810 195,042
General 133,361 137,333 127,690 114,042
Construction work in progress 27,057 35,204 27,755 33,544
- --------------------------------------------------------------------------------------------------------------------------------
Total utility plant 1,084,890 1,058,280 1,018,416 977,060
Accumulated provision for depreciation 366,193 348,085 328,761 312,571
- --------------------------------------------------------------------------------------------------------------------------------
Total 718,697 710,195 689,655 664,489
Less property-related accumulated deferred income taxes 138,071 134,220 127,912 120,990
- --------------------------------------------------------------------------------------------------------------------------------
Total 580,626 575,975 561,743 543,499
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Securities received from settlement of disputed contracts - - - -
Miscellaneous 7,792 8,153 4,122 1,738
- --------------------------------------------------------------------------------------------------------------------------------
Total 7,792 8,153 4,122 1,738
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 5,842 11,966 21,943 18,871
Investment securities - - - -
Receivables, net 58,425 43,246 42,218 48,158
Accrued utility revenues 13,854 10,527 12,371 18,431
Fossil fuel stock, at average cost 24,788 26,587 29,989 46,067
Materials and supplies, at average cost 21,232 23,120 20,001 17,631
Current portion of deferred fuel commitments 3,017 - - -
Prepayments 12,512 12,341 830 973
Vacation pay deferred 3,910 3,815 3,956 3,559
- --------------------------------------------------------------------------------------------------------------------------------
Total 143,580 131,602 131,308 153,690
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 886 949 1,012 1,212
Premium on reacquired debt, being amortized 5,161 5,404 5,647 2,800
Deferred fuel commitments 45,103 50,714 55,889 60,663
Deferred charges related to income taxes - - - -
Miscellaneous 3,422 6,522 4,347 3,508
- --------------------------------------------------------------------------------------------------------------------------------
Total 54,572 63,589 66,895 68,183
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 786,570 $ 779,319 $ 764,068 $ 767,110
================================================================================================================================
</TABLE>
II-217B
<PAGE>
BALANCE SHEETS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 37,691 $ 37,691 $ 37,691
Paid-in capital 179,389 179,362 179,362
Premium on preferred stock 372 372 372
Earnings retained in the business 166,282 157,459 144,328
- ------------------------------------------------------------------------------------------------------------------------------
Total common equity 383,734 374,884 361,753
Preferred stock 74,414 74,414 74,414
Preferred stock subject to mandatory redemption - - -
Long-term debt 326,379 288,820 306,522
- ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 784,527 738,118 742,689
- ------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - -
Preferred stock due within one year - - -
Long-term debt due within one year 10 57,229 41,199
Accounts payable 51,644 50,775 34,481
Customer deposits 3,154 2,716 2,712
Taxes accrued 32,445 31,913 31,657
Interest accrued 4,384 4,701 4,427
Vacation pay accrued 4,793 4,563 4,588
Miscellaneous 9,149 8,890 10,025
- ------------------------------------------------------------------------------------------------------------------------------
Total 105,579 160,787 129,089
- ------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 133,437 129,711 129,505
Accumulated deferred investment tax credits 28,333 29,773 31,228
Deferred credits related to income taxes 40,568 43,266 45,832
Miscellaneous 49,883 47,298 45,368
- ------------------------------------------------------------------------------------------------------------------------------
Total 252,221 250,048 251,933
- ------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,142,327 $1,148,953 $1,123,711
==============================================================================================================================
</TABLE>
II-218
<PAGE>
BALANCE SHEETS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 37,691 $ 37,691 $ 37,691 $ 37,691
Paid-in capital 154,362 124,326 124,300 124,300
Premium on preferred stock 372 194 194 299
Earnings retained in the business 129,343 118,429 111,670 117,543
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 321,768 280,640 273,855 279,833
Preferred stock 74,414 74,414 39,414 39,414
Preferred stock subject to mandatory redemption - - - 3,750
Long-term debt 250,391 238,650 304,150 270,724
- -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 646,573 593,704 617,419 593,721
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 40,000 31,000 4,500 30,103
Preferred stock due within one year - - - 368
Long-term debt due within one year 19,345 8,878 14,650 7,039
Accounts payable 60,928 43,550 38,213 45,763
Customer deposits 2,786 2,976 3,109 3,430
Taxes accrued 27,138 32,035 29,609 24,935
Interest accrued 4,237 3,961 4,602 4,315
Vacation pay accrued 4,797 4,651 4,406 3,955
Miscellaneous 9,323 10,963 10,236 6,833
- --------------------------------------------------------------------------------------------------------------------------------
Total 168,554 138,014 109,325 126,741
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 124,334 169 4,117 18,992
Accumulated deferred investment tax credits 32,710 34,242 35,657 37,187
Deferred credits related to income taxes 48,228 - - -
Miscellaneous 29,935 25,154 24,123 23,385
- --------------------------------------------------------------------------------------------------------------------------------
Total 235,207 59,565 63,897 79,564
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 1,050,334 $ 791,283 $ 790,641 $ 800,026
================================================================================================================================
</TABLE>
II-219A
<PAGE>
BALANCE SHEETS
Mississippi Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 37,691 $ 37,691 $ 37,691 $ 37,691
Paid-in capital 124,300 124,300 124,300 108,300
Premium on preferred stock 299 299 299 299
Earnings retained in the business 110,867 99,183 90,702 80,311
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 273,157 261,473 252,992 226,601
Preferred stock 39,414 39,414 39,414 39,414
Preferred stock subject to mandatory redemption 4,500 5,250 6,750 8,250
Long-term debt 277,693 287,525 294,811 299,684
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 594,764 593,662 593,967 573,949
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 12,957 6,500 - -
Preferred stock due within one year 368 368 368 368
Long-term debt due within one year 10,717 9,789 5,451 34,724
Accounts payable 47,019 46,937 45,659 36,490
Customer deposits 3,906 3,904 3,857 3,720
Taxes accrued 23,843 21,130 21,351 29,029
Interest accrued 4,280 4,016 4,474 5,064
Vacation pay accrued 3,910 3,815 3,956 3,559
Miscellaneous 7,746 9,347 6,005 5,746
- --------------------------------------------------------------------------------------------------------------------------------
Total 114,746 105,806 91,121 118,700
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 22,085 24,556 27,411 25,922
Accumulated deferred investment tax credits 38,752 40,435 41,427 42,183
Deferred credits related to income taxes - - - -
Miscellaneous 16,223 14,860 10,142 6,356
- --------------------------------------------------------------------------------------------------------------------------------
Total 77,060 79,851 78,980 74,461
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 786,570 $ 779,319 $ 764,068 $ 767,110
================================================================================================================================
</TABLE>
II-219B
<PAGE>
MISSISSIPPI POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- --------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1993 $ 35,000 5-3/8% 35,000 3/1/98
1992 40,000 6-5/8% 40,000 8/1/00
1994 35,000 6.60% 35,000 3/1/04
1993 35,000 7.45% 35,000 6/1/23
1995 30,000 6-7/8% 30,000 12/1/25
======== ========
$175,000 $175,000
======== ========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- --------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1977 $ 1,000 5.80% 960 10/1/07
1992 6,550 Variable 6,550 12/1/20
1992 16,750 Variable 16,750 12/1/22
1993 13,000 6.20% 13,000 4/1/23
1993 25,875 5.65% 25,875 11/1/23
1995 10,600 Variable 10,600 7/1/25
======= =======
$73,775 $73,735
======= =======
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
- --------------------------------------------------------------------------------------------------
(Thousands)
1947 20,099 4.60% 2,010
1956 40,000 4.40% 4,000
1965 50,000 4.72% 5,000
1968 50,000 7.00% 5,000
1992 350,000 7.25% 35,000
1993 150,000 6.32% 15,000
1993 84,040 6.65% 8,404
======== =======
$744,139 $74,414
======== =======
</TABLE>
II-220
<PAGE>
MISSISSIPPI POWER COMPANY
SECURITIES RETIRED DURING 1996
First Mortgage Bonds
Principal Interest
Series Amount Rate
- ------------------------------------------------------------------------
(Thousands)
1991 45,447 9-1/4%
Pollution Control Bonds
Principal Interest
Series Amount Rate
- ------------------------------------------------------------------------
(Thousands)
1977 10 5.80%
II-221
SAVANNAH ELECTRIC AND POWER COMPANY
FINANCIAL SECTION
II-5
<PAGE>
MANAGEMENT'S REPORT
Savannah Electric and Power Company 1996 Annual Report
The management of Savannah Electric and 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 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 three 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 the 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 Savannah Electric and Power Company in conformity with generally accepted
accounting principles.
/s/ Arthur M. Gignilliat, Jr.
Arthur M. Gignilliat, Jr.
President
and Chief Executive Officer
/s/ K. R. Willis
K. R. Willis
Vice-President
Treasurer and Chief Financial Officer
February 12, 1997
II-223
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Savannah Electric and Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Savannah Electric and Power Company (a Georgia corporation and a wholly owned
subsidiary of Southern Company) as of December 31, 1996 and 1995, and the
related statements of income, retained earnings, and cash flows for each of the
three years in the period ended December 31, 1996. 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 II-230 through II-242)
referred to above present fairly, in all material respects, the financial
position of Savannah Electric and Power Company as of December 31, 1996 and
1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
II-224
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Savannah Electric and Power Company 1996 Annual Report
RESULTS OF OPERATIONS
Earnings
Savannah Electric and Power Company's net income after dividends on preferred
stock for 1996 totaled $23.9 million, representing a $0.5 million increase over
the prior year. This 2.3 percent improvement in earnings over 1995 is
principally the result of increased retail energy sales primarily attributable
to an increase in the number of customers served.
In 1995, earnings were $23.4 million, representing a $1.3 million (5.8
percent) increase from the prior year. This was primarily due to higher retail
energy sales as a result of exceptionally hot summer weather.
Revenues
Total revenues for 1996 were $234.1 million, reflecting a 3.7 percent increase
compared to 1995. The following table summarizes revenue increases and decreases
compared to prior years:
Increase (Decrease)
From Prior Year
--------------------------------------
1996 1995 1994
--------------------------------------
Retail -- (in thousands)
Sales growth $ 3,679 $ 1,068 $ 7,884
Weather (2,813) 6,232 (6,589)
Fuel cost recovery
and other 12,365 6,177 (9,214)
-------------------------------------------------------------------
Total retail 13,231 13,477 (7,919)
-------------------------------------------------------------------
Sales for resale--
Non-affiliates 147 (2,935) (1,235)
Affiliates (4,070) 754 4,013
-------------------------------------------------------------------
Total sales for resale (3,923) (2,181) 2,778
-------------------------------------------------------------------
Other operating revenues (963) 2,648 (1,516)
-------------------------------------------------------------------
Total operating revenues $ 8,345 $13,944 $(6,657)
===================================================================
Percent change 3.7% 6.6% (3.0)%
-------------------------------------------------------------------
Retail revenues increased 6.2 percent in 1996, compared to an increase of
6.7 percent in 1995. The increase in 1996 retail revenues is attributable to an
increase in the number of customers served and an increase in fuel cost recovery
revenues. Industrial energy sales were lower primarily due to a decrease in the
demand of a major customer. Under the Company's fuel cost recovery provisions,
fuel revenues--including purchased energy--generally equal fuel expense and have
no effect on earnings. The $1.0 million decrease in other operating revenues
reflects the elimination of the demand-side management rider in 1995. Revenues
from demand-side management riders (included in retail revenues) recovered
demand-side management program costs and had little impact on earnings. See Note
3 to the financial statements for further information on the Company's
demand-side management programs.
The increase in 1995 retail revenues was attributable to hot summer weather,
an increase in the number of customers served, higher demand in the industrial
sector, and an increase in fuel cost recovery revenues.
Revenues from sales to utilities outside the service area under long-term
contracts consist of capacity and energy components. Capacity revenues reflect
the recovery of fixed costs and a return on investment under the contracts.
Energy is generally sold at variable cost. Capacity revenues continued to
decrease in 1996 primarily as a result of the scheduled decline in megawatts of
capacity under contract. The capacity and energy components were as follows:
1996 1995 1994
---------------------------------
(in thousands)
Capacity $ 2 $ 3 $ 448
Energy 1,329 1,250 3,052
- ------------------------------------------------------
Total $1,331 $1,253 $3,500
======================================================
Sales to affiliated companies within the Southern electric system vary from
year to year depending on demand and the availability and cost of generating
resources at each company. These sales have little impact on earnings.
II-225
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1996 Annual Report
Changes in revenues are influenced heavily by the amount of energy sold
each year. Kilowatt-hour sales for 1996 and the percent change by year were as
follows:
KWH Percent Change
------------ ---------------------------
1996 1996 1995 1994
------------ ---------------------------
(millions)
Residential 1,457 3.9% 8.0% (2.3)%
Commercial 1,141 3.8 5.1 2.9
Industrial 839 (5.5) 11.0 (6.4)
Other 126 0.1 5.4 3.1
------------
Total retail 3,563 1.4 7.7 (1.6)
Sales for resale
Non-affiliates 91 4.4 (56.5) (18.4)
Affiliates 42 (34.4) (31.5) 23.4
------------
Total 3,696 0.8% 3.1% (2.2)%
==================================================================
Expenses
Total operating expenses for 1996 were $195.2 million, reflecting an $7.7
million increase over 1995. Major components of this increase include $5.3
million in purchased power from affiliates and $3.8 million in fuel, partially
offset by a $1.2 million reduction in other operation expenses. The increase in
purchased power from affiliates was due to an increase in the unit cost of
purchased power. The increase in fuel expense was primarily attributable to
higher generation and an increase in the unit cost of gas. The reduction in
other operation expense primarily resulted from the demand-side management
program being discontinued in December 1995.
In 1995, total operating expenses were $187.5 million, reflecting an $11.8
million increase from 1994. This increase includes $6.8 million in fuel, $3.6
million in other operation, $1.1 million in maintenance, and $1.1 million in
depreciation and amortization, partially offset by a $2.6 million reduction in
purchased power from affiliates. The increase in fuel expense was primarily
attributable to the exceptionally hot summer weather, which not only increased
generation but also necessitated greater use of more costly gas-fired sources of
generation. The increase in other operation expense was due to increased
expenses related to demand-side management programs and employee incentive
compensation programs. The increase in maintenance expense reflects maintenance
performed at Plants Kraft and McIntosh during 1995, and the increase in
depreciation and amortization reflects the completion in 1994 of two combustion
turbine units.
Fuel and purchased power costs constitute the single largest expense for
the Company. The mix of energy supply is determined primarily by system load,
the unit cost of fuel consumed and the availability of units.
The amount and sources of energy supply, the average cost of fuel per net
kilowatt-hour generated, the average cost of purchased power per net
kilowatt-hour, and the total average cost of energy supply were as follows:
1996 1995 1994
--------------------------
Total energy supply
(millions of kilowatt-hours) 3,917 3,908 3,768
Sources of energy supply
(percent) --
Coal 28 24 18
Oil - - 1
Gas 3 6 1
Purchased Power 69 70 80
Average cost of fuel per net
kilowatt-hour generated
(cents) --
Coal 1.76 1.77 2.19
Oil 5.79 5.14 3.89
Gas 8.89 3.76 5.19
Average cost of purchased
power per net kilowatt-
hour (cents) 2.25 2.02 1.92
Total average cost of
energy supply 2.30 2.07 2.02
---------------------------------------------------------------
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.
II-226
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1996 Annual Report
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 energy sales,
which is subject to a number of factors. Traditionally, these factors 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 having 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 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 energy generation to other utilities.
Various federal and state initiatives designed to promote wholesale and
retail competition, among other things, include proposals that would allow
customers to choose their electricity provider. As the initiatives
materialize, the structure of the utility industry could radically change.
Certain initiatives could result in a change in the ownership and/or
operation of generation and transmission facilities. Numerous issues must be
resolved, including significant ones relating to transmission pricing and
recovery of stranded investments. Being a low-cost producer could provide
significant opportunities to increase market share and profitability in
markets that evolve with changing regulation. 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.
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities and determine if any other assets have been
impaired. See Note 1 to the financial statements under "Regulatory Assets and
Liabilities" 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 is discussed later under "Environmental Matters."
Rates to retail customers served by the Company are regulated by the
Georgia Public Service Commission (GPSC). As part of the Company's most recent
rate settlement in 1992, it was informally agreed that the Company's earned rate
of return on common equity should be 12.95 percent. The Company is currently
undergoing an earnings review by the GPSC, and to date, the GPSC has made no
determination.
In August 1995, the GPSC ordered the phase out of the Company's demand-side
management programs effective December 31, 1995 and the elimination of
demand-side management rate riders effective October 1, 1995. In June 1996, the
Company refunded to customers approximately $0.3 million which had been
overcollected from the rate riders.
FINANCIAL CONDITION
Overview
The principal change in the Company's financial condition in 1996 was the
addition of $29 million to utility plant. The funds needed for gross property
additions are currently provided from operating activities, principally from
earnings and non-cash charges to income such as depreciation and deferred income
taxes and from financing activities. See Statements of Cash Flows for additional
information.
II-227
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1996 Annual Report
Capital Structure
As of December 31, 1996, the Company's capital structure consisted of 46.7
percent common equity, 9.5 percent preferred stock and 43.8 percent long-term
debt, excluding amounts due within one year. The Company's long-term financial
objective for capitalization ratios is to maintain a capital structure of common
equity at 48 percent, preferred stock at 10 percent and debt at 42 percent.
In May 1996, the Company issued $20 million of 6.90% first mortgage bonds
maturing in 2006 and $10 million of 6.88% term notes maturing in 2001.
Maturities and retirements of long-term debt were $29 million in 1996, $29
million in 1995 and $5 million in 1994.
In March 1996, the Company entered into a fifteen year variable rate
capital lease agreement with the Savannah Economic Development Authority for a
coal ship docking and unloading facility at Plant Kraft.
The composite interest rates and dividend rate for the years 1994 through
1996 as of year-end were as follows:
1996 1995 1994
-------------------------------
Composite interest rates
on long-term debt 7.0% 7.5% 8.0%
Preferred stock dividend rate 6.6% 6.6% 6.6%
- ---------------------------------------------------------------
The Company's current securities ratings are as follows:
Standard
Moody's & Poor's
--------------------------
First Mortgage Bonds A1 A+
Preferred Stock "a2" A
- -----------------------------------------------------------------
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$72 million ($26 million in 1997, $22 million in 1998, and $24 million in 1999).
Actual construction costs may vary from this estimate because of factors such as
changes in: business conditions; environmental regulations; load projections;
the cost and efficiency of construction labor, equipment and materials; and the
cost of capital. In addition, there can be no assurance that costs related to
capital expenditures will be fully recovered. The Company does not have any
traditional baseload generating plants under construction, and current energy
demand forecasts do not require any additional traditional baseload facilities
until well into the future. Construction of transmission and distribution
facilities and upgrading of generating plants will be continuing.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately
$21.6 million will be needed by the end of 1999 for maturities of long-term debt
and present sinking fund requirements.
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--impacts the Company and
other subsidiaries of Southern Company. 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 initially affected 28
generating units of Southern Company. As a result of Southern Company's
compliance strategy, an additional 22 generating units, which included four of
the Company's 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.
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 sulfur dioxide emission allowance program is expected to
minimize the cost of compliance. Southern Company's sulfur dioxide compliance
strategy is designed to use allowances as a compliance option.
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. Construction expenditures for Phase I compliance totaled
approximately $2 million for Savannah Electric.
II-228
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1996 Annual Report
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired plants as required
to meet Phase II limits. Therefore, current compliance strategy could require
total Phase II estimated construction expenditures of approximately $4 million
for the Company. 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 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.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: revisions to the ambient air quality
standards for ozone and particulate matter; emission control strategies for
ozone nonattainment areas; additional controls for hazardous air pollutant
emissions; and hazardous waste disposal requirements. The impact of new
standards will depend on the development and implementation of applicable
regulations.
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 substantial costs to clean up properties
currently or previously owned. The Company conducts studies to determine the
extent of any required cleanup costs and will recognize in the financial
statements any 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 Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. 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
At December 31, 1996, the Company had $5.2 million of cash and $20.5 million of
unused short-term credit arrangements with banks to meet its short-term cash
needs. Revolving credit arrangements of $20 million, which expire December 31,
1998, are also used to meet short-term cash needs and to provide additional
interim funding for the Company's construction program. Of the revolving credit
arrangements, $15 million remained unused at December 31, 1996.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations and the sale of additional first mortgage bonds and preferred
stock and capital contributions from Southern Company. The Company is required
to meet certain earnings coverage requirements specified in its mortgage
indenture and corporate charter to issue new first mortgage bonds and preferred
stock. The Company's coverage ratios are sufficiently high to permit, at present
interest rate levels, any foreseeable security sales. The amount of securities
which the Company will be permitted to issue in the future will depend upon
market conditions and other factors prevailing at that time.
II-229
<PAGE>
<TABLE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995, and 1994
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues (Notes 1 and 3):
Revenues $230,944 $218,529 $205,339
Revenues from affiliates 3,130 7,200 6,446
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 234,074 225,729 211,785
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 29,139 25,386 18,555
Purchased power from non-affiliates 2,350 2,139 1,839
Purchased power from affiliates 58,591 53,252 55,822
Other 44,007 45,214 41,623
Maintenance 14,140 13,668 12,560
Depreciation and amortization (Note 1) 19,113 18,949 17,854
Taxes other than income taxes 11,675 11,465 11,074
Federal and state income taxes (Notes 1 and 6) 16,175 17,378 16,289
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 195,190 187,451 175,616
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 38,884 38,278 36,169
Other Income (Expense):
Allowance for equity funds used during construction (Note 1) 317 163 831
Interest income 201 164 54
Other, net (1,756) (618) (1,032)
Income taxes applicable to other income (Notes 1 and 6) 1,034 651 864
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 38,680 38,638 36,886
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 11,563 12,380 12,585
Allowance for debt funds used during construction (Note 1) (333) (450) (1,225)
Interest on notes payable 229 135 205
Amortization of debt discount, premium, and expense, net 579 448 550
Other interest charges 378 406 337
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 12,416 12,919 12,452
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 26,264 25,719 24,434
Dividends on Preferred Stock 2,324 2,324 2,324
================================================================================================================================
Net Income After Dividends on Preferred Stock $ 23,940 $ 23,395 $ 22,110
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Period $105,033 $ 99,216 $ 93,479
Net income after dividends on preferred stock 23,940 23,395 22,110
Cash dividends on common stock (19,600) (17,600) (16,300)
Preferred stock transactions, net - 22 (73)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period (Note 10) $109,373 $105,033 $ 99,216
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-230
<PAGE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995, and 1994
Savannah Electric and Power Company 1996 Annual Report
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 26,264 $ 25,719 $ 24,434
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 20,246 20,535 19,353
Deferred income taxes and investment tax credits 7,482 4,359 1,625
Allowance for equity funds used during construction (317) (163) (831)
Other, net 705 35 826
Changes in certain current assets and liabilities --
Receivables, net (641) (6,241) 18,481
Inventories 410 2,318 1,144
Payables 4,242 2,213 (19,957)
Other (5,953) (1,848) (117)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 52,438 46,927 44,958
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (28,950) (26,503) (30,078)
Other (3,173) 3,198 (841)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (32,123) (23,305) (30,919)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
First mortgage bonds 20,000 15,000 -
Other long-term debt 17,000 33,500 8,500
Retirements:
First mortgage bonds (29,400) (29,250) (5,065)
Other long-term debt (397) (23,003) (823)
Notes payable, net 1,000 1,500 (500)
Payment of preferred stock dividends (2,324) (2,324) (2,129)
Payment of common stock dividends (19,600) (17,600) (16,300)
Miscellaneous (2,257) (2,131) (74)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (15,978) (24,308) (16,391)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 4,337 (686) (2,352)
Cash and Cash Equivalents at Beginning of Year 877 1,563 3,915
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 5,214 $ 877 $ 1,563
===================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for-
Interest (net of amount capitalized) $ 12,960 $ 12,775 $ 11,579
Income taxes 10,926 11,316 14,441
- -----------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
II-231
<PAGE>
BALANCE SHEETS
At December 31, 1996 and 1995
Savannah Electric and Power Company 1996 Annual Report
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Assets 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Utility Plant:
Plant in service, at original cost (Notes 1, 4, 5, and 8) $739,461 $715,146
Less accumulated provision for depreciation 304,760 287,004
- --------------------------------------------------------------------------------------------------------------------------------
434,701 428,142
Construction work in progress 13,463 6,707
- --------------------------------------------------------------------------------------------------------------------------------
Total 448,164 434,849
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,785 1,788
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 5,214 877
Special deposits 1,395 -
Receivables-
Customer accounts receivable 18,827 19,574
Other accounts and notes receivable 769 7,251
Affiliated companies 844 614
Accumulated provision for uncollectible accounts (632) (983)
Fuel cost under recovery 7,289 -
Fossil fuel stock, at average cost 5,892 6,076
Materials and supplies, at average cost (Note 1) 8,013 8,239
Prepayments 6,135 6,467
- --------------------------------------------------------------------------------------------------------------------------------
Total 53,746 48,115
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 6) 19,167 21,557
Premium on reacquired debt, being amortized 7,142 5,316
Cash surrender value of life insurance for deferred compensation plans 10,288 8,560
Miscellaneous 2,003 4,477
- --------------------------------------------------------------------------------------------------------------------------------
Total 38,600 39,910
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $542,295 $524,662
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-232
<PAGE>
<TABLE>
BALANCE SHEETS
At December 31, 1996 and 1995
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Capitalization and Liabilities 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Capitalization (See accompanying statements):
Common stock equity $172,284 $167,812
Preferred stock 35,000 35,000
Long-term debt 161,801 153,679
- --------------------------------------------------------------------------------------------------------------------------------
Total 369,085 356,491
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Amount of securities due within one year (Note 9) 637 1,407
Notes payable (Note 5) 5,000 4,000
Accounts payable-
Affiliated companies 6,374 5,742
Other 10,201 5,620
Fuel cost over recovery - 865
Customer deposits 5,232 5,054
Taxes accrued-
Federal and state income - 570
Other 1,015 1,014
Interest accrued 5,275 6,331
Vacation pay accrued 2,038 1,916
Miscellaneous 7,470 5,870
- --------------------------------------------------------------------------------------------------------------------------------
Total 43,242 38,389
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 6) 76,654 74,152
Accumulated deferred investment tax credits (Note 6) 13,271 13,934
Deferred credits related to income taxes (Note 6) 22,792 24,419
Deferred compensation plans 8,602 7,690
Deferred under-funded accrued benefit obligation (Note 2) - 2,123
Postretirement benefits 5,472 4,728
Miscellaneous 3,177 2,736
- --------------------------------------------------------------------------------------------------------------------------------
Total 129,968 129,782
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 4, 5, and 8)
Total Capitalization and Liabilities $542,295 $524,662
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-233
<PAGE>
<TABLE>
STATEMENTS OF CAPITALIZATION
At December 31, 1996 and 1995
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
Common Stock Equity (Notes 2 and 10):
Common stock, par value $5 per share --
Authorized -- 16,000,000 shares
Outstanding -- 10,844,635 shares in
1996 and 1995 $ 54,223 $ 54,223
Paid-in capital 8,688 8,688
Additional minimum liability
for under-funded pension obligations - (132)
Retained earnings 109,373 105,033
- --------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 172,284 167,812 46.7% 47.1%
- --------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock (Note 7):
$25 par value --
Authorized -- 2,200,000 shares
6.64% Series -- Outstanding -- 1,400,000 shares 35,000 35,000
- --------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $2,324,000) 35,000 35,000 9.5 9.8
- --------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt (Note 8):
First mortgage bonds --
Maturity Interest Rates
July 1, 2003 6 3/8% 20,000 20,000
May 1, 2006 6.90% 20,000 -
July 1, 2021 9 3/8% - 29,400
July 1, 2022 8.30% 30,000 30,000
July 1, 2023 7.40% 25,000 25,000
May 1, 2025 7 7/8% 15,000 15,000
- --------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 110,000 119,400
Pollution control obligations (Note 8) 17,955 17,955
Other long-term debt (Note 8) 37,088 20,485
Unamortized debt premium (discount), net (2,605) (2,754)
- --------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $11,526,000) 162,438 155,086
Less amount due within one year (Note 9) 637 1,407
- --------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 161,801 153,679 43.8 43.1
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $369,085 $356,491 100.0% 100.0%
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-234
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Savannah Electric and Power Company (the Company), is a wholly owned subsidiary
of Southern Company, which is the parent company of five operating companies, a
system service company, Southern Communications Services (Southern
Communications), Southern Energy, Inc. (Southern Energy), Southern Nuclear
Operating Company (Southern Nuclear), The Southern Development and Investment
Group (Southern Development) and other direct and indirect subsidiaries. The
operating companies 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. The system service company provides, at cost,
specialized services to 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 Energy 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 Southern Company's
nuclear power plants. Southern Development develops new business opportunities
related to energy products and services.
Southern Company is registered as a holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its
subsidiaries are subject to the regulatory provisions of the PUHCA. The Company
also is subject to regulation by the FERC and the Georgia Public Service
Commission (GPSC). The Company follows generally accepted accounting principles
and complies with the accounting policies and practices prescribed by the GPSC.
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.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are to be credited to
customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to:
1996 1995
---------------------------
(in thousands)
Deferred income taxes $ 19,167 $ 21,557
Premium on reacquired debt 7,142 5,316
Deferred income tax credits (22,792) (24,419)
- ---------------------------------------------------------------
Total $ 3,517 $ 2,454
===============================================================
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 service 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 and purchased power capacity
costs. Revenues are adjusted for differences between recoverable fuel costs and
amounts actually recovered in current rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1996, uncollectible
accounts continued to average less than 1 percent of revenues.
II-235
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
Depreciation and Amortization
Depreciation of the original cost of depreciable utility plant in service is
provided primarily by using composite straight-line rates, which approximated
2.8 percent in 1996 and 2.9 percent in 1995 and 1994. 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
removal of certain facilities.
Income Taxes
The Company, which is included in the consolidated federal income tax return
filed by Southern 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 rates used by the Company to calculate AFUDC
were 8.69 percent in 1996, 7.42 percent in 1995 and 8.04 percent in 1994.
Utility Plant
Utility plant is stated at original cost, which includes: materials; labor;
minor items of property; appropriate administrative and general costs;
payroll-related costs such as taxes, pensions, and other benefits; and AFUDC.
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.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
The Company's financial instruments for which the carrying amounts did not equal
fair value at December 31 were as follows:
Long-Term Debt
--------------------------
Carrying Fair
Year Amount Value
--------------------------
(in millions)
1996 $155 $161
1995 154 165
- --------------------------------------------------------------
The fair values for long-term debt were based on either closing market
prices or closing prices 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.
Storm Damage Reserve
In December 1995, in response to a request by the Company, the GPSC issued an
order allowing the Company to establish a Storm Damage Reserve. As of December
31, 1996, the accumulated provision amounted to $0.9 million. Regulatory
treatment by the GPSC allows the Company to accrue up to an additional $0.6
million per year.
II-236
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
2. RETIREMENT BENEFITS
Pension Plan
The Company has a defined benefit, trusteed, non-contributory pension plan that
covers substantially all regular employees. Benefits are based on the greater of
amounts resulting from two different formulas: years of service and final
average pay or years of service and a flat-dollar benefit. The Company uses the
"projected unit credit" actuarial method for funding purposes, subject to
limitations under federal income tax regulations. Amounts funded to the pension
trust 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. Trusts are funded to the extent deductible under
federal income tax regulations and to the extent required by the GPSC and the
FERC. Amounts funded are primarily invested in debt and equity securities and
money market funds.
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." The cost of postretirement
benefits is reflected in rates on a current basis.
Funded Status and Cost of Benefits
The following tables show actuarial results and assumptions for pension and
postretirement benefits as computed under the requirements of FASB Statement
Nos. 87 and 106, respectively. The funded status of the plans at December 31 was
as follows:
Pension
------------------------
1996 1995
------------------------
(in thousands)
Actuarial present value of benefit
obligation:
Vested benefits $39,270 $38,169
Non-vested benefits 2,939 2,585
- ----------------------------------------------------------------
Accumulated benefit obligation 42,209 40,754
Additional amounts related to
projected salary increases 7,705 7,786
- ----------------------------------------------------------------
Projected benefit obligation 49,914 48,540
Less:
Fair value of plan assets 42,430 36,836
Unrecognized net loss 7,252 9,606
Unrecognized prior service cost 1,240 1,375
Unrecognized net transition
obligation 444 532
Adjustment required to
recognize additional
minimum liability - 3,727
- ----------------------------------------------------------------
(Prepaid asset) accrued liability
recognized in the Balance Sheets $(1,452) $ 3,918
================================================================
The weighted average rates assumed in the actuarial calculations for the
pension plan were:
1996 1995 1994
------------------------
Discount 7.25% 7.25% 8.00%
Annual salary increase 4.75 4.75 5.25
Long-term return on plan assets 8.75 8.75 9.00
---------------------------------------------------------------
II-237
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
In accordance with Statement No. 87, an additional liability related to an
under-funded accumulated benefit obligations was reflected at December 31, 1995.
A corresponding net-of-tax balance of $0.1 million was recognized as a separate
component of Common Stock Equity in the 1995 Statement of Capitalization.
Postretirement
Benefits
------------------------
1996 1995
------------------------
(in thousands)
Actuarial present value of benefit
obligation:
Retirees and dependents $12,442 $13,560
Employees eligible to retire 1,614 1,471
Other employees 6,464 5,966
- -------------------------------------------------------------
Accumulated benefit obligation 20,520 20,997
Less:
Fair value of plan assets 2,473 1,443
Unrecognized net loss 4,835 5,719
Unrecognized transition
obligation 7,900 9,135
- -------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $ 5,312 $ 4,700
=============================================================
In 1995, the Company 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 $3.1 million.
The weighted average rates assumed in the actuarial calculations for the
postretirement benefit plans were:
1996 1995
-------------------
Discount 7.75% 7.25%
Long-term return on plan assets 8.50 8.50
- ------------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 9.3
percent for 1996, decreasing gradually to 5.8 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 at December 31, 1996, by $1.2 million and the aggregate of the
service and interest cost components of the net postretirement cost by $0.1
million.
Components of the plans' net costs are shown below:
Pension
------------------------------
1996 1995 1994
------------------------------
(in thousands)
Benefits earned during the year $1,352 $1,188 $1,192
Interest cost on projected
benefit obligation 3,389 3,395 3,279
Actual (return) loss on plan assets (4,852) (5,791) 27
Net amortization and deferral 2,439 4,125 (1,474)
- --------------------------------------------------------------------
Net pension cost $2,328 $2,917 $3,024
====================================================================
Of the above net pension costs, $2.0 million in 1996, $2.4 million in 1995
and $2.6 million in 1994 were recorded in operating expenses, and the remainder
was recorded in construction and other accounts.
Postretirement
Benefits
------------------------------
1996 1995 1994
------------------------------
(in thousands)
Benefits earned during the year $ 360 $ 504 $ 632
Interest cost on accumulated
benefit obligation 1,422 1,638 1,492
Amortization of transition
obligation 494 723 723
Actual (return) loss on plan assets (145) (34) 6
Net amortization and deferral 187 93 111
- --------------------------------------------------------------------
Net postretirement costs $2,318 $2,924 $2,964
- --------------------------------------------------------------------
Of the above net postretirement costs, $2.0 million in 1996, $2.4 million
in 1995 and $2.4 million in 1994 were recorded in operating expenses, and the
remainder was recorded in construction and other accounts.
II-238
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
The Company has a supplemental retirement plan for certain executive
employees. The plan is unfunded and payable from the general funds of the
Company. The Company has purchased life insurance on participating executives,
and plans to use these policies to satisfy this obligation. Benefit costs
associated with this plan were $0.4 million for 1996, 1995 and 1994.
3. REGULATORY MATTERS
Rates to retail customers served by the Company are regulated by the GPSC. As
part of the Company's most recent rate settlement in 1992, it was informally
agreed that the Company's earned rate of return on common equity should be 12.95
percent. The Company is currently undergoing an earnings review by the GPSC, and
to date, the GPSC has made no determination.
In August 1995, the GPSC ordered the phase out of the Company's demand-side
management programs effective December 31, 1995 and the elimination of
demand-side management rate riders effective October 1, 1995. In June 1996, the
Company refunded to customers approximately $0.3 million which had been
overcollected from the rate rider.
4. CONSTRUCTION PROGRAM
The Company is engaged in a continuous construction program, currently estimated
to total $26 million in 1997, $22 million in 1998 and $24 million in 1999. The
construction program is subject to periodic review and revision, and actual
construction costs may vary from the above estimates because of numerous
factors. These factors include: changes in business conditions; revised load
growth estimates; changes in environmental regulations; increasing cost of
labor, equipment and materials; and changes in cost of capital. The Company does
not have any traditional baseload generating plants under construction. However,
construction related to transmission and distribution facilities and the
upgrading and extension of the useful lives of generating plants will continue.
5. FINANCING AND COMMITMENTS
General
To the extent possible, the Company's construction program is expected to be
financed from internal sources and from the issuance of additional long-term
debt, preferred stock and capital contributions from Southern Company.
The amounts of long-term debt and preferred stock that can be issued in the
future will be contingent on market conditions, the maintenance of adequate
earnings levels, regulatory authorizations and other factors.
Bank Credit Arrangements
At the end of 1996, unused credit arrangements with five banks totaled $20.5
million and expire at various times during 1997.
The Company's revolving credit arrangements of $20 million, of which $15
million remained unused as of December 31, 1996, expire December 31, 1998. These
agreements allow short-term borrowings to be converted 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 Company's option.
In connection with these credit arrangements, the Company agrees to pay
commitment fees based on the unused portions of the commitments.
Assets Subject to Lien
As amended and supplemented, the Company's Indenture of Mortgage, which secures
the first mortgage bonds issued by the Company, constitutes a direct first lien
on substantially all of the Company's fixed property and franchises. A second
lien for $10 million of bank debt is secured by a portion of the Plant Kraft
property.
II-239
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
Operating Leases
The Company has rental agreements with various terms and expiration dates.
Rental expenses totaled $1.6 million for 1996, $1.3 million for 1995, and $1.5
million for 1994. The Company entered into a 22.5 year lease agreement effective
December 1, 1995 for 100 new aluminum rail cars at an annual cost of
approximately $0.5 million. The rail cars are used to transport coal to one of
the Company's generating plants.
At December 31, 1996, estimated future minimum lease payments for
non-cancelable operating leases were as follows:
Amounts
--------------------
(in thousands)
1997 $1,413
1998 1,135
1999 497
2000 485
2001 483
2002 and thereafter 7,935
- -------------------------------------------------------------
6. INCOME TAXES
At December 31, 1996, tax-related regulatory assets and liabilities were $19
million and $23 million, respectively. The assets are attributable to tax
benefits flowed through to customers in prior years and to taxes applicable to
capitalized AFUDC. The 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:
1996 1995 1994
--------------------------------
(in thousands)
Total provision for income taxes
Federal --
Currently payable $ 7,084 $10,427 $11,736
Deferred -- current year 8,216 5,290 2,106
-- reversal of
prior years (1,989) (1,661) (755)
- -----------------------------------------------------------------
13,311 14,056 13,087
- -----------------------------------------------------------------
State --
Currently payable 575 1,941 2,064
Deferred -- current year 1,216 695 188
-- reversal of
prior years 39 35 86
- -----------------------------------------------------------------
1,830 2,671 2,338
- -----------------------------------------------------------------
Total 15,141 16,727 15,425
Less income taxes credited
to other income (1,034) (651) (864)
- -----------------------------------------------------------------
Total income taxes
charged to operations $16,175 $17,378 $16,289
=================================================================
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:
1996 1995
--------------------
Deferred tax liabilities: (in thousands)
Accelerated depreciation $67,104 $62,822
Property basis differences 9,550 11,330
Other 5,703 1,511
- ----------------------------------------------------------------
Total 82,357 75,663
- ----------------------------------------------------------------
Deferred tax assets:
Pension and other benefits 5,183 3,660
Other 2,186 3,818
- ----------------------------------------------------------------
Total 7,369 7,478
- ----------------------------------------------------------------
Net deferred tax liabilities 74,988 68,185
Portions included in current assets, net 1,666 5,967
- ----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $76,654 $74,152
================================================================
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 $0.7 million in 1996, 1995 and 1994. At December 31, 1996, all
investment tax credits available to reduce federal income taxes payable had been
utilized.
II-240
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1996 1995 1994
-----------------------------
Federal statutory tax rate 35% 35% 35%
State income tax, net of
federal income tax benefit 3 4 4
Other (1) - -
--------------------------------------------------------------
Effective income tax rate 37% 39% 39%
==============================================================
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.
7. CUMULATIVE PREFERRED STOCK
The Company has outstanding 1,400,000 shares of 6.64% Series Preferred Stock
which has redemption provisions of $26.66 per share plus accrued dividends if
redeemed on or prior to November 1, 1998, and redemption provisions of $25 per
share plus accrued dividends thereafter. Cumulative preferred stock dividends
are preferential to the payment of dividends on common stock.
8. LONG-TERM DEBT
The Company's Indenture related to its First Mortgage Bonds is unlimited as to
the authorized amount of bonds which may be issued, provided that required
property additions, earnings and other provisions of such Indenture are met.
In May 1996, the Company issued $20 million in 6.90% Series First Mortgage
Bonds maturing in 2006 and $10 million of 6.88% term notes maturing in 2001.
Using the proceeds from such sales, the Company redeemed in July 1996 all of its
remaining outstanding 9 3/8% Series First Mortgage Bonds due July 2021.
The sinking fund requirements of first mortgage bonds were satisfied by
cash redemption in 1996 and 1995. The 1997 requirement will be satisfied by
certifying property additions. Sinking fund requirements and/or maturities
through 2001 applicable to long-term debt are as follows: $0.6 million in 1997;
$20.5 million in 1998; $0.5 million in 1999; $0.4 million in 2000; and $10.4
million in 2001.
Details of pollution control obligations and other long-term debt at
December 31 are as follows:
1996 1995
-----------------------
(in thousands)
Collateralized obligations incurred in
connection with the sale by public
authorities of tax-exempt pollution
control revenue bonds --
Variable rate (3.20% at 1/1/97)
due 2016 $ 4,085 $ 4,085
6 3/4% due 2022 13,870 13,870
Capital lease obligations --
Coal unloading facility
Variable rate (5.60% at 1/1/97) 6,667 -
Transportation fleet 421 485
Notes Payable --
6.88% due 2001 10,000 -
Variable rate (5.75% at 1/1/97)
due 1998 15,000 15,000
Variable rate (5.73% at 1/1/97)
due 1998 5,000 5,000
- ----------------------------------------------------------------
Total $55,043 $38,440
================================================================
Assets acquired under capital leases are recorded as utility plant in
service, and the related obligation is classified as other long-term debt.
Leases are capitalized at the net present value of the future lease payments.
However, for ratemaking purposes, these obligations are treated as operating
leases, and as such, lease payments are charged to expense as incurred.
In March 1996, the Company entered into a fifteen year variable rate
capital lease agreement with the Savannah Economic Development Authority for a
coal ship docking and unloading facility at Plant Kraft.
II-241
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1996 Annual Report
The Company leased combustion turbine generating equipment under a
non-cancelable lease that expired in 1995. In December 1995, the Company
exercised its option to purchase this equipment. The Company currently leases a
portion of its transportation fleet. Under the terms of these leases, the
Company is responsible for taxes, insurance and other expenses.
9. LONG-TERM DEBT DUE WITHIN ONE YEAR
A summary of the sinking fund requirements and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:
1996 1995
----------------------
(in thousands)
Bond sinking fund requirement $1,100 $1,200
Less:
Portion to be satisfied by
certifying property additions 1,100 -
- --------------------------------------------------------------------
Cash sinking fund requirement - 1,200
Other long-term debt maturities (Note 9) 637 207
- --------------------------------------------------------------------
Total $ 637 $1,407
====================================================================
The first mortgage bond improvement (sinking) fund requirements amount to 1
percent of each outstanding series of bonds authenticated under the Indenture
prior to January 1 of each year, other than those issued to collateralize
pollution control and other obligations. The requirements may be satisfied by
depositing cash or reacquiring bonds, or by pledging additional property equal
to 1 2/3 times the requirements.
10. COMMON STOCK DIVIDEND RESTRICTIONS
The Company's Charter and Indenture contain certain limitations on the payment
of cash dividends on preferred and common stocks. At December 31, 1996,
approximately $68 million of retained earnings was restricted against the
payment of cash dividends on common stock under the terms of the Indenture.
11. QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized quarterly financial data for 1996 and 1995 are as follows (in
thousands):
Net Income After
Operating Operating Dividends on
Quarter Ended Revenue Income Preferred Stock
- -----------------------------------------------------------------
March 1996 $50,575 $ 6,562 $ 2,740
June 1996 61,906 9,786 5,859
September 1996 73,359 16,542 12,815
December 1996 48,234 5,994 2,526
March 1995 $46,743 $ 6,468 $ 2,420
June 1995 57,673 9,920 6,041
September 1995 73,449 16,438 12,693
December 1995 47,864 5,452 2,241
- -----------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and a
seasonal rate structure, among other factors.
II-242
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $234,074 $225,729 $211,785
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $23,940 $23,395 $22,110
Cash Dividends on Common Stock (in thousands) $19,600 $17,600 $16,300
Return on Average Common Equity (percent) 14.08 14.20 14.00
Total Assets (in thousands) $542,295 $524,662 $518,305
Gross Property Additions (in thousands) $28,950 $26,503 $30,078
- ---------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $172,284 $167,812 $161,581
Preferred stock 35,000 35,000 35,000
Preferred and preference stock subject
to mandatory redemption - - -
Long-term debt 161,801 153,679 155,922
- ---------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $369,085 $356,491 $352,503
=====================================================================================================================
Capitalization Ratios (percent):
Common stock equity 46.7 47.1 45.8
Preferred and preference stock 9.5 9.8 9.9
Long-term debt 43.8 43.1 44.3
- ---------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=====================================================================================================================
First Mortgage Bonds (in thousands):
Issued 20,000 15,000 -
Retired 29,400 29,250 5,065
Preferred and Preference Stock (in thousands):
Issued - - -
Retired - - -
- ---------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A
Preferred Stock -
Moody's "a2" "a2" "a2"
Standard and Poor's A A A-
- ---------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 106,657 104,624 103,199
Commercial 13,877 13,339 13,015
Industrial 65 65 65
Other 1,097 1,048 1,007
- ---------------------------------------------------------------------------------------------------------------------
Total 121,696 119,076 117,286
=====================================================================================================================
Employees (year-end) 571 584 616
</TABLE>
Note:
NR = Not Rated
II-243
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (in thousands) $218,442 $197,761 $189,646 $205,635
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $21,459 $20,512 $24,030 $26,254
Cash Dividends on Common Stock (in thousands) $21,000 $22,000 $22,000 $22,000
Return on Average Common Equity (percent) 13.73 12.89 15.13 16.85
Total Assets (in thousands) $527,187 $352,175 $352,505 $340,050
Gross Property Additions (in thousands) $72,858 $30,132 $19,478 $20,086
- -------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $154,269 $158,376 $159,841 $157,811
Preferred stock 35,000 20,000 20,000 20,000
Preferred and preference stock subject
to mandatory redemption - - - -
Long-term debt 151,338 110,767 119,280 112,377
- -------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $340,607 $289,143 $299,121 $290,188
=========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 45.3 54.8 53.4 54.4
Preferred and preference stock 10.3 6.9 6.7 6.9
Long-term debt 44.4 38.3 39.9 38.7
- -------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
=========================================================================================================================
First Mortgage Bonds (in thousands):
Issued 45,000 30,000 30,000 -
Retired - 38,750 22,500 9,135
Preferred and Preference Stock (in thousands):
Issued 35,000 - - -
Retired 20,000 - - 5,374
- -------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A A A A
Preferred Stock -
Moody's "a2" "a2" "a2" "a2"
Standard and Poor's A- A- A- A-
- -------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 101,032 99,164 97,446 96,452
Commercial 12,702 12,416 12,153 12,045
Industrial 69 73 73 76
Other 957 940 897 867
- -------------------------------------------------------------------------------------------------------------------------
Total 114,760 112,593 110,569 109,440
=========================================================================================================================
Employees (year-end) 665 688 672 648
</TABLE>
Note:
NR = Not Rated
II-244A
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (in thousands) $201,799 $182,440 $174,707 $174,847
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $25,535 $24,272 $22,086 $20,452
Cash Dividends on Common Stock (in thousands) $20,000 $11,700 $10,741 $9,353
Return on Average Common Equity (percent) 16.88 17.03 17.03 17.52
Total Assets (in thousands) $349,887 $347,051 $340,109 $341,826
Gross Property Additions (in thousands) $18,831 $23,254 $32,276 $26,800
- ----------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $153,737 $148,883 $136,207 $123,133
Preferred stock 22,300 22,300 2,300 2,300
Preferred and preference stock subject
to mandatory redemption 2,884 3,075 9,665 10,256
Long-term debt 117,522 98,285 129,329 137,821
- ----------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $296,443 $272,543 $277,501 $273,510
======================================================================================================================
Capitalization Ratios (percent):
Common stock equity 51.9 54.6 49.1 45.0
Preferred and preference stock 8.5 9.3 4.3 4.6
Long-term debt 39.6 36.1 46.6 50.4
- ----------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
======================================================================================================================
First Mortgage Bonds (in thousands):
Issued 30,000 - - 25,000
Retired 18,275 12,231 10,239 10,160
Preferred and Preference Stock (in thousands):
Issued - 20,000 - -
Retired 6,591 553 588 610
- ----------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A3 A3
Standard and Poor's A A- A- A-
Preferred Stock -
Moody's "a2" "a2" NR NR
Standard and Poor's A- BBB+ BBB+ BBB+
- ----------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 94,766 93,486 92,094 89,951
Commercial 12,298 12,135 11,812 11,405
Industrial 69 69 67 67
Other 856 828 762 731
- ----------------------------------------------------------------------------------------------------------------------
Total 107,989 106,518 104,735 102,154
======================================================================================================================
Employees (year-end) 643 655 655 658
</TABLE>
Note:
NR = Not Rated
II-244B
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $101,607 $95,208 $89,195
Commercial 80,494 75,117 71,227
Industrial 37,077 36,040 32,906
Other 8,804 8,386 7,946
- ---------------------------------------------------------------------------------------------------------------------
Total retail 227,982 214,751 201,274
Sales for resale - non-affiliates 1,998 1,851 4,786
Sales for resale - affiliates 3,130 7,200 6,446
- ---------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 233,110 223,802 212,506
Other revenues 964 1,927 (721)
- ---------------------------------------------------------------------------------------------------------------------
Total $234,074 $225,729 $211,785
=====================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,456,651 1,402,148 1,298,122
Commercial 1,141,218 1,099,570 1,045,831
Industrial 838,753 887,141 799,543
Other 126,215 126,057 119,593
- ---------------------------------------------------------------------------------------------------------------------
Total retail 3,562,837 3,514,916 3,263,089
Sales for resale - non-affiliates 91,610 87,747 201,716
Sales for resale - affiliates 41,808 63,731 93,001
- ---------------------------------------------------------------------------------------------------------------------
Total 3,696,255 3,666,394 3,557,806
=====================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.98 6.79 6.87
Commercial 7.05 6.83 6.81
Industrial 4.42 4.06 4.12
Total retail 6.40 6.11 6.17
Sale for resale 3.84 5.98 3.81
Total sales 6.31 6.10 5.97
Residential Average Annual Kilowatt-Hour Use Per Customer 13,771 13,478 12,686
Residential Average Annual Revenue Per Customer $960.58 $915.15 $871.68
Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 788 788
Maximum Peak-Hour Demand (megawatts):
Winter 666 630 617
Summer 811 811 729
Annual Load Factor (percent) 53.1 52.9 54.3
Plant Availability - Fossil-Steam (percent) 77.6 83.3 81.0
- ---------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 27.7 23.9 18.6
Oil and gas 3.1 5.9 1.8
Purchased power -
From non-affiliates 2.1 2.3 1.5
From affiliates 67.1 67.9 78.1
- ---------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=====================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 11,888 12,146 11,786
Cost of fuel per million BTU (cents) 203.36 179.25 205.03
Average cost of fuel per net kilowatt-hour generated (cents) 2.42 2.18 2.42
=====================================================================================================================
</TABLE>
II-245
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (in thousands):
Residential $93,883 $82,670 $80,541 $87,063
Commercial 71,320 64,756 61,827 65,462
Industrial 36,180 33,171 30,492 30,237
Other 7,810 7,095 6,561 6,782
- -------------------------------------------------------------------------------------------------------------------------
Total retail 209,193 187,692 179,421 189,544
Sales for resale - non-affiliates 6,021 7,821 7,813 9,482
Sales for resale - affiliates 2,433 1,505 1,430 5,566
- -------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 217,647 197,018 188,664 204,592
Other revenues 795 743 982 1,043
- -------------------------------------------------------------------------------------------------------------------------
Total $218,442 $197,761 $189,646 $205,635
=========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,329,362 1,216,993 1,195,005 1,183,486
Commercial 1,015,935 953,840 925,757 892,931
Industrial 854,324 861,121 825,862 644,704
Other 115,969 110,270 106,683 103,539
- -------------------------------------------------------------------------------------------------------------------------
Total retail 3,315,590 3,142,224 3,053,307 2,824,660
Sales for resale - non-affiliates 247,203 367,066 372,085 441,090
Sales for resale - affiliates 75,384 37,632 32,581 294,042
- -------------------------------------------------------------------------------------------------------------------------
Total 3,638,177 3,546,922 3,457,973 3,559,792
=========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.06 6.79 6.74 7.36
Commercial 7.02 6.79 6.68 7.33
Industrial 4.23 3.85 3.69 4.69
Total retail 6.31 5.97 5.88 6.71
Sale for resale 2.62 2.30 2.28 2.05
Total sales 5.98 5.55 5.46 5.75
Residential Average Annual Kilowatt-Hour Use Per Customer 13,269 12,369 12,323 12,339
Residential Average Annual Revenue Per Customer $937.07 $840.23 $830.54 $907.68
Plant Nameplate Capacity Ratings (year-end) (megawatts) 628 628 605 605
Maximum Peak-Hour Demand (megawatts):
Winter 524 533 526 428
Summer 747 695 691 648
Annual Load Factor (percent) 54.1 55.0 54.1 53.2
Plant Availability - Fossil-Steam (percent) 90.2 89.1 76.9 89.6
- -------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 21.5 12.0 16.3 52.8
Oil and gas 4.5 2.9 1.7 3.4
Purchased power -
From non-affiliates 0.9 1.0 0.4 0.8
From affiliates 73.1 84.1 81.6 43.0
- -------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
=========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 11,515 12,547 10,917 10,741
Cost of fuel per million BTU (cents) 215.97 201.50 199.42 188.18
Average cost of fuel per net kilowatt-hour generated (cents) 2.49 2.53 2.18 2.02
=========================================================================================================================
</TABLE>
II-246A
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1996 Annual Report
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (in thousands):
Residential $85,113 $81,098 $79,785 $80,348
Commercial 65,474 62,640 60,285 59,547
Industrial 28,304 26,865 27,422 27,694
Other 6,892 6,557 6,315 6,300
- ----------------------------------------------------------------------------------------------------------------------
Total retail 185,783 177,160 173,807 173,889
Sales for resale - non-affiliates 8,814 808 - -
Sales for resale - affiliates 6,025 3,567 - -
- ----------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 200,622 181,535 173,807 173,889
Other revenues 1,177 905 900 958
- ----------------------------------------------------------------------------------------------------------------------
Total $201,799 $182,440 $174,707 $174,847
======================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,109,976 1,067,411 1,044,554 1,021,905
Commercial 839,756 806,687 775,643 746,133
Industrial 561,063 533,604 557,281 515,544
Other 101,164 97,072 94,949 92,471
- ----------------------------------------------------------------------------------------------------------------------
Total retail 2,611,959 2,504,774 2,472,427 2,376,053
Sales for resale - non-affiliates 437,943 24,168 - -
Sales for resale - affiliates 303,142 156,106 - -
- ----------------------------------------------------------------------------------------------------------------------
Total 3,353,044 2,685,048 2,472,427 2,376,053
======================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.67 7.60 7.64 7.86
Commercial 7.80 7.77 7.77 7.98
Industrial 5.04 5.03 4.92 5.37
Total retail 7.11 7.07 7.03 7.32
Sale for resale 2.00 2.43 - -
Total sales 5.98 6.76 7.03 7.32
Residential Average Annual Kilowatt-Hour Use Per Customer 11,781 11,489 11,481 11,514
Residential Average Annual Revenue Per Customer $903.37 $872.87 $876.95 $905.27
Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 605 605
Maximum Peak-Hour Demand (megawatts):
Winter 548 471 414 464
Summer 613 574 562 565
Annual Load Factor (percent) 52.4 53.4 53.6 51.1
Plant Availability - Fossil-Steam (percent) 94.7 77.1 81.2 86.9
- ----------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.5 79.8 74.3 81.9
Oil and gas 1.4 5.4 4.4 6.8
Purchased power -
From non-affiliates 1.5 5.9 19.9 11.3
From affiliates 33.6 8.9 1.4 -
- ----------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
======================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,611 10,683 10,551 10,607
Cost of fuel per million BTU (cents) 180.48 178.31 176.10 186.30
Average cost of fuel per net kilowatt-hour generated (cents) 1.92 1.90 1.86 1.98
======================================================================================================================
</TABLE>
II-246B
<PAGE>
STATEMENTS OF INCOME
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $ 230,944 $ 218,529 $ 205,339
Revenues from affiliates 3,130 7,200 6,446
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 234,074 225,729 211,785
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 29,139 25,386 18,555
Purchased power from non-affiliates 2,350 2,139 1,839
Purchased power from affiliates 58,591 53,252 55,822
Other 44,007 45,214 41,623
Maintenance 14,140 13,668 12,560
Depreciation and amortization 19,113 18,949 17,854
Taxes other than income taxes 11,675 11,465 11,074
Federal and state income taxes 16,175 17,378 16,289
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 195,190 187,451 175,616
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 38,884 38,278 36,169
Other Income (Expense):
Allowance for equity funds used during construction 317 163 831
Interest income 201 164 54
Other, net (1,756) (618) (1,032)
Income taxes applicable to other income 1,034 651 864
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 38,680 38,638 36,886
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 11,563 12,380 12,585
Allowance for debt funds used during construction (333) (450) (1,225)
Interest on notes payable 229 135 205
Amortization of debt discount, premium, and expense, net 579 448 550
Other interest charges 378 406 337
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 12,416 12,919 12,452
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of a
Change in Method of Recording Revenues 26,264 25,719 24,434
Cumulative effect as of January 1, 1988, of accruing unbilled
revenues--less income taxes of $1,164(000) - - -
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 26,264 25,719 24,434
Dividends on Preferred and Preference Stock 2,324 2,324 2,324
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred and Preference Stock $ 23,940 $ 23,395 $ 22,110
================================================================================================================================
Pro Forma Net Income After Dividends on Preferred Stock
Assuming Change in Method of Recording
Revenues Was Applied Retroactively $ 23,940 $ 23,395 $ 22,110
</TABLE>
II-247
<PAGE>
STATEMENTS OF INCOME
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $ 216,009 $ 196,256 $ 188,216 $ 200,069
Revenues from affiliates 2,433 1,505 1,430 5,566
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 218,442 197,761 189,646 205,635
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 24,976 14,162 14,415 42,630
Purchased power from non-affiliates 793 494 297 611
Purchased power from affiliates 56,274 56,492 49,007 34,648
Other 45,610 36,884 32,945 30,630
Maintenance 13,516 14,232 12,475 12,754
Depreciation and amortization 16,467 16,829 16,549 16,118
Taxes other than income taxes 11,136 10,231 10,122 9,798
Federal and state income taxes 15,436 14,566 16,195 17,611
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 184,208 163,890 152,005 164,800
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 34,234 33,871 37,641 40,835
Other Income (Expense):
Allowance for equity funds used during construction 958 446 170 193
Interest income 209 276 589 741
Other, net (1,841) (1,450) (879) (803)
Income taxes applicable to other income 1,117 758 722 187
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 34,677 33,901 38,243 41,153
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 10,696 10,870 11,486 12,052
Allowance for debt funds used during construction (699) (289) (103) (194)
Interest on notes payable 240 15 25 116
Amortization of debt discount, premium, and expense, net 535 427 380 241
Other interest charges 340 466 525 665
- --------------------------------------------------------------------------------------------------------------------------------
Net interest charges 11,112 11,489 12,313 12,880
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of a
Change in Method of Recording Revenues 23,565 22,412 25,930 28,273
Cumulative effect as of January 1, 1988, of accruing unbilled
revenues--less income taxes of $1,164(000) - - - -
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 23,565 22,412 25,930 28,273
Dividends on Preferred and Preference Stock 2,106 1,900 1,900 2,019
- --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred and Preference Stock $ 21,459 $ 20,512 $ 24,030 $ 26,254
================================================================================================================================
Pro Forma Net Income After Dividends on Preferred Stock
Assuming Change in Method of Recording
Revenues Was Applied Retroactively $ 21,459 $ 20,512 $ 24,030 $ 26,254
</TABLE>
II-248A
<PAGE>
STATEMENTS OF INCOME
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Revenues:
Revenues $ 195,774 $ 178,873 $ 174,707 $ 174,847
Revenues from affiliates 6,025 3,567 - -
- -------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 201,799 182,440 174,707 174,847
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 44,224 46,578 38,597 44,393
Purchased power from non-affiliates 616 3,593 11,453 6,069
Purchased power from affiliates 26,361 6,586 1,186 2,071
Other 29,371 28,271 25,642 24,114
Maintenance 12,281 14,261 13,629 12,591
Depreciation and amortization 20,343 19,771 18,152 16,443
Taxes other than income taxes 9,152 9,209 9,088 7,863
Federal and state income taxes 17,571 14,017 16,969 21,405
- -------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 159,919 142,286 134,716 134,949
- -------------------------------------------------------------------------------------------------------------------------------
Operating Income 41,880 40,154 39,991 39,898
Other Income (Expense):
Allowance for equity funds used during construction - 273 512 27
Interest income 719 355 925 924
Other, net (672) (1,423) (464) (553)
Income taxes applicable to other income 192 459 (317) (217)
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 42,119 39,818 40,647 40,079
- -------------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 12,287 15,603 17,127 17,415
Allowance for debt funds used during construction (112) (330) (459) (73)
Interest on notes payable 402 230 70 315
Amortization of debt discount, premium, and expense, net 274 196 237 234
Other interest charges 1,313 336 251 335
- -------------------------------------------------------------------------------------------------------------------------------
Net interest charges 14,164 16,035 17,226 18,226
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of a
Change in Method of Recording Revenues 27,955 23,783 23,421 21,853
Cumulative effect as of January 1, 1988, of accruing unbilled
revenues--less income taxes of $1,164(000) - 1,920 - -
- -------------------------------------------------------------------------------------------------------------------------------
Net Income 27,955 25,703 23,421 21,853
Dividends on Preferred and Preference Stock 2,420 1,431 1,335 1,401
- -------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred and Preference Stock $ 25,535 $ 24,272 $ 22,086 $ 20,452
===============================================================================================================================
Pro Forma Net Income After Dividends on Preferred Stock
Assuming Change in Method of Recording
Revenues Was Applied Retroactively $ 25,535 $ 22,352 $ 21,865 $ 20,606
</TABLE>
II-248B
<PAGE>
STATEMENTS OF CASH FLOWS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 26,264 $ 25,719 $ 24,434
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 20,246 20,535 19,353
Deferred income taxes, net 7,482 4,359 1,625
Deferred investment tax credits, net - - -
Allowance for equity funds used during construction (317) (163) (831)
Other, net 705 35 826
Changes in certain current assets and liabilities --
Receivables, net (641) (6,241) 18,481
Special deposits (1,395) - -
Inventories 410 2,318 1,144
Payables 4,242 2,213 (19,957)
Other (4,558) (1,848) (117)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 52,438 46,927 44,958
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (28,950) (26,503) (30,078)
Sales of property - - -
Other (3,173) 3,198 (841)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (32,123) (23,305) (30,919)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock - - -
First mortgage bonds 20,000 15,000 -
Pollution control bonds - - -
Other long-term debt 17,000 33,500 8,500
Common stock - - -
Retirements:
Preferred and preference stock - - -
First mortgage bonds (29,400) (29,250) (5,065)
Pollution control bonds - - -
Other long-term debt (397) (23,003) (823)
Notes payable, net 1,000 1,500 (500)
Payment of preferred and preference stock dividends (2,324) (2,324) (2,129)
Payment of common and class A stock dividends (19,600) (17,600) (16,300)
Miscellaneous (2,257) (2,131) (74)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (15,978) (24,308) (16,391)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 4,337 (686) (2,352)
Cash and Cash Equivalents at Beginning of Year 877 1,563 3,915
- --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 5,214 $ 877 $ 1,563
================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-249
<PAGE>
STATEMENTS OF CASH FLOWS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 23,565 $ 22,412 $ 25,930 $ 28,273
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 17,482 17,757 17,501 16,995
Deferred income taxes, net 607 5,947 1,601 2,782
Deferred investment tax credits, net - - - -
Allowance for equity funds used during construction (958) (446) (170) (193)
Other, net 2,853 (1,312) (1,876) 511
Changes in certain current assets and liabilities --
Receivables, net (16,839) (4,107) 5,291 1,541
Special deposits - 350 1,348 185
Inventories (3,947) 4,435 (1,082) 1,246
Payables 18,742 351 568 (228)
Other 3,282 2,083 3,710 (319)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 44,787 47,470 52,821 50,793
- ------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (72,858) (30,132) (19,478) (20,086)
Sales of property - - - -
Other 1,676 (1,073) 407 (120)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (71,182) (31,205) (19,071) (20,206)
- ------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock 35,000 - - -
First mortgage bonds 45,000 30,000 30,000 -
Pollution control bonds 4,085 13,870 - -
Other long-term debt 10,000 - - -
Common stock - - - -
Retirements:
Preferred and preference stock (20,000) - - (5,374)
First mortgage bonds - (38,750) (22,500) (9,135)
Pollution control bonds (4,085) (14,550) (515) (485)
Other long-term debt (10,356) (217) (275) (364)
Notes payable, net (4,500) 7,500 (1,500) 1,500
Payment of preferred and preference stock dividends (2,222) (1,900) (1,900) (2,113)
Payment of common and class A stock dividends (21,000) (22,000) (22,000) (22,000)
Miscellaneous (3,400) (3,985) (477) 47
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 28,522 (30,032) (19,167) (37,924)
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,127 (13,767) 14,583 (7,337)
Cash and Cash Equivalents at Beginning of Year 1,788 15,555 972 8,309
- ------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 3,915 $ 1,788 $ 15,555 $ 972
==============================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-250A
<PAGE>
STATEMENTS OF CASH FLOWS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
Operating Activities:
Net income $ 27,955 $ 25,703 $ 23,421 $ 21,853
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 21,310 20,592 19,126 16,855
Deferred income taxes, net 3,476 3,568 925 4,443
Deferred investment tax credits, net - - (5) 489
Allowance for equity funds used during construction - (273) (512) (27)
Other, net (775) 718 (1,016) 474
Changes in certain current assets and liabilities --
Receivables, net (6,949) (7,062) 1,360 1,456
Special deposits 2,708 (558) (587) (53)
Inventories (1,503) 3,063 (503) 663
Payables 1,086 (1,151) (78) (1,750)
Other 1,544 (1,684) (757) 1,916
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 48,852 42,916 41,374 46,319
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (18,831) (23,254) (32,276) (26,800)
Sales of property - - - -
Other 381 (4,042) 1,296 (824)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (18,450) (27,296) (30,980) (27,624)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Preferred stock - 20,000 - -
First mortgage bonds 30,000 - - 25,000
Pollution control bonds - - - -
Other long-term debt - - - -
Common stock - 403 1,693 1,691
Retirements:
Preferred and preference stock (6,591) (553) (588) (610)
First mortgage bonds (18,275) (12,231) (10,239) (10,160)
Pollution control bonds (455) (430) (405) (380)
Other long-term debt (7,656) (4,401) (3,954) (3,075)
Notes payable, net - - - (4,500)
Payment of preferred and preference stock dividends (2,318) (1,284) (1,351) (1,418)
Payment of common and class A stock dividends (20,000) (14,407) (10,383) (9,114)
Miscellaneous (1,071) (269) - (436)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (26,366) (13,172) (25,227) (3,002)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 4,036 2,448 (14,833) 15,693
Cash and Cash Equivalents at Beginning of Year 4,273 1,825 16,658 965
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 8,309 $ 4,273 $ 1,825 $ 16,658
==================================================================================================================================
( ) Denotes use of cash.
</TABLE>
II-250B
<PAGE>
BALANCE SHEETS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 327,549 $ 317,026 $ 312,215
Transmission 103,160 102,129 100,956
Distribution 275,877 264,115 251,323
General 32,875 31,876 28,938
Construction work in progress 13,463 6,707 5,930
- --------------------------------------------------------------------------------------------------------------------------------
Total utility plant 752,924 721,853 699,362
Accumulated provision for depreciation 304,760 287,004 267,590
- --------------------------------------------------------------------------------------------------------------------------------
Total 448,164 434,849 431,772
Less property-related accumulated deferred income taxes - - -
- --------------------------------------------------------------------------------------------------------------------------------
Total 448,164 434,849 431,772
- --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,785 1,788 1,790
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 5,214 877 1,563
Receivables, net 16,606 21,346 12,328
Accrued unbilled revenues 4,597 5,110 4,780
Fuel cost under recovery 7,289 - 3,113
Fossil fuel stock, at average cost 5,892 6,076 7,557
Materials and supplies, at average cost 8,013 8,239 9,076
Prepayments 6,135 6,467 7,446
- --------------------------------------------------------------------------------------------------------------------------------
Total 53,746 48,115 45,863
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 19,167 21,557 23,521
Miscellaneous 19,433 18,353 15,359
- --------------------------------------------------------------------------------------------------------------------------------
Total 38,600 39,910 38,880
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 542,295 $ 524,662 $ 518,305
================================================================================================================================
</TABLE>
II-251
<PAGE>
BALANCE SHEETS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 257,708 $ 258,539 $ 247,017 $ 246,278
Transmission 99,791 93,182 90,198 73,358
Distribution 237,012 222,024 212,576 217,913
General 28,010 25,851 24,283 22,990
Construction work in progress 49,797 5,966 4,211 1,354
- ----------------------------------------------------------------------------------------------------------------------------------
Total utility plant 672,318 605,562 578,285 561,893
Accumulated provision for depreciation 251,565 240,094 225,605 211,725
- ----------------------------------------------------------------------------------------------------------------------------------
Total 420,753 365,468 352,680 350,168
Less property-related accumulated deferred income taxes - 65,725 62,737 58,106
- ----------------------------------------------------------------------------------------------------------------------------------
Total 420,753 299,743 289,943 292,062
- ----------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,793 1,795 39 39
- ----------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 3,915 1,788 15,555 972
Receivables, net 27,714 14,480 14,549 14,450
Accrued unbilled revenues 3,789 3,401 3,252 3,831
Fuel cost under recovery 7,112 3,895 - 5,662
Fossil fuel stock, at average cost 8,419 4,895 9,196 8,071
Materials and supplies, at average cost 9,358 8,935 9,069 9,112
Prepayments 4,849 1,599 4,544 1,492
- ----------------------------------------------------------------------------------------------------------------------------------
Total 65,156 38,993 56,165 43,590
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes 24,890 - - -
Miscellaneous 14,595 11,644 6,358 4,359
- ----------------------------------------------------------------------------------------------------------------------------------
Total 39,485 11,644 6,358 4,359
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 527,187 $ 352,175 $ 352,505 $ 340,050
==================================================================================================================================
</TABLE>
II-252A
<PAGE>
BALANCE SHEETS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
ASSETS
Utility Plant:
Production-fossil $ 242,988 $ 241,833 236,587 $ 232,316
Transmission 72,299 71,601 69,822 65,215
Distribution 204,611 192,335 177,163 160,346
General 22,482 21,686 17,513 14,838
Construction work in progress 2,880 1,684 7,214 5,270
- ----------------------------------------------------------------------------------------------------------------------------------
Total utility plant 545,260 529,139 508,299 477,985
Accumulated provision for depreciation 198,228 178,888 161,531 144,232
- ----------------------------------------------------------------------------------------------------------------------------------
Total 347,032 350,251 346,768 333,753
Less property-related accumulated deferred income taxes 54,418 51,487 49,255 46,496
- ----------------------------------------------------------------------------------------------------------------------------------
Total 292,614 298,764 297,513 287,257
- ----------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 49 49 49 39
- ----------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 8,309 4,273 1,825 16,658
Receivables, net 14,300 15,714 14,419 13,806
Accrued unbilled revenues 4,501 3,889 - -
Fuel cost under recovery 6,881 1,838 - 787
Fossil fuel stock, at average cost 9,706 8,455 12,359 12,642
Materials and supplies, at average cost 8,723 8,471 7,630 6,844
Prepayments 585 1,240 2,786 978
- ----------------------------------------------------------------------------------------------------------------------------------
Total 53,005 43,880 39,019 51,715
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes - - - -
Miscellaneous 4,219 4,358 4,127 2,815
- ----------------------------------------------------------------------------------------------------------------------------------
Total 4,219 4,358 4,127 2,815
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $349,887 $347,051 $340,708 $341,826
==================================================================================================================================
</TABLE>
II-252B
<PAGE>
BALANCE SHEETS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 54,223 $ 54,223 $ 54,223
Paid-in capital 8,688 8,688 8,688
Additional minimum liability
for under-funded pension obligations - (132) (546)
Retained Earnings 109,373 105,033 99,216
- --------------------------------------------------------------------------------------------------------------------------------
Total common equity 172,284 167,812 161,581
Preferred stock 35,000 35,000 35,000
Preferred and preference stock subject to mandatory redemption - - -
Long-term debt 161,801 153,679 155,922
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 369,085 356,491 352,503
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 5,000 4,000 2,500
Preferred and preference stock due within one year - - -
Long-term debt due within one year 637 1,407 2,579
Accounts payable 16,575 11,362 8,991
Customer deposits 5,232 5,054 4,698
Fuel cost over recovery - 865 -
Taxes accrued 1,015 1,584 1,133
Interest accrued 5,275 6,331 6,830
Vacation pay accrued 2,038 1,916 1,823
Miscellaneous 7,470 5,870 8,282
- --------------------------------------------------------------------------------------------------------------------------------
Total 43,242 38,389 36,836
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 76,654 74,152 70,786
Accumulated deferred investment tax credits 13,271 13,934 14,637
Deferred credits related to income taxes 22,792 24,419 25,487
Deferred under-funded accrued benefit obligation - 2,123 3,022
Miscellaneous 17,251 15,154 15,034
- --------------------------------------------------------------------------------------------------------------------------------
Total 129,968 129,782 128,966
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 542,295 $ 524,662 $ 518,305
================================================================================================================================
</TABLE>
II-253
<PAGE>
BALANCE SHEETS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 54,223 $ 54,223 $ 54,223 $ 54,223
Paid-in capital 8,688 8,688 8,665 8,665
Additional minimum liability
for under-funded pension obligations (2,121) - - -
Retained Earnings 93,479 95,465 96,953 94,923
- ---------------------------------------------------------------------------------------------------------------------------------
Total common equity 154,269 158,376 159,841 157,811
Preferred stock 35,000 20,000 20,000 20,000
Preferred and preference stock subject to mandatory redemption - - - -
Long-term debt 151,338 110,767 119,280 112,377
- ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 340,607 289,143 299,121 290,188
- ---------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks 3,000 7,500 - 1,500
Preferred and preference stock due within one year - - - -
Long-term debt due within one year 4,499 1,319 2,442 2,358
Accounts payable 30,442 11,179 10,176 8,786
Customer deposits 4,714 4,541 4,528 4,472
Fuel cost over recovery - - 1,603 -
Taxes accrued 1,529 3,016 724 1,387
Interest accrued 6,730 5,733 4,657 3,415
Vacation pay accrued 1,638 1,790 1,672 1,604
Miscellaneous 8,703 5,025 4,823 3,398
- ---------------------------------------------------------------------------------------------------------------------------------
Total 61,255 40,103 30,625 26,920
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 66,947 - - -
Accumulated deferred investment tax credits 15,301 15,964 16,628 17,292
Deferred credits related to income taxes 26,173 - - -
Deferred under-funded accrued benefit obligation 5,855 - - -
Miscellaneous 11,049 6,965 6,131 5,650
- ---------------------------------------------------------------------------------------------------------------------------------
Total 125,325 22,929 22,759 22,942
- ---------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $527,187 $352,175 $352,505 $340,050
=================================================================================================================================
</TABLE>
II-254A
<PAGE>
BALANCE SHEETS
Savannah Electric and Power Company
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
At December 31, 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 54,223 $ 54,223 $ 54,131 $ 53,174
Paid-in capital 8,665 8,665 8,353 7,623
Additional minimum liability
for under-funded pension obligations - - - -
Retained Earnings 90,849 85,995 73,723 62,336
- ---------------------------------------------------------------------------------------------------------------------------------
Total common equity 153,737 148,883 136,207 123,133
Preferred stock 22,300 22,300 2,300 2,300
Preferred and preference stock subject to mandatory redemption 2,884 3,075 9,665 10,256
Long-term debt 117,522 98,285 129,329 137,821
- ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amount due within one year) 296,443 272,543 277,501 273,510
- ---------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable to banks - - - -
Preferred and preference stock due within one year 190 6,590 553 550
Long-term debt due within one year 7,091 23,217 8,956 14,836
Accounts payable 9,078 7,950 9,427 10,329
Customer deposits 4,296 3,983 3,729 3,403
Fuel cost over recovery - - 599 -
Taxes accrued 1,749 1,899 3,713 4,834
Interest accrued 4,287 4,154 4,599 4,906
Vacation pay accrued 1,477 1,412 1,306 1,255
Miscellaneous 2,880 1,705 6,257 3,650
- ---------------------------------------------------------------------------------------------------------------------------------
Total 31,048 50,910 39,139 43,763
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes - - - -
Accumulated deferred investment tax credits 17,971 19,106 20,264 21,663
Deferred credits related to income taxes - - - -
Deferred under-funded accrued benefit obligation - - - -
Miscellaneous 4,425 4,492 3,804 2,890
- ---------------------------------------------------------------------------------------------------------------------------------
Total 22,396 23,598 24,068 24,553
- ---------------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $349,887 $347,051 $340,708 $341,826
=================================================================================================================================
</TABLE>
II-254B
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
OUTSTANDING SECURITIES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
First Mortgage Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1993 $ 20,000 6-3/8% $ 20,000 7/1/03
1992 30,000 8.30% 30,000 7/1/22
1993 25,000 7.40% 25,000 7/1/23
1995 15,000 7-7/8% 15,000 5/1/25
1996 20,000 6.90% 20,000 5/1/06
======== ========
$110,000 $110,000
======== ========
Pollution Control Bonds
Amount Interest Amount
Series Issued Rate Outstanding Maturity
- ------------------------------------------------------------------------------------------------
(Thousands) (Thousands)
1993 $ 4,085 Variable $ 4,085 1/1/16
1992 13,870 6-3/4% 13,870 2/1/22
======= =======
$17,955 $17,955
======= =======
Preferred Stock
Shares Dividend Amount
Series Outstanding Rate Outstanding
- ------------------------------------------------------------------------------------------------
(Thousands)
1993 1,400,000 6.64% $35,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECURITIES RETIRED DURING 1996
First Mortgage Bonds
Principal Interest
Series Amount Rate
- ------------------------------------------------------------------------------------------------
(Thousands)
1991 $29,400 9-3/8%
</TABLE>
II-255
<PAGE>
PART III
Items 10, 11, 12 and 13 for SOUTHERN are incorporated by reference to ELECTION
OF DIRECTORS in SOUTHERN's definitive Proxy Statement relating to the 1997
annual meeting of stockholders. The ages of directors and executive officers in
Item 10 set forth below are as of December 31, 1996.
Item 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANTS
ALABAMA
Identification of directors of ALABAMA.
Elmer B. Harris (1)
President and Chief Executive Officer
Age 57
Served as Director since 3-1-89
Bill M. Guthrie
Executive Vice President
Age 63
Served as Director since 12-16-88
Whit Armstrong (2)
Age 49
Served as Director since 9-24-82
A. W. Dahlberg (2)
Age 56
Served as Director since 4-22-94
Peter V. Gregerson, Sr. (2)
Age 68
Served as Director since 10-22-93
Carl E. Jones, Jr. (2)
Age 56
Served as Director since 4-22-88
Wallace D. Malone, Jr. (2)
Age 60
Served as Director since 6-22-90
William V. Muse (2)
Age 57
Served as Director since 2-26-93
John T. Porter (2)
Age 65
Served as Director since 10-22-93
Gerald H. Powell (2)
Age 70
Served as Director since 2-28-86
Robert D. Powers (2)
Age 46
Served as Director since 1-24-92
John W. Rouse (2)
Age 59
Served as Director since 4-22-88
William J. Rushton, III (2)
Age 67
Served as Director since 9-18-70
James H. Sanford (2)
Age 52
Served as Director since 8-1-83
John C. Webb, IV (2)
Age 54
Served as Director since 4-22-77
John W. Woods (2)
Age 65
Served as Director since 4-20-73
(1) Previously served as Director of ALABAMA from 1980 to 1985.
(2) No position other than Director.
Each of the above is currently a director of ALABAMA, serving a term
running from the last annual meeting of ALABAMA's stockholder (April 26, 1996)
for one year until the next annual meeting or until a successor is elected and
qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as a director or nominee, other than any arrangements or understandings with
directors or officers of ALABAMA acting solely in their capacities as such.
III-1
<PAGE>
Identification of executive officers of ALABAMA.
Elmer B. Harris (1)
President, Chief Executive Officer and Director
Age 57
Served as Executive Officer since 3-1-89
Banks H. Farris
Executive Vice President
Age 61
Served as Executive Officer since 12-3-91
William B. Hutchins, III
Executive Vice President and Chief Financial Officer
Age 53
Served as Executive Officer since 12-3-91
Charles D. McCrary
Executive Vice President
Age 45
Served as Executive Officer since 1-1-91
(1) Previously served as executive officer of ALABAMA from 1979 to 1985.
Each of the above is currently an executive officer of ALABAMA, serving a
term running from the last annual meeting of the directors (April 26, 1996) for
one year until the next annual meeting or until his successor is elected and
qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
ALABAMA acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
Elmer B. Harris - Elected in 1989; Chief Executive Officer. Director of
SOUTHERN and AmSouth Bancorporation.
Bill M. Guthrie - Elected in 1988; also served since 1991 as Chief Production
Officer of the SOUTHERN system and from 1991 to 1994 as Executive Vice President
and Chief Production Officer of SCS. Elected Senior Executive Vice President and
Chief Production Officer of SCS effective 1994. Also serves as Vice President of
SOUTHERN, GULF, MISSISSIPPI and SAVANNAH and Executive Vice President of
GEORGIA. Responsible primarily for providing overall management of materials
management, fuel services, operating and planning services, fossil, hydro and
bulk power operations of the Southern electric system.
Whit Armstrong - President, Chairman and Chief Executive Officer of The
Citizens Bank, Enterprise, Alabama. Also, President and Chairman of the Board
of Enterprise Capital Corporation, Inc. Director of Enstar Group, Inc.
A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN
since 1995. He previously served as President of SOUTHERN from 1994 to 1995
and President and Chief Executive Officer of GEORGIA from 1988 through 1993.
Director of SOUTHERN, GEORGIA, Equifax, Inc., Protective Life Corporation and
SunTrust Banks, Inc.
Peter V. Gregerson, Sr. - Chairman Emeritus of Gregerson's Foods, Inc. (retail
groceries), Gadsden, Alabama.
Carl E. Jones, Jr. - President and Chief Operating Officer of Regions Bank,
Birmingham, Alabama. President of the Southern Region, Regions Financial
Corporation. He previously served as Chairman and Chief Executive Officer of
Regions Bank (formerly First Alabama Bank), Mobile, Alabama.
Wallace D. Malone, Jr. - Chairman and Chief Executive Officer of SouthTrust
Corporation, bank holding company, Birmingham, Alabama. Director of American
Cast Iron Pipe Company.
III-2
<PAGE>
William V. Muse - President of Auburn University. Director of SouthTrust
Corporation and American Cast Iron Pipe Company.
John T. Porter - Pastor of Sixth Avenue Baptist Church, Birmingham, Alabama.
Director of Citizen Federal Bank.
Gerald H. Powell - President, Dixie Clay Company of Alabama, Inc. (refractory
clay producer), Jacksonville, Alabama.
Robert D. Powers - President and Director, The Eufaula Agency, Inc. (real
estate and insurance), Eufaula, Alabama.
John W. Rouse - President and Chief Executive Officer of Southern Research
Institute (non-profit research institute), Birmingham, Alabama. Director of
Protective Life Corporation.
William J. Rushton, III - Chairman Emeritus of the Board, Protective Life
Corporation (insurance holding company), Birmingham, Alabama. Director of
SOUTHERN.
James H. Sanford - Chairman, HOME Place Farms Inc. (diversified farmers and
ginners), Prattville, Alabama. Chairman of the Board, Sylvest Farms of
Georgia, Inc., College Park, Georgia. Chairman of the Board, Sylvest Poultry
Inc., Montgomery, Alabama.
John C. Webb, IV - President, Webb Lumber Company, Inc. (wholesale lumber and
wood products sales), Demopolis, Alabama. Director, J. F. Suttle, Co.
John W. Woods - Director of Protective Life Corporation and McWane, Inc. During
1996, he served as Chairman of AmSouth Bancorporation and Chairman of AmSouth
Bank of Alabama.
Banks H. Farris - Elected in 1991; responsible primarily for providing the
overall management of human resources, information resources, power delivery and
marketing departments, customer service centers and the six geographic
divisions. He previously served as Senior Vice President from 1991 to 1994.
William B. Hutchins, III - Elected in 1991; Chief Financial Officer, responsible
primarily for providing the overall management of accounting and financial
planning activities. He previously served as Senior Vice President and Chief
Financial Officer from 1991 to 1994.
Charles D. McCrary - Elected in 1991; responsible for the external relations
department, public relations and corporate services. He previously served as
Senior Vice President from 1991 to 1994.
Involvement in certain legal proceedings.
None.
III-3
<PAGE>
GEORGIA
Identification of directors of GEORGIA.
H. Allen Franklin
President and Chief Executive Officer
Age 52
Served as Director since 1-1-94
Warren Y. Jobe
Executive Vice President, Treasurer and
Chief Financial Officer
Age 56
Served as Director since 8-1-82
Bennett A. Brown (1)
Age 67
Served as Director since 5-15-80
A. W. Dahlberg (1)
Age 56
Served as Director since 6-1-88
William A. Fickling, Jr. (1)
Age 64
Served as Director since 4-18-73
L. G. Hardman III (1)
Age 57
Served as Director since 6-25-79
James R. Lientz, Jr. (1)
Age 53
Served as Director since 7-21-93
William A. Parker, Jr. (1)
Age 69
Served as Director since 5-19-65
G. Joseph Prendergast (1)
Age 51
Served as Director since 1-20-93
Herman J. Russell (1)
Age 66
Served as Director since 5-18-88
Gloria M. Shatto (1)
Age 65
Served as Director since 2-20-80
William Jerry Vereen (1)
Age 56
Served as Director since 5-18-88
Carl Ware (1) (2)
Age 53
Served as Director since 2-15-95
Thomas R. Williams (1)
Age 68
Served as Director since 3-17-82
(1) No position other than Director.
(2) Previously served as Director of GEORGIA
from 1980 to 1991.
Each of the above is currently a director of GEORGIA, serving a term running
from the last annual meeting of GEORGIA's stockholder (May 15, 1996) for one
year until the next annual meeting or until a successor is elected and
qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he/she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of GEORGIA acting solely in their capacities as such.
Identification of executive officers of GEORGIA.
H. Allen Franklin
President, Chief Executive Officer and Director
Age 52
Served as Executive Officer since 1-1-94
Warren Y. Jobe
Executive Vice President, Treasurer, Chief Financial Officer and Director
Age 56
Served as Executive Officer since 5-19-82
William C. Archer, III
Executive Vice President - External Affairs
Age 48
Served as Executive Officer since 4-6-95
III-4
<PAGE>
W. G. Hairston, III
Executive Vice President - Nuclear
Age 52
Served as Executive Officer since 6-1-93
Gene R. Hodges
Executive Vice President - Customer Operations
Age 58
Served as Executive Officer since 11-19-86
William P. Bowers
Senior Vice President - Marketing
Age 40
Served as Executive Officer since 9-22-95
Wayne T. Dahlke
Senior Vice President - Power Delivery
Age 55
Served as Executive Officer since 4-19-89
James K. Davis
Senior Vice President - Corporate Relations
Age 56
Served as Executive Officer since 10-1-93
Robert H. Haubein
Senior Vice President - Fossil/Hydro Power
Age 56
Served as Executive Officer since 2-19-92
Fred D. Williams
Senior Vice President - Wholesale Power Marketing
Age 52
Served as Executive Officer since 11-18-92
Each of the above is currently an executive officer of GEORGIA, serving a
term running from the last annual meeting of the directors (May 15, 1996) for
one year until the next annual meeting or until his successor is elected and
qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
GEORGIA acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
H. Allen Franklin - President and Chief Executive Officer since 1994. He
previously served as President and Chief Executive Officer of SCS from 1988
through 1993. Director of SOUTHERN and SouthTrust Corporation.
Warren Y. Jobe - Executive Vice President and Chief Financial Officer since 1982
and Treasurer since 1992. Responsible for financial and accounting operations
and planning, internal auditing, procurement, corporate services, corporate
secretary and treasury operations.
Bennett A. Brown - Retired as Chairman of the Board of NationsBank on December
31, 1992. Previously Chairman of the Board and Chief Executive Officer of
C&S/Sovran Corporation. Director of Cousins Properties.
A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN
since 1995. He previously served as President of SOUTHERN from 1994 to 1995
and President and Chief Executive Officer of GEORGIA from 1988 through 1993.
Director of SOUTHERN, ALABAMA, Equifax, Inc., Protective Life Corporation and
SunTrust Banks, Inc.
William A. Fickling, Jr. - Chairman of the Board, Chief Executive Officer and
President of Beech Street Corporation (provider of managed care services).
L. G. Hardman III - Chairman of the Board of The First National Bank of
Commerce, Georgia and Chairman of the Board and Chief Executive Officer of
First Commerce Bancorp, Inc. Chairman of the Board, President and Treasurer
of Harmony Grove Mills, Inc. (real estate investments). Director of SOUTHERN.
James R. Lientz, Jr. - President of NationsBank of Georgia since 1993. He
previously served as President and Chief Executive Officer of former Citizens
& Southern Bank of South Carolina (now NationsBank) from 1990 to 1993.
III-5
<PAGE>
William A. Parker, Jr. - Chairman of the Board, Seminole Investment Co., L.L.C.
(private investments), Atlanta, Georgia. Director of SOUTHERN, Genuine Parts
Company, Atlantic Investment Company, Post Properties, Inc. and Haverty
Furniture Companies, Inc.
G. Joseph Prendergast - Chairman, Wachovia Bank of Georgia, N.A. since 1994.
Chairman, Wachovia Bank of South Carolina, and Director, Wachovia Bank of
North Carolina. He previously served as President and Chief Executive Officer,
Wachovia Corporation of Georgia and Wachovia Bank of Georgia, N.A. from 1993 to
1994 and from 1988 to 1993 as Executive Vice President of Wachovia
Corporation of Georgia and President of Wachovia Corporate Services, Inc.
Herman J. Russell - Chairman of the Board,
H. J. Russell & Company (construction), Atlanta, Georgia. Chairman of the
Board, Citizens Trust Bank, and Citizens Bancshares Corporation Atlanta,
Georgia. Director of Wachovia Corporation and National Service Industries.
Member of Board of Trustees, First Union Real Estate Equity and Mortgage
Investments.
Gloria M. Shatto - President, Berry College, Mount Berry, Georgia. Director of
SOUTHERN, Becton Dickinson & Company and Texas Instruments, Inc.
William Jerry Vereen - President, Treasurer and Chief Executive Officer of
Riverside Manufacturing Company (manufacture and sale of uniforms), Moultrie,
Georgia. Director of Gerber Scientific, Inc., Textile Clothing Technology Group
and Blue Cross/Blue Shield of Georgia.
Carl Ware - President, Africa Group, Coca-Cola International since 1991.
Thomas R. Williams - President of The Wales Group, Inc. (investments), Atlanta,
Georgia. Director of ConAgra, Inc., BellSouth Corporation, National Life
Insurance Company of Vermont, AppleSouth, Inc., American Software, Inc. and The
Fidelity Group of Funds.
William C. Archer, III - Executive Vice President - External Affairs since
September 1995. Senior Vice President - External Affairs from April 1995 to
September 1995. Vice President - Human Resources for SCS from 1992 to 1995. Vice
President - Northern Region from March 1992 to August 1992 and Vice President -
Metro Region from 1990 to March 1992.
W. G. Hairston, III - Executive Vice President - Nuclear since 1993. Also, he
has served as President and Chief Operating Officer of Southern Nuclear since
May 1993 and Chief Executive Officer since December 1993. Executive Vice
President of Southern Nuclear from 1992 to 1993 and Senior Vice President of
Southern Nuclear from 1990 to 1992.
Gene R. Hodges - Executive Vice President - Customer Operations, Power Delivery
and Safety. Senior Vice President - Region/Land Operations from 1990 to 1992.
William P. Bowers - Senior Vice President - Marketing since 1995. Vice
President - Retail Sales and Service from 1992 to 1995 and Vice President -
Marketing from 1990 to 1992.
Wayne T. Dahlke - Senior Vice President - Power Delivery since 1992. Senior
Vice President - Marketing from 1989 to 1992.
James K. Davis - Senior Vice President - Corporate Relations since 1993. Vice
President of Corporate Relations from 1988 to 1993.
Robert H. Haubein - Senior Vice President - Fossil/ Hydro Power since 1994.
Senior Vice President - Administrative Services from 1992 to 1994 and Vice
President - Northern Region from 1990 to 1992.
Fred D. Williams - Senior Vice President - Wholesale Power Marketing since
August 1995. Senior Vice President - Bulk Power Markets from 1992 to August
1995. Vice President - Bulk Power Markets from 1984 to 1992. In addition, he was
elected Senior Vice President - Wholesale Power Marketing of SCS in 1995 and
Senior Vice President of ALABAMA in February 1996
Involvement in certain legal proceedings.
None.
III-6
<PAGE>
GULF
Identification of directors of GULF.
Travis J. Bowden
President and Chief Executive Officer
Age 58
Served as Director since 2-1-94
Paul J. DeNicola (1)
Age 48
Served as Director since 4-19-91
Fred C. Donovan (1)
Age 56
Served as Director since 1-18-91
W. Deck Hull, Jr. (1)
Age 64
Served as Director since 10-14-83
Joseph K. Tannehill (1)
Age 63
Served as Director since 7-19-85
Barbara H. Thames (1)
Age 56
Served as Director since 2-28-97
(1) No position other than Director.
Each of the above is currently a director of GULF, serving a term running
from the last annual meeting of GULF's stockholder (June 25, 1996) for one year
until the next annual meeting or until a successor is elected and qualified,
except for Ms. Thames whose election was effective on the date indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as a director or nominee, other than any arrangements or understandings with
directors or officers of GULF acting solely in their capacities as such.
Identification of executive officers of GULF.
Travis J. Bowden
President, Chief Executive Officer and Director
Age 58
Served as Executive Officer since 2-1-94
Francis M. Fisher, Jr.
Vice President - Power Delivery and Customer Operations
Age 48
Served as Executive Officer since 5-19-89
John E. Hodges, Jr.
Vice President - Marketing and Employee/External Affairs
Age 53
Served as Executive Officer since 5-19-89
G. Edison Holland, Jr.
Vice President - Power Generation/Transmission and Corporate Counsel
Age 44
Served as Executive Officer since 4-25-92
Arlan E. Scarbrough
Vice President - Finance
Age 60
Served as Executive Officer since 9-21-77
Each of the above is currently an executive officer of GULF, serving a term
running from the last annual meeting of the directors (July 26, 1996) for one
year until the next annual meeting or until his successor is elected and
qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
GULF acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
III-7
<PAGE>
Business experience.
Travis J. Bowden - Elected President effective February 1994 and, effective May
1994, Chief Executive Officer. He previously served as Executive Vice President
of ALABAMA from 1985 to 1994.
Paul J. DeNicola - President and Chief Executive Officer of SCS since 1994. He
previously served as Executive Vice President of SCS from 1991 through 1993.
Director of SOUTHERN, MISSISSIPPI and SAVANNAH.
Fred C. Donovan - President of Baskerville - Donovan, Inc., Pensacola, Florida,
an architectural and engineering firm. Director of Baptist Health Care, Inc.
W. Deck Hull, Jr. - Vice Chairman of the SunTrust Bank, West Florida, Panama
City, Florida. He previously served as President and Chief Executive Officer
and Director of the Sun Commercial Bank, Panama City, Florida from 1989 to 1992.
Joseph K. Tannehill - President and Chief Executive Officer of Merrick
International Industries, Lynn Haven, Florida. Director of Florida First Bank,
Panama City, Florida.
Barbara H. Thames - Chief Executive Officer of Santa Rosa Medical Center,
Milton, Florida since 1991.
Francis M. Fisher, Jr. - Elected Vice President - Employee and External
Relations in 1989 and, effective August 1996, Vice President - Power Delivery
and Customer Operations.
John E. Hodges, Jr. - Elected Vice President - Customer Operations in 1989 and,
effective August 1996, Vice President - Marketing and Employee/External
Affairs. Director of Barnett Bank of West Florida, Pensacola, Florida.
G. Edison Holland, Jr. - Elected Vice President and Corporate Counsel in 1992
and Vice President - Power Generation/Transmission and Corporate Counsel in
1995; responsible for generation and transmission of electric energy, all legal
matters associated with GULF and serves as compliance officer. Also serves,
since 1982, as a partner in the law firm, Beggs & Lane.
Arlan E. Scarbrough - Elected Vice President - Finance in 1980; responsible for
all accounting and financial services of GULF.
Involvement in certain legal proceedings.
None.
III-8
<PAGE>
MISSISSIPPI
Identification of directors of MISSISSIPPI.
Dwight H. Evans
President and Chief Executive Officer
Age 48
Served as Director since 3-27-95
Paul J. DeNicola (1)
Age 48
Served as Director since 5-1-89
Edwin E. Downer (1)
Age 65
Served as Director since 4-24-84
Robert S. Gaddis (1)
Age 65
Served as Director since 1-21-86
Walter H. Hurt, III (1)
Age 61
Served as Director since 4-6-82
Aubrey K. Lucas (1)
Age 62
Served as Director since 4-24-84
George A. Schloegel (1)
Age 56
Served as Director since 7-26-95
Philip J. Terrell (1)
Age 43
Served as Director since 2-22-95
N. Eugene Warr (1)
Age 61
Served as Director since 1-21-86
(1) No position other than Director.
Each of the above is currently a director of MISSISSIPPI, serving a term
running from the last annual meeting of MISSISSIPPI's stockholder (April 2,
1996) for one year until the next annual meeting or until his successor is
elected and qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he or she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of MISSISSIPPI acting solely in their capacities as
such.
Identification of executive officers of MISSISSIPPI.
Dwight H. Evans
President, Chief Executive Officer and Director
Age 48
Served as Executive Officer since 3-27-95
H. E. Blakeslee
Vice President - Customer Services and Marketing
Age 56
Served as Executive Officer since 1-25-84
F. D. Kuester (1)
Vice President - Power Generation and Delivery
Age 46
Served as Executive Officer since 3-28-94
Don E. Mason
Vice President - External Affairs and Corporate Services
Age 55
Served as Executive Officer since 7-27-83
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
Age 44
Served as Executive Officer since 1-1-95
(1) Resigned effective March 1, 1997, to assume the position of Director -
Commercial of SOUTHERN's Hong Kong-based affiliate, Consolidated Electric
Power Asia.
Each of the above, except for Mr. Kuester, is currently an executive officer
of MISSISSIPPI, serving a term running from the last annual meeting of the
directors (April 24, 1996) for one year until the next annual meeting or until
his successor is elected and qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
MISSISSIPPI acting solely in their capacities as such.
Identification of certain significant employees.
None.
III-9
<PAGE>
Family relationships.
None.
Business experience.
Dwight H. Evans - President and Chief Executive Officer since 1995. He
previously served as Executive Vice President of GEORGIA from 1989 to 1995.
Paul J. DeNicola - President and Chief Executive Officer of SCS effective 1994.
Executive Vice President of SCS from 1991 through 1993. Director of SOUTHERN,
SAVANNAH and GULF.
Edwin E. Downer - Business consultant specializing in economic analysis,
management controls and procedural studies.
Robert S. Gaddis - Chairman of the Advisory Board of Trustmark National Bank,
Laurel, Mississippi.
Walter H. Hurt, III - President and Director of NPC Inc. (Investments). Vicar,
All Saints Church, Inverness, Mississippi, and St. Thomas Church, Belzoni,
Mississippi. Retired newspaper editor and publisher.
Aubrey K. Lucas - President Emeritus and Distinguished Professor of Higher
Education at the University of Southern Mississippi, Hattiesburg, Mississippi.
George A. Schloegel - President of Hancock Bank and Hancock Bank Securities
Corporation. Vice Chairman of Hancock Holding Company. Director of Hancock
Bank - Mississippi and Hancock Bank - Louisiana.
Philip J. Terrell - Superintendent of Pass Christian Public School District and
adjunct professor at William Carey College.
N. Eugene Warr - Retailer (Biloxi and Gulfport, Mississippi). Director of
Coast Community Bank, formerly SouthTrust Bank of Mississippi, Biloxi,
Mississippi.
H. E. Blakeslee - Elected Vice President in 1984. Primarily responsible for
retail marketing, rates and wholesale marketing, division operations, the
customer service center and distribution services.
F. D. Kuester - Elected Vice President in 1994.
Primarily responsible for generating plants, environmental quality, fuel
services, power generation technical services, transmission, system planning,
bulk power contracts, system operations and control, system protection and real
estate. He previously served as Manager of Business and New Project
Design/Development of SCS from 1993 to 1994 and Vice President of SCS from 1990
to 1993.
Don E. Mason - Elected Vice President in 1983. Primarily responsible for
external affairs, corporate communications, security, risk management, economic
development and general services, as well as the human resources function.
Michael W. Southern - Elected Vice President, Secretary, Treasurer and Chief
Financial Officer in 1995. Primarily responsible for accounting,
secretary/treasury, corporate planning, procurement and information resources.
He previously served as Director of Corporate Finance of SCS from 1994 to 1995
and Director of Financial Planning of SCS from 1990 to 1994.
Involvement in certain legal proceedings.
None.
III-10
<PAGE>
SAVANNAH
Identification of directors of SAVANNAH.
Arthur M. Gignilliat, Jr.
President and Chief Executive Officer
Age 64
Served as Director since 9-1-82
Helen Quattlebaum Artley (1)
Age 69
Served as Director since 5-17-77
Archie H. Davis (1)
Age 55
Served as Director since 2-18-97
Paul J. DeNicola (1)
Age 48
Served as Director since 3-14-91
Walter D. Gnann (1)
Age 61
Served as Director since 5-17-83
Robert B. Miller, III (1)
Age 51
Served as Director since 5-17-83
Arnold M. Tenenbaum (1)
Age 60
Served as Director since 5-17-77
Frederick F. Williams, Jr. (1)
Age 69
Served as Director since 7-2-75
(1) No Position other than Director.
Each of the above is currently a director of SAVANNAH, serving a term
running from the last annual meeting of SAVANNAH's stockholder (May 21, 1996)
for one year until the next annual meeting or until a successor is elected and
qualified, except for Mr. Davis whose election was effective on the date
indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he/she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of SAVANNAH acting solely in their capacities as
such.
Identification of executive officers of SAVANNAH.
Arthur M. Gignilliat, Jr.
President, Chief Executive Officer and Director
Age 64
Served as Executive Officer since 2-15-72
W. Miles Greer
Vice President - Marketing and Customer Services
Age 53
Served as Executive Officer since 11-20-85
Larry M. Porter
Vice President - Operations
Age 51
Served as Executive Officer since 7-1-91
Kirby R. Willis
Vice President, Treasurer and Chief Financial Officer
Age 45
Served as Executive Officer since 1-1-94
Each of the above is currently an executive officer of SAVANNAH, serving a
term running from the last annual meeting of the directors (July 16, 1996) for
one year until the next annual meeting or until his successor is elected and
qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
SAVANNAH acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
Arthur M. Gignilliat, Jr. - Elected President and Chief Executive Officer in
1984. Director of Savannah Foods and Industries, Inc.
Helen Quattlebaum Artley - Homemaker and Civic Worker.
III-11
<PAGE>
Archie H. Davis - President and Chief Executive Officer of The Savannah Bank,
Savannah, Georgia. Previously served as President of C&S in Savannah, Georgia.
Chairman of the Board of Candler Health Services. Member of the Board of
Directors of Thomaston Mills, Thomaston, Georgia.
Paul J. DeNicola - President and Chief Executive Officer of SCS since 1994.
Executive Vice President of SCS from 1991 through 1993. Director of SOUTHERN,
GULF and MISSISSIPPI.
Walter D. Gnann - President of Walt's TV, Appliance and Furniture Co., Inc.,
Springfield, Georgia. Past Chairman of the Development Authority of Effingham
County, Georgia.
Robert B. Miller, III - President of American Building Systems, Inc.
Arnold M. Tenenbaum - President and Director of Chatham Steel Corporation.
Director of First Union National Bank of Georgia and
Savannah Foods and Industries, Inc.
Frederick F. Williams, Jr. - Retired Partner and Consultant, Hilb, Rogal and
Hamilton Employee Benefits, Incorporated (Insurance Brokers), formerly Jones,
Hill & Mercer.
W. Miles Greer - Vice President - Marketing and Customer Services effective
1994. Formerly served as Vice President - Economic Development and Corporate
Services from 1989 through 1993.
Larry M. Porter - Vice President - Operations since 1991. Responsible for
managing the areas of fuel procurement, power production, transmission and
distribution, engineering and system operation.
Kirby R. Willis - Vice President, Treasurer and Chief Financial Officer since
1994. Responsible primarily for all accounting, financial, information
resources, labor relations, corporate services, environmental and safety
activities. He previously served as Treasurer, Controller and Assistant
Secretary from 1991 to 1993.
Involvement in certain legal proceedings.
None.
III-12
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Tables. The following tables set forth information
concerning any Chief Executive Officer and the four most highly compensated
executive officers whose total annual salary and bonus exceeded $100,000 during
1996 for each of the operating affiliates (ALABAMA, GEORGIA, GULF, MISSISSIPPI
and SAVANNAH).
Key terms used in this Item will have the following meanings:-
<TABLE>
<CAPTION>
<S> <C>
AME.........................................Above-market earnings on deferred compensation
ESP.........................................Employee Savings Plan
ESOP........................................Employee Stock Ownership Plan
SBP.........................................Supplemental Benefit Plan
ERISA.......................................Employee Retirement Income Security Act
</TABLE>
<TABLE>
<CAPTION>
ALABAMA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Elmer B. Harris
President,
Chief Executive 1996 480,310 72,697 7,112 31,608 439,508 25,068
Officer, 1995 458,940 74,204 5,956 32,170 494,447 26,058
Director 1994 436,280 96,711 13,882 31,441 236,642 24,467
Banks H. Farris 1996 235,255 32,390 7,829 9,730 155,313 12,161
Executive Vice 1995 221,405 76,182 4,239 9,856 174,727 11,889
President 1994 203,508 38,828 52,567 8,331 41,134 9,864
Charles D. McCrary 1996 215,762 29,906 3,198 8,984 126,075 11,530
Executive Vice 1995 206,400 69,380 2,549 9,188 141,834 11,071
President 1994 189,718 35,459 4,254 7,767 38,195 10,260
</TABLE>
See next page for footnotes.
III-13
<PAGE>
<TABLE>
<CAPTION>
ALABAMA
SUMMARY COMPENSATION TABLE
(Continued)
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William B.
Hutchins, III
Executive Vice
President, 1996 209,213 28,806 3,029 8,654 115,169 10,853
Chief Financial 1995 199,164 69,841 1,180 8,850 129,565 11,088
Officer 1994 184,995 26,993 1,289 7,551 35,138 9,650
1 Tax reimbursement by ALABAMA and certain personal benefits, including membership fee of $44,014 for Mr. Farris in
1994.
2 Payouts made in 1995, 1996 and 1997 for the four-year performance periods ending December 31, 1994, 1995 and 1996,
respectively.
3 ALABAMA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under
which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:-
Name ESP ESOP SBP
Elmer B. Harris $6,750 $1,127 $17,191
Banks H. Farris 6,750 1,127 4,284
Charles D. McCrary 6,750 1,127 3,653
William B. Hutchins, III 6,750 1,127 2,976
</TABLE>
III-14
<PAGE>
<TABLE>
<CAPTION>
GEORGIA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Allen Franklin
President, 1996 482,658 73,260 10,992 31,853 498,688 27,334
Chief Executive 1995 456,366 82,935 3,936 31,960 561,024 25,493
Officer, Director 1994 415,954 87,763 30,078 31,386 203,201 100,201
William G.
Hairston, III 1996 308,789 46,748 3,555 15,583 257,040 17,070
Executive 1995 296,988 47,489 6,020 15,785 289,170 16,442
Vice President 1994 287,831 44,521 3,225 15,725 81,662 14,593
Warren Y. Jobe
Executive
Vice President,
Treasurer, 1996 227,496 26,749 4,308 9,404 126,075 12,476
Chief Financial 1995 220,152 31,000 1,994 9,710 141,834 12,248
Officer, Director 1994 215,809 27,579 2,744 8,610 56,635 11,736
Gene R. Hodges 1996 221,708 26,209 1,783 9,214 126,075 12,193
Executive 1995 214,502 32,000 1,978 9,514 141,834 11,160
Vice President 1994 204,190 27,579 4,601 8,196 52,188 11,093
Robert H.
Haubein, Jr. 1996 211,010 29,681 2,081 8,757 115,169 11,740
Senior Vice 1995 199,759 34,000 1,623 8,871 129,565 10,825
President 1994 184,470 32,391 3,115 7,165 34,836 9,924
1 Tax reimbursement by GEORGIA on certain personal benefits.
2 Payouts made in 1995, 1996 and 1997 for the four-year performance periods ending December 31, 1994,
1995 and 1996, respectively.
3 GEORGIA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan
under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for
the following:-
Name ESP ESOP SBP
H. Allen Franklin $6,750 $1,127 $19,457
William G. Hairston, III 6,750 1,127 9,193
Warren Y. Jobe 6,750 1,127 4,599
Gene R. Hodges 6,750 1,127 4,316
Robert H. Haubein, Jr. 7,031 1,127 3,582
</TABLE>
III-15
<PAGE>
<TABLE>
<CAPTION>
GULF
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Travis J. Bowden
President, 1996 297,685 29,950 1,560 14,975 207,322 14,950
Chief Executive 1995 289,749 29,077 4,663 15,464 233,237 16,679
Officer, Director 1994 282,513 42,849 42,015 15,134 86,730 115,241
G. Edison
Holland, Jr. 1996 184,359 18,584 2,969 7,677 91,977 9,940
Vice President, 1995 177,682 16,718 2,463 7,851 103,474 9,491
Corporate Counsel 1994 172,092 21,352 1,512 6,893 18,888 9,307
Arlan E. Scarbrough 1996 173,719 17,512 1,514 7,234 84,047 9,420
Vice President 1995 167,568 16,718 722 7,398 94,553 8,556
1994 163,548 19,511 1,185 - 25,889 8,612
John E. Hodges, Jr. 1996 171,688 17,297 1,415 7,145 91,977 9,405
Vice President 1995 164,738 16,718 2,272 7,307 103,474 9,040
1994 156,831 21,352 1,999 5,455 37,776 8,733
Francis M.
Fisher, Jr. 1996 151,236 15,352 459 5,674 84,047 8,177
Vice President 1995 141,389 16,718 510 5,603 94,553 7,694
1994 135,307 17,812 586 - 23,635 5,576
1 Tax reimbursement by GULF on certain personal benefits.
2 Payouts made in 1995, 1996 and 1997 for the four-year performance periods ending December 31, 1994,
1995 and 1996, respectively.
3 GULF contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under
which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:-
Name ESP ESOP SBP
Travis J. Bowden $6,750 $1,127 $7,073
G. Edison Holland, Jr. 6,750 1,127 2,063
Arlan E. Scarbrough 6,703 1,127 1,590
John E. Hodges, Jr. 6,750 1,127 1,528
Francis M. Fisher, Jr. 6,681 1,127 369
</TABLE>
III-16
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dwight H. Evans
President, Chief 1996 253,006 35,923 3,519 12,830 126,075 13,824
Executive 1995 233,069 42,965 2,746 10,486 141,834 34,139
Officer, Director 1994 215,887 35,459 2,318 8,610 56,635 11,812
H. E. Blakeslee 1996 190,429 25,664 224 7,572 91,977 9,885
Vice President 1995 168,651 29,358 952 7,598 103,474 9,161
1994 156,204 23,808 1,055 5,509 37,776 8,494
Don E. Mason 1996 186,670 25,148 125 7,420 84,047 9,587
Vice President 1995 163,901 29,358 794 7,445 94,553 8,830
1994 150,162 22,069 686 - 25,889 8,080
Michael W. Southern4
Vice President,
Chief Financial 1996 155,027 20,740 2,841 5,475 65,768 7,865
Officer, Secretary, 1995 133,505 24,467 344 4,847 73,989 19,806
Treasurer 1994 - - - - - -
Frederick D. 1996 152,134 20,447 505 5,398 65,768 7,776
Kuester 1995 136,723 24,467 714 4,779 73,989 7,300
Vice President 1994 127,590 16,481 1,781 - 16,588 19,121
1 Tax reimbursement by MISSISSIPPI on certain personal benefits.
2 Payouts made in 1995, 1996 and 1997 for the four-year performance periods ending December 31, 1994,
1995 and 1996, respectively.
3 MISSISSIPPI contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan
under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the
following:-
Name ESP ESOP SBP
Dwight H. Evans $6,750 $1,127 $5,947
H. E. Blakeslee 6,750 1,127 2,008
Don E. Mason 6,750 1,127 1,710
Michael W. Southern 6,590 1,127 148
Frederick D. Kuester 6,500 1,127 149
In 1994, Mr. Evans and Mr. Southern received a one-time lump-sum payment of $22,102 and $12,440, respectively, given in
connection with their appointment to their current positions.
4 Mr. Southern was named an executive officer effective January 1, 1995.
</TABLE>
III-17
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arthur M.
Gignilliat, Jr.
President, 1996 218,208 26,371 1,104 9,077 151,382 25,705
Chief Executive 1995 211,385 31,847 492 9,327 170,305 21,323
Officer, Director 1994 206,964 37,384 194 8,253 76,164 18,617
Larry M. Porter 1996 138,931 16,740 421 4,560 65,768 9,814
Vice President 1995 134,687 18,100 256 4,701 73,989 8,718
1994 130,619 15,249 198 - 15,070 7,561
W. Miles Greer 1996 131,203 16,225 322 4,261 60,636 9,631
Vice President 1995 125,891 18,225 355 4,393 68,215 8,376
1994 122,153 14,050 198 - 14,527 7,642
Kirby R. Willis
Vice President, 1996 122,110 15,505 674 3,924 60,636 8,765
Chief Financial 1995 115,632 18,225 256 4,038 68,215 7,444
Officer, Treasurer 1994 111,653 14,207 46 - 8,257 6,840
1 Tax reimbursement by SAVANNAH on certain personal benefits.
2 Payouts made in 1995, 1996 and 1997 for the four-year performance periods ending December 31, 1994, 1995
and 1996, respectively.
3 SAVANNAH contributions to the ESP, under Section 401(k) of the Internal Revenue Code, ESOP, and AME for
the following:-
Name ESP ESOP AME
Arthur M. Gignilliat $6,750 $1,127 $17,828
Larry M. Porter 5,359 1,127 3,328
W. Miles Greer 5,039 1,127 3,465
Kirby R. Willis 5,292 1,038 2,435
</TABLE>
III-18
<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1996
Stock Option Grants. The following table sets forth all stock option grants to
the named executive officers of each operating subsidiary during the year ending
December 31, 1996.
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
------------------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C> <C>
Elmer B. Harris 31,608 2.2 23.00 04/15/2006 115,369
Banks H. Farris 9,730 0.7 23.00 06/01/2003 34,444
Charles D. McCrary 8,984 0.6 23.00 04/15/2006 32,792
William B. Hutchins, III 8,654 0.6 23.00 04/15/2006 31,587
GEORGIA
H. Allen Franklin 31,853 2.2 23.00 04/15/2006 116,263
William G. Hairston, III 15,583 1.1 23.00 04/15/2006 56,878
Warren Y. Jobe 9,404 0.6 23.00 04/15/2006 34,325
Gene R. Hodges 9,214 0.6 23.00 04/15/2006 33,631
Robert H. Haubein, Jr. 8,757 0.6 23.00 04/15/2006 31,963
GULF
Travis J. Bowden 14,975 1.0 23.00 04/15/2006 54,659
G. Edison Holland, Jr. 7,677 0.5 23.00 04/15/2006 28,021
Arlan E. Scarbrough 7,234 0.5 23.00 11/01/2004 26,115
John E. Hodges, Jr. 7,145 0.5 23.00 04/15/2006 26,079
Francis M. Fisher, Jr. 5,674 0.4 23.00 04/15/2006 20,710
See next page for footnotes.
</TABLE>
III-19
<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1996
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
--------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C> <C>
Dwight H. Evans 12,830 0.9 23.00 04/15/2006 46,830
H. E. Blakeslee 7,572 0.5 23.00 04/15/2006 27,638
Don E. Mason 7,420 0.5 23.00 04/15/2006 27,083
Michael W. Southern 5,475 0.4 23.00 04/15/2006 19,984
Frederick D. Kuester 5,398 0.4 23.00 04/15/2006 19,703
SAVANNAH
Arthur M. Gignilliat, Jr. 9,077 0.6 23.00 09/03/2000 28,683
Larry M. Porter 4,560 0.3 23.00 04/15/2006 16,644
W. Miles Greer 4,261 0.3 23.00 04/15/2006 15,553
Kirby R. Willis 3,924 0.3 23.00 04/15/2006 14,323
1 Grants were made on April 15, 1996, and vest 25% per year on the anniversary
date of the grant. Grants fully vest upon termination incident to death,
disability, or retirement. The exercise price is the average of the high and low
fair market value of SOUTHERN's common stock on the date granted. In accordance
with the terms of the Executive Stock Plan, Mr. Farris' unexercised options
expire on June 1, 2003, three years after his normal retirement date; Mr.
Scarbrough's unexercised options expire on November 1, 2004, three years after
his normal retirement date; and Mr. Gignilliat's unexercised options expire on
September 3, 2000, three years after his normal retirement date.
2 A total of 1,460,731 stock options were granted in 1996 to key executives
participating in SOUTHERN's Executive Stock Plan.
3 Based on the Black-Scholes option valuation model. The actual value, if any,
an executive officer may realize ultimately depends on the market value of
SOUTHERN's common stock at a future date. This valuation is provided pursuant
to SEC disclosure rules. There is no assurance that the value realized will be
at or near the value estimated by the Black-Scholes model. Assumptions used to
calculate this value: price volatility - 18.627%; risk-free rate of
return - 6.51%; dividend yield - 5.48%; and time to exercise - 10 years.
</TABLE>
III-20
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED STOCK OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
Aggregated Stock Option Exercises. The following table sets forth information
concerning options exercised during the year ending December 31, 1996, by the
named executive officers and the value of unexercised options held by them as of
December 31, 1996.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End($)1
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)2 Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C>
Elmer B. Harris - - 120,265/78,180 657,199/92,536
Banks H. Farris - - 18,261/22,864 56,021/25,231
Charles D. McCrary - - 16,113/21,228 48,101/23,522
William B. Hutchins, III - - 16,061/20,542 48,197/22,871
GEORGIA
H. Allen Franklin - - 90,733/77,368 458,476/91,048
William G. Hairston, III - - 18,817/38,231 40,646/45,468
Warren Y. Jobe - - 21,293/22,862 78,175/26,056
Gene R. Hodges - - 17,422/22,168 60,499/24,922
Robert H. Haubein, Jr. - - 16,992/20,497 52,277/22,204
GULF
Travis J. Bowden - - 51,315/37,200 265,382/44,277
G. Edison Holland, Jr. - - 15,378/18,473 46,373/20,868
Arlan E. Scarbrough - - 1,849/12,783 1,849/5,549
John E. Hodges, Jr. - - 13,050/16,499 39,826/17,321
Francis M. Fisher, Jr. - - 1,400/9,877 1,400/4,203
</TABLE>
See next page for footnotes.
III-21
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED STOCK OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End($)1
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)2 Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C>
Dwight H. Evans - - 21,316/26,875 76,831/26,645
H. E. Blakeslee - - 13,513/17,218 41,198/17,706
Don E. Mason - - 1,861/13,004 1,861/5,584
Michael W. Southern - - 1,211/9,111 1,211/3,636
Frederick D. Kuester - - 1,194/8,983 1,194/3,585
SAVANNAH
Arthur M. Gignilliat, Jr. - - 42,773/22,000 270,024/25,003
Larry M. Porter - - 1,175/8,086 1,175/3,526
W. Miles Greer - - 1,098/7,556 1,098/3,295
Kirby R. Willis - - 1,009/6,953 1,009/3,029
1 This represents the excess of the fair market value of SOUTHERN's common stock
of $22.625 per share, as of December 31, 1996, above the exercise price of the
options. One column reports the "value" of options that are vested and therefore
could be exercised; the other the "value" of options that are not vested and
therefore could not be exercised as of December 31, 1996.
2 The "Value Realized" is ordinary income, before taxes, and represents the
amount equal to the excess of the fair market value of the shares at the time
of exercise over the exercise price.
</TABLE>
III-22
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN 1996
Long-Term Incentive Plans. The following table sets forth the long-term
incentive plan awards made to the named executive officers for the performance
period January 1, 1996 through December 31, 1999.
Estimated Future Payouts under
Non-Stock Price-Based Plans
Performance or
Other Period
Number of Until Maturation Threshold Target Maximum
Name Units (#)1 or Payout ($)2 ($)2 ($)2
- -----------------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C> <C>
Elmer B. Harris 280,184 4 years 140,092 280,184 560,368
Banks H. Farris 108,335 4 years 54,168 108,335 216,670
Charles D. McCrary 80,251 4 years 40,126 80,251 160,502
William B. Hutchins, III 80,251 4 years 40,126 80,251 160,502
GEORGIA
H. Allen Franklin 317,913 4 years 158,957 317,913 635,826
William G. Hairston, III 163,866 4 years 81,933 163,866 327,732
Warren Y. Jobe 80,251 4 years 40,126 80,251 160,502
Gene R. Hodges 80,251 4 years 40,126 80,251 160,502
Robert H. Haubein, Jr. 80,251 4 years 40,126 80,251 160,502
GULF
Travis J. Bowden 132,168 4 years 66,084 132,168 264,336
G. Edison Holland, Jr. 58,514 4 years 29,257 58,514 117,028
Arlan E. Scarbrough 58,514 4 years 29,257 58,514 117,028
John E. Hodges, Jr. 58,514 4 years 29,257 58,514 117,028
Francis M. Fisher, Jr. 58,514 4 years 29,257 58,514 117,028
</TABLE>
See next page for footnotes.
III-23
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN 1996
Estimated Future Payouts under
Non-Stock Price-Based Plans
Performance or
Other Period
Number of Until Maturation Threshold Target Maximum
Name Units (#)1 or Payout ($)2 ($)2 ($)2
- -----------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C> <C>
Dwight H. Evans 132,168 4 years 66,084 132,168 264,336
H. E. Blakeslee 58,514 4 years 29,257 58,514 117,028
Don E. Mason 58,514 4 years 29,257 58,514 117,028
Michael W. Southern 41,800 4 years 20,900 41,800 83,600
Frederick D. Kuester 41,800 4 years 20,900 41,800 83,600
SAVANNAH
Arthur M. Gignilliat, Jr. 96,504 4 years 48,252 96,504 193,008
Larry M. Porter 41,800 4 years 20,900 41,800 83,600
W. Miles Greer 41,800 4 years 20,900 41,800 83,600
Kirby R. Willis 41,800 4 years 20,900 41,800 83,600
1 A performance unit is a method of assigning a dollar value to a performance
award opportunity. The actual number of units granted to a participant will be
based on an award percentage of an individual's base salary range control
mid-point at the beginning of the performance period.
2 The threshold, target and maximum value of a unit is $0.50, $1.00, and $2.00,
respectively, and can vary based on SOUTHERN's return on common equity relative
to a selected group of electric and gas utilities in the Southeastern United
States. If certain minimum performance relative to the selected group is not
achieved, there will be no payout; nor is there a payout if the current
earnings of SOUTHERN are not sufficient to fund the dividend rate paid in the
last calendar year. All awards are payable in cash at the end of the
performance period.
</TABLE>
III-24
<PAGE>
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
Pension Plan Table. The following table sets forth the estimated combined annual
pension benefits under the pension and supplemental defined benefit plans in
effect during 1996 for ALABAMA, GEORGIA, GULF and MISSISSIPPI. Employee
compensation covered by the pension and supplemental benefit plans for pension
purposes is limited to the average of the highest three of the final 10 years'
base salary and wages (reported under column titled "Salary" in the Summary
Compensation Tables on pages III-13 through III-18).
The amounts shown in the table were calculated according to the final average
pay formula and are based on a single life annuity without reduction for joint
and survivor annuities (although married employees are required to have their
pension benefits paid in one of various joint and survivor annuity forms, unless
the employee elects otherwise with the spouse's consent) or computation of the
Social Security offset which would apply in most cases. This offset amounts to
one-half of the estimated Social Security benefit (primary insurance amount) in
excess of $3,000 per year times the number of years of accredited service,
divided by the total possible years of accredited service to normal retirement
age.
<TABLE>
<CAPTION>
Years of Accredited Service
Remuneration 15 20 25 30 35 40
- ------------ -----------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 12,750 $ 17,000 $ 21,250 $ 25,500 $ 29,750 $ 34,000
$100,000 25,500 34,000 42,500 51,000 59,500 68,000
$300,000 76,500 102,000 127,500 153,000 178,500 204,000
$500,000 127,500 170,000 212,500 255,000 297,500 340,000
$700,000 178,500 238,000 297,500 357,000 416,500 476,000
$800,000 204,000 272,000 340,000 408,000 476,000 544,000
</TABLE>
As of December 31, 1996, the applicable compensation levels and years
of accredited service are presented in the following tables:
<TABLE>
<CAPTION>
ALABAMA
Compensation Accredited
Name Level Years of Service
<S> <C> <C>
Elmer B. Harris $462,672 38
Banks H. Farris 223,188 37
Charles D. McCrary 207,360 22
William B. Hutchins, III 200,328 30
</TABLE>
III-25
<PAGE>
<TABLE>
<CAPTION>
GEORGIA
Compensation Accredited
Name Level Years of Service
<S> <C> <C>
H. Allen Franklin $462,660 25
William G. Hairston, III 301,752 28
Warren Y. Jobe 221,784 25
Gene R. Hodges 215,292 32
Robert H. Haubein, Jr. 201,684 29
</TABLE>
<TABLE>
<CAPTION>
GULF
Compensation Accredited
Name Level Years of Service
<S> <C> <C>
Travis J. Bowden $291,972 30 (1)
G. Edison Holland, Jr. 179,340 14 (1)
Arlan E. Scarbrough 169,272 33
John E. Hodges, Jr. 165,900 30
Francis M. Fisher, Jr. 144,288 25
</TABLE>
<TABLE>
<CAPTION>
MISSISSIPPI
Compensation Accredited
Name Level Years of Service
<S> <C> <C>
Dwight H. Evans $237,324 25
H. E. Blakeslee 172,068 31
Don E. Mason 167,640 30
Michael W. Southern 137,436 21
Frederick D. Kuester 138,768 24
</TABLE>
SAVANNAH has in effect a qualified, trusteed, noncontributory, defined
benefit pension plan which provides pension benefits to employees upon
retirement at the normal retirement age after designated periods of accredited
service and at a specified compensation level. The plan provides pension
benefits under a formula which includes each participant's years of service with
the Southern system and average annual earnings of the highest three of the
final 10 years of service with the Southern system preceding retirement. Plan
benefits are reduced by a portion of the benefits participants are entitled to
receive under Social Security. The plan provides for reduced early retirement
benefits at age 55 and a pension for the surviving spouse equal to one-half of
the deceased retiree's pension.
1 The number of accredited years of service includes 10 years credited to
both Mr. Bowden and Mr. Holland pursuant to individual supplemental pension
agreements.
III-26
<PAGE>
As of December 31, 1996, the applicable compensation levels and years
of accredited service are presented in the following table:-
<TABLE>
<CAPTION>
SAVANNAH
Compensation Accredited
Name Level Years of Service
<S> <C> <C>
Arthur M. Gignilliat $212,953 36
Larry M. Porter 135,254 19
W. Miles Greer 126,998 12
Kirby R. Willis 116,929 22
</TABLE>
SAVANNAH has in effect a voluntary deferred compensation plan for
certain executive employees pursuant to which such employees may defer a portion
of their respective annual salaries. In addition, SAVANNAH has a supplemental
executive retirement plan for certain of its executive employees. The deferred
compensation plan is designed to provide supplemental retirement or survivor
benefit payments. The supplemental executive retirement plan is also designed to
provide retiring executives of SAVANNAH with a supplemental retirement benefit,
which, in conjunction with social security and benefits under SAVANNAH's
qualified pension plan, will equal 70 percent of the highest three of the final
10 years' average annual compensation (including deferrals under the deferred
compensation plan). Both of these plans are unfunded and the liability is
payable from general funds of SAVANNAH. The deferred compensation plan became
effective December 1, 1983, and all of SAVANNAH's executive officers are
participating in the plan. In addition, all executives are participating in the
supplemental executive retirement plan.
In order to provide for its liabilities under the deferred compensation
plan and the supplemental executive retirement plan, SAVANNAH has purchased life
insurance on participating executive employees in actuarially determined amounts
which, based upon assumptions as to mortality experience, policy dividends, tax
effects, and other factors which, if realized, along with compensation deferred
by employees and the death benefits payable to SAVANNAH, are expected to cover
all such insurance premium payments, and all benefit payments to participants,
plus a factor for the cost of funds of SAVANNAH.
The following table sets forth the estimated combined annual pension
benefits under the pension plan and supplemental executive retirement plan in
effect during 1996 which are payable by SAVANNAH to executives upon retirement
at the normal retirement age after designated periods of accredited service and
at a specified compensation level.
<TABLE>
<CAPTION>
Years of Accredited Service
Remuneration 15 25 35
- -------------------------- -- -- --
<S> <C> <C> <C>
$ 90,000 $ 63,000 $ 63,000 $ 63,000
$120,000 84,000 84,000 84,000
$150,000 105,000 105,000 105,000
$180,000 126,000 126,000 126,000
$210,000 147,000 147,000 147,000
$260,000 182,000 182,000 182,000
</TABLE>
III-27
<PAGE>
Compensation of Directors.
Standard Arrangements. The following table presents compensation paid
to the directors, during 1996 for service as a member of the board of directors
and any board committee(s), except that employee directors received no fees or
compensation for service as a member of the board of directors or any board
committee. All or a portion of these fees may be deferred until membership on
the board is terminated.
<TABLE>
<CAPTION>
ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
<S> <C> <C> <C> <C> <C>
Retainer Fee $20,000 $23,000 $12,000 $12,000 $12,000
Meeting Fee 900 900 750 750 750
Committees:
Audit 900 900 750 750 750
Compensation 900 900 750 750 750
Executive 900 900 - - 750
Finance - 900 - 750 -
Nominating 900 - - - -
Nuclear Safety 900 - - - -
Nuclear Operations
Overview - 1,800 - - -
</TABLE>
Effective January 1, 1997, the Outside Directors Pension Plan (the
"Plan") was terminated and benefits payable under the Plan were frozen.
Non-employee directors serving as of January 1, 1997, have a one-time election
to receive a Plan benefit buy-out equal to the actuarial present value of future
Plan benefits or receive benefits under the terms of the Plan at the annual
retainer rate in effect on December 31, 1996. Directors who elect to receive the
benefit buy-out must defer receipt until membership on the board is terminated.
Directors who elect to continue to participate under the terms of the Plan are
entitled to benefits upon retirement from the board on the retirement date
designated in the respective companies' by-laws. The annual benefit payable is
based upon length of service and varies from 75 percent of the annual retainer
in effect on December 31, 1996, if the participant has at least 60 months of
service on the board of one or more system companies, to 100 percent if the
participant has at least 120 months of such service. Payments continue for the
greater of the lifetime of the participant or 10 years.
Other Arrangements. No director received other compensation for
services as a director during the year ending December 31, 1996 in addition to
or in lieu of that specified by the standard arrangements specified above.
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
None.
Report on Repricing of Options.
None.
III-28
<PAGE>
Additional Information with Respect to Compensation Committee Interlocks and
Insider Participation in Compensation Decisions.
ALABAMA
Elmer B. Harris serves on the Compensation Committee of
AmSouth Bancorporation. John W. Woods, a director of ALABAMA, served
as Chairman of AmSouth Bancorporation during 1996.
III-29
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership of certain beneficial owners. SOUTHERN is the beneficial
owner of 100% of the outstanding common stock of registrants: ALABAMA, GEORGIA,
GULF, MISSISSIPPI and SAVANNAH.
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of Percent
of Beneficial Beneficial of
Title of Class Owner Ownership Class
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock The Southern Company 100%
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Registrants:
ALABAMA 5,608,955
GEORGIA 7,761,500
GULF 992,717
MISSISSIPPI 1,121,000
SAVANNAH 10,844,635
</TABLE>
Security ownership of management. The following table shows the number of shares
of SOUTHERN common stock and operating subsidiary preferred stock owned by the
directors, nominees and executive officers as of December 31, 1996. It is based
on information furnished by the directors, nominees and executive officers. The
shares owned by all directors, nominees and executive officers as a group
constitute less than one percent of the total number of shares of the respective
classes outstanding on December 31, 1996.
<TABLE>
<CAPTION>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
- ---------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C>
Whit Armstrong SOUTHERN Common 14,974
A. William Dahlberg SOUTHERN Common 182,190
Peter V. Gregerson, Sr. SOUTHERN Common 279
Bill M. Guthrie SOUTHERN Common 128,855
Elmer B. Harris SOUTHERN Common 170,780
Carl E. Jones, Jr. SOUTHERN Common 9,764
</TABLE>
III-30
<PAGE>
<TABLE>
<CAPTION>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
William V. Muse SOUTHERN Common 279
John T. Porter SOUTHERN Common 667
Gerald H. Powell SOUTHERN Common 5,883
Robert Davis Powers SOUTHERN Common 279
John W. Rouse, Jr. SOUTHERN Common 4,011
William J. Rushton, III SOUTHERN Common 6,927
ALABAMA Preferred 20
James H. Sanford SOUTHERN Common 262
John C. Webb, IV SOUTHERN Common 18,799
ALABAMA Preferred 136
John W. Woods SOUTHERN Common 34
Banks H. Farris SOUTHERN Common 27,521
William B. Hutchins, III SOUTHERN Common 37,299
Charles D. McCrary SOUTHERN Common 22,606
The directors, nominees,
and executive officers
as a group SOUTHERN Common 631,409
ALABAMA Preferred 156
GEORGIA
Bennett A. Brown SOUTHERN Common 398
A. William Dahlberg SOUTHERN Common 182,190
</TABLE>
III-31
<PAGE>
<TABLE>
<CAPTION>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
W. A. Fickling, Jr. SOUTHERN Common 699
GEORGIA Preferred 50
H. Allen Franklin SOUTHERN Common 114,757
L. G. Hardman III SOUTHERN Common 8,250
Warren Y. Jobe SOUTHERN Common 50,212
GEORGIA Preferred 403
James R. Lientz, Jr. SOUTHERN Common 282
W. A. Parker, Jr. SOUTHERN Common 27,000
GEORGIA Preferred 2
G. Joseph Prendergast SOUTHERN Common 398
Herman J. Russell SOUTHERN Common 8,414
Gloria M. Shatto SOUTHERN Common 15,832
GEORGIA Preferred 1,200
W. J. Vereen SOUTHERN Common 5,493
GEORGIA Preferred 3,301
Carl Ware SOUTHERN Common 342
Thomas R. Williams SOUTHERN Common 240
GEORGIA Preferred 1,000
William G. Hairston, III SOUTHERN Common 36,912
Robert H. Haubein, Jr. SOUTHERN Common 23,678
Gene R. Hodges SOUTHERN Common 47,700
GEORGIA Preferred 800
The directors, nominees
and executive officers
as a group SOUTHERN Common 620,124
GEORGIA Preferred 6,756
</TABLE>
III-32
<PAGE>
<TABLE>
<CAPTION>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
- ----------------------------------------------------------------------------------------------------
GULF
<S> <C> <C>
Travis J. Bowden SOUTHERN Common 81,563
Paul J. DeNicola SOUTHERN Common 85,643
Fred C. Donovan SOUTHERN Common 239
W. Deck Hull, Jr. SOUTHERN Common 2,529
Joseph K. Tannehill SOUTHERN Common 4,239
Francis M Fisher, Jr. SOUTHERN Common 6,663
GULF Preferred 2
John E. Hodges, Jr. SOUTHERN Common 35,179
GULF Preferred 3
G. Edison Holland, Jr. SOUTHERN Common 16,874
Arlan E. Scarbrough SOUTHERN Common 23,344
The directors, nominees
and executive officers
as a group SOUTHERN Common 256,273
GULF Preferred 5
MISSISSIPPI
Paul J. DeNicola SOUTHERN Common 85,643
Edwin E. Downer SOUTHERN Common 2,156
Dwight H. Evans SOUTHERN Common 40,340
GEORGIA Preferred 200
MISSISSIPPI Preferred 100
Robert S. Gaddis SOUTHERN Common 2,632
</TABLE>
III-33
<PAGE>
<TABLE>
<CAPTION>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Walter H. Hurt, III SOUTHERN Common 1,130
MISSISSIPPI Preferred 33
Aubrey K. Lucas SOUTHERN Common 1,675
George A. Schloegel SOUTHERN Common 127
Philip J. Terrell SOUTHERN Common 689
N. Eugene Warr SOUTHERN Common 472
H. E. Blakeslee SOUTHERN Common 24,097
Frederick D. Kuester SOUTHERN Common 6,236
Don E. Mason SOUTHERN Common 22,286
Michael W. Southern SOUTHERN Common 6,047
The directors, nominees
and executive officers
as a group SOUTHERN Common 193,530
GEORGIA Preferred 200
MISSISSIPPI Preferred 133
SAVANNAH
Helen Quattlebaum Artley SOUTHERN Common 2,654
Paul J. DeNicola SOUTHERN Common 85,643
Arthur M. Gignilliat, Jr. SOUTHERN Common 66,722
Walter D. Gnann SOUTHERN Common 1,596
Robert B. Miller, III SOUTHERN Common 2,316
Arnold M. Tenenbaum SOUTHERN Common 590
Fred F. Williams SOUTHERN Common 2,244
</TABLE>
III-34
<PAGE>
<TABLE>
<CAPTION>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
W. Miles Greer SOUTHERN Common 3,240
Larry M. Porter SOUTHERN Common 15,678
Kirby R. Willis SOUTHERN Common 5,538
The directors, nominees
and executive officers
as a group SOUTHERN Common 186,221
Changes in control. SOUTHERN and the operating affiliates know of no
arrangements which may at a subsequent date result in any change in control.
- --------
1 As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the
voting of, a security and/or investment power with respect to a security (i.e., the power to dispose of, or to
direct the disposition of, a security).
2 The shares shown include shares of SOUTHERN common stock of which certain directors and executive officers
have the right to acquire beneficial ownership within 60 days pursuant to the Executive Stock Plan, as follows:
Mr. Blakeslee, 13,513 shares; Mr. Bowden, 51,315 shares; Mr. Dahlberg, 123,218 shares; Mr. DeNicola, 52,086
shares; Mr. Evans, 21,316 shares; Mr. Farris, 18,261 shares; Mr. Franklin, 90,733 shares; Mr. Gignilliat, 42,773
shares; Mr. Greer, 1,098 shares; Mr. Guthrie, 74,833 shares; Mr. Hairston, 18,817 shares; Mr. Harris, 120,265
shares; Mr. Haubein, 16,992 shares; Mr. G. R. Hodges, 17,422 shares; Mr. J. E. Hodges, 13,050 shares; Mr.
Holland, 15,378 shares; Mr. Hutchins, 16,061 shares; Mr. Jobe, 21,293 shares; Mr. Kuester, 1,194 shares; Mr.
Mason, 1,861 shares; Mr. McCrary, 16,113 shares; Mr. Porter, 1,175 shares; Mr. Scarbrough, 1,849 shares; Mr.
Southern, 1,211 shares; and Mr. Willis, 1,009 shares. Also included are shares of SOUTHERN common stock held by
the spouses of the following directors: Mr. Hardman, 100 shares; Mr. Harris, 310 shares; Mr. Parker, 53 shares;
Mr. Powers, 50 shares; and Dr. Shatto, 12,667 shares. Also included are 1,200 shares of GEORGIA preferred stock
held by Dr. Shatto's spouse.
</TABLE>
III-35
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ALABAMA
Transactions with management and others.
Mr. Whit Armstrong is President, Chairman and Chief Executive Officer of
The Citizens Bank, Enterprise, Alabama; Mr. Carl E.Jones, Jr. is President and
Chief Operating Officer of Regions Bank, Birmingham, Alabama; Mr. Wallace D.
Malone is Chairman and Chief Executive Officer of SouthTrust Corporation,
Birmingham, Alabama. During 1996, these banks furnished a number of regular
banking services in the ordinary course of business to ALABAMA. ALABAMA
intends to maintain normal banking relations with all the aforesaid banks in
the future.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
GEORGIA
Transactions with management and others.
Mr. L. G. Hardman III is Chairman of the Board of The First National Bank
of Commerce, Georgia; Mr. James R. Lientz, Jr. is President of NationsBank of
Georgia, Atlanta, Georgia; Mr. G. Joseph Prendergast is Chairman of Wachovia
Bank of Georgia, N.A., Atlanta, Georgia; and Mr. Herman J. Russell is Chairman
of the Board of Citizens Trust Bank, Atlanta, Georgia. During 1996, these
banks furnished a number of regular banking services in the ordinary course of
business to GEORGIA. GEORGIA intends to maintain normal banking relations
with all the aforesaid banks in the future.
In 1996, GEORGIA leased a building from Riverside Manufacturing Co. for
approximately $77,000. Mr. William J. Vereen is Chief Executive Officer,
President, Treasurer and Director of Riverside Manufacturing Co.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
GULF
Transactions with management and others.
Mr. W. Deck Hull, Jr. is Vice Chairman of SunTrust Bank, West Florida,
Panama City, Florida. During 1996, this bank furnished a number of regular
banking services in the ordinary course of business to GULF. GULF intends to
maintain normal banking relations with the aforesaid bank in the future.
The firm of Beggs & Lane, P.A. serves as local counsel for GULF and
received from GULF approximately $960,994 for services rendered. Mr. G.
Edison Holland, Jr. is a partner in the firm and also serves as Vice President
- Power Generation/Transmission and Corporate Counsel of GULF.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
MISSISSIPPI
Transactions with management and others.
Mr. Robert S. Gaddis is Chairman of the Advisory Board of Trustmark
National Bank, Laurel, Mississippi; Mr. George A. Schloegel is President of
Hancock Bank, Gulfport, Mississippi and Mr. N. Eugene Warr is a director of
Coast Community Bank. During 1996, these banks furnished a number of regular
banking services in the ordinary course of business to MISSISSIPPI.
MISSISSIPPI intends to maintain normal banking relations with the aforesaid
banks in the future.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
III-36
<PAGE>
SAVANNAH
Transactions with management and others.
None
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
III-37
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report on this Form
10-K:
(1) Financial Statements:
Reports of Independent Public Accountants on the financial statements
for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF,
MISSISSIPPI and SAVANNAH are listed under Item 8 herein.
The financial statements filed as a part of this report for SOUTHERN
and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and
SAVANNAH are listed under Item 8 herein.
(2) Financial Statement Schedules:
Reports of Independent Public Accountants as to Schedules for SOUTHERN
and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and
SAVANNAH are included herein on pages IV-12 through IV-17.
Financial Statement Schedules for SOUTHERN and Subsidiary Companies,
ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed in the
Index to the Financial Statement Schedules at page S-1.
(3) Exhibits:
Exhibits for SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
are listed in the Exhibit Index at page E-1.
(b) Reports on Form 8-K during the fourth quarter of 1996 were as follows:
SOUTHERN filed a Current Report on Form 8-K:
Date of event: October 9, 1996
Items reported: Items 5 and 7
GULF filed a Current Report on Form 8-K:
Date of event: November 6, 1996
Items reported: Items 5 and 7
IV-1
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
THE SOUTHERN COMPANY
By: A. W. Dahlberg, Chairman, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
A. W. Dahlberg
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
W. L. Westbrook
Financial Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
Directors:
John C. Adams Elmer B. Harris
A. D. Correll William A. Parker, Jr.
Paul J. DeNicola William J. Rushton, III
Jack Edwards Gloria M. Shatto
H. Allen Franklin Gerald J. St. Pe'
Bruce S. Gordon Herbert Stockham
L. G. Hardman III
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of Section 13 or 15(d) 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. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
ALABAMA POWER COMPANY
By: Elmer B. Harris, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Elmer B. Harris
President, Chief Executive Officer and Director
(Principal Executive Officer)
William B. Hutchins, III
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
David L. Whitson
Vice President and Comptroller
(Principal Accounting Officer)
Directors:
Whit Armstrong Gerald H. Powell
Peter V. Gregerson, Sr. Robert D. Powers
Bill M. Guthrie John W. Rouse
Wallace D. Malone, Jr. James H. Sanford
William V. Muse John Cox Webb, IV
John T. Porter
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
IV-2
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
GEORGIA POWER COMPANY
By: H. Allen Franklin, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
H. Allen Franklin
President, Chief Executive Officer and Director
(Principal Executive Officer)
Warren Y. Jobe
Executive Vice President, Treasurer,
Chief Financial Officer and Director
(Principal Financial Officer)
Cliff S. Thrasher
Vice President, Comptroller and Chief Accounting Officer
(Principal Accounting Officer)
Directors:
Bennett A. Brown Herman J. Russell
William A. Fickling, Jr. Gloria M. Shatto
L. G. Hardman III William Jerry Vereen
James R. Lientz, Jr. Carl Ware
G. Joseph Prendergast Thomas R. Williams
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of Section 13 or 15(d) 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. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
GULF POWER COMPANY
By: Travis J. Bowden, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Travis J. Bowden
President, Chief Executive Officer and Director
(Principal Executive Officer)
Arlan E. Scarbrough
Vice President - Finance
(Principal Financial and Accounting Officer)
Directors:
Paul J. DeNicola Joseph K. Tannehill
Fred C. Donovan Barbara H. Thames
W. Deck Hull, Jr.
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
IV-3
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
MISSISSIPPI POWER COMPANY
By: Dwight H. Evans, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Dwight H. Evans
President, Chief Executive Officer and Director
(Principal Executive Officer)
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
Paul J. DeNicola Aubrey K. Lucas
Edwin E. Downer George A. Schloegel
Robert S. Gaddis Philip J. Terrell
Walter H. Hurt, III Gene Warr
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of Section 13 or 15(d) 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. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
SAVANNAH ELECTRIC AND POWER COMPANY
By: Arthur M. Gignilliat, Jr., President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Arthur M. Gignilliat, Jr.
President, Chief Executive Officer and Director
(Principal Executive Officer)
Kirby R. Willis
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
Helen Q. Artley Robert B. Miller, III
Archie H. Davis Arnold M. Tenenbaum
Paul J. DeNicola Frederick F. Williams, Jr.
Walter D. Gnann
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 21, 1997
IV-4
<PAGE>
Exhibit 21. Subsidiaries of the Registrants.*
Jurisdiction of
Name of Company Organization
-----------------------------------------------------------------------------
Alabama Power Company Alabama
Alabama Power Capital Trust I Delaware
Alabama Power Capital Trust II Delaware
Alabama Power Capital Trust III Delaware
Alabama Power Capital Trust IV Delaware
Alabama Property Company Alabama
Southern Electric Generating Company Alabama
Georgia Power Company Georgia
Georgia Power Capital Trust I Delaware
Georgia Power Capital Trust II Delaware
Georgia Power Capital Trust III Delaware
Georgia Power L.P. Holdings Corp. Georgia
Georgia Power Capital, L.P. Delaware
Piedmont-Forrest Corporation Georgia
Southern Electric Generating Company Alabama
Gulf Power Company Maine
Gulf Power Capital Trust I Delaware
Gulf Power Capital Trust II Delaware
Mississippi Power Company Mississippi
Savannah Electric and Power Company Georgia
SEI Holdings, Inc. Delaware
-----------------------------------------------------------------------------
*This information is as of December 31, 1996. In addition, the list omits
certain subsidiaries pursuant to paragraph (b)(21)(ii) of Regulation S-K Item
601.
IV-5
<PAGE>
Arthur Andersen LLP
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 12, 1997 on the financial statements of The
Southern Company and its subsidiaries and the related financial statement
schedule, included in this Form 10-K, into The Southern Company's previously
filed Registration Statement File Nos. 2-78617, 33-3546, 33-30171, 33-51433,
33-54415, 33-57951, 33-58371, 33-60427, 333-07539 and 333-09077.
/s/Arthur Andersen LLP
Atlanta, Georgia
March 20, 1997
IV-6
<PAGE>
Arthur Andersen LLP
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 12, 1997 on the financial statements of Alabama
Power Company and the related financial statement schedule, included in this
Form 10-K, into Alabama Power Company's previously filed Registration Statement
File Nos. 33-49653, 33-61845 and 333-17333.
/s/Arthur Andersen LLP
Birmingham, Alabama
March 20, 1997
IV-7
<PAGE>
Arthur Andersen LLP
Exhibit 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 12, 1997 on the financial statements of Georgia
Power Company and the related financial statement schedule, included in this
Form 10-K, into Georgia Power Company's previously filed Registration Statement
File Nos. 33-49661 and 33-60345.
/s/Arthur Andersen LLP
Atlanta, Georgia
March 20, 1997
IV-8
<PAGE>
Arthur Andersen LLP
Exhibit 23(d)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 12, 1997 on the financial statements of Gulf Power
Company and the related financial statement schedule, included in this Form
10-K, into Gulf Power Company's previously filed Registration Statement File
Nos. 33-50165 and 333-19271.
/s/Arthur Andersen LLP
Atlanta, Georgia
March 20, 1997
IV-9
<PAGE>
Arthur Andersen LLP
Exhibit 23(e)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 12, 1997 on the financial statements of
Mississippi Power Company and the related financial statement schedule, included
in this Form 10-K, into Mississippi Power Company's previously filed
Registration Statement File Nos. 33-49320, 33-49649 and 333-20469.
/s/Arthur Andersen LLP
Atlanta, Georgia
March 20, 1997
IV-10
<PAGE>
Arthur Andersen LLP
Exhibit 23(f)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 12, 1997 on the financial statements of Savannah
Electric and Power Company and the related financial statement schedule,
included in this Form 10-K, into Savannah Electric and Power Company's
previously filed Registration Statement File No. 33-52509.
/s/Arthur Andersen LLP
Atlanta, Georgia
March 20, 1997
IV-11
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
To The Southern Company:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of The Southern Company and its
subsidiaries included in this Form 10-K, and have issued our report thereon
dated February 12, 1997. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed under Item
14(a)(2) herein as it relates to The Southern Company and its subsidiaries (page
S-2) is the responsibility of The Southern Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
IV-12
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
To Alabama Power Company:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Alabama Power Company included in this Form 10-K,
and have issued our report thereon dated February 12, 1997. Our audits were made
for the purpose of forming an opinion on those statements taken as a whole. The
schedule listed under Item 14(a)(2) herein as it relates to Alabama Power
Company (page S-3) is the responsibility of Alabama Power Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
Birmingham, Alabama
February 12, 1997
IV-13
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
To Georgia Power Company:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Georgia Power Company included in this Form 10-K,
and have issued our report thereon dated February 12, 1997. Our audits were made
for the purpose of forming an opinion on those statements taken as a whole. The
schedule listed under Item 14(a)(2) herein as it relates to Georgia Power
Company (page S-4) is the responsibility of Georgia Power Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
IV-14
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
To Gulf Power Company:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Gulf Power Company included in this Form 10-K, and
have issued our report thereon dated February 12, 1997. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed under Item 14(a)(2) herein as it relates to Gulf Power Company
(page S-5) is the responsibility of Gulf Power Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
IV-15
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
To Mississippi Power Company:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Mississippi Power Company included in this Form
10-K, and have issued our report thereon dated February 12, 1997. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed under Item 14(a)(2) herein as it relates to
Mississippi Power Company (page S-6) is the responsibility of Mississippi Power
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
IV-16
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
To Savannah Electric and Power Company:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Savannah Electric and Power Company included in this
Form 10-K, and have issued our report thereon dated February 12, 1997. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed under Item 14(a)(2) herein as it relates to
Savannah Electric and Power Company (page S-7) is the responsibility of Savannah
Electric and Power Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 12, 1997
IV-17
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule Page
<S> <C> <C>
II Valuation and Qualifying Accounts and Reserves
1996, 1995 and 1994
The Southern Company and Subsidiary Companies.......................................................... S-2
Alabama Power Company.................................................................................. S-3
Georgia Power Company.................................................................................. S-4
Gulf Power Company..................................................................................... S-5
Mississippi Power Company.............................................................................. S-6
Savannah Electric and Power Company.................................................................... S-7
Schedules I through V not listed above are omitted as not applicable or not
required. Columns omitted from schedules filed have been omitted because the
information is not applicable or not required.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Stated in Thousands of Dollars)
Additions
----------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
----------------------------------- ------------------------ -------------- ------------------- --------------- ----------------
Provision for uncollectible
accounts
<S> <C> <C> <C> <C> <C>
1996.......................... $37,119 $24,768 $ 48 $30,348 (2) $31,587
1995.......................... 9,129 30,445 23,053 (1) 25,508 (2) 37,119
1994.......................... 9,067 23,322 8 23,268 (2) 9,129
- -------------------
Notes:
(1) Includes the addition of a Purchased Reserve in the amount of $23,027
related to the acquisition of SWEB.
(2) Represents write-off of accounts considered to be uncollectible, less
recoveries of amounts previously written off.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Stated in Thousands of Dollars)
Additions
---------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
---------------------------------- ----------------------- --------------- ------------------ -------------- ---------------
Provision for uncollectible
accounts
<S> <C> <C> <C> <C> <C>
1996.......................... $1,212 $8,214 $- $8,255 (Note) $1,171
1995.......................... 2,297 5,823 - 6,908 (Note) 1,212
1994.......................... 2,632 4,967 - 5,302 (Note) 2,297
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Stated in Thousands of Dollars)
Additions
---------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
--------------------------------- ----------------------- -------------- ------------------ ----------------- ----------------
Provision for uncollectible
accounts
<S> <C> <C> <C> <C> <C>
1996.......................... $5,000 $11,815 $- $12,815 (Note) $4,000
1995.......................... 4,500 15,875 - 15,375 (Note) 5,000
1994.......................... 4,300 15,424 - 15,224 (Note) 4,500
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Stated in Thousands of Dollars)
Additions
--------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
---------------------------------- ------------------------ --------------- ------------------ ---------------- ---------------
Provision for uncollectible
accounts
<S> <C> <C> <C> <C> <C>
1996.......................... $768 $1,850 $7 $1,836 (Note) $789
1995.......................... 600 1,612 3 1,447 (Note) 768
1994.......................... 447 1,195 9 1,051 (Note) 600
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Stated in Thousands of Dollars)
Additions
--------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
---------------------------------- ------------------------- -------------- ------------------ ---------------- ---------------
Provision for uncollectible
accounts
<S> <C> <C> <C> <C> <C>
1996.......................... $802 $1,726 $41 $1,730 (Note) $839
1995.......................... 670 1,602 23 1,493 (Note) 802
1994.......................... 737 1,234 (1) 1,300 (Note) 670
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Stated in Thousands of Dollars)
Additions
-------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
------------------------------------ ---------------------- ------------ ------------------ --------------- -----------------
Provision for uncollectible
accounts
<S> <C> <C> <C> <C> <C>
1996.......................... $983 $126 $- $477 (Note) $632
1995.......................... 866 439 - 322 (Note) 983
1994.......................... 762 419 - 315 (Note) 866
- -------------------
Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written
off.
</TABLE>
S-7
<PAGE>
EXHIBIT INDEX
The following exhibits indicated by an asterisk preceding the exhibit number
are filed herewith. The balance of the exhibits have heretofore been filed with
the SEC, respectively, as the exhibits and in the file numbers indicated and are
incorporated herein by reference. Reference is made to a duplicate list of
exhibits being filed as a part of this Form 10-K, which list, prepared in
accordance with Item 601 of Regulation S-K of the SEC, immediately precedes the
exhibits being physically filed with this Form 10-K.
(1) Underwriting Agreements
GEORGIA
(c) -Distribution Agreement dated November 29, 1995 between GEORGIA
and Lehman Brothers Inc.; Donaldson, Lufkin & Jenrette Securities
Corporation; J. P. Morgan Securities Inc.; Salomon Brothers Inc
and Smith Barney Inc. relating to $300,000,000 First Mortgage
Bonds Secured Medium-Term Notes. (Designated in GEORGIA's Form
10-K for the year ended December 31, 1995, as Exhibit 1(c).)
(3) Articles of Incorporation and By-Laws
SOUTHERN
(a)1 -Composite Certificate of Incorporation of SOUTHERN,
reflecting all amendments thereto through January 5, 1994.
(Designated in Registration No. 33-3546 as Exhibit 4(a), in
Certificate of Notification, File No. 70-7341, as Exhibit A and
in Certificate of Notification, File No. 70-8181, as Exhibit A.)
(a)2 -By-laws of SOUTHERN as amended effective October 21, 1991,
and as presently in effect. (Designated in Form U-1, File No.
70-8181, as Exhibit A-2.)
ALABAMA
(b)1 -Charter of ALABAMA and amendments thereto through October 14,
1994. (Designated in Registration Nos. 2-59634 as Exhibit 2(b),
2-60209 as Exhibit 2(c), 2-60484 as Exhibit 2(b), 2-70838 as
Exhibit 4(a)-2, 2-85987 as Exhibit 4(a)-2, 33-25539 as Exhibit
4(a)-2, 33-43917 as Exhibit 4(a)-2, in Form 8-K dated February 5,
1992, File No. 1-3164, as Exhibit 4(b)-3, in Form 8-K dated July
8, 1992, File No. 1-3164, as Exhibit 4(b)-3, in Form 8-K dated
October 27, 1993, File No. 1-3164, as Exhibits 4(a) and 4(b), in
Form 8-K dated November 16, 1993, File No. 1-3164, as Exhibit
4(a) and in Certificate of Notification, File No. 70-8191, as
Exhibit A.)
(b)2 -By-laws of ALABAMA as amended effective July 23, 1993, and as
presently in effect. (Designated in Form U-1, File No. 70-8191,
as Exhibit A-2.)
E-1
<PAGE>
GEORGIA
(c)1 -Charter of GEORGIA and amendments thereto through October 25,
1993. (Designated in Registration Nos. 2-63392 as Exhibit 2(a)-2,
2-78913 as Exhibits 4(a)-(2) and 4(a)-(3), 2-93039 as Exhibit
4(a)-(2), 2-96810 as Exhibit 4(a)-2, 33-141 as Exhibit 4(a)-(2),
33-1359 as Exhibit 4(a)(2), 33-5405 as Exhibit 4(b)(2), 33-14367
as Exhibits 4(b)-(2) and 4(b)-(3), 33-22504 as Exhibits 4(b)-(2),
4(b)-(3) and 4(b)-(4), in GEORGIA's Form 10-K for the year ended
December 31, 1991, File No. 1-6468, as Exhibits 4(a)(2) and
4(a)(3), in Registration No. 33-48895 as Exhibits 4(b)-(2) and
4(b)-(3), in Form 8-K dated December 10, 1992, File No. 1-6468 as
Exhibit 4(b), in Form 8-K dated June 17, 1993, File No. 1-6468,
as Exhibit 4(b) and in Form 8-K dated October 20, 1993, File No.
1-6468, as Exhibit 4(b).)
(c)2 -By-laws of GEORGIA as amended effective July 18, 1990, and as
presently in effect. (Designated in GEORGIA's Form 10-K for the
year ended December 31, 1990, File No. 1-6468, as Exhibit 3.)
GULF
(d)1 -Restated Articles of Incorporation of GULF and amendments
thereto through November 8, 1993. (Designated in Registration No.
33-43739 as Exhibit 4(b)-1, in Form 8-K dated January 15, 1992,
File No. 0-2429, as Exhibit 1(b), in Form 8-K dated August 18,
1992, File No. 0-2429, as Exhibit 4(b)-2, in Form 8-K dated
September 22, 1993, File No. 0-2429, as Exhibit 4 and in Form 8-K
dated November 3, 1993, File No. 0-2429, as Exhibit 4.)
(d)2 -By-laws of GULF as amended effective July 26, 1996, and as
presently in effect. (Designated in Form U-1, File No. 70-8949,
as Exhibit A-2(c).)
MISSISSIPPI
(e)1 -Articles of incorporation of MISSISSIPPI, articles of merger
of Mississippi Power Company (a Maine corporation) into
MISSISSIPPI and articles of amendment to the articles of
incorporation of MISSISSIPPI through August 19, 1993. (Designated
in Registration No. 2-71540 as Exhibit 4(a)-1, in Form U5S for
1987, File No. 30-222-2, as Exhibit B-10, in Registration No.
33-49320 as Exhibit 4(b)-(1), in Form 8-K dated August 5, 1992,
File No. 0-6849, as Exhibits 4(b)-2 and 4(b)-3, in Form 8-K dated
August 4, 1993, File No. 0-6849, as Exhibit 4(b)-3 and in Form
8-K dated August 18, 1993, File No. 0-6849, as Exhibit 4(b)-3.)
(e)2 -By-laws of MISSISSIPPI as amended effective April 2, 1996,
and as presently in effect. (Designated in Form U5S for 1995,
File No. 30-222-2, as Exhibit B-10.)
SAVANNAH
(f)1 -Charter of SAVANNAH and amendments thereto through November
10, 1993. (Designated in Registration Nos. 33-25183 as Exhibit
4(b)-(1), 33-45757 as Exhibit 4(b)-(2) and in Form 8-K dated
November 9, 1993, File No. 1-5072, as Exhibit 4(b).)
E-2
<PAGE>
(f)2 -By-laws of SAVANNAH as amended effective February 16, 1994,
and as presently in effect. (Designated in SAVANNAH's Form 10-K
for the year ended December 31, 1993, as Exhibit 3(f)2.)
(4) Instruments Describing Rights of Security Holders, Including Indentures
ALABAMA
(b)1 -Indenture dated as of January 1, 1942, between ALABAMA and
The Chase Manhattan Bank (formerly Chemical Bank), as Trustee,
and indentures supplemental thereto through that dated as of
December 1, 1994. (Designated in Registration Nos. 2-59843 as
Exhibit 2(a)-2, 2-60484 as Exhibits 2(a)-3 and 2(a)-4, 2-60716 as
Exhibit 2(c), 2-67574 as Exhibit 2(c), 2-68687 as Exhibit 2(c),
2-69599 as Exhibit 4(a)-2, 2-71364 as Exhibit 4(a)-2, 2-73727 as
Exhibit 4(a)-2, 33-5079 as Exhibit 4(a)-2, 33-17083 as Exhibit
4(a)-2, 33-22090 as Exhibit 4(a)-2, in ALABAMA's Form 10-K for
the year ended December 31, 1990, File No. 1-3164, as Exhibit
4(c), in Registration Nos. 33-43917 as Exhibit 4(a)-2, 33-45492
as Exhibit 4(a)-2, 33-48885 as Exhibit 4(a)-2, 33-48917 as
Exhibit 4(a)-2, in Form 8-K dated January 20, 1993, File No.
1-3436, as Exhibit 4(a)-3, in Form 8-K dated February 17, 1993,
File No. 1-3436, as Exhibit 4(a)-3, in Form 8-K dated March 10,
1993, File No. 1-3436, as Exhibit 4(a)-3, in Certificate of
Notification, File No. 70-8069, as Exhibits A and B, in Form 8-K
dated June 24, 1993, File No. 1-3436, as Exhibit 4, in
Certificate of Notification, File No. 70-8069, as Exhibit A, in
Form 8-K dated November 16, 1993, File No. 1-3436, as Exhibit
4(b), in Certificate of Notification, File No. 70-8069, as
Exhibits A and B, in Certificate of Notification, File No.
70-8069, as Exhibit A, in Certificate of Notification, File No.
70-8069, as Exhibit A and in Form 8-K dated November 30, 1994,
File No. 1-3436, as Exhibit 4.)
(b)2 -Subordinated Note Indenture dated as of January 1, 1996,
between ALABAMA and The Chase Manhattan Bank (formerly Chemical
Bank), as Trustee, and indenture supplemental thereto dated as of
January 1, 1996. (Designated in Certificate of Notification, File
No. 70-8461, as Exhibits E and F.)
(b)3 -Subordinated Note Indenture dated as of January 1, 1997,
between ALABAMA and The Chase Manhattan Bank, as Trustee, and
indenture supplemental thereto dated as of January 1, 1997.
(Designated in Form 8-K dated January 9, 1997, File No. 1-3436,
as Exhibits 4.1 and 4.2.)
(b)4 -Amended and Restated Trust Agreement of Alabama Power Capital
Trust I dated as of January 1, 1996. (Designated in Certificate
of Notification, File No. 70-8461, as Exhibit D.)
(b)5 -Amended and Restated Trust Agreement of Alabama Power Capital
Trust II dated as of January 1, 1997. (Designated in Form 8-K
dated January 9, 1997, File No. 1-3436, as Exhibit 4.5.)
(b)6 -Guarantee Agreement relating to Alabama Power Capital Trust I
dated as of January 1, 1996. (Designated in Certificate of
Notification, File No. 70-8461, as Exhibit G.)
E-3
<PAGE>
(b)7 -Guarantee Agreement relating to Alabama Power Capital Trust
II dated as of January 1, 1997. (Designated in Form 8-K dated
January 9, 1997, File No. 1-3436, as Exhibit 4.8.)
GEORGIA
(c)1 -Indenture dated as of March 1, 1941, between GEORGIA and The
Chase Manhattan Bank (formerly Chemical Bank), as Trustee, and
indentures supplemental thereto dated as of March 1, 1941, March
3, 1941 (3 indentures), March 6, 1941 (139 indentures), March 1,
1946 (88 indentures) and December 1, 1947, through October 15,
1995. (Designated in Registration Nos. 2-4663 as Exhibits B-3 and
B-3(a), 2-7299 as Exhibit 7(a)-2, 2-61116 as Exhibit 2(a)-3 and
2(a)-4, 2-62488 as Exhibit 2(a)-3, 2-63393 as Exhibit 2(a)-4,
2-63705 as Exhibit 2(a)-3, 2-68973 as Exhibit 2(a)-3, 2-70679 as
Exhibit 4(a)-(2), 2-72324 as Exhibit 4(a)-2, 2-73987 as Exhibit
4(a)-(2), 2-77941 as Exhibits 4(a)-(2) and 4(a)-(3), 2-79336 as
Exhibit 4(a)-(2), 2-81303 as Exhibit 4(a)-(2), 2-90105 as Exhibit
4(a)-(2), 33-5405 as Exhibit 4(a)-(2), 33-14367 as Exhibits
4(a)-(2) and 4(a)-(3), 33-22504 as Exhibits 4(a)-(2), 4(a)-(3)
and 4(a)-(4), 33-32420 as Exhibit 4(a)-(2), 33-35683 as Exhibit
4(a)-(2), in GEORGIA's Form 10-K for the year ended December 31,
1990, File No. 1-6468, as Exhibit 4(a)(3), in Form 10-K for the
year ended December 31, 1991, File No. 1-6468, as Exhibit
4(a)(5), in Registration No. 33-48895 as Exhibit 4(a)-(2), in
Form 8-K dated August 26, 1992, File No. 1-6468, as Exhibit
4(a)-(3), in Form 8-K dated September 9, 1992, File No. 1-6468,
as Exhibits 4(a)-(3) and 4(a)-(4), in Form 8-K dated September
23, 1992, File No. 1-6468, as Exhibit 4(a)-(3), in Form 8-A dated
October 12, 1992, as Exhibit 2(b), in Form 8-K dated January 27,
1993, File No. 1-6468, as Exhibit 4(a)-(3), in Registration No.
33-49661 as Exhibit 4(a)-(2), in Form 8-K dated July 26, 1993,
File No. 1-6468, as Exhibit 4, in Certificate of Notification,
File No. 70-7832, as Exhibit M, in Certificate of Notification,
File No. 70-7832, as Exhibit C, in Certificate of Notification,
File No. 70-7832, as Exhibits K and L, in Certificate of
Notification, File No. 70-8443, as Exhibit C, in Certificate of
Notification, File No. 70-8443, as Exhibit C, in Certificate of
Notification, File No. 70-8443, as Exhibit E, in Certificate of
Notification, File No. 70-8443, as Exhibit E, in Certificate of
Notification, File No. 70-8443, as Exhibit E, in GEORGIA's Form
10-K for the year ended December 31, 1994, File No. 1-6468, as
Exhibits 4(c)2 and 4(c)3, in Certificate of Notification, File
No. 70-8443, as Exhibit C, in Certificate of Notification, File
No. 70-8443, as Exhibit C, in Form 8-K dated May 17, 1995, File
No. 1-6468, as Exhibit 4 and in GEORGIA's Form 10-K for the year
ended December 31, 1995, File No. 1-6468, as Exhibits 4(c)2,
4(c)3, 4(c)4, 4(c)5 and 4(c)6.)
(c)2 -Indenture dated as of December 1, 1994, between GEORGIA and
Trust Company Bank, as Trustee and indentures supplemental
thereto through that dated as of December 15, 1994. (Designated
in Certificate of Notification, File No. 70-8461, as Exhibits E
and F.)
E-4
<PAGE>
(c)3 -Subordinated Note Indenture dated as of August 1, 1996,
between GEORGIA and The Chase Manhattan Bank, as Trustee, and
indentures supplemental thereto through January 1, 1997.
(Designated in Form 8-K dated August 21, 1996, File No. 1-6468,
as Exhibits 4.1 and 4.2 and in Form 8-K dated January 9, 1997,
File No. 1-6468, as Exhibit 4.2.)
(c)4 -Amended and Restated Trust Agreement of Georgia Power Capital
Trust I dated as of August 1, 1996. (Designated in Form 8-K dated
August 21, 1996, File No. 1-6468, as Exhibit 4.5.)
(c)5 -Amended and Restated Trust Agreement of Georgia Power Capital
Trust II dated as of January 1, 1997. (Designated in Form 8-K
dated January 9, 1997, File No. 1-6468, as Exhibit 4.5.)
(c)6 -Guarantee Agreement relating to Georgia Power Capital Trust I
dated as of August 1, 1996. (Designated in Form 8-K dated August
21, 1996, File No. 1-6468, as Exhibit 4.8.)
(c)7 -Guarantee Agreement relating to Georgia Power Capital Trust
II dated as of January 1, 1997. (Designated in Form 8-K dated
January 9, 1997, File No. 1-6468, as Exhibit 4.8.)
GULF
(d)1 -Indenture dated as of September 1, 1941, between GULF and The
Chase Manhattan Bank (formerly The Chase Manhattan Bank (National
Association)), as Trustee, and indentures supplemental thereto
through November 1, 1996. (Designated in Registration Nos. 2-4833
as Exhibit B-3, 2-62319 as Exhibit 2(a)-3, 2-63765 as Exhibit
2(a)-3, 2-66260 as Exhibit 2(a)-3, 33-2809 as Exhibit 4(a)-2,
33-43739 as Exhibit 4(a)-2, in GULF's Form 10-K for the year
ended December 31, 1991, File No. 0-2429, as Exhibit 4(b), in
Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit
4(a)-3, in Registration No. 33-50165 as Exhibit 4(a)-2, in Form
8-K dated July 12, 1993, File No. 0-2429, as Exhibit 4, in
Certificate of Notification, File No. 70-8229, as Exhibit A, in
Certificate of Notification, File No. 70-8229, as Exhibits E and
F, in Form 8-K dated January 17, 1996, File No. 0-2429, as
Exhibit 4, in Certificate of Notification, File No. 70-8229, as
Exhibit A, in Certificate of Notification, File No. 70-8229, as
Exhibit A and in Form 8-K dated November 6, 1996, File No.
0-2429, as Exhibit 4.)
(d)2 -Subordinated Note Indenture dated as of January 1, 1997,
between GULF and The Chase Manhattan Bank, as Trustee, and
indenture supplemental thereto dated as of January 1, 1997.
(Designated in Form 8-K dated January 27, 1997, File No. 0-2429,
as Exhibits 4.1 and 4.2.)
(d)3 -Amended and Restated Trust Agreement of Gulf Power Capital
Trust I dated as of January 1, 1997. (Designated in Form 8-K
dated January 27, 1997, File No. 0-2429, as Exhibit 4.5.)
E-5
<PAGE>
(d)4 -Guarantee Agreement relating to Gulf Power Capital Trust I
dated as of January 1, 1997. (Designated in Form 8-K dated
January 27, 1997, File No. 0-2429, as Exhibit 4.8.)
MISSISSIPPI
(e)1 -Indenture dated as of September 1, 1941, between MISSISSIPPI
and Bankers Trust Company, as Successor Trustee, and indentures
supplemental thereto through December 1, 1995. (Designated in
Registration Nos. 2-4834 as Exhibit B-3, 2-62965 as Exhibit
2(b)-2, 2-66845 as Exhibit 2(b)-2, 2-71537 as Exhibit 4(a)-(2),
33-5414 as Exhibit 4(a)-(2), 33-39833 as Exhibit 4(a)-2, in
MISSISSIPPI's Form 10-K for the year ended December 31, 1991,
File No. 0-6849, as Exhibit 4(b), in Form 8-K dated August 5,
1992, File No. 0-6849, as Exhibit 4(a)-2, in Second Certificate
of Notification, File No. 70-7941, as Exhibit I, in MISSISSIPPI's
Form 8-K dated February 26, 1993, File No. 0-6849, as Exhibit
4(a)-2, in Certificate of Notification, File No. 70-8127, as
Exhibit A, in Form 8-K dated June 22, 1993, File No. 0-6849, as
Exhibit 1, in Certificate of Notification, File No. 70-8127, as
Exhibit A, in Form 8-K dated March 8, 1994, File No. 0-6849, as
Exhibit 4, in Certificate of Notification, File No. 70-8127, as
Exhibit C and in Form 8-K dated December 5, 1995, File No.
0-6849, as Exhibit 4.)
SAVANNAH
(f) -Indenture dated as of March 1, 1945, between SAVANNAH and Bank
of New York, New York, as Trustee, and indentures supplemental
thereto through May 1, 1996. (Designated in Registration Nos.
33-25183 as Exhibit 4(a)-(1), 33-41496 as Exhibit 4(a)-(2),
33-45757 as Exhibit 4(a)-(2), in SAVANNAH's Form 10-K for the
year ended December 31, 1991, File No. 1-5072, as Exhibit 4(b),
in Form 8-K dated July 8, 1992, File No. 1-5072, as Exhibit
4(a)-3, in Registration No. 33-50587 as Exhibit 4(a)-(2), in Form
8-K dated July 22, 1993, File No. 1-5072, as Exhibit 4, in Form
8-K dated May 18, 1995, File No. 1-5072, as Exhibit 4 and in Form
8-K dated May 23, 1996, File No. 1-5072, as Exhibit 4.)
(10) Material Contracts
SOUTHERN
(a)1 -Service contracts dated as of January 1, 1984 and Amendment
No. 1 dated as of September 6, 1985, between SCS and ALABAMA,
GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1984, File
No. 1-3526, as Exhibit 10(a) and in SOUTHERN's Form 10-K for the
year ended December 31, 1985, File No. 1-3526, as Exhibit
10(a)(3).)
(a)2 -Service contract dated as of July 17, 1981, between SCS and
SEI. (Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1985, File No. 1-3526, as Exhibit 10(a)(2).)
E-6
<PAGE>
(a)3 -Service contract dated as of March 3, 1988, between SCS and
SAVANNAH. (Designated in SAVANNAH's Form 10-K for the year ended
December 31, 1987, File No. 1-5072, as Exhibit 10-p.)
(a)4 -Service contract dated as of January 15, 1991, between SCS
and Southern Nuclear. (Designated in SOUTHERN's Form 10-K for the
year ended December 31, 1991, File No. 1-3526, as Exhibit
10(a)(4).)
(a)5 -Service Contract dated as of December 12, 1994, between SCS
and Mobile Energy Services Company, Inc. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1994, File
No. 1-3526, as Exhibit 10(a)58.)
(a)6 -Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the
year ended December 31, 1988, File No. 1-5072, as Exhibit 10(b).)
(a)7 -Agreement dated as of January 27, 1959, Amendment No. 1 dated
as of October 27, 1982 and Amendment No. 2 dated November 4, 1993
and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA.
(Designated in Registration No. 2-59634 as Exhibit 5(c), in
GEORGIA's Form 10-K for the year ended December 31, 1982, File
No. 1-6468, as Exhibit 10(d)(2) and in ALABAMA's Form 10-K for
the year ended December 31, 1994, File No. 1-3164, as Exhibit
10(b)18.)
(a)8 -Joint Committee Agreement dated as of August 27, 1976, among
GEORGIA, OPC, MEAG and Dalton. (Designated in Registration No.
2-61116 as Exhibit 5(d).)
(a)9 -Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of January 6, 1975, between
GEORGIA and OPC. (Designated in Form 8-K for January, 1975, File
No. 1-6468, as Exhibit (b)(1).)
(a)10 -Edwin I. Hatch Nuclear Plant Operating Agreement dated as of
January 6, 1975, between GEORGIA and OPC. (Designated in Form 8-K
for January, 1975, File No. 1-6468, as Exhibit (b)(3).)
(a)11 -Revised and Restated Integrated Transmission System
Agreement dated as of November 12, 1990, between GEORGIA and OPC.
(Designated in GEORGIA's Form 10-K for the year ended December
31, 1990, File No. 1-6468, as Exhibit 10(g).)
(a)12 -Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of March 26, 1976, between GEORGIA and OPC.
(Designated in Certificate of Notification, File No. 70-5592, as
Exhibit A.)
(a)13 -Plant Hal Wansley Operating Agreement dated as of March 26,
1976, between GEORGIA and OPC. (Designated in Certificate of
Notification, File No. 70-5592, as Exhibit B.)
E-7
<PAGE>
(a)14 -Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of August 27, 1976, between
GEORGIA, MEAG and Dalton. (Designated in Form 8-K dated as of
June 13, 1977, File No. 1-6468, as Exhibit (b)(1).)
(a)15 -Edwin I. Hatch Nuclear Plant Operating Agreement dated as of
August 27, 1976, between GEORGIA, MEAG and Dalton. (Designated in
Form 8-K for February 1977, File No. 1-6468, as Exhibit (b)(2).)
(a)16 -Alvin W. Vogtle Nuclear Units Number One and Two Purchase
and Ownership Participation Agreement dated as of August 27, 1976
and Amendment No. 1 dated as of January 18, 1977, among GEORGIA,
OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-5792,
as Exhibit B-1 and in Form 8-K for January 1977, File No. 1-6468,
as Exhibit (B)(3).)
(a)17 -Alvin W. Vogtle Nuclear Units Number One and Two Operating
Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG
and Dalton. (Designated in Form U-1, File No. 70-5792, as Exhibit
B-2.)
(a)18 -Alvin W. Vogtle Nuclear Units Number One and Two Purchase,
Amendment, Assignment and Assumption Agreement dated as of
November 16, 1983, between GEORGIA and MEAG. (Designated in
GEORGIA's Form 10-K for the year ended December 31, 1983, File
No. 1-6468, as Exhibit 10(k)(4).)
(a)19 -Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of August 27, 1976, between GEORGIA and MEAG.
(Designated in Form 8-K dated as of July 5, 1977, File No.
1-6468, as Exhibit (b)(2).)
(a)20 -Plant Hal Wansley Operating Agreement dated as of August 27,
1976, between GEORGIA and MEAG. (Designated in Form 8-K dated as
of July 5, 1977, File No. 1-6468, as Exhibit (b)(4).)
(a)21 -Integrated Transmission System Agreement dated as of August
27, 1976, between GEORGIA and Dalton. (Designated in Form 8-K
dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(8).)
(a)22 -Integrated Transmission System Agreement dated as of August
27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K for
February 1977, File No. 1-6468, as Exhibit (b)(4).)
(a)23 -Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of April 19, 1977, between GEORGIA and Dalton.
(Designated in Form 8-K dated as of June 13, 1977, File No.
1-6468, as Exhibit (b)(3).)
(a)24 -Plant Hal Wansley Operating Agreement dated as of April 19,
1977, between GEORGIA and Dalton. (Designated in Form 8-K dated
as of June 13, 1977, File No. 1-6468, as Exhibit (b)(7).)
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(a)25 -Plant Robert W. Scherer Units Number One and Two Purchase
and Ownership Participation Agreement dated as of May 15, 1980,
Amendment No. 1 dated as of December 30, 1985, Amendment No. 2
dated as of July 1, 1986, Amendment No. 3 dated as of August 1,
1988 and Amendment No. 4 dated as of December 31, 1990, among
GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No.
70-6481, as Exhibit B-3, in SOUTHERN's Form 10-K for the year
ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(2), in
SOUTHERN's Form 10-K for the year ended December 31, 1989, File
No. 1-3526, as Exhibit 10(n)(2) and in SOUTHERN's Form 10-K for
the year ended December 31, 1993, File No. 1-3526, as Exhibit
10(a)54.)
(a)26 -Plant Robert W. Scherer Units Number One and Two Operating
Agreement dated as of May 15, 1980, Amendment No. 1 dated as of
December 3, 1985 and Amendment No. 2 dated as of December 31,
1990, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form
U-1, File No. 70-6481, as Exhibit B-4, in SOUTHERN's Form 10-K
for the year ended December 31, 1987, File No. 1-3526, as Exhibit
10(o)(4) and in SOUTHERN's Form 10-K for the year ended December
31, 1993, File No. 1-3526, as Exhibit 10(a)55.)
(a)27 -Plant Robert W. Scherer Purchase, Sale and Option Agreement
dated as of May 15, 1980, between GEORGIA and MEAG. (Designated
in Form U-1, File No. 70-6481, as Exhibit B-1.)
(a)28 -Plant Robert W. Scherer Purchase and Sale Agreement dated as
of May 16, 1980, between GEORGIA and Dalton. (Designated in Form
U-1, File No. 70-6481, as Exhibit B-2.)
(a)29 -Plant Robert W. Scherer Unit Number Three Purchase and
Ownership Participation Agreement dated as of March 1, 1984,
Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2
dated as of August 1, 1988, between GEORGIA and GULF. (Designated
in Form U-1, File No. 70-6573, as Exhibit B-4, in SOUTHERN's Form
10-K for the year ended December 31, 1987, as Exhibit 10(o)(2)
and in SOUTHERN's Form 10-K for the year ended December 31, 1989,
as Exhibit 10(n)(2).)
(a)30 -Plant Robert W. Scherer Unit Number Three Operating
Agreement dated as of March 1, 1984, between GEORGIA and GULF.
(Designated in Form U-1, File No. 70-6573, as Exhibit B-5.)
(a)31 -Plant Robert W. Scherer Unit No. Four Amended and Restated
Purchase and Ownership Participation Agreement by and among
GEORGIA, FP&L and JEA, dated as of December 31, 1990 and
Amendment No. 1 dated as of June 15, 1994. (Designated in Form
U-1, File No. 70-7843, as Exhibit B-1 and in SOUTHERN's Form 10-K
for the year ended December 31, 1994, File No. 1-3526, as Exhibit
10(a)60.)
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<PAGE>
(a)32 -Plant Robert W. Scherer Unit No. Four Operating Agreement by
and among GEORGIA, FP&L and JEA, dated as of December 31, 1990
and Amendment No. 1 dated as of June 15, 1994. (Designated in
Form U-1, File No. 70-7843, as Exhibit B-2 and in SOUTHERN's Form
10-K for the year ended December 31, 1994, File No. 1-3526, as
Exhibit 10(a)61.)
(a)33 -Amended and Restated Unit Power Sales Agreement dated
February 18, 1982 and Amendment No. 1 dated May 18, 1982, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. (Designated
in MISSISSIPPI's Form 10-K for the year ended December 31, 1981,
File No. 0-6849, as Exhibit 10(c)(2) and in GEORGIA's Form 10-K
for the year ended December 31, 1982, File No. 1-6468, as Exhibit
10(r)(3).)
(a)34 -Amended and Restated Unit Power Sales Agreement dated May
19, 1982, Amendment No. 1 dated August 30, 1984 and Amendment No.
2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI and SCS. (Designated in GEORGIA's Form 10-K for the
year ended December 31, 1982, File No. 1-6468, as Exhibit
10(s)(2), in SOUTHERN's Form 10-K for the year ended December 31,
1984, File No. 1-3526, as Exhibit 10(r)(2) and in GEORGIA's Form
10-K for the year ended December 31, 1990, File No. 1-6468, as
Exhibit 10(s)(2).)
(a)35 -Unit Power Sales Agreement dated July 19, 1988, between FPC
and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
(Designated in SAVANNAH's Form 10-K for the year ended December
31, 1988, File No. 1-5072, as Exhibit 10(d).)
(a)36 -Amended Unit Power Sales Agreement dated July 20, 1988,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH
and SCS. (Designated in SAVANNAH's Form 10-K for the year ended
December 31, 1988, File No. 1-5072, as Exhibit 10(e).)
(a)37 -Amended Unit Power Sales Agreement dated August 17, 1988,
between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. (Designated in SAVANNAH's Form 10-K for the year ended
December 31, 1988, File No. 1-5072, as Exhibit 10(f).)
(a)38 -Unit Power Sales Agreement dated December 8, 1990, between
Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. (Designated in GEORGIA's Form 10-K for the year ended
December 31, 1990, File No. 1-6468, as Exhibit 10(x).)
(a)39 -Transition Energy Agreement dated December 31, 1990, between
JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
(Designated in GULF's Form 10-K for the year ended December 31,
1991, File No. 0-2429, as Exhibit 10(1).)
(a)40 -Transition Energy Agreement dated December 31, 1990, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
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<PAGE>
(Designated in GULF's Form 10-K for the year ended December 31,
1991, File No. 0-2429, as Exhibit 10(m).)
(a)41 -Rocky Mountain Pumped Storage Hydroelectric Project
Ownership Participation Agreement dated November 18, 1988,
between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for
the year ended December 31, 1988, File No. 1-6468, as Exhibit
10(x).)
(a)42 -Rocky Mountain Pumped Storage Hydroelectric Project
Operating Agreement dated November 18, 1988, between OPC and
GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended
December 31, 1988, File No. 1-6468, as Exhibit 10(y).)
(a)43 -Purchase and Ownership Agreement for Joint Ownership
Interest in the James H. Miller, Jr. Steam Electric Generating
Plant Units One and Two dated November 18, 1988, between ALABAMA
and AEC. (Designated in Form U-1, File No. 70-7609, as Exhibit
B-1.)
(a)44 -Operating Agreement for Joint Ownership Interest in the
James H. Miller, Jr. Steam Electric Generating Plant Units One
and Two dated November 18, 1988, between ALABAMA and AEC.
(Designated in Form U-1, File No. 70-7609, as Exhibit B-2.)
(a)45 -Transmission Facilities Agreement dated February 25, 1982,
Amendment No. 1 dated May 12, 1982 and Amendment No. 2 dated
December 6, 1983, between Gulf States and MISSISSIPPI.
(Designated in MISSISSIPPI's Form 10-K for the year ended
December 31, 1981, File No. 0-6849, as Exhibit 10(f), in
MISSISSIPPI's Form 10-K for the year ended December 31, 1982,
File No. 0-6849, as Exhibit 10(f)(2) and in MISSISSIPPI's Form
10-K for the year ended December 31, 1983, File No. 0-6849, as
Exhibit 10(f)(3).)
(a)46 -Form of commitment agreement, Amendment No. 1 and Amendment
No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI
revolving credits. (Designated in Form U-1, File No. 70-7738, as
Exhibit A-5 and in Form U-1, File No. 70-7937, as A-5(b).)
(a)47 -Block Power Sale Agreement between GEORGIA and OPC dated as
of November 12, 1990. (Designated in GEORGIA's Form 10-K for the
year ended December 31, 1990, File No. 1-6468, as Exhibit
10(cc).)
(a)48 -Coordination Services Agreement between GEORGIA and OPC
dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K
for the year ended December 31, 1990, File No. 1-6468, as Exhibit
10(dd).)
(a)49 -Amended and Restated Nuclear Managing Board Agreement for
Plant Hatch and Plant Vogtle among GEORGIA, OPC, MEAG and Dalton
dated as of July 1, 1993. (Designated in SOUTHERN's Form 10-K for
the year ended December 31, 1993, File No. 1-3526, as Exhibit
10(a)49.)
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<PAGE>
(a)50 -Integrated Transmission System Agreement, Power Sale and
Coordination Umbrella Agreement between GEORGIA and OPC dated as
of November 12, 1990. (Designated in GEORGIA's Form 10-K for the
year ended December 31, 1990, File No. 1-6468, as Exhibit
10(ff).)
(a)51 -Revised and Restated Integrated Transmission System
Agreement between GEORGIA and Dalton dated as of December 7,
1990. (Designated in GEORGIA's Form 10-K for the year ended
December 31, 1990, File No. 1-6468, as Exhibit 10(gg).)
(a)52 -Revised and Restated Integrated Transmission System
Agreement between GEORGIA and MEAG dated as of December 7, 1990.
(Designated in GEORGIA's Form 10-K for the year ended December
31, 1990, File No. 1-6468, as Exhibit 10(hh).)
(a)53 -Long Term Transmission Service Agreement between Entergy
Power, Inc. and ALABAMA, MISSISSIPPI and SCS. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1992, File
No. 1-3526, as Exhibit 10(a)53.)
(a)54 -Plant Scherer Managing Board Agreement dated as of December
31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA.
(Designated in SOUTHERN's Form 10-K for the year ended December
31, 1993, File No. 1-3526, as Exhibit 10(a)56.)
(a)55 -Plant McIntosh Combustion Turbine Purchase and Ownership
Participation Agreement between GEORGIA and SAVANNAH dated as of
December 15, 1992. (Designated in SOUTHERN's Form 10-K for the
year ended December 31, 1993, File No. 1-3526, as Exhibit
10(a)57.)
(a)56 -Plant McIntosh Combustion Turbine Operating Agreement
between GEORGIA and SAVANNAH dated as of December 15, 1992.
(Designated in SOUTHERN's Form 10-K for the year ended December
31, 1993, File No. 1-3526, as Exhibit 10(a)58.)
(a)57 -Power Purchase Agreement dated as of December 3, 1993
between GEORGIA and FPC. (Designated in SOUTHERN's Form 10-K for
the year ended December 31, 1993, File No. 1-3526, as Exhibit
10(a)59.)
(a)58 -Operating Agreement for the Joseph M. Farley Nuclear Plant
between ALABAMA and Southern Nuclear dated as of December 23,
1991. (Designated in Form U-1, File No. 70-7530, as Exhibit B-7.)
(a)59 -Nuclear Services Agreement between Southern Nuclear and
GEORGIA dated as of October 31, 1991. (Designated in Form U-1,
File No. 70-7530, as Exhibit B-6.)
(a)60 -Nuclear Managing Board Agreement among GEORGIA, OPC, MEAG
and Dalton dated as of November 12, 1990. (Designated in
GEORGIA's Form 10-K for the year ended December 31, 1990, File
No. 1-6468, as Exhibit 10(ee).)
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<PAGE>
(a)61 -The Southern Company Productivity Improvement Plan, Amended
and Restated effective January 1, 1995. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1995, File No. 1-3526,
as Exhibit 10(a)61.)
(a)62 -The Southern Company Executive Productivity Improvement
Plan, effective January 1, 1995. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1995, File No. 1-3526, as
Exhibit 10(a)62.)
(a)63 -The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and First Amendment and Second
Amendment thereto. (Designated in SOUTHERN's Form 10-K for the
year ended December 31, 1995, File No. 1-3526, as Exhibit
10(a)63.)
*(a)64 -Third Amendment and Fourth Amendment to The Southern
Company Employee Savings Plan.
(a)65 -The Southern Company Employee Stock Ownership Plan, Amended
and Restated effective April 1, 1995 and First Amendment thereto.
(Designated in SOUTHERN's Form 10-K for the year ended December
31, 1995, File No. 1-3526, as Exhibit 10(a)64.)
*(a)66 -Second Amendment to The Southern Company Employee Stock
Ownership Plan.
(a)67 -Pension Plan For Employees of ALABAMA, Amended and Restated
effective as of January 1, 1989. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1994, File No. 1-3526, as
Exhibit 10(a)69.)
*(a)68 -First Amendment, Second Amendment and Third Amendment to
the Pension Plan For Employees of ALABAMA.
(a)69 -Pension Plan For Employees of GEORGIA, Amended and Restated
effective as of January 1, 1989. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1994, File No. 1-3526, as
Exhibit 10(a)70.)
*(a)70 -First Amendment, Second Amendment and Third Amendment to
the Pension Plan For Employees of GEORGIA.
(a)71 -Pension Plan For Employees of SCS, Amended and Restated
effective as of January 1, 1989 and First Amendment thereto.
(Designated in SOUTHERN's Form 10-K for the year ended December
31, 1994, File No. 1-3526, as Exhibit 10(a)71 and in SOUTHERN's
Form 10-K for the year ended December 31, 1995, File No. 1-3526,
as Exhibit 10(a)68.)
*(a)72 -Second Amendment, Third Amendment and Fourth Amendment
to the Pension Plan For Employees of SCS.
*(a)73 -The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996.
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<PAGE>
(a)74 -Supplemental Benefit Plan for ALABAMA. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1995, File
No. 1-3526, as Exhibit 10(a)71.)
(a)75 -Supplemental Benefit Plan for GEORGIA. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1995, File
No. 1-3526, as Exhibit 10(a)72.)
*(a)76 -Supplemental Benefit Plan for SCS and SEI, Amended and
Restated effective as of January 1, 1996.
(a)77 -The Deferred Compensation Plan for the Directors of The
Southern Company and First Amendment and Second Amendment
thereto. (Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1994, File No. 1-3526, as Exhibit 10(a)76 and in
SOUTHERN's Form 10-K for the year ended December 31, 1995, File
No. 1-3526, as Exhibit 10(a)75.)
(a)78 -The Southern Company Outside Directors Pension Plan.
(Designated in SOUTHERN's Form 10-K for the year ended December
31, 1994, File No. 1-3526, as Exhibit 10(a)77.)
(a)79 -The Southern Company Deferred Compensation Plan. (Designated
in SOUTHERN's Form 10-K for the year ended December 31, 1995,
File No. 1-3526, as Exhibit 10(a)77.)
(a)80 -The Southern Company Outside Directors Stock Plan and First
Amendment thereto. (Designated in Registration No. 33-54415 as
Exhibit 4(c) and in SOUTHERN's Form 10-K for the year ended
December 31, 1995, File No. 1-3526, as Exhibit 10(a)79.)
(a)81 -Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1995, File
No. 1-3526, as Exhibit 10(a)80.)
(a)82 -The Southern Company Executive Stock Plan for the Southern
Electric System and First Amendment and Second Amendment thereto.
(Designated in Registration No. 33-30171 as Exhibit 4(c) and in
SOUTHERN's Form 10-K for the year ended December 31, 1995, File
No. 1-3526, as Exhibit 10(a)82.)
*(a)83 -The Southern Company Pension Plan, effective as of
January 1, 1997.
ALABAMA
(b)1 -Service contracts dated as of January 1, 1984 and Amendment
No. 1 dated as of September 6, 1985, between SCS and ALABAMA,
GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit
10(a)1 herein.
(b)2 -Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)6 herein.
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<PAGE>
(b)3 -Agreement dated as of January 27, 1959, Amendment No. 1 dated
as of October 27, 1982 and Amendment No. 2 dated November 4, 1993
and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See
Exhibit 10(a)7 herein.
(b)4 -Amended and Restated Unit Power Sales Agreement dated
February 18, 1982 and Amendment No. 1 dated May 18, 1982, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit
10(a)33 herein.
(b)5 -Amended and Restated Unit Power Sales Agreement dated May 19,
1982, Amendment No. 1, dated August 30, 1984 and Amendment No. 2,
dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI and SCS. See Exhibit 10(a)34 herein.
(b)6 -Unit Power Sales Agreement dated July 19, 1988, between FPC
and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See
Exhibit 10(a)35 herein.
(b)7 -Amended Unit Power Sales Agreement dated July 20, 1988,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH
and SCS. See Exhibit 10(a)36 herein.
(b)8 -Amended Unit Power Sales Agreement dated August 17, 1988,
between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)37 herein.
(b)9 -Unit Power Sales Agreement dated December 8, 1990, between
Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)38 herein.
(b)10 -Transition Energy Agreement dated December 31, 1990, between
JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)39 herein.
(b)11 -Transition Energy Agreement dated December 31, 1990, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)40 herein.
(b)12 -Firm Power Purchase Contract between ALABAMA and AMEA.
(Designated in Certificate of Notification, File No. 70-7212, as
Exhibit B.)
(b)13 -1991 Firm Power Purchase Contract between ALABAMA and AMEA.
(Designated in Form U-1, File No. 70-7873, as Exhibit B-1.)
(b)14 -Purchase and Ownership Agreement for Joint Ownership
Interest in the James H. Miller, Jr. Steam Electric Generating
Plant Units One and Two dated November 18, 1988, between ALABAMA
and AEC. See Exhibit 10(a)43 herein.
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<PAGE>
(b)15 -Operating Agreement for Joint Ownership Interest in the
James H. Miller, Jr. Steam Electric Generating Plant Units One
and Two dated November 18, 1988, between ALABAMA and AEC. See
Exhibit 10(a)44 herein.
(b)16 -Form of commitment agreement, Amendment No. 1 and Amendment
No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI
revolving credits. See Exhibit 10(a)46 herein.
(b)17 -Long Term Transmission Service Agreement between Entergy
Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See Exhibit 10(a)53
herein.
(b)18 -Operating Agreement for the Joseph M. Farley Nuclear Plant
between ALABAMA and Southern Nuclear dated as of December 23,
1991. See Exhibit 10(a)58 herein.
(b)19 -The Southern Company Productivity Improvement Plan, Amended
and Restated effective January 1, 1995. See Exhibit 10(a)61
herein.
(b)20 -The Southern Company Executive Productivity Improvement
Plan, effective January 1, 1995. See Exhibit 10(a)62 herein.
(b)21 -The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and First Amendment and Second
Amendment thereto. See Exhibit 10(a)63 herein.
*(b)22 -Third Amendment and Fourth Amendment to The Southern
Company Employee Savings Plan. See Exhibit 10(a)64 herein.
(b)23 -The Southern Company Employee Stock Ownership Plan, Amended
and Restated effective April 1, 1995 and First Amendment thereto.
See Exhibit 10(a)65 herein.
*(b)24 -Second Amendment to The Southern Company Employee Stock
Ownership Plan. See Exhibit 10(a)66 herein.
(b)25 -Pension Plan For Employees of ALABAMA, Amended and Restated
effective as of January 1, 1989. See Exhibit 10(a)67 herein.
*(b)26 -First Amendment, Second Amendment and Third Amendment to
the Pension Plan For Employees of ALABAMA. See Exhibit 10(a)68
herein.
*(b)27 -The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)73 herein.
(b)28 -Supplemental Benefit Plan for ALABAMA. See Exhibit 10(a)74
herein.
(b)29 -The Southern Company Deferred Compensation Plan. See Exhibit
10(a)79 herein.
(b)30 -The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)78 herein.
(b)31 -Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit 10(a)81
herein.
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<PAGE>
*(b)32 -The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)83 herein.
GEORGIA
(c)1 -Service contracts dated as of January 1, 1984 and Amendment
No. 1 dated as of September 6, 1985, between SCS and ALABAMA,
GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit
10(a)1 herein.
(c)2 -Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(c)3 -Agreement dated as of January 27, 1959, Amendment No. 1 dated
as of October 27, 1982 and Amendment No. 2 dated November 4, 1993
and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See
Exhibit 10(a)7 herein.
(c)4 -Joint Committee Agreement dated as of August 27, 1976, among
GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)8 herein.
(c)5 -Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of January 6, 1975, between
GEORGIA and OPC. See Exhibit 10(a)9 herein.
(c)6 -Edwin I. Hatch Nuclear Plant Operating Agreement dated as of
January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)10
herein.
(c)7 -Revised and Restated Integrated Transmission System Agreement
dated as of November 12, 1990, between GEORGIA and OPC. See
Exhibit 10(a)11 herein.
(c)8 -Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of March 26, 1976, between GEORGIA and OPC.
See Exhibit 10(a)12 herein.
(c)9 -Plant Hal Wansley Operating Agreement dated as of March 26,
1976, between GEORGIA and OPC. See Exhibit 10(a)13 herein.
(c)10 -Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of August 27, 1976, between
GEORGIA, MEAG and Dalton. See Exhibit 10(a)14 herein.
(c)11 -Edwin I. Hatch Nuclear Plant Operating Agreement dated as of
August 27, 1976, between GEORGIA, MEAG and Dalton. See Exhibit
10(a)15 herein.
(c)12 -Alvin W. Vogtle Nuclear Units Number One and Two Purchase
and Ownership Participation Agreement dated as of August 27, 1976
and Amendment No. 1 dated as of January 18, 1977, among GEORGIA,
OPC, MEAG and Dalton. See Exhibit 10(a)16 herein.
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<PAGE>
(c)13 -Alvin W. Vogtle Nuclear Units Number One and Two Operating
Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG
and Dalton. See Exhibit 10(a)17 herein.
(c)14 -Alvin W. Vogtle Nuclear Units Number One and Two Purchase,
Amendment, Assignment and Assumption Agreement dated as of
November 16, 1983, between GEORGIA and MEAG. See Exhibit 10(a)18
herein.
(c)15 -Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of August 27, 1976, between GEORGIA and MEAG.
See Exhibit 10(a)19 herein.
(c)16 -Plant Hal Wansley Operating Agreement dated as of August 27,
1976, between GEORGIA and MEAG. See Exhibit 10(a)20 herein.
(c)17 -Integrated Transmission System Agreement dated as of August
27, 1976, between GEORGIA and Dalton. See Exhibit 10(a)21 herein.
(c)18 -Integrated Transmission System Agreement dated as of August
27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)22 herein.
(c)19 -Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of April 19, 1977, between GEORGIA and Dalton.
See Exhibit 10(a)23 herein.
(c)20 -Plant Hal Wansley Operating Agreement dated as of April 19,
1977, between GEORGIA and Dalton. See Exhibit 10(a)24 herein.
(c)21 -Plant Robert W. Scherer Units Number One and Two Purchase
and Ownership Participation Agreement dated as of May 15, 1980,
Amendment No. 1 dated as of December 30, 1985, Amendment No. 2
dated as of July 1, 1986, Amendment No. 3 dated as of August 1,
1988 and Amendment No. 4 dated as of December 31, 1990, among
GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)25 herein.
(c)22 -Plant Robert W. Scherer Units Number One and Two Operating
Agreement dated as of May 15, 1980, Amendment No. 1 dated as of
December 3, 1985 and Amendment No. 2 dated as of December 31,
1990, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)26
herein.
(c)23 -Plant Robert W. Scherer Purchase, Sale and Option Agreement
dated as of May 15, 1980, between GEORGIA and MEAG. See Exhibit
10(a)27 herein.
(c)24 -Plant Robert W. Scherer Purchase and Sale Agreement dated as
of May 16, 1980, between GEORGIA and Dalton. See Exhibit 10(a)28
herein.
(c)25 -Plant Robert W. Scherer Unit Number Three Purchase and
Ownership Participation Agreement dated as of March 1, 1984,
Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2
dated as of August 1, 1988, between GEORGIA and GULF. See Exhibit
10(a)29 herein.
(c)26 -Plant Robert W. Scherer Unit Number Three Operating
Agreement dated as of March 1, 1984, between GEORGIA and GULF.
See Exhibit 10(a)30 herein.
E-18
<PAGE>
(c)27 -Plant Robert W. Scherer Unit No. Four Amended and Restated
Purchase and Ownership Participation Agreement by and among
GEORGIA, FP&L and JEA dated as of December 31, 1990 and Amendment
No. 1 dated as of June 15, 1994. See Exhibit 10(a)31 herein.
(c)28 -Plant Robert W. Scherer Unit No. Four Operating Agreement by
and among GEORGIA, FP&L and JEA dated as of December 31, 1990 and
Amendment No. 1 dated as of June 15, 1994. See Exhibit 10(a)32
herein.
(c)29 -Amended and Restated Unit Power Sales Agreement dated
February 18, 1982 and Amendment No. 1 dated May 18, 1982, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit
10(a)33 herein.
(c)30 -Amended and Restated Unit Power Sales Agreement dated May
19, 1982, Amendment No. 1, dated August 30, 1984 and Amendment
No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA,
GULF, MISSISSIPPI and SCS. See Exhibit 10(a)34 herein.
(c)31 -Unit Power Sales Agreement dated July 19, 1988, between FPC
and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See
Exhibit 10(a)35 herein.
(c)32 -Amended Unit Power Sales Agreement dated July 20, 1988,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH
and SCS. See Exhibit 10(a)36 herein.
(c)33 -Amended Unit Power Sales Agreement dated August 17, 1988,
between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)37 herein.
(c)34 -Unit Power Sales Agreement dated December 8, 1990, between
Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)38 herein.
(c)35 -Power Purchase Agreement dated as of December 3, 1993
between GEORGIA and FPC. See Exhibit 10(a)57 herein.
(c)36 -Transition Energy Agreement dated December 31, 1990, between
JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)39 herein.
(c)37 -Transition Energy Agreement dated December 31, 1990, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)40 herein.
(c)38 -Rocky Mountain Pumped Storage Hydroelectric Project
Ownership Participation Agreement dated November 18, 1988,
between OPC and GEORGIA. See Exhibit 10(a)41 herein.
E-19
<PAGE>
(c)39 -Rocky Mountain Pumped Storage Hydroelectric Project
Operating Agreement dated November 18, 1988, between OPC and
GEORGIA. See Exhibit 10(a)42 herein.
(c)40 -Form of commitment agreement, Amendment No. 1 and Amendment
No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI
revolving credits. See Exhibit 10(a)46 herein.
(c)41 -Block Power Sale Agreement between GEORGIA and OPC dated as
of November 12, 1990. See Exhibit 10(a)47 herein.
(c)42 -Coordination Services Agreement between GEORGIA and OPC
dated as of November 12, 1990. See Exhibit 10(a)48 herein.
(c)43 -Amended and Restated Nuclear Managing Board Agreement for
Plant Hatch and Plant Vogtle among GEORGIA, OPC, MEAG and Dalton
dated as of July 1, 1993. See Exhibit 10(a)49 herein.
(c)44 -Integrated Transmission System Agreement, Power Sale and
Coordination Umbrella Agreement between GEORGIA and OPC dated as
of November 12, 1990. See Exhibit 10(a)50 herein.
(c)45 -Revised and Restated Integrated Transmission System
Agreement between GEORGIA and Dalton dated as of December 7,
1990. See Exhibit 10(a)51 herein.
(c)46 -Revised and Restated Integrated Transmission System
Agreement between GEORGIA and MEAG dated as of December 7, 1990.
See Exhibit 10(a)52 herein.
(c)47 -Plant Scherer Managing Board Agreement dated as of December
31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA.
See Exhibit 10(a)54 herein.
(c)48 -Plant McIntosh Combustion Turbine Purchase and Ownership
Participation Agreement between GEORGIA and SAVANNAH dated as of
December 15, 1992. See Exhibit 10(a)55 herein.
(c)49 -Plant McIntosh Combustion Turbine Operating Agreement
between GEORGIA and SAVANNAH dated as of December 15, 1992. See
Exhibit 10(a)56 herein.
(c)50 -Certificate of Limited Partnership of Georgia Power Capital.
(Designated in Certificate of Notification, File No. 70-8461, as
Exhibit B.)
(c)51 -Amended and Restated Agreement of Limited Partnership of
Georgia Power Capital, dated as of December 1, 1994. (Designated
in Certificate of Notification, File No. 70-8461, as Exhibit C.)
(c)52 -Action of General Partner of Georgia Power Capital creating
the Series A Preferred Securities. (Designated in Certificate of
Notification, File No. 70-8461, as Exhibit D.)
E-20
<PAGE>
(c)53 -Guarantee Agreement of GEORGIA dated as of December 1, 1994,
for the benefit of the holders from time to time of the Series A
Preferred Securities. (Designated in Certificate of Notification,
File No. 70-8461, as Exhibit G.)
(c)54 -Nuclear Services Agreement between Southern Nuclear and
GEORGIA dated as of October 31, 1991. See Exhibit 10(a)59 herein.
(c)55 -Nuclear Managing Board Agreement among GEORGIA, OPC, MEAG
and Dalton dated as of November 12, 1990. See Exhibit 10(a)60
herein.
(c)56 -The Southern Company Productivity Improvement Plan, Amended
and Restated effective January 1, 1995. See Exhibit 10(a)61
herein.
(c)57 -The Southern Company Executive Productivity Improvement
Plan, effective January 1, 1995. See Exhibit 10(a)62 herein.
(c)58 -The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and First Amendment and Second
Amendment thereto. See Exhibit 10(a)63 herein.
*(c)59 -Third Amendment and Fourth Amendment to The Southern
Company Employee Savings Plan. See Exhibit 10(a)64 herein.
(c)60 -The Southern Company Employee Stock Ownership Plan, Amended
and Restated effective April 1, 1995 and First Amendment thereto.
See Exhibit 10(a)65 herein.
*(c)61 -Second Amendment to The Southern Company Employee Stock
Ownership Plan. See Exhibit 10(a)66 herein.
(c)62 -Pension Plan For Employees of GEORGIA, Amended and Restated
effective as of January 1, 1989. See Exhibit 10(a)69 herein.
*(c)63 -First Amendment, Second Amendment and Third Amendment to
the Pension Plan For Employees of GEORGIA. See Exhibit 10(a)70
herein.
*(c)64 -The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)73 herein.
(c)65 -Supplemental Benefit Plan for GEORGIA. See Exhibit 10(a)75
herein.
(c)66 -The Southern Company Deferred Compensation Plan. See Exhibit
10(a)79 herein.
(c)67 -The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)78 herein.
(c)68 -Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit 10(a)81
herein.
*(c)69 -The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)83 herein.
E-21
<PAGE>
GULF
(d)1 -Service contracts dated as of January 1, 1984 and Amendment
No. 1 dated as of September 6, 1985, between SCS and ALABAMA,
GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit
10(a)1 herein.
(d)2 -Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(d)3 -Plant Robert W. Scherer Unit Number Three Purchase and
Ownership Participation Agreement dated as of March 1, 1984,
Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2
dated as of August 1, 1988, between GEORGIA and GULF. See Exhibit
10(a)29 herein.
(d)4 -Plant Robert W. Scherer Unit Number Three Operating Agreement
dated as of March 1, 1984, between GEORGIA and GULF. See Exhibit
10(a)30 herein.
(d)5 -Plant Scherer Managing Board Agreement dated as of December
31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA.
See Exhibit 10(a)54 herein.
(d)6 -Amended and Restated Unit Power Sales Agreement dated
February 18, 1982 and Amendment No. 1 dated May 18, 1982, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit
10(a)33 herein.
(d)7 -Amended and Restated Unit Power Sales Agreement dated May 19,
1982, Amendment No. 1 dated August 30, 1984 and Amendment No. 2
dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI and SCS. See Exhibit 10(a)34 herein.
(d)8 -Unit Power Sales Agreement dated July 19, 1988, between FPC
and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See
Exhibit 10(a)35 herein.
(d)9 -Amended Unit Power Sales Agreement dated July 20, 1988,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH
and SCS. See Exhibit 10(a)36 herein.
(d)10 -Amended Unit Power Sales Agreement dated August 17, 1988,
between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)37 herein.
(d)11 -Agreement between GULF and AEC, effective August 1, 1985.
(Designated in GULF's Form 10-K for the year ended December 31,
1985, File No. 0-2429, as Exhibit 10(g).)
E-22
<PAGE>
(d)12 -Unit Power Sales Agreement dated December 8, 1990, between
Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)38 herein.
(d)13 -Transition Energy Agreement dated December 31, 1990, between
JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)39 herein.
(d)14 -Transition Energy Agreement dated December 31, 1990, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)40 herein.
(d)15 -The Southern Company Productivity Improvement Plan, Amended
and Restated effective January 1, 1995. See Exhibit 10(a)61
herein.
(d)16 -The Southern Company Executive Productivity Improvement
Plan, effective January 1, 1995. See Exhibit 10(a)62 herein.
(d)17 -The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and First Amendment and Second
Amendment thereto. See Exhibit 10(a)63 herein.
*(d)18 -Third Amendment and Fourth Amendment to The Southern
Company Employee Savings Plan. See Exhibit 10(a)64 herein.
(d)19 -The Southern Company Employee Stock Ownership Plan, Amended
and Restated effective April 1, 1995 and First Amendment thereto.
See Exhibit 10(a)65 herein.
*(d)20 -Second Amendment to The Southern Company Employee Stock
Ownership Plan. See Exhibit 10(a)66 herein.
(d)21 -Pension Plan For Employees of GULF, Amended and Restated
effective as of January 1, 1989. (Designated in GULF's Form 10-K
for the year ended December 31, 1994, File No. 0-2429, as Exhibit
10(d)18.)
*(d)22 -First Amendment, Second Amendment and Third Amendment to
the Pension Plan For Employees of GULF.
*(d)23 -The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)73 herein.
(d)24 -Supplemental Benefit Plan for GULF. (Designated in GULF's
Form 10-K for the year ended December 31, 1995, File No. 0-2429,
as Exhibit 10(d)22.)
(d)25 -The Southern Company Deferred Compensation Plan. See Exhibit
10(a)79 herein.
(d)26 -The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)78 herein.
E-23
<PAGE>
(d)27 -Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit 10(a)81
herein.
*(d)28 -The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)83 herein.
MISSISSIPPI
(e)1 -Service contracts dated as of January 1, 1984 and Amendment
No. 1 dated September 6, 1985, between SCS and ALABAMA, GEORGIA,
GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein.
(e)2 -Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(e)3 -Amended and Restated Unit Power Sales Agreement dated
February 18, 1982 and Amendment No. 1 dated May 18, 1982, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit
10(a)33 herein.
(e)4 -Amended and Restated Unit Power Sales Agreement dated May 19,
1982, Amendment No. 1 dated August 30, 1984, and Amendment No. 2
dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI and SCS. See Exhibit 10(a)34 herein.
(e)5 -Unit Power Sales Agreement dated July 19, 1988, between FPC
and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See
Exhibit 10(a)35 herein.
(e)6 -Amended Unit Power Sales Agreement dated July 20, 1988,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH
and SCS. See Exhibit 10(a)36 herein.
(e)7 -Amended Unit Power Sales Agreement dated August 17, 1988,
between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)37 herein.
(e)8 -Unit Power Sales Agreement dated December 8, 1990, between
Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)38 herein.
(e)9 -Transition Energy Agreement dated December 31, 1990, between
JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)39 herein.
(e)10 -Transition Energy Agreement dated December 31, 1990, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)40 herein.
E-24
<PAGE>
(e)11 -Transmission Facilities Agreement dated February 25, 1982,
Amendment No. 1 dated May 12, 1982 and Amendment No. 2 dated
December 6, 1983, between Gulf States and MISSISSIPPI. See
Exhibit 10(a)45 herein.
(e)12 -Form of commitment agreement, Amendment No. 1 and Amendment
No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI
revolving credits. See Exhibit 10(a)46 herein.
(e)13 -Long Term Transmission Service Agreement between Entergy
Power, Inc. and ALABAMA MISSISSIPPI and SCS. See Exhibit 10(a)53
herein.
(e)14 -The Southern Company Productivity Improvement Plan, Amended
and Restated effective January 1, 1995. See Exhibit 10(a)61
herein.
(e)15 -The Southern Company Executive Productivity Improvement
Plan, effective January 1, 1995. See Exhibit 10(a)62 herein.
(e)16 -The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and First Amendment and Second
Amendment thereto. See Exhibit 10(a)63 herein.
*(e)17 -Third Amendment and Fourth Amendment to The Southern
Company Employee Savings Plan. See Exhibit 10(a)64 herein.
(e)18 -The Southern Company Employee Stock Ownership Plan, Amended
and Restated effective April 1, 1995 and First Amendment thereto.
See Exhibit 10(a)65 herein.
*(e)19 -Second Amendment to The Southern Company Employee Stock
Ownership Plan. See Exhibit 10(a)66 herein.
(e)20 -Pension Plan For Employees of MISSISSIPPI, Amended and
Restated effective as of January 1, 1989. (Designated in
MISSISSIPPI's Form 10-K for the year ended December 31, 1994,
File No. 0-6849, as Exhibit 10(e)18.)
*(e)21 -First Amendment, Second Amendment and Third Amendment to
the Pension Plan For Employees of MISSISSIPPI.
*(e)22 -The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)73 herein.
*(e)23 -Supplemental Benefit Plan for MISSISSIPPI, Amended and
Restated effective as of January 1, 1996.
(e)24 -The Southern Company Deferred Compensation Plan. See Exhibit
10(a)79 herein.
(e)25 -The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)78 herein.
(e)26 -Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit 10(a)81
herein.
E-25
<PAGE>
*(e)27 -The Southern Company Pension Plan, effective as of
January 1, 1997. See Exhibit 10(a)83 herein.
SAVANNAH
(f)1 -Service contract dated as of March 3, 1988, between SCS and
SAVANNAH. See Exhibit 10(a)3 herein.
(f)2 -Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(f)3 -Unit Power Sales Agreement dated July 19, 1988, between FPC
and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See
Exhibit 10(a)35 herein.
(f)4 -Amended Unit Power Sales Agreement dated July 20, 1988,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH
and SCS. See Exhibit 10(a)36 herein.
(f)5 -Amended Unit Power Sales Agreement dated August 17, 1988,
between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)37 herein.
(f)6 -Unit Power Sales Agreement dated December 8, 1990, between
Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)38 herein.
(f)7 -Transition Energy Agreement dated December 31, 1990, between
JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)39 herein.
(f)8 -Transition Energy Agreement dated December 31, 1990, between
FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS.
See Exhibit 10(a)40 herein.
(f)9 -Plant McIntosh Combustion Turbine Purchase and Ownership
Participation Agreement between GEORGIA and SAVANNAH dated as of
December 15, 1992. See Exhibit 10(a)55 herein.
(f)10 -Plant McIntosh Combustion Turbine Operating Agreement
between GEORGIA and SAVANNAH dated December 15, 1992. See Exhibit
10(a)56 herein.
(f)11 -The Southern Company Productivity Improvement Plan, Amended
and Restated effective January 1, 1995. See Exhibit 10(a)61
herein.
E-26
<PAGE>
(f)12 -The Southern Company Executive Productivity Improvement
Plan, effective January 1, 1995. See Exhibit 10(a)62 herein.
(f)13 -The Southern Company Employee Savings Plan, Amended and
Restated effective July 3, 1995 and First Amendment and Second
Amendment thereto. See Exhibit 10(a)63 herein.
*(f)14 -Third Amendment and Fourth Amendment to The Southern
Company Employee Savings Plan. See Exhibit 10(a)64 herein.
(f)15 -The Southern Company Employee Stock Ownership Plan, Amended
and Restated effective April 1, 1995 and First Amendment thereto.
See Exhibit 10(a)65 herein.
*(f)16 -Second Amendment to The Southern Company Employee Stock
Ownership Plan. See Exhibit 10(a)66 herein.
(f)17 -Employees' Retirement Plan of SAVANNAH, Amended and Restated
effective January 1, 1989 and First Amendment thereto.
(Designated in SAVANNAH's Form 10-K for the year ended December
31, 1994, File No. 1-5072, as Exhibit 10(f)15 and in SAVANNAH's
Form 10-K for the year ended December 31, 1995, File No. 1-5072,
as Exhibit 10(f)16.)
*(f)18 -Second Amendment and Third Amendment to the Employees'
Retirement Plan of SAVANNAH.
(f)19 -Supplemental Executive Retirement Plan of SAVANNAH, Amended
and Restated effective January 1, 1996. (Designated in SAVANNAH's
Form 10-K for the year ended December 31, 1995, File No. 1-5072,
as Exhibit 10(f)17.)
*(f)20 -First Amendment to the Supplemental Executive Retirement
Plan of SAVANNAH.
(f)21 -Deferred Compensation Plan for Key Employees of SAVANNAH and
First Amendment thereto. (Designated in SAVANNAH's Form 10-K for
the year ended December 31, 1994, File No. 1-5072, as Exhibit
10(f)17 and in SAVANNAH's Form 10-K for the year ended December
31, 1995, File No. 1-5072, as Exhibit 10(f)19.)
*(f)22 -Second Amendment to the Deferred Compensation Plan for
Key Employees of SAVANNAH.
*(f)23 -The Southern Company Performance Pay Plan, Amended and
Restated effective January 1, 1996. See Exhibit 10(a)73 herein.
(f)24 -The Southern Company Outside Directors Pension Plan. See
Exhibit 10(a)78 herein.
(f)25 -Deferred Compensation Plan for Directors of SAVANNAH and
First Amendment, Second Amendment and Third Amendment thereto.
(Designated in SAVANNAH's Form 10-K for the year ended December
31, 1994, File No. 1-5072, as Exhibit 10(f)20.)
E-27
<PAGE>
*(f)26 -Fourth Amendment to the Deferred Compensation Plan for
Directors of SAVANNAH.
(f)27 -Outside Directors Stock Plan for Subsidiaries of The
Southern Company and First Amendment thereto. See Exhibit 10(a)81
herein.
(21) *Subsidiaries of Registrants - Contained herein at page IV-5.
(23) Consents of Experts and Counsel
SOUTHERN
*(a) -The consent of Arthur Andersen LLP is contained herein at
page IV-6.
ALABAMA
*(b) -The consent of Arthur Andersen LLP is contained herein at
page IV-7.
GEORGIA
*(c) -The consent of Arthur Andersen LLP is contained herein at
page IV-8.
GULF
*(d) -The consent of Arthur Andersen LLP is contained herein at
page IV-9.
MISSISSIPPI
*(e) -The consent of Arthur Andersen LLP is contained herein at
page IV-10.
SAVANNAH
*(f) -The consent of Arthur Andersen LLP is contained herein at
page IV-11.
(24) Powers of Attorney and Resolutions
SOUTHERN
*(a) -Power of Attorney and resolution.
ALABAMA
*(b) -Power of Attorney and resolution.
GEORGIA
*(c) -Power of Attorney and resolution.
E-28
<PAGE>
GULF
*(d) -Power of Attorney and resolution.
MISSISSIPPI
*(e) -Power of Attorney and resolution.
SAVANNAH
*(f) -Power of Attorney and resolution.
(27) Financial Data Schedule
SOUTHERN
(a) -Financial Data Schedule. (Designated in Form 8-K dated February
12, 1997, File No. 1-3526, as Exhibit 27.)
ALABAMA
(b) -Financial Data Schedule. (Designated in Form 8-K dated February
12, 1997, File No. 1-3164, as Exhibit 27.)
GEORGIA
(c) -Financial Data Schedule. (Designated in Form 8-K dated February
12, 1997, File No. 1-6468, as Exhibit 27.)
GULF
(d) -Financial Data Schedule. (Designated in Form 8-K dated February
12, 1997, File No. 0-2429, as Exhibit 27.)
MISSISSIPPI
(e) -Financial Data Schedule. (Designated in Form 8-K dated February
12, 1997, File No. 0-6849, as Exhibit 27.)
SAVANNAH
(f) -Financial Data Schedule. (Designated in Form 8-K dated February
12, 1997, File No. 1-5072, as Exhibit 27.)
E-29
Exhibit 10(a)64
THIRD AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore
adopted the amendment and restatement of The Southern Company Employee Savings
Plan ("Plan"), effective as of July 3, 1995, which was amended by the Board of
Directors of Southern Company Services, Inc. ("Company") effective as of August
1, 1995 and by the Committee to be effective as provided in the Second
Amendment; and
WHEREAS, the Committee desires to amend the Plan in accordance with the
comments of the Internal Revenue Service related to the favorable determination
letter application of the Plan; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan;
NOW, THEREFORE, the Committee hereby amends the Plan as follows to be
effective as of July 3, 1995:
I.
Section 5.4(b) of the Plan shall be amended by deleting said subsection
in its entirety and substituting new Section 5.4(b) as follows:
"(b) Multiple Use Limitation. If both the Average Actual
Deferral Percentage and the Average Contribution Percentage of the
Highly Compensated Employees exceed 1.25 of the Average Actual Deferral
Percentage and the Average Contribution Percentage of the Non-Highly
Compensated Employees and if one or more Highly Compensated Employees
makes Elective Employer Contributions and receives Employer Matching
Contributions, and the sum of the Actual Deferral Percentage and Actual
Contribution Percentage of those Highly Compensated Employees subject
to either or both tests exceed the aggregate limit as defined in
Treasury Regulation Section 1.401(m)-2, then the Contribution
Percentage of those Highly Compensated Employees who also participate
in the cash or deferred arrangement will be reduced (beginning with
such Highly Compensated Employee whose Contribution Percentage is the
highest) so that the aggregate limit is not exceeded.
The amount by which each Highly Compensated Employee's
Contribution Percentage amount is reduced shall be treated as an Excess
Aggregate Contribution. For purposes of determining if the aggregate
limit has been exceeded, the Actual Deferral Percentage and the
Contribution Percentage of the Highly Compensated Employees shall be
determined after any corrections required to meet the Actual Deferral
Percentage Test and the Actual Contribution Percentage Test."
II.
Except as amended herein by this Third Amendment, the Plan shall remain
in full force and effect as amended and restated by the Company prior to the
adoption of this Second Amendment.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly
authorized officers has adopted this Third Amendment to The Southern Company
Employee Savings Plan this ____ day of _________________________, 1996 to be
effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________
Title:__________________________
ATTEST:
By:
Title:______________________
[CORPORATE SEAL]
<PAGE>
FOURTH AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore
adopted the amendment and restatement of The Southern Company Employee Savings
Plan ("Plan"), effective as of July 3, 1995, which was amended by the Board of
Directors of Southern Company Services, Inc. ("Company") effective as of August
1, 1995 and by the Committee to be effective as provided in the Second and Third
Amendments; and
WHEREAS, the Committee desires again to amend the Plan in order to
allow partial distributions for former employees of an Affiliated Employer who
are prohibited from receiving a total distribution from the Plan by Section
401(k)(2)(B)(i)(I) of the Internal Revenue Code of 1986, as amended, and to
allow Participants who have terminated employment with the Affiliated Employers
to elect withdrawals from the Plan in the same manner as active employees; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan;
NOW, THEREFORE, the Committee hereby amends the Plan as follows:
I.
Effective January 1, 1997, Article XI of the Plan shall be amended by
deleting the heading "Withdrawals and Loans Prior to Termination of Employment"
and substituting a new heading as follows: "Withdrawals and Loans".
II.
Effective January 1, 1997, Section 11.1 of the Plan shall be amended by
deleting such section in its entirety and substituting a new Section 11.1 as
follows:
11.1 Withdrawals by Participants.
(a) Subject to the provisions of Article XII, this Section
11.1, and Sections 11.2 through 11.6, a Participant may make
withdrawals from his Account effective as of any Valuation Date in the
order of priority listed below:
(1) All or a portion of the value of his Account
attributable to Voluntary Participant Contributions (not
including any earnings or appreciation thereon) made prior to
January 1, 1987;
(2) All amounts described above, plus all or a
portion of the value of his Account attributable to Voluntary
Participant Contributions, plus a ratable portion of the
earnings and/or appreciation on Voluntary Participant
Contributions;
(3) All amounts described above, plus up to fifty
percent (50%) of the value of his Account attributable to
Employer Matching Contributions (including earnings and
appreciation thereon) allocated to his Account; provided,
however, that said Participant shall have participated in the
Plan for not less than sixty (60) months at the time of the
withdrawal;
(4)(A) For Participants who have not attained age 59
1/2 or separated from service with the Affiliated Employers
(within the meaning of Code Section 401(k)(2)(B)(i)(I)), all
amounts described above, plus all or a portion of the value of
his Account attributable to Elective Employer Contributions
(not including any earnings or appreciation thereon for Plan
Years beginning after December 31, 1988); and
(B) For Participants who have attained age 59 1/2 or
separated from service with the Affiliated Employers (within
the meaning of Code Section 401(k)(2)(B)(i)(I)), all amounts
described above, plus all or a portion of the value of his
Account attributable to any earnings or appreciation on
Elective Employer Contributions.
(b) Notwithstanding the foregoing, withdrawals from a
Participant's SEPCO Transferred Account shall be made subject to the
provisions of Article XVIII.
III.
Effective January 1, 1997, Section 11.6(e) of the Plan shall be amended
by deleting such subsection in its entirety and substituting a new subsection
(e) as follows:
(e) Notwithstanding (a) above, if a Participant has attained
age 59 1/2 or separated from service with the Affiliated Employers
(within the meaning of Code Section 401(k)(2)(B)(i)(I)), he shall be
permitted to make a withdrawal pursuant to Section 11.1(a)(4)(A), even
if such withdrawal is not on account of hardship.
IV.
Effective January 1, 1997, Section 12.1(a) shall be amended by deleting
the first sentence thereof and substituting a new sentence as follows:
Subject to the provisions of Article XVIII, if a Participant's
employment with the Affiliated Employers is terminated as a result of
his retirement pursuant to the defined benefit pension plan of an
Affiliated Employer, in addition to the withdrawal options under
Section 11.1, the entire balance credited to his Account shall be
payable to him in the manner set forth in this Section 12.1 at such
time requested by the Participant pursuant to Section 12.6 and in
accordance with the procedures established by the Committee.
V.
Effective January 1, 1997, Section 12.2 shall be amended by deleting
the first sentence thereof and substituting a new sentence as follows:
If a Participant's employment with the Affiliated Employers is
terminated prior to his Normal Retirement Date by reason of his total
and permanent disability, as determined by the Social Security
Administration and evidenced in a writing provided to the Committee,
such disabled Participant, in addition to the withdrawal options under
Section 11.1, shall be entitled to receive the entire value credited to
his Account at such time as requested by the Participant or such legal
representative pursuant to Section 12.6 and in accordance with the
procedures established by the Committee.
VI.
Effective January 1, 1997, Section 12.5 shall be amended by deleting
such section in its entirety and substituting a new Section 12.5 as follows:
12.5 Distribution upon Termination of Employment.
(a) If a Participant's employment with the Affiliated
Employers is terminated for any reason other than in accordance with
Sections 12.1, 12.2, and 12.3, the balance to the credit of the
Participant's Account shall be payable in a single lump sum. Such lump
sum distribution shall be made as soon as practicable after the
Participant's termination of employment, provided that one of the
following conditions is met:
(1) the Participant's Account Balance does not exceed
$3,500 in accordance with Code Section 411(a)(11), or
(2) in accordance with Section 12.10, the Participant
elects to receive a distribution of his Account.
(b) A Participant who does not receive a distribution under
Section 12.5(a)(1) may elect to defer the commencement of the
distribution of his Account following the termination of his employment
until a later Valuation Date, provided that such distribution shall
commence not later than the date required under Section 12.6 of the
Plan. In addition to the withdrawal options under Section 11.1, any
deferred distribution of his entire account balance shall commence as
soon as practicable in a lump sum after the Valuation Date selected by
the Participant.
VII.
Effective January 1, 1997, Section 12.8 shall be amended by deleting
the last sentence thereof and inserting a new sentence as follows:
Such distribution to an alternate payee shall be made only in
a manner permitted under Articles XI or XII of the Plan.
VIII.
Effective as of the date hereof, Article XII shall be amended by adding
a new Section 12.12 thereto as follows:
12.12 Partial Distribution upon Termination of Employment. If
a Participant's employment with the Affiliated Employers is terminated
and such Participant is deemed not to have separated from service with
the Affiliated Employers within the meaning of Code Section
401(k)(2)(B)(i)(I), such Participant, in addition to the withdrawal
options available under Article XI effective January 1, 1997, shall be
entitled to elect a lump sum distribution of the entire balance to the
credit of his Account less the amount credited to his Elective Employer
Contribution subaccount. The amounts credited to his Elective Employer
Contribution subaccount may be distributed in a lump sum distribution
at such time permitted pursuant to Code Section 401(k)(2)(B)(i) and
Section 4.4(c) hereof. Such lump sum distributions shall otherwise be
subject to the provisions of this Article XII.
IX.
Effective as of January 1, 1996, Section 13.12 shall be amended by
deleting such section in its entirety and substituting a new Section 13.12 as
follows:
13.12 Expenses of Plan and Trust Fund. The expenses of
establishment and administration of the Plan and the Trust Fund,
including all fees of the Trustee, auditors, and counsel, shall be paid
by the Company or the Employing Companies. Notwithstanding the
foregoing, to the extent provided in the Trust Agreement, certain
administrative expenses may be paid from the Trust Fund either directly
or through reimbursement of the Company or the Employing Companies. Any
expenses directly related to the investments of the Trust Fund, such as
stock transfer taxes, brokerage commissions, or other charges incurred
in the acquisition or disposition of such investments, shall be paid
from the Trust Fund (or from the particular Investment Fund to which
such fees or expenses relate) and shall be deemed to be part of the
cost of such securities or deducted in computing the proceeds
therefrom, as the case may be. Investment management fees for the
Investment Funds shall be paid from the particular Investment Fund to
which they relate either directly or through reimbursement of the
Company or the Employing Companies unless the Company or the Employment
Company do not elect to receive reimbursement for payment of such
expenses. Taxes, if any, on any assets held or income received by the
Trustee and transfer taxes on the transfer of Common Stock from the
Trustee to a Participant or his Beneficiary shall be charged
appropriately against the Accounts of Participants as the Committee
shall determine. Any expenses paid by the Company pursuant to Section
13.11 and this section shall be subject to reimbursement by other
Employing Companies of their proportionate shares of such expenses as
determined by the Committee.
X.
Except as amended herein by this Fourth Amendment, the Plan shall
remain in full force and effect as amended and restated by the Company prior to
the adoption of this Fourth Amendment.
<PAGE>
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly
authorized officers has adopted this Fourth Amendment to The Southern Company
Employee Savings Plan this ____ day of _________________________, 1996 to be
effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By:
Its:
ATTEST:
By:
Its:
[CORPORATE SEAL]
Exhibit 10(a)66
SECOND AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, the Employee Stock Ownership Plan Committee ("Committee")
heretofore adopted the amendment and restatement of The Southern Company
Employee Stock Ownership Plan ("Plan"), effective as of April 1, 1995, which was
amended by the Board of Directors of Southern Company Services, Inc. ("Company")
effective as of August 1, 1995; and
WHEREAS, the Committee desires again to amend the Plan in order to
clarify that the Company and the Employing Companies may be reimbursed by the
Trust Fund for certain Plan expenses; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan;
NOW, THEREFORE, the Committee hereby amends the Plan as follows:
I.
Effective as of January 1, 1996, Section 9.12 shall be amended by
deleting such section in its entirety and substituting a new Section 9.12 as
follows:
9.12 Expenses of Plan and Trust Fund. The expenses of
establishment and administration of the Plan and the Trust Fund,
including all fees of the Trustee, auditors, and counsel, shall be paid
by the Company or the Employing Companies. Notwithstanding the
foregoing, to the extent provided in the Trust Agreement, certain
administrative expenses may be paid from the Trust Fund either directly
or through reimbursement of the Company or the Employing Companies. Any
expenses directly related to the investments of the Trust Fund, such as
stock transfer taxes, brokerage commissions, or other charges incurred
in the acquisition or disposition of such investments, shall be paid
from the Trust Fund and shall be deemed to be part of the cost of such
securities or deducted in computing the proceeds therefrom, as the case
may be. Taxes, if any, on any assets held or income received by the
Trustee and transfer taxes on the transfer of Common Stock from the
Trustee to a Participant or his Beneficiary shall be charged
appropriately against the Accounts of Participants as the Committee
shall determine. Any expenses paid by the Company pursuant to Section
9.11 and this section shall be subject to reimbursement by other
Employing Companies of their proportionate shares of such expenses as
determined by the Committee.
II.
Except as amended herein by this Second Amendment, the Plan shall
remain in full force and effect as amended and restated by the Company prior to
the adoption of this Second Amendment.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly
authorized officers has adopted this Second Amendment to The Southern Company
Employee Stock Ownership Plan this ____ day of _________________________, 1996
to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By:
Its:
ATTEST:
By:
Its:
[CORPORATE SEAL]
Exhibit 10(a)68
FIRST AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
ALABAMA POWER COMPANY
WHEREAS, the Board of Directors of Alabama Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Alabama Power Company (the "Plan") effective January 1, 1989 in
order to comply with the Internal Revenue Code of 1986, as amended, (the "Code")
and to make other technical and clarifying changes; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
additional requirements imposed by the Internal Revenue Service and to make
certain other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1989, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.14(b) should be deleted in its entirety and replaced by the
following:
(b) Notwithstanding the above, "Earnings" with
respect to any commissioned salesperson means the salary or
wages of an Employee of the Employer or employee of any
Affiliated Employer within any Plan Year, without including
overtime, and before deductions for taxes, Social Security,
etc. but applying those adjustments identified in paragraphs
(a)(2), (3) and (4) above. In addition, "Earnings" for any
Employee who is a regular part-time employee means with regard
to paragraph (a)(1) above the highest annual rate of salary or
wages based on a forty (40) hour work week.
II.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary
Social Security benefit (primary old age insurance benefit) to
which it is estimated that an Employee will become entitled in
accordance with the Social Security Act in force as provided
in subparagraphs (a) through (e) below which shall exceed $168
per month on and after January 1, 1989, and $250 per month, on
and after January 1, 1991, multiplied by a fraction not
greater than one, the numerator of which shall be the
Employee's total Accredited Service, and the denominator of
which shall be such total Accredited Service plus the
Accredited Service the Employee could have accumulated if he
had continued his employment from the date he terminates
service with his Employer or any Affiliated Employer until his
Normal Retirement Date. For purposes of determining the
estimated Federal primary Social Security benefit used in the
Social Security Offset, an Employee shall be deemed to be
entitled to receive Federal primary Social Security benefits
after retirement or death, if earlier, regardless of the fact
that he may have disqualified himself to receive payment
thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history
of the Employee as provided in Section 5.4(b) and shall be
determined pursuant to the following, as applicable:
III.
Section 2.6 should be deleted in its entirety and replaced by the
following:
2.6 Exclusion of certain categories of employees.
Notwithstanding any other provision of this Article II, leased
employees shall not be eligible to participate in the Plan. In
addition, temporary employees, except Employees as defined in
Section 1.17 participating in the Plan prior to July 1, 1991,
shall not be eligible to participate in the Plan. Thirdly, any
person who is employed by Electric City Merchandise Company,
Inc. on or after May 1, 1988, or who is employed by Savannah
Electric and Power Company on or after March 3, 1988, shall
not be entitled to accrue Retirement Income under the Plan
while employed at such companies. Lastly, any person who is a
member of the United Mine Workers at the date of his
employment, or on October 1, 1948, or thereafter becomes a
member of said union or any other mine workers union having a
retirement or similar fund, shall on the date of his
employment or on October 1, 1948 or the date of his becoming a
member, whichever is later, be deemed for purposes of the Plan
to have terminated his employment with the Employer on such
date and shall not be eligible to participate in the Plan;
provided that any such person shall again become an employee
eligible to participate in the Plan upon termination of his
membership in such union subject to inclusion in the Plan as a
new employee.
IV.
Section 4.2(a) should be deleted in its entirety and replaced by the
following:
4.2 Accredited Service.
(a) Each Employee meeting the requirements of Article II
shall, in addition to any Accredited Service to which he may
be entitled in accordance with Section 4.1, be credited with
Accredited Service as set forth in (b) below. Any such
Employee who is on authorized leave of absence with regular
pay shall be credited with Accredited Service during the
period of such absence. Any such Employee who is a
"participant in the Plan" within the meaning of that term as
defined in paragraph (a) of Section 5.12 shall be credited
with Accredited Service during all or such portion of the
period of his absence to serve in the Armed Forces of the
United States as may be recognized under paragraph (b) of
Section 5.12. Employees on authorized leave of absence without
regular pay, other than Employees deemed to accrue Hours of
Service under Section 4.4, and persons in the Armed Forces who
are not "participants in the Plan" within the meaning of that
term as defined in paragraph (a) of section 5.12 shall not be
credited with Accredited Service for the period of such
absence.
An Employee who is on an approved leave of absence from the
Employer to serve as Business Manager or Assistant Business
Manger for System Council U-19, and who makes timely written
election to participate in the Plan during such leave of
absence, shall be credited with Accredited Service for the
period (or portion of the period) after January 1, 1989
covered by such timely written election. For the purpose of
determining the Earnings of such Employee during the period
(or portion of the period) after January 1, 1989, of such
leave of absence, he shall be deemed to have received Earnings
at the rate of Earnings he would have been eligible to receive
had he remained in the employ of the Employer.
V.
Effective September 1, 1996, Section 5.4(a) should be deleted in its
entirety.
VI.
Effective September 1, 1996, Section 5.4(b) should be deleted in its
entirety and a new Section 5.4 should be inserted as follows:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an
Employee's Retirement Income under the Plan, the Social
Security Offset shall be determined by using the actual salary
history of the Employee during his employment with the
Employer or any Affiliated Employer, provided that in the
event that the Retirement Board is unable to secure such
actual salary history within 90 days (or such longer period as
may be prescribed by the Retirement Board) following the later
of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is
notified of the Retirement Income to which he is entitled, the
salary history shall be determined in the following manner:
(1) The salary history shall be estimated by
applying a salary scale, projected backwards, to the
Employee's compensation from the Employer for W-2
purposes for the first Plan Year following the most
recent Plan Year for which the salary history is
estimated. The salary scale shall be a level
percentage per year equal to six percent (6%) per
annum.
(2) The Plan shall give clear written notice
to each Employee of the Employee's right to supply
the actual salary history and of the financial
consequences of failing to supply such history. Such
notice shall state that the actual salary history is
available from the Social Security Administration.
For purposes of determining the Social Security
Offset in calculating the Retirement Income of an Employee
entitled to receive a public pension based on his employment
with a Federal, state, or local government agency, no
reduction in such Employee's Social Security benefit resulting
from the receipt of a public pension shall be recognized.
VII.
Effective September 1, 1996, Section 5.4(c) should be deleted in its
entirety.
VIII.
Section 5.9(a) should be deleted in its entirety and replaced by the
following:
5.9 Required distributions.
(a) Once a written claim for benefits is filed with
the Retirement Board, payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day
of the Plan Year in which the latest of the following events
occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the
Employee commenced participation in the Plan; or
(3) the Employee's separation from service from the
Employer or any Affiliated Employer.
IX.
Section 5.9(d) should be deleted in its entirety and replaced by the
following:
(d) Distribution upon death of Employee
(1) Death after commencement of benefits
If the Employee dies before his entire nonforfeitable
interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Employee as
set forth in the provisions of Article VII.
(2) Death prior to commencement of benefits
If the Employee dies before the distribution of his
nonforfeitable interest has begun, the entire interest,
subject to the provisions of Article VII, shall be distributed
monthly to his Provisional Payee, if any, over such
Provisional Payee's remaining lifetime.
X.
Effective January 1, 1996, Section 10.7 should be deleted in its
entirety and replaced by the following:
10.7 Accounts and tables. The Retirement Board shall maintain
accounts showing the fiscal transactions of the Plan, and
shall keep in convenient form such data as may be necessary
for actuarial valuations with respect to the operation and
administration of the Plan. The Retirement Board shall
annually report to the Board of Directors and provide a
reasonable summary of the financial condition of the Trust and
the operation of the Plan for the past year, and any further
information which the Board of Directors may require.
The Retirement Board may, with the advice of an
enrolled actuary, adopt from time to time mortality and other
tables as it may deem necessary or appropriate for use in
calculating benefits under the Plan.
XI.
Section 10.9 should be deleted in its entirety and replaced by the
following:
10.9 Areas in which the Retirement Board does not have
responsibility. The Retirement Board shall not have
responsibility which respect to control or management of the
assets of the Plan. The Trustee or an insurance company, if
funds of the Plan shall be held by an insurance company, shall
have the sole responsibility for the administration of the
assets of the Plan as provided in the Trust Agreement or
contract with an insurance company, except to the extent that
an "Investment Manager," as that term is defined in ERISA,
appointed by the Board of Directors shall have responsibility
for the management of the assets of the Plan, or some part
thereof, including the power to acquire and dispose of the
assets of the Plan, or some part thereof.
The responsibility for providing a procedure for
establishing and carrying out a funding policy and method for
the Plan consistent with the objectives of the Plan and the
requirements of Title I of ERISA shall be that of the Board of
Directors or such committee, whether or not comprised of
members of the Board of Directors, as the Board of Directors
may from time to time designate and shall not be the
responsibility of the Retirement Board.
Effective July 23, 1993, the Pension Fund Investment
Review Committee of The Southern Company System shall
recommend for approval by the Board of Directors of Southern
Company Services, Inc. any Investment Manager that shall have
responsibility with respect to management of any Plan assets.
In addition, the Pension Fund Investment Review Committee
shall assume all responsibility for providing a procedure for
establishing and carrying out a funding policy and method for
the Plan consistent with the objectives of the Plan and the
requirements of Title I of ERISA.
XII.
Article XV should be deleted in its entirety and replaced by the
following:
ARTICLE XV
Post-retirement Medical Benefits
15.1 Definitions. The following words and phraseology as used
herein shall have the following meanings unless a different meaning is
plainly required by the context:
(a) "Pensioned Employee" means a former Employee of the
Employer (1) who is eligible to receive Retirement Income after the
attainment of his Normal or Deferred Retirement Date, as applicable,
pursuant to the terms of the Plan, (2) who was insured under the
Employer's program of medical insurance benefits on the last day worked
prior to retirement, (3) who is not insured under any group insurance
plan providing hospitalization and medical coverage to which the
Employer contributes, (4) who resides in the United States,and (5) who
has become eligible for Medicare and, if the Pensioned Employee's
retirement occurred before attainment of Medicare eligibility, the
premiums for hospitalization and medical coverage were being deducted
from his Retirement Income continuously until his eligibility for
Medicare. A "Pensioned Employee" shall not include a Key Employee, as
defined in Section Error! Reference source not found.(g), or effective
January 1, 1991, any Pensioned Employee of an Employer that has adopted
the Plan pursuant to Section Error! Reference source not found. hereof
but does not provide medical benefits to its Pensioned Employees.
(b) "Spouse " means the Pensioned Employee's spouse (1) who is
not legally separated from the Pensioned Employee, (2) who was insured
under the Employer's program of medical insurance benefits on the last
day prior to the Pensioned Employee's retirement, (3) who resides in
the United States, (4) who is not insured under any group insurance
plan providing hospitalization and medical coverage to which the
Employer contributes, (5) who meets the eligibility requirements of the
Medicare program, (6) who has become eligible for Medicare and, if the
Pensioned Employee's retirement occurred before his Spouse became
eligible for Medicare, premiums for hospitalization and medical
coverage for both the Pensioned Employee and his Spouse were being
deducted from his Retirement Income continuously until his Spouse
became eligible for Medicare, and (7) in the case of a surviving spouse
of a deceased Pensioned Employee, who was insured as a Spouse at the
time of the Pensioned Employee's death.
(c) "Covered Individual" means a Pensioned Employee or Spouse
of a Pensioned Employee who is eligible to receive medical benefits
under Article XV.
(d) "Qualified Transfer" means a transfer of Excess Pension
Assets of the Plan to a Health Benefits Account after December 31,
1990, but before December 31, 2000, which satisfies the requirements
set forth in paragraphs (1) through (6) below.
(1) (A) Except as provided in Section 15.1(d)(1)(B)
below, no more than 1 transfer per Plan Year may be treated as
a Qualified Transfer.
(B) Subject to the provisions of Sections
15.1(d)(3), (4) and (5) below, a transfer shall be
treated as a Qualified Transfer if such transfer
(i) is made after the close of the
Plan Year preceding the Employer's first
Plan Year beginning after December 31, 1990,
and before the earlier of (I) the due date
(including extensions) for the filing of the
Employer's corporate tax return for such
preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the
expenditures of the Employer for Qualified
Current Retiree Health Liabilities for such
preceding Plan Year.
(iii) The reduction described in the
second paragraph of Section 15.1(d)(6)(G)
shall not apply to a transfer described in
Section 15.1(d)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
15.1(d)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 15.1(d)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 15.1(d)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Spouse under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 15.1(d)(1)(B), the requirements of this Section
15.1(d)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 15.1(d)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
15.1(d)(5), the Employer may elect at any time during the Plan Year to
have this Section 15.1(d)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 15.1(d), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to
any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 15.1(d)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Spouses.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
15.1(d)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 15.1(d)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any,
of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section 412(c)(7)(A)(i), or
(II) 125 percent of current liability (as defined in
Code Section 412(c)(7)(B)).
The determination under this paragraph shall
be made as of the most recent valuation date of the
Plan preceding the Qualified Transfer.
(F) "Health Benefits Account" means an account
established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities"
means, with respect to any Plan Year, the aggregate amounts,
including administrative expenses, which would have been
allowable as a deduction to the Employer for payment of
Applicable Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were provided
directly by the Employer and the Employer used the cash
receipts and disbursements method of accounting. For purposes
of the preceding sentence, the rule of Code Section
419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or
before December 8, 1994, the amount determined in the
paragraph above shall be reduced by any amount previously
contributed to a Health Benefits Account or welfare benefit
fund, as defined in Code Section 419(e)(1), to pay for the
Qualified Current Retiree Health Liabilities. The portion of
any reserves remaining as of the close of December 31, 1990
shall be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount determined under
the preceding paragraph shall be reduced by the amount which
bears the same ratio to such amount as the value (as of the
close of the Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits Accounts or
welfare benefit funds, as defined in section 419(e)(1), set
aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without
regard to this paragraph.
15.2 Eligibility of Pensioned Employees and their Spouses.
(a) A person who is a Pensioned Employee on January 1, 1989
shall be eligible for coverage as a Pensioned Employee on January 1,
1989, provided he was covered as an Employee under a group medical plan
maintained by the Employer immediately prior to the time he became a
Pensioned Employee.
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered as an Employee under a
group medical plan maintained by the Employer immediately prior to the
time he became a Pensioned Employee.
(c) A Spouse of a Pensioned Employee shall be eligible for
coverage under this Plan on the later of (1) the date the Pensioned
Employee becomes eligible for coverage hereunder and (2) the date such
person becomes a Spouse.
15.3 Medical benefits. The medical benefits provided under
this Article XV by the Employer and each adopting Employer are set
forth in the copy of each such Employer's medical benefits plan which
is attached hereto as Exhibit A and specifically incorporated herein by
reference in its entirety, as may be amended from time to time. Such
medical benefits shall be subject without limitation to all
deductibles, maximums, exclusions, coordination with Medicare and other
medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
15.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as
follows:
(1) when Article XV is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of a Spouse shall cease as follows:
(1) when Article XV is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
15.5 Continuation of coverage to certain individuals.
(a) Anything in Article XV to the contrary notwithstanding, a
Pensioned Employee or Spouse shall be entitled to elect continued
medical coverage as provided under the terms of Article XV upon the
occurrence of a Qualifying Event, provided such Pensioned Employee or
Spouse was entitled to benefits under Article XV on the day prior to
the Qualifying Event.
(1) "Qualifying Event" means with respect to any
Pensioned Employee or Spouse, as appropriate, (A) the death of
the Pensioned Employee, (B) the divorce or legal separation of
the Pensioned Employee from his Spouse, or (C) a proceeding in
a case under Title 11, United States Code, with respect to the
Employer.
(b) The Pensioned Employee or Spouse electing continued
coverage under this Section 0 shall be required to pay such monthly
contributions as determined by the Employer to be equal to a reasonable
estimate of 102% of the cost of providing coverage for such period for
similarly situated beneficiaries which (1) is determined on an
actuarial basis and (2) takes into account such factors as the
Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee
or Spouse shall begin on the date of the Qualifying Event and end not
earlier than the first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XV of the Plan;
(3) The failure of the Pensioned Employee or Spouse to
pay any required contribution when due;
(4) The date on which the Pensioned Employee or
Spouse first becomes, after the date of his election, (A) a
covered employee under any other group health plan which does
not contain any exclusion or limitation with respect to any
preexisting condition of such individual, or (B) entitled to
benefits under Title XVIII of the Social Security Act; or
(5) The date the Spouse becomes covered under another
group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such
Spouse.
(d) Any election to continue coverage under this Section 0
shall be made during the election period (1) beginning not later than
the termination date of coverage by reason of the Qualifying Event and
(2) ending sixty (60) days following the later of the date described in
(1) above or the date any Pensioned Employee or Spouse receives notice
of a Qualifying Event from the Employer.
(e) The Employer shall provide each Pensioned Employee and
Spouse, if any, written notice of the rights provided in this Section
0. The Pensioned Employee or Spouse is required to notify the Employer
within thirty (30) days of any Qualifying Event described in Section
0(a)(1)(B), and the Employer shall provide the Spouse written notice of
the rights provided in this Section 0 within fourteen (14) days
thereafter.
15.6 Contributions or Qualified Transfers to fund medical
benefits.
(a) Any contributions which the Employer deems necessary to
provide the medical benefits under Article XV will be made from time to
time by or on behalf of the Employer, and contributions shall be
required of the Pensioned Employees to the Employer's medical benefit
plan in amounts determined in the sole discretion of the Employer from
time to time. All Employer contributions shall be made to the Trustee
under the Trust Agreement provided for in Article XI and shall be
allocated to a separate account maintained solely to fund the medical
benefits provided under this Article XV. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding
of medical benefits under this Article XV. In the event that a
Pensioned Employee's interest in an account, or his Spouse's,
maintained pursuant to this Article XV is forfeited prior to
termination of the Plan, the forfeited amount shall be applied as soon
as possible to reduce Employer contributions made under this Article
XV. In no event at any time prior to the satisfaction of all
liabilities under this Article XV shall any part of the corpus or
income of such separate account be used for, or diverted to, purposes
other than for the exclusive purpose of providing benefits under this
Article XV.
The amount of contributions to be made by or on behalf of the
Employer for any Plan Year, if any, shall be reasonable and
ascertainable and shall be determined in accordance with any generally
accepted actuarial method which is reasonable in view of the provisions
and coverage of Article XV, the funding medium, and any other
applicable considerations. However, the Employer is under no obligation
to make any contributions under Article XV after Article XV is
terminated, except to fund claims for medical expenses incurred prior
to the date of termination.
The medical benefits provided under this Article XV, when
added to any life insurance protection provided under the Plan, shall
be subordinate to the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from
January 1, 1987) plus the costs of any life insurance protection shall
not exceed twenty-five percent (25%) of the sum of the aggregate of
costs of retirement benefits under the Plan (other than past service
credits), the aggregate of costs of the medical benefits and the costs
of any life insurance protection (both measured from January 1, 1987).
The aggregate of costs of retirement benefits, other than for past
service credits, and the aggregate of costs of medical benefits
provided under the Plan shall be determined using the projected unit
credit funding method and the actuarial assumptions set forth in
Exhibit B, a copy of which is attached hereto and specifically
incorporated herein by reference in its entirety, and as may be amended
from time to time by the committee responsible for providing a
procedure for establishing and carrying out a funding policy and method
for the Plan pursuant to Section 10.9 of the Plan. Effective for
contributions made after January 1, 1990, the limitations set forth in
the preceding two sentences in this paragraph on amounts that may be
contributed to fund medical benefits under this Article XV shall be
based on contributions alone and not on cost. Contributions allocated
to any separate account established for a Pensioned Employee from which
medical benefits will be payable solely to such Pensioned Employee or
his Spouse shall be treated as an Annual Addition as defined in Section
6.6(a) to any defined contribution plan maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the
right, in its sole discretion, to make a Qualified Transfer of all or a
portion of any Excess Pension Assets contributed to fund Retirement
Income under the Plan to the Health Benefits Accounts to fund medical
benefits under this Article XV.
15.7 Pensioned Employee Contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer
promptly in writing when a change in the amount of the Pensioned
Employee's contribution is in order because his Spouse has become
ineligible for coverage under this Article XV. No person shall become
covered under this Article XV for whom the Pensioned Employee has not
made the required contribution. Any contribution paid by a Pensioned
Employee for any person after such person shall have become ineligible
for coverage under this Article XV shall be returned upon written
request but only provided such written request by or on behalf of the
Pensioned Employee is received by the Employer within ninety (90) days
from the date coverage terminates with respect to such ineligible
person.
15.8 Amendment of Article XV. The Employer reserves the right,
through action of its Board of Directors, to amend Article XV
(including Exhibit A) pursuant to Section 13.1 or the Trust without the
consent of any Pensioned Employee or his Spouse, provided, however,
that no amendment of this Article or the Trust shall cancel the payment
or reimbursement of expenses for claims already incurred by a Pensioned
Employee or his Spouse prior to the date of any amendment, nor shall
any such amendment increase the duties and obligations of the Trustee
except with its consent. This Article XV, as set forth in the Plan
document, is not a contract and non-contributory benefits hereunder are
provided gratuitously, without consideration from any Pensioned
Employee or his Spouse. The Employer makes no promise to continue these
benefits in the future and rights to future benefits will never vest.
In particular, retirement or the fulfillment of the prerequisites for a
retirement benefit pursuant to the terms of the Plan or under the terms
of any other employee benefit plan maintained by the Employer shall not
confer upon any Pensioned Employee or his Spouse any right to continued
benefits under this Article XV.
15.9 Termination of Article XV. Although it is the intention
of the Employer that this Article shall be continued and the
contribution shall be made regularly thereto each year, the Employer,
by action of its Board of Directors pursuant to Section 13.1, may
terminate this Article XV or permanently discontinue contributions at
any time in its sole discretion. This Article XV, as set forth in the
Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Spouse. The Employer makes no promise to
continue these benefits in the future and rights to future benefits
will never vest. In particular, retirement or the fulfillment of the
prerequisites for a retirement benefit pursuant to the terms of the
Plan or under the terms of any other employee benefit plan maintained
by the Employer shall not confer upon any Pensioned Employee or his
Spouse any right to continued benefits under this Article XV. Effective
January 1, 1991, in the event the Employer or any adopting Employer
shall terminate its provision of the medical benefits described in
Exhibit A to Section 0 of the Plan to its Pensioned Employees, this
Article XV of the Plan shall automatically terminate with respect to
the Pensioned Employees and their Spouses of such Employer without the
requirement of any action by such Employer.
15.10 Reversion of assets upon termination. Upon the
termination of this Article XV and the satisfaction of all liabilities
under this Article XV, all remaining assets in the separate account
described in Section 0 shall be returned to the Employer.
XIII.
Article XVI should be deleted in its entirety and replaced by the
following:
ARTICLE XVI
Post-retirement Medical Benefits Prior
to Attainment of Normal Retirement Date
16.1 Definitions. The following words and phraseology as used
herein shall have the following meanings unless a different meaning is
plainly required by the context:
(a) "Pensioned Employee" means a former Employee of the
Employer who is receiving Retirement Income after his retirement at his
Early Retirement Date and prior to attainment of his Normal Retirement
Date, pursuant to the terms of the Plan, and who was insured under the
Employer's program of medical insurance benefits on the last day prior
to his retirement. The term "Pensioned Employee" shall not include (1)
any former Employee who terminated his service with the Employer prior
to his Early Retirement Date and who is entitled to Retirement Income
under the Plan or, effective January 1, 1991, (2) a Key Employee, as
defined in Section 14.6(g), or (3) any Pensioned Employee of an
Employer that has adopted the Plan pursuant to Section 14.1 hereof but
does not provide medical benefits to its Pensioned Employees.
(b) "Dependents" means a person who was insured by the
Pensioned Employee under the Employer's program of medical insurance on
the last day prior to retirement and who is:
(1) the spouse of the Pensioned Employee, or
(2) an unmarried child of either or both under nineteen
(19) years of age, or
(3) an unmarried child of either or both under
twenty-three (23) years of age who is a full-time student in
a course of study or training (approved by the Employer),
not employed on a regular full-time basis and chiefly
dependent upon the Pensioned Employee for support, or
(4) an unmarried child of either or both who is
mentally or physically incapacitated and unable to support
himself and chiefly dependent upon the Pensioned Employee
for support, if the incapacity begins and is certified to
the Employer by a Doctor of Medicine or Osteopathy before
the child reaches the age of nineteen (19) years. Whenever a
claim for benefits under Article XVI is submitted, another
certification of incapacity must be with the claim. The
Employer is entitled to have its physician examine such
child prior to acceptance of such child's coverage and
periodically thereafter to ensure the continuation of
incapacity.
The term "child" as used in this definition is limited to the
following:
(1) Any natural child of the Pensioned Employee;
(2) Any child of the Pensioned Employee's spouse who
regularly and permanently resides with the Pensioned Employee
and such spouse in a parent-child relationship during the
marriage; and
(3) A child placed for adoption with a Pensioned
Employee (as such term is defined in Exhibit C).
(c) "Qualified Transfer" means a transfer of Excess Pension
Assets of the Plan to a Health Benefits Account after December 31,
1990, but before December 31, 2000, which satisfies the requirements
set forth in paragraphs (1) through (6) below.
(1) (A) Except as provided in Section 16.1(c)(1)(B)
below, no more than 1 transfer per Plan Year may be treated as
a Qualified Transfer.
(B) Subject to the provisions of Sections
16.1(c)(3), (4) and (5) below, a transfer shall be
treated as a Qualified Transfer if such transfer
(i) is made after the close of the
Plan Year preceding the Employer's first
Plan Year beginning after December 31, 1990,
and before the earlier of (I) the due date
(including extensions) for the filing of the
Employer's corporate tax return for such
preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the
expenditures of the Employer for Qualified
Current Retiree Health Liabilities for such
preceding Plan Year.
(iii) The reduction described in the
second paragraph of Section 16.1(c)(6)(G)
shall not apply to a transfer described in
Section 16.1(c)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
16.1(c)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 16.1(c)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 16.1(c)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 16.1(c)(1)(B), the requirements of this Section
16.1(c)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 16.1(c)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
16.1(c)(5), the Employer may elect at any time during the Plan Year to
have this Section 16.1(c)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 16.1(c), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to
any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 16.1(c)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
16.1(c)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 16.1(c)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any,
of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section 412(c)(7)(A)(i), or
(II) 125 percent of current liability (as defined in
Code Section 412(c)(7)(B)).
The determination under this paragraph shall
be made as of the most recent valuation date of the
Plan preceding the Qualified Transfer.
(F) "Health Benefits Account" means an account
established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities"
means, with respect to any Plan Year, the aggregate amounts,
including administrative expenses, which would have been
allowable as a deduction to the Employer for payment of
Applicable Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were provided
directly by the Employer and the Employer used the cash
receipts and disbursements method of accounting. For purposes
of the preceding sentence, the rule of Code Section
419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or
before December 8, 1994, the amount determined in the
paragraph above shall be reduced by any amount previously
contributed to a Health Benefits Account or welfare benefit
fund, as defined in Code Section 419(e)(1), to pay for the
Qualified Current Retiree Health Liabilities. The portion of
any reserves remaining as of the close of December 31, 1990
shall be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount determined under
the preceding paragraph shall be reduced by the amount which
bears the same ratio to such amount as the value (as of the
close of the Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits Accounts or
welfare benefit funds, as defined in section 419(e)(1), set
aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without
regard to this paragraph.
16.2 Application for and commencement of Coverage.
(a) Every Pensioned Employee, as defined in Section 16.1,
shall be entitled to apply for coverage for himself and his eligible
Dependents.
(b) If the required contributions for coverage of a covered
individual have been paid in advance in accordance with Article XVI,
the Employer's coverage of a Pensioned Employee and his Dependents who
were continuously covered under a prior medical plan maintained by the
Employer on December 31, 1989 or the day before the retirement of a
Pensioned Employee, shall continue under Article XVI commencing with
such effective date, subject to any waiting periods. Application for
such prior medical plan shall be deemed to be application for coverage
under Article XVI.
16.3 Medical benefits. The medical benefits provided under
this Article XVI by the Employer and each adopting Employer are set
forth in the copy of each such Employer's medical benefits plan which
is attached hereto as Exhibit C and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time.
Such medical benefits shall be subject without limitation to all
deductibles, maximums, exclusions, coordination with Medicare and other
medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
16.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as
follows:
(1) when Article XVI is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit C.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XVI is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit C.
16.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVI to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be
entitled to elect continued medical coverage as provided under the
terms of Article XVI upon the occurrence of a Qualifying Event,
provided such Pensioned Employee, Dependent spouse, or Dependent child
was entitled to benefits under Article XVI on the day prior to the
Qualifying Event.
(1) "Qualifying Event" means with respect to any
Pensioned Employee, Dependent spouse, or Dependent child, as
appropriate, (A) the death of the Pensioned Employee, (B) the
divorce or legal separation of the Pensioned Employee from the
Dependent spouse, (C) a Dependent child ceasing to be a
Dependent as defined under the requirements of Article XVI, or
(D) a proceeding in a case under Title 11, United States Code,
with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued
coverage under this Section 16.5 shall be required to pay such monthly
contributions as determined by the Employer to be equal to a reasonable
estimate of 102% of the cost of providing coverage for such period for
similarly situated beneficiaries which (1) is determined on an
actuarial basis and (2) takes into account such factors as the
Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the
Qualifying Event and end not earlier than the first to occur of the
following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVI of the Plan;
(3) The failure of the Pensioned Employee or Dependent
to pay any required contribution when due;
(4) The date on which the Pensioned Employee or
Dependent first becomes, after the date of his election, (A)
a covered employee under any other group health plan which
does not contain any exclusion or limitation with respect to
any preexisting condition of such individual, or (B)
entitled to benefits under Title XVIII of the Social
Security Act; or
(5) The date the Dependent spouse becomes covered under
another group health plan which does not contain any
exclusion or limitation with respect to any preexisting
condition of such Dependent spouse.
(d) Any election to continue coverage under this Section 16.5
shall be made during the election period (1) beginning not later than
the termination date of coverage by reason of the Qualifying Event and
(2) ending sixty (60) days following the later of the date described in
(1) above or the date any Pensioned Employee, Dependent spouse, or
Dependent child receives notice of a Qualifying Event from the
Employer.
(e) The Employer shall provide each Pensioned Employee and
Dependent spouse, if any, written notice of the rights provided in this
Section 16.5. The Pensioned Employee or Dependent spouse is required to
notify the Employer within thirty (30) days of any Qualifying Event
described in Section 16.5(a)(1)(B) or (C), and the Employer shall
provide the Dependent spouse or Dependent child written notice of the
rights provided in this Section 16.5 within fourteen (14) days
thereafter. Notice to the Dependent spouse shall be deemed notice to
each Dependent child residing with such spouse at the time such
notification is made.
16.6 Contributions or Qualified Transfers to fund medical
benefits.
(a) Any contributions which the Employer deems necessary to
provide the medical benefits under Article XVI will be made from time
to time by or on behalf of the Employer, and contributions shall be
required of the Pensioned Employees in amounts determined in the sole
discretion of the Employer from time to time. All contributions shall
be made to the Trustee under the Trust Agreement provided for in
Article XI and shall be allocated to a separate account maintained
solely to fund the medical benefits provided under Article XVI. The
Employer shall designate that portion of any contribution to the Plan
allocable to the funding of medical benefits under this Article XVI. In
the event that a Pensioned Employee's interest in an account, or his
Dependents', maintained pursuant to this Article XVI is forfeited prior
to termination of the Plan, the forfeited amount shall be applied as
soon as possible to reduce Employer contributions made under this
Article XVI. In no event at any time prior to the satisfaction of all
liabilities under this Article XVI shall any part of the corpus or
income of such separate account be used for, or diverted to, purposes
other than for the exclusive purpose of providing benefits under this
Article XVI.
The minimum amount of contributions to be made by or on behalf
of the Employer for any Plan Year, if any, shall be reasonable and
ascertainable and shall be determined in accordance with any generally
accepted actuarial method which is reasonable in view of the provisions
and coverage of Article XVI, the funding medium, and any other
applicable considerations. However, the Employer is under no obligation
to make any contributions under Article XVI after Article XVI is
terminated, except to fund claims for medical expenses incurred prior
to the date of termination.
The medical benefits provided under this Article XVI, when
added to any life insurance protection provided under the Plan, shall
be subordinate to the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from
January 1, 1987) plus the costs of any life insurance protection shall
not exceed twenty-five percent (25%) of the sum of the aggregate of
costs of retirement benefits under the Plan (other than past service
credits), the aggregate of costs of the medical benefits and the costs
of any life insurance protection (both measured from January 1, 1987).
The aggregate of costs of retirement benefits, other than for past
service credits, and the aggregate of costs of medical benefits
provided under the Plan shall be determined using the projected unit
credit funding method and the actuarial assumptions set forth in
Exhibit B, a copy of which is attached hereto and specifically
incorporated herein by reference in its entirety, and as may be amended
from time to time by the committee responsible for providing a
procedure for establishing and carrying out a funding policy and method
for the Plan pursuant to Section 10.9 of the Plan. Effective for
contributions made after January 1, 1990, the limitations set forth in
the preceding two sentences in this paragraph on amounts that may be
contributed to fund medical benefits under this Article XV shall be
based on contributions alone and not cost. Contributions allocated to
any separate account established for a Pensioned Employee from which
medical benefits will be payable solely to such Pensioned Employee or
his Dependents shall be treated as an Annual Addition as defined in
Section 6.6(a) to any defined contribution plan maintained by the
Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion
of any Excess Pension Assets contributed to fund Retirement Income
under the Plan to the Health Benefits Accounts to fund medical benefits
under this Article XVI.
16.7 Pensioned Employee Contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer
promptly in writing when a change in the amount of the Pensioned
Employee's contribution is in order because a Dependent has become
ineligible for coverage under this Article XVI. No person shall become
covered under this Article XVI for whom the Pensioned Employee has not
made the required contribution. Any contribution paid by a Pensioned
Employee for any person after such person shall have become ineligible
for coverage under this Article XVI shall be returned upon written
request but only provided such written request by or on behalf of the
Pensioned Employee is received by the Employer within ninety (90) days
from the date coverage terminates with respect to such ineligible
person.
16.8 Amendment of Article XVI. The Employer reserves the
right, through action of its Board of Directors pursuant to Section
13.1, to amend Article XVI (including Exhibit C) or the Trust without
the consent of any Pensioned Employee, or any Dependent of a Pensioned
Employee, provided, however, that no amendment of this Article or the
Trust shall cancel the payment or reimbursement of expenses for claims
already incurred by a Pensioned Employee or his Dependent prior to the
date of any amendment, nor shall any such amendment increase the duties
and obligations of the Trustee except with its consent. This Article
XVI, as set forth in the Plan document, is not a contract and
non-contributory benefits hereunder are provided gratuitously, without
consideration from any Pensioned Employee or the Dependent of any
Pensioned Employee. The Employer makes no promise to continue these
benefits in the future and rights to future benefits will never vest.
In particular, retirement or the fulfillment of the prerequisites for a
retirement benefit pursuant to the terms of the Plan or under the terms
of any other employee benefit plan maintained by the Employer shall not
confer upon any Pensioned Employee or the Dependent of any Pensioned
Employee any right to continued benefits under this Article XVI.
16.9 Termination of Article XVI. Although it is the intention
of the Employer that this Article shall be continued and the
contribution shall be made regularly thereto each year, the Employer,
by action of its Board of Directors pursuant to Section 13.1, may
terminate this Article XVI or permanently discontinue contributions at
any time in its sole discretion. This Article XVI, as set forth in the
Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any
Pensioned Employee or the Dependent of any Pensioned Employee. The
Employer makes no promise to continue these benefits in the future and
rights to future benefits will never vest. In particular, retirement or
the fulfillment of the prerequisites for a retirement benefit pursuant
to the terms of the Plan or under the terms of any other employee
benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or the Dependent of any Pensioned Employee any right
to continued benefits under this Article XVI. Effective January 1,
1991, in the event the Employer or any adopting Employer shall
terminate its provision of the medical benefits described in Exhibit C
to Section 16.3 of the Plan to its Pensioned Employees, this Article
XVI of the Plan shall automatically terminate with respect to the
Pensioned Employees of such Employer without the requirement of any
action by such Employer.
16.10 Reversion of Assets upon Termination. Upon the
termination of this Article XVI and the satisfaction of all liabilities
under this Article XVI, any remaining assets in the separate account
described in Section 16.6 shall be returned to the Employer.
IN WITNESS WHEREOF, Alabama Power Company through its duly authorized
officers, has adopted this First Amendment to the Pension Plan for Employees of
Alabama Power Company this ____ day of _________________, 1996, to be effective
as stated herein.
ALABAMA POWER COMPANY
By: ________________________________
Title:______________________________
ATTEST:
By: _________________________
Title:________________________
[CORPORATE SEAL]
<PAGE>
SECOND AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
ALABAMA POWER COMPANY
WHEREAS, the Board of Directors of Alabama Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Alabama Power Company (the "Plan") effective January 1, 1989;
and
WHEREAS, the Company wishes to amend the Plan to provide ad hoc cost of
living increases to retirees; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 5.11 should be deleted in its entirety and replaced with the
following:
5.11 Increase in Retirement Income of retired Employees
(a) Retirement Income payable on and after January 1, 1991 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1991 pursuant to the Plan as in
effect prior to January 1, 1991 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of two percent (2%)
to a maximum of forty percent (40%) in accordance with the following
schedule:
Year in which Percentage
retirement occurred increase
1990 2%
1989 4%
1988 6%
1987 8%
1976 - 1986 10%
1971 - 1975 20%
1966 - 1970 30%
1965 and prior years 40%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1991 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1991
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1991 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1991 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(b) Retirement Income payable on and after January 1, 1996 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1996 pursuant to the Plan as in
effect prior to January 1, 1996 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of one and one-half
percent (1.5%) to a maximum of seven and one-half percent (7.5%) in
accordance with the following schedule:
Year in which Percentage
retirement occurred increase
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1996 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1996
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1996 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1996 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(c) This Section 5.11 shall not apply with respect to an
Employee who has not retired, but for whom the distribution of
Retirement Income has commenced pursuant to Section 5.9 of the Plan.
IN WITNESS WHEREOF, Alabama Power Company through its duly authorized
officer, has adopted this Second Amendment to the Pension Plan for Employees of
Alabama Power Company this ____ day of _________________, 1996, to be effective
as stated herein.
ALABAMA POWER COMPANY
By: _________________________
Title:_______________________
ATTEST:
By: ________________________
Title:_______________________
[CORPORATE SEAL]
<PAGE>
THIRD AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
ALABAMA POWER COMPANY
WHEREAS, the Board of Directors of Alabama Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Alabama Power Company (the "Plan") effective January 1, 1989;
and
WHEREAS, the Company wishes to amend the Plan to comply with certain
requirements imposed by the Retirement Protection Act of 1994, to reduce the
early retirement age from 55 to 50, to reduce the Social Security offset amount,
to provide for outsourcing of Plan administration to a third party
administrator, and to make certain other technical and miscellaneous changes;
and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.13 should be amended by adding the following paragraph to the
end of such section:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service and elects to retire in 1996 and who has not attained his
fifty-fifth (55th) birthday, such Employee's Early Retirement Date
shall be January 1, 1997.
II.
Section 1.31 should be deleted in its entirety and replaced with the
following:
1.31 "Qualified Election" means an election by an Employee or
former Employee on a prescribed form that concerns the form of
distribution of Retirement Income that must be in writing and must be
consented to by the Employee's spouse. The spouse's consent to such an
election must acknowledge the effect of such election, must be in
writing, and must be witnessed by a notary public. Notwithstanding this
consent requirement, if the Employee establishes to the satisfaction of
the Retirement Board (or its delegee) that such written consent may not
be obtained because the spouse cannot be located or because of such
other circumstances as the Secretary of the Treasury may by regulations
prescribe, an election by the Employee will be deemed a Qualified
Election. Any consent necessary under this provision shall be valid and
effective only with respect to the spouse who signs the consent, or in
the event of a deemed Qualified Election, with respect to such spouse.
A revocation of a prior Qualified Election may be made by the
Employee without consent at any time commencing within 90 days before
such Employee's fifty-fifth (55th) birthday but not later than before
the commencement of Retirement Income. Effective for Employees who have
an Hour of Service on or after January 1, 1996 and who (a) are not
covered by the terms of a collective bargaining agreement or (b) are
covered by the terms of a collective bargaining agreement but where the
bargaining unit representative and the Employer have mutually agreed to
participation in the Plan as amended, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding sentence.
III.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary Social
Security benefit (primary old age insurance benefit) to which it is
estimated that an Employee will become entitled in accordance with the
Social Security Act in force as provided in subparagraphs (a) through
(e) below which shall exceed $168 per month on and after January 1,
1989, $250 per month on and after January 1, 1991, and for Employees
who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and the Employer
have mutually agreed to participation in the Plan as amended, $325 per
month on and after January 1, 1996, multiplied by a fraction not
greater than one, the numerator of which shall be the Employee's total
Accredited Service, and the denominator of which shall be such total
Accredited Service plus the Accredited Service the Employee could have
accumulated if he had continued his employment from the date he
terminates service with his Employer or any Affiliated Employer until
his Normal Retirement Date. For purposes of determining the estimated
Federal primary Social Security benefit used in the Social Security
Offset, an Employee shall be deemed to be entitled to receive Federal
primary Social Security benefits after retirement or death, if earlier,
regardless of the fact that he may have disqualified himself to receive
payment thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history of the
Employee as provided in Section 5.4 and shall be determined pursuant to
the following, as applicable:
IV.
Section 3.2 should be amended by adding the following paragraph to the
end thereof:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service in 1996, who has not attained his fifty-fifth (55th) birthday
and who elects to retire pursuant to uniform rules established for
Employees retiring pursuant to this paragraph, such Employee's Early
Retirement Date shall be January 1, 1997.
V.
Section 4.4(a) should be deleted in its entirety and replaced with the
following:
(a) If an Employee included in the Plan who has completed at
least five (5) Vesting Years of Service becomes totally disabled and is
granted either Social Security disability benefits or long-term
disability benefits under a long-term disability benefit plan of the
Employer, he shall be considered to be on a leave of absence, herein
referred to as a "Disability Leave." An Employee's Disability Leave
shall be deemed to begin on the initial date of the disability and
shall continue until the earlier of: (1) the end of the month in which
he shall cease to be entitled to receive Social Security Disability
benefits and long-term disability benefits under a long-term disability
benefit plan of the Employer; (2) his death; and (3) his Retirement
Date if he elects to have his Retirement Income commence on such date.
During the period of the Employee's Disability Leave, he shall, for
purposes of the Plan, be deemed to have received Earnings at the
regular rate in effect for him.
VI.
Section 5.3(a) should be deleted in its entirety and replaced with the
following:
(a) Upon retirement at Early Retirement Date, his Minimum
Retirement Income (before adjustment for Provisional Payee designation,
if any) shall be an amount equal to 1.70% of his Average Monthly
Earnings multiplied by his years (and fraction of a year) of Accredited
Service earned as of his Early Retirement Date including a Social
Security Offset.
VII.
Section 5.4 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an Employee's
Retirement Income under the Plan, the Social Security Offset shall be
determined by using the actual salary history of the Employee during
his employment with the Employer or any Affiliated Employer, provided
that in the event that the Retirement Board (or its delegee) is unable
to secure such actual salary history within 180 days following the
later of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is notified of
the Retirement Income to which he is entitled, the salary history shall
be determined in the following manner:
VIII.
Section 5.5 should be deleted in its entirety and replaced with the
following:
5.5 Early Retirement Income. The monthly amount of Retirement
Income payable to an Employee who retires from the service of the
Employer at his Early Retirement Date subject to the limitations of
Section 6.2, will be equal to his Retirement Income determined in
accordance with Sections 5.1 and 5.3 based on his Accredited Service to
his Early Retirement Date, reduced by three-tenths of one percent
(0.3%) for each calendar month by which the commencement date of his
Retirement Income precedes his Normal Retirement Date but follows the
first day of the month following his attainment of his fifty-fifth
(55th) birthday.
Effective for Employees who have an Hour of Service on or
after January 1, 1996, and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) elect to retire in accordance with this
Section 5.5 on or after attainment of age fifty (50) but before
attainment of age fifty-five (55), Retirement Income shall be
determined as in the preceding paragraph including an additional
reduction of one-third of one percent (0.33%) for each calendar month
by which the commencement date precedes the first day of the month
following any such Employee's attainment of his fifty-fifth (55th)
birthday.
At the option of the Employee exercised at or prior to
commencement of his Retirement Income on or after his Early Retirement
Date (provided he shall not have in effect at such Early Retirement
Date a Provisional Payee designation pursuant to Article VII), he may
have his Retirement Income adjusted upwards in an amount which will
make his Retirement Income payable up to age sixty-five (65) equal, as
nearly as may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to become payable
after age sixty-five (65), as computed at the time of his retirement in
accordance with Section 5.3(a), plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after age
sixty-five (65). The Federal primary Social Security benefit used in
calculating an Employee's Retirement Income payable under the Plan
shall be determined by using the salary history of the Employee during
his employment with the Employer or any Affiliated Employer, as
calculated in accordance with Section 5.4.
IX.
Section 5.7 should be deleted in its entirety and replaced with the
following:
5.7 Payment of Retirement Income. The first payment of an
Employee's Retirement Income will be made on his Early Retirement Date,
Normal Retirement Date, Deferred Retirement Date, or date of
commencement of payment of Retirement Income in accordance with Section
8.2 or 8.6, as the case may be; provided that commencement of the
distribution of an Employee's Retirement Income shall not be made prior
to his Normal Retirement Date without the consent of such Employee,
except as provided in Section 8.4 of the Plan.
Notwithstanding anything to the contrary above, if in
accordance with this Section 5.7, an Employee is entitled to receive
Retirement Income commencing at his Early Retirement Date, he may, in
lieu of commencing payment of his Retirement Income upon his Early
Retirement Date, elect to receive such Retirement Income commencing as
of the first day of any month after his Early Retirement Date and
preceding his Normal Retirement Date in an amount equal to his Accrued
Retirement Income determined as of the commencement of his Retirement
Income on or after his Early Retirement Date determined in accordance
with Section 5.5. An election pursuant to this Section 5.7 to have
Retirement Income commence prior to Normal Retirement Date shall be
made on a prescribed form and shall be filed with the Retirement Board
(or its delegee) at least thirty (30) days before Retirement Income is
to commence.
In the event of the death of an Employee who has designated a
Provisional Payee or is deemed to have done so in accordance with
Article VII, if the designation has become effective, the first payment
to be made to the Provisional Payee pursuant to Article VII shall be
made to the Provisional Payee on the first day of the month after the
later of (a) the Employee's death and (b) the date on which the
Employee would have attained his fifty-fifth (55th) birthday if he had
survived to such date, if the Provisional Payee shall then be alive and
proof of the Employee's death satisfactory to the Retirement Board (or
its delegee) shall have been received by it. Subsequent payments will
be made monthly thereafter until the death of such Provisional Payee.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who dies in 1996
while in service with the Employer and who has attained his fiftieth
(50th) birthday but has not attained his fifty-fifth (55th) birthday at
the time of his death, such Employee's Provisional Payee shall commence
receipt of Retirement Income on the earlier of the first day of the
month following the date on which the Employee would have attained his
fifty-fifth (55th) birthday if he were still alive or on January 1,
1997, provided the Employee's Provisional Payee is alive and proof of
the Employee's death satisfactory to the Retirement Board (or its
delegee) is received.
In any event, payment of Retirement Income, including any
adjustments thereto caused by an amendment to the Plan providing for or
which has the effect of providing retroactively increased Retirement
Income, to the Employee shall begin not later than the sixtieth (60th)
day after the later of the close of the Plan Year in which falls (a)
the Employee's Normal Retirement Date or (b) the date the Employee
terminates his service with the Employer or any Affiliated Employer.
Notwithstanding the provisions of the Plan for the monthly payment of
Retirement Income, such income may be adjusted and payable annually in
arrears if the amount of the Retirement Income is less than $10.00 per
month.
X.
Section 5.9(a) should be deleted in its entirety and replaced with the
following:
(a) Once a written claim for benefits is filed with the
Retirement Board (or its delegee), payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day of the
Plan Year in which the latest of the following events occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the
Employee commenced participation in the Plan; or
(3) the Employee's separation from service from the
Employer or any Affiliated Employer.
XI.
Section 5.12(b) should be amended by deleting such paragraph in its
entirety and renaming paragraphs "(c)," "(d)," "(e)," and "(f)" to be "(b),"
"(c)," "(d)," and "(e)."
XII.
Section 6.1(a) should be deleted in its entirety and replaced with the
following:
(a) The maximum annual amount of Retirement Income payable
with respect to an Employee in the form of a straight life annuity
without any ancillary benefits after any adjustment for a Provisional
Payee designation shall be the lesser of the dollar limitation
determined under Code Section 415(b)(1)(A) as adjusted under Code
Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury
Regulation Section 1.415-5, subject to the following provisions of
Article VI. With respect to any former Employee who has Accrued
Retirement Income under the Plan or his Provisional Payee, the maximum
annual amount shall also be subject to the adjustment under Code
Section 415(d), but only those adjustments occurring before September
1, 1996.
XIII.
Article VII should be deleted in its entirety and replaced with the
following:
ARTICLE VII
Provisional Payee
7.1 Adjustment of Retirement Income to provide for payment to
Provisional Payee. An Employee who desires to have his Accrued
Retirement Income adjusted in accordance with the provisions of this
Article VII to provide a reduced amount of Retirement Income payable to
him for his lifetime commencing on his Early Retirement Date, his
Normal Retirement Date, or his Deferred Retirement Date, as the case
may be, may elect subject to Section 7.11, in accordance with the
provisions of this Article VII, at his option, either:
(a) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty percent (80%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that the same amount will be
continued after his death to his Provisional Payee until the death of
such Provisional Payee, or
(b) that an amount of Retirement Income be payable to him for
his lifetime which is equal to ninety percent (90%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount
payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or
(c) that an amount of Retirement Income be payable to him for
his lifetime which is equal to seventy-five percent (75%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that the same amount will
be continued after his death to his Provisional Payee until the death
of such Provisional Payee, or, if such Provisional Payee predeceases
the Employee, the Employee's Retirement Income automatically increases
to a monthly amount equal to the Retirement Income which would be
payable to him had he not elected the form of benefit described in this
Section 7.1(c) and instead had elected the single life annuity form of
benefit, or
(d) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty-eight percent (88%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the
amount payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or, if
such Provisional Payee predeceases the Employee, the Employee's
Retirement Income automatically increases to a monthly amount equal to
the Retirement Income which would be payable to him had he not elected
the form of benefit described in this Section 7.1(d) and instead had
elected the single life annuity form of benefit.
7.2 Form and time of election and notice requirements.
(a) An election of payment and designation of a Provisional
Payee in accordance with Section 7.1 shall be made in writing at the
same time on a prescribed form delivered to the Retirement Board (or
its delegee). Subject to Section 7.10(d), the election and designation
shall specify its effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII.
Notwithstanding the preceding paragraph, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan.
(b) Subject to Section 7.10(d), an election of payment to be
made in accordance with paragraph (a), (b), (c), or (d) of Section 7.1
may be changed by an Employee, provided the written election of the
change specifies an effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII. Notwithstanding the preceding sentence, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan. To the
extent that the new method of payment shall afford the Employee changed
protection in the event of his death after the effective date of the
new election and prior to retirement, his Accrued Retirement Income
shall be adjusted pursuant to Section 7.4(a) to reflect such changed
protection.
(c) With respect to Sections 7.5 and 7.6, within the period
not less than 30 days and not more than 90 days prior to the
anticipated commencement of benefits, the Employee shall be furnished,
by mail or personal delivery, a written explanation of: (1) the terms
and conditions of the reduced Retirement Income payable as provided in
paragraph (b) of Section 7.1; (2) the Employee's right to make, and the
effect of, an election to waive the payment of reduced Retirement
Income pursuant to a Provisional Payee designation; (3) the rights of
the Employee's Provisional Payee; and (4) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
reduced Retirement Income pursuant to a Provisional Payee designation.
Within thirty (30) days following an Employee's written
request received by the Retirement Board (or its delegee) during the
election period, but within sixty (60) days from the date the Employee
is furnished all of the information prescribed in the immediately
preceding sentence, the Employee shall be furnished an additional
written explanation, in terms of dollar amounts, of the financial
effect of an election by him not to receive such reduced Retirement
Income. If an Employee makes such request, the election period herein
prescribed shall end not earlier than sixty (60) calendar days
following the day of the mailing or personal delivery of the additional
explanation to the Employee. Except that if an election made as
provided in Section 7.5 or 7.6 is revoked, another election under that
Section may be made during the specified election period.
7.3 Circumstances in which election and designation are
inoperative. An election and designation made pursuant to this Article
shall be inoperative and the regular provisions of the Plan shall again
become applicable as if a Provisional Payee had not been designated if,
prior to the commencement of any payment in accordance with this
Article VII: (a) an Employee's Provisional Payee shall die, (b) the
Employee and the Provisional Payee shall be divorced under a final
decree of divorce, or (c) the Retirement Board (or its delegee) shall
have received the written Qualified Election of the Employee to rescind
his election of payment and designation of a Provisional Payee in order
to receive a single life annuity form of benefit. If such a Qualified
Election to rescind is made by the Employee, his Accrued Retirement
Income shall be reduced to reflect the protection afforded the Employee
by any Provisional Payee designation during the period from its
effective date to the date of the Retirement Board's (or its delegee's)
receipt of the Employee's Qualified Election to rescind if the option
as to payments of reduced Retirement Income was in accordance with
either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries
subsequent to the death or divorce of his Provisional Payee and prior
to the commencement of payments in accordance with this Article VII,
then he shall be entitled to designate a new Provisional Payee in the
manner set forth in Section 7.2.
7.4 Pre-retirement death benefit. If prior to his Normal
Retirement Date (or his Deferred Retirement Date, if applicable), an
Employee shall die while in the service of the Employer and is survived
by his spouse to whom he shall be married at the time of his death,
there shall be payable to his surviving spouse (whom he shall be deemed
to have designated as his Provisional Payee) Retirement Income
determined in accordance with paragraph (a) or paragraph (c) of this
Section 7.4, as applicable. Subject to Section 7.10(b), such Retirement
Income shall commence on the first day of the month following the death
of the Employee or the first day of the month following the date on
which he would have attained his fifty-fifth (55th) birthday if he were
still alive, whichever is later, and shall cease with the last payment
preceding the death of his Provisional Payee.
(a) The amount of Retirement Income payable to the Provisional
Payee of a deceased Employee who prior to his death had attained his
fifty-fifth (55th) birthday shall be equal to the amount payable to the
Provisional Payee as calculated in Section 7.1(b) determined on the
basis of his Accredited Service to the date of his death, or if the
Employee shall have attained his fifty-fifth (55th) birthday and so
elected prior to his death, such Retirement Income shall be equal to
the amount set forth in Section 7.1(a) determined on the basis of his
Accredited Service to the date of his death reduced as provided in the
next sentence. If such election shall be made by the Employee, the
Retirement Income which shall be payable to the Employee if he lives to
his Early Retirement Date or the first day of the month following his
attainment of age sixty-five (65), if later, shall be reduced by
three-fourths of one percent (0.75%) for each year (prorated for a
fraction of a year from the first day of the month following the
effective date of the election) which has elapsed from the effective
date of his election to the earlier of (1) the commencement of
Retirement Income on or after his Early Retirement Date or the first
day of the month following his attainment of age sixty-five (65), if
later, or (2) the revocation of such election. If he shall die before
the commencement of Retirement Income on or after his Early Retirement
Date or the first day of the month following his attainment of age
sixty-five (65), if later, his Accrued Retirement Income to the date of
his death shall be reduced by three-quarters of one percent (0.75%) for
each year (prorated for a fraction of a year from the first day of the
month following the effective date of the election) between the
effective date of his election and the first day of the month following
his attainment of age sixty-five (65). No reduction in the Employee's
Retirement Income shall be made for the period during which the
election is in effect after the first day of the month following his
attainment of age sixty-five (65).
(b) Retirement Income shall not be payable under paragraph (a)
of this Section 7.4 to the Provisional Payee of a deceased Employee if
at the time of his death there was in effect a Qualified Election made
after August 22, 1984 under this paragraph (b) that no Retirement
Income shall be paid to his Provisional Payee in the event of his death
while in the service of the Employer (or while in the service of an
Affiliated Employer to which his employment had been transferred in
accordance with Section 4.6) as provided in paragraph (a), provided the
Employee had received at least 180 days prior to his fifty-fifth (55th)
birthday a written explanation of: (1) the terms and conditions of the
Retirement Income payable to his Provisional Payee as provided in
paragraph (a); (2) the Employee's right to make, and the effect of, an
election to waive the payment of Retirement Income to his Provisional
Payee; (3) the rights of the Employee's Provisional Payee; and (4) the
right to make, and the effect of, a revocation of a previous election
to waive the payment of Retirement Income to the Employee's Provisional
Payee.
A revocation of a prior Qualified Election may be made by the
Employee without the consent of the Employee's Provisional Payee at any
time before the commencement of benefits. An election under this
paragraph (b) may be made and such election may be revoked by an
Employee during the period commencing ninety (90) days prior to the
Employee's fifty-fifth (55th) birthday and ending on the date of the
Employee's death.
Notwithstanding the above provisions of this paragraph (b),
such Employee shall not be entitled on or after September 1, 1996 to
waive payment of Retirement Income to his Provisional Payee as provided
in this Section 7.4. Any such election to waive payment of Retirement
Income in effect on August 31, 1996 shall remain in effect unless
subsequently revoked by the Employee.
(c) The amount of such Retirement Income payable to the
Provisional Payee of a deceased Employee who prior to his death, had
completed at least five (5) Vesting Years of Service and had not
attained his fifty-fifth (55th) birthday shall be equal to one-half of
the reduced amount, as actuarially adjusted to provide for the payment
of such Retirement Income beginning as of the first day of the month
following the date on which such deceased Employee would have attained
his fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the Employee's Accrued Retirement Income, determined on the
basis of his Accredited Service to the date of his death.
This Section 7.4(c) shall also apply to adjust, as provided in
the next following paragraph, the future payment of Retirement Income
after December 31, 1990 to a Provisional Payee with respect to an
Employee who died (while in the service of the Employer prior to his
fifty-fifth (55th) birthday after completing the requisite number of
Years of Service in order to have a nonforfeitable right to Retirement
Income under the Plan as in effect on the Employee's date of death),
provided Retirement Income is payable to such Provisional Payee on or
after January 1, 1991. The adjustment under this Section 7.4(c) shall
be determined by adjusting the Retirement Income that had commenced to
the Provisional Payee on or before January 1, 1986, and then adding the
applicable percentage increase under Section 5.13 of the Prior Plan.
Subject to Section 7.10(c), for an Employee on or after
January 1, 1991, who dies while in the service of the Employer prior to
his fifty-fifth (55th) birthday after completing five (5) Vesting Years
of Service, the amount of such Retirement Income payable to the
Provisional Payee shall be calculated as provided in Section 7.1(b)
determined on the basis of his Accredited Service to the date of his
death. The payment of such Retirement Income to the Provisional Payee
shall begin on the first day of the month following the date on which
such deceased Employee would have attained his fifty-fifth (55th)
birthday.
7.5 Post-retirement death benefit - qualified joint and
survivor annuity. If at his Early Retirement Date, Normal Retirement
Date, or Deferred Retirement Date, as the case may be, an Employee is
married and he has not: (a) designated a Provisional Payee in
accordance with Section 7.1 in respect of payments to be made
commencing on his Early, Normal, or Deferred Retirement Date or (b)
made, subject to Section 7.4(b), a Qualified Election that payment be
made to him in the mode of a single life annuity, he shall nevertheless
be deemed to have made an effective designation of a Provisional Payee
under this Section 7.5 and to have specified the payment of a benefit
as provided in Section 7.1(b).
7.6 Election and designation by former Employee entitled to
Retirement Income in accordance with Article VIII. If a former Employee
is entitled to receive in accordance with Section 8.1 Retirement Income
commencing at Normal Retirement Date, or sooner in accordance with
Section 8.2, he may, on or after his fifty-fifth (55th) birthday,
designate his spouse as his Provisional Payee and elect, subject to
Section 7.11, to have his Accrued Retirement Income at the date of
termination of his service actuarially adjusted to provide, at his
option, in the event of the commencement of payment prior to his Normal
Retirement Date either:
(a) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee; or
(b) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee; or
(c) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee, or, if such Provisional Payee predeceases the former Employee,
the former Employee's Retirement Income automatically increases to a
monthly amount equal to the Retirement Income which would be payable to
him had he not elected the form of benefit described in this Section
7.6(c) and instead had elected the single life annuity form of benefit;
or
(d) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee, or, if such Provisional Payee predeceases the
former Employee, the former Employee's Retirement Income automatically
increases to a monthly amount equal to the Retirement Income which
would be payable to him had he not elected the form of benefit
described in this Section 7.6(d) and instead had elected the single
life annuity form of benefit.
Subject to Section 7.10(d), a former Employee's election and
designation of his Provisional Payee made in accordance with this
Section 7.6 shall be in writing on a prescribed form delivered to the
Retirement Board (or its delegee) and shall become effective not sooner
than the date received or the former Employee's fifty-fifth (55th)
birthday, whichever is later, nor later than the date of commencement
of payment in accordance with this Section 7.6. Notwithstanding the
preceding sentence, an election under Section 7.6(c) or (d) is subject
to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until commencement of Retirement Income
payments under the Plan.
If the former Employee dies prior to his Normal Retirement
Date but after the effective date of his Provisional Payee designation,
there will be payable to his Provisional Payee for life commencing on
the first day of the calendar month after the former Employee's death
Retirement Income in a reduced amount in accordance with the former
Employee's election of payments to be made to his Provisional Payee
after the death of the former Employee under paragraph (a), (b), (c),
or (d), as the case may be, of this Section 7.6. Notwithstanding the
preceding sentence, an election under Section 7.6(c) or (d) is subject
to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until commencement of Retirement Income
payments under the Plan. However, if prior to the former Employee's
death, the Retirement Board (or its delegee) has not received such
election, payment of a reduced amount of Retirement Income will be made
in accordance with paragraph (b) of this Section 7.6 to his surviving
spouse to whom he is married at the time of his death, unless (1) at
the time of his death there is in effect a Qualified Election by the
former Employee that reduced Retirement Income shall not be paid to his
surviving spouse in accordance with this Section 7.6 should he die
between his fifty-fifth (55th) birthday and his Normal Retirement Date
without having elected that payment be made to a Provisional Payee and
(2) at least 180 days prior to his fifty-fifth (55th) birthday a
written explanation is provided to the former Employee of: (A) the
terms and conditions of the Retirement Income payable to his
Provisional Payee as provided in this Section 7.6; (B) the former
Employee's right to make, and the effect of, an election to waive the
payment of Retirement Income to his Provisional Payee; (C) the rights
of a former Employee's spouse; and (D) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
Retirement Income to his Provisional Payee.
If the former Employee is entitled to receive payment of
Retirement Income in accordance with Section 8.2 after his fifty-fifth
(55th) birthday and prior to his Normal Retirement Date and elects to
do so, a reduced amount of Retirement Income determined in accordance
with this Section 7.6, subject to Section 7.11, based upon his Accrued
Retirement Income at the date of termination of his service
(actuarially reduced in accordance with Section 8.2) will be payable to
him commencing on the date on which payments commence prior to Normal
Retirement Date in accordance with Section 8.2 with payments in the
same or reduced amount to be continued to his Provisional Payee for
life after the former Employee's death in accordance with his election
under paragraph (a), (b), (c), or (d), as the case may be, of this
Section 7.6. However, if the former Employee is married and he has not
designated a Provisional Payee in respect of payments to commence to
him prior to his Normal Retirement Date or elected that payment be made
to him in the mode of a single life annuity pursuant to a Qualified
Election, he shall be deemed to have designated a Provisional Payee
pursuant to this Section 7.6 and thereby specified that a reduced
Retirement Income shall be paid to him during his lifetime as provided
in paragraph (b) of this Section 7.6 and continued after his death to
his Provisional Payee as provided in paragraph (b) of this Section 7.6.
If the former Employee is alive on his Normal Retirement Date
and is married and payment of Retirement Income has not sooner
commenced, the provisions of Section 7.5 shall be applicable to the
payment of his Retirement Income, unless he shall elect, subject to
Section 7.11, at his Normal Retirement Date to receive payment of his
Retirement Income pursuant to Section 7.1(a), (b), (c), or (d).
However, if an election and designation in accordance with this Section
7.6 was in effect prior to his Normal Retirement Date, the former
Employee's Accrued Retirement Income at his Normal Retirement Date
shall be actuarially adjusted for the period the election and
designation was in effect.
7.7 Death benefit for Provisional Payee of former Employee. If
an Employee, whose service with the Employer terminates on or after
January 1, 1989, shall die after such termination of employment, and
prior to his death (a) shall have not attained his fifty-fifth (55th)
birthday, (b) shall have completed at least five (5) Vesting Years of
Service, and (c) shall be survived by his spouse to whom he shall be
married at his death, then there shall be payable to his surviving
spouse (whom he shall be deemed to have designated as his Provisional
Payee) Retirement Income determined in accordance with this Section
7.7. Such Retirement Income shall be equal to one-half of the reduced
amount, as actuarially adjusted to provide for the payment of such
Retirement Income beginning as of the first day of the month following
the date on which such deceased former Employee would have attained his
fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the former Employee's Accrued Retirement Income, determined on
the basis of his Accredited Service to the date of his death. Subject
to Section 7.10(b) and (c), the Provisional Payee shall be eligible to
commence receipt of such Retirement Income on the first day of the
month following the date on which the former Employee would have
attained his fifty-fifth (55th) birthday if he were still alive, or the
first day of any subsequent month preceding what would have been the
former Employee's Normal Retirement Date, and shall cease with the last
payment preceding the death of his Provisional Payee. In any event, the
Provisional Payee shall commence receipt of such Retirement Income no
later than what would have been the former Employee's Normal Retirement
Date.
7.8 Limitations on Employee's and Provisional Payee's benefits.
(a) With respect to an Employee who does not elect a single
life annuity, the limitation on benefits imposed under Article VI shall
be applied as if such Employee had elected a benefit in the form of a
single life annuity.
(b) With respect to a Provisional Payee, the limitations on
benefits imposed under Article VI shall be applied consistent with
paragraph (a) above prorated to provide a limitation equal to or
one-half of the Employee's limitation as appropriate in accordance with
annuity form of benefit elected by the Employee.
7.9 Effect of election under Article VII. An election of
payment or a deemed election of payment in accordance with this Article
VII shall be in lieu of any other form or method of payment of
Retirement Income.
7.10 Effects of change in retirement at Early Retirement Date.
(a) Notwithstanding any other provision of this Article VII
with the exception of paragraphs one and two of Section 7.4(c), with
respect to Employees who have an Hour of Service on or after January 1,
1996 and who (1) are not covered by the terms of a collective
bargaining agreement or (2) are covered by the terms of a collective
bargaining agreement but where the bargaining unit representative and
the Employer have mutually agreed to participation in the Plan as
amended, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)."
(b) Notwithstanding Sections 7.4 and 7.7 and subject to
paragraph (a) above, if an Employee who has an Hour of Service on or
after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (3) dies after attaining his fiftieth (50th)
birthday but before attaining his fifty-fifth (55th) birthday, his
Provisional Payee shall commence receipt of Retirement Income on or
after January 1, 1997, provided the Employee's Provisional Payee is
alive and proof of the Employee's death satisfactory to the Retirement
Board (or its delegee) is received. Notwithstanding the preceding
sentence, with respect to Section 7.7, the Provisional Payee may elect
to defer receipt of Retirement Income to the first day of any month
following the date the Employee would have attained his fiftieth (50th)
birthday but not beyond what would have been such Employee's Normal
Retirement Date.
(c) Subject to the provisions of paragraph (a) above except
for the requirement that an Employee have an Hour of Service on or
after January 1, 1996, the Provisional Payee of any Employee described
in the third paragraph of Section 7.4(c) or in Section 7.7 who (1) is
not covered by the terms of a collective bargaining agreement or (2) is
covered by the terms of a collective bargaining agreement but where the
bargaining unit representative and the Employer have mutually agreed to
participation in the Plan as amended shall commence receipt of
Retirement Income upon the later of the first day of the month after
the Employee would have attained his fiftieth (50th) birthday or
January 1, 1997. For purposes of the preceding sentence only, the
requirement in Section 7.7 that a former Employee terminate service
with the Employer on or after January 1, 1989 should be disregarded to
allow the Provisional Payee of any former Employee to be eligible to
commence receipt of Retirement Income as provided in such sentence.
(d) For Employees who have an Hour of Service on or after
January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) have not attained their fifty-fifth
(55th) birthday by December 31, 1996, notwithstanding Section 7.2, with
respect to an election to receive a form of benefit described in
Sections 7.1(a) and 7.6(a), such election will be effective not sooner
than the date received by the Retirement Board (or its delegee) or
January 1, 1997, whichever is later, nor later than the date of
commencement of payments in accordance with this Article VII.
7.11 Commencement of new optional forms of payment. The
options for payment described in Sections 7.1(c) and (d) and Sections
7.6(c) and (d) may be elected only for payments that commence on or
after October 1, 1996 and only for Employees who have an Hour of
Service on or after January 1, 1996 and who (a) are not covered by the
terms of a collective bargaining agreement or (b) are covered by the
terms of a collective bargaining agreement but where the bargaining
unit representative and the Employer have mutually agreed to
participation in the Plan as amended.
7.12 Special form of benefit for former Employees.
(a) With respect to any Employee who has an Hour of Service on
or after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended (3) terminates employment with the Employer in
1996 and (4) has attained his fiftieth (50th) birthday but not his
fifty-fifth (55th) birthday as of his termination of employment, such
Employee shall be eligible to elect the special form of benefit
described in the next following paragraph which election must be made
in the form of a written Qualified Election.
(b) This special form of benefit shall only commence on
January 1, 1997 and shall be comprised of two components consisting of
a lump sum and a single life annuity as described in paragraphs (1) and
(2) below.
(1) Annuity Component: A reduced amount of Retirement
Income payable to the former Employee for his lifetime
determined as if he had elected to retire as of the
first of the month following the date such former
Employee terminated from employment.
(2) Lump Sum Component: A lump sum payment equal to the
difference between paragraphs (A) and (B) below:
(A) the lump sum amount which is the
Actuarial Equivalent of a single
life annuity payable to the former
Employee determined as if the former
Employee had elected such single
life annuity to commence as of
January 1, 1997, and
(B) the lump sum amount which is the
Actuarial Equivalent of the payment
described in paragraph (1) above.
(3) With respect to paragraph (1) above, if the annuity
component is payable to the former Employee for his
lifetime, he may elect to have his Retirement Income
adjusted upwards in an amount which will make his
Retirement Income payable up to age sixty-five (65)
equal, as nearly as may be, to the amount of his
Federal primary Social Security benefit (primary old
age insurance benefit) estimated to become payable
after age sixty-five (65), computed as of the first of
the month following the date the former Employee
terminated employment, plus a reduced amount, if any,
of Retirement Income actuarially determined to be
payable after age sixty-five (65). The Federal primary
Social Security benefit used in calculating the former
Employee's Retirement Income payable under the Plan
shall be determined by using the salary history of the
former Employee during his employment with the
Employer, or any Affiliated Employer, as calculated in
accordance with Section 5.4.
(c) Notwithstanding paragraph (b) above, with respect to this
form of benefit, a former Employee may elect, in lieu of receiving the
annuity component as a single life annuity, to receive his benefit in a
manner similar to the forms of payment described in Section 7.1(a),
(b), (c), or (d). If one of these alternatives is elected, the annuity
and lump sum component will be adjusted as follows:
(1) Alternative 1
(A) Annuity Component: The form of payment described in
Section 7.1(a) but which is calculated based on eighty
percent (80%) of the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty percent
(80%) of the amount provided in paragraph (b)(2) above.
(2) Alternative 2
(A) Annuity Component: The form of payment described in
Section 7.1(b) but which is calculated based on ninety
percent (90%) of the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to ninety percent
(90%) of the amount provided in paragraph (b)(2) above.
(3) Alternative 3
(A) Annuity Component: The form of payment described in
Section 7.1(c) but which is calculated based on
seventy-five percent (75%) of the single life annuity
provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to seventy-five
percent (75%) of the amount provided in paragraph
(b)(2) above.
(4) Alternative 4
(A) Annuity Component: The form of payment described in
Section 7.1(d) but which is calculated based on
eighty-eight percent (88%) of the single life annuity
provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty-eight
percent (88%) of the amount provided in paragraph
(b)(2) above.
XIV.
Section 8.2 should be deleted in its entirety and replaced with the
following:
8.2 Early distribution of vested benefit. If an Employee
terminates from service before his fifty-fifth (55th) birthday and is
entitled to receive in accordance with Section 8.1 Retirement Income
commencing at his Normal Retirement Date and at the time his service
terminated he had at least ten (10) Years of Accredited Service, he
may, in lieu of receiving payment of such Retirement Income commencing
at Normal Retirement Date, elect to receive such Retirement Income
commencing as of the first day of any month after his fifty-fifth
(55th) birthday but preceding his Normal Retirement Date in an amount
equal to his Accrued Retirement Income at the date of termination of
his service actuarially reduced in accordance with reasonable actuarial
assumptions adopted by the Retirement Board. An election pursuant to
this Section 8.2 to have Retirement Income commence prior to Normal
Retirement Date shall be made on a prescribed form and shall be filed
with the Retirement Board (or its delegee) at least thirty (30) days
before Retirement Income is to commence.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. If any such Employee
commences receipt of his Retirement Income after attaining age fifty
(50) but before attaining age fifty-five (55), the Employee's
Retirement Income shall be determined as in the preceding paragraph
including an additional reduction of one-third of one percent (0.33%)
for each calendar month by which the commencement date precedes the
first day of the month following such Employee's attainment of his
fifty-fifth (55th) birthday.
XV.
Section 8.4 should be deleted in its entirety and replaced with the
following:
8.4 Cash-out and buy-back. (a) Notwithstanding any other
provision of this Plan, if the present value of Accrued Retirement
Income of an Employee whose service terminates for any reason other
than transfer to an Affiliated Employer under Section 4.6, or
retirement under Article III, is not more than $3,500 (or such greater
amount as permitted by the regulations prescribed by the Secretary of
the Treasury), the Employer shall direct that such present value of the
Employee's Accrued Retirement Income be paid in a lump sum, in cash, to
such terminated Employee. The present value of the Accrued Retirement
Income shall be calculated as of the date of distribution of the lump
sum applying the Applicable Interest Rate as defined in Section 8.5(e)
in effect on the first day of the Plan Year of distribution or in
accordance with Section 8.5(g), as applicable. For purposes of this
Section 8.4, if the present value of the Employee's vested Accrued
Retirement Income is zero, the Employee shall be deemed to have
received a distribution of such vested Retirement Income.
(b) If such terminated Employee is subsequently reemployed and
becomes covered under this Plan, the calculation of his Accrued
Retirement Income shall be without regard to his years of Accredited
Service prior to any One-Year Breaks in Service, unless the amount of
such payment is repaid to the Trust, plus interest at the rate
determined under Section 411(c)(2)(C) of the Code. If such amount (plus
interest) is repaid, the Employee's Retirement Income shall be
calculated based on his years of Accredited Service before and after
any One-Year Breaks in Service. Any repayment of a cash-out made
pursuant to this Section 8.4 shall be made before the earlier of (a)
five (5) years after the date on which the Employee is reemployed by
the Employer or an Affiliated Employer, or (b) the close of the first
period of five (5) consecutive One-Year Breaks in Service commencing
after the distribution. If an Employee has been deemed to receive a
distribution in accordance with paragraph (a) and is then reemployed,
upon such reemployment, the amount of the deemed distribution shall be
restored to the Employee.
(c) Notwithstanding paragraph (b) above, effective on or after
July 15, 1996, a terminated Employee who has been paid a lump sum of
the present value of his Accrued Retirement Income in accordance with
paragraph (a) above shall not be entitled to repay this amount to the
Trust. If such terminated Employee is subsequently reemployed and
attains his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date, or terminates service for any reason subject to the
requirements of Section 8.1 or 8.2, the Employee shall receive
Retirement Income based on all Accredited Service, including Accredited
Service earned prior to reemployment, but reduced by the Actuarial
Equivalent of the lump sum payment made in accordance with paragraph
(a).
XVI.
Section 8.5 should be amended by adding the following new paragraph (g)
to the end thereof:
(g) Notwithstanding paragraph (c) and (e) above, effective for
Employees who will commence receipt of their Retirement Income on or
after October 1, 1996, the present value of such Employee's vested
Accrued Retirement Income under Section 8.4 shall be calculated by
using the annual rate of interest on 30-year Treasury securities for
the month of November in the Plan Year which precedes the Plan Year in
which such present value is determined and by using the prevailing
commissioners' standard table used to determine reserves for group
annuity contracts in effect on the date as of which the present value
is being determined.
XVII.
Section 8.7 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
8.7 Requirement for Direct Rollovers. This Section 8.7 applies
to distributions made from the Plan on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Article VIII, a
Distributee may elect on a prescribed form to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
XVIII.
Section 10.2 should be amended by deleting the second paragraph in its
entirety and replacing it with the following:
The members of the Retirement Board shall elect a Chairman
from their number, and a Secretary who may be but need not be one of
the members of the Retirement Board, and shall designate an actuary to
act in actuarial matters relating to the Plan. They may appoint from
their number such committees with such powers as they shall determine,
may authorize one or more of their number or any agent to make any
payment in their behalf, or to execute or deliver any instrument except
that a requisition for funds from the Trustee shall be signed by two
(2) members of the Retirement Board unless the Retirement Board
determines in writing to delegate such requisition authority.
XIX.
Section 10.3 should be amended by deleting the last paragraph in its
entirety and replacing it with the following:
Any action by the Retirement Board under this Section 10.3
shall be binding and conclusive. To the extent that the Retirement
Board delegates any of the foregoing duties or functions to another
party, the Retirement Board retains the ultimate authority to act in
accordance with this Section 10.3.
XX.
Section 16.1(a) should be deleted in its entirety and replaced with the
following:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible, or becomes eligible pursuant to Section 3.2
as amended, to receive Retirement Income after his retirement at his
Early Retirement Date and prior to attainment of his Normal Retirement
Date, pursuant to the terms of the Plan, and who was insured, or is
deemed to be insured by the Retirement Board, under the Employer's
program of medical insurance benefits on the last day prior to his
retirement. The term "Pensioned Employee" shall not include (1) any
former Employee who terminated his service with the Employer prior to
his Early Retirement Date and who is entitled to Retirement Income
under Section 8.1 or 8.2 of the Plan or, effective January 1, 1991, (2)
a Key Employee, as defined in Section 14.6(g), or (3) any Pensioned
Employee of an Employer that has adopted the Plan pursuant to Section
14.1 hereof but does not provide medical benefits to its Pensioned
Employees.
XXI.
Section 16.2(b) should be deleted in its entirety and replaced with the
following:
(b) If the required contributions for coverage of a covered
individual have been paid in advance in accordance with Article XVI,
the Employer's coverage of a Pensioned Employee and his Dependents who
were continuously covered, or deemed to be continuously covered by the
Retirement Board, under a prior medical plan maintained by the Employer
on December 31, 1989 or the day before the retirement of a Pensioned
Employee, shall continue under Article XVI commencing with such
effective date, subject to any waiting periods. Application for such
prior medical plan shall be deemed to be application for coverage under
Article XVI.
IN WITNESS WHEREOF, Alabama Power Company through its duly authorized
officer, has adopted this Third Amendment to the Pension Plan for Employees of
Alabama Power Company this ____ day of _________________, 1996, to be effective
as stated herein.
ALABAMA POWER COMPANY
By: _________________
Title:_______________
ATTEST:
By:
Title:________________________
[CORPORATE SEAL]
Exhibit 10(a)70
FIRST AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
GEORGIA POWER COMPANY
WHEREAS, the Board of Directors of Georgia Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Georgia Power Company (the "Plan") effective January 1, 1989 in
order to comply with the Internal Revenue Code of 1986, as amended, (the "Code")
and to make other technical and clarifying changes; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
additional requirements imposed by the Internal Revenue Service and to make
certain other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1989, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.14(b) should be deleted in its entirety and replaced by the
following:
(b) Notwithstanding the above, "Earnings" with
respect to any commissioned salesperson means the salary or
wages of an Employee of the Employer or employee of any
Affiliated Employer within any Plan Year, without including
overtime, and before deductions for taxes, Social Security,
etc. but applying those adjustments identified in paragraphs
(a)(2), (3) and (4) above. In addition, "Earnings" for any
Employee who is a regular part-time employee means with regard
to paragraph (a)(1) above the highest annual rate of salary or
wages based on a forty (40) hour work week.
II.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary
Social Security benefit (primary old age insurance benefit) to
which it is estimated that an Employee will become entitled in
accordance with the Social Security Act in force as provided
in subparagraphs (a) through (e) below which shall exceed $168
per month on and after January 1, 1989, and $250 per month, on
and after January 1, 1991, multiplied by a fraction not
greater than one, the numerator of which shall be the
Employee's total Accredited Service, and the denominator of
which shall be such total Accredited Service plus the
Accredited Service the Employee could have accumulated if he
had continued his employment from the date he terminates
service with his Employer or any Affiliated Employer until his
Normal Retirement Date. For purposes of determining the
estimated Federal primary Social Security benefit used in the
Social Security Offset, an Employee shall be deemed to be
entitled to receive Federal primary Social Security benefits
after retirement or death, if earlier, regardless of the fact
that he may have disqualified himself to receive payment
thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history
of the Employee as provided in Section 5.4(b) and shall be
determined pursuant to the following, as applicable:
III.
Effective as of the execution date of this Amendment, Section 5.4(a)
should be deleted in its entirety.
IV.
Effective as of the execution date of this Amendment, Section 5.4(b)
should be deleted in its entirety and a new Section 5.4 should be inserted as
follows:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an
Employee's Retirement Income under the Plan, the Social
Security Offset shall be determined by using the actual salary
history of the Employee during his employment with the
Employer or any Affiliated Employer, provided that in the
event that the Retirement Board is unable to secure such
actual salary history within 90 days (or such longer period as
may be prescribed by the Retirement Board) following the later
of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is
notified of the Retirement Income to which he is entitled, the
salary history shall be determined in the following manner:
(1) The salary history shall be estimated by
applying a salary scale, projected backwards, to the
Employee's compensation from the Employer for W-2
purposes for the first Plan Year following the most
recent Plan Year for which the salary history is
estimated. The salary scale shall be a level
percentage per year equal to six percent (6%) per
annum.
(2) The Plan shall give clear written notice
to each Employee of the Employee's right to supply
the actual salary history and of the financial
consequences of failing to supply such history. Such
notice shall state that the actual salary history is
available from the Social Security Administration.
For purposes of determining the Social Security
Offset in calculating the Retirement Income of an Employee
entitled to receive a public pension based on his employment
with a Federal, state, or local government agency, no
reduction in such Employee's Social Security benefit resulting
from the receipt of a public pension shall be recognized.
V.
Effective as of the execution date of this Amendment, Section 5.4(c)
should be deleted in its entirety.
VI.
Section 5.9(a) should be deleted in its entirety and replaced by the
following:
5.9 Required distributions.
(a) Once a written claim for benefits is filed with
the Retirement Board, payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day
of the Plan Year in which the latest of the following events
occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the
Employee commenced participation in the Plan; or
(3) the Employee's separation from service from the
Employer or any Affiliated Employer.
VII.
Section 5.9(d) should be deleted in its entirety and replaced by the
following:
(d) Distribution upon death of Employee
(1) Death after commencement of benefits
If the Employee dies before his entire nonforfeitable
interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Employee as
set forth in the provisions of Article VII.
(2) Death prior to commencement of benefits
If the Employee dies before the distribution of his
nonforfeitable interest has begun, the entire interest,
subject to the provisions of Article VII, shall be distributed
monthly to his Provisional Payee, if any, over such
Provisional Payee's remaining lifetime.
VIII.
Effective January 1, 1996, Section 10.7 should be deleted in its
entirety and replaced by the following:
10.7 Accounts and tables. The Retirement Board shall maintain
accounts showing the fiscal transactions of the Plan, and
shall keep in convenient form such data as may be necessary
for actuarial valuations with respect to the operation and
administration of the Plan. The Retirement Board shall
annually report to the Board of Directors and provide a
reasonable summary of the financial condition of the Trust and
the operation of the Plan for the past year, and any further
information which the Board of Directors may require.
The Retirement Board may, with the advice of an
enrolled actuary, adopt from time to time mortality and other
tables as it may deem necessary or appropriate for use in
calculating benefits under the Plan.
IX.
Section 10.9 should be deleted in its entirety and replaced by the
following:
10.9 Areas in which the Retirement Board does not have
responsibility. The Retirement Board shall not have
responsibility which respect to control or management of the
assets of the Plan. The Trustee or an insurance company, if
funds of the Plan shall be held by an insurance company,
shall have the sole responsibility for the administration of
the assets of the Plan as provided in the Trust Agreement or
contract with an insurance company, except to the extent
that an "Investment Manager," as that term is defined in
ERISA, appointed by the Board of Directors shall have
responsibility for the management of the assets of the Plan,
or some part thereof, including the power to acquire and
dispose of the assets of the Plan, or some part thereof.
The responsibility for providing a procedure for
establishing and carrying out a funding policy and method for
the Plan consistent with the objectives of the Plan and the
requirements of Title I of ERISA shall be that of the Board of
Directors or such committee, whether or not comprised of
members of the Board of Directors, as the Board of Directors
may from time to time designate and shall not be the
responsibility of the Retirement Board.
Effective July 21, 1993, the Pension Fund Investment
Review Committee of The Southern Company System shall
recommend for approval by the Board of Directors of Southern
Company Services, Inc. any Investment Manager that shall have
responsibility with respect to management of any Plan assets.
In addition, the Pension Fund Investment Review Committee
shall assume all responsibility for providing a procedure for
establishing and carrying out a funding policy and method for
the Plan consistent with the objectives of the Plan and the
requirements of Title I of ERISA.
X.
Article XV should be deleted in its entirety and replaced by the
following:
ARTICLE XV
Post-retirement Medical Benefits
15.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer who is
eligible to receive Retirement Income after his retirement at his Early, Normal,
or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan,
but shall not include any former Employee who terminated his service with the
Employer prior to his Early, Normal, or Deferred Retirement Date and who is
entitled to Retirement Income under the Plan. A "Pensioned Employee" shall not
include a Key Employee, as defined in Section 14.6(g), or effective January 1,
1991 any Pensioned Employee of an Employer that has adopted the Plan pursuant to
Section 14.1 hereof but does not provide medical benefits to its Pensioned
Employees.
(b) "Dependents" means the Pensioned Employee's spouse who is not
legally separated or, effective January 1, 1991, divorced from the Pensioned
Employee and the Pensioned Employee's unmarried children (both natural and
legally adopted) within the prescribed age limit set forth below. The term
"children" includes stepchildren and foster children who reside with the
Pensioned Employee in a regular parent-child relationship and are dependent upon
the Pensioned Employee for principal support and maintenance. The term Dependent
shall not include any person who is covered, or eligible for coverage, under the
Plan as a Pensioned Employee or who is entitled to any benefits under any
provisions of this Plan because of having been covered as a Pensioned Employee.
Children shall be considered to be within the prescribed age limit if
they are less than nineteen (19) years of age, except that unmarried children
shall continue to be eligible until the December 31 coinciding with or next
following attainment of age nineteen (19). Unmarried children age nineteen (19),
but less than age twenty-five (25), shall continue to be within the prescribed
age limit if they are regularly attending school on a full-time basis. Effective
January 1, 1991, for purposes of this Article XV, an unmarried child shall be
considered to be regularly attending school on a full-time basis if such child
is enrolled in and regularly attending a secondary school or an accredited
vocational school, College or University (as defined under Exhibit A) and meets
the minimum requirements of such school, College or University to maintain
full-time status. This shall also include an unmarried child who is enrolled as
a part-time student at one of the above institutions while such individual is
taking a course load that is equivalent to the minimum course load required for
full-time student status at such institution.
If both a husband and his wife are covered under this Plan as Pensioned
Employees of the Employer, either, but not both, may elect to cover their
eligible children as Dependents.
Any person covered or eligible for coverage under Article XV as a
Pensioned Employee, or under any group medical plan maintained by the Employer
as an Employee, shall not be considered as a Dependent.
(c) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 15.1(d)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 15.1(d)(3),
(4) and (5) below, a transfer shall be treated as a Qualified
Transfer if such transfer
(i) is made after the close of the Plan Year
preceding the Employer's first Plan Year beginning
after December 31, 1990, and before the earlier of
(I) the due date (including extensions) for the
filing of the Employer's corporate tax return for
such preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the expenditures of the
Employer for Qualified Current Retiree Health
Liabilities for such preceding Plan Year.
(iii) The reduction described in the second
paragraph of Section 15.1(d)(6)(G) shall not apply to
a transfer described in Section 15.1(d)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
15.1(d)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 15.1(d)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 15.1(d)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 15.1(d)(1)(B), the requirements of this Section
15.1(d)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 15.1(d)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
15.1(d)(5), the Employer may elect at any time during the Plan Year to
have this Section 15.1(d)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 15.1(d), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to
any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 15.1(d)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
15.1(d)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 15.1(d)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if
any, of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section 412(c)(7)(A)(i), or
(II) 125 percent of current liability (as defined in
Code Section 412(c)(7)(B)).
The determination under this paragraph shall
be made as of the most recent valuation date of the
Plan preceding the Qualified Transfer.
(F) "Health Benefits Account" means an account
established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities"
means, with respect to any Plan Year, the aggregate amounts,
including administrative expenses, which would have been
allowable as a deduction to the Employer for payment of
Applicable Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were provided
directly by the Employer and the Employer used the cash
receipts and disbursements method of accounting. For purposes
of the preceding sentence, the rule of Code Section
419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or
before December 8, 1994, the amount determined in the
paragraph above shall be reduced by any amount previously
contributed to a Health Benefits Account or welfare benefit
fund, as defined in Code Section 419(e)(1), to pay for the
Qualified Current Retiree Health Liabilities. The portion of
any reserves remaining as of the close of December 31, 1990
shall be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount determined under
the preceding paragraph shall be reduced by the amount which
bears the same ratio to such amount as the value (as of the
close of the Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits Accounts or
welfare benefit funds, as defined in section 419(e)(1), set
aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without
regard to this paragraph.
15.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1989 shall be
eligible for coverage as a Pensioned Employee on January 1, 1989, provided he
was covered as an Employee under a group medical plan maintained by the Employer
immediately prior to the time he became a Pensioned Employee.
(b) An Employee who becomes a Pensioned Employee on or after January 1,
1989 shall be eligible for coverage on the date he becomes a Pensioned Employee,
provided he was covered as an Employee under a group medical plan maintained by
the Employer immediately prior to the time he became a Pensioned Employee.
(c) Effective January 1, 1989, a Dependent of a Pensioned Employee
shall be eligible for coverage under this Plan on the later of (1) the date the
Pensioned Employee becomes eligible for coverage hereunder and (2) the date such
person becomes a Dependent and (3) the date of the payment of any contribution
required of the Pensioned Employee with respect to the Dependent.
(d) Notwithstanding paragraph (c) above, effective January 1, 1991, a
Dependent of a Pensioned Employee shall be eligible for coverage under this Plan
on the later of (1) the date the Pensioned Employee becomes eligible for
coverage hereunder and (2) the date such person becomes a Dependent.
15.3 Medical benefits. The medical benefits provided under this Article
XV by the Employer and each adopting Employer are set forth in the copy of each
such Employer's medical benefits plan which is attached hereto as Exhibit A and
specifically incorporated herein by reference in its entirety, as may be amended
from time to time. Such medical benefits shall be subject without limitation to
all deductibles, maximums, exclusions, coordination with Medicare Parts A and B
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
15.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XV is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XV is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
15.5 Continuation of coverage to certain individuals.
(a) Anything in Article XV to the contrary notwithstanding, a Pensioned
Employee, Dependent spouse, or Dependent child shall be entitled to elect
continued medical coverage as provided under the terms of Article XV upon the
occurrence of a Qualifying Event, provided such Pensioned Employee, Dependent
spouse, or Dependent child was entitled to benefits under Article XV on the day
prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee, Dependent spouse, or Dependent child, as appropriate, (A) the
death of the Pensioned Employee, (B) the divorce or legal separation of
the Pensioned Employee from the Dependent spouse, (C) a Dependent child
ceasing to be a Dependent as defined under the requirements of Article
XV, or (D) a proceeding in a case under Title 11, United States Code,
with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued coverage
under this Section 15.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the Qualifying
Event and end not earlier than the first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XV of the Plan;
(3) The failure of the Pensioned Employee or Dependent to pay any
required contribution when due;
(4) The date on which the Pensioned Employee or Dependent first
becomes, after the date of his election, (A) a covered employee under
any other group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such
individual, or (B) entitled to benefits under Title XVIII of the
Social Security Act; or
(5) The date the Dependent spouse becomes covered under another
group health plan which does not contain any exclusion or limitation
with respect to any preexisting condition of such Dependent spouse.
(d) Any election to continue coverage under this Section 15.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee, Dependent spouse, or Dependent child receives notice of a
Qualifying Event from the Employer.
(e) The Employer shall provide each Pensioned Employee and Dependent
spouse, if any, written notice of the rights provided in this Section 15.5. The
Pensioned Employee or Dependent spouse is required to notify the Employer within
thirty (30) days of any Qualifying Event described in Section 15.5(a)(1)(B) or
(C), and the Employer shall provide the Dependent spouse or Dependent child
written notice of the rights provided in this Section 15.5 within fourteen (14)
days thereafter. Notice to the Dependent spouse shall be deemed notice to each
Dependent child residing with such spouse at the time such notification is made.
15.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XV will be made from time to time by or on behalf
of the Employer, and contributions shall be required of the Pensioned Employees
to the Employer's medical benefit plan in amounts determined in the sole
discretion of the Employer from time to time. All Employer contributions shall
be made to the Trustee under the Trust Agreement provided for in Article XI and
shall be allocated to a separate account maintained solely to fund the medical
benefits provided under this Article XV. The Employer shall designate that
portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XV. In the event that a Pensioned Employee's
interest in an account, or his Dependents', maintained pursuant to this Article
XV is forfeited prior to termination of the Plan, the forfeited amount shall be
applied as soon as possible to reduce Employer contributions made under this
Article XV. In no event at any time prior to the satisfaction of all liabilities
under this Article XV shall any part of the corpus or income of such separate
account be used for, or diverted to, purposes other than for the exclusive
purpose of providing benefits under this Article XV.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertainable and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XV, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XV after Article XV is
terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XV, when added to any
life insurance protection provided under the Plan, shall be subordinate to the
retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from January
1, 1987) plus the costs of any life insurance protection shall not exceed
twenty-five percent (25%) of the sum of the aggregate of costs of retirement
benefits under the Plan (other than past service credits), the aggregate of
costs of the medical benefits and the costs of any life insurance protection
(both measured from January 1, 1987). The aggregate of costs of retirement
benefits, other than for past service credits, and the aggregate of costs of
medical benefits provided under the Plan shall be determined using the projected
unit credit funding method and the actuarial assumptions set forth in Exhibit B,
a copy of which is attached hereto and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time by the
committee responsible for providing a procedure for establishing and carrying
out a funding policy and method for the Plan pursuant to Section 10.9 of the
Plan. Effective for contributions made after January 1, 1990, the limitations
set forth in the preceding two sentences in this paragraph on amounts that may
be contributed to fund medical benefits under this Article XV shall be based on
contributions alone and not cost. Contributions allocated to any separate
account established for a Pensioned Employee from which medical benefits will be
payable solely to such Pensioned Employee or his Dependents shall be treated as
an Annual Addition as defined in Section 6.6(a) to any defined contribution plan
maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XV.
15.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because a Dependent has become ineligible for coverage under this
Article XV. No person shall become covered under this Article XV for whom the
Pensioned Employee has not made the required contribution. Any contribution paid
by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XV shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
15.8 Amendment of Article XV. The Employer reserves the right, through
action of its Board of Directors, to amend Article XV (including Exhibit A)
pursuant to Section 13.1 or the Trust without the consent of any Pensioned
Employee, or his Dependents, provided, however, that no amendment of this
Article or the Trust shall cancel the payment or reimbursement of expenses for
claims already incurred by a Pensioned Employee or his Dependent prior to the
date of any amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XV, as set
forth in the Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any Pensioned
Employee or his Dependents. The Employer makes no promise to continue these
benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or Dependents any right to continued benefits under this
Article XV.
15.9 Termination of Article XV. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XV or permanently
discontinue contributions at any time in its sole discretion. This Article XV,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Dependents any right to continued benefits under this
Article XV. Effective January 1, 1991, in the event the Employer or any adopting
Employer shall terminate its provision of the medical benefits described in
Exhibit A to Section 15.3 of the Plan to its Pensioned Employees, this Article
XV of the Plan shall automatically terminate with respect to the Pensioned
Employees and their Dependents of such Employer without the requirement of any
action by such Employer.
15.10 Reversion of assets upon termination. Upon the termination of
this Article XV and the satisfaction of all liabilities under this Article XV,
all remaining assets in the separate account described in Section 15.6 shall be
returned to the Employer.
IN WITNESS WHEREOF, Georgia Power Company through its duly authorized
officers, has adopted this First Amendment to the Pension Plan for Employees of
Georgia Power Company this ____ day of _________________, 1996, to be effective
as stated herein.
GEORGIA POWER COMPANY
By: _________________
Title:_______________
ATTEST:
By: ____________________
Title:___________________
[CORPORATE SEAL]
<PAGE>
SECOND AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
GEORGIA POWER COMPANY
WHEREAS, the Board of Directors of Georgia Power Company (the "Company")
heretofore adopted the amendment and restatement of the Pension Plan for
Employees of Georgia Power Company (the "Plan") effective January 1, 1989; and
WHEREAS, the Company wishes to amend the Plan to provide ad hoc cost of
living increases to retirees; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan to
amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated, the
Company hereby amends the Plan as follows:
I.
Section 5.11 should be deleted in its entirety and replaced with the
following:
5.11 Increase in Retirement Income of retired Employees
(a) Retirement Income payable on and after January 1, 1991 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1991 pursuant to the Plan as in
effect prior to January 1, 1991 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of two percent (2%)
to a maximum of forty percent (40%) in accordance with the following
schedule:
Year in which Percentage
retirement occurred increase
1990 2%
1989 4%
1988 6%
1987 8%
1976 - 1986 10%
1971 - 1975 20%
1966 - 1970 30%
1965 and prior years 40%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1991 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1991
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1991 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1991 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(b) Retirement Income payable on and after January 1, 1996 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1996 pursuant to the Plan as in
effect prior to January 1, 1996 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of one and one-half
percent (1.5%) to a maximum of seven and one-half percent (7.5%) in
accordance with the following schedule:
Year in which Percentage
retirement occurred increase
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1996 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1996
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1996 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1996 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(c) This Section 5.11 shall not apply with respect to an
Employee who has not retired, but for whom the distribution of
Retirement Income has commenced pursuant to Section 5.9 of the Plan.
IN WITNESS WHEREOF, Georgia Power Company through its duly authorized
officer, has adopted this Second Amendment to the Pension Plan for Employees of
Georgia Power Company this ____ day of _________________, 1996, to be effective
as stated herein.
GEORGIA POWER COMPANY
By: _________________
Title:_______________
ATTEST:
By: ________________________
Title:_______________________
[CORPORATE SEAL]
<PAGE>
THIRD AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
GEORGIA POWER COMPANY
WHEREAS, the Board of Directors of Georgia Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Georgia Power Company (the "Plan") effective January 1, 1989;
and
WHEREAS, the Company wishes to amend the Plan to comply with certain
requirements imposed by the Retirement Protection Act of 1994, to reduce the
early retirement age from 55 to 50, to reduce the Social Security offset amount,
to provide for outsourcing of Plan administration to a third party
administrator, and to make certain other technical and miscellaneous changes;
and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.13 should be amended by adding the following paragraph to the
end of such section:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service and elects to retire in 1996 and who has not attained his
fifty-fifth (55th) birthday, such Employee's Early Retirement Date
shall be January 1, 1997.
II.
Section 1.31 should be deleted in its entirety and replaced with the
following:
1.31 "Qualified Election" means an election by an Employee or
former Employee on a prescribed form that concerns the form of
distribution of Retirement Income that must be in writing and must be
consented to by the Employee's spouse. The spouse's consent to such an
election must acknowledge the effect of such election, must be in
writing, and must be witnessed by a notary public. Notwithstanding this
consent requirement, if the Employee establishes to the satisfaction of
the Retirement Board (or its delegee) that such written consent may not
be obtained because the spouse cannot be located or because of such
other circumstances as the Secretary of the Treasury may by regulations
prescribe, an election by the Employee will be deemed a Qualified
Election. Any consent necessary under this provision shall be valid and
effective only with respect to the spouse who signs the consent, or in
the event of a deemed Qualified Election, with respect to such spouse.
A revocation of a prior Qualified Election may be made by the
Employee without consent at any time commencing within 90 days before
such Employee's fifty-fifth (55th) birthday but not later than before
the commencement of Retirement Income. Effective for Employees who have
an Hour of Service on or after January 1, 1996 and who (a) are not
covered by the terms of a collective bargaining agreement or (b) are
covered by the terms of a collective bargaining agreement but where the
bargaining unit representative and the Employer have mutually agreed to
participation in the Plan as amended, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding sentence.
III.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary Social
Security benefit (primary old age insurance benefit) to which it is
estimated that an Employee will become entitled in accordance with the
Social Security Act in force as provided in subparagraphs (a) through
(e) below which shall exceed $168 per month on and after January 1,
1989, $250 per month on and after January 1, 1991, and for Employees
who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and the Employer
have mutually agreed to participation in the Plan as amended, $325 per
month on and after January 1, 1996, multiplied by a fraction not
greater than one, the numerator of which shall be the Employee's total
Accredited Service, and the denominator of which shall be such total
Accredited Service plus the Accredited Service the Employee could have
accumulated if he had continued his employment from the date he
terminates service with his Employer or any Affiliated Employer until
his Normal Retirement Date. For purposes of determining the estimated
Federal primary Social Security benefit used in the Social Security
Offset, an Employee shall be deemed to be entitled to receive Federal
primary Social Security benefits after retirement or death, if earlier,
regardless of the fact that he may have disqualified himself to receive
payment thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history of the
Employee as provided in Section 5.4 and shall be determined pursuant to
the following, as applicable:
IV.
Section 3.2 should be amended by adding the following paragraph to the
end thereof:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service in 1996, who has not attained his fifty-fifth (55th) birthday
and who elects to retire pursuant to uniform rules established for
Employees retiring pursuant to this paragraph, such Employee's Early
Retirement Date shall be January 1, 1997.
V.
Section 4.4(a) should be deleted in its entirety and replaced with the
following:
(a) If an Employee included in the Plan who has completed at
least five (5) Vesting Years of Service becomes totally disabled and is
granted either Social Security disability benefits or long-term
disability benefits under a long-term disability benefit plan of the
Employer, he shall be considered to be on a leave of absence, herein
referred to as a "Disability Leave." An Employee's Disability Leave
shall be deemed to begin on the initial date of the disability and
shall continue until the earlier of: (1) the end of the month in which
he shall cease to be entitled to receive Social Security Disability
benefits and long-term disability benefits under a long-term disability
benefit plan of the Employer; (2) his death; and (3) his Retirement
Date if he elects to have his Retirement Income commence on such date.
During the period of the Employee's Disability Leave, he shall, for
purposes of the Plan, be deemed to have received Earnings at the
regular rate in effect for him.
VI.
Section 5.3(a) should be deleted in its entirety and replaced with the
following:
(a) Upon retirement at Early Retirement Date, his Minimum
Retirement Income (before adjustment for Provisional Payee designation,
if any) shall be an amount equal to 1.70% of his Average Monthly
Earnings multiplied by his years (and fraction of a year) of Accredited
Service earned as of his Early Retirement Date including a Social
Security Offset.
VII.
Section 5.4 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an Employee's
Retirement Income under the Plan, the Social Security Offset shall be
determined by using the actual salary history of the Employee during
his employment with the Employer or any Affiliated Employer, provided
that in the event that the Retirement Board (or its delegee) is unable
to secure such actual salary history within 180 days following the
later of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is notified of
the Retirement Income to which he is entitled, the salary history shall
be determined in the following manner:
VIII.
Section 5.5 should be deleted in its entirety and replaced with the
following:
5.5 Early Retirement Income. The monthly amount of Retirement
Income payable to an Employee who retires from the service of the
Employer at his Early Retirement Date subject to the limitations of
Section 6.2, will be equal to his Retirement Income determined in
accordance with Sections 5.1 and 5.3 based on his Accredited Service to
his Early Retirement Date, reduced by three-tenths of one percent
(0.3%) for each calendar month by which the commencement date of his
Retirement Income precedes his Normal Retirement Date but follows the
first day of the month following his attainment of his fifty-fifth
(55th) birthday.
Effective for Employees who have an Hour of Service on or
after January 1, 1996, and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) elect to retire in accordance with this
Section 5.5 on or after attainment of age fifty (50) but before
attainment of age fifty-five (55), Retirement Income shall be
determined as in the preceding paragraph including an additional
reduction of one-third of one percent (0.33%) for each calendar month
by which the commencement date precedes the first day of the month
following any such Employee's attainment of his fifty-fifth (55th)
birthday.
At the option of the Employee exercised at or prior to
commencement of his Retirement Income on or after his Early Retirement
Date (provided he shall not have in effect at such Early Retirement
Date a Provisional Payee designation pursuant to Article VII), he may
have his Retirement Income adjusted upwards in an amount which will
make his Retirement Income payable up to age sixty-five (65) equal, as
nearly as may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to become payable
after age sixty-five (65), as computed at the time of his retirement in
accordance with Section 5.3(a), plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after age
sixty-five (65). The Federal primary Social Security benefit used in
calculating an Employee's Retirement Income payable under the Plan
shall be determined by using the salary history of the Employee during
his employment with the Employer or any Affiliated Employer, as
calculated in accordance with Section 5.4.
IX.
Section 5.7 should be deleted in its entirety and replaced with the
following:
5.7 Payment of Retirement Income. The first payment of an
Employee's Retirement Income will be made on his Early Retirement Date,
Normal Retirement Date, Deferred Retirement Date, or date of
commencement of payment of Retirement Income in accordance with Section
8.2 or 8.6, as the case may be; provided that commencement of the
distribution of an Employee's Retirement Income shall not be made prior
to his Normal Retirement Date without the consent of such Employee,
except as provided in Section 8.4 of the Plan.
Notwithstanding anything to the contrary above, if in
accordance with this Section 5.7, an Employee is entitled to receive
Retirement Income commencing at his Early Retirement Date, he may, in
lieu of commencing payment of his Retirement Income upon his Early
Retirement Date, elect to receive such Retirement Income commencing as
of the first day of any month after his Early Retirement Date and
preceding his Normal Retirement Date in an amount equal to his Accrued
Retirement Income determined as of the commencement of his Retirement
Income on or after his Early Retirement Date determined in accordance
with Section 5.5. An election pursuant to this Section 5.7 to have
Retirement Income commence prior to Normal Retirement Date shall be
made on a prescribed form and shall be filed with the Retirement Board
(or its delegee) at least thirty (30) days before Retirement Income is
to commence.
In the event of the death of an Employee who has designated a
Provisional Payee or is deemed to have done so in accordance with
Article VII, if the designation has become effective, the first payment
to be made to the Provisional Payee pursuant to Article VII shall be
made to the Provisional Payee on the first day of the month after the
later of (a) the Employee's death and (b) the date on which the
Employee would have attained his fifty-fifth (55th) birthday if he had
survived to such date, if the Provisional Payee shall then be alive and
proof of the Employee's death satisfactory to the Retirement Board (or
its delegee) shall have been received by it. Subsequent payments will
be made monthly thereafter until the death of such Provisional Payee.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who dies in 1996
while in service with the Employer and who has attained his fiftieth
(50th) birthday but has not attained his fifty-fifth (55th) birthday at
the time of his death, such Employee's Provisional Payee shall commence
receipt of Retirement Income on the earlier of the first day of the
month following the date on which the Employee would have attained his
fifty-fifth (55th) birthday if he were still alive or on January 1,
1997, provided the Employee's Provisional Payee is alive and proof of
the Employee's death satisfactory to the Retirement Board (or its
delegee) is received.
In any event, payment of Retirement Income, including any
adjustments thereto caused by an amendment to the Plan providing for or
which has the effect of providing retroactively increased Retirement
Income, to the Employee shall begin not later than the sixtieth (60th)
day after the later of the close of the Plan Year in which falls (a)
the Employee's Normal Retirement Date or (b) the date the Employee
terminates his service with the Employer or any Affiliated Employer.
Notwithstanding the provisions of the Plan for the monthly payment of
Retirement Income, such income may be adjusted and payable annually in
arrears if the amount of the Retirement Income is less than $10.00 per
month.
X.
Section 5.9(a) should be deleted in its entirety and replaced with the
following:
(a) Once a written claim for benefits is filed with the
Retirement Board (or its delegee), payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day of the
Plan Year in which the latest of the following events occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the Employee
commenced participation in the Plan; or
(3) the Employee's separation from service from the Employer
or any Affiliated Employer.
XI.
Section 5.12(b) should be amended by deleting such paragraph in its
entirety and renaming paragraphs "(c)," "(d)," "(e)," and "(f)" to be "(b),"
"(c)," "(d)," and "(e)."
XII.
Section 6.1(a) should be deleted in its entirety and replaced with the
following:
(a) The maximum annual amount of Retirement Income payable
with respect to an Employee in the form of a straight life annuity
without any ancillary benefits after any adjustment for a Provisional
Payee designation shall be the lesser of the dollar limitation
determined under Code Section 415(b)(1)(A) as adjusted under Code
Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury
Regulation Section 1.415-5, subject to the following provisions of
Article VI. With respect to any former Employee who has Accrued
Retirement Income under the Plan or his Provisional Payee, the maximum
annual amount shall also be subject to the adjustment under Code
Section 415(d), but only those adjustments occurring before September
1, 1996.
XIII.
Article VII should be deleted in its entirety and replaced with the
following:
ARTICLE VII
Provisional Payee
7.1 Adjustment of Retirement Income to provide for payment to
Provisional Payee. An Employee who desires to have his Accrued
Retirement Income adjusted in accordance with the provisions of this
Article VII to provide a reduced amount of Retirement Income payable to
him for his lifetime commencing on his Early Retirement Date, his
Normal Retirement Date, or his Deferred Retirement Date, as the case
may be, may elect subject to Section 7.11, in accordance with the
provisions of this Article VII, at his option, either:
(a) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty percent (80%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that the same amount will be
continued after his death to his Provisional Payee until the death of
such Provisional Payee, or
(b) that an amount of Retirement Income be payable to him for
his lifetime which is equal to ninety percent (90%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount
payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or
(c) that an amount of Retirement Income be payable to him for
his lifetime which is equal to seventy-five percent (75%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that the same amount will
be continued after his death to his Provisional Payee until the death
of such Provisional Payee, or, if such Provisional Payee predeceases
the Employee, the Employee's Retirement Income automatically increases
to a monthly amount equal to the Retirement Income which would be
payable to him had he not elected the form of benefit described in this
Section 7.1(c) and instead had elected the single life annuity form of
benefit, or
(d) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty-eight percent (88%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the
amount payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or, if
such Provisional Payee predeceases the Employee, the Employee's
Retirement Income automatically increases to a monthly amount equal to
the Retirement Income which would be payable to him had he not elected
the form of benefit described in this Section 7.1(d) and instead had
elected the single life annuity form of benefit.
7.2 Form and time of election and notice requirements.
(a) An election of payment and designation of a Provisional
Payee in accordance with Section 7.1 shall be made in writing at the
same time on a prescribed form delivered to the Retirement Board (or
its delegee). Subject to Section 7.10(d), the election and designation
shall specify its effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII.
Notwithstanding the preceding paragraph, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan.
(b) Subject to Section 7.10(d), an election of payment to be
made in accordance with paragraph (a), (b), (c), or (d) of Section 7.1
may be changed by an Employee, provided the written election of the
change specifies an effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII. Notwithstanding the preceding sentence, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan. To the
extent that the new method of payment shall afford the Employee changed
protection in the event of his death after the effective date of the
new election and prior to retirement, his Accrued Retirement Income
shall be adjusted pursuant to Section 7.4(a) to reflect such changed
protection.
(c) With respect to Sections 7.5 and 7.6, within the period
not less than 30 days and not more than 90 days prior to the
anticipated commencement of benefits, the Employee shall be furnished,
by mail or personal delivery, a written explanation of: (1) the terms
and conditions of the reduced Retirement Income payable as provided in
paragraph (b) of Section 7.1; (2) the Employee's right to make, and the
effect of, an election to waive the payment of reduced Retirement
Income pursuant to a Provisional Payee designation; (3) the rights of
the Employee's Provisional Payee; and (4) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
reduced Retirement Income pursuant to a Provisional Payee designation.
Within thirty (30) days following an Employee's written
request received by the Retirement Board (or its delegee) during the
election period, but within sixty (60) days from the date the Employee
is furnished all of the information prescribed in the immediately
preceding sentence, the Employee shall be furnished an additional
written explanation, in terms of dollar amounts, of the financial
effect of an election by him not to receive such reduced Retirement
Income. If an Employee makes such request, the election period herein
prescribed shall end not earlier than sixty (60) calendar days
following the day of the mailing or personal delivery of the additional
explanation to the Employee. Except that if an election made as
provided in Section 7.5 or 7.6 is revoked, another election under that
Section may be made during the specified election period.
7.3 Circumstances in which election and designation are
inoperative. An election and designation made pursuant to this Article
shall be inoperative and the regular provisions of the Plan shall again
become applicable as if a Provisional Payee had not been designated if,
prior to the commencement of any payment in accordance with this
Article VII: (a) an Employee's Provisional Payee shall die, (b) the
Employee and the Provisional Payee shall be divorced under a final
decree of divorce, or (c) the Retirement Board (or its delegee) shall
have received the written Qualified Election of the Employee to rescind
his election of payment and designation of a Provisional Payee in order
to receive a single life annuity form of benefit. If such a Qualified
Election to rescind is made by the Employee, his Accrued Retirement
Income shall be reduced to reflect the protection afforded the Employee
by any Provisional Payee designation during the period from its
effective date to the date of the Retirement Board's (or its delegee's)
receipt of the Employee's Qualified Election to rescind if the option
as to payments of reduced Retirement Income was in accordance with
either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries
subsequent to the death or divorce of his Provisional Payee and prior
to the commencement of payments in accordance with this Article VII,
then he shall be entitled to designate a new Provisional Payee in the
manner set forth in Section 7.2.
7.4 Pre-retirement death benefit. If prior to his Normal
Retirement Date (or his Deferred Retirement Date, if applicable), an
Employee shall die while in the service of the Employer and is survived
by his spouse to whom he shall be married at the time of his death,
there shall be payable to his surviving spouse (whom he shall be deemed
to have designated as his Provisional Payee) Retirement Income
determined in accordance with paragraph (a) or paragraph (c) of this
Section 7.4, as applicable. Subject to Section 7.10(b), such Retirement
Income shall commence on the first day of the month following the death
of the Employee or the first day of the month following the date on
which he would have attained his fifty-fifth (55th) birthday if he were
still alive, whichever is later, and shall cease with the last payment
preceding the death of his Provisional Payee.
(a) The amount of Retirement Income payable to the Provisional
Payee of a deceased Employee who prior to his death had attained his
fifty-fifth (55th) birthday shall be equal to the amount payable to the
Provisional Payee as calculated in Section 7.1(b) determined on the
basis of his Accredited Service to the date of his death, or if the
Employee shall have attained his fifty-fifth (55th) birthday and so
elected prior to his death, such Retirement Income shall be equal to
the amount set forth in Section 7.1(a) determined on the basis of his
Accredited Service to the date of his death reduced as provided in the
next sentence. If such election shall be made by the Employee, the
Retirement Income which shall be payable to the Employee if he lives to
his Early Retirement Date or the first day of the month following his
attainment of age sixty-five (65), if later, shall be reduced by
three-fourths of one percent (0.75%) for each year (prorated for a
fraction of a year from the first day of the month following the
effective date of the election) which has elapsed from the effective
date of his election to the earlier of (1) the commencement of
Retirement Income on or after his Early Retirement Date or the first
day of the month following his attainment of age sixty-five (65), if
later, or (2) the revocation of such election. If he shall die before
the commencement of Retirement Income on or after his Early Retirement
Date or the first day of the month following his attainment of age
sixty-five (65), if later, his Accrued Retirement Income to the date of
his death shall be reduced by three-quarters of one percent (0.75%) for
each year (prorated for a fraction of a year from the first day of the
month following the effective date of the election) between the
effective date of his election and the first day of the month following
his attainment of age sixty-five (65). No reduction in the Employee's
Retirement Income shall be made for the period during which the
election is in effect after the first day of the month following his
attainment of age sixty-five (65).
(b) Retirement Income shall not be payable under paragraph (a)
of this Section 7.4 to the Provisional Payee of a deceased Employee if
at the time of his death there was in effect a Qualified Election made
after August 22, 1984 under this paragraph (b) that no Retirement
Income shall be paid to his Provisional Payee in the event of his death
while in the service of the Employer (or while in the service of an
Affiliated Employer to which his employment had been transferred in
accordance with Section 4.6) as provided in paragraph (a), provided the
Employee had received at least 180 days prior to his fifty-fifth (55th)
birthday a written explanation of: (1) the terms and conditions of the
Retirement Income payable to his Provisional Payee as provided in
paragraph (a); (2) the Employee's right to make, and the effect of, an
election to waive the payment of Retirement Income to his Provisional
Payee; (3) the rights of the Employee's Provisional Payee; and (4) the
right to make, and the effect of, a revocation of a previous election
to waive the payment of Retirement Income to the Employee's Provisional
Payee.
A revocation of a prior Qualified Election may be made by the
Employee without the consent of the Employee's Provisional Payee at any
time before the commencement of benefits. An election under this
paragraph (b) may be made and such election may be revoked by an
Employee during the period commencing ninety (90) days prior to the
Employee's fifty-fifth (55th) birthday and ending on the date of the
Employee's death.
Notwithstanding the above provisions of this paragraph (b),
such Employee shall not be entitled on or after September 1, 1996 to
waive payment of Retirement Income to his Provisional Payee as provided
in this Section 7.4. Any such election to waive payment of Retirement
Income in effect on August 31, 1996 shall remain in effect unless
subsequently revoked by the Employee.
(c) The amount of such Retirement Income payable to the
Provisional Payee of a deceased Employee who prior to his death, had
completed at least five (5) Vesting Years of Service and had not
attained his fifty-fifth (55th) birthday shall be equal to one-half of
the reduced amount, as actuarially adjusted to provide for the payment
of such Retirement Income beginning as of the first day of the month
following the date on which such deceased Employee would have attained
his fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the Employee's Accrued Retirement Income, determined on the
basis of his Accredited Service to the date of his death.
This Section 7.4(c) shall also apply to adjust, as provided in
the next following paragraph, the future payment of Retirement Income
after December 31, 1990 to a Provisional Payee with respect to an
Employee who died (while in the service of the Employer prior to his
fifty-fifth (55th) birthday after completing the requisite number of
Years of Service in order to have a nonforfeitable right to Retirement
Income under the Plan as in effect on the Employee's date of death),
provided Retirement Income is payable to such Provisional Payee on or
after January 1, 1991. The adjustment under this Section 7.4(c) shall
be determined by adjusting the Retirement Income that had commenced to
the Provisional Payee on or before January 1, 1986, and then adding the
applicable percentage increase under Section 5.13 of the Prior Plan.
Subject to Section 7.10(c), for an Employee on or after
January 1, 1991, who dies while in the service of the Employer prior to
his fifty-fifth (55th) birthday after completing five (5) Vesting Years
of Service, the amount of such Retirement Income payable to the
Provisional Payee shall be calculated as provided in Section 7.1(b)
determined on the basis of his Accredited Service to the date of his
death. The payment of such Retirement Income to the Provisional Payee
shall begin on the first day of the month following the date on which
such deceased Employee would have attained his fifty-fifth (55th)
birthday.
7.5 Post-retirement death benefit - qualified joint and
survivor annuity. If at his Early Retirement Date, Normal Retirement
Date, or Deferred Retirement Date, as the case may be, an Employee is
married and he has not: (a) designated a Provisional Payee in
accordance with Section 7.1 in respect of payments to be made
commencing on his Early, Normal, or Deferred Retirement Date or (b)
made, subject to Section 7.4(b), a Qualified Election that payment be
made to him in the mode of a single life annuity, he shall nevertheless
be deemed to have made an effective designation of a Provisional Payee
under this Section 7.5 and to have specified the payment of a benefit
as provided in Section 7.1(b).
7.6 Election and designation by former Employee entitled to
Retirement Income in accordance with Article VIII. If a former Employee
is entitled to receive in accordance with Section 8.1 Retirement Income
commencing at Normal Retirement Date, or sooner in accordance with
Section 8.2, he may, on or after his fifty-fifth (55th) birthday,
designate his spouse as his Provisional Payee and elect, subject to
Section 7.11, to have his Accrued Retirement Income at the date of
termination of his service actuarially adjusted to provide, at his
option, in the event of the commencement of payment prior to his Normal
Retirement Date either:
(a) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee; or
(b) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee; or
(c) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee, or, if such Provisional Payee predeceases the former Employee,
the former Employee's Retirement Income automatically increases to a
monthly amount equal to the Retirement Income which would be payable to
him had he not elected the form of benefit described in this Section
7.6(c) and instead had elected the single life annuity form of benefit;
or
(d) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee, or, if such Provisional Payee predeceases the
former Employee, the former Employee's Retirement Income automatically
increases to a monthly amount equal to the Retirement Income which
would be payable to him had he not elected the form of benefit
described in this Section 7.6(d) and instead had elected the single
life annuity form of benefit.
The former Employee's election and designation of his
Provisional Payee made in accordance with this Section 7.6 shall be in
writing on a prescribed form delivered to the Retirement Board (or its
delegee) and shall become effective not sooner than the date received
or the former Employee's fifty-fifth (55th) birthday, whichever is
later, nor later than the date of commencement of payment in accordance
with this Section 7.6. Notwithstanding the preceding sentence, an
election under Section 7.6(c) or (d) is subject to Section 7.11, must
be in the form of a written Qualified Election, and shall not become
effective until commencement of Retirement Income payments under the
Plan.
If the former Employee dies prior to his Normal Retirement
Date but after the effective date of his Provisional Payee designation,
there will be payable to his Provisional Payee for life commencing on
the first day of the calendar month after the former Employee's death
Retirement Income in a reduced amount in accordance with the former
Employee's election of payments to be made to his Provisional Payee
after the death of the former Employee under paragraph (a), (b), (c),
or (d), as the case may be, of this Section 7.6. Notwithstanding the
preceding sentence, an election under Section 7.6(c) or (d) is subject
to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until commencement of Retirement Income
payments under the Plan. However, if prior to the former Employee's
death, the Retirement Board (or its delegee) has not received such
election, payment of a reduced amount of Retirement Income will be made
in accordance with paragraph (b) of this Section 7.6 to his surviving
spouse to whom he is married at the time of his death, unless (1) at
the time of his death there is in effect a Qualified Election by the
former Employee that reduced Retirement Income shall not be paid to his
surviving spouse in accordance with this Section 7.6 should he die
between his fifty-fifth (55th) birthday and his Normal Retirement Date
without having elected that payment be made to a Provisional Payee and
(2) at least 180 days prior to his fifty-fifth (55th) birthday a
written explanation is provided to the former Employee of: (A) the
terms and conditions of the Retirement Income payable to his
Provisional Payee as provided in this Section 7.6; (B) the former
Employee's right to make, and the effect of, an election to waive the
payment of Retirement Income to his Provisional Payee; (C) the rights
of a former Employee's spouse; and (D) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
Retirement Income to his Provisional Payee.
If the former Employee is entitled to receive payment of
Retirement Income in accordance with Section 8.2 after his fifty-fifth
(55th) birthday and prior to his Normal Retirement Date and elects to
do so, a reduced amount of Retirement Income determined in accordance
with this Section 7.6, subject to Section 7.11, based upon his Accrued
Retirement Income at the date of termination of his service
(actuarially reduced in accordance with Section 8.2) will be payable to
him commencing on the date on which payments commence prior to Normal
Retirement Date in accordance with Section 8.2 with payments in the
same or reduced amount to be continued to his Provisional Payee for
life after the former Employee's death in accordance with his election
under paragraph (a), (b), (c), or (d), as the case may be, of this
Section 7.6. However, if the former Employee is married and he has not
designated a Provisional Payee in respect of payments to commence to
him prior to his Normal Retirement Date or elected that payment be made
to him in the mode of a single life annuity pursuant to a Qualified
Election, he shall be deemed to have designated a Provisional Payee
pursuant to this Section 7.6 and thereby specified that a reduced
Retirement Income shall be paid to him during his lifetime as provided
in paragraph (b) of this Section 7.6 and continued after his death to
his Provisional Payee as provided in paragraph (b) of this Section 7.6.
If the former Employee is alive on his Normal Retirement Date
and is married and payment of Retirement Income has not sooner
commenced, the provisions of Section 7.5 shall be applicable to the
payment of his Retirement Income, unless he shall elect, subject to
Section 7.11, at his Normal Retirement Date to receive payment of his
Retirement Income pursuant to Section 7.1(a), (b), (c), or (d).
However, if an election and designation in accordance with this Section
7.6 was in effect prior to his Normal Retirement Date, the former
Employee's Accrued Retirement Income at his Normal Retirement Date
shall be actuarially adjusted for the period the election and
designation was in effect.
7.7 Death benefit for Provisional Payee of former Employee. If
an Employee, whose service with the Employer terminates on or after
January 1, 1989, shall die after such termination of employment, and
prior to his death (a) shall have not attained his fifty-fifth (55th)
birthday, (b) shall have completed at least five (5) Vesting Years of
Service, and (c) shall be survived by his spouse to whom he shall be
married at his death, then there shall be payable to his surviving
spouse (whom he shall be deemed to have designated as his Provisional
Payee) Retirement Income determined in accordance with this Section
7.7. Such Retirement Income shall be equal to one-half of the reduced
amount, as actuarially adjusted to provide for the payment of such
Retirement Income beginning as of the first day of the month following
the date on which such deceased former Employee would have attained his
fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the former Employee's Accrued Retirement Income, determined on
the basis of his Accredited Service to the date of his death. Subject
to Section 7.10(b), the Provisional Payee shall be eligible to commence
receipt of such Retirement Income on the first day of the month
following the date on which the former Employee would have attained his
fifty-fifth (55th) birthday if he were still alive, or the first day of
any subsequent month preceding what would have been the former
Employee's Normal Retirement Date, and shall cease with the last
payment preceding the death of his Provisional Payee. In any event, the
Provisional Payee shall commence receipt of such Retirement Income no
later than what would have been the former Employee's Normal Retirement
Date.
7.8 Limitations on Employee's and Provisional Payee's benefits.
(a) With respect to an Employee who does not elect a single
life annuity, the limitation on benefits imposed under Article VI shall
be applied as if such Employee had elected a benefit in the form of a
single life annuity.
(b) With respect to a Provisional Payee, the limitations on
benefits imposed under Article VI shall be applied consistent with
paragraph (a) above prorated to provide a limitation equal to or
one-half of the Employee's limitation as appropriate in accordance with
annuity form of benefit elected by the Employee.
7.9 Effect of election under Article VII. An election of
payment or a deemed election of payment in accordance with this Article
VII shall be in lieu of any other form or method of payment of
Retirement Income.
7.10 Effects of change in retirement at Early Retirement Date.
(a) Notwithstanding any other provision of this Article VII
with the exception of paragraphs one and two of Section 7.4(c), with
respect to Employees who have an Hour of Service on or after January 1,
1996 and who (1) are not covered by the terms of a collective
bargaining agreement or (2) are covered by the terms of a collective
bargaining agreement but where the bargaining unit representative and
the Employer have mutually agreed to participation in the Plan as
amended, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)."
(b) Notwithstanding Sections 7.4 and 7.7 and subject to
paragraph (a) above, if an Employee who has an Hour of Service on or
after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (3) dies after attaining his fiftieth (50th)
birthday but before attaining his fifty-fifth (55th) birthday, his
Provisional Payee shall commence receipt of Retirement Income on or
after January 1, 1997, provided the Employee's Provisional Payee is
alive and proof of the Employee's death satisfactory to the Retirement
Board (or its delegee) is received. Notwithstanding the preceding
sentence, with respect to Section 7.7, the Provisional Payee may elect
to defer receipt of Retirement Income to the first day of any month
following the date the Employee would have attained his fiftieth (50th)
birthday but not beyond what would have been such Employee's Normal
Retirement Date.
(c) Subject to paragraph (a) above, the Provisional Payee of
any Employee described in the third paragraph of Section 7.4(c) who (1)
is not covered by the terms of a collective bargaining agreement or (2)
is covered by the terms of a collective bargaining agreement but where
the bargaining unit representative and the Employer have mutually
agreed to participation in the Plan as amended shall commence receipt
of Retirement Income upon the later of the first day of the month after
the Employee would have attained his fiftieth (50th) birthday or
January 1, 1997.
(d) For Employees who have an Hour of Service on or after
January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) have not attained their fifty-fifth
(55th) birthday by December 31, 1996, notwithstanding Section 7.2, with
respect to an election to receive a form of benefit described in
Sections 7.1(a) and 7.6(a), such election will be effective not sooner
than the date received by the Retirement Board (or its delegee) or
January 1, 1997, whichever is later, nor later than the date of
commencement of payments in accordance with this Article VII.
7.11 Commencement of new optional forms of payment. The
options for payment described in Sections 7.1(c) and (d) and Sections
7.6(c) and (d) may be elected only for payments that commence on or
after October 1, 1996 and only for Employees who have an Hour of
Service on or after January 1, 1996 and who (a) are not covered by the
terms of a collective bargaining agreement or (b) are covered by the
terms of a collective bargaining agreement but where the bargaining
unit representative and the Employer have mutually agreed to
participation in the Plan as amended.
7.12 Special form of benefit for former Employees.
(a) With respect to any Employee who has an Hour of Service on
or after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended (3) terminates employment with the Employer in
1996 and (4) has attained his fiftieth (50th) birthday but not his
fifty-fifth (55th) birthday as of his termination of employment, such
Employee shall be eligible to elect the special form of benefit
described in the next following paragraph which election must be made
in the form of a written Qualified Election.
(b) This special form of benefit shall only commence on
January 1, 1997 and shall be comprised of two components consisting of
a lump sum and a single life annuity as described in paragraphs (1) and
(2) below.
(1) Annuity Component: A reduced amount of Retirement Income
payable to the former Employee for his lifetime determined
as if he had elected to retire as of the first of the month
following the date such former Employee terminated from
employment.
(2) Lump Sum Component: A lump sum payment equal to the
difference between paragraphs (A) and (B) below:
(A) the lump sum amount which is the Actuarial Equivalent
of a single life annuity payable to the former Employee
determined as if the former Employee had elected such
single life annuity to commence as of January 1, 1997,
and
(B) the lump sum amount which is the Actuarial Equivalent
of the payment described in paragraph (1) above.
(3) With respect to paragraph (1) above, if the annuity
component is payable to the former Employee for his
lifetime, he may elect to have his Retirement Income
adjusted upwards in an amount which will make his Retirement
Income payable up to age sixty-five (65) equal, as nearly as
may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to
become payable after age sixty-five (65), computed as of the
first of the month following the date the former Employee
terminated employment, plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after
age sixty-five (65). The Federal primary Social Security
benefit used in calculating the former Employee's Retirement
Income payable under the Plan shall be determined by using
the salary history of the former Employee during his
employment with the Employer, or any Affiliated Employer, as
calculated in accordance with Section 5.4.
(c) Notwithstanding paragraph (b) above, with respect to this
form of benefit, a former Employee may elect, in lieu of receiving the
annuity component as a single life annuity, to receive his benefit in a
manner similar to the forms of payment described in Section 7.1(a),
(b), (c), or (d). If one of these alternatives is elected, the annuity
and lump sum component will be adjusted as follows:
(1) Alternative 1
(A) Annuity Component: The form of payment described in Section
7.1(a) but which is calculated based on eighty percent (80%)
of the single life annuity provided in paragraph (b)(1)
above.
(B) Lump Sum Component: A lump sum equal to eighty percent (80%)
of the amount provided in paragraph (b)(2) above.
(2) Alternative 2
(A) Annuity Component: The form of payment described in Section
7.1(b) but which is calculated based on ninety percent (90%)
of the single life annuity provided in paragraph (b)(1)
above.
(B) Lump Sum Component: A lump sum equal to ninety percent (90%)
of the amount provided in paragraph (b)(2) above.
(3) Alternative 3
(A) Annuity Component: The form of payment described in Section
7.1(c) but which is calculated based on seventy-five percent
(75%) of the single life annuity provided in paragraph
(b)(1) above.
(B) Lump Sum Component: A lump sum equal to seventy-five percent
(75%) of the amount provided in paragraph (b)(2) above.
(4) Alternative 4
(A) Annuity Component: The form of payment described in Section
7.1(d) but which is calculated based on eighty-eight percent
(88%) of the single life annuity provided in paragraph
(b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty-eight percent
(88%) of the amount provided in paragraph (b)(2) above.
XIV.
Section 8.2 should be deleted in its entirety and replaced with the
following:
8.2 Early distribution of vested benefit. If an Employee
terminates from service before his fifty-fifth (55th) birthday and is
entitled to receive in accordance with Section 8.1 Retirement Income
commencing at his Normal Retirement Date and at the time his service
terminated he had at least ten (10) Years of Accredited Service, he
may, in lieu of receiving payment of such Retirement Income commencing
at Normal Retirement Date, elect to receive such Retirement Income
commencing as of the first day of any month after his fifty-fifth
(55th) birthday but preceding his Normal Retirement Date in an amount
equal to his Accrued Retirement Income at the date of termination of
his service actuarially reduced in accordance with reasonable actuarial
assumptions adopted by the Retirement Board. An election pursuant to
this Section 8.2 to have Retirement Income commence prior to Normal
Retirement Date shall be made on a prescribed form and shall be filed
with the Retirement Board (or its delegee) at least thirty (30) days
before Retirement Income is to commence.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. If any such Employee
commences receipt of his Retirement Income after attaining age fifty
(50) but before attaining age fifty-five (55), the Employee's
Retirement Income shall be determined as in the preceding paragraph
including an additional reduction of one-third of one percent (0.33%)
for each calendar month by which the commencement date precedes the
first day of the month following such Employee's attainment of his
fifty-fifth (55th) birthday.
XV.
Section 8.4 should be deleted in its entirety and replaced with the
following:
8.4 Cash-out and buy-back. (a) Notwithstanding any other
provision of this Plan, if the present value of Accrued Retirement
Income of an Employee whose service terminates for any reason other
than transfer to an Affiliated Employer under Section 4.6, or
retirement under Article III, is not more than $3,500 (or such greater
amount as permitted by the regulations prescribed by the Secretary of
the Treasury), the Employer shall direct that such present value of the
Employee's Accrued Retirement Income be paid in a lump sum, in cash, to
such terminated Employee. The present value of the Accrued Retirement
Income shall be calculated as of the date of distribution of the lump
sum applying the Applicable Interest Rate as defined in Section 8.5(e)
in effect on the first day of the Plan Year of distribution or in
accordance with Section 8.5(g), as applicable. For purposes of this
Section 8.4, if the present value of the Employee's vested Accrued
Retirement Income is zero, the Employee shall be deemed to have
received a distribution of such vested Retirement Income.
(b) If such terminated Employee is subsequently reemployed and
becomes covered under this Plan, the calculation of his Accrued
Retirement Income shall be without regard to his years of Accredited
Service prior to any One-Year Breaks in Service, unless the amount of
such payment is repaid to the Trust, plus interest at the rate
determined under Section 411(c)(2)(C) of the Code. If such amount (plus
interest) is repaid, the Employee's Retirement Income shall be
calculated based on his years of Accredited Service before and after
any One-Year Breaks in Service. Any repayment of a cash-out made
pursuant to this Section 8.4 shall be made before the earlier of (a)
five (5) years after the date on which the Employee is reemployed by
the Employer or an Affiliated Employer, or (b) the close of the first
period of five (5) consecutive One-Year Breaks in Service commencing
after the distribution. If an Employee has been deemed to receive a
distribution in accordance with paragraph (a) and is then reemployed,
upon such reemployment, the amount of the deemed distribution shall be
restored to the Employee.
(c) Notwithstanding paragraph (b) above, effective on or after
July 15, 1996, a terminated Employee who has been paid a lump sum of
the present value of his Accrued Retirement Income in accordance with
paragraph (a) above shall not be entitled to repay this amount to the
Trust. If such terminated Employee is subsequently reemployed and
attains his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date, or terminates service for any reason subject to the
requirements of Section 8.1 or 8.2, the Employee shall receive
Retirement Income based on all Accredited Service, including Accredited
Service earned prior to reemployment, but reduced by the Actuarial
Equivalent of the lump sum payment made in accordance with paragraph
(a).
XVI.
Section 8.5 should be amended by adding the following new paragraph (g)
to the end thereof:
(g) Notwithstanding paragraph (c) and (e) above, effective for
Employees who will commence receipt of their Retirement Income on or
after October 1, 1996, the present value of such Employee's vested
Accrued Retirement Income under Section 8.4 shall be calculated by
using the annual rate of interest on 30-year Treasury securities for
the month of November in the Plan Year which precedes the Plan Year in
which such present value is determined and by using the prevailing
commissioners' standard table used to determine reserves for group
annuity contracts in effect on the date as of which the present value
is being determined.
XVII.
Section 8.7 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
8.7 Requirement for Direct Rollovers. This Section 8.7 applies
to distributions made from the Plan on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Article VIII, a
Distributee may elect on a prescribed form to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
XVIII.
Section 10.2 should be amended by deleting the second paragraph in its
entirety and replacing it with the following:
The members of the Retirement Board shall elect a Chairman
from their number, and a Secretary who may be but need not be one of
the members of the Retirement Board, and shall designate an actuary to
act in actuarial matters relating to the Plan. They may appoint from
their number such committees with such powers as they shall determine,
may authorize one or more of their number or any agent to make any
payment in their behalf, or to execute or deliver any instrument except
that a requisition for funds from the Trustee shall be signed by two
(2) members of the Retirement Board unless the Retirement Board
determines in writing to delegate such requisition authority.
XIX.
Section 10.3 should be amended by deleting the last paragraph in its
entirety and replacing it with the following:
Any action by the Retirement Board under this Section 10.3
shall be binding and conclusive. To the extent that the Retirement
Board delegates any of the foregoing duties or functions to another
party, the Retirement Board retains the ultimate authority to act in
accordance with this Section 10.3.
XX.
Section 15.1(a) should be deleted in its entirety and replaced with the
following:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible, or becomes eligible pursuant to Section 3.2
as amended, to receive Retirement Income after his retirement at his
Early, Normal, or Deferred Retirement Date, as applicable. A "Pensioned
Employee" shall not include any former Employee who terminated his
service with the Employer prior to his Early, Normal, or Deferred
Retirement Date and who is entitled to Retirement Income under Section
8.1 or 8.2 of the Plan; a Key Employee, as defined in Section 14.6(g);
or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not
provide medical benefits to its Pensioned Employees.
XXI.
Section 15.2(b) should be deleted in its entirety and replaced with the
following:
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered, or is deemed covered as
determined by the Retirement Board, as an Employee under a group
medical plan maintained by the Employer immediately prior to the time
he became a Pensioned Employee.
IN WITNESS WHEREOF, Georgia Power Company through its duly authorized
officer, has adopted this Third Amendment to the Pension Plan for Employees of
Georgia Power Company this ____ day of _________________, 1996, to be effective
as stated herein.
GEORGIA POWER COMPANY
By: ____________________________
Title:__________________________
ATTEST:
By: _____________________________
Title:____________________________
[CORPORATE SEAL]
Exhibit 10(a)72
SECOND AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
SOUTHERN COMPANY SERVICES, INC.
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Southern Company Services, Inc. (the "Plan") effective January
1, 1989 in order to comply with the Internal Revenue Code of 1986, as amended,
(the "Code") and to make other technical and clarifying changes; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
additional requirements imposed by the Internal Revenue Service and to make
certain other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1989, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.14(b) should be deleted in its entirety and replaced by the
following:
(b) Notwithstanding the above, "Earnings" with
respect to any commissioned salesperson means the salary or
wages of an Employee of the Employer or employee of any
Affiliated Employer within any Plan Year, without including
overtime, and before deductions for taxes, Social Security,
etc. but applying those adjustments identified in paragraphs
(a)(2), (3) and (4) above. In addition, "Earnings" for any
Employee who is a regular part-time employee means with regard
to paragraph (a)(1) above the highest annual rate of salary or
wages based on a forty (40) hour work week.
II.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary
Social Security benefit (primary old age insurance benefit) to
which it is estimated that an Employee will become entitled in
accordance with the Social Security Act in force as provided
in subparagraphs (a) through (e) below which shall exceed $168
per month on and after January 1, 1989, and $250 per month, on
and after January 1, 1991, multiplied by a fraction not
greater than one, the numerator of which shall be the
Employee's total Accredited Service, and the denominator of
which shall be such total Accredited Service plus the
Accredited Service the Employee could have accumulated if he
had continued his employment from the date he terminates
service with his Employer or any Affiliated Employer until his
Normal Retirement Date. For purposes of determining the
estimated Federal primary Social Security benefit used in the
Social Security Offset, an Employee shall be deemed to be
entitled to receive Federal primary Social Security benefits
after retirement or death, if earlier, regardless of the fact
that he may have disqualified himself to receive payment
thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history
of the Employee as provided in Section 5.4(b) and shall be
determined pursuant to the following, as applicable:
III.
Section 2.6 should be deleted in its entirety and replaced by the
following:
2.6 Exclusion of certain categories of employees.
Notwithstanding any other provision of this Article II, leased
employees shall not be eligible to participate in the Plan. In
addition, temporary employees, except Employees as defined in
Section 1.17 participating in the Plan prior to July 1, 1991,
shall not be eligible to participate in the Plan. Any person
who is employed by Electric City Merchandise Company, Inc. on
or after May 1, 1988, or who is employed by Savannah Electric
and Power Company on or after March 3, 1988, shall not be
entitled to accrue Retirement Income under the Plan while
employed at such companies.
IV.
Effective September 1, 1996, Section 5.4(a) should be deleted in its
entirety.
V.
Effective September 1, 1996, Section 5.4(b) should be deleted in its
entirety and a new Section 5.4 should be inserted as follows:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an
Employee's Retirement Income under the Plan, the Social
Security Offset shall be determined by using the actual salary
history of the Employee during his employment with the
Employer or any Affiliated Employer, provided that in the
event that the Retirement Board is unable to secure such
actual salary history within 90 days (or such longer period as
may be prescribed by the Retirement Board) following the later
of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is
notified of the Retirement Income to which he is entitled, the
salary history shall be determined in the following manner:
(1) The salary history shall be estimated by
applying a salary scale, projected backwards, to the
Employee's compensation from the Employer for W-2
purposes for the first Plan Year following the most
recent Plan Year for which the salary history is
estimated. The salary scale shall be a level
percentage per year equal to six percent (6%) per
annum.
(2) The Plan shall give clear written notice
to each Employee of the Employee's right to supply
the actual salary history and of the financial
consequences of failing to supply such history. Such
notice shall state that the actual salary history is
available from the Social Security Administration.
For purposes of determining the Social Security
Offset in calculating the Retirement Income of an Employee
entitled to receive a public pension based on his employment
with a Federal, state, or local government agency, no
reduction in such Employee's Social Security benefit resulting
from the receipt of a public pension shall be recognized.
VI.
Effective September 1, 1996, Section 5.4(c) should be deleted in its
entirety.
VII.
Section 5.9(a) should be deleted in its entirety and replaced by the
following:
5.9 Required distributions.
(a) Once a written claim for benefits is filed with
the Retirement Board, payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day
of the Plan Year in which the latest of the following events
occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the Employee
commenced participation in the Plan; or
(3) the Employee's separation from service from the Employer
or any Affiliated Employer.
VIII.
Section 5.9(d) should be deleted in its entirety and replaced by the
following:
(d) Distribution upon death of Employee
(1) Death after commencement of benefits
If the Employee dies before his entire nonforfeitable
interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Employee as
set forth in the provisions of Article VII.
(2) Death prior to commencement of benefits
If the Employee dies before the distribution of his
nonforfeitable interest has begun, the entire interest,
subject to the provisions of Article VII, shall be distributed
monthly to his Provisional Payee, if any, over such
Provisional Payee's remaining lifetime.
IX.
Effective January 1, 1996, Section 10.7 should be deleted in its
entirety and replaced by the following:
10.7 Accounts and tables. The Retirement Board shall maintain
accounts showing the fiscal transactions of the Plan, and
shall keep in convenient form such data as may be necessary
for actuarial valuations with respect to the operation and
administration of the Plan. The Retirement Board shall
annually report to the Board of Directors and provide a
reasonable summary of the financial condition of the Trust and
the operation of the Plan for the past year, and any further
information which the Board of Directors may require.
The Retirement Board may, with the advice of an
enrolled actuary, adopt from time to time mortality and other
tables as it may deem necessary or appropriate for use in
calculating benefits under the Plan.
X.
Article XV should be deleted in its entirety and replaced by the
following:
ARTICLE XV
Post-retirement Medical Benefits
15.1 Definitions. The following words and phraseology as used
herein shall have the following meanings unless a different meaning is
plainly required by the context:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible to receive Retirement Income after his
retirement at his Early, Normal, or Deferred Retirement Date, as
applicable, pursuant to the terms of the Plan, but shall not include
any former Employee who terminated his service with the Employer prior
to his Early, Normal, or Deferred Retirement Date and who is entitled
to Retirement Income under the Plan. A "Pensioned Employee" shall not
include a Key Employee, as defined in Section 14.6(g), or effective
January 1, 1991 any Pensioned Employee of an Employer that has adopted
the Plan pursuant to Section 14.1 hereof but does not provide medical
benefits to its Pensioned Employees.
(b) "Dependents" means the Pensioned Employee's spouse who is
not legally separated from the Pensioned Employee and the Pensioned
Employee's unmarried children (both natural and legally adopted) within
the prescribed age limit set forth below. The term "children" includes
stepchildren and foster children who reside with the Pensioned Employee
in a regular parent-child relationship and are dependent upon the
Pensioned Employee for principal support and maintenance. The term
Dependent shall not include any person who is covered, or eligible for
coverage, under the Plan as a Pensioned Employee or who is entitled to
any benefits under any provisions of this Plan because of having been
covered as a Pensioned Employee.
Children shall be considered to be within the prescribed age
limit if they are less than nineteen (19) years of age. Unmarried
children age nineteen (19) but less than age twenty-four (24) continue
to be within the prescribed age limit if they are (1) attending school
on a full-time basis as defined by the school and are dependent upon
the Pensioned Employee for more than half of their support, or (2)
attending school on a part-time basis, receiving medical treatment
prescribed by an attending physician, and are dependent upon the
Pensioned Employee for more than half of their support. The attending
physician must also certify that the Dependent is mentally or
physically unable to attend school on a full-time basis.
If both a husband and his wife are covered under this Plan as
Pensioned Employees of the Employer, either, but not both, may elect to
cover their eligible children as Dependents.
Any person covered or eligible for coverage under Article XV
as a Pensioned Employee, or under any group medical plan maintained by
the Employer as an Employee, shall not be considered as a Dependent.
(c) "Covered Individual" means a Pensioned Employee or
Dependent of a Pensioned Employee who is eligible to receive medical
benefits under Article XV.
(d) "Qualified Transfer" means a transfer of Excess Pension
Assets of the Plan to a Health Benefits Account after December 31,
1990, but before December 31, 2000, which satisfies the requirements
set forth in paragraphs (1) through (6) below.
(1) (A) Except as provided in Section 15.1(d)(1)(B)
below, no more than 1 transfer per Plan Year may be treated as
a Qualified Transfer.
(B) Subject to the provisions of Sections
15.1(d)(3), (4) and (5) below, a transfer shall be
treated as a Qualified Transfer if such transfer
(i) is made after the close of the
Plan Year preceding the Employer's first
Plan Year beginning after December 31, 1990,
and before the earlier of (I) the due date
(including extensions) for the filing of the
Employer's corporate tax return for such
preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the
expenditures of the Employer for Qualified
Current Retiree Health Liabilities for such
preceding Plan Year.
(iii) The reduction described in the
second paragraph of Section 15.1(d)(6)(G)
shall not apply to a transfer described in
Section 15.1(d)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a
reasonable estimate of the amount the Employer will pay
(directly or through reimbursement) out of the Health Benefits
Accounts for Qualified Current Retiree Health Liabilities
during the Plan Year of the transfer.
(3) (A) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocated
thereto) shall only be used to pay Qualified Current Retiree
Health Liabilities (whether directly or through
reimbursement).
(B) Any assets transferred to a Health
Benefits Account in a Qualified Transfer (and any
income allocable thereto) which are not used as
provided in Section 15.1(d)(3)(A) above shall be
transferred from the Health Benefits Account back to
the Plan.
(C) For purposes of this Section 15.1(d)(3),
any amount transferred from a Health Benefits Account
shall be treated as paid first out of the assets and
income described in Section 15.1(d)(3)(A) above.
(4) (A) The Accrued Retirement Income of any
Pensioned Employee or Dependent under the Plan shall become
nonforfeitable in the same manner which would be required if
the Plan had terminated immediately before the Qualified
Transfer (or in the case of a Pensioned Employee who
terminated service during the 1-year period ending on the date
of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer
described in Section 15.1(d)(1)(B), the requirements
of this Section 15.1(d)(4) are met with respect to
any Pensioned Employee who terminated service during
the Plan Year to which such Qualified Transfer
relates by recomputing such Pensioned Employee's
benefits as if Section 15.1(d)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or
before December 8, 1994, the Applicable Employer Cost for each
Plan Year during the Cost Maintenance Period shall not be less
than the higher of the Applicable Employer Cost for each of
the two Plan Years immediately preceding the Plan Year of the
Qualified Transfer. Effective for Qualified Transfers
occurring after December 8, 1994, the medical benefits plan
set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year
during the Benefit Maintenance Period shall be substantially
the same as the Applicable Health Benefits provided by the
Employer during the Plan Year immediately preceding the Plan
Year of the Qualified Transfer. Notwithstanding any other
provision to the contrary in this Section 15.1(d)(5), the
Employer may elect at any time during the Plan Year to have
this Section 15.1(d)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of
the Social Security Act and with respect to Pensioned
Employees which are not so eligible.
(6) For purposes of this Section 15.1(d), the
following words and phraseology shall have the following
meanings unless a different meaning is plainly required by the
context:
(A) "Applicable Employer Cost" means, with
respect to any Plan Year, the amount determined by
dividing
(i) the Qualified Current Retiree
Health Liabilities of the Employer for such
Plan Year determined (I) without regard to
any reduction under Section 15.1(d)(6)(G),
and (II) in the case of a Plan Year in which
there was no Qualified Transfer in the same
manner as if there had been such a transfer
at the end of the Plan Year, by
(ii) the number of individuals to
whom coverage for Applicable Health Benefits
was provided during such Plan Year.
(B) "Applicable Health Benefits" means
health benefits or coverage which are provided to
Pensioned Employees who immediately before the
Qualified Transfer are eligible to receive such
benefits and their Dependents.
(C) "Benefit Maintenance Period" means the
period of five (5) Plan Years beginning with the Plan
Year in which the Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the
period of five (5) Plan Years beginning with the
taxable year in which the Qualified Transfer occurs.
If a Plan Year is in two (2) or more overlapping Cost
Maintenance periods, this Section 15.1(d)(6)(D) shall
be applied by taking into account the highest
Applicable Employer Cost required to be provided
under Section 15.1(d)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the
excess, if any, of
(i) the amount determined under Code
Section 412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section
412(c)(7)(A)(i), or (II) 125 percent of
current liability (as defined in Code
Section 412(c)(7)(B)).
The determination under this
paragraph shall be made as of the most
recent valuation date of the Plan preceding
the Qualified Transfer.
(F) "Health Benefits Account" means an
account established and maintained under Code Section
401(h).
(G) "Qualified Current Retiree Health
Liabilities" means, with respect to any Plan Year,
the aggregate amounts, including administrative
expenses, which would have been allowable as a
deduction to the Employer for payment of Applicable
Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were
provided directly by the Employer and the Employer
used the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence,
the rule of Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring
on or before December 8, 1994, the amount determined
in the paragraph above shall be reduced by any amount
previously contributed to a Health Benefits Account
or welfare benefit fund, as defined in Code Section
419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. The portion of any reserves
remaining as of the close of December 31, 1990 shall
be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified
Transfers occurring after December 8, 1994, the
amount determined under the preceding paragraph shall
be reduced by the amount which bears the same ratio
to such amount as the value (as of the close of the
Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits
Accounts or welfare benefit funds, as defined in
section 419(e)(1), set aside to pay the Qualified
Current Retiree Health Liability, bears to the
present value of the Qualified Current Retiree Health
Liabilities for all Plan Years determined without
regard to this paragraph.
15.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1989
shall be eligible for coverage as a Pensioned Employee on January 1,
1989, provided he was covered as an Employee under a group medical plan
maintained by the Employer immediately prior to the time he became a
Pensioned Employee.
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered as an Employee under a
group medical plan maintained by the Employer immediately prior to the
time he became a Pensioned Employee.
(c) A Dependent of a Pensioned Employee shall be eligible for
coverage under this Plan on the later of (1) the date the Pensioned
Employee becomes eligible for coverage hereunder and (2) the date such
person becomes a Dependent.
15.3 Medical benefits. The medical benefits provided under
this Article XV by the Employer and each adopting Employer are set
forth in the copy of each such Employer's medical benefits plan which
is attached hereto as Exhibit A and specifically incorporated herein by
reference in its entirety, as may be amended from time to time. Such
medical benefits shall be subject without limitation to all
deductibles, maximums, exclusions, coordination with Medicare and other
medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
15.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as
follows:
(1) when Article XV is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XV is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
15.5 Continuation of coverage to certain individuals.
(a) Anything in Article XV to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be
entitled to elect continued medical coverage as provided under the
terms of Article XV upon the occurrence of a Qualifying Event, provided
such Pensioned Employee, Dependent spouse, or Dependent child was
entitled to benefits under Article XV on the day prior to the
Qualifying Event.
(1) "Qualifying Event" means with respect to any
Pensioned Employee, Dependent spouse, or Dependent child, as
appropriate, (A) the death of the Pensioned Employee, (B) the
divorce or legal separation of the Pensioned Employee from the
Dependent spouse, (C) a Dependent child ceasing to be a
Dependent as defined under the requirements of Article XV, or
(D) a proceeding in a case under Title 11, United States Code,
with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued
coverage under this Section 15.5 shall be required to pay such monthly
contributions as determined by the Employer to be equal to a reasonable
estimate of 102% of the cost of providing coverage for such period for
similarly situated beneficiaries which (1) is determined on an
actuarial basis and (2) takes into account such factors as the
Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the
Qualifying Event and end not earlier than the first to occur of the
following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XV of the Plan;
(3) The failure of the Pensioned Employee or Dependent
to pay any required contribution when due;
(4) The date on which the Pensioned Employee or
Dependent first becomes, after the date of his election, (A)
a covered employee under any other group health plan which
does not contain any exclusion or limitation with respect to
any preexisting condition of such individual, or (B)
entitled to benefits under Title XVIII of the Social
Security Act; or
(5) The date the Dependent spouse becomes covered under
another group health plan which does not contain any
exclusion or limitation with respect to any preexisting
condition of such Dependent spouse.
(d) Any election to continue coverage under this Section 15.5
shall be made during the election period (1) beginning not later than
the termination date of coverage by reason of the Qualifying Event and
(2) ending sixty (60) days following the later of the date described in
(1) above or the date any Pensioned Employee, Dependent spouse, or
Dependent child receives notice of a Qualifying Event from the
Employer.
(e) The Employer shall provide each Pensioned Employee and
Dependent spouse, if any, written notice of the rights provided in this
Section 15.5. The Pensioned Employee or Dependent spouse is required to
notify the Employer within thirty (30) days of any Qualifying Event
described in Section 15.5(a)(1)(B) or (C), and the Employer shall
provide the Dependent spouse or Dependent child written notice of the
rights provided in this Section 15.5 within fourteen (14) days
thereafter. Notice to the Dependent spouse shall be deemed notice to
each Dependent child residing with such spouse at the time such
notification is made.
15.6 Contributions or Qualified Transfers to fund medical
benefits.
(a) Any contributions which the Employer deems necessary to
provide the medical benefits under Article XV will be made from time to
time by or on behalf of the Employer, and contributions shall be
required of the Pensioned Employees to the Employer's medical benefit
plan in amounts determined in the sole discretion of the Employer from
time to time. All Employer contributions shall be made to the Trustee
under the Trust Agreement provided for in Article XI and shall be
allocated to a separate account maintained solely to fund the medical
benefits provided under this Article XV. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding
of medical benefits under this Article XV. In the event that a
Pensioned Employee's interest in an account, or his Dependents',
maintained pursuant to this Article XV is forfeited prior to
termination of the Plan, the forfeited amount shall be applied as soon
as possible to reduce Employer contributions made under this Article
XV. In no event at any time prior to the satisfaction of all
liabilities under this Article XV shall any part of the corpus or
income of such separate account be used for, or diverted to, purposes
other than for the exclusive purpose of providing benefits under this
Article XV.
The amount of contributions to be made by or on behalf of the
Employer for any Plan Year, if any, shall be reasonable and
ascertainable and shall be determined in accordance with any generally
accepted actuarial method which is reasonable in view of the provisions
and coverage of Article XV, the funding medium, and any other
applicable considerations. However, the Employer is under no obligation
to make any contributions under Article XV after Article XV is
terminated, except to fund claims for medical expenses incurred prior
to the date of termination.
The medical benefits provided under this Article XV, when
added to any life insurance protection provided under the Plan, shall
be subordinate to the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from
January 1, 1987) plus the costs of any life insurance protection shall
not exceed twenty-five percent (25%) of the sum of the aggregate of
costs of retirement benefits under the Plan (other than past service
credits), the aggregate of costs of the medical benefits and the costs
of any life insurance protection (both measured from January 1, 1987).
The aggregate of costs of retirement benefits, other than for past
service credits, and the aggregate of costs of medical benefits
provided under the Plan shall be determined using the projected unit
credit funding method and the actuarial assumptions set forth in
Exhibit B, a copy of which is attached hereto and specifically
incorporated herein by reference in its entirety, and as may be amended
from time to time by the committee responsible for providing a
procedure for establishing and carrying out a funding policy and method
for the Plan pursuant to Section 10.9 of the Plan. Effective for
contributions made after January 1, 1990, the limitations set forth in
the preceding two sentences in this paragraph on amounts that may be
contributed to fund medical benefits under this Article XV shall be
based on contributions alone and not cost. Contributions allocated to
any separate account established for a Pensioned Employee from which
medical benefits will be payable solely to such Pensioned Employee or
his Dependents shall be treated as an Annual Addition as defined in
Section 6.6(a) to any defined contribution plan maintained by the
Employer.
(b) Effective January 1, 1991, the Employer shall have the
right, in its sole discretion, to make a Qualified Transfer of all or a
portion of any Excess Pension Assets contributed to fund Retirement
Income under the Plan to the Health Benefits Accounts to fund medical
benefits under this Article XV.
15.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer
promptly in writing when a change in the amount of the Pensioned
Employee's contribution is in order because a Dependent has become
ineligible for coverage under this Article XV. No person shall become
covered under this Article XV for whom the Pensioned Employee has not
made the required contribution. Any contribution paid by a Pensioned
Employee for any person after such person shall have become ineligible
for coverage under this Article XV shall be returned upon written
request but only provided such written request by or on behalf of the
Pensioned Employee is received by the Employer within ninety (90) days
from the date coverage terminates with respect to such ineligible
person.
15.8 Amendment of Article XV. The Employer reserves the right,
through action of its Board of Directors, to amend Article XV
(including Exhibit A) pursuant to Section 13.1 or the Trust without the
consent of any Pensioned Employee, or his Dependents, provided,
however, that no amendment of this Article or the Trust shall cancel
the payment or reimbursement of expenses for claims already incurred by
a Pensioned Employee or his Dependent prior to the date of any
amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XV, as
set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration
from any Pensioned Employee or his Dependents. The Employer makes no
promise to continue these benefits in the future and rights to future
benefits will never vest. In particular, retirement or the fulfillment
of the prerequisites for a retirement benefit pursuant to the terms of
the Plan or under the terms of any other employee benefit plan
maintained by the Employer shall not confer upon any Pensioned Employee
or Dependents any right to continued benefits under this Article XV.
15.9 Termination of Article XV. Although it is the intention
of the Employer that this Article shall be continued and the
contribution shall be made regularly thereto each year, the Employer,
by action of its Board of Directors pursuant to Section 13.1, may
terminate this Article XV or permanently discontinue contributions at
any time in its sole discretion. This Article XV, as set forth in the
Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to
continue these benefits in the future and rights to future benefits
will never vest. In particular, retirement or the fulfillment of the
prerequisites for a retirement benefit pursuant to the terms of the
Plan or under the terms of any other employee benefit plan maintained
by the Employer shall not confer upon any Pensioned Employee or his
Dependents any right to continued benefits under this Article XV.
Effective January 1, 1991, in the event the Employer or any adopting
Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 15.3 of the Plan to its Pensioned
Employees, this Article XV of the Plan shall automatically terminate
with respect to the Pensioned Employees and their Dependents of such
Employer without the requirement of any action by such Employer.
15.10 Reversion of assets upon termination. Upon the
termination of this Article XV and the satisfaction of all liabilities
under this Article XV, all remaining assets in the separate account
described in Section 15.6 shall be returned to the Employer.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly
authorized officers, has adopted this Second Amendment to the Pension Plan for
Employees of Southern Company Services, Inc. this ____ day of _________________,
1996, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: _____________________________
Title:___________________________
ATTEST:
By: __________________________
Title:_________________________
[CORPORATE SEAL]
<PAGE>
THIRD AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
SOUTHERN COMPANY SERVICES, INC.
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Southern Company Services, Inc. (the "Plan") effective January
1, 1989; and
WHEREAS, the Company wishes to amend the Plan to provide ad hoc cost of
living increases to retirees; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan to
amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated, the
Company hereby amends the Plan as follows:
I.
Section 5.11 should be deleted in its entirety and replaced with the
following:
5.11 Increase in Retirement Income of retired Employees
(a) Retirement Income payable on and after January 1, 1991 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1991 pursuant to the Plan as in
effect prior to January 1, 1991, or to the plan of Southern, will be
recalculated to increase the amount thereof by an amount ranging from a
minimum of two percent (2%) to a maximum of forty percent (40%) in
accordance with the following schedule:
Year in which Percentage
retirement occurred increase
1990 2%
1989 4%
1988 6%
1987 8%
1976 - 1986 10%
1971 - 1975 20%
1966 - 1970 30%
1965 and prior years 40%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1991 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1991
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1991 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1991 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(b) Retirement Income payable on and after January 1, 1996 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1996 pursuant to the Plan as in
effect prior to January 1, 1996, or to the plan of Southern, will be
recalculated to increase the amount thereof by an amount ranging from a
minimum of one and one-half percent (1.5%) to a maximum of seven and
one-half percent (7.5%) in accordance with the following schedule:
Year in which Percentage
retirement occurred increase
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1996 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1996
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1996 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1996 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(c) This Section 5.11 shall not apply with respect to an
Employee who has not retired, but for whom the distribution of
Retirement Income has commenced pursuant to Section 5.9 of the Plan.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly
authorized officer, has adopted this Third Amendment to the Pension Plan for
Employees of Southern Company Services, Inc. this ____ day of _________________,
1996, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________
Title:__________________________
ATTEST:
By: ______________________________
Title:_____________________________
(CORPORATE SEAL)
<PAGE>
FOURTH AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
SOUTHERN COMPANY SERVICES, INC.
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Southern Company Services, Inc. (the "Plan") effective January
1, 1989; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
requirements imposed by the Retirement Protection Act of 1994, to reduce the
early retirement age from 55 to 50, to reduce the Social Security offset amount,
to provide for outsourcing of Plan administration to a third party
administrator, and to make certain other technical and miscellaneous changes;
and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan to
amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated, the
Company hereby amends the Plan as follows:
I.
Section 1.13 should be amended by adding the following paragraph to the
end of such section:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service and elects to retire in 1996 and who has not attained his
fifty-fifth (55th) birthday, such Employee's Early Retirement Date
shall be January 1, 1997.
II.
Section 1.31 should be deleted in its entirety and replaced with the
following:
1.31 "Qualified Election" means an election by an Employee or
former Employee on a prescribed form that concerns the form of
distribution of Retirement Income that must be in writing and must be
consented to by the Employee's spouse. The spouse's consent to such an
election must acknowledge the effect of such election, must be in
writing, and must be witnessed by a notary public. Notwithstanding this
consent requirement, if the Employee establishes to the satisfaction of
the Retirement Board (or its delegee) that such written consent may not
be obtained because the spouse cannot be located or because of such
other circumstances as the Secretary of the Treasury may by regulations
prescribe, an election by the Employee will be deemed a Qualified
Election. Any consent necessary under this provision shall be valid and
effective only with respect to the spouse who signs the consent, or in
the event of a deemed Qualified Election, with respect to such spouse.
A revocation of a prior Qualified Election may be made by the
Employee without consent at any time commencing within 90 days before
such Employee's fifty-fifth (55th) birthday but not later than before
the commencement of Retirement Income. Effective for Employees who have
an Hour of Service on or after January 1, 1996 and who (a) are not
covered by the terms of a collective bargaining agreement or (b) are
covered by the terms of a collective bargaining agreement but where the
bargaining unit representative and the Employer have mutually agreed to
participation in the Plan as amended, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding sentence.
III.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary Social
Security benefit (primary old age insurance benefit) to which it is
estimated that an Employee will become entitled in accordance with the
Social Security Act in force as provided in subparagraphs (a) through
(e) below which shall exceed $168 per month on and after January 1,
1989, $250 per month on and after January 1, 1991, and for Employees
who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and the Employer
have mutually agreed to participation in the Plan as amended, $325 per
month on and after January 1, 1996, multiplied by a fraction not
greater than one, the numerator of which shall be the Employee's total
Accredited Service, and the denominator of which shall be such total
Accredited Service plus the Accredited Service the Employee could have
accumulated if he had continued his employment from the date he
terminates service with his Employer or any Affiliated Employer until
his Normal Retirement Date. For purposes of determining the estimated
Federal primary Social Security benefit used in the Social Security
Offset, an Employee shall be deemed to be entitled to receive Federal
primary Social Security benefits after retirement or death, if earlier,
regardless of the fact that he may have disqualified himself to receive
payment thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history of the
Employee as provided in Section 5.4 and shall be determined pursuant to
the following, as applicable:
IV.
Section 3.2 should be amended by adding the following paragraph to the
end thereof:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service in 1996, who has not attained his fifty-fifth (55th) birthday
and who elects to retire pursuant to uniform rules established for
Employees retiring pursuant to this paragraph, such Employee's Early
Retirement Date shall be January 1, 1997.
V.
Section 4.4(a) should be deleted in its entirety and replaced with the
following:
(a) If an Employee included in the Plan who has completed at
least five (5) Vesting Years of Service becomes totally disabled and is
granted either Social Security disability benefits or long-term
disability benefits under a long-term disability benefit plan of the
Employer, he shall be considered to be on a leave of absence, herein
referred to as a "Disability Leave." An Employee's Disability Leave
shall be deemed to begin on the initial date of the disability and
shall continue until the earlier of: (1) the end of the month in which
he shall cease to be entitled to receive Social Security Disability
benefits and long-term disability benefits under a long-term disability
benefit plan of the Employer; (2) his death; and (3) his Retirement
Date if he elects to have his Retirement Income commence on such date.
During the period of the Employee's Disability Leave, he shall, for
purposes of the Plan, be deemed to have received Earnings at the
regular rate in effect for him.
VI.
Section 5.3(a) should be deleted in its entirety and replaced with the
following:
(a) Upon retirement at Early Retirement Date, his Minimum
Retirement Income (before adjustment for Provisional Payee designation,
if any) shall be an amount equal to 1.70% of his Average Monthly
Earnings multiplied by his years (and fraction of a year) of Accredited
Service earned as of his Early Retirement Date including a Social
Security Offset.
VII.
Section 5.4 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an Employee's
Retirement Income under the Plan, the Social Security Offset shall be
determined by using the actual salary history of the Employee during
his employment with the Employer or any Affiliated Employer, provided
that in the event that the Retirement Board (or its delegee) is unable
to secure such actual salary history within 180 days following the
later of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is notified of
the Retirement Income to which he is entitled, the salary history shall
be determined in the following manner:
VIII.
Section 5.5 should be deleted in its entirety and replaced with the
following:
5.5 Early Retirement Income. The monthly amount of Retirement
Income payable to an Employee who retires from the service of the
Employer at his Early Retirement Date subject to the limitations of
Section 6.2, will be equal to his Retirement Income determined in
accordance with Sections 5.1 and 5.3 based on his Accredited Service to
his Early Retirement Date, reduced by three-tenths of one percent
(0.3%) for each calendar month by which the commencement date of his
Retirement Income precedes his Normal Retirement Date but follows the
first day of the month following his attainment of his fifty-fifth
(55th) birthday.
Effective for Employees who have an Hour of Service on or
after January 1, 1996, and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) elect to retire in accordance with this
Section 5.5 on or after attainment of age fifty (50) but before
attainment of age fifty-five (55), Retirement Income shall be
determined as in the preceding paragraph including an additional
reduction of one-third of one percent (0.33%) for each calendar month
by which the commencement date precedes the first day of the month
following any such Employee's attainment of his fifty-fifth (55th)
birthday.
At the option of the Employee exercised at or prior to
commencement of his Retirement Income on or after his Early Retirement
Date (provided he shall not have in effect at such Early Retirement
Date a Provisional Payee designation pursuant to Article VII), he may
have his Retirement Income adjusted upwards in an amount which will
make his Retirement Income payable up to age sixty-five (65) equal, as
nearly as may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to become payable
after age sixty-five (65), as computed at the time of his retirement in
accordance with Section 5.3(a), plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after age
sixty-five (65). The Federal primary Social Security benefit used in
calculating an Employee's Retirement Income payable under the Plan
shall be determined by using the salary history of the Employee during
his employment with the Employer or any Affiliated Employer, as
calculated in accordance with Section 5.4.
IX.
Section 5.7 should be deleted in its entirety and replaced with the
following:
5.7 Payment of Retirement Income. The first payment of an
Employee's Retirement Income will be made on his Early Retirement Date,
Normal Retirement Date, Deferred Retirement Date, or date of
commencement of payment of Retirement Income in accordance with Section
8.2 or 8.6, as the case may be; provided that commencement of the
distribution of an Employee's Retirement Income shall not be made prior
to his Normal Retirement Date without the consent of such Employee,
except as provided in Section 8.4 of the Plan.
Notwithstanding anything to the contrary above, if in
accordance with this Section 5.7, an Employee is entitled to receive
Retirement Income commencing at his Early Retirement Date, he may, in
lieu of commencing payment of his Retirement Income upon his Early
Retirement Date, elect to receive such Retirement Income commencing as
of the first day of any month after his Early Retirement Date and
preceding his Normal Retirement Date in an amount equal to his Accrued
Retirement Income determined as of the commencement of his Retirement
Income on or after his Early Retirement Date determined in accordance
with Section 5.5. An election pursuant to this Section 5.7 to have
Retirement Income commence prior to Normal Retirement Date shall be
made on a prescribed form and shall be filed with the Retirement Board
(or its delegee) at least thirty (30) days before Retirement Income is
to commence.
In the event of the death of an Employee who has designated a
Provisional Payee or is deemed to have done so in accordance with
Article VII, if the designation has become effective, the first payment
to be made to the Provisional Payee pursuant to Article VII shall be
made to the Provisional Payee on the first day of the month after the
later of (a) the Employee's death and (b) the date on which the
Employee would have attained his fifty-fifth (55th) birthday if he had
survived to such date, if the Provisional Payee shall then be alive and
proof of the Employee's death satisfactory to the Retirement Board (or
its delegee) shall have been received by it. Subsequent payments will
be made monthly thereafter until the death of such Provisional Payee.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who dies in 1996
while in service with the Employer and who has attained his fiftieth
(50th) birthday but has not attained his fifty-fifth (55th) birthday at
the time of his death, such Employee's Provisional Payee shall commence
receipt of Retirement Income on the earlier of the first day of the
month following the date on which the Employee would have attained his
fifty-fifth (55th) birthday if he were still alive or on January 1,
1997, provided the Employee's Provisional Payee is alive and proof of
the Employee's death satisfactory to the Retirement Board (or its
delegee) is received.
In any event, payment of Retirement Income, including any
adjustments thereto caused by an amendment to the Plan providing for or
which has the effect of providing retroactively increased Retirement
Income, to the Employee shall begin not later than the sixtieth (60th)
day after the later of the close of the Plan Year in which falls (a)
the Employee's Normal Retirement Date or (b) the date the Employee
terminates his service with the Employer or any Affiliated Employer.
Notwithstanding the provisions of the Plan for the monthly payment of
Retirement Income, such income may be adjusted and payable annually in
arrears if the amount of the Retirement Income is less than $10.00 per
month.
X.
Section 5.9(a) should be deleted in its entirety and replaced with the
following:
(a) Once a written claim for benefits is filed with the
Retirement Board (or its delegee), payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day of the
Plan Year in which the latest of the following events occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the
Employee commenced participation in the Plan; or
(3) the Employee's separation from service from the
Employer or any Affiliated Employer.
XI.
Section 5.12(b) should be amended by deleting such paragraph in its
entirety and renaming paragraphs "(c)," "(d)," "(e)," and "(f)" to be "(b),"
"(c)," "(d)," and "(e)."
XII.
Section 6.1(a) should be deleted in its entirety and replaced with the
following:
(a) The maximum annual amount of Retirement Income payable
with respect to an Employee in the form of a straight life annuity
without any ancillary benefits after any adjustment for a Provisional
Payee designation shall be the lesser of the dollar limitation
determined under Code Section 415(b)(1)(A) as adjusted under Code
Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury
Regulation Section 1.415-5, subject to the following provisions of
Article VI. With respect to any former Employee who has Accrued
Retirement Income under the Plan or his Provisional Payee, the maximum
annual amount shall also be subject to the adjustment under Code
Section 415(d), but only those adjustments occurring before September
1, 1996.
XIII.
Article VII should be deleted in its entirety and replaced with the
following:
ARTICLE VII
Provisional Payee
7.1 Adjustment of Retirement Income to provide for payment to
Provisional Payee. An Employee who desires to have his Accrued
Retirement Income adjusted in accordance with the provisions of this
Article VII to provide a reduced amount of Retirement Income payable to
him for his lifetime commencing on his Early Retirement Date, his
Normal Retirement Date, or his Deferred Retirement Date, as the case
may be, may elect subject to Section 7.11, in accordance with the
provisions of this Article VII, at his option, either:
(a) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty percent (80%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that the same amount will be
continued after his death to his Provisional Payee until the death of
such Provisional Payee, or
(b) that an amount of Retirement Income be payable to him for
his lifetime which is equal to ninety percent (90%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount
payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or
(c) that an amount of Retirement Income be payable to him for
his lifetime which is equal to seventy-five percent (75%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that the same amount will
be continued after his death to his Provisional Payee until the death
of such Provisional Payee, or, if such Provisional Payee predeceases
the Employee, the Employee's Retirement Income automatically increases
to a monthly amount equal to the Retirement Income which would be
payable to him had he not elected the form of benefit described in this
Section 7.1(c) and instead had elected the single life annuity form of
benefit, or
(d) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty-eight percent (88%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the
amount payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or, if
such Provisional Payee predeceases the Employee, the Employee's
Retirement Income automatically increases to a monthly amount equal to
the Retirement Income which would be payable to him had he not elected
the form of benefit described in this Section 7.1(d) and instead had
elected the single life annuity form of benefit.
7.2 Form and time of election and notice requirements.
(a) An election of payment and designation of a Provisional
Payee in accordance with Section 7.1 shall be made in writing at the
same time on a prescribed form delivered to the Retirement Board (or
its delegee). Subject to Section 7.10(d), the election and designation
shall specify its effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII.
Notwithstanding the preceding paragraph, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan.
(b) Subject to Section 7.10(d), an election of payment to be
made in accordance with paragraph (a), (b), (c), or (d) of Section 7.1
may be changed by an Employee, provided the written election of the
change specifies an effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII. Notwithstanding the preceding sentence, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan. To the
extent that the new method of payment shall afford the Employee changed
protection in the event of his death after the effective date of the
new election and prior to retirement, his Accrued Retirement Income
shall be adjusted pursuant to Section 7.4(a) to reflect such changed
protection.
(c) With respect to Sections 7.5 and 7.6, within the period
not less than 30 days and not more than 90 days prior to the
anticipated commencement of benefits, the Employee shall be furnished,
by mail or personal delivery, a written explanation of: (1) the terms
and conditions of the reduced Retirement Income payable as provided in
paragraph (b) of Section 7.1; (2) the Employee's right to make, and the
effect of, an election to waive the payment of reduced Retirement
Income pursuant to a Provisional Payee designation; (3) the rights of
the Employee's Provisional Payee; and (4) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
reduced Retirement Income pursuant to a Provisional Payee designation.
Within thirty (30) days following an Employee's written
request received by the Retirement Board (or its delegee) during the
election period, but within sixty (60) days from the date the Employee
is furnished all of the information prescribed in the immediately
preceding sentence, the Employee shall be furnished an additional
written explanation, in terms of dollar amounts, of the financial
effect of an election by him not to receive such reduced Retirement
Income. If an Employee makes such request, the election period herein
prescribed shall end not earlier than sixty (60) calendar days
following the day of the mailing or personal delivery of the additional
explanation to the Employee. Except that if an election made as
provided in Section 7.5 or 7.6 is revoked, another election under that
Section may be made during the specified election period.
7.3 Circumstances in which election and designation are
inoperative. An election and designation made pursuant to this Article
shall be inoperative and the regular provisions of the Plan shall again
become applicable as if a Provisional Payee had not been designated if,
prior to the commencement of any payment in accordance with this
Article VII: (a) an Employee's Provisional Payee shall die, (b) the
Employee and the Provisional Payee shall be divorced under a final
decree of divorce, or (c) the Retirement Board (or its delegee) shall
have received the written Qualified Election of the Employee to rescind
his election of payment and designation of a Provisional Payee in order
to receive a single life annuity form of benefit. If such a Qualified
Election to rescind is made by the Employee, his Accrued Retirement
Income shall be reduced to reflect the protection afforded the Employee
by any Provisional Payee designation during the period from its
effective date to the date of the Retirement Board's (or its delegee's)
receipt of the Employee's Qualified Election to rescind if the option
as to payments of reduced Retirement Income was in accordance with
either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries
subsequent to the death or divorce of his Provisional Payee and prior
to the commencement of payments in accordance with this Article VII,
then he shall be entitled to designate a new Provisional Payee in the
manner set forth in Section 7.2.
7.4 Pre-retirement death benefit. If prior to his Normal
Retirement Date (or his Deferred Retirement Date, if applicable), an
Employee shall die while in the service of the Employer and is survived
by his spouse to whom he shall be married at the time of his death,
there shall be payable to his surviving spouse (whom he shall be deemed
to have designated as his Provisional Payee) Retirement Income
determined in accordance with paragraph (a) or paragraph (c) of this
Section 7.4, as applicable. Subject to Section 7.10(b), such Retirement
Income shall commence on the first day of the month following the death
of the Employee or the first day of the month following the date on
which he would have attained his fifty-fifth (55th) birthday if he were
still alive, whichever is later, and shall cease with the last payment
preceding the death of his Provisional Payee.
(a) The amount of Retirement Income payable to the Provisional
Payee of a deceased Employee who prior to his death had attained his
fifty-fifth (55th) birthday shall be equal to the amount payable to the
Provisional Payee as calculated in Section 7.1(b) determined on the
basis of his Accredited Service to the date of his death, or if the
Employee shall have attained his fifty-fifth (55th) birthday and so
elected prior to his death, such Retirement Income shall be equal to
the amount set forth in Section 7.1(a) determined on the basis of his
Accredited Service to the date of his death reduced as provided in the
next sentence. If such election shall be made by the Employee, the
Retirement Income which shall be payable to the Employee if he lives to
his Early Retirement Date or the first day of the month following his
attainment of age sixty-five (65), if later, shall be reduced by
three-fourths of one percent (0.75%) for each year (prorated for a
fraction of a year from the first day of the month following the
effective date of the election) which has elapsed from the effective
date of his election to the earlier of (1) the commencement of
Retirement Income on or after his Early Retirement Date or the first
day of the month following his attainment of age sixty-five (65), if
later, or (2) the revocation of such election. If he shall die before
the commencement of Retirement Income on or after his Early Retirement
Date or the first day of the month following his attainment of age
sixty-five (65), if later, his Accrued Retirement Income to the date of
his death shall be reduced by three-quarters of one percent (0.75%) for
each year (prorated for a fraction of a year from the first day of the
month following the effective date of the election) between the
effective date of his election and the first day of the month following
his attainment of age sixty-five (65). No reduction in the Employee's
Retirement Income shall be made for the period during which the
election is in effect after the first day of the month following his
attainment of age sixty-five (65).
(b) Retirement Income shall not be payable under paragraph (a)
of this Section 7.4 to the Provisional Payee of a deceased Employee if
at the time of his death there was in effect a Qualified Election made
after August 22, 1984 under this paragraph (b) that no Retirement
Income shall be paid to his Provisional Payee in the event of his death
while in the service of the Employer (or while in the service of an
Affiliated Employer to which his employment had been transferred in
accordance with Section 4.6) as provided in paragraph (a), provided the
Employee had received at least 180 days prior to his fifty-fifth (55th)
birthday a written explanation of: (1) the terms and conditions of the
Retirement Income payable to his Provisional Payee as provided in
paragraph (a); (2) the Employee's right to make, and the effect of, an
election to waive the payment of Retirement Income to his Provisional
Payee; (3) the rights of the Employee's Provisional Payee; and (4) the
right to make, and the effect of, a revocation of a previous election
to waive the payment of Retirement Income to the Employee's Provisional
Payee.
A revocation of a prior Qualified Election may be made by the
Employee without the consent of the Employee's Provisional Payee at any
time before the commencement of benefits. An election under this
paragraph (b) may be made and such election may be revoked by an
Employee during the period commencing ninety (90) days prior to the
Employee's fifty-fifth (55th) birthday and ending on the date of the
Employee's death.
Notwithstanding the above provisions of this paragraph (b),
such Employee shall not be entitled on or after September 1, 1996 to
waive payment of Retirement Income to his Provisional Payee as provided
in this Section 7.4. Any such election to waive payment of Retirement
Income in effect on August 31, 1996 shall remain in effect unless
subsequently revoked by the Employee.
(c) The amount of such Retirement Income payable to the
Provisional Payee of a deceased Employee who prior to his death, had
completed at least five (5) Vesting Years of Service and had not
attained his fifty-fifth (55th) birthday shall be equal to one-half of
the reduced amount, as actuarially adjusted to provide for the payment
of such Retirement Income beginning as of the first day of the month
following the date on which such deceased Employee would have attained
his fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the Employee's Accrued Retirement Income, determined on the
basis of his Accredited Service to the date of his death.
This Section 7.4(c) shall also apply to adjust, as provided in
the next following paragraph, the future payment of Retirement Income
after December 31, 1990 to a Provisional Payee with respect to an
Employee who died (while in the service of the Employer prior to his
fifty-fifth (55th) birthday after completing the requisite number of
Years of Service in order to have a nonforfeitable right to Retirement
Income under the Plan as in effect on the Employee's date of death),
provided Retirement Income is payable to such Provisional Payee on or
after January 1, 1991. The adjustment under this Section 7.4(c) shall
be determined by adjusting the Retirement Income that had commenced to
the Provisional Payee on or before January 1, 1986, and then adding the
applicable percentage increase under Section 5.13 of the Prior Plan.
Subject to Section 7.10(c), for an Employee on or after
January 1, 1991, who dies while in the service of the Employer prior to
his fifty-fifth (55th) birthday after completing five (5) Vesting Years
of Service, the amount of such Retirement Income payable to the
Provisional Payee shall be calculated as provided in Section 7.1(b)
determined on the basis of his Accredited Service to the date of his
death. The payment of such Retirement Income to the Provisional Payee
shall begin on the first day of the month following the date on which
such deceased Employee would have attained his fifty-fifth (55th)
birthday.
7.5 Post-retirement death benefit - qualified joint and
survivor annuity. If at his Early Retirement Date, Normal Retirement
Date, or Deferred Retirement Date, as the case may be, an Employee is
married and he has not: (a) designated a Provisional Payee in
accordance with Section 7.1 in respect of payments to be made
commencing on his Early, Normal, or Deferred Retirement Date or (b)
made, subject to Section 7.4(b), a Qualified Election that payment be
made to him in the mode of a single life annuity, he shall nevertheless
be deemed to have made an effective designation of a Provisional Payee
under this Section 7.5 and to have specified the payment of a benefit
as provided in Section 7.1(b).
7.6 Election and designation by former Employee entitled to
Retirement Income in accordance with Article VIII. If a former Employee
is entitled to receive in accordance with Section 8.1 Retirement Income
commencing at Normal Retirement Date, or sooner in accordance with
Section 8.2, he may, on or after his fifty-fifth (55th) birthday,
designate his spouse as his Provisional Payee and elect, subject to
Section 7.11, to have his Accrued Retirement Income at the date of
termination of his service actuarially adjusted to provide, at his
option, in the event of the commencement of payment prior to his Normal
Retirement Date either:
(a) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee; or
(b) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee; or
(c) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee, or, if such Provisional Payee predeceases the former Employee,
the former Employee's Retirement Income automatically increases to a
monthly amount equal to the Retirement Income which would be payable to
him had he not elected the form of benefit described in this Section
7.6(c) and instead had elected the single life annuity form of benefit;
or
(d) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee, or, if such Provisional Payee predeceases the
former Employee, the former Employee's Retirement Income automatically
increases to a monthly amount equal to the Retirement Income which
would be payable to him had he not elected the form of benefit
described in this Section 7.6(d) and instead had elected the single
life annuity form of benefit.
The former Employee's election and designation of his
Provisional Payee made in accordance with this Section 7.6 shall be in
writing on a prescribed form delivered to the Retirement Board (or its
delegee) and shall become effective not sooner than the date received
or the former Employee's fifty-fifth (55th) birthday, whichever is
later, nor later than the date of commencement of payment in accordance
with this Section 7.6. Notwithstanding the preceding sentence, an
election under Section 7.6(c) or (d) is subject to Section 7.11, must
be in the form of a written Qualified Election, and shall not become
effective until commencement of Retirement Income payments under the
Plan.
If the former Employee dies prior to his Normal Retirement
Date but after the effective date of his Provisional Payee designation,
there will be payable to his Provisional Payee for life commencing on
the first day of the calendar month after the former Employee's death
Retirement Income in a reduced amount in accordance with the former
Employee's election of payments to be made to his Provisional Payee
after the death of the former Employee under paragraph (a), (b), (c),
or (d), as the case may be, of this Section 7.6. Notwithstanding the
preceding sentence, an election under Section 7.6(c) or (d) is subject
to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until commencement of Retirement Income
payments under the Plan. However, if prior to the former Employee's
death, the Retirement Board (or its delegee) has not received such
election, payment of a reduced amount of Retirement Income will be made
in accordance with paragraph (b) of this Section 7.6 to his surviving
spouse to whom he is married at the time of his death, unless (1) at
the time of his death there is in effect a Qualified Election by the
former Employee that reduced Retirement Income shall not be paid to his
surviving spouse in accordance with this Section 7.6 should he die
between his fifty-fifth (55th) birthday and his Normal Retirement Date
without having elected that payment be made to a Provisional Payee and
(2) at least 180 days prior to his fifty-fifth (55th) birthday a
written explanation is provided to the former Employee of: (A) the
terms and conditions of the Retirement Income payable to his
Provisional Payee as provided in this Section 7.6; (B) the former
Employee's right to make, and the effect of, an election to waive the
payment of Retirement Income to his Provisional Payee; (C) the rights
of a former Employee's spouse; and (D) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
Retirement Income to his Provisional Payee.
If the former Employee is entitled to receive payment of
Retirement Income in accordance with Section 8.2 after his fifty-fifth
(55th) birthday and prior to his Normal Retirement Date and elects to
do so, a reduced amount of Retirement Income determined in accordance
with this Section 7.6, subject to Section 7.11, based upon his Accrued
Retirement Income at the date of termination of his service
(actuarially reduced in accordance with Section 8.2) will be payable to
him commencing on the date on which payments commence prior to Normal
Retirement Date in accordance with Section 8.2 with payments in the
same or reduced amount to be continued to his Provisional Payee for
life after the former Employee's death in accordance with his election
under paragraph (a), (b), (c), or (d), as the case may be, of this
Section 7.6. However, if the former Employee is married and he has not
designated a Provisional Payee in respect of payments to commence to
him prior to his Normal Retirement Date or elected that payment be made
to him in the mode of a single life annuity pursuant to a Qualified
Election, he shall be deemed to have designated a Provisional Payee
pursuant to this Section 7.6 and thereby specified that a reduced
Retirement Income shall be paid to him during his lifetime as provided
in paragraph (b) of this Section 7.6 and continued after his death to
his Provisional Payee as provided in paragraph (b) of this Section 7.6.
If the former Employee is alive on his Normal Retirement Date
and is married and payment of Retirement Income has not sooner
commenced, the provisions of Section 7.5 shall be applicable to the
payment of his Retirement Income, unless he shall elect, subject to
Section 7.11, at his Normal Retirement Date to receive payment of his
Retirement Income pursuant to Section 7.1(a), (b), (c), or (d).
However, if an election and designation in accordance with this Section
7.6 was in effect prior to his Normal Retirement Date, the former
Employee's Accrued Retirement Income at his Normal Retirement Date
shall be actuarially adjusted for the period the election and
designation was in effect.
7.7 Death benefit for Provisional Payee of former Employee. If
an Employee, whose service with the Employer terminates on or after
January 1, 1989, shall die after such termination of employment, and
prior to his death (a) shall have not attained his fifty-fifth (55th)
birthday, (b) shall have completed at least five (5) Vesting Years of
Service, and (c) shall be survived by his spouse to whom he shall be
married at his death, then there shall be payable to his surviving
spouse (whom he shall be deemed to have designated as his Provisional
Payee) Retirement Income determined in accordance with this Section
7.7. Such Retirement Income shall be equal to one-half of the reduced
amount, as actuarially adjusted to provide for the payment of such
Retirement Income beginning as of the first day of the month following
the date on which such deceased former Employee would have attained his
fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the former Employee's Accrued Retirement Income, determined on
the basis of his Accredited Service to the date of his death. Subject
to Section 7.10(b), the Provisional Payee shall be eligible to commence
receipt of such Retirement Income on the first day of the month
following the date on which the former Employee would have attained his
fifty-fifth (55th) birthday if he were still alive, or the first day of
any subsequent month preceding what would have been the former
Employee's Normal Retirement Date, and shall cease with the last
payment preceding the death of his Provisional Payee. In any event, the
Provisional Payee shall commence receipt of such Retirement Income no
later than what would have been the former Employee's Normal Retirement
Date.
7.8 Limitations on Employee's and Provisional Payee's benefits.
(a) With respect to an Employee who does not elect a single
life annuity, the limitation on benefits imposed under Article VI shall
be applied as if such Employee had elected a benefit in the form of a
single life annuity.
(b) With respect to a Provisional Payee, the limitations on
benefits imposed under Article VI shall be applied consistent with
paragraph (a) above prorated to provide a limitation equal to or
one-half of the Employee's limitation as appropriate in accordance with
annuity form of benefit elected by the Employee.
7.9 Effect of election under Article VII. An election of
payment or a deemed election of payment in accordance with this Article
VII shall be in lieu of any other form or method of payment of
Retirement Income.
7.10 Effects of change in retirement at Early Retirement Date.
(a) Notwithstanding any other provision of this Article VII
with the exception of paragraphs one and two of Section 7.4(c), with
respect to Employees who have an Hour of Service on or after January 1,
1996 and who (1) are not covered by the terms of a collective
bargaining agreement or (2) are covered by the terms of a collective
bargaining agreement but where the bargaining unit representative and
the Employer have mutually agreed to participation in the Plan as
amended, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)."
(b) Notwithstanding Sections 7.4 and 7.7 and subject to
paragraph (a) above, if an Employee who has an Hour of Service on or
after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (3) dies after attaining his fiftieth (50th)
birthday but before attaining his fifty-fifth (55th) birthday, his
Provisional Payee shall commence receipt of Retirement Income on or
after January 1, 1997, provided the Employee's Provisional Payee is
alive and proof of the Employee's death satisfactory to the Retirement
Board (or its delegee) is received. Notwithstanding the preceding
sentence, with respect to Section 7.7, the Provisional Payee may elect
to defer receipt of Retirement Income to the first day of any month
following the date the Employee would have attained his fiftieth (50th)
birthday but not beyond what would have been such Employee's Normal
Retirement Date.
(c) Subject to paragraph (a) above, the Provisional Payee of
any Employee described in the third paragraph of Section 7.4(c) who (1)
is not covered by the terms of a collective bargaining agreement or (2)
is covered by the terms of a collective bargaining agreement but where
the bargaining unit representative and the Employer have mutually
agreed to participation in the Plan as amended shall commence receipt
of Retirement Income upon the later of the first day of the month after
the Employee would have attained his fiftieth (50th) birthday or
January 1, 1997.
(d) For Employees who have an Hour of Service on or after
January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) have not attained their fifty-fifth
(55th) birthday by December 31, 1996, notwithstanding Section 7.2, with
respect to an election to receive a form of benefit described in
Sections 7.1(a) and 7.6(a), such election will be effective not sooner
than the date received by the Retirement Board (or its delegee) or
January 1, 1997, whichever is later, nor later than the date of
commencement of payments in accordance with this Article VII.
7.11 Commencement of new optional forms of payment. The
options for payment described in Sections 7.1(c) and (d) and Sections
7.6(c) and (d) may be elected only for payments that commence on or
after October 1, 1996 and only for Employees who have an Hour of
Service on or after January 1, 1996 and who (a) are not covered by the
terms of a collective bargaining agreement or (b) are covered by the
terms of a collective bargaining agreement but where the bargaining
unit representative and the Employer have mutually agreed to
participation in the Plan as amended.
7.12 Special form of benefit for former Employees.
(a) With respect to any Employee who has an Hour of Service on
or after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended (3) terminates employment with the Employer in
1996 and (4) has attained his fiftieth (50th) birthday but not his
fifty-fifth (55th) birthday as of his termination of employment, such
Employee shall be eligible to elect the special form of benefit
described in the next following paragraph which election must be made
in the form of a written Qualified Election.
(b) This special form of benefit shall only commence on
January 1, 1997 and shall be comprised of two components consisting of
a lump sum and a single life annuity as described in paragraphs (1) and
(2) below.
(1) Annuity Component: A reduced amount of Retirement Income
payable to the former Employee for his lifetime determined
as if he had elected to retire as of the first of the month
following the date such former Employee terminated from
employment.
(2) Lump Sum Component: A lump sum payment equal to the
difference between paragraphs (A) and (B) below:
(A) the lump sum amount which is the Actuarial Equivalent
of a single life annuity payable to the former Employee
determined as if the former Employee had elected such
single life annuity to commence as of January 1, 1997,
and
(B) the lump sum amount which is the Actuarial Equivalent
of the payment described in paragraph (1) above.
(3) With respect to paragraph (1) above, if the annuity
component is payable to the former Employee for his
lifetime, he may elect to have his Retirement Income
adjusted upwards in an amount which will make his Retirement
Income payable up to age sixty-five (65) equal, as nearly as
may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to
become payable after age sixty-five (65), computed as of the
first of the month following the date the former Employee
terminated employment, plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after
age sixty-five (65). The Federal primary Social Security
benefit used in calculating the former Employee's Retirement
Income payable under the Plan shall be determined by using
the salary history of the former Employee during his
employment with the Employer, or any Affiliated Employer, as
calculated in accordance with Section 5.4.
(c) Notwithstanding paragraph (b) above, with respect to this
form of benefit, a former Employee may elect, in lieu of receiving the
annuity component as a lump life annuity, to receive his benefit in a
manner similar to the forms of payment described in Section 7.1(a),
(b), (c), or (d). If one of these alternatives is elected, the annuity
and single sum component will be adjusted as follows:
(1) Alternative 1
(A) Annuity Component: The form of payment described in
Section 7.1(a) but which is calculated based on eighty
percent (80%) of the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty percent
(80%) of the amount provided in paragraph (b)(2) above.
(2) Alternative 2
(A) Annuity Component: The form of payment described in
Section 7.1(b) but which is calculated based on ninety
percent (90%) of the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to ninety percent
(90%) of the amount provided in paragraph (b)(2) above.
(3) Alternative 3
(A) Annuity Component: The form of payment described in
Section 7.1(c) but which is calculated based on
seventy-five percent (75%) of the single life annuity
provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to seventy-five
percent (75%) of the amount provided in paragraph
(b)(2) above.
(4) Alternative 4
(A) Annuity Component: The form of payment described in
Section 7.1(d) but which is calculated based on
eighty-eight percent (88%) of the single life annuity
provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty-eight
percent (88%) of the amount provided in paragraph
(b)(2) above.
XIV.
Section 8.2 should be deleted in its entirety and replaced with the
following:
8.2 Early distribution of vested benefit. If an Employee
terminates from service before his fifty-fifth (55th) birthday and is
entitled to receive in accordance with Section 8.1 Retirement Income
commencing at his Normal Retirement Date and at the time his service
terminated he had at least ten (10) Years of Accredited Service, he
may, in lieu of receiving payment of such Retirement Income commencing
at Normal Retirement Date, elect to receive such Retirement Income
commencing as of the first day of any month after his fifty-fifth
(55th) birthday but preceding his Normal Retirement Date in an amount
equal to his Accrued Retirement Income at the date of termination of
his service actuarially reduced in accordance with reasonable actuarial
assumptions adopted by the Retirement Board. An election pursuant to
this Section 8.2 to have Retirement Income commence prior to Normal
Retirement Date shall be made on a prescribed form and shall be filed
with the Retirement Board (or its delegee) at least thirty (30) days
before Retirement Income is to commence.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. If any such Employee
commences receipt of his Retirement Income after attaining age fifty
(50) but before attaining age fifty-five (55), the Employee's
Retirement Income shall be determined as in the preceding paragraph
including an additional reduction of one-third of one percent (0.33%)
for each calendar month by which the commencement date precedes the
first day of the month following such Employee's attainment of his
fifty-fifth (55th) birthday.
XV.
Section 8.4 should be deleted in its entirety and replaced with the
following:
8.4 Cash-out and buy-back. (a) Notwithstanding any other
provision of this Plan, if the present value of Accrued Retirement
Income of an Employee whose service terminates for any reason other
than transfer to an Affiliated Employer under Section 4.6, or
retirement under Article III, is not more than $3,500 (or such greater
amount as permitted by the regulations prescribed by the Secretary of
the Treasury), the Employer shall direct that such present value of the
Employee's Accrued Retirement Income be paid in a lump sum, in cash, to
such terminated Employee. The present value of the Accrued Retirement
Income shall be calculated as of the date of distribution of the lump
sum applying the Applicable Interest Rate as defined in Section 8.5(e)
in effect on the first day of the Plan Year of distribution or in
accordance with Section 8.5(g), as applicable. For purposes of this
Section 8.4, if the present value of the Employee's vested Accrued
Retirement Income is zero, the Employee shall be deemed to have
received a distribution of such vested Retirement Income.
(b) If such terminated Employee is subsequently reemployed and
becomes covered under this Plan, the calculation of his Accrued
Retirement Income shall be without regard to his years of Accredited
Service prior to any One-Year Breaks in Service, unless the amount of
such payment is repaid to the Trust, plus interest at the rate
determined under Section 411(c)(2)(C) of the Code. If such amount (plus
interest) is repaid, the Employee's Retirement Income shall be
calculated based on his years of Accredited Service before and after
any One-Year Breaks in Service. Any repayment of a cash-out made
pursuant to this Section 8.4 shall be made before the earlier of (a)
five (5) years after the date on which the Employee is reemployed by
the Employer or an Affiliated Employer, or (b) the close of the first
period of five (5) consecutive One-Year Breaks in Service commencing
after the distribution. If an Employee has been deemed to receive a
distribution in accordance with paragraph (a) and is then reemployed,
upon such reemployment, the amount of the deemed distribution shall be
restored to the Employee.
(c) Notwithstanding paragraph (b) above, effective on or after
July 15, 1996, a terminated Employee who has been paid a lump sum of
the present value of his Accrued Retirement Income in accordance with
paragraph (a) above shall not be entitled to repay this amount to the
Trust. If such terminated Employee is subsequently reemployed and
attains his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date, or terminates service for any reason subject to the
requirements of Section 8.1 or 8.2, the Employee shall receive
Retirement Income based on all Accredited Service, including Accredited
Service earned prior to reemployment, but reduced by the Actuarial
Equivalent of the lump sum payment made in accordance with paragraph
(a).
XVI.
Section 8.5 should be amended by adding the following new paragraph (g)
to the end thereof:
(g) Notwithstanding paragraph (c) and (e) above, effective for
Employees who will commence receipt of their Retirement Income on or
after October 1, 1996, the present value of such Employee's vested
Accrued Retirement Income under Section 8.4 shall be calculated by
using the annual rate of interest on 30-year Treasury securities for
the month of November in the Plan Year which precedes the Plan Year in
which such present value is determined and by using the prevailing
commissioners' standard table used to determine reserves for group
annuity contracts in effect on the date as of which the present value
is being determined.
XVII.
Section 8.7 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
8.7 Requirement for Direct Rollovers. This Section 8.7 applies
to distributions made from the Plan on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Article VIII, a
Distributee may elect on a prescribed form to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
XVIII.
Section 10.2 should be amended by deleting the second paragraph in its
entirety and replacing it with the following:
The members of the Retirement Board shall elect a Chairman
from their number, and a Secretary who may be but need not be one of
the members of the Retirement Board, and shall designate an actuary to
act in actuarial matters relating to the Plan. They may appoint from
their number such committees with such powers as they shall determine,
may authorize one or more of their number or any agent to make any
payment in their behalf, or to execute or deliver any instrument except
that a requisition for funds from the Trustee shall be signed by two
(2) members of the Retirement Board unless the Retirement Board
determines in writing to delegate such requisition authority.
XIX.
Section 10.3 should be amended by deleting the last paragraph in its
entirety and replacing it with the following:
Any action by the Retirement Board under this Section 10.3
shall be binding and conclusive. To the extent that the Retirement
Board delegates any of the foregoing duties or functions to another
party, the Retirement Board retains the ultimate authority to act in
accordance with this Section 10.3.
XX.
Section 15.1(a) should be deleted in its entirety and replaced with the
following:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible, or becomes eligible pursuant to Section 3.2
as amended, to receive Retirement Income after his retirement at his
Early, Normal, or Deferred Retirement Date, as applicable. A "Pensioned
Employee" shall not include any former Employee who terminated his
service with the Employer prior to his Early, Normal, or Deferred
Retirement Date and who is entitled to Retirement Income under Section
8.1 or 8.2 of the Plan; a Key Employee, as defined in Section 14.6(g);
or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not
provide medical benefits to its Pensioned Employees.
XXI.
Section 15.2(b) should be deleted in its entirety and replaced with the
following:
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered, or is deemed covered as
determined by the Retirement Board, as an Employee under a group
medical plan maintained by the Employer immediately prior to the time
he became a Pensioned Employee.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly
authorized officer, has adopted this Fourth Amendment to the Pension Plan for
Employees of Southern Company Services, Inc. this ____ day of _________________,
1996, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ________________________________
Title:______________________________
ATTEST:
By: __________________________
Title:_________________________
[CORPORATE SEAL]
Exhibit 10(a)73
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
As Amended and Restated
Effective January 1, 1996
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
As Amended and Restated
Effective January 1, 1996
ARTICLE DESCRIPTION PAGE
I Definitions...........................................1
II Participation.........................................5
III Funding of Incentive Pay Awards.......................7
IV Incentive Pay Award Opportunities......................9
V Administration of Plan................................10
VI Miscellaneous Provisions..............................12
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Purposes
The purposes of the Performance Pay Plan are to focus the attention and
efforts of employees on goals which have a direct and significant influence on
individual, organizational and corporate performance; to improve the correlation
between pay and performance for the achievement of individual, organizational
and corporate goals; and to provide the potential for levels of compensation
that will enhance the ability of the Operating Companies to attract, retain, and
motivate employees. In order to achieve these objectives, the Performance Pay
Plan is intended to pay additional compensation to eligible employees based upon
individual, organizational and corporate performance. Such compensation shall be
paid out of the general assets of The Southern Company. No benefits under the
Performance Pay Plan shall be deferred or held in trust for the benefit of
eligible employees. The Performance Pay Plan is not intended to be an employee
benefit plan or any other plan subject to regulation by the Employee Retirement
Income Security Act of 1974.
The Performance Pay Plan was established effective January 1, 1989. It
has subsequently been amended and restated effective January 1, 1991 and January
1, 1993. The Board of Directors of Southern Company Services, Inc. now desires
to amend and restate the Performance Pay Plan to expand eligibility and modify
the basis for funding and allocating Incentive Pay Awards. The effective date of
this amendment and restatement (the "Restatement Effective Date") of the
Performance Pay Plan shall be January 1, 1996.
ARTICLE I
Definitions
For purposes of the Performance Pay Plan, the following terms shall
have the following meanings, unless a different meaning is plainly required by
the context:
1.1 "Annual Salary" shall mean with respect to Employees the base
salary or wages paid to a Participant before deductions for taxes, social
security, etc., including all amounts contributed by an Operating Company to The
Southern Electric System Flexible Benefits Plan or The Southern Company Flexible
Benefits Plan on behalf of a Participant, amounts contributed by any Operating
Company to The Southern Company Employee Savings Plan as Elective Employer
Contributions, as said term is defined in Section 4.1 therein, pursuant to the
Participant's exercise of his deferral option made in accordance with Section
401(k) of the Internal Revenue Code, and amounts contributed to the Deferred
Compensation Plan for The Southern Company, but excluding all awards under The
Southern Company Performance Pay Plan and The Southern Company Productivity
Improvement Plan, overtime pay, shift differential and substitution pay. With
respect to Covered Employees, "Annual Salary" shall be defined in the Covered
Employee Plan established by an Operating Company for the benefit of Covered
Employees.
1.2 "Base Funding Opportunity" shall mean the funding percentage
determined with reference to ROE earned by The Southern Company and each
Operating Company as provided in Appendix A.
1.3 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.4 "Company Goals" shall mean the goals established annually by The
Southern Company Leadership Council and set forth in Schedule V.
1.5 "Covered Employee" shall mean an employee of an Operating Company
covered by a collective bargaining agreement between the Operating Company and a
union or other employee representative who participates in a Covered Employee
Plan.
1.6 "Covered Employee Plan" shall mean a performance based plan
established for the benefit of Covered Employees by an Operating Company
pursuant to a collective bargaining agreement which plan is maintained in
conjunction with this Performance Pay Plan.
1.7 "Earnings Thresholds" shall mean The Southern Company Earnings
Threshold and the Operating Company Earnings Threshold set forth at Section 3.1
of the Plan.
1.8 "Effective Date" shall mean January 1, 1989. The "Restatement Effective
Date" shall mean
January 1, 1996.
1.9 "Grade Value" shall mean with respect to Employees the assigned
dollar value within the Annual Salary range for a grade level in a Performance
Period and upon which Incentive Pay Awards are based. Grade Values of Employees
who commence service during a Performance Period and Grade Values of Employees
who terminate their employment for one of the reasons set forth in Section
2.1(b)(1)-(5) shall be prorated based upon their date of commencement or
termination of service with their Operating Company in accordance with Schedule
I or Schedule II, as appropriate. With respect to Covered Employees, "Grade
Value" shall be defined in the Covered Employee Plan established by the
Operating Company in which such Covered Employee participates.
1.10 "Incentive Pay Award" shall mean the amount awarded to a Participant
in accordance with Article
IV.
1.11 "Incentive Pay Award Pool" shall mean the pool of funds
established in accordance with Article III either for the benefit of Employees
or for the benefit of Covered Employees, respectively, and which funds are
allocated to each Operating Company.
1.12 "Employee" shall mean each active full-time and regular part-time
employee of an Operating Company, regardless of their classification as an
exempt or non-exempt employee. The term "Employee" shall not include any person
who is a temporary employee, cooperative employee, a contractor of an Operating
Company or an employee covered by a collective bargaining agreement unless such
employee is eligible to participate in the Plan as an Employee pursuant to an
agreement between his Operating Company and his collective bargaining
representative. In addition, the term "Employee" shall not include any employee
who is eligible to participate in any incentive compensation program maintained
by his Operating Company that specifically provides that an eligible employee
under such program shall not be entitled to also receive Incentive Pay Awards
under this Plan.
1.13 "Operating Companies" shall mean Southern Company Services, Inc.,
or any affiliate or subsidiary (direct or indirect) of The Southern Company,
which the Board of Directors may from time to time determine to be eligible to
participate under the Plan and which shall adopt the Plan, and any successor of
any such affiliate or subsidiary. The Operating Companies as of the Restatement
Effective Date are as follows: Alabama Power Company, Georgia Power Company,
Gulf Power Company, Mississippi Power Company, Savannah Electric and Power
Company, Southern Company Services, Inc. and Southern Nuclear Operating Company,
Inc.
1.14 "Participant" shall mean all Employees and Covered Employees who
satisfy the criteria set forth in Article II.
1.15 "Performance Period" shall mean each 12-month period commencing on
the first day of January and ending on the last day of December next following.
1.16 "Plan" shall mean The Southern Company Performance Pay Plan, as
described herein or as from time to time amended.
1.17 "Plan Administrator" shall mean Southern Company Compensation and
Benefits Department.
1.18 "ROE" shall mean return on equity.
1.19 "The Southern Company Earnings Test" shall mean the test set forth at
Section 3.2(b) of the Plan.
1.20 "The Southern Company Earnings Threshold" shall mean the
percentage ROE determined under Section 3.1(a).
Where the context requires, words in the masculine gender include the
feminine and neuter genders and words in the singular include the plural and
words in the plural include the singular.
<PAGE>
ARTICLE II
Participation
2.1 Employees. All Employees of an Operating Company shall be eligible to
participate in the Plan and receive Incentive Pay Awards.
(a) Employees who commence service with an Operating Company after
January 1 and before December 15 of a Performance Period shall be eligible to
receive Incentive Pay Awards in the same proportion as the ratio of the number
of months employed during a Performance Period bears to the total number of
months in a Performance Period. For purposes of calculating the number of months
of employment with an Operating Company under this Section 2.1:
(1) Employees whose effective date of employment is on or before the
fourteenth (14th) day of a month shall be considered Employees as of the
first day of such month; and
(2) Employees whose effective date of employment is on or after the
fifteenth (15th) day of a month shall not be considered Employees until the
first day of the next succeeding month.
Employees whose effective date of employment is on or after
December 15 of a Performance Period shall not be eligible to participate until
the next succeeding Performance Period.
(b) Employees whose employment with an Operating Company is terminated
during a Performance Period for one of the following reasons shall be eligible
to receive an Incentive Pay Award for such Performance Period on a pro-rata
basis:
(1) retirement,
(2) total disability (as determined by the Social Security
Administration),
(3) death,
(4) termination of employment, but only in the event the
Participant shall transfer to or be reemployed by Southern
Electric International, Inc., or any successor thereto, during
such Performance Period, or
(5) termination from participation in the Plan because the
requirements of Section 1.13 above are not met.
The pro-rata amount of an Incentive Pay Award shall be
determined for the Performance Period in which such termination described above
occurs by a fraction which is the number of months of employment with an
Operating Company during the Performance Period, divided by the total number of
months in the Performance Period. For purposes of calculating the number of
months of employment with an Operating Company under this Section 2.(1)(b) for
an Employee whose service is terminated for one of the reasons described above:
(1) The month in which the Employee's service terminates shall
not be considered if such terminating event occurs on or before the fourteenth
(14th) day of the month; and
(2) The month in which the Employee's service terminates shall
be considered if such terminating event occurs on or after the fifteenth (15th)
day of the month.
An Employee whose employment with an Operating Company is
terminated during a Performance Period for any reason other the reasons
described above shall not be eligible to receive an Incentive Pay Award for such
Performance Period.
(c) Notwithstanding paragraphs (a) and (b) above, the following employees
of Alabama Power Company are ineligible to participate in the Plan: Appliance
Sales Persons with Job Code 4074 and Commissioned Commercial Account Managers
with Job Code 5867.
2.2 Covered Employees. All Covered Employees of an Operating Company
who are covered under a Covered Employee Plan shall not be eligible to
participate in the Plan, but shall be eligible to participate in the Covered
Employee Plan and to receive Incentive Pay Awards in accordance with the terms
of such Covered Employee Plan.
<PAGE>
ARTICLE III
Funding of Incentive Pay Awards
3.1 Earnings Thresholds. Incentive Pay Award Pools shall be eligible
for funding for the Performance Period in an amount determined in accordance
with this Article III of the Plan for each Operating Company, provided both of
the following Earnings Thresholds are achieved:
(a) Southern Company Earnings Threshold - The Southern Company achieves
earnings during the Performance Period equal to or greater than a percentage
return on equity, which percentage is designated by The Southern Company
Management Council by no later than the end of each Performance Period and which
percentage shall be set forth on Schedule III; and
(b) Operating Company Earnings Threshold - Each Operating Company
achieves earnings during the Performance Period equal to or greater than a
percentage return on equity, which percentage is designated by The Southern
Company Management Council by no later than the end of each Performance Period
and which percentage and its dollar equivalent shall be set forth on Schedule
IV.
If, during the Performance Period, The Southern Company Earnings Threshold is
not satisfied, no Incentive Pay Award Pool for any Operating Company shall be
eligible for funding. If, during the Performance Period, The Southern Company
Earnings Threshold is satisfied, but an Operating Company fails to satisfy its
Operating Company Earnings Threshold, such Operating Company's Incentive Pay
Award Pool shall not be eligible for funding. If, during the Performance Period,
The Southern Company Earnings Threshold is satisfied and the Operating Company
satisfies its Operating Company Earnings Threshold, such Operating Company's
Incentive Pay Award Pools shall be eligible for funding in accordance with this
Article III.
3.2 Funding for Employee Participants. Subject to paragraph (c) below,
Plan funding for the Incentive Pay Award Pool benefiting Employees for each
Operating Company shall equal for any given Performance Period the percentage
provided under The Southern Company Earnings Test set forth in paragraph (a)
below reduced or increased by the achievement of the Company Goals set forth in
paragraph (b) below.
(a) The Southern Company Earnings Test. The Southern Company Earnings Test
set forth in Appendix A shall be applied at the end of each Performance Period
to determine the Base Funding Opportunity.
(b) Company Goals. The Chief Executive Officer of The Southern Company
shall determine in his sole discretion whether to increase or decrease the Base
Funding Opportunity established in paragraph (a) above based on achievement of
the Company Goals set forth in Schedule V. Such increase or decrease shall not
cause a deviation of more than 10% in the Base Funding Opportunity.
(c) If an Employee Participant transfers from one Funding Unit to another
Funding Unit during a Performance Period, the transferee Funding Unit will fund
such Participant's Incentive Pay Award for the entire Performance Period, and
shall include such Participant's Grade Value in the calculation of the Incentive
Pay Award Pool for the transferee Funding Unit without prorating the Grade Value
of such Participant for the Performance Period.
3.3 Funding for Covered Employee Participants. With respect to a Covered
Employee Plan sponsored by an Operating Company, such Plan shall be funded in
accordance with this Section 3.3.
(a) A Covered Employee Plan shall be eligible for funding provided the
Earnings Thresholds set forth in Section 3.1 are satisfied.
(b) Provided the Incentive Pay Award Pool for a Covered Employee Plan
is eligible for funding under Paragraph (a) above, the Incentive Pay Award Pool
for a Covered Employee Plan shall be funded in accordance with its terms, except
that the maximum dollar amount of the Incentive Pay Award Pool for the Covered
Employee Plan shall be subject to and may be limited by The Southern Company
Earnings Test.
3.4 Extraordinary Item Exception. If requested by an Operating Company,
at the sole discretion of the Chief Executive Officer of The Southern Company,
the Incentive Pay Award Pool for a Performance Period may be calculated without
regard to any extraordinary item of income or expense ("Extraordinary Item")
incurred by The Southern Company or any Operating Company, provided such
determination is made prior to the close of the Performance Period. If the Chief
Executive Officer of The Southern Company approves an Extraordinary Item, it
shall be identified in Schedule VI, and, in addition, an explanation as to how
such Extraordinary Item shall impact upon the funding of the Plan and the
Incentive Pay Award Pool of the Operating Company requesting approval of the
Extraordinary Item shall be set forth therein.
3.5 Determination of Funding Amount. Funding in accordance with this
Article III shall be fixed in all events by the end of each Performance Period.
<PAGE>
ARTICLE IV
Incentive Pay Award Opportunities
4.1 Employee Participants.
(a) The Incentive Pay Award Pool benefiting Employee Participants of an
Operating Company shall be allocated to each Operating Company in accordance
with Article III. The amount allocated to each Operating Company shall then be
allocated by the Plan Administrator among Participants in proportion to each
such Participant's Annual Salary, except that for the 1996 Performance Period
only, the Plan Administrator, in its sole discretion, may allocate such
Incentive Pay Awards for all or certain Participants based on their Grade Value.
(b) The Plan Administrator shall be solely responsible for calculating
each Participant's Incentive Pay Award and distributing such Incentive Pay
Award.
(c) The Plan Administrator shall endeavor to pay the Incentive Pay
Awards for a Performance Period to the Participants not later than two and
one-half (2 1/2) months following the close of the preceding Performance Period,
or such shorter or longer period of time following the close of the preceding
Performance Period as may be required under the Internal Revenue Code to
preserve the federal income tax deduction for Incentive Pay Awards paid with
respect to such Performance Period. The Incentive Pay Award payment shall be
made in cash or its functional equivalent and the receipt of such payment may
not be deferred at the option of the Participant. In the event of a
Participant's death prior to the payment of any Incentive Pay Award payable to
the Participant, such amount shall be paid to the estate of the Participant.
4.2 Covered Employee Participants.
(a) The Incentive Pay Award Pool benefiting Covered Employees of an
Operating Company shall be allocated among Covered Employee Participants in the
Covered Employee Plan in accordance with the terms of such Covered Employee
Plan.
(b) The Plan Administrator shall be solely responsible for calculating
and distributing each Participant's Incentive Pay Award in accordance with the
terms of the Covered Employee Plan in which the Covered Employee Participant
participates.
<PAGE>
ARTICLE V
Administration of Plan
5.1 Employment of Agents. The Plan Administrator shall be responsible
for the daily administration of the Plan and may appoint other persons or
entities to perform or assist in the performance of any of its fiduciary duties,
subject to its review and approval. The Plan Administrator shall have the right
to remove any such appointee from his position without cause upon notice. Any
person, group of persons, or entity may serve in more than one fiduciary
capacity.
5.2 Record Keeping and Reporting.
(a) The Plan Administrator shall maintain permanent records and
accounts of Participants and shall be responsible for all receipts,
disbursements, transfers and other transactions concerning the Plan. Such
accounts, books, and records relating thereto shall be open to inspection and
audit by the Boards of Directors of the Operating Companies and any persons
designated thereby at all reasonable times.
(b) The Plan Administrator shall undertake the preparation and filing
of all documents and forms required by any governmental agency. The Plan
Administrator shall keep all such books of account records, and other data as
may be necessary for proper administration of the Plan.
5.3 Responsibilities in General. The Plan Administrator shall
administer the Plan in accordance with its terms and shall have all powers
necessary to carry out the provisions of the Plan as more particularly set forth
herein. The Plan Administrator shall interpret the Plan and shall determine all
questions concerning eligibility, administration, interpretation, and
application of the Plan, and all such determinations shall be conclusive and
binding on all Participants and interested persons. The Plan Administrator shall
adopt such procedures and guidelines as it deems necessary and/or desirable in
order to discharge its duties hereunder.
5.4 Indemnification. The Operating Companies shall indemnify the Plan
Administrator against any and all claims, losses, damages, expenses, and
liability arising from its actions or omissions, except when the same is finally
adjudicated to be due to gross negligence or willful misconduct. The Operating
Companies may purchase at their own expense sufficient liability insurance for
the Plan Administrator to cover any and all claims, losses, damages, and
expenses arising from any action or omission in connection with the execution of
the duties as the Plan Administrator.
5.5 Service of Process. The Plan Administrator shall be the appointed agent
for the service of process.
<PAGE>
ARTICLE VI
Miscellaneous Provisions
6.1 No Right of Assignment or Alienation. Neither the Participant nor
his personal representative shall have any rights to commute, sell, assign,
transfer or otherwise convey the right to receive any payments hereunder, which
payments and the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payments of this
Plan shall be void and have no effect.
6.2 No Trust Requirement. The Operating Company shall not reserve or
otherwise set aside funds for the payments of Incentive Pay Awards under the
Plan.
6.3 Amendment and Termination of Plan. The Board of Directors may
terminate the Plan at any time or may from time to time amend the Plan;
provided, however, that no amendment shall impair any rights to payments which
have been earned under the Plan prior to the termination or amendment. Any
amendment or termination of the Plan shall apply, in the Board of Directors'
sole discretion, with respect to all Employees as defined in Section 1.12
participating in the Plan, irrespective of whether any such amendment or
termination has been collectively bargained. Notwithstanding the foregoing, in
the event that the Plan is terminated before funding is fixed at the end of a
Performance Period, no Incentive Pay Award shall be funded, and accordingly, no
Incentive Pay Awards shall be paid for such Performance Period.
6.4 Incentive Pay Award as Compensation.
(a) Incentive Pay Awards made in accordance with the Plan are in
addition to any other benefits or compensation to which a Participant may be
entitled or for which he may be eligible, whether funded or unfunded, by reason
of his employment with the Operating Company.
(b) There shall be deducted from each Incentive Pay Award to a
Participant the amount of any tax required to be withheld by any governmental
authority and paid over by the Operating Company to such governmental authority.
6.5 Coordination with Benefit Plans. Any Incentive Pay Awards paid to a
Participant while employed by an Operating Company shall not be considered in
the calculation of the Participant's benefits under any employee welfare or
pension benefit plan maintained by an Operating Company, unless otherwise
specifically provided therein.
6.6 Plan Not a Contract. The Plan shall not be deemed to constitute a
contract between an Operating Company and any Employee or Covered Employee, nor
shall anything herein contained be deemed to give any Employee or Covered
Employee any right to be retained in the employ of an Operating Company or
interfere with the right of the Operating Company to discharge any Employee or
Covered Employee at any time and to treat him without regard to the effect which
such treatment might have upon him as a Participant.
6.7 Choice of Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its
officers duly authorized, hereby amends and restates The Southern Company
Performance Pay Plan this _____ day of _________________, _____, to be effective
January 1, 1996.
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________
C. Alan Martin
Vice President
Attest:
By: ___________________________
Tommy Chisholm
Secretary
[CORPORATE SEAL]
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1996
SCHEDULE I
Employment Date Accrual Factor
January 1 - January 14 12/12 = 1.00
January 15 - February 14 11/12 = .92
February 15 - March 14 10/12 = .83
March 15 - April 14 9/12 = .75
April 15 - May 14 8/12 = .67
May 15 - June 14 7/12 = .58
June 15 - July 14 6/12 = .50
July 15 - August 14 5/12 = .42
August 15 - September 14 4/12 = .33
September 15 - October 14 3/12 = .25
October 15 - November 14 2/12 = .17
November 15 - December 14 1/12 = .08
December 15 - December 31 0/12 = .00
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1996
SCHEDULE II
Termination Date Accrual Factor
December 15 - December 31 12/12 = 1.00
November 15 - December 14 11/12 = .92
October 15 - November 14 10/12 = .83
September 15 - October 14 9/12 = .75
August 15 - September 14 8/12 = .67
July 15 - August 14 7/12 = .58
June 15 - July 14 6/12 = .50
May 15 - June 14 5/12 = .42
April 15 - May 14 4/12 = .33
March 15 - April 14 3/12 = .25
February 15 - March 14 2/12 = .17
January 15 - February 14 1/12 = .08
January 1 - January 14 0/12 = .00
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1996
SCHEDULE III
THE SOUTHERN COMPANY EARNINGS THRESHOLD
Year Percentage ROE
1996 12.1%
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1996
SCHEDULE IV
OPERATING COMPANY EARNINGS THRESHOLD
Percentage ROE
Southern
Year Alabama Georgia Gulf Mississippi Savannah Nuclear SCS SOCO
- ---- ------- ------- ---- ----------- -------- ------- --- ----
1996 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1%
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1996
SCHEDULE V
COMPANY GOALS
Year Goals
Date Goals (1) APC GPC Gulf MPC SAV SNC
- ---- ---------- --- --- ---- --- --- ---
1996 Cost (2)
Non - Fuel $634.8 $834 $144.2 $148.5 $57.1 $500.6
Capital $414 $406 $70.8 $69.5 $32.6 $53.4
Overhead - cost reduction
of 20% by 1998(3) $206 $221 $33.0 $42.0 $15.0 $9
Cashflow - above capital
reinvestment
- free cash flow $300 Break
even
- maximum expenditures
authorized in 1996 $389 $68.2 $31.7 $51.2
- special dividend
requirement $25 $200 $2.6 $1.2 $0.9
Customer Satisfaction -
Percentage of very satisfied 70.5% 67.5% 72.2 72.1% 70% Best
responses required quartile
of top
utilities
(1) Expressed in millions
(2) GPC's & APC's cost goals exclude Nuclear costs
(3) Indicates overhead level to be achieved in 1998.
The goal for SNC indicates total overhead reduction to be achieved in 1998.
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1996
SCHEDULE VI
EXTRAORDINARY ITEMS
<PAGE>
THE SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1996
APPENDIX A
SOUTHERN COMPANY EARNINGS TEST
Southern
Year Alabama Georgia Gulf Mississippi Savannah Nuclear SCS SOCO
- ---- ------- ------- ---- ----------- -------- ------- --- ----
1996 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1%
Exhibit 10(a)76
SUPPLEMENTAL BENEFIT PLAN
FOR
SOUTHERN COMPANY SERVICES, INC.
AND
SOUTHERN ELECTRIC INTERNATIONAL, INC.
January 1, 1996
<PAGE>
SUPPLEMENTAL BENEFIT PLAN
FOR
SOUTHERN COMPANY SERVICES, INC.
AND
SOUTHERN ELECTRIC INTERNATIONAL, INC.
Page
ARTICLE I - PURPOSE AND ADOPTION OF PLAN....................................1
1.1 Adoption.......................................................1
1.2 Purpose........................................................1
ARTICLE II DEFINITIONS......................................................2
2.1 Account.......................................................2
2.2 Affiliated Employer...........................................2
2.3 Beneficiary...................................................2
2.4 Board of Directors............................................2
2.5 Code..........................................................2
2.6 Common Stock..................................................2
2.7 Company.......................................................2
2.8 Deferred Compensation Plan....................................3
2.9 Effective Date................................................3
2.10 Employee......................................................3
2.11 Employing Company.............................................3
2.12 ESOP..........................................................3
2.13 Non-Pension Benefit...........................................3
2.14 Participant...................................................3
2.15 Pension Benefit...............................................4
2.16 Pension Plan..................................................4
2.17 Plan..........................................................4
2.18 Plan Year.....................................................4
2.19 Savings Plan..................................................4
ARTICLE III ADMINISTRATION OF PLAN..........................................5
3.1 Administrator..................................................5
3.2 Powers.........................................................5
3.3 Duties of the Board of Directors...............................5
3.4 Indemnification................................................6
ARTICLE IV ELIGIBILITY......................................................8
4.1 Eligibility Requirements.......................................8
4.2 Determination of Eligibility...................................8
ARTICLE V BENEFITS..........................................................9
5.1 Pension Benefit................................................9
5.2 Non-Pension Benefit...........................................10
5.3 Distribution of Benefits......................................12
5.4 Funding of Benefits...........................................14
5.5 Withholding...................................................15
<PAGE>
ARTICLE VI MISCELLANEOUS...................................................16
6.1 Assignment....................................................16
6.2 Amendment and Termination.....................................16
6.3 No Guarantee of Employment....................................16
6.4 Construction..................................................16
<PAGE>
SUPPLEMENTAL BENEFIT PLAN
FOR
SOUTHERN COMPANY SERVICES, INC.
AND
SOUTHERN ELECTRIC INTERNATIONAL, INC.
1
ARTICLE I - PURPOSE AND ADOPTION OF PLAN
1.1......Adoption: Southern Company Services, Inc. hereby establishes and
Southern Electric International, Inc. hereby adopts the Supplemental Benefit
Plan for Southern Company Services, Inc. and Southern Electric International,
Inc. The Plan shall be an unfunded deferred compensation arrangement whose
benefits shall be paid solely from the general assets of the Employing
Companies.
1.2......Purpose: The Plan is designed to provide certain retirement
and other deferred compensation benefits primarily for a select group of
management or highly compensated employees which are not otherwise payable or
cannot otherwise be provided by the Employing Companies (1) under the Pension
Plan for Employees of Southern Company Services, Inc., The Southern Company
Employee Savings Plan, and The Southern Company Employee Stock Ownership Plan,
as a result of the limitations set forth under Sections 401(a)(17), 401(k),
401(m), 402(g), or 415 of the Internal Revenue Code of 1986, as amended from
time to time and (2) to compensate for lost benefits resulting from
participation in The Southern Company Deferred Compensation Plan, as amended
from time to time.
<PAGE>
ARTICLE II DEFINITIONS
2.1......"Account" shall mean the account or accounts established and
maintained by an Employing Company to reflect the interest of a Participant in
the Plan resulting from a Participant's Non- Pension Benefit calculated in
accordance with Section 5.2.
2.2......"Affiliated Employer" shall mean any corporation which is a member
of the controlled group of corporations of which The Southern Company is the
common parent corporation.
2.3......"Beneficiary" shall mean any person, estate, trust, or
organization entitled to receive any payment under the Plan upon the death of a
Participant.
2.4......"Board of Directors" shall mean the Board of Directors of the
Company.
2.5......"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
2.6......"Common Stock" shall mean common stock of The Southern Company.
2.7......"Company" shall mean Southern Company Services, Inc.
2.8......"Deferred Compensation Plan" shall mean The Southern Company
Deferred Compensation Plan, as amended from time to time, following its adoption
by the Boards of Directors of Employing Companies.
2.9......"Effective Date" shall mean January 1, 1983. The Effective Date of
this amendment and restatement shall mean January 1, 1996.
2.10....."Employee" shall mean any person who is currently employed by an
Employing Company.
2.11....."Employing Company" shall mean the Company, Southern Electric
International, Inc., and any affiliate or subsidiary of The Southern Company
which the Board of Directors may from time to time determine to bring under the
Plan and which shall adopt the Plan, and any successor of any of them.
2.12....."ESOP" shall mean The Southern Company Employee Stock Ownership
Plan, as amended from time to time.
2.13....."Non-Pension Benefit" shall mean the benefit described in Section
5.2.
2.14....."Participant" shall mean an Employee or former Employee of an
Employing Company who is eligible pursuant to Sections 4.1 and 4.2.
2.15....."Pension Benefit" shall mean the benefit described in Section 5.1.
2.16....."Pension Plan" shall mean the defined benefit pension plan
maintained by an Employing Company or Affiliated Employer, as amended from time
to time.
2.17....."Plan" shall mean the Supplemental Benefit Plan for Southern
Company Services, Inc. and Southern Electric International, Inc., as amended
from time to time.
2.18....."Plan Year" shall mean the calendar year.
2.19....."Savings Plan" shall mean The Southern Company Employee Savings
Plan, as amended from time to time.
Where the context requires, the definitions of all terms set forth in the
Pension Plan, the ESOP, the Savings Plan and the Deferred Compensation Plan
shall apply with equal force and effect for purposes of interpretation and
administration of the Plan, unless said terms are otherwise specifically defined
in the Plan. The masculine pronoun shall be construed to include the feminine
pronoun and the singular shall include the plural, where the context so
requires.
<PAGE>
ARTICLE III ADMINISTRATION OF PLAN
3.1......Administrator. The general administration of the Plan shall be
placed in the Board of Directors.
3.2......Powers. The Board of Directors shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan more particularly set forth herein. It shall interpret
the Plan and shall determine all questions arising in the administration,
interpretation and application of the Plan. Any such determination by it shall
be conclusive and binding on all persons. It may adopt such regulations as it
deems desirable for the conduct of its affairs. It may appoint such accountants,
counsel, actuaries, specialists and other persons as it deems necessary or
desirable in connection with the administration of this Plan, and shall be the
agent for the service of process.
3.3......Duties of the Board of Directors.
.........(a) The Board of Directors is responsible for the daily
administration of the Plan. It may appoint other persons or entities to
perform any of its fiduciary functions. The Board of Directors and any such
appointee may employ advisors and other persons necessary or convenient to
help it carry out its duties, including its fiduciary duties. The Board of
Directors shall have the right to remove any such appointee from his
position. Any person, group of persons or entity may serve in more than one
fiduciary capacity.
.........(b) The Board of Directors shall maintain accurate and
detailed records and accounts of Participants and of their rights under the
Plan and of all receipts, disbursements, transfers and other transactions
concerning the Plan. Such accounts, books and records relating thereto
shall be open at all reasonable times to inspection and audit by persons
designated by the Board of Directors.
.........(c) The Board of Directors shall take all steps necessary to
ensure that the Plan complies with the law at all times. These steps shall
include such items as the preparation and filing of all documents and forms
required by any governmental agency; maintaining of adequate Participants'
records; recording and transmission of all notices required to be given to
Participants and their Beneficiaries; the receipt and dissemination, if
required, of all reports and information received from an Affiliated
Employer; securing of such fidelity bonds as may be required by law; and
doing such other acts necessary for the proper administration of the Plan.
The Board of Directors shall keep a record of all of its proceedings and
acts, and shall keep all such books of account, records and other data as
may be necessary for proper administration of the Plan.
3.4......Indemnification. The Employing Companies shall indemnify the
Board of Directors against any and all claims, losses, damages, expenses and
liability arising from an action or failure to act, except when the same is
finally judicially determined to be due to gross negligence or willful
misconduct. The Employing Companies may purchase at their own expense sufficient
liability insurance for the Board of Directors to cover any and all claims,
losses, damages and expenses arising from any action or failure to act in
connection with the execution of the duties as Board of Directors. No member of
the Board of Directors who is also an Employee of the Employing Companies shall
receive any compensation from the Plan for his services in administering the
Plan.
<PAGE>
ARTICLE IV ELIGIBILITY
4.1......Eligibility Requirements. All Employees (a) who are determined
eligible to participate in accordance with Section 4.2; (b) whose benefits under
the Pension Plan of their Employing Company are limited by the limitations set
forth in Sections 401(a)(17) or 415 of the Code, (c) for whom contributions by
their Employing Company to the Savings Plan are limited by the limitations set
forth in Sections 401(a)(17), 401(k), 401(m), 402(g) or 415 of the Code, (d) for
whom contributions by their Employing Company to the ESOP are limited by the
limitations set forth in Sections 401(a)(17) or 415 of the Code or (e) who after
December 31, 1995, make deferrals under the Deferred Compensation Plan, shall be
eligible to receive benefits under the Plan.
4.2......Determination of Eligibility. The Board of Directors shall
determine which Employees are eligible to participate. Upon becoming a
Participant, an Employee shall be deemed to have assented to the Plan and to any
amendments hereafter adopted. The Board of Directors shall be authorized to
rescind the eligibility of any Participant if necessary to insure that the Plan
is maintained primarily for the purpose of providing deferred compensation to a
select group of management or highly compensated employees under the Employee
Retirement Income Security Act of 1974, as amended.
<PAGE>
ARTICLE V BENEFITS
5
5.1......Pension Benefit.
.........(a) If a Participant has Accredited Service with respect to
the Pension Plan of his Employing Company, but not with respect to the Pension
Plan of any other Employing Company or Affiliated Employer, he shall be entitled
to a Pension Benefit equal to that portion of his Retirement Income under the
Pension Plan of his Employing Company which is not payable under such Pension
Plan as a result of the limitations imposed by Sections 401(a)(17), 415(b), or
415(e) of the Code.
.........(b) If a Participant has Accredited Service with respect to
the Pension Plan of his Employing Company and with respect to the Pension Plan
of any other Employing Company or one or more Affiliated Employers, his Pension
Benefit payable by his Employing Company, his former Employing Company, and/or
Affiliated Employer(s) shall be equal to that portion of his combined Retirement
Income under each Pension Plan which is not payable under any of such Pension
Plans as a result of the limitations described by Sections 401(a)(17), 415(b),
or 415(e) of the Code, multiplied by a fraction, the sum of the individual
fractions not to exceed one (1), the numerator of which is his years of
Accredited Service under the Pension Plan of each Employing Company or
Affiliated Employer and the denominator which is his total years of Accredited
Service under the Pension Plans of all of his Employing Companies and Affiliated
Employers.
.........(c) For purposes of this Section 5.1, the Pension Benefit of a
Participant shall be calculated based on the Participant's Earnings that are
considered under the Pension Plan of his Employing Company in calculating his
Retirement Income, without regard to the limitation of Section 401(a)(17) of the
Code, including any portion of his compensation he may have elected to defer
under the Deferred Compensation Plan but excluding Incentive Pay he deferred
under such Deferred Compensation Plan.
.........(d) To the extent that a Participant's Retirement Income under
a Pension Plan is recalculated as a result of an amendment to such Pension Plan
in order to increase the amount of his Retirement Income, the Participant's
Pension Benefit shall also be recalculated in order to properly reflect such
increase in determining payments of the Participant's Pension Benefit made on or
after the effective date of such increase.
5.2......Non-Pension Benefit.
.........(a) A Participant shall be entitled to a Non-Pension Benefit which
is determined under this Section 5.2. An Account shall be established for the
Participant by his Employing Company, as of his initial Plan Year of
participation in the Plan, and by each other Employing Company by which the
Participant is subsequently employed. Each Plan Year such Account shall be
credited with an amount equal to the amount that his Employing Company is
prohibited from contributing (1) to the Savings Plan on behalf of the
Participant as a result of the limitations imposed by Sections 401(a)(17),
401(k), 401(m), 402(g), 415(c), or 415(e) of the Code and (2) to the ESOP on
behalf of the Participant as a result of the limitations imposed by Sections
401(a)(17), 415(c), or 415(e) of the Code.
.........(b) For purposes of this Section 5.2, the Non-Pension Benefit of a
Participant shall be calculated based on the Participant's compensation that
would have been considered in calculating allocations to his accounts under the
Savings Plan and ESOP, without regard to the limitations of Section 401(a)(17)
or Section 402(g) of the Code, including any portion of his compensation he may
have elected to defer under the Deferred Compensation Plan but excluding
Incentive Pay he deferred under the Deferred Compensation Plan.
.........(c) All amounts so credited to the Account of the Participant
shall be deemed to be invested in the Common Stock at the same time that such
amounts would have been so invested if they had been contributed by his
Employing Company to the Savings Plan or the ESOP, as the case may be. In
addition, such Account shall be credited with respect to shares of Common Stock
allocated to the Participant's Account as follows: (1) In the case of cash
dividends, such additional shares as could be purchased with the dividends which
would have been payable if the credited shares had been outstanding; (2) In the
case of dividends payable in property other than cash or Common Stock, such
additional shares as could be purchased with the fair market value of the
property which would have been payable if the credited shares had been
outstanding; or (3) In the case of dividends payable in Common Stock, such
additional shares as would have been payable on the credited shares if they had
been outstanding.
(d) As soon as practicable following the first day of his eligibility to
have benefits credited to his Account, a Participant shall designate in writing
on a form to be prescribed by the Company the method of payment of his Account,
which shall be the payment of a single lump sum or a series of annual
installments not to exceed twenty (20). The method of distribution initially
designated by a Participant shall not be revoked and shall govern the
distribution of each Account established for the benefit of the Participant by
his Employing Companies. Notwithstanding, in the sole discretion of the Board of
Directors upon application by the Participant, the method of distribution
designated by such Participant may be modified not prior to 395 days nor later
than 365 days prior to a Participant's date of separation from service in order
to change the form of distribution of his Account in accordance with the terms
of the Plan. Each Participant, his Beneficiary, and legal representative shall
be bound as to any action taken pursuant to the method of distribution elected
by a Participant and the terms of the Plan.
5.3 Distribution of Benefits.
(a) The Pension Benefit, as determined in accordance with
Section 5.1, shall be payable in monthly increments on the first day of the
month concurrently with and in the same manner as the Participant's Retirement
Income under the Pension Plan. The Beneficiary of a Participant's Pension
Benefit shall be the same as the beneficiary of the Participant's Retirement
Income under the Pension Plan.
(b) When a Participant terminates his employment with an
Employing Company, said Participant shall be entitled to receive the market
value of any shares of Common Stock (and fractions thereof) reflected in any
Account maintained by an Employing Company for his benefit under the Plan in a
single lump sum distribution or annual installments not to exceed twenty (20).
Such distribution shall be made not later than sixty (60) days following the
close of the calendar quarter in which his termination of employment occurs, or
as soon as reasonably practicable thereafter. The transfer by a Participant
between companies within The Southern Company shall not be deemed to be a
termination of employment with an Employing Company. No portion of a
Participant's Account shall be distributed in Common Stock.
(c) In the event a Participant elects to receive the
distribution of his Account in annual installments, the first payment shall be
made not later than sixty (60) days following the close of the calendar quarter
in which his termination of employment occurs, or as soon as reasonably
practicable thereafter, and shall be an amount equal to the balance in the
Participant's Account divided by the number of annual installment payments. Each
subsequent annual payment shall be an amount equal to the balance in the
Participant's Account divided by the number of the remaining annual payments and
shall be due on the anniversary of the preceding payment date. No portion of a
Participant's Account shall be distributed in Common Stock.
(d) Upon the death of a Participant, or a former Participant
prior to the payment of all amounts credited to said Participant's Account, the
unpaid balance shall be paid in the sole discretion of the Board of Directors
(1) in a lump sum to the designated Beneficiary of a Participant or former
Participant within sixty (60) days following the close of the calendar quarter
in which the Board of Directors is provided evidence of the Participant's death
(or as soon as reasonably practicable thereafter) or (2) in accordance with the
distribution method chosen by such Participant or former Participant. The
Beneficiary designation may be changed by the Participant or former Participant
at any time without the consent of the prior Beneficiary. In the event a
Beneficiary designation is not on file or the designated Beneficiary is deceased
or cannot be located, payment will be made to the estate of the Participant or
former Participant. No portion of a Participant's Account shall be distributed
in Common Stock.
(e) Upon the total disability of a Participant or former
Participant, as determined by the Social Security Administration, the unpaid
balance of his Account shall be paid in the sole discretion of the Board of
Directors (1) in a lump sum to the Participant or former Participant, or his
legal representative within sixty (60) days following the notification of the
Board of Directors of the determination of disability by the Social Security
Administration (or as soon as reasonably practicable thereafter) or (2) in
accordance with the distribution method elected by such Participant or former
Participant. No portion of a Participant's Account shall be distributed in
Common Stock.
(f) The Board of Directors in its sole discretion upon
application made by the Participant, a designated Beneficiary, or their legal
representative, may determine to accelerate payments or, in the event of death
or total disability (as determined by Social Security Administration), to extend
or otherwise make payments in a manner different from the manner in which such
payment would be made under the method of distribution elected by the
Participant in the absence of such determination.
5.4 Funding of Benefits. Any Employing Company maintaining an Account
for the benefit of a Participant shall not reserve or otherwise set aside funds
for the payment of its obligations under the Plan, and such obligations shall be
paid solely from the general assets of the Employing Companies. Notwithstanding
that a Participant shall be entitled to receive the balance of his Account under
the Plan, the assets from which such amount shall be paid at all times remain
subject to the claims of the creditors of the Participant's Employing Companies.
5.5 Withholding. There shall be deducted from the payment of any
Pension Benefit or Non-Pension Benefit due under the Plan the amount of any tax
required by any governmental authority to be withheld and paid over by an
Employing Company to such governmental authority for the account of the
Participant or Beneficiary entitled to such payment.
<PAGE>
ARTICLE VI MISCELLANEOUS
6
6.1 Assignment. Neither the Participant, his Beneficiary, nor his legal
representative shall have any rights to sell, assign, transfer or otherwise
convey the right to receive the payment of any Pension Benefit or Non-Pension
Benefit due hereunder, which payment and the right thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to assign or
transfer the right to payment under the Plan shall be null and void and of no
effect.
6.2 Amendment and Termination. The Plan may be amended or terminated at
any time by the Board of Directors, provided that no amendment or termination
shall cause a forfeiture or reduction in any benefits accrued as of the date of
such amendment or termination.
6.3 No Guarantee of Employment. Participation hereunder shall not be
construed as creating any contract of employment between any Employing Company
and a Participant, nor shall it limit the right of an Employing Company to
suspend, terminate, alter, or modify, whether or not for cause, the employment
relationship between such Employing Company and a Participant.
6.4 Construction. This Plan shall be construed in accordance with and
governed by the laws of the State of Georgia, to the extent such laws are not
otherwise superseded by the laws of the United States.
<PAGE>
IN WITNESS WHEREOF, the Plan has been executed by duly authorized
officers of Southern Company Services, Inc., pursuant to resolutions of the
Board of Directors of the Company, this day of , 1996.
SOUTHERN COMPANY SERVICES, INC.
By: ______________________________________
[CORPORATE SEAL] C. Alan Martin
Vice President, Human Resources
ATTEST:
By: ___________________________________
Tommy Chisholm
Secretary
Exhibit 10(a)83
THE SOUTHERN COMPANY
PENSION PLAN
EFFECTIVE AS OF JANUARY 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
Article I - Definitions
Article II - Eligibility
2.1 Employees...........................................16
2.2 Employees represented by a collective
bargaining agent.................................14
2.3 Persons in military service and Employees
on authorized leave of absence...................14
2.4 Employees reemployed................................15
2.5 Participation upon return to eligible class.........15
2.6 Exclusion of certain categories of employees........15
2.7 Waiver of participation.............................16
Article III - Retirement
3.1 Retirement at Normal Retirement Date................17
3.2 Retirement at Early Retirement Date.................17
3.3 Retirement at Deferred Retirement Date..............17
Article IV - Determination of Accredited Service
4.1 Accredited Service pursuant to Prior Plan...........18
4.2 Accredited Service..................................18
4.3 Accredited Service and Years of Service
in respect of service of certain
Employees previously employed by
an Employing Company or by certain
Affiliated Employers.............................19
4.4 Accrual of Retirement Income during period
of total disability..............................20
4.5 Employees leaving Employer's service................21
<PAGE>
4.6 Transfers to or from Savannah Electric
and Power Company................................22
Article V - Retirement Income
5.1 Normal Retirement Income............................24
5.2 Minimum Retirement Income payable upon
retirement at Normal Retirement Date
or Deferred Retirement Date......................24
5.3 Minimum Retirement Income upon retirement
at Early Retirement Date or upon
termination of service by reason of
death or otherwise prior to retirement...........24
5.4 Calculation of Social Security Offset...............25
5.5 Early Retirement Income.............................26
5.6 Deferred Retirement Income..........................27
5.7 Payment of Retirement Income........................27
5.8 Termination of Retirement Income....................28
5.9 Required distributions..............................28
5.10 Suspension of Retirement Income for
reemployment.....................................30
5.11 Increase in Retirement Income of retired
Employees........................................31
5.12 Special provisions relating to the
treatment of absence of an Employee
from the service of an Employing
Company to serve in the Armed Forces
of the United States.............................32
Article VI - Limitations on Benefits
6.1 Maximum Retirement Income...........................33
6.2 Adjustment to Defined Benefit Dollar
Limitation for Early or Deferred
Retirement.......................................34
6.3 Adjustment of limitation for Years of
Service or participation.........................35
6.4 Limitation on benefits from multiple plans..........35
6.5 Special rules for plans subject to overall
limitations under Code Section 415(e)............36
6.6 Combination of Plans................................37
6.7 Incorporation of Code Section 415...................37
<PAGE>
Article VII - Provisional Payee
7.1 Adjustment of Retirement Income to provide
for payment to Provisional Payee.................38
7.2 Form and time of election and notice
requirements.....................................39
7.3 Circumstances in which election and
designation are inoperative......................40
7.4 Pre-retirement death benefit........................40
7.5 Post-retirement death benefit - qualified
joint and survivor annuity.......................42
7.6 Election and designation by former
Employee entitled to Retirement Income
in accordance with Article VIII..................43
7.7 Death benefit for Provisional Payee of
former Employee..................................45
7.8 Limitations on Employee's and Provisional
Payee's benefits.................................45
7.9 Effect of election under Article VII................46
7.10 Effects of change in retirement at Early
Retirement Date..................................46
7.11 Commencement of new optional forms of
payment..........................................47
7.12 Special form of benefit for former
Employees........................................47
Article VIII - Termination of Service
8.1 Vested interest.....................................50
8.2 Early distribution of vested benefit................50
8.3 Years of Service of reemployed Employees............51
8.4 Cash-out and buy-back...............................52
8.5 Calculation of present value for cash-out
of benefits and for determining amount
of benefits......................................52
8.6 Retirement Income under Prior Plans.................53
8.7 Requirement for Direct Rollovers....................54
Article IX - Contributions
9.1 Contributions generally.............................56
9.2 Return of Employing Company contributions...........56
9.3 Expenses............................................57
<PAGE>
Article X - Administration of Plan
10.1 Retirement Board....................................58
10.2 Organization and transaction of business
of Retirement Board..............................58
10.3 Administrative responsibilities of
Retirement Board.................................59
10.4 Retirement Board, the "Administrator"...............59
10.5 Fiduciary responsibilities..........................60
10.6 Employment of actuaries and others..................60
10.7 Accounts and tables.................................60
10.8 Indemnity of members of Retirement Board............61
10.9 Areas in which the Retirement Board
does not have responsibility.....................61
10.10 Claims Procedures...................................62
Article XI - Management of Trust
11.1 Trust...............................................63
11.2 Disbursement of the Trust Fund......................63
11.3 Rights in the Trust.................................63
11.4 Merger of the Plan..................................64
Article XII - Termination of the Plan
12.1 Termination of the Plan.............................65
12.2 Limitation on benefits for certain
highly paid employees............................65
Article XIII - Amendment of the Plan
13.1 Amendment of the Plan...............................67
Article XIV - Special Provisions
14.1 Exclusive benefit...................................68
14.2 Assignment or alienation............................68
14.3 Voluntary undertaking...............................68
14.4 Top-Heavy Plan requirements.........................69
14.5 Determination of Top-Heavy status...................69
14.6 Minimum Retirement Income for Top-Heavy
Plan Years.......................................73
14.7 Vesting requirements for Top-Heavy Plan Years.......74
14.8 Adjustments to maximum benefits for
Top-Heavy Plans..................................74
<PAGE>
Article XV - New Pension Program
15.1 Eligibility.........................................76
15.2 Retirement Income payable upon retirement...........76
15.3 Early Retirement Reduction..........................77
15.4 Transfers from Savannah Electric and
Power Company....................................77
15.5 Effect on other Plan provisions.....................77
Article XVI - Special Provisions Concerning Certain
of Southern Electric International, Inc.
16.1 Eligibility and Recognition of Service for
Former Employees of Scott Paper Company..........78
Appendix A
Schedules
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
<PAGE>
Introductory Statement
The Southern Company Pension Plan, effective as of January 1, 1997 and
hereinafter set forth (the "Plan"), is a modification and continuation of the
Pension Plan for Employees of Southern Company Services, Inc. which originally
became effective November 1, 1949, and which has been amended from time to time.
Effective January 1, 1997, the following other plans are merged into
the Plan:
o Pension Plan for Employees of Alabama Power Company
o Pension Plan for Employees of Georgia Power Company
o Pension Plan for Employees of Gulf Power Company
o Pension Plan for Employees of Mississippi Power Company
o Pension Plan for Employees of Southern Company Services, Inc., as
adopted by Southern Communications Services, Inc.
o Pension Plan for Employees of Southern Company Services, Inc., as
adopted by Southern Development and Investment Group, Inc.
o Pension Plan for Employees of Southern Company Services, Inc., as
adopted by Southern Electric International, Inc.
o Pension Plan for Employees of Southern Nuclear Operating
Company, Inc.
Employees participating in the Merged Plans and employed by an
Employing Company on January 1, 1997 shall become immediately covered under the
Plan and upon the merger such Employees shall be eligible to receive a benefit
immediately after the merger which is equal to or greater than the benefit they
would have been entitled to receive immediately before the merger. In addition,
notwithstanding any provision of the Plan, the terms of the Prior Plans govern
an Employee's circumstances with regard to actions taken or occurring before
January 1, 1997.
To the extent that different terms and conditions exist under the
Merged Plans and must be protected in the Plan in accordance with requirements
under the Code and ERISA, these differences are set forth in schedules attached
to and incorporated into the Plan and supersede any inconsistent provisions
otherwise set forth in the Plan.
<PAGE>
Retirement Income of former Employees (or Provisional Payees of former
Employees) who retired in accordance with the provisions of the Prior Plans is
payable in accordance with the provisions of the Prior Plans.
All contributions made by the Employing Companies to this Plan are
expressly conditioned upon the continued qualification of the Plan under Section
401(a) of the Code, including any amendments to the Plan, and upon the
deductibility of such contributions by the Employing Companies pursuant to
Section 404 of the Code.
<PAGE>
Article I
Definitions
The following words and phraseology as used herein have the following
meanings unless a different meaning is plainly required by the context:
1
1.1 "Accrued Retirement Income" means with respect to any Employee at
any particular date, the Retirement Income, determined pursuant to Section 5.1
as may be modified by Article 15, commencing on his Normal Retirement Date which
would be payable to such Employee in the form of a single life annuity on the
basis of his Accredited Service to the date as of which the computation of
Retirement Income is made.
1.2 "Accredited Service" means with respect to any Employee included in
the Plan, the period of service as provided in Article IV.
1.3 "Actuarial Equivalent" means a benefit of equivalent value when
computed on the basis of five percent (5%) interest per annum, compounded
annually and the 1951 Group Annuity Mortality Table for males. The ages for all
Employees under the above table shall be set back six (6) years and the ages for
such Employees' spouses shall be set back one year. All actuarial adjustments
and actuarial determinations required and made under the terms of the Plan shall
be calculated in accordance with such assumptions.
1.4 "Affiliated Employer" means an Employing Company and any
corporation which is a member of a controlled group of corporations (as defined
in Section 414(b) of the Code) which includes such Employing Company; any trade
or business (whether or not incorporated) which is under common control (as
defined in Section 414(c) of the Code) with such Employing Company; any
organization (whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) which includes such
Employing Company; and any other entity required to be aggregated with such
Employing Company pursuant to regulations under Section 414(o) of the Code.
1.5 "Average Monthly Earnings" means the greater of: (a) an Employee's
Monthly Earnings averaged over the three (3) highest Plan Years of participation
which shall produce the highest monthly average within the last ten (10) Plan
Years; or (b) an Employee's Monthly Earnings averaged over the three (3) highest
Plan Years of participation which shall produce the highest monthly average
<PAGE>
within the last ten (10) Plan Years during which the Employee actively performed
services for an Employing Company. If an Employee has completed less than three
(3) Plan Years of participation upon his termination of employment, his Average
Monthly Earnings will be based on his Earnings during his participation to his
date of termination.
1.6 "Board of Directors" means the Board of Directors of Southern Company
Services, Inc.
1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.8 "Deferred Retirement Date" means the first day of the month after a
retirement subsequent to the Normal Retirement Date.
Employment subsequent to Normal Retirement Date shall be deemed to be a
retirement if an Employee has less than forty (40) Hours of Service during a
calendar month.
1.9 "Defined Benefit Dollar Limitation" means the limitation set forth in
Section 415(b)(1)(A) or (d) of the Code.
1.10 "Defined Contribution Dollar Limitation" means the limitation set
forth in Section 415(c)(1)(A) of the Code.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.12 "Early Retirement Date" means the first day of the month following the
retirement of an Employee on or after his fifty-fifth (55th) birthday and before
his sixty-fifth (65th) birthday.
Effective for Employees who have an Hour of Service on or after January
1, 1996 and who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and an Employing Company have
mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding paragraph.
<PAGE>
1.13 (a) "Earnings" with respect to any Employee including any Employee
whose service is terminated by reason of disability (as defined in Section 4.4)
means (1) the highest annual rate of salary or wages of an Employee of any
Affiliated Employer within any Plan Year before deductions for taxes, Social
Security, etc., (2) all amounts contributed by any Affiliated Employer to The
Southern Company Employee Savings Plan as Elective Employer Contributions, as
said term is described under Section 4.1 of such plan, pursuant to the
Employee's exercise of his deferral option made thereunder in accordance with
the requirements of Section 401(k) of the Code, and (3) all amounts contributed
by any Affiliated Employer to The Southern Electric System Flexible Benefits
Plan or The Southern Company Flexible Benefits Plan on behalf of an Employee
pursuant to his salary reduction election, and applied to provide one or more of
the optional benefits available under such plan, but (4) shall exclude all
amounts deferred under any non-qualified deferred compensation plan maintained
by any Affiliated Employer.
(b) Notwithstanding the above, "Earnings" with respect to any
commissioned salesperson means the salary or wages of an Employee of any
Affiliated Employer within any Plan Year, without including overtime, and before
deductions for taxes, Social Security, etc. but applying those adjustments
identified in paragraphs (a)(2), (3) and (4) above. In addition, "Earnings" for
any Employee who is a regular part-time employee means with regard to paragraph
(a)(1) above the highest annual rate of salary or wages based on a forty (40)
hour work week.
(c) With respect to an Employee whose service terminates because of a
disability under Section 4.4, Earnings shall be deemed to continue in effect
throughout the period of the Employee's Disability Leave, as also defined in
Section 4.4.
(d) With respect to an Employee on approved leave of absence to serve
in the Armed Forces of the United States, Earnings shall be determined for the
recognized period of his absence at the rate which is paid to him on the day he
returns to the service of an Affiliated Employer or at the rate which was
payable to him at the time he left the employment of an Employing Company to
enter the Armed Forces of the United States, if such amount was greater.
(e) For Plan Years beginning after December 31, 1988 and prior to
January 1, 1994, the annual compensation of each Employee taken into account for
<PAGE>
purposes of this Plan shall not exceed $200,000 (as adjusted by the Secretary of
Treasury). The imposition of this limitation shall not reduce an Employee's
Retirement Income below the amount as determined on December 31, 1988. In
addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the Plan shall not exceed $150,000, as adjusted for
increases in the cost of living in accordance with Code Section 401(a)(17). The
cost of living adjustment in effect for a calendar year applies to any period,
not exceeding twelve (12) months, over which compensation is determined (the
"determination period") beginning in such calendar year. If the determination
period is less than twelve (12) months, the limit shall be prorated.
If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year
beginning on or after January 1, 1989 or January 1, 1994, as applicable, the
compensation for that prior determination period is subject to the $200,000 or
the $150,000 compensation limit in effect for that prior determination period.
Notwithstanding any other provision in the Plan, each Employee's
Accrued Retirement Income under this Plan will be the greater of:
(a) the Employee's Accrued Retirement Income as of the last day of
the last Plan Year beginning before January 1, 1994, frozen in
accordance with Treasury Regulation Section 1.401(a)(4)-13, or
(b) the Employee's Accrued Retirement Income determined with
respect to the benefit formula applicable for the Plan Year
beginning on or after January 1, 1994, as applied to the
employee's total Years of Service taken into account under the
Plan for purposes of benefit accruals.
1.14 "Effective Date" means January 1, 1997.
1.15 "Eligibility Year of Service" is a Year of Service commencing on
the Employee's date of employment or reemployment or anniversary date thereof.
<PAGE>
1.16 "Employee" means any person who is currently employed by an
Employing Company as (a) a regular full-time employee, (b) a regular part-time
employee, (c) a cooperative education employee, or (d) a temporary employee
(whether full-time or part-time) paid directly or indirectly by an Employing
Company. The term also includes "leased employees" within the meaning of Section
414(n)(2) of the Code, unless the total number of leased employees constitutes
less than twenty percent (20%) of the Employing Company's non-highly compensated
workforce within the meaning of Section 414(n)(5)(C)(ii) and such leased
employees are covered by a plan described in Section 414(n)(5)(B) of the Code.
1.17 "Employer" means Southern Company Services, Inc., and its successors.
1.18 "Employing Company" means the Employer and any affiliate or
subsidiary of The Southern Company which the Board of Directors may from time to
time, and upon such terms and conditions as may be fixed by the Board of
Directors, determine to bring under the Plan, and any successor to them. The
Employing Companies are set forth on Appendix A to the Plan as updated from time
to time. No entity shall be treated as an Employing Company prior to the date it
adopts the Plan.
1.19 "Full Current Costs" means the normal cost, as defined in Treasury
Regulation Section 1.404(a)-6, for all years since the Effective Date of the
Plan, plus interest on any unfunded liability during such period.
<PAGE>
1.20 "Hour of Service" means an Employee shall be credited with one
Hour of Service for each hour for which (a) he is paid, or entitled to payment,
for the performance of duties for an Affiliated Employer, and such hours shall
be credited to the Employee for the computation period or periods in which the
duties are performed; (b) he is paid, or entitled to payment, by an Affiliated
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military duty, or leave of absence in which case the Employee shall be
credited with Hours of Service for the computation period or periods in which
the period during which no duties were performed occurs; (c) back pay,
irrespective of mitigation of damages, has been either awarded or agreed to by
an Affiliated Employer, in which case the Employee shall be credited with Hours
of Service for the computation period or periods to which the award or agreement
pertains, rather than the computation period in which the award, agreement, or
payment is made; and (d) solely for the purpose of calculating Vesting Years of
Service, he was on any form of authorized leave of absence. The same Hours of
Service shall not be credited under clauses (a), (b), (c), and (d).
An Employee who is entitled to be credited with Hours of Service in
accordance with clause (b) or (d) of this Section 1.20 shall be credited with
such number of Hours of Service for the period of time during which no duties
were performed as though he were in the active employment of an Employing
Company during such period of time. However, an Employee shall not be credited
with Hours of Service in accordance with clause (b) of this Section 1.20 for
unused vacation for which payment is received at termination of employment, or
if the payment which is made to him or to which he is entitled in accordance
with clause (b) is made or due under a plan maintained solely for the purpose of
complying with applicable Worker's Compensation, or unemployment compensation or
disability insurance laws, or if such payment is one which solely reimburses an
Employee for medical or medically related expenses incurred by the Employee.
Provided there is no duplication of Hours of Service credited in
accordance with the foregoing provisions, if an Employee is on an approved leave
of absence to serve in the Armed Forces of the United States, he shall be
credited with such number of Hours of Service with respect to all or such
portion of the period of his absence to serve in the Armed Forces of the United
States as may be recognized under Sections 1.41(b), 2.3, and 4.2(a).
<PAGE>
The rules set forth in paragraphs (b) and (c) of Department of Labor
Regulations 2530.200b-2 are incorporated in the Plan by this reference and made
a part hereof.
1.21 "Limitation Year" means the Plan Year.
1.22 "Merged Plans" means the following:
Pension Plan for Employees of Alabama Power Company;
Pension Plan for Employees of Georgia Power Company;
Pension Plan for Employees of Gulf Power Company;
Pension Plan for Employees of Mississippi Power Company;
Pension Plan for Employees of Southern Company Services, Inc.,
as adopted by Southern Communications Services, Inc.;
Pension Plan for Employees of Southern Company Services, Inc.,
as adopted by Southern Development and Investment
Group, Inc.;
Pension Plan for Employees of Southern Company Services, Inc.,
as adopted by Southern Electric International, Inc.; and
Pension Plan for Employees of Southern Nuclear Operating
Company, Inc.
1.23 "Monthly Earnings" means one-twelfth (1/12) of the Earnings of an
Employee of an Affiliated Employer during a Plan Year.
1.24 "Normal Retirement Date" means the first day of the month
following an Employee's sixty-fifth (65th) birthday, except that the Normal
Retirement Date of any Employee hired on or after his sixtieth (60th) birthday
shall be the fifth (5th) anniversary of his initial participation in the Plan.
1.25 "One-Year Break in Service" means a twelve (12) consecutive month
period commencing on or after January 1, 1976 which would constitute a Year of
Service but for the fact that the Employee has not completed more than 500 Hours
of Service during such period.
<PAGE>
Solely for the purpose of determining whether a One-Year Break in
Service has occurred for eligibility or vesting purposes, an Employee who is
absent from work for maternity or paternity reasons shall receive credit for the
Hours of Service which would otherwise have been credited to such Employee but
for such absence, or in any case in which such hours cannot be determined, eight
(8) Hours of Service per day of such absence. In no event shall Hours of Service
credited under this paragraph be in excess of the amount necessary to prevent a
One-Year Break in Service from occurring. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence (a) by
reason of the pregnancy of the Employee, (b) by reason of a birth of a child of
the Employee, (c) by reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee, or (d) for purposes
of caring for such child for a period beginning immediately following such birth
or placement. The Hours of Service shall be credited under this paragraph: (a)
in the vesting or eligibility period in which the absence begins if the Hours of
Service credited are necessary to prevent a One-Year Break in Service in such
period, and (b) in all other cases, in the vesting or eligibility period
following the period in which the absence begins.
1.26 "Past Service" means with respect to any Employee included in the
Plan, the period of his Accredited Service prior to January 1, 1997 as
determined under the Prior Plans.
1.27 "Plan" means The Southern Company Pension Plan, as set forth
herein and as hereinafter amended, effective January 1, 1997.
1.28 "Plan Year" means the twelve (12) month period commencing on the
first day of January and ending on the last day of December next following.
1.29 "Plan Year of Service" is a Year of Service determined as if the
date of employment or reemployment is the first day of the Plan Year.
1.30 "Prior Plans" means the Pension Plan for Employees of Southern
Company Services, Inc. and the Merged Plans in effect prior to January 1, 1997.
With respect to any particular Employee, Prior Plan means the last plan
described in the preceding sentence in which the Employee participated prior to
January 1, 1997.
<PAGE>
1.31 "Provisional Payee" means a spouse designated or deemed to have
been designated by an Employee or former Employee pursuant to Article VII to
receive Retirement Income on the death of the Employee or former Employee.
1.32 "Qualified Election" means an election by an Employee or former
Employee on a prescribed form that concerns the form of distribution of
Retirement Income that must be in writing and must be consented to by the
Employee's spouse. The spouse's consent to such an election must acknowledge the
effect of such election, must be in writing, and must be witnessed by a notary
public. Notwithstanding this consent requirement, if the Employee establishes to
the satisfaction of the Retirement Board (or its delegee) that such written
consent may not be obtained because the spouse cannot be located or because of
such other circumstances as the Secretary of the Treasury may by regulations
prescribe, an election by the Employee will be deemed a Qualified Election. Any
consent necessary under this provision shall be valid and effective only with
respect to the spouse who signs the consent, or in the event of a deemed
Qualified Election, with respect to such spouse.
A revocation of a prior Qualified Election may be made by the Employee
without consent at any time commencing within ninety (90) days before such
Employee's fifty-fifth (55th) birthday but not later than before the
commencement of Retirement Income. Effective for Employees who have an Hour of
Service on or after January 1, 1996 and who (a) are not covered by the terms of
a collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit representative and
an Employing Company have mutually agreed to participation in the Plan, the term
"fiftieth (50th)" shall replace "fifty-fifth (55th)" in the preceding sentence.
1.33 "Retirement Board" means the managing board of the Plan provided
for in Article X.
1.34 "Retirement Date" means the Employee's Normal, Early, or Deferred
Retirement Date, whichever is applicable to him.
1.35 "Retirement Income" means the monthly Retirement Income provided for
by the Plan.
<PAGE>
1.36 "Social Security Offset" shall mean an amount equal to one-half
(1/2) of the amount, if any, of the Federal primary Social Security benefit
(primary old age insurance benefit) to which it is estimated that an Employee
will become entitled in accordance with the Social Security Act in force as
provided in subparagraphs (a) through (e) below which shall exceed $168 per
month on and after January 1, 1989, $250 per month on and after January 1, 1991,
and for Employees who (a) are not covered by the terms of a collective
bargaining agreement or (b) are covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and an Employing Company
have mutually agreed to participation in the Plan as amended, $325 per month on
and after January 1, 1996, multiplied by a fraction not greater than one, the
numerator of which shall be the Employee's total Accredited Service, and the
denominator of which shall be such total Accredited Service plus the Accredited
Service the Employee could have accumulated if he had continued his employment
from the date he terminates service with any Affiliated Employer until his
Normal Retirement Date. For purposes of determining the estimated Federal
primary Social Security benefit used in the Social Security Offset, an Employee
shall be deemed to be entitled to receive Federal primary Social Security
benefits after retirement or death, if earlier, regardless of the fact that he
may have disqualified himself to receive payment thereof. In addition to the
foregoing, the calculation of the Social Security benefit shall be based on the
salary history of the Employee as provided in Section 5.4 and shall be
determined pursuant to the following, as applicable:
(a) With regard to an Employee described in Section 5.2, the Social
Security benefit shall be computed at retirement. In estimating the amount of
the Federal primary Social Security benefit to which the Employee would be
entitled, it shall be assumed that he will receive no wages for Social Security
purposes after his retirement on his Normal Retirement Date or Deferred
Retirement Date, and it will be further assumed in calculating his estimated
Federal primary Social Security benefit that the amount thereof will be the
amount determined under the recomputation provision, if applicable, of the
Social Security Act in effect at the time of his retirement.
(b) With regard to an Employee described in Section 5.3(a), the Social
Security benefit to which it is estimated that he will be entitled at sixty-five
(65), shall be computed at the time of his retirement. In estimating the amount
of the Federal primary Social Security benefit to which the Employee would be
<PAGE>
entitled at age sixty-five (65), it shall be assumed that he will receive no
wages for Social Security purposes after his Early Retirement Date, and it will
be further assumed in calculating his estimated Federal primary Social Security
benefit that the amount thereof will be the amount determined under the
recomputation provision, if applicable, of the Social Security Act in effect at
his Early Retirement Date.
(c) With regard to an Employee described in Section 5.3(b), the Social
Security benefit to which it is estimated that he would have been entitled to
receive at age sixty-five (65) or his date of death, if later, had he not died,
shall be computed at the time of his death. In estimating the amount of Federal
primary Social Security benefit to which the Employee would have been entitled
at age sixty-five (65) or his date of death, if later, it shall be assumed that
he would not have received any wages for Social Security purposes after the date
of his death, and it will be further assumed in calculating his Federal primary
Social Security benefit that the amount thereof will be the amount determined
under the recomputation provision, if applicable, of the Social Security Act in
effect at the time of his death.
(d) With regard to an Employee described in Section 5.3(c), the Social
Security benefit to which it is estimated that he will become entitled at age
sixty-five (65) or his date of termination, if later, shall be computed at the
date of termination. In estimating the amount of the Federal primary Social
Security benefit to which the Employee would be entitled at age sixty-five (65)
or his date of termination, if later, it shall be assumed that he will receive
no wages for Social Security purposes after his date of termination, and it will
be further assumed in calculating his estimated Federal primary Social Security
benefit that the amount thereof will be the amount determined under the
recomputation provision, if applicable, of the Social Security Act in effect at
his date of termination.
(e) With regard to an Employee described in Section 5.3(d), the Social
Security benefit to which it is estimated that he would have been entitled to
receive at age sixty-five (65) or his initial date of disability, if later, had
he not become disabled, shall be computed at the time of his retirement. In
estimating the amount of Federal primary Social Security benefit to which the
Employee would have been entitled at age sixty-five (65) or his date of
<PAGE>
disability, if later, it shall be assumed that he would have received wages for
Social Security purposes as specified in Section 5.4, and it will be further
assumed in calculating his estimated Federal primary Social Security benefit
that the amount thereof will be the amount determined under the recomputation
provision, if applicable, of the Social Security Act in effect at the time of
his retirement.
1.37 "Social Security Retirement Age" means age sixty-five (65) if the
Employee attains age sixty-two (62) before January 1, 2000 (i.e., born before
January 1, 1938), age sixty-six (66) if the Employee attains age sixty-two (62)
after December 31, 1999, but before January 1, 2017 (i.e., born after December
31, 1937, but before January 1, 1955), and age sixty-seven (67) if the Employee
attains age sixty-two (62) after December 31, 2016 (i.e., born after December
31, 1954).
1.38 "Trust" or "Trust Fund" means all such money or other property
which shall be held by the Trustee pursuant to the terms of the Trust Agreement
or pursuant to contracts with life insurance companies.
1.39 "Trust Agreement" means the Trust agreement or agreements between
the Employer and the Trustee established for the purpose of funding the
Retirement Income to be paid.
1.40 "Trustee" means the trustee or trustees acting as such under the
Trust Agreement, including any successor or successors.
1.41 "Vesting Year of Service" means an Employee's Years of Service
including: (a) Years of Service with an Affiliated Employer; (b) active service
with the Armed Forces of the United States if the Employee entered or enters
active service or training in such Armed Forces directly from the employ of an
Employing Company and after discharge or release therefrom returns within ninety
(90) days to the employ of an Affiliated Employer or is deemed to return under
Section 2.3 because of the death of such Employee while in active service with
such Armed Forces; and (c) any period during which the Employee was on any other
form of authorized leave of absence. For purposes of this Section 1.41 in
determining Vesting Years of Service with respect to a period of absence
referred to in clause (b) or (c) of this Section 1.41, an Employee shall be
credited with Hours of Service as though the period of absence were a period of
active employment with the Affiliated Employer.
<PAGE>
Each Employee who participated in the Prior Plans shall be credited
with such Vesting Years of Service, if any, earned under such Prior Plans as of
December 31, 1996.
1.42 "Year of Service" means with respect to an Employee in the service
of an Affiliated Employer:
(a) a twelve (12) consecutive month period commencing on the Employee's
most recent date of hire by the Affiliated Employer (or date of reemployment as
provided in Section 2.4) and any subsequent twelve (12) consecutive month period
commencing on an anniversary date of such date of hire, provided he has
completed at least 1000 Hours of Service during each such twelve (12)
consecutive month period; and
(b) to the extent not resulting in duplication, each Year of Service
restored to the Employee upon reemployment as provided in Section 8.3.
An Employee's vested interest in his Accrued Retirement Income shall be
based on his Vesting Years of Service and an Employee's eligibility to
participate in the Plan pursuant to Article II shall be based on his Eligibility
Year of Service. Breaks in service will be measured on the same computation
period as the Year of Service.
In the Plan and Trust Agreement, where the context requires, words in
the masculine gender include the feminine and neuter genders and words in the
singular include the plural and words in the plural include the singular.
<PAGE>
Article II
Eligibility
2.1 Employees. Each Employee participating in the Plan as of January 1,
1997 shall continue to be included in the Plan. With respect to Employees
participating in Merged Plans as of December 31, 1996 who are employed by an
Employing Company on January 1, 1997, such Employees will be treated as
participating in the Plan as of January 1, 1997 for purposes of the preceding
sentence. Each other Employee, except as provided in this Article II, shall be
included in the Plan on the first day of the month next following the date on
which he first completes an Eligibility Year of Service.
2.2 Employees represented by a collective bargaining agent. An Employee
who is represented by a collective bargaining agent may participate in the Plan,
subject to its terms, if the representative(s) of his bargaining unit and an
Employing Company mutually agree to participation in the Plan by members of his
bargaining unit.
2.3 Persons in military service and Employees on authorized leave of
absence. Any person not already included in the Plan who leaves or has left the
employ of an Employing Company to enter the Armed Forces of the United States or
is on authorized leave of absence without regular pay and who returns to the
employ of an Affiliated Employer within ninety (90) days after discharge from
such military service or on or before termination of his leave of absence,
shall, upon such return, be included in the Plan effective as of the first day
of the month next following the date on which he first met or meets the
eligibility requirement of Section 2.1. In determining whether an Employee
entering the service of an Affiliated Employer has completed an Eligibility Year
of Service, his Hours of Service prior to such authorized leave of absence
without regular pay or entry into the Armed Forces shall be taken into account,
and for purposes of Section 2.4, he shall be deemed not to have incurred a
One-Year Break in Service by reason of such absence.
If an Employee dies while in active service with the Armed Forces of
the United States, such Employee shall be deemed to have returned to the employ
of an Employing Company on his date of death.
<PAGE>
An Employee not already included in the Plan who is on authorized leave
of absence and receiving his regular pay shall be considered credited with Hours
of Service as though the period of absence was a period of active employment
with an Employing Company, and he shall be included in the Plan if and when he
meets the requirements of this Article II regardless of whether he is, on the
date of such inclusion, on such leave of absence.
2.4 Employees reemployed. An Employee whose service terminates at any
time and who is reemployed as an Employee, unless excluded under Section 2.6,
will be included in the Plan as provided in Section 2.1 unless:
(a) prior to termination of his service he had completed at least one Year
of Service; and
(b) upon his reemployment, to the extent provided in Section 8.3 without
regard to Section 8.4, he is entitled to restoration of his Years of Service, in
which case he will be included in the Plan as of the date of his reemployment.
For purposes of determining Years of Service of an Employee who is
reemployed by an Affiliated Employer subsequent to a One-Year Break in Service,
a Year of Service subsequent to his reemployment shall be computed on the basis
of the twelve (12) consecutive month period commencing on his date of
reemployment or an anniversary thereof.
2.5 Participation upon return to eligible class. If an Employee is a
participant in the Plan before July 1, 1991, the exclusion from participation
provided in Section 2.6, as it regards temporary employees, shall not apply with
respect to such Employee, and such Employee shall be eligible to participate in
the Plan after July 1, 1991 whether or not he is classified as a temporary
employee.
If an Employee first becomes a participant on or after July 1, 1991, in
the event such Employee ceases to be a member of an eligible class of Employees
and becomes ineligible to participate, but has not incurred a One-Year Break in
Service, such Employee will participate immediately upon returning to an
eligible class of Employees. If such Employee incurred a One-Year Break in
Service, eligibility will be determined under Section 2.4 of the Plan.
<PAGE>
In all other instances, if an Employee is not a member of an eligible
class of Employees but then becomes a member of an eligible class, such Employee
will commence participation in the Plan as of the first day of the month next
following the later of (a) the date such Employee completes an Eligibility Year
of Service or (b) the date he becomes a member of an eligible class of
Employees.
2.6 Exclusion of certain categories of employees. Notwithstanding any
other provision of this Article II, leased employees shall not be eligible to
participate in the Plan. In addition, temporary employees, except Employees as
defined in Section 1.16 participating in the Plan prior to July 1, 1991, shall
not be eligible to participate in the Plan. Any person who is employed by
Electric City Merchandise Company, Inc. on or after May 1, 1988, or who is
employed by Savannah Electric and Power Company on or after March 3, 1988, shall
not be entitled to accrue Retirement Income under the Plan while employed at
such companies.
2.7 Waiver of participation. Notwithstanding the above, an Employee may
elect voluntarily not to participate in the Plan. The election not to
participate must be communicated in writing to and acknowledged by the
Retirement Board (or its delegee) and shall be effective as of the date set
forth in such written waiver.
<PAGE>
Article III
Retirement
3.1 Retirement at Normal Retirement Date. Each Employee eligible to
participate in the Plan shall have a nonforfeitable right to his Accrued
Retirement Income by no later than his sixty-fifth (65th) birthday, or in the
case of any Employee hired on or after his sixtieth (60th) birthday, the fifth
(5th) anniversary of his initial participation in the Plan. Notwithstanding the
above, an Employee's Normal Retirement Date shall be as provided in Section
1.24.
3.2 Retirement at Early Retirement Date. An Employee having at least
ten (10) Years of Accredited Service (including any Accredited Service to which
he is entitled under the pension plan of any Affiliated Employer from which such
Employee was transferred pursuant to Section 4.6, or which was credited to him
in accordance with Section 4.3) may elect to retire on an Early Retirement Date
on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th)
birthday and to have his Retirement Income commence on the first day of any
month up to and including the Employee's Normal Retirement Date.
Effective for Employees who have an Hour of Service on or after January
1, 1996 and who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and an Employing Company have
mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding paragraph.
3.3 Retirement at Deferred Retirement Date. An Employee included in the
Plan may remain in active service after his Normal Retirement Date. The
involuntary retirement of an Employee on or after his Normal Retirement Date
shall not be permitted solely on the basis of the Employee's age, except in
accordance with the provisions of the Age Discrimination in Employment Act, as
amended from time to time. Termination of service of such an Employee for any
reason after Normal Retirement Date shall be deemed retirement as provided in
the Plan.
<PAGE>
Article IV
Determination of Accredited Service
4.1 Accredited Service pursuant to Prior Plan. Each Employee who
participated in the Prior Plans shall be credited with such Accredited Service,
if any, earned under such Prior Plans as of December 31, 1996.
4.2 Accredited Service.
(a) Each Employee meeting the requirements of Article II shall, in
addition to any Accredited Service to which he may be entitled in accordance
with Section 4.1, be credited with Accredited Service as set forth in (b) below.
Any such Employee who is on authorized leave of absence with regular pay shall
be credited with Accredited Service during the period of such absence. Any such
Employee who is on an approved leave of absence to serve in the Armed Forces of
the United States shall, subject to Sections 1.41(b) and 2.3, be credited with
Accredited Service during all or such portion of the period of his absence.
Employees on authorized leave of absence without regular pay, other than
Employees deemed to accrue Hours of Service under Section 4.4 and Employees
described in the preceding sentence, shall not be credited with Accredited
Service for the period of such absence.
(b) For each Plan Year commencing after December 31, 1996, an Employee
included in the Plan who is credited with a Plan Year of Service shall be
credited with Accredited Service as follows:
(1) if an Employee completes at least 1,680 Hours of Service in a
Plan Year, he shall be credited with one year of Accredited Service;
(2) if an Employee completes less than 1,680 Hours of Service
in a Plan Year, but not less than 1,000 Hours of Service, he shall be
credited with one-twelfth (1/12) of a year of Accredited Service for
each 140 Hours of Service; or
(3) if an Employee's initial eligibility in the Plan shall
occur after the beginning of the Plan Year, and the Employee shall
therefore have completed less than 1,000 Hours of Service in such Plan
Year, he shall be credited with one-twelfth (1/12) of a year of
Accredited Service for each 140 Hours of Service during such Plan Year
after his inclusion in the Plan.
<PAGE>
(c) If an Employee (1) who has previously satisfied the eligibility
requirements under Article II shall again be included in the Plan at such time
which is after the beginning of the Plan Year, or (2) shall terminate his
employment for any reason before the close of such Plan Year and shall therefore
have completed less than 1,000 Hours of Service in such Plan Year, he shall be
credited with one-twelfth (1/12) of a year of Accredited Service for each 140
Hours of Service during such Plan Year after his inclusion in the Plan or before
his termination of employment in such Plan Year, as the case may be.
(d) In addition to the foregoing, Accredited Service may include
Accredited Service accrued subsequent to a One-year Break in Service including
such Accredited Service which may be restored in accordance with the provisions
of Section 8.3.
(e) Notwithstanding the above, the maximum number of years of
Accredited Service with respect to any Employee participating in the Plan shall
not exceed forty-three (43), except with respect to Employees eligible under
Section 15.1 whose Accredited Service shall not be limited to any maximum
number.
4.3 Accredited Service and Years of Service in respect of service of
certain Employees previously employed by an Employing Company or by certain
Affiliated Employers. An Employee in the service of an Employing Company on
January 1, 1976 or employed thereafter who meets the requirements of paragraph
(a) of this Section 4.3, in addition to any other Years of Service or Accredited
Service to which he may be entitled under the Plan, upon completion of an
Eligibility Year of Service where required under Section 8.3(c) (which shall
also be considered to be Accredited Service) shall be credited with such number
of Years of Service (and fractions thereof to the nearest whole month for
service prior to January 1, 1976) and such Accredited Service and Retirement
Income as shall be determined in accordance with the provisions of paragraphs
(b) and (c) of this Section 4.3.
(a) (1) Such Employee shall have been employed prior to January 1, 1976
by an Employing Company or by a company which at that time was an Affiliated
Employer; (2) he shall have terminated his service with such Employing Company
or such Affiliated Employer other than by retirement and he shall not be
entitled to receive at any time any retirement income under the pension plan of
<PAGE>
any such prior employer in respect of any period of time for which he shall
receive credit for Years of Service or Accredited Service under this Section
4.3; and (3) for Employees reemployed on or after January 1, 1985, the number of
consecutive One-Year Breaks in Service incurred by the Employee prior to the
date of his employment by an Employing Company does not equal or exceed the
greater of (A) five (5), or (B) the aggregate number of his Years of Service
(and fractions thereof to the nearest whole month for service prior to January
1, 1976) with an Employing Company and such Affiliated Employer. The years of
Accredited Service credited to an Employee reemployed prior to January 1, 1985,
with regard to years of Accredited Service immediately prior to the termination
of his service, shall be determined under the terms of the Prior Plans in effect
prior to January 1, 1985.
(b) The number of Years of Service (and fractions thereof to the
nearest whole month for service prior to January 1, 1976) and the Accredited
Service, respectively, which shall be credited to such Employee shall be equal
to the respective number of his Years of Service (and fractions thereof to the
nearest whole month for service prior to January 1, 1976) and Accredited Service
which were forfeited by the Employee and not restored under the pension plans of
an Employing Company or an Affiliated Employer described in the preceding
paragraph.
(c) There shall be credited to the Employee Retirement Income equal to
retirement income which was accrued by him under the pension plan of an
Employing Company or an Affiliated Employer during the period of his Accredited
Service which was forfeited and which is credited under the Plan in accordance
with this Section 4.3. The amount of Retirement Income credited in accordance
with this paragraph (c) shall be treated as Prior Plans Retirement Income for
purposes of determining the amount of Retirement Income to which the Employee is
entitled, and shall be determined in accordance with the provisions of the
pension plan of the Employing Company or the Affiliated Employer in effect at
the time the Employee's service with such Employing Company or the Affiliated
Employer terminated without regard to any minimum provisions of such pension
plan; for this purpose and if relevant in respect of the Employee, it shall be
assumed that the pension plan of the Employing Company or the Affiliated
Employer in effect at the time the Employee's service with such Employing
Company or the Affiliated Employer terminated contained provisions concerning
<PAGE>
service in the Armed Forces of the United States as provided under the terms of
the Prior Plans. For Plan Years beginning after December 31, 1987, an Employee
who meets the requirements of paragraph (a) of this Section 4.3 shall be deemed
to have transferred to or from an Affiliated Employer for the purpose of the
transfer of assets or liabilities as provided under the terms of the Prior
Plans.
4.4 Accrual of Retirement Income during period of total disability.
(a) If an Employee included in the Plan who has completed at least five
(5) Vesting Years of Service becomes totally disabled and is granted either
Social Security disability benefits or long-term disability benefits under a
long-term disability benefit plan of an Employing Company, he shall be
considered to be on a leave of absence, herein referred to as a "Disability
Leave." An Employee's Disability Leave shall be deemed to begin on the initial
date of the disability and shall continue until the earlier of: (1) the end of
the month in which he shall cease to be entitled to receive Social Security
Disability benefits and long-term disability benefits under a long-term
disability benefit plan of an Employing Company; (2) his death; and (3) his
Retirement Date if he elects to have his Retirement Income commence on such
date. During the period of the Employee's Disability Leave, he shall, for
purposes of the Plan, be deemed to have received Earnings at the regular rate in
effect for him.
(b) A disabled Employee who applies for and would be granted long-term
disability benefits under a long-term disability benefit plan of an Employing
Company, if it were not for the fact that the deductions therefrom attributable
to other disability benefits equal or exceed the amount of his unreduced benefit
under such long-term disability benefit plan of the Employing Company, will be
considered as being currently granted benefits under such long-term disability
benefit plan.
(c) An Employee's Disability Leave shall be deemed to be a period for
which Hours of Service shall be credited to the Employee as though the period of
his Disability Leave were a period of active employment.
(d) If an Employee's Disability Leave shall terminate prior to his
Normal Retirement Date and he shall fail to return to the employment of the
Employing Company within sixty (60) days after the termination of such leave,
his service shall be deemed to have terminated upon the termination of his
<PAGE>
Disability Leave and his rights shall be determined in accordance with Article
VIII, unless at such time he shall be entitled to retire on an Early Retirement
Date, in which event his termination of service shall be deemed to constitute
his retirement under Section 3.2.
(e) Notwithstanding the above, the years of Accredited Service for any
Employee whose initial date of disability occurred under the Prior Plans shall
be determined under the terms of the applicable Prior Plans.
4.5 Employees leaving Employer's service. If the service of an Employee
is terminated prior to retirement as provided by Article III, such Employee will
forfeit any Vesting Years of Service and Accredited Service which he may have
subject to possible restoration of some or all of his Vesting Years of Service
and Accredited Service in accordance with Article VIII. The provisions of this
Section 4.5 shall not affect the rights, if any, of an Employee under Article
VIII nor shall the rights of an Employee be affected during or by reason of a
layoff, due to lack of work, which continues for a period of one year or less,
except that such period of layoff shall not be deemed to be service with an
Employing Company. If the service of an Employee is terminated, or if he is not
reemployed before the expiration of one year after being laid off for lack of
work, and he is subsequently reemployed, he will be treated as provided in
Section 3.2.
Forfeitures arising by reason of an Employee's termination of service
for any reason shall not be applied to increase the benefits any Employee would
otherwise receive under the Plan but shall be used to reduce contributions of
the Employing Companies to the Plan.
<PAGE>
4.6 Transfers to or from Savannah Electric and Power Company.
(a) In the case of the transfer to an Employing Company of an employee
of Savannah Electric and Power Company ("SEPCO"), such Employee, if and when he
attains his Normal Retirement Date or Deferred Retirement Date, shall be
entitled to receive Retirement Income calculated pursuant to Section 5.1 or 5.2,
as appropriate, based upon his Accredited Service with an Employing Company and
Accredited Service attributable to actual service during his employment with
SEPCO. Such amount calculated in accordance with the preceding sentence shall be
reduced by the amount of retirement income calculated under the defined benefit
pension plan of SEPCO attributable to Accredited Service during his actual
service during his employment with SEPCO. Any Retirement Income based upon an
Employee's Accredited Service with an Employing Company and Accredited Service
attributable to actual service during his employment with SEPCO shall be subject
to the provisions of the Plan relating to Retirement Income payable at an Early
Retirement Date, or if such Retirement Income shall be payable in accordance
with the provisions of Section 8.2 or 8.6, subject to the provisions of such
Section.
This Section 4.6 shall also apply in calculating the Retirement Income
payable under this Plan to a former employee of SEPCO who is hired by an
Employing Company and is entitled to credit for years of Accredited Service
under the Plan attributable to his actual service with SEPCO.
(b) Subject to paragraph (a) above, in the case of an Employee who
transfers from an Employing Company to SEPCO, such Employee shall receive the
following Accredited Service under the Plan or Credited Service under the
Employees' Retirement Plan of Savannah Electric and Power Company (the "SEPCO
Plan"), as the case may be.
(1) With respect to service with an Employing Company through
the date of transfer, Accredited Service shall be determined in
accordance with the terms of the Plan in effect for such Employee as of
his transfer date.
<PAGE>
(2) With respect to the "Computation Year," as defined in the
SEPCO Plan, in which the Employee transfers, Credited Service under the
SEPCO Plan shall be equal to the greater of (a) the Credited Service
that the Employee would be credited with under the SEPCO Plan during
the entire Computation Year in which the transfer occurs without regard
to the transfer of employment, or (b) Accredited Service earned under
the terms of the Plan as of the date of transfer.
(3) With respect to Computation Years after the year in which
the transfer occurs, the Employee shall receive Credited Service as
determined in accordance with the terms of the SEPCO Plan.
(c) Subject to paragraph (a) above, in the case of an Employee who
transfers from SEPCO to an Employing Company, such Employee shall receive the
following Accredited Service under the Plan or Credited Service under the SEPCO
Plan, as the case may be.
(1) With respect to service with SEPCO through the date of
transfer, Credited Service shall be determined in accordance with the
terms of the SEPCO Plan in effect for such Employee as of his transfer
date.
(2) With respect to the Plan Year in which the Employee
transfers, Accredited Service under the Plan shall be determined on the
basis of the equivalency set forth in 29 C.F.R.
ss. 2530.200b-3(e)(1)(i).
(3) With respect to Plan Years after the year in which the
transfer occurs, Accredited Service under the Plan shall be determined
in accordance with the terms of the Plan.
(d) With respect to paragraphs (b) and (c) above, in no event is an
Employee subject to this Section 4.6 entitled to more than one (1) year of
Accredited Service or Credited Service as the case may be in the year of
transfer.
<PAGE>
Article V
Retirement Income
5.1 Normal Retirement Income. The monthly Retirement Income payable as
a single life annuity to an Employee included in the Plan who retires from the
service of an Employing Company at his Normal Retirement Date after January 1,
1997, subject to the limitations of Article VI, shall be the greater of (a) and
(b):
(a) the amount determined under (1) or (2) below, whichever is greater:
(1) the Accrued Retirement Income determined in accordance with
Section 5.1 of the Prior Plans without regard to the Minimum Retirement
Income requirement, plus $25.00 times the Employee's years of Accredited
Service earned after December 31, 1996; and
(2) $25.00 times an Employee's years of Accredited Service; and
(b) the Minimum Retirement Income as determined in accordance with Section
5.2.
5.2 Minimum Retirement Income payable upon retirement at Normal
Retirement Date or Deferred Retirement Date. The monthly Minimum Retirement
Income payable to an Employee (or his Provisional Payee) who retires from the
service of an Employing Company at his Normal Retirement Date or Deferred
Retirement Date (before adjustment for Provisional Payee designation, if any)
shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by
his years (and fraction of a year) of Accredited Service to his Normal
Retirement Date or Deferred Retirement Date including a Social Security Offset.
Any provisions of this Article V to the contrary notwithstanding,
Retirement Income determined in accordance with this Article V with respect to
an Employee who retires on his Normal Retirement Date or Deferred Retirement
Date shall not be less than the Retirement Income which would have been payable
with respect to such Employee commencing on an Early Retirement Date which would
have resulted in the greatest Retirement Income if such Retirement Income had
been payable in the same form as his Retirement Income commencing on his Normal
Retirement Date or Deferred Retirement Date.
<PAGE>
5.3 Minimum Retirement Income upon retirement at Early Retirement Date
or upon termination of service by reason of death or otherwise prior to
retirement. The monthly Minimum Retirement Income payable to an Employee (or his
Provisional Payee), if he shall retire on his Early Retirement Date, or if his
service shall terminate by reason of death or otherwise prior to retirement,
shall be determined in accordance with the following provisions:
(a) Upon retirement at Early Retirement Date, his Minimum Retirement
Income (before adjustment for Provisional Payee designation, if any) shall be an
amount equal to 1.70% of his Average Monthly Earnings multiplied by his years
(and fraction of a year) of Accredited Service earned as of his Early Retirement
Date including a Social Security Offset.
(b) Upon termination of service by reason of the death of the Employee
prior to retirement and after the effective date of his Provisional Payee
designation or deemed designation, the Minimum Retirement Income for the purpose
of determining the Employee's Accrued Retirement Income upon which payment to
his Provisional Payee in accordance with Section 7.4 shall be based shall be an
amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by
his years (and fraction of a year) of Accredited Service to the date of his
death including a Social Security Offset.
(c) For an Employee who terminates his service with an Employing
Company with entitlement to receive Retirement Income in accordance with Section
8.1, upon retirement at Early Retirement Date or Normal Retirement Date his
Minimum Retirement Income (before adjustment for Provisional Payee designation,
if any) shall be an amount equal to 1.70% of his Average Monthly Earnings
multiplied by his years (and fraction of a year) of Accredited Service to his
date of termination including a Social Security Offset.
(d) Upon termination of service by reason of disability (as defined in
Section 4.4) of the Employee prior to retirement, provided such Employee does
not return to the service of an Employing Company prior to his Retirement Date,
the Minimum Retirement Income shall be an amount equal to 1.70% of the
Employee's Average Monthly Earnings multiplied by his years (and fraction of a
year) of Accredited Service to his Retirement Date including a Social Security
Offset.
<PAGE>
5.4 Calculation of Social Security Offset. For purposes of determining
the Social Security Offset in calculating an Employee's Retirement Income under
the Plan, the Social Security Offset shall be determined by using the actual
salary history of the Employee during his employment with any Affiliated
Employer, provided that in the event that the Retirement Board (or its delegee)
is unable to secure such actual salary history within one hundred eighty (180)
days following the later of the date of the Employee's separation from service
(by retirement or otherwise) and the time when the Employee is notified of the
Retirement Income to which he is entitled, the salary history shall be
determined in the following manner:
(1) The salary history shall be estimated by applying a salary
scale, projected backwards, to the Employee's compensation for W-2
purposes from the Affiliated Employer which last employed the Employee
for the first Plan Year following the most recent Plan Year for which
the salary history is estimated. The salary scale shall be a level
percentage per year equal to six percent (6%) per annum.
(2) The Plan shall give clear written notice to each Employee
of the Employee's right to supply the actual salary history and of the
financial consequences of failing to supply such history. Such notice
shall state that the actual salary history is available from the Social
Security Administration.
For purposes of determining the Social Security Offset in calculating
the Retirement Income of an Employee entitled to receive a public pension based
on his employment with a Federal, state, or local government agency, no
reduction in such Employee's Social Security benefit resulting from the receipt
of a public pension shall be recognized.
5.5 Early Retirement Income. The monthly amount of Retirement Income
payable to an Employee who retires from the service of an Employing Company at
his Early Retirement Date subject to the limitations of Section 6.2, will be
equal to his Retirement Income determined in accordance with Sections 5.1 and
5.3 based on his Accredited Service to his Early Retirement Date, reduced by
three-tenths of one percent (0.3%) for each calendar month by which the
commencement date of his Retirement Income precedes his Normal Retirement Date
but follows the first day of the month following his attainment of his
fifty-fifth (55th) birthday.
<PAGE>
Effective for Employees who have an Hour of Service on or after January
1, 1996, and who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and an Employing Company have
mutually agreed to participation in the Plan and (c) elect to retire in
accordance with this Section 5.5 on or after attainment of age fifty (50) but
before attainment of age fifty-five (55), Retirement Income shall be determined
as in the preceding paragraph including an additional reduction of one-third of
one percent (0.33%) for each calendar month by which the commencement date
precedes the first day of the month following any such Employee's attainment of
his fifty-fifth (55th) birthday.
At the option of the Employee exercised at or prior to commencement of
his Retirement Income on or after his Early Retirement Date (provided he shall
not have in effect at such Early Retirement Date a Provisional Payee designation
pursuant to Article VII), he may have his Retirement Income adjusted upwards in
an amount which will make his Retirement Income payable up to age sixty-five
(65) equal, as nearly as may be, to the amount of his Federal primary Social
Security benefit (primary old age insurance benefit) estimated to become payable
after age sixty-five (65), as computed at the time of his retirement in
accordance with Section 5.3(a), plus a reduced amount, if any, of Retirement
Income actuarially determined to be payable after age sixty-five (65). The
Federal primary Social Security benefit used in calculating an Employee's
Retirement Income payable under the Plan shall be determined by using the salary
history of the Employee during his employment with any Affiliated Employer, as
calculated in accordance with Section 5.4.
5.6 Deferred Retirement Income. The monthly amount of Retirement Income
payable to an Employee who retires from the service of the Employer at his
Deferred Retirement Date, subject to the limitations of Section 6.2, will be
equal to his Retirement Income determined in accordance with Sections 5.1 and
5.2 based on his Accredited Service to his Deferred Retirement Date.
<PAGE>
5.7 Payment of Retirement Income. The first payment of an Employee's
Retirement Income will be made on his Early Retirement Date, Normal Retirement
Date, Deferred Retirement Date, or date of commencement of payment of Retirement
Income in accordance with Section 8.1, 8.2 or 8.6, as the case may be; provided
that commencement of the distribution of an Employee's Retirement Income shall
not be made prior to his Normal Retirement Date without the consent of such
Employee, except as provided in Section 8.4 of the Plan.
Notwithstanding anything to the contrary above, if in accordance with
this Section 5.7, an Employee is entitled to receive Retirement Income
commencing at his Early Retirement Date, he may, in lieu of commencing payment
of his Retirement Income upon his Early Retirement Date, elect to receive such
Retirement Income commencing as of the first day of any month after his Early
Retirement Date and preceding his Normal Retirement Date in an amount equal to
his Accrued Retirement Income determined as of the commencement of his
Retirement Income on or after his Early Retirement Date determined in accordance
with Section 5.5. An election pursuant to this Section 5.7 to have Retirement
Income commence prior to Normal Retirement Date shall be made on a prescribed
form and shall be filed with the Retirement Board (or its delegee) at least
thirty (30) days before Retirement Income is to commence.
In the event of the death of an Employee who has designated a
Provisional Payee or is deemed to have done so in accordance with Article VII,
if the designation has become effective, the first payment to be made to the
Provisional Payee pursuant to Article VII shall be made to the Provisional Payee
on the first day of the month after the later of (a) the Employee's death and
(b) the date on which the Employee would have attained his fifty-fifth (55th)
birthday if he had survived to such date, if the Provisional Payee shall then be
alive and proof of the Employee's death satisfactory to the Retirement Board (or
its delegee) shall have been received by it. Subsequent payments will be made
monthly thereafter until the death of such Provisional Payee.
Effective for Employees who have an Hour of Service on or after January
1, 1996 and who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and an Employing Company have
mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding paragraph.
<PAGE>
In any event, payment of Retirement Income, including any adjustments
thereto caused by an amendment to the Plan providing for or which has the effect
of providing retroactively increased Retirement Income, to the Employee shall
begin not later than the sixtieth (60th) day after the later of the close of the
Plan Year in which falls (a) the Employee's Normal Retirement Date or (b) the
date the Employee terminates his service with any Affiliated Employer.
Notwithstanding the provisions of the Plan for the monthly payment of Retirement
Income, such income may be adjusted and payable annually in arrears if the
amount of the Retirement Income is less than $10.00 per month.
5.8 Termination of Retirement Income. The monthly payment of Retirement
Income will cease with the last payment preceding the retired Employee's death;
subject, however, to the continuation of payments to a surviving Provisional
Payee, if one has been designated or deemed to have been designated, which
likewise will cease with the last payment preceding the death of the Provisional
Payee. There shall be no benefits payable under the Plan on behalf of any
Employee whose death occurs prior to his retirement, except as otherwise
provided in Article VII with respect to a Provisional Payee of an Employee.
Following the death of an Employee and of his Provisional Payee, if any, no
further payments will be made under the Plan on account of such Employee or to
his estate.
5.9 Required distributions.
(a) Once a written claim for benefits is filed with the Retirement
Board (or its delegee), payment of benefits to the Employee shall begin not
later than sixty (60) days after the last day of the Plan Year in which the
latest of the following events occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the Employee
commenced participation in the Plan; or
(3) the Employee's separation from service from any Affiliated
Employer.
<PAGE>
(b) Required minimum distributions
(1) The payment of Retirement Income to any Employee shall
begin April 1 of the calendar year following the calendar year in which
the Employee attains age 70-1/2 or, if later, the calendar year in
which such Employee retires. Notwithstanding the preceding sentence,
with respect to any Employee who is a five-percent owner as defined in
Section 14.5(g) with regard to the Plan Year ending in which the
Employee attains age 70-1/2 or any Employee who commenced receipt of
his Retirement Income in accordance with the minimum distribution
provisions of the Prior Plans before January 1, 1997, the payment of
Retirement Income shall commence no later than April 1 of the Plan Year
following the Plan Year in which the Employee attains age 70-1/2.
(2) With respect to an Employee who commences receipt of
Retirement Income while in active service, the amount of his Retirement
Income shall be computed as of the end of the Plan Year the Employee
attains age 70-1/2 and shall be recomputed as of the close of each Plan
Year thereafter and preceding his actual retirement date. Any
additional Retirement Income he accrues at the close of any Plan Year
pursuant to the preceding sentence shall be offset (but not below zero)
by the value of the benefit payments received in such Plan Year. With
respect to the Plan Year of retirement, Retirement Income calculated at
the Employee's Deferred Retirement Date shall be offset (but not below
zero) by the value of the benefit payments received on or after January
1 but before his retirement date in such Plan Year. The receipt by an
Employee of any payments or distributions as a result of his attaining
age 70-1/2 prior to his actual retirement or death shall in no way
affect the entitlement of an otherwise eligible Employee to additional
accrued benefits.
(3) With respect to an Employee who retires after attaining
age 70-1/2 and who has not previously commenced receipt of his
Retirement Income pursuant to this Section 5.9(b) while an Employee of
an Affiliated Employer, he shall receive Retirement Income based on his
actual retirement date, but which Retirement Income shall not be less
than the Actuarial Equivalent of his Retirement Income as of the first
of the month following attainment of age 70-1/2.
<PAGE>
(c) Distribution upon death of Employee
(1) Death after commencement of benefits
If the Employee dies before his entire nonforfeitable
interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Employee as
set forth in the provisions of Article VII.
(2) Death prior to commencement of benefits
If the Employee dies before the distribution of his
nonforfeitable interest has begun, the entire interest,
subject to the provisions of Article VII, shall be distributed
monthly to his Provisional Payee, if any, over such
Provisional Payee's remaining lifetime.
(d) Determining required minimum distributions
Notwithstanding anything in this Plan to the contrary, all
distributions, including the minimum amounts which must be distributed each
calendar year, under this Plan shall be made in accordance with Code Section
401(a)(9) and the regulations thereunder.
(e) Minimum distribution transitional rules
Any distribution made pursuant to Section 242(b)(2) of the Tax Equity
and Fiscal Responsibility Act of 1982 shall meet the requirements of Code
Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code
Sections 401(a)(11) and 417.
5.10 Suspension of Retirement Income for reemployment.
(a) If a former Employee who is receiving Retirement Income shall be
reemployed by any Affiliated Employer as an Employee and shall not elect to
waive his right to participate under the Plan or the pension plan of the
Affiliated Employer, whichever applies, his Retirement Income shall cease during
each calendar month after his reemployment in which he completes forty (40) or
more Hours of Service. The Retirement Income payable upon his subsequent
retirement shall be reduced by the Actuarial Equivalent of any Retirement Income
he received prior to his reemployment.
<PAGE>
(b) No payment shall be withheld by the Plan pursuant to this Section
5.10 unless the Plan notifies the Employee by personal delivery or first class
mail during the first calendar month in which the Plan withholds payments that
his Retirement Income is suspended.
(c) If the payment of Retirement Income has been suspended, payments
shall resume no later than the first day of the third calendar month after the
calendar month in which the Employee ceases to be employed in ERISA Section
203(a)(3)(B) service. The initial payment upon resumption shall include the
payment scheduled to occur in the calendar month when payments resume and any
amounts withheld during the period between the cessation of ERISA Section
203(a)(3)(B) service and the resumption of payments.
5.11 Increase in Retirement Income of retired Employees
Retirement Income payable on and after January 1, 1996 to an Employee
(or to the Provisional Payee of an Employee) who retired under the Prior Plans
at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement
Date on or before January 1, 1996 will be recalculated to increase the amount
thereof by an amount ranging from a minimum of one and one-half percent (1.5%)
to a maximum of seven and one-half percent (7.5%) in accordance with the
following schedule:
Year in which Percentage
retirement occurred increase
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather than the
Employee's Retirement Date, will be made in respect of Retirement Income which
is payable on or after January 1, 1996 where a Provisional Payee election was in
effect, or was deemed to be in effect, when an Employee died while in service
prior to January 1, 1996 and prior to his retirement.
<PAGE>
A similar adjustment will be made in respect of Retirement Income which
is payable on or after January 1, 1996 for a former Employee who is not eligible
to retire but who is vested in a benefit (or the Provisional Payee of such
former Employee) for which payments have commenced on or before January 1, 1996
in accordance with the terms of the Prior Plans, except for Employees whose
Retirement Income has been cashed-out pursuant to the terms of the Prior Plans.
For purposes of determining the applicable percentage increase under
this Section 5.11, the year of retirement includes retirement where the last day
of employment was December 31 of such year. An Employee whose Deferred
Retirement Date is on or before January 1, 1988 and who did not retire at his
Normal Retirement Date shall be deemed to have retired at his Normal Retirement
Date for purposes of determining the increase in his Retirement Income payable
at his Deferred Retirement Date.
This Section 5.11 shall not apply with respect to an Employee who has
not retired, but for whom the distribution of Retirement Income has commenced
pursuant to Section 5.9 of the Plan.
5.12 Special provisions relating to the treatment of absence of an
Employee from the service of an Employing Company to serve in the Armed Forces
of the United States.
(a) Notwithstanding any other provisions of the Plan to the contrary,
contributions, benefits, and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.
(b) Service to be credited to any Employee in accordance with this
Section 5.12 may be conditioned by the Retirement Board upon its receipt of (1)
such information pertaining to absence of an Employee or former Employee to
serve in the Armed Forces of the United States as it may request and (2) such
form of receipt and release as it may determine to be appropriate in the
circumstances.
<PAGE>
Article VI
Limitations on Benefits
6.1 Maximum Retirement Income. Notwithstanding any other provision of the
Plan, the amount of Retirement Income shall be subject to the provisions of
Article VI.
(a) The maximum annual amount of Retirement Income payable with respect
to an Employee in the form of a straight life annuity without any ancillary
benefits after any adjustment for a Provisional Payee designation shall be the
lesser of the dollar limitation determined under Code Section 415(b)(1)(A) as
adjusted under Code Section 415(d), or Code Section 415(b)(1)(B) as adjusted
under Treasury Regulation Section 1.415-5, subject to the following provisions
of Article VI. With respect to any former Employee who has Accrued Retirement
Income under the Plan or his Provisional Payee, the maximum annual amount shall
also be subject to the adjustment under Code Section 415(d), but only those
adjustments occurring before September 1, 1996.
(b) For purposes of Section 6.1, the term "average compensation for his
high three (3) years" shall mean the period of consecutive calendar years (not
more than three) during which the Employee was both an active participant in the
Plan and had the greatest aggregate compensation from an Employing Company or,
if he is also entitled to receive a pension from a defined benefit plan of an
Affiliated Employer or if assets and liabilities attributable to the pension of
the Employee from a defined benefit plan of an Affiliated Employer have been
transferred to this Plan, the greatest aggregate compensation from the Employer
and the Affiliated Employer during such high three (3) years. The limitation
described in Section 6.1(a) shall also apply in the case of the payment of an
Employee's Retirement Income with a Provisional Payee designation.
(c) For purposes of Article VI, the term "compensation" means an
Employee's earned income, wages, salaries, and fees for professional services,
and other amounts received for personal services actually rendered in the course
of employment with any Affiliated Employer (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and bonuses), and
excluding the following:
<PAGE>
(1) Affiliated Employer contributions to a plan of deferred
compensation which are not included in the Employee's gross income for
the taxable year in which contributed or Affiliated Employer
contributions under a simplified employee pension plan to the extent
such contributions are deductible by the Employee, or any distributions
from a plan of deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by an Affiliated Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
described in Section 403(b) of the Code (whether or not the amounts are
actually excludable from the gross income of the Employee).
Compensation for any Limitation Year is the compensation actually paid or
includible in gross income during such year.
(d) The foregoing limitations regarding the maximum Retirement Income
shall not apply with respect to an Employee if the Retirement Income payable
under the Plan and under any other defined benefit plans of any Affiliated
Employer does not exceed $10,000 for the calendar year or for any prior calendar
year, and any Affiliated Employer has not at any time maintained a defined
contribution plan in which the Employee has participated. The terms "defined
benefit plan" and "defined contribution plan" shall have the meanings set forth
in Section 415(k) of the Code.
<PAGE>
6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred
Retirement.
(a) If the retirement benefit of an Employee commences before the
Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation
shall be reduced in accordance with Code Section 415(b)(2)(C) as prescribed by
the Secretary of the Treasury. The reduction shall be made in such manner as the
Secretary of the Treasury may prescribe which is consistent with the reduction
for old-age insurance benefits commencing before the Social Security Retirement
Age under the Social Security Act.
(b) If the retirement benefit of an Employee commences after the
Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation
shall be adjusted in accordance with Code Section 415(b)(2)(D) as prescribed by
the Secretary of the Treasury, based on the lesser of the interest rate
assumption under the Plan or on an assumption of five percent (5%) per year.
6.3 Adjustment of limitation for Years of Service or participation.
(a) If an Employee has completed less than ten (10) years of
participation, the Employee's accrued benefit shall not exceed the Defined
Benefit Dollar Limitation as adjusted by multiplying such amount by a fraction,
the numerator of which is the Employee's number of years (or part thereof) of
participation in the Plan, and the denominator of which is ten (10).
(b) If an Employee has completed less than ten (10) Years of Service
with any Affiliated Employer, the limitations described in Sections
415(b)(1)(B), 415(b)(4), and 415(e) of the Code shall be adjusted by multiplying
such amounts by a fraction, the numerator of which is the Employee's number of
years of service (or part thereof), and the denominator of which is ten (10).
(c) In no event shall paragraphs (a) and (b) above reduce the
limitations provided under Sections 415(b)(1), 415(b)(4), and 415(e) of the Code
to an amount less than one-tenth (1/10) of the applicable limitation (as
determined without regard to this Section 6.3).
(d) This Section 6.3 shall be applied separately with respect to each
change in the benefit structure of the Plan, except as is or may be limited by
Revenue Procedure 92-42.
<PAGE>
6.4 Limitation on benefits from multiple plans.
(a) In the case of an Employee who is also a participant in any other
defined benefit plan of any Affiliated Employer or in any defined contribution
plan of any Affiliated Employer, the Retirement Income provided by the Plan
shall be limited to the extent necessary to prevent the sum of Fractions A and B
below, computed as of the end of the Plan Year, from exceeding 1.0.
Fraction A
(numerator) Projected annual benefit of the Employee under the
Plan and any other defined benefit plan of any Affiliated
Employer (determined as of the close of the Plan Year).
(denominator) The lesser of (1) the product of 1.25 multiplied
by the Defined Benefit Dollar Limitation (or such higher
accrued benefit as of December 31, 1982), or (2) 1.4
multiplied by the amount determined under Code Section
415(b)(1)(B) as adjusted under Treasury Regulation Section
1.415-5.
Fraction B
(numerator) The sum of all Annual Additions to the account of
the Employee under any defined contribution plan of any
Affiliated Employer as of the close of the Plan Year.
(denominator) The sum of the lesser of the following amounts,
determined for such Plan Year and for each prior Plan Year in
which the Employee has a Year of Service, (1) 1.25 multiplied
by the Defined Contribution Dollar Limitation determined under
Code Section 415(c)(1)(A), or (2) 1.4 multiplied by
twenty-five percent (25%) of the Employee's compensation for
the year.
6.5 Special rules for plans subject to overall limitations under Code
Section 415(e).
<PAGE>
(a) For purposes of computing the defined contribution plan fraction of
Section 415(e)(1) of the Code, "Annual Addition" shall mean the amount allocated
to an Employee's account during the Limitation Year as a result of:
(1) employer contributions,
(2) employee contributions,
(3) forfeitures, and
(4) amounts described in Sections 415(1)(1) and 419(A)(d)(2) of
the Code.
(b) The Annual Addition for any Limitation Year beginning before
January 1, 1987 shall not be recomputed to treat all Employee contributions as
an Annual Addition.
(c) If the sum of Fractions A and B exceeds 1.0 as of December 31,
1982, the numerator of Fraction B shall be reduced by an amount which does not
exceed the numerator, so that the sum of Fraction A and Fraction B does not
exceed 1.0.
(d) If the Plan satisfied the applicable requirements of Section 415 of
the Code as in effect for all Limitation Years beginning before January 1, 1987,
an amount shall be subtracted from the numerator of the defined contribution
plan fraction (not exceeding such numerator) as prescribed by the Secretary of
the Treasury so that the sum of the defined benefit plan fraction and defined
contribution plan fraction computed under Section 415(e)(1) of the Code (as
revised by this Article VI) does not exceed 1.0 for such Limitation Year.
(e) The defined contribution plans and the other defined benefit plans
of Affiliated Employers include, respectively, (1) The Southern Company Employee
Savings Plan, The Southern Company Employee Stock Ownership Plan, The Southern
Company Performance Sharing Plan, and any other defined contribution plan (as
defined in Section 415(k) of the Code) and (2) any other qualified pension plan
in which the Employee participates in accruing benefits maintained by any
Affiliated Employer.
6.6 Combination of Plans. Notwithstanding any provisions contained
herein to the contrary, in the event that an Employee participates in a defined
contribution plan or defined benefit plan required to be aggregated with this
Plan under Code Section 415(g) and the combined benefits with respect to an
<PAGE>
Employee exceed the limitations contained in Code Section 415(e), corrective
adjustments shall first be made under this Plan. However, if an Employee's
Retirement Income under this Plan has already commenced, corrections shall first
be made under The Southern Company Employee Stock Ownership Plan, if possible;
second, correction shall next be made under The Southern Company Performance
Sharing Plan, if possible; and if not possible, then correction shall be made to
the Employee's Accrued Retirement Income under this Plan.
6.7 Incorporation of Code Section 415. Notwithstanding anything
contained in this Article to the contrary, the limitations, adjustments and
other requirements prescribed in this Article shall at all times comply with the
provisions of Code Section 415 and the regulations thereunder, the terms of
which are specifically incorporated herein by reference.
<PAGE>
Article VII
Provisional Payee
7.1 Adjustment of Retirement Income to provide for payment to
Provisional Payee. An Employee who desires to have his Accrued Retirement Income
adjusted in accordance with the provisions of this Article VII to provide a
reduced amount of Retirement Income payable to him for his lifetime commencing
on his Early Retirement Date, his Normal Retirement Date, or his Deferred
Retirement Date, as the case may be, may elect subject to Section 7.11, in
accordance with the provisions of this Article VII, at his option, either:
(a) that an amount of Retirement Income be payable to him for his
lifetime which is equal to eighty percent (80%) of the Retirement Income which
would otherwise be payable to him, but for such election (taking into account
any reduction required in accordance with Sections 7.3 and 7.4(a)), with the
provision that the same amount will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or
(b) that an amount of Retirement Income be payable to him for his
lifetime which is equal to ninety percent (90%) of the Retirement Income which
would otherwise be payable to him, but for such election (taking into account
any reduction required in accordance with Sections 7.3 and 7.4(a)), with the
provision that one-half (1/2) of the amount payable to the Employee will be
continued after his death to his Provisional Payee until the death of such
Provisional Payee, or
(c) that an amount of Retirement Income be payable to him for his
lifetime which is equal to seventy-five percent (75%) of the Retirement Income
which would otherwise be payable to him, but for such election (taking into
account any reduction required in accordance with Sections 7.3 and 7.4(a)), with
the provision that the same amount will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or, if such
Provisional Payee predeceases the Employee, the Employee's Retirement Income
automatically increases to a monthly amount equal to the Retirement Income which
would be payable to him had he not elected the form of benefit described in this
Section 7.1(c) and instead had elected the single life annuity form of benefit,
or
<PAGE>
(d) that an amount of Retirement Income be payable to him for his
lifetime which is equal to eighty-eight percent (88%) of the Retirement Income
which would otherwise be payable to him, but for such election (taking into
account any reduction required in accordance with Sections 7.3 and 7.4(a)), with
the provision that one-half (1/2) of the amount payable to the Employee will be
continued after his death to his Provisional Payee until the death of such
Provisional Payee, or, if such Provisional Payee predeceases the Employee, the
Employee's Retirement Income automatically increases to a monthly amount equal
to the Retirement Income which would be payable to him had he not elected the
form of benefit described in this Section 7.1(d) and instead had elected the
single life annuity form of benefit.
7.2 Form and time of election and notice requirements.
(a) An election of payment and designation of a Provisional Payee in
accordance with Section 7.1 shall be made in writing at the same time on a
prescribed form delivered to the Retirement Board (or its delegee). The election
and designation shall specify its effective date which shall not be sooner than
the date received by the Retirement Board (or its delegee) or the Employee's
fifty-fifth (55th) birthday, whichever is later, nor later than the date of
commencement of payments in accordance with this Article VII.
Notwithstanding the preceding paragraph, an election under Section
7.1(c) or (d) is subject to Section 7.11, must be in the form of a written
Qualified Election, and shall not become effective until the commencement of
Retirement Income payments under the Plan.
(b) An election of payment to be made in accordance with paragraph (a),
(b), (c), or (d) of Section 7.1 may be changed by an Employee, provided the
written election of the change specifies an effective date which shall not be
sooner than the date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the
date of commencement of payments in accordance with this Article VII.
Notwithstanding the preceding sentence, an election under Section 7.1(c) or (d)
is subject to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until the commencement of Retirement Income
payments under the Plan. To the extent that the new method of payment shall
afford the Employee changed protection in the event of his death after the
effective date of the new election and prior to retirement, his Accrued
Retirement Income shall be adjusted pursuant to Section 7.4(a) to reflect such
changed protection.
<PAGE>
(c) With respect to Sections 7.5 and 7.6, within the period not less
than thirty (30) days and not more than ninety (90) days prior to the
anticipated commencement of benefits, the Employee shall be furnished, by mail
or personal delivery, a written explanation of: (1) the terms and conditions of
the reduced Retirement Income payable as provided in Section 7.1; (2) the
Employee's right to make, and the effect of, an election to waive the payment of
reduced Retirement Income pursuant to a Provisional Payee designation; (3) the
rights of the Employee's Provisional Payee; and (4) the right to make, and the
effect of, a revocation of a previous election to waive the payment of reduced
Retirement Income pursuant to a Provisional Payee designation. Notwithstanding
the preceding sentence, such written explanation may be furnished after an
Employee's Early, Normal or Deferred Retirement date, as applicable, if in the
discretion of the Retirement Board the circumstances so warrant, provided the
Employee shall have at least thirty (30) days after being furnished the written
explanation to elect payment in accordance with paragraph (a) above.
Within thirty (30) days following an Employee's written request
received by the Retirement Board (or its delegee) during the election period,
but within sixty (60) days from the date the Employee is furnished all of the
information prescribed in the immediately preceding sentence, the Employee shall
be furnished an additional written explanation, in terms of dollar amounts, of
the financial effect of an election by him not to receive such reduced
Retirement Income. If an Employee makes such request, the election period herein
prescribed shall end not earlier than sixty (60) calendar days following the day
of the mailing or personal delivery of the additional explanation to the
Employee. Except that if an election made as provided in Section 7.5 or 7.6 is
revoked, another election under that Section may be made during the specified
election period.
7.3 Circumstances in which election and designation are inoperative. An
election and designation made pursuant to this Article shall be inoperative and
the regular provisions of the Plan shall again become applicable as if a
Provisional Payee had not been designated if, prior to the commencement of any
payment in accordance with this Article VII: a) an Employee's Provisional Payee
shall die, (b) the Employee and the Provisional Payee shall be divorced under a
final decree of divorce, or (c) the Retirement Board (or its delegee) shall have
<PAGE>
received the written Qualified Election of the Employee to rescind his election
of payment and designation of a Provisional Payee in order to receive a single
life annuity form of benefit. If such a Qualified Election to rescind is made by
the Employee, his Accrued Retirement Income shall be reduced to reflect the
protection afforded the Employee by any Provisional Payee designation during the
period from its effective date to the date of the Retirement Board's (or its
delegee's) receipt of the Employee's Qualified Election to rescind if the option
as to payments of reduced Retirement Income was in accordance with either
Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries subsequent to the
death or divorce of his Provisional Payee and prior to the commencement of
payments in accordance with this Article VII, then he shall be entitled to
designate a new Provisional Payee in the manner set forth in Section 7.2.
7.4 Pre-retirement death benefit. If prior to his Normal Retirement
Date (or his Deferred Retirement Date, if applicable), an Employee shall die
while in the service of an Employing Company (or while in the service of an
Affiliated Employer to which his employment had been transferred) and is
survived by his spouse to whom he shall be married at the time of his death,
there shall be payable to his surviving spouse (whom he shall be deemed to have
designated as his Provisional Payee) Retirement Income determined in accordance
with paragraph (a) or paragraph (c) of this Section 7.4, as applicable. Subject
to Section 7.10(b), such Retirement Income shall commence on the first day of
the month following the death of the Employee or the first day of the month
following the date on which he would have attained his fifty-fifth (55th)
birthday if he were still alive, whichever is later, and shall cease with the
last payment preceding the death of his Provisional Payee.
(a) The amount of Retirement Income payable to the Provisional Payee of
a deceased Employee who prior to his death had attained his fifty-fifth (55th)
birthday shall be equal to the amount payable to the Provisional Payee as
calculated in Section 7.1(b) determined on the basis of his Accredited Service
to the date of his death, or if the Employee shall have attained his fifty-fifth
(55th) birthday and so elected prior to his death, such Retirement Income shall
be equal to the amount set forth in Section 7.1(a) determined on the basis of
his Accredited Service to the date of his death reduced as provided in the next
sentence. If such election shall be made by the Employee, the Retirement Income
which shall be payable to the Employee if he lives to his Early Retirement Date
<PAGE>
or the first day of the month following his attainment of age sixty-five (65),
if later, shall be reduced by three-fourths of one percent (0.75%) for each year
(prorated for a fraction of a year from the first day of the month following the
effective date of the election) which has elapsed from the effective date of his
election to the earlier of (1) the commencement of Retirement Income on or after
his Early Retirement Date or the first day of the month following his attainment
of age sixty-five (65), if later, or (2) the revocation of such election. If he
shall die before the commencement of Retirement Income on or after his Early
Retirement Date or the first day of the month following his attainment of age
sixty-five (65), if later, his Accrued Retirement Income to the date of his
death shall be reduced by three-quarters of one percent (0.75%) for each year
(prorated for a fraction of a year from the first day of the month following the
effective date of the election) between the effective date of his election and
the first day of the month following his attainment of age sixty-five (65). No
reduction in the Employee's Retirement Income shall be made for the period
during which the election is in effect after the first day of the month
following his attainment of age sixty-five (65).
(b) Retirement Income shall not be payable under paragraph (a) of this
Section 7.4 to the Provisional Payee of a deceased Employee if at the time of
his death there was in effect a Qualified Election made after August 22, 1984
under this paragraph (b) that no Retirement Income shall be paid to his
Provisional Payee in the event of his death while in the service of an Employing
Company (or while in the service of an Affiliated Employer to which his
employment had been transferred) as provided in paragraph (a), provided the
Employee had received at least one hundred eighty (180) days prior to his
fifty-fifth (55th) birthday a written explanation of: (1) the terms and
conditions of the Retirement Income payable to his Provisional Payee as provided
in paragraph (a); (2) the Employee's right to make, and the effect of, an
election to waive the payment of Retirement Income to his Provisional Payee; (3)
the rights of the Employee's Provisional Payee; and (4) the right to make, and
the effect of, a revocation of a previous election to waive the payment of
Retirement Income to the Employee's Provisional Payee.
<PAGE>
A revocation of a prior Qualified Election may be made by the Employee
without the consent of the Employee's Provisional Payee at any time before the
commencement of benefits. An election under this paragraph (b) may be made and
such election may be revoked by an Employee during the period commencing ninety
(90) days prior to the Employee's fifty-fifth (55th) birthday and ending on the
date of the Employee's death.
Notwithstanding the above provisions of this paragraph (b), such
Employee shall not be entitled on or after September 1, 1996 to waive payment of
Retirement Income to his Provisional Payee as provided in this Section 7.4. Any
such election to waive payment of Retirement Income in effect on August 31, 1996
shall remain in effect unless subsequently revoked by the Employee.
(c) Subject to Section 7.10(c), for an Employee who dies while in the
service of an Employing Company (or while in the service of an Affiliated
Employer to which his employment had been transferred) prior to his fifty-fifth
(55th) birthday after completing five (5) Vesting Years of Service, the amount
of such Retirement Income payable to the Provisional Payee shall be calculated
as provided in Section 7.1(b) determined on the basis of his Accredited Service
to the date of his death. The payment of such Retirement Income to the
Provisional Payee shall begin on the first day of the month following the date
on which such deceased Employee would have attained his fifty-fifth (55th)
birthday.
7.5 Post-retirement death benefit - qualified joint and survivor
annuity. If at his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date, as the case may be, an Employee is married and he has not: (a)
designated a Provisional Payee in accordance with Section 7.1 in respect of
payments to be made commencing on his Early, Normal, or Deferred Retirement Date
or (b) made, subject to Section 7.4(b) a Qualified Election that payment be made
to him in the mode of a single life annuity, he shall nevertheless be deemed to
have made an effective designation of a Provisional Payee under this Section 7.5
and to have specified the payment of a benefit as provided in Section 7.1(b).
7.6 Election and designation by former Employee entitled to Retirement
Income in accordance with Article VIII. If a former Employee is entitled to
receive in accordance with Section 8.1 Retirement Income commencing at Normal
Retirement Date, or sooner in accordance with Section 8.2, he may, on or after
<PAGE>
his fifty-fifth (55th) birthday, designate his spouse as his Provisional Payee
and elect, subject to Section 7.11, to have his Accrued Retirement Income at the
date of termination of his service actuarially adjusted to provide, at his
option, in the event of the commencement of payment prior to his Normal
Retirement Date either:
(a) a reduced amount payable to him for his lifetime with the provision
that such reduced amount will be continued after his death to his spouse as
Provisional Payee until the death of such Provisional Payee; or
(b) a reduced amount payable to him for his lifetime with the provision
that one-half (1/2) of such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional Payee; or
(c) a reduced amount payable to him for his lifetime with the provision
that such reduced amount will be continued after his death to his spouse as
Provisional Payee until the death of such Provisional Payee, or, if such
Provisional Payee predeceases the former Employee, the former Employee's
Retirement Income automatically increases to a monthly amount equal to the
Retirement Income which would be payable to him had he not elected the form of
benefit described in this Section 7.6(c) and instead had elected the single life
annuity form of benefit; or
(d) a reduced amount payable to him for his lifetime with the provision
that one-half (1/2) of such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional Payee, or,
if such Provisional Payee predeceases the former Employee, the former Employee's
Retirement Income automatically increases to a monthly amount equal to the
Retirement Income which would be payable to him had he not elected the form of
benefit described in this Section 7.6(d) and instead had elected the single life
annuity form of benefit.
A former Employee's election and designation of his Provisional Payee
made in accordance with this Section 7.6 shall be in writing on a prescribed
form delivered to the Retirement Board (or its delegee) and shall become
effective not sooner than the date received or the former Employee's fifty-fifth
(55th) birthday, whichever is later, nor later than the date of commencement of
payment in accordance with this Section 7.6. Notwithstanding the preceding
<PAGE>
sentence, an election under Section 7.6(c) or (d) is subject to Section 7.11,
must be in the form of a written Qualified Election, and shall not become
effective until commencement of Retirement Income payments under the Plan.
If the former Employee dies prior to his Normal Retirement Date but
after the effective date of his Provisional Payee designation, there will be
payable to his Provisional Payee for life commencing on the first day of the
calendar month after the former Employee's death Retirement Income in a reduced
amount in accordance with the former Employee's election of payments to be made
to his Provisional Payee after the death of the former Employee under paragraph
(a), (b), (c), or (d) as the case may be, of this Section 7.6. Notwithstanding
the preceding sentence, an election under Section 7.6(c) or (d) is subject to
Section 7.11, must be in the form of a written Qualified Election, and shall not
become effective until commencement of Retirement Income payments under the
Plan. However, if prior to the former Employee's death, the Retirement Board (or
its delegee) has not received such election, payment of a reduced amount of
Retirement Income will be made in accordance with paragraph (b) of this Section
7.6 to his surviving spouse to whom he is married at the time of his death,
unless (1) at the time of his death there is in effect a Qualified Election by
the former Employee that reduced Retirement Income shall not be paid to his
surviving spouse in accordance with this Section 7.6 should he die between his
fifty-fifth (55th) birthday and his Normal Retirement Date without having
elected that payment be made to a Provisional Payee and (2) at least one hundred
eighty (180) days prior to his fifty-fifth (55th) birthday a written explanation
is provided to the former Employee of: (A) the terms and conditions of the
Retirement Income payable to his Provisional Payee as provided in this Section
7.6; (B) the former Employee's right to make, and the effect of, an election to
waive the payment of Retirement Income to his Provisional Payee; (C) the rights
of a former Employee's spouse; and (D) the right to make, and the effect of, a
revocation of a previous election to waive the payment of Retirement Income to
his Provisional Payee.
If the former Employee is entitled to receive payment of Retirement
Income in accordance with Section 8.2 after his fifty-fifth (55th) birthday and
prior to his Normal Retirement Date and elects to do so, a reduced amount of
Retirement Income determined in accordance with this Section 7.6, subject to
Section 7.11, based upon his Accrued Retirement Income at the date of
termination of his service (actuarially reduced in accordance with Section 8.2)
<PAGE>
will be payable to him commencing on the date on which payments commence prior
to Normal Retirement Date in accordance with Section 8.2 with payments in the
same or reduced amount to be continued to his Provisional Payee for life after
the former Employee's death in accordance with his election under paragraph (a),
(b), (c), or (d), as the case may be, of this Section 7.6. However, if the
former Employee is married and he has not designated a Provisional Payee in
respect of payments to commence to him prior to his Normal Retirement Date or
elected that payment be made to him in the mode of a single life annuity
pursuant to a Qualified Election, he shall be deemed to have designated a
Provisional Payee pursuant to this Section 7.6 and thereby specified that a
reduced Retirement Income shall be paid to him during his lifetime as provided
in paragraph (b) of this Section 7.6 and continued after his death to his
Provisional Payee as provided in paragraph (b) of this Section 7.6.
If the former Employee is alive on his Normal Retirement Date and is
married and payment of Retirement Income has not sooner commenced, the
provisions of Section 7.5 shall be applicable to the payment of his Retirement
Income, unless he shall elect, subject to Section 7.11, at his Normal Retirement
Date to receive payment of his Retirement Income pursuant to Section 7.1(a),
(b), (c), or (d). However, if an election and designation in accordance with
this Section 7.6 was in effect prior to his Normal Retirement Date, the former
Employee's Accrued Retirement Income at his Normal Retirement Date shall be
actuarially adjusted for the period the election and designation was in effect.
7.7 Death benefit for Provisional Payee of former Employee. If an
Employee, whose service with the Employing Company terminates on or after
January 1, 1989, shall die after such termination of employment, and prior to
his death (a) shall have not attained his fifty-fifth (55th) birthday, (b) shall
have completed at least five (5) Vesting Years of Service, and (c) shall be
survived by his spouse to whom he shall be married at his death, then there
shall be payable to his surviving spouse (whom he shall be deemed to have
designated as his Provisional Payee) Retirement Income determined in accordance
with this Section 7.7. Such Retirement Income shall be equal to one-half of the
reduced amount, as actuarially adjusted to provide for the payment of such
Retirement Income beginning as of the first day of the month following the date
on which such deceased former Employee would have attained his fifty-fifth
(55th) birthday and to provide for the determination of such Retirement Income
on a joint and fifty percent (50%) survivor basis of the former Employee's
<PAGE>
Accrued Retirement Income, determined on the basis of his Accredited Service to
the date of his death. Subject to Section 7.10(b) and (c), the Provisional Payee
shall be eligible to commence receipt of such Retirement Income on the first day
of the month following the date on which the former Employee would have attained
his fifty-fifth (55th) birthday if he were still alive, or the first day of any
subsequent month preceding what would have been the former Employee's Normal
Retirement Date, and shall cease with the last payment preceding the death of
his Provisional Payee. In any event, the Provisional Payee shall commence
receipt of such Retirement Income no later than what would have been the former
Employee's Normal Retirement Date.
7.8 Limitations on Employee's and Provisional Payee's benefits.
(a) With respect to an Employee who does not elect a single life
annuity, the limitation on benefits imposed under Article VI shall be applied as
if such Employee had elected a benefit in the form of a single life annuity.
(b) With respect to a Provisional Payee, the limitations on benefits
imposed under Article VI shall be applied consistent with paragraph (a) above
prorated to provide a limitation equal to or one-half of the Employee's
limitation as appropriate in accordance with annuity form of benefit elected by
the Employee.
7.9 Effect of election under Article VII. An election of payment or a
deemed election of payment in accordance with this Article VII shall be in lieu
of any other form or method of payment of Retirement Income.
7.10 Effects of change in retirement at Early Retirement Date.
(a) Notwithstanding any other provision of this Article VII with the
exception of paragraphs one and two of Section 7.4(c), with respect to Employees
who have an Hour of Service on or after January 1, 1996 and who (1) are not
covered by the terms of a collective bargaining agreement or (2) are covered by
the terms of a collective bargaining agreement but where the bargaining unit
representative and an Employing Company have mutually agreed to participation in
the Plan, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)."
<PAGE>
(b) Notwithstanding Sections 7.4 and 7.7 and subject to paragraph (a)
above, if an Employee who has an Hour of Service on or after January 1, 1996 and
who (1) is not covered by the terms of a collective bargaining agreement or (2)
is covered by the terms of a collective bargaining agreement but where the
bargaining unit representative and an Employing Company have mutually agreed to
participation in the Plan and (3) dies after attaining his fiftieth (50th)
birthday but before attaining his fifty-fifth (55th) birthday, his Provisional
Payee shall commence receipt of Retirement Income on or after January 1, 1997,
provided the Employee's Provisional Payee is alive and proof of the Employee's
death satisfactory to the Retirement Board (or its delegee) is received.
Notwithstanding the preceding sentence, with respect to Section 7.7, the
Provisional Payee may elect to defer receipt of Retirement Income to the first
day of any month following the date the Employee would have attained his
fiftieth (50th) birthday but not beyond what would have been such Employee's
Normal Retirement Date.
(c) Subject to paragraph (a) above except for the requirement that an
Employee have an Hour of Service on or after January 1, 1996, the Provisional
Payee of any Employee described in Section 7.4(c) or in Section 7.7 who (1) is
not covered by the terms of a collective bargaining agreement or (2) is covered
by the terms of a collective bargaining agreement but where the bargaining unit
representative and an Employing Company have mutually agreed to participation in
the Plan shall commence receipt of Retirement Income upon the first day of the
month after the Employee would have attained his fiftieth (50th) birthday. For
purposes of the preceding sentence only, the requirement in Section 7.7 that a
former Employee terminate service with the Employing Company on or after January
1, 1989 should be disregarded to allow the Provisional Payee of any former
Employee to be eligible to commence receipt of Retirement Income as provided in
such sentence.
7.11 Commencement of new optional forms of payment. The options for
payment described in Sections 7.1(c) and (d) and Sections 7.6(c) and (d) may be
elected only for Employees who have an Hour of Service on or after January 1,
1996 and who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and an Employing Company have
mutually agreed to participation in the Plan.
<PAGE>
7.12 Special form of benefit for former Employees.
(a) With respect to any Employee who has an Hour of Service on or after
January 1, 1996 and who (1) is not covered by the terms of a collective
bargaining agreement or (2) is covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and an Employing Company
have mutually agreed to participation in the Plan (3) terminates employment with
such Employing Company in 1996 and (4) has attained his fiftieth (50th) birthday
but not his fifty-fifth (55th) birthday as of his termination of employment,
such Employee shall be eligible to elect the special form of benefit described
in the next following paragraph which election must be made in the form of a
written Qualified Election.
(b) This special form of benefit shall only commence on January 1, 1997
and shall be comprised of two components consisting of a lump sum and a single
life annuity as described in paragraphs (1) and (2) below.
(1) Annuity Component: A reduced amount of Retirement Income payable
to the former Employee for his lifetime determined as if he had
elected to retire as of the first of the month following the date
such former Employee terminated from employment.
(2) Lump Sum Component: A lump sum payment equal to the difference
between paragraphs (A) and (B) below:
(A) the lump sum amount which is the Actuarial Equivalent of a
single life annuity payable to the former Employee
determined as if the former Employee had elected such single
life annuity to commence as of January 1, 1997, and
(B) the lump sum amount which is the Actuarial Equivalent of the
payment described in paragraph (1) above.
(3) With respect to paragraph (1) above, if the annuity component is
payable to the former Employee for his lifetime, he may elect to
have his Retirement Income adjusted upwards in an amount which
will make his Retirement Income payable up to age sixty-five (65)
<PAGE>
equal, as nearly as may be, to the amount of his Federal primary
Social Security benefit (primary old age insurance benefit)
estimated to become payable after age sixty-five (65), computed
as of the first of the month following the date the former
Employee terminated employment, plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after age
sixty-five (65). The Federal primary Social Security benefit used
in calculating the former Employee's Retirement Income payable
under the Plan shall be determined by using the salary history of
the former Employee during his employment with any Affiliated
Employer, as calculated in accordance with Section 5.4.
(c) Notwithstanding paragraph (b) above, with respect to this form of
benefit, a former Employee may elect, in lieu of receiving the annuity component
as a single life annuity, to receive his benefit in a manner similar to the
forms of payment described in Section 7.1(a), (b), (c), or (d). If one of these
alternatives is elected, the annuity and lump sum component will be adjusted as
follows:
(1) Alternative 1
(A) Annuity Component: The form of payment described in Section
7.1(a) but which is calculated based on eighty percent (80%)
of the single life annuity provided in paragraph (b)(1)
above.
(B) Lump Sum Component: A lump sum equal to eighty percent (80%)
of the amount provided in paragraph (b)(2) above.
(2) Alternative 2
(A) Annuity Component: The form of payment described in Section
7.1(b) but which is calculated based on ninety percent (90%)
of the single life annuity provided in paragraph (b)(1)
above.
<PAGE>
(B) Lump Sum Component: A lump sum equal to ninety percent (90%)
of the amount provided in paragraph (b)(2) above.
(3) Alternative 3
(A) Annuity Component: The form of payment described in Section
7.1(c) but which is calculated based on seventy-five percent
(75%) of the single life annuity provided in paragraph
(b)(1) above.
(B) Lump Sum Component: A lump sum equal to seventy-five percent
(75%) of the amount provided in paragraph (b)(2) above.
(4) Alternative 4
(A) Annuity Component: The form of payment described in Section
7.1(d) but which is calculated based on eighty-eight percent
(88%) of the single life annuity provided in paragraph
(b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty-eight percent
(88%) of the amount provided in paragraph (b)(2) above.
<PAGE>
Article VIII
Termination of Service
8.1 Vested interest. If an Employee included in the Plan terminates for
any reason other than death or retirement as provided by Article III, and if
such Employee has had at least five (5) Vesting Years of Service with any
Affiliated Employer, whether or not Accredited Service, he will be entitled to
receive, commencing at Normal Retirement Date (except as provided in Section 8.2
and subject to the provisions of Section 7.6) Retirement Income equal to his
Accrued Retirement Income at the date of the termination of such service,
provided that he makes application to the Retirement Board (or its delegee) for
the payment of such Retirement Income. If proper application for payment of
Retirement Income shall not be received by the Retirement Board (or its delegee)
by the April 1 of the calendar year following the calendar year in which the
Employee attains age 70 1/2 and the whereabouts of the Employee cannot be
determined by the Retirement Board (or its delegee), Retirement Income shall be
paid to the Employee's Provisional Payee, if any, and if surviving and the
whereabouts known to the Retirement Board (or its delegee), or applied in such
other manner as the Retirement Board shall deem appropriate. The payment of
Retirement Income pursuant to this provision shall completely discharge all
liability of the Retirement Board (or its delegee), the Employer, and the
Trustee or other payor to the extent of the payments so made. If such Employee
terminates with less than five (5) Vesting Years of Service with any Affiliated
Employer, he shall immediately forfeit any Accrued Retirement Income under the
Plan based upon his service prior to such termination.
8.2 Early distribution of vested benefit. If an Employee terminates
from service before his fifty-fifth (55th) birthday and is entitled to receive
in accordance with Section 8.1 Retirement Income commencing at his Normal
Retirement Date and at the time his service terminated he had at least ten (10)
Years of Accredited Service, he may, in lieu of receiving payment of such
Retirement Income commencing at Normal Retirement Date, elect to receive such
Retirement Income commencing as of the first day of any month after his
fifty-fifth (55th) birthday but preceding his Normal Retirement Date in an
amount equal to his Accrued Retirement Income at the date of termination of his
service actuarially reduced in accordance with reasonable actuarial assumptions
adopted by the Retirement Board. An election pursuant to this Section 8.2 to
have Retirement Income commence prior to Normal Retirement Date shall be made on
a prescribed form and shall be filed with the Retirement Board (or its delegee)
at least thirty (30) days before Retirement Income is to commence.
<PAGE>
Effective for Employees who have an Hour of Service on or after January
1, 1996 and who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and an Employing Company have
mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding paragraph. If any such Employee
commences receipt of his Retirement Income after attaining age fifty (50) but
before attaining age fifty-five (55), the Employee's Retirement Income shall be
determined as in the preceding paragraph including an additional reduction of
one-third of one percent (0.33%) for each calendar month by which the
commencement date precedes the first day of the month following such Employee's
attainment of his fifty-fifth (55th) birthday.
8.3 Years of Service of reemployed Employees. If an Employee whose
service terminates is again employed by an Affiliated Employer as an Employee,
his Years of Service with any Affiliated Employer and his Accredited Service
immediately prior to the termination of his service shall be treated as provided
in this Section 8.3, subject to the provisions of Section 8.4.
(a) If at the time of his reemployment he has not incurred a One-Year
Break in Service, his Years of Service with an Affiliated Employer and his
Accredited Service will be restored whether or not he is entitled to receive
Retirement Income in accordance with Section 8.1.
(b) If at the time of termination of his service he is entitled to
receive Retirement Income in accordance with the provisions of Section 8.1, upon
his reemployment his Years of Service with an Affiliated Employer immediately
prior to the termination of his service shall be restored whether or not he has
incurred a One-Year Break in Service.
(c) If at the time of reemployment he is not entitled to receive
Retirement Income in accordance with Section 8.1 and he (1) has incurred less
than five (5) consecutive One-Year Breaks in Service or (2) has incurred five
(5) or more consecutive One-Year Breaks in Service, but his Years of Service
prior to such One-Year Breaks in Service exceeded the consecutive One-Year
<PAGE>
Breaks in Service, then upon the completion of one Eligibility Year of Service
following his reemployment, provided that if his reemployment date is on or
after January 1, 1995, no such Eligibility Year of Service shall be required,
his Years of Service with an Affiliated Employer and his Accredited Service
prior to the first One-Year Break in Service shall be restored, disregarding any
Years of Service with an Affiliated Employer which are not required to be taken
into account by reason of any previous One-Year Breaks in Service.
(d) Years of Service and Accredited Service restored to an Employee in
accordance with this Section 8.3 shall be aggregated with Years of Service and
Accredited Service to which the Employee may be entitled after his reemployment.
If, however, the Minimum Retirement Income so determined for the Employee upon
his subsequent retirement or termination of service shall be less than the
aggregate of: (1) his Minimum Retirement Income, if any, determined in respect
of the period ending with his prior termination of service, and (2) his Minimum
Retirement Income determined in respect of the period after his reemployment,
the aggregate of such Minimum Retirement Incomes shall be deemed to be his
Minimum Retirement Income upon such subsequent retirement or termination of
service. In any event, his Retirement Income, however computed, shall be reduced
by the Actuarial Equivalent of any Retirement Income he received with respect to
his prior period of employment.
8.4 Cash-out and buy-back. (a) Notwithstanding any other provision of
this Plan, if the present value of Accrued Retirement Income of an Employee
whose service terminates for any reason other than transfer to an Affiliated
Employer or retirement under Article III is not more than $3,500 (or such
greater amount as permitted by the regulations prescribed by the Secretary of
the Treasury), the present value of the Employee's Accrued Retirement Income
shall be paid in a lump sum, in cash, to such terminated Employee. The present
value of the Accrued Retirement Income shall be calculated as of the date of
distribution of the lump sum applying the Applicable Interest Rate as defined in
Section 8.5(c). For purposes of this Section 8.4, if the present value of the
Employee's vested Accrued Retirement Income is zero, the Employee shall be
deemed to have received a distribution of such vested Retirement Income.
<PAGE>
(b) A terminated Employee who has been paid a lump sum of the present
value of his Accrued Retirement Income in accordance with paragraph (a) above
shall not be entitled to repay this amount to the Trust. If such terminated
Employee is subsequently reemployed and attains his Early Retirement Date,
Normal Retirement Date, or Deferred Retirement Date, or terminates service for
any reason subject to the requirements of Section 8.1 or 8.2, the Employee shall
receive Retirement Income based on all Accredited Service, including Accredited
Service earned prior to reemployment, but reduced by the Actuarial Equivalent of
the lump sum payment made in accordance with paragraph (a).
8.5 Calculation of present value for cash-out of benefits and for
determining amount of benefits.
(a) This Section 8.5 shall apply to all distributions from the Plan and
from annuity contracts purchased to provide Accrued Retirement Income other than
distributions described in Section 1.417-1T(e)(3) of the income tax regulations
issued under the Retirement Equity Act of 1984.
(b) (1) For purposes of determining whether the present value of (A) an
Employee's vested accrued benefit; (B) a qualified joint and survivor annuity,
within the meaning of Section 417(b) of the Code; or (C) a qualified
preretirement survivor annuity within the meaning of Section 417(c)(1) of the
Code exceeds $3,500, the present value of such benefits or annuities shall be
calculated by using an interest rate no greater than the Applicable Interest
Rate.
(2) In no event shall the present value of any such benefit or
annuity determined under this Section 8.5(b) be less than the present
value of such benefits or annuities determined using the Applicable
Interest Rate.
(3) In no event shall the amount of any benefit or annuity
determined under this Section 8.5 exceed the maximum benefit permitted
under Section 415 of the Code.
(c) For purposes of this Section 8.5, "Applicable Interest Rate" shall
be calculated by using the annual rate of interest on 30-year Treasury
securities for the month of November in the Plan Year which precedes the Plan
Year in which such present value is determined and by using the prevailing
commissioners' standard table used to determine reserves for group annuity
contracts in effect on the date as of which the present value is being
determined.
<PAGE>
8.6 Retirement Income under Prior Plans. Any person entitled to receive
Retirement Income as a former Employee under the Prior Plans shall only be
entitled to receive Retirement Income in accordance with the provisions of such
Prior Plan in effect at the time his service was terminated, except that any
such person whose service terminated prior to January 1, 1976:
(a) with at least twenty (20) years of Accredited Service may elect to
receive Retirement Income commencing prior to his Normal Retirement Date in
accordance with Section 8.2;
(b) who shall have returned to the employment of an Employing Company,
whether before or after January 1, 1976, and shall be an Employee who is
entitled to receive Retirement Income in respect of his Accredited Service after
January 1, 1976, his years of Accredited Service under the Prior Plans with
respect to his service before January 1, 1976, shall, for the purpose of
calculating his Minimum Retirement Income, be aggregated with his years of
Accredited Service after his reemployment. His Accrued Retirement Income to the
date of termination of his service payable in accordance with the Prior Plans as
a former Employee shall be treated as Prior Plan Retirement Income and his Years
of Service prior to the date of termination of his service shall be restored to
his credit. It shall be a condition of the treatment provided for in this
paragraph (b) that: (1) the Employee rescind any election of payment and
designation of a Provisional Payee which he shall have made under the Prior Plan
and which shall be in effect at the time of his return to the employment of an
Employing Company and (2) if he is receiving Retirement Income, his Retirement
Income shall cease during his period of employment and any Retirement Income
payable upon his subsequent retirement shall be reduced by the Actuarial
Equivalent of any Retirement Income he received prior to his reemployment.
8.7 Requirement for Direct Rollovers. Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a Distributee's election
under this Article VIII, a Distributee may elect on a prescribed form to have
any portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
(a) Definitions
<PAGE>
(1) Eligible Rollover Distribution
An Eligible Rollover Distribution is any distribution of all
or any portion of the balance to the credit of the Distributee, except
that an Eligible Rollover Distribution does not include:
(A) any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's spouse, or for a specified
period of 10 years or more;
(B) any distribution to the extent such distribution is
required under Code Section 401(a)(9); and
(C) the portion of any distribution that is not includible
in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
(2) Eligible Retirement Plan
An Eligible Retirement Plan is an individual retirement
account described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan described in
Code Section 403(a), or a qualified trust described in Code Section
401(a) that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution for a
Provisional Payee, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(3) Distributee
A Distributee includes an Employee or former Employee. In
addition, a Distributee includes the Employee's or former Employee's
spouse who is an alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p).
<PAGE>
(4) Direct Rollover
A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
<PAGE>
Article IX
Contributions
9.1 Contributions generally. All contributions necessary to provide the
Retirement Incomes under the Plan will be made from time to time by or on behalf
of the Employing Companies and no contributions will be required of the
Employees. All contributions shall be made to the Trustee under the Trust
Agreement provided for in Article XI, and if a group annuity contract shall be
entered into with a life insurance company ("contract with an insurance
company"), contributions may also be made to the insurance company.
The minimum amount of contributions to be made by or on behalf of the
Employing Companies for any Plan Year of the Plan shall be such amount as is
required to meet the minimum funding standards of ERISA and any regulations in
respect thereto. However, the Employing Companies are under no obligation to
make any contributions under the Plan after the Plan is terminated, whether or
not Retirement Income accrued or vested prior to the date of termination has
been fully funded. All contributions are expressly conditioned upon the
deductibility of such contributions by the Employing Companies pursuant to
Section 404 of the Code.
9.2 Return of Employing Company contributions. All contributions made
pursuant to the Plan shall be held by the Trustee in accordance with the terms
of the Trust Agreement for the exclusive benefit of those Employees who are
participants under the Plan, including former Employees and their beneficiaries,
and shall be applied to provide benefits under the Plan and to pay expenses of
administration of the Plan and Trust, to the extent that such expenses are not
otherwise paid. At no time prior to the satisfaction of all liabilities with
respect to such Employees and their beneficiaries shall any part of the Trust
Fund be used for, or diverted to, purposes other than for the exclusive benefit
of such Employees and their beneficiaries. However, notwithstanding the
provisions of this Section 9.2:
(a) If a contribution is conditioned upon the deductibility of the
contributions under Section 404 of the Code, then, to the extent the deduction
is disallowed, the Trustee shall upon written request of an Employing Company,
return the contribution (to the extent disallowed) to such Employing Company
within one year after the date the deduction is disallowed.
<PAGE>
(b) If a contribution or any portion thereof is made by an Employing
Company by a mistake of fact, the Trustee shall, upon written request of such
Employing Company, return the contribution or such portion to the Employing
Company within one year after the date of payment to the Trustee.
The amount which may be returned to an Employing Company under this
Section 9.2, is the excess of (a) the amount contributed over (b) the amount
that would have been contributed had there not occurred a mistake of fact or a
mistake in determining the deduction. Earnings attributable to the excess
contribution shall not be returned to such Employing Company, but losses
attributable thereto shall reduce the amount to be so returned.
(c) If permitted under Federal common law, the Employing Company may
recover any other contributions to the Plan or payments to any other entity to
the extent such contributions or payments unjustly enrich or otherwise
gratuitously benefit such entity.
9.3 Expenses. Prior to termination of the Plan, all investment expenses
(including brokerage costs, transfer taxes, shipping expenses, and charges of
correspondent banks of the Trustee) and any taxes which may be levied against
the Trust shall be charged to the Trust. All other expenses prior to the
termination of the Plan shall either be paid by the Employing Companies or
charged to or reimbursed by the Trust, as determined in the discretion of The
Southern Company Pension Fund Investment Review Committee. After the termination
of the Plan, all expenses shall be levied against the Trust and shall be charged
to the Trust.
<PAGE>
Article X
Administration of Plan
10.1 Retirement Board. The general administration of the Plan shall be
placed in a Retirement Board of six (6) members who shall be appointed from time
to time by the Board of Directors to serve at the pleasure of the Board of
Directors.
10.2 Organization and transaction of business of Retirement Board. Any
person appointed a member of the Retirement Board shall signify his acceptance
by filing written acceptance with the Board of Directors. Any member of the
Retirement Board may resign by delivering his written resignation to the Board
of Directors, and such resignation shall become effective at delivery or at any
later date specified therein.
The members of the Retirement Board shall elect a Chairman from their
number, and a Secretary who may be but need not be one of the members of the
Retirement Board, and shall designate an actuary to act in actuarial matters
relating to the Plan. They may appoint from their number such committees with
such powers as they shall determine, may authorize one or more of their number
or any agent to make any payment in their behalf, or to execute or deliver any
instrument except that a requisition for funds from the Trustee shall be signed
by two (2) members of the Retirement Board unless the Retirement Board
determines in writing to delegate such requisition authority.
The Retirement Board shall hold meetings upon such notice, at such
place or places, and at such time or times as they may from time to time
determine.
A majority of the members of the Retirement Board at the time in office
shall constitute a quorum for the transaction of business. All resolutions or
other actions taken by the Retirement Board at any meeting shall be by the vote
of a majority of the Retirement Board at the time in office. Any determination
or action of the Retirement Board may be made or taken without a meeting by a
resolution or written memorandum concurred upon by a majority of the members
then in office.
No member of the Retirement Board who is also an Employee of an
Employing Company shall receive any compensation from the Plan for his service
as such. No bond or other security need be required of any member in any
jurisdiction except as may be required by ERISA.
<PAGE>
10.3 Administrative responsibilities of Retirement Board. The
Retirement Board, in addition to the functions and duties provided for elsewhere
in the Plan, shall have exclusive discretionary authority for the following:
(a) construing and interpreting the Plan;
(b) determining all questions affecting the eligibility of any Employee,
retired Employee, former Employee, Provisional Payee, or alternate payee;
(c) determining all questions affecting the amount of the benefit payable
hereunder;
(d) ascertaining the persons to whom benefits shall be payable under the
provisions hereof;
(e) to the extent provided in the Plan, authorizing and directing
disbursements of benefits from the Plan;
(f) making final and binding determinations in connection with any
questions of fact which may arise regarding the operation of the Plan;
(g) making such rules and regulations with reference to the operation of
the Plan as it may deem necessary or advisable, provided that such rules and
regulations shall not be inconsistent with the express terms of the Plan or
ERISA;
(h) prescribing such procedures and adopting such forms as it determines
necessary under the terms of the Plan; and
(i) reviewing such denials of claims for benefits as may arise.
Any action by the Retirement Board under this Section 10.3 shall be
binding and conclusive. To the extent that the Retirement Board delegates any of
the foregoing duties or functions to another party, the Retirement Board retains
the ultimate authority to act in accordance with this Section 10.3.
<PAGE>
10.4 Retirement Board, the "Administrator". For the purposes of
compliance with the provisions of ERISA, the Retirement Board shall be deemed
the "administrator" of the Plan as that term is defined in ERISA, and the
Retirement Board shall be, with respect to the Plan, a "named fiduciary" as that
term is defined in ERISA. For the purpose of carrying out its duties, the
Retirement Board may, in its discretion, allocate responsibilities under the
Plan among its members and may, in its discretion, designate in writing, as set
forth in the records of the Retirement Board, persons other than members of the
Retirement Board to carry out such responsibilities of the Retirement Board
under the Plan as it may see fit.
10.5 Fiduciary responsibilities. It is intended, that to the maximum
extent permitted by ERISA, each person who is a "fiduciary" with respect to the
Plan as that term is defined in ERISA shall be responsible for the proper
exercise of his own powers, duties, responsibilities, and obligations under the
Plan and the Trust or other funding medium, as shall each person designated by
any fiduciary to carry out any fiduciary responsibility with respect to the
Plan, the Trust or other funding medium and no fiduciary or other person to whom
fiduciary responsibilities are allocated shall be liable for any act or omission
of any other fiduciary or of any other person delegated to carry out any
fiduciary or other responsibility under the Plan or the Trust or other funding
medium.
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan and any fiduciary with respect to the Plan may
serve as a fiduciary with respect to the Plan in addition to being an officer,
employee, agent, or other representative of a "party in interest" as that term
is defined in ERISA.
10.6 Employment of actuaries and others. The Retirement Board may
employ such "enrolled actuaries" and independent "qualified public accountants"
as such terms are defined in ERISA, legal counsel (who may be of counsel to an
Employing Company), other specialists, and other persons as the Retirement Board
deems necessary or desirable in connection with the administration of the Plan.
The Retirement Board and any person to whom it may delegate any duty or power in
connection with the administration of the Plan, an Employing Company, and the
officers and directors thereof shall be entitled to rely conclusively upon and
shall be fully protected in any action omitted, taken, or suffered by them in
good faith in reliance upon any enrolled actuary, independent qualified public
accountant, counsel, or other specialist or other person selected by the
<PAGE>
Retirement Board or in reliance upon any tables, evaluations, certificates,
opinions, or reports which shall be furnished by any of them or by the Trustee
or any insurance company. Any action so taken, omitted, or suffered in
accordance with the provisions of this Section 10.6 shall be conclusive upon
each Employee, former Employee, and Provisional Payee covered under the Plan.
10.7 Accounts and tables. The Retirement Board shall maintain accounts
showing the fiscal transactions of the Plan, and shall keep in convenient form
such data as may be necessary for actuarial valuations with respect to the
operation and administration of the Plan. The Retirement Board shall annually
report to the Board of Directors and provide a reasonable summary of the
financial condition of the Trust and the operation of the Plan for the past
year, and any further information which the Board of Directors may require. In
addition, the Retirement Board shall annually report to the Compensation and
Management Succession Committee of The Southern Company Board of Directors and
provide a reasonable summary about significant matters concerning the operation
of the Plan and the adoption of any amendments not otherwise required to be
recommended by such Committee in accordance with Section 13.1.
The Retirement Board may, with the advice of an enrolled actuary, adopt
from time to time mortality and other tables as it may deem necessary or
appropriate for use in calculating benefits under the Plan.
10.8 Indemnity of members of Retirement Board. To the extent not
compensated for by any applicable insurance, the Employing Companies shall
indemnify and hold harmless each member of the Retirement Board and each
Employee of the Employing Companies designated by the Retirement Board to carry
out any fiduciary responsibility with respect to the Plan from any and all
claims, loss, damages, expense (including counsel fees approved by the Board of
Directors) and liability (including any amount paid in settlement with the
approval of the Board of Directors) arising from any act or omission of such
member or Employee designated by the Retirement Board in connection with the
Plan or the Trust, except where the same is determined by the Board of Directors
or is judicially determined to be due to a failure to act in good faith or is
due to the gross negligence or willful misconduct of such member or Employee. No
assets of the Plan may be used for any such indemnification.
<PAGE>
10.9 Areas in which the Retirement Board does not have responsibility.
The Retirement Board shall not have responsibility with respect to control or
management of the assets of the Plan. The Trustee or an insurance company, if
funds of the Plan shall be held by an insurance company, shall have the sole
responsibility for the administration of the assets of the Plan as provided in
the Trust Agreement or contract with an insurance company, except to the extent
that an "Investment Manager," as that term is defined in ERISA, appointed by the
Board of Directors upon recommendation of the Pension Fund Investment Review
Committee of The Southern Company System shall have responsibility for the
management of the assets of the Plan, or some part thereof, including the power
to acquire and dispose of the assets of the Plan, or some part thereof.
The responsibility for providing a procedure for establishing and
carrying out a funding policy and method for the Plan consistent with the
objectives of the Plan and the requirements of Title I of ERISA shall be that of
the Pension Fund Investment Review Committee of The Southern Company System.
10.10 Claims procedures. Consistent with the requirements of ERISA and
the regulations thereunder of the Secretary of Labor from time to time in
effect, the Retirement Board (or its delegee) shall:
(a) provide adequate notice in writing to any Employee, former
Employee, retired Employee, or Provisional Payee (each being hereinafter in the
paragraph referred to as "participant") whose claim for benefit under the Plan
has been denied, setting forth specific reasons for such denial, written in a
manner calculated to be understood by such participant; and
(b) afford a reasonable opportunity to any participant whose claim for
benefits has been denied for a full and fair review of the decision denying the
claim.
<PAGE>
Article XI
Management of Trust
11.1 Trust. All assets of the Plan shall be held as a special trust for use
in accordance with the Plan.
The funds of the Plan shall be held by a Trustee in trust or held by a
life insurance company in accordance with the provisions of a contract with such
insurance company entered into by the Trustee or the Employer. The Trust
Agreement and contract with an insurance company may from time to time be
amended in the manner therein provided.
11.2 Disbursement of the Trust Fund. Subject to the provisions of the
Trust Agreement or contract with an insurance company the Retirement Board shall
determine the manner in which the funds of the Plan shall be disbursed pursuant
to the Plan, including the form of voucher or warrant to be used in making
disbursements and the due qualification of persons authorized to approve and
sign the same. The responsibility for the retention and investment of funds held
by the Trustee shall lie with the Trustee and not with the Retirement Board, and
the responsibility for the retention and investment of funds held by an
insurance company shall lie with the insurance company and not with the
Retirement Board. However, if in accordance with a Trust Agreement forming a
part of the Plan (including any pooled trust agreement in which a trust forming
a part of the Plan participates) a contract with an insurance company shall be
held by the Trustee as an investment of the Trust, directions may be given from
time to time to the Trustee by the Board of Directors or such committee, person,
or persons as may be specified in the Trust Agreement to transfer funds of the
Trust to the life insurance company which issued such contract or to transfer
funds from the life insurance company to the Trustee, as the case may be.
11.3 Rights in the Trust. Under no circumstances shall amounts of money
or other things of value contributed by the Employing Companies to the Plan, or
any part of the corpus or income of the Trust held by the Trustee under the
Plan, be recoverable by the Employing Companies from the Trustee or from any
Employee, retired Employee, former Employee, or Provisional Payee, or be used
for, or diverted to, purposes other than for the exclusive benefit of the
Employees, retired Employees, former Employees, and Provisional Payees covered
hereunder; provided, however, that, if after satisfaction of all liabilities of
the Trust with respect to Employees, retired Employees, former Employees, and
Provisional Payees under the Plan, there is any balance remaining, the Trustee
shall return such balance to the Employing Companies. Notwithstanding the above,
<PAGE>
upon the approval of the Internal Revenue Service or the enactment or
promulgation of any laws or regulations by any governmental authority, the
Employing Companies shall be authorized to rededicate all or a portion of the
assets allocated to fund Retirement Income under the Plan to the separate
account to fund medical benefits under Article XV of the Plan.
11.4 Merger of the Plan. The Plan shall not be merged or consolidated
with, or any of its assets or liabilities transferred to, any other plan, unless
each Employee included in the Plan would (if the Plan then terminated) receive a
benefit immediately after the merger, consolidation, or transfer which is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the Plan then
terminated).
<PAGE>
Article XII
Termination of the Plan
12.1 Termination of the Plan. The Plan may be terminated at any time by
action of the Board of Directors in accordance with the amendment procedures
provided in Section 13.1. Upon such termination or partial termination all
Accrued Retirement Income of Employees to the date of such termination, to the
extent then funded, shall become nonforfeitable and the assets of the Plan which
have not previously been allocated to provide Retirement Income shall then be
paid out to Employees, retired Employees, former Employees, and Provisional
Payees in accordance with the applicable requirements of ERISA and regulations
thereunder governing termination of "employee pension benefit plans" as defined
in ERISA. If after satisfaction of all liabilities, as provided above, there is
any balance remaining in the Trust, the Trustee shall return such balance to the
Employing Companies.
To the extent permitted by law, subject to the foregoing limitations,
such remaining assets shall be allocated among all persons in the following
categories for whom such Retirement Income or other benefits have not previously
been provided, namely, (a) Employees who have been retired under the Plan, (b)
Employees who at the date of termination of the Plan are included in the Plan,
(c) former Employees who at the date of the termination of their employment were
entitled to payment of Retirement Income in accordance with Article VIII, and
(d) former Employees who have transferred to an Affiliated Employer. Retirement
Income already purchased under any contract with an insurance company will be
payable in accordance with the provisions of that contract.
12.2 Limitation on benefits for certain highly paid employees.
(a) The annual payments to an Employee described in paragraph (b) below
shall not exceed an amount equal to the payments that would be made to or on
behalf of such Employee under a single life annuity that is the Actuarial
Equivalent of the sum of the Employee's Accrued Retirement Income and the
Employee's other benefits under this Plan (other than a Social Security
supplement) and any Social Security supplement that the restricted Employee is
entitled to receive. The restrictions in this paragraph (a) do not apply,
however, if:
<PAGE>
(1) after payment to an Employee described in paragraph (b) of
all benefits payable to such Employee under this Plan, the value of
this Plan's assets equals or exceeds 110% of the value of current
liabilities, as defined in Code Section 412(c)(7), or
(2) the value of the benefits payable to such Employee under
this Plan for an Employee described in paragraph (b) below is less than
1% of the value of current liabilities before distribution.
(b) The Employees whose benefits are restricted on distribution include
all highly compensated employees and highly compensated former employees (as
such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided,
however, that Employees whose benefits are subject to restriction under this
Section 12.2 shall be limited to only those Employees who in the current or in
any previous Plan Year were one of the 25 non-excludable Employees of the
Affiliated Employers with the greatest compensation from such Affiliated
Employers.
<PAGE>
Article XIII
Amendment of the Plan
13.1 Amendment of the Plan.
(a) The Plan may be amended or modified at any time by the Board of
Directors pursuant to its written resolutions to among other things (but without
limiting the scope of the Board of Directors' authority) implement collectively
bargained agreements, provide non-collectively bargained Employees those
benefits granted collectively bargained Employees or such other benefits not
granted collectively bargained Employees, change plan distribution options and
the timing of distributions, provide for administrative efficiency, make any
changes necessary or desirable to make the contributions to the Trust eligible
for tax deductions, make the income of the Trust exempt from taxation, or bring
the Plan into conformity or compliance with ERISA, the Code, or with other
governmental regulations. Notwithstanding the foregoing, amendments or
modifications which substantially increase on an on-going basis the
contributions required under Article IX for any Employing Company or which
significantly increase or decrease the future opportunity for Accrued Retirement
Income for Employees of any Employing Company will be made by the Board of
Directors, only after recommendation to and approval by the Compensation and
Management Succession Committee of The Southern Company Board of Directors.
(b) Notwithstanding paragraph (a) above, no amendment shall be made
which has the effect of decreasing the Accrued Retirement Income of any
Employee, retired Employee, former Employee, or Provisional Payee as provided
under the limitations of Section 411(d)(6) of the Code.
<PAGE>
Article XIV
Special Provisions
14.1 Exclusive benefit. The Employing Companies intend that the Plan
(including the Trust forming a part thereof) be a pension plan maintained for
the exclusive benefit of its Employees and their beneficiaries subject to
Section 11.3, as provided for in Section 401 of the Code, and as may be provided
for in any similar provisions of subsequent revenue laws, and that the Trust
shall qualify as an employees' trust which shall be exempt under Section 501(a)
of the Code, and any similar provisions of subsequent revenue laws, as a trust
forming part of such a plan.
14.2 Assignment or alienation. No benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment
(either at law or in equity), pledge, encumbrance, charge, garnishment, levy,
execution, or other legal or equitable process and any attempt so to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge, garnish, levy,
execute, or enforce other legal or equitable process against the same shall be
void, nor shall any such benefit be in any manner liable for or subject to the
debts, contracts, liabilities, engagements, or torts of the person entitled to
such benefit.
If any Employee, former Employee, or retired Employee, or any
Provisional Payee under the Plan is adjudicated bankrupt or attempts to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any
benefit under the Plan or if any action shall be taken which is in violation of
the provisions of the immediately preceding paragraph, then such benefit shall
cease and terminate and in that event the Retirement Board shall hold or apply
the same or any part thereof to or for the benefit of such Employee, former
Employee, retired Employee, or Provisional Payee in such manner as the
Retirement Board may think proper.
Notwithstanding the above, the Retirement Board and Trustee shall
comply with any "domestic relations order" (as defined in Section 414(p)(1)(B)
of the Code) which is a "qualified domestic relations order" satisfying the
requirements of Section 414(p) of the Code. The Retirement Board shall establish
procedures for (a) notifying Employees and alternate payees who have or may have
an interest in benefits which are the subject of domestic relations orders, (b)
determining whether such domestic relations orders are qualified domestic
relations orders under Section 414(p) of the Code, and (c) distributing benefits
which are subject to qualified domestic relations orders.
<PAGE>
14.3 Voluntary undertaking. This Plan is strictly a voluntary
undertaking on the part of the Employing Companies and shall not be deemed to
constitute a contract between the Employing Companies or any other company and
any Employee or to be a consideration for, or an inducement or condition of, the
employment of any Employee. Nothing contained in this Plan shall be deemed to
give any Employee the right to be retained in the service of an Employing
Company or to interfere with the right of the Employing Companies to discharge
any Employee at any time. Inclusion under the Plan will not give any Employee or
Provisional Payee any right or claim to a Retirement Income except to the extent
such right is specifically fixed under the terms of the Plan and there are funds
available therefor in the hands of the Trustee or of any insurance company which
may hold funds of the Plan.
14.4 Top-Heavy Plan requirements. For any Plan Year the Plan shall be
determined to be a Top-Heavy Plan, the Plan shall provide the following:
(a) the minimum benefit requirement of Section 14.6; and
(b) the vesting requirement of Section 14.7.
14.5 Determination of Top-Heavy status.
(a) The Plan shall be determined to be a "Top-Heavy Plan," if, as of
the Determination Date, (1) the Present Value of Accrued Retirement Income of
Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under
this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of
the Present Value of Accrued Retirement Income or the Aggregate Accounts of all
Employees entitled to participate in this Plan and any Plan of an Aggregation
Group.
(b) The Accrued Retirement Income of a Non-Key Employee shall be
determined under the accrual method under the Plan.
(c) The Plan shall be determined to be a "Super Top-Heavy Plan," if, as
of the Determination Date, (1) the Present Value of Accrued Retirement Income of
Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under
<PAGE>
this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of
the Present Value of Accrued Retirement Income or the Aggregate Accounts of all
Employees entitled to participate in this Plan and any plan of an Aggregation
Group.
For purposes of Sections 14.5(a) and 14.5(b), if any Employee is a
Non-Key Employee for any Plan Year, but such Employee was a Key Employee for any
prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/
or Aggregate Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether
any Aggregation Group which includes this Plan is a Top-Heavy Group). In
addition, if an Employee or former Employee has not performed any services for
an Employing Company or any Affiliated Employer maintaining the Plan or Prior
Plans at any time during the five (5) year period ending on the Determination
Date, the Aggregate Account and/or Present Value of Accrued Retirement Income
for such Employee or former Employee shall not be taken into account for
purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy
Plan.
(d) An Employee's "Aggregate Account" as of the Determination Date
shall be determined under applicable provisions of the defined contribution plan
used in determining Top-Heavy status.
(e) An "Aggregation Group" shall mean either a Required Aggregation
Group or a Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Affiliated Employers in
which a Key Employee is a participant, and each other plan of the
Affiliated Employers which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or
410, will be required to be aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top-Heavy Plan if the Required Aggregation
Group is a Top-Heavy Group. No plan in the Required Aggregation Group
will be considered a Top-Heavy Plan if the Aggregation Group is not a
Top-Heavy Group.
<PAGE>
(2) Permissive Aggregation Group: The Affiliated Employers may
also include any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a whole,
would continue to satisfy the provisions of Code Sections 401(a)(4) or
410. Such group shall be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is part
of the Required Aggregation Group will be considered a Top-Heavy Plan if the
Permissive Aggregation Group is a Top-Heavy Group. A plan that is not part of
the Required Aggregation Group but that has nonetheless been aggregated as part
of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even
if the Permissive Group is a Top-Heavy Group.
(3) Only those plans of the Affiliated Employers in which the
Determination Dates fall within the same calendar year shall be
aggregated in order to determine whether such plans are Top-Heavy
Plans.
(f) The "Determination Date" shall mean with respect to any Plan Year,
the last day of the preceding Plan Year, or in the case of the first Plan Year,
the last day of such Plan Year.
(g) A "Key Employee" shall mean any Employee or former Employee (and
his beneficiaries) who, at any time during the Plan Year or any of the four (4)
preceding Plan Years, is:
(1) an officer of the Affiliated Employers having an annual
compensation from the Affiliated Employers greater than fifty percent
(50%) of the amount in effect under Code Section 415(b)(1)(A) for any
such Plan Year. For purposes of this Section 14.5(g)(1), only those
employers which are incorporated shall be considered as having
officers, and no more than fifty (50) Employees (or, if lesser, the
greater of three (3) or ten percent (10%) of the Employees) shall be
treated as officers. Annual compensation means compensation as defined
in Section 415(c)(3) of the Code, but including amounts contributed by
the Affiliated Employers pursuant to a salary reduction agreement which
are excludable from the Employee's gross income under Section 125,
Section 402(a)(8), Section 402(h), or Section 403(b) of the Code.
<PAGE>
(2) one of the ten (10) Employees (A) having annual
compensation from the Affiliated Employers greater than the limitation
in effect under Code Section 415(c)(1)(A) and (B) owning (or considered
as owning within the meaning of Code Section 318) the largest interests
in the Affiliated Employers. For purposes of this Section 14.5(g)(2),
if two (2) Employees have the same interest in the Affiliated
Employers, the Employee having the greater annual compensation from the
Affiliated Employers shall be treated as having a larger interest.
(3) a "five-percent owner" of the Affiliated Employers. The
term "five-percent owner" shall mean any person who owns (or is
considered as owning within the meaning of Code Section 318) more than
five percent (5%) of the outstanding stock of the Affiliated Employers
or stock possessing more than five percent (5%) of the total combined
voting power of all stock of the Affiliated Employers. In determining
percentage ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), and (m) shall be treated as
separate employers.
(4) a "one-percent owner" of the Affiliated Employers having
an annual compensation from the Affiliated Employers of more than
$150,000. The term "one-percent owner" shall mean any person who owns
(or is considered as owning within the meaning of Code Section 318)
more than one percent (1%) of the outstanding stock of the Affiliated
Employers or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Affiliated Employers. In
determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c), and (m) shall
be treated as separate employers. However, in determining whether an
individual has compensation of more than $150,000, compensation from
each employer required to be aggregated under Code Sections 414(b),
(c), and (m) shall be taken into account.
(h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee
as defined in Section 14.5(g).
(i) An Employee's "Present Value of Accrued Retirement Income" shall mean
as of the Determination Date, the sum of the following:
<PAGE>
(1) the Present Value of his Accrued Retirement Income as of
the most recent valuation occurring within a twelve (12) month period
ending on the Determination Date.
(2) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4) preceding Plan
Years. However, in the case of distributions made after the valuation
date and prior to the Determination Date, such distributions are not
included as distributions for Top-Heavy purposes to the extent that
such distributions are already included in the Employee's Present Value
of Accrued Retirement Income as of the valuation date. Notwithstanding
anything herein to the contrary, all distributions, including
distributions made prior to January 1, 1984, and distributions under a
terminated plan which if it had not been terminated would have been
required to be included in an Aggregation Group, will be counted.
(3) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to qualified deductible
employee contributions shall not be considered to be a part of the
Employee's Present Value of Accrued Retirement Income.
(4) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and made from
a plan maintained by one employer to a plan maintained by another
employer), if this Plan provides for rollovers or plan-to-plan
transfers, it shall always consider such rollover or plan-to-plan
transfer as a distribution for the purposes of this Section. If this
Plan is the plan accepting such rollovers or plan-to-plan transfers, it
shall not consider such rollovers or plan-to-plan transfers accepted
after December 31, 1983 as part of the Employee's Present Value of
Accrued Retirement Income. However, rollovers or plan-to-plan transfers
accepted prior to January 1, 1984 shall be considered as part of the
Employee's Present Value of Accrued Retirement Income.
(5) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made to a plan
maintained by the same employer), if this Plan provides for rollovers
or plan-to-plan transfers, it shall not be counted as a distribution
<PAGE>
for purposes of this Section. If this Plan is the plan accepting such
rollover or plan-to-plan transfer, it shall consider such rollover or
plan-to-plan transfer as part of the Employee's Present Value of
Accrued Retirement Income, irrespective of the date on which such
rollover or plan-to-plan transfer is accepted.
(j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the
Determination Date, the sum of:
(1) the Present Value of Accrued Retirement Income of Key Employees
under all defined benefit plans included in that group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all Employees.
14.6 Minimum Retirement Income for Top-Heavy Plan Years.
Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year,
the minimum Accrued Retirement Income derived from Affiliated Employer
contributions for each Non-Key Employee, including benefits accrued in years in
which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key
Employee's highest average compensation not less than the lesser of: (a) two
percent (2%) multiplied by the Employee's number of Years of Service with the
Affiliated Employers, or (b) twenty percent (20%). For purposes of the minimum
benefit, an Employee's Years of Service shall exclude (a) Plan Years in which
the Plan is not a Top-Heavy Plan, and (b) Years of Service completed prior to
January 1, 1984. The minimum benefit required by this Section 14.6 shall be
calculated using the Employee's total compensation and expressed in the form of
a single life annuity (with no ancillary benefits) beginning at such Employee's
Normal Retirement Date. An Employee's average compensation shall be based on the
five (5) consecutive years for which the Employee had the highest compensation.
Notwithstanding the foregoing, in any Plan Year in which a Non-Key
Employee is an Employee in both this Plan and a defined contribution plan, and
both such plans are Top-Heavy Plans, the Affiliated Employers shall not be
required to provide a Non-Key Employee with both the full separate minimum
<PAGE>
defined benefit and the full separate minimum defined contribution plan
allocation. Therefore, if a Non-Key Employee is participating in a defined
contribution plan maintained by the Affiliated Employers and the minimum
allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee
under such defined contribution plan, the minimum Accrued Retirement Income
provided for above shall not be applicable, and no minimum benefit shall accrue
on behalf of the Non-Key Employee. Alternatively, the Affiliated Employers may
satisfy the minimum benefit requirement of Code Section 416(c)(1) for the
Non-Key Employee by providing any combination of benefits and/or contributions
that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12).
14.7 Vesting requirements for Top-Heavy Plan Years. Notwithstanding the
provisions of Section 8.1, for any Top-Heavy Plan Year, the vested portion of an
Employee's Accrued Retirement Income shall be determined on the basis of the
Employee's Vesting Years of Service according to the following schedule:
Years of Service Vested Percentage
less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited
during any period for which the payment of the Employee's Retirement Income is
required to be suspended under Section 5.10 of the Plan.
If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan,
the Retirement Board may, in its sole discretion, elect to (a) continue to apply
this vesting schedule in determining the vested percentage of an Employee's
Accrued Retirement Income or (b) revert to the vesting schedule in effect before
the Plan became a Top-Heavy Plan. Any such reversion shall be treated as a Plan
amendment pursuant to the terms of the Plan. No decrease in an Employee's
nonforfeitable percentage may occur in the event the Plan's status as a
Top-Heavy Plan changes for any Plan Year.
<PAGE>
14.8 Adjustments to maximum benefits for Top-Heavy Plans.
(a) In the case of an Employee who is a participant in a defined
benefit plan and a defined contribution plan maintained by the Affiliated
Employers, and such plans as a group are determined to be Top-Heavy for any
limitation year beginning after December 31, 1983, "1.0" shall be substituted
for "1.25" in each place it appears in the denominators of Fractions A and B, as
set forth in Section 6.5 of the Plan, unless the extra minimum benefit is
provided pursuant to Section 14.8(b). Super Top-Heavy Plans shall be required at
all times to substitute "1.0" for "1.25" in the denominator of each plan
fraction.
(b) If a Key Employee is a participant in both a defined benefit plan
and a defined contribution plan that are both part of a Top-Heavy Group (but
neither of such plans is a Super Top-Heavy Plan), the defined benefit and
defined contribution fractions set forth in Section 6.5 shall remain unchanged,
provided that in Section 14.6 above, "three percent (3%)" shall be substituted
for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1)
percentage point (but not more than ten (10) percentage points) for each Year of
Service included in the computations under Section 14.6.
(c) For purposes of this Section 14.8, if the sum of the defined
benefit plan fraction and the defined contribution fraction shall exceed 1.0 in
any Plan Year for any Employee in this Plan, the Affiliated Employers shall
eliminate any amounts in excess of the limits set forth in Section 6.5, pursuant
to Section 6.7 of the Plan.
<PAGE>
Article XV
New Pension Program
15.1 Eligibility. The following Employees shall be subject to the
provisions of this Article XV:
(a) Employees who (1) are actively employed by an Employing Company on
December 31, 1996 but who will not attain their fortieth (40th) birthday on or
before January 1, 2002, or (2) are not members of an eligible class of Employees
on December 31, 1996 and have not previously participated in the Prior Plans;
(b) Employees who are actively employed by an Employing Company on
December 31, 1996 and elect in accordance with uniform procedures established by
the Retirement Board to be subject to the provisions of this Article XV; and
(c) Employees who (1) are employed or reemployed by an Employing
Company on or after January 1, 1997, or (2) rescind a waiver of participation
under Section 2.7 on or after January 1, 1997 that was in effect on December 31,
1996.
(d) Notwithstanding paragraphs (a) through (c) of this Section 15.1,
Employees covered by the terms of a collective bargaining agreement shall not
participate in the provisions of Article XV unless the bargaining unit
representative and the Employing Company have mutually agreed to such
participation.
15.2 Retirement Income payable upon retirement.
(a) The monthly Retirement Income payable as a single life annuity to
an Employee (or his Provisional Payee) included in the Plan who retires from the
service of an Employing Company at his Normal Retirement Date or Deferred
Retirement Date (before adjustment for a Provisional Payee designation, if any)
after January 1, 1997, subject to the limitations in Article VI, shall be the
greater of (1) and (2) below:
(1) 1.0% of his Average Monthly Earnings multiplied
by his years (and fraction of a year) of Accredited Service,
without application of the limitation described in Section
4.2(e), to his Normal Retirement Date or Deferred Retirement
Date; or
<PAGE>
(2) $25 multiplied by his years (and fraction of a
year) of Accredited Service, without application of the
limitation described in Section 4.2(e), to his Normal
Retirement Date or Deferred Retirement Date.
(b) Notwithstanding paragraph (a) above, with respect to an Employee
who is actively employed on December 31, 1996, if the Retirement Income provided
under Article V as of the earlier of his retirement or termination of employment
with an Employing Company or December 31, 2001 would be greater, such Employee
shall be entitled to receive such greater Retirement Income upon his retirement
or termination of employment with an Employing Company.
(c) For purposes of paragraph (a) above, with respect to Employees
described in Section 15.1(c) the term "Average Monthly Earnings" shall have the
same meaning, as provided in Section 1.5 except that the term "five (5) highest
Plan Years of participation" shall replace the term "three (3) highest Plan
Years of participation" wherever it appears.
(d) Notwithstanding paragraphs (a) and (b) above, Retirement Income
determined with respect to an Employee who retires on his Normal Retirement Date
or Deferred Retirement Date shall not be less than the Retirement Income which
would have been payable with respect to such Employee commencing on his Early
Retirement Date had (1) the Employee retired on his Early Retirement Date which
would have resulted in the greatest Retirement Income and (2) such Retirement
Income commencing on such Early Retirement Date been payable in the same form as
his Retirement Income commencing on his Normal Retirement Date or Deferred
Retirement Date.
15.3 Early Retirement Reduction. With respect to Employees described in
Section 15.1(a) and (b) who retire before their Normal Retirement Date, the
monthly amount of Retirement Income provided in Section 15.2 shall be reduced in
accordance with Section 5.5. With respect to Employees described in Section
15.1(c), the monthly amount of Retirement Income provided in Section 15.2 shall
be reduced in accordance with Section 5.5 except that the term "five-tenths of
one percent (0.5%)" shall replace the term "three-tenths of one percent (0.3%)"
where it appears in the first paragraph thereof.
<PAGE>
15.4 Transfers from Savannah Electric and Power Company. With respect
to an Employee of Savannah Electric and Power Company ("SEPCO") who transfers to
an Employing Company in 1997 and who would otherwise be eligible to participate
as provided in Section 15.1 except for the fact that he was employed by SEPCO on
December 31, 1996, the provisions of this Article XV shall apply.
15.5 Effect on other Plan provisions. To the extent not inconsistent
with the provisions of this Article XV, all provisions of the Plan are
applicable to Employees described in Section 15.1.
<PAGE>
Article XVI
Special Provisions Concerning Certain Employees
of Southern Electric International, Inc.
16.1 Eligibility and Recognition of Service for Former Employees of Scott
Paper Company.
(a) Effective January 1, 1995, notwithstanding any other provision of
the Plan to the contrary, with respect to a former, non-collective bargaining
unit employee of Scott Paper Company who was employed by Southern Electric
International, Inc. as of December 17, 1994 as set forth on Schedule 2.1 of the
Employee Transition Agreement entered into by and among Mobile Energy Services
Company, Inc., Southern Electric International, Inc. and Scott Paper Company
(hereinafter referred to in this Article XVI as the "Scheduled Employee"),
(1) Such Scheduled Employee shall be eligible to participate in
the Plan effective January 1, 1995.
(2) Such Scheduled Employee, if and when he attains his Early
Retirement Date, Normal Retirement Date, or Deferred Retirement Date,
or terminates service for any other reason subject to the requirements
of Section 8.1 or 8.2, shall be entitled to receive Retirement Income
based on both his Accredited Service with an Employing Company and the
service accrued under the Scott Paper Company Pension Plan for
Salaried Employees (the "Scott Salaried Plan") which shall be treated
as if Accredited Service under this Plan. To calculate such Scheduled
Employee's Retirement Income, the Scheduled Employee's Accrued
Retirement Income, as determined in accordance with Section 5.1, shall
first be reduced by the Employee's accrued benefit in the Scott
Salaried Plan, determined as if he retired from Scott Paper Company at
his normal retirement age, as that term is defined in the Scott
Salaried Plan on December 17, 1994. Thereafter, such Employee's
Retirement Income shall be subject to applicable reductions, if any,
in accordance with Article V, Section 8.1 and Section 8.2, as
appropriate.
(3) For purposes of calculating such Scheduled Employee's Social
Security Offset under Section 5.4, the Social Security Offset shall be
determined by using the actual salary history of the Scheduled
Employee during his employment with any Affiliated Employer, and Scott
<PAGE>
Paper Company. If the actual salary history is not available from
Scott Paper Company, such history shall be estimated in accordance
with Section 5.4.
(4) For vesting purposes, such Scheduled Employee shall be
entitled to receive Vesting Years of Service as provided in Section
1.41 and, in addition, shall be entitled to vesting service equal to
the sum of the years of vesting service accrued under each defined
benefit pension plan maintained by Scott Paper Company in which such
Scheduled Employee participated.
IN WITNESS WHEREOF, the Board of Directors of Southern Company
Services, Inc. through its authorized officer has adopted The Southern Company
Pension Plan this day of , 1996, to be effective January 1, 1997.
SOUTHERN COMPANY SERVICES, INC.
By: _______________________
C. Alan Martin
Vice President
ATTEST:
By: ___________________
Tommy Chisholm
Secretary
[CORPORATE SEAL]
<PAGE>
APPENDIX A
THE SOUTHERN COMPANY PENSION PLAN
EMPLOYING COMPANIES AS OF JANUARY 1, 1997
Alabama Power Company;
Georgia Power Company;
Gulf Power Company;
Mississippi Power Company;
Southern Communications Services, Inc.; Southern
Company Services, Inc.; Southern Development and
Investment Group, Inc.; Southern Energy, Inc.; and
Southern Nuclear Operating Company, Inc.
<PAGE>
Schedules
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
<PAGE>
ALABAMA POWER COMPANY SCHEDULE
============= ==================================================================
APC ss. NO. APC PLAN TEXT
============= ==================================================================
ss. 2.3 An Employee not already included in the Plan who is granted
a leave of absence on or after January 1, 1981 to serve as
Business Manager or Assistant Business Manager of System Council
U-19 and who makes timely written election to participate in the
Plan during such leave of absence, shall be credited with Hours
of Service as though the period of absence was a period of active
employment with the Employer for the period (or portion of the
period). Such Employee shall be included in the plan when he
meets the requirements of this Article II if he is, on the date
of such inclusion, on such leave of absence or has returned to
the active employment of the Employer. The crediting of Hours of
Service with respect to such Employee shall continue only so long
as such employee remains on leave in such capacity as stated
above.
============= ==================================================================
ss. 2.6 2.6 Exclusion of certain categories of employees.
Notwithstanding any other provision of this Article II, leased
employees shall not be eligible to participate in the Plan. In
addition, temporary employees, except Employees as defined in
Section 1.17 participating in the Plan prior to July 1, 1991,
shall not be eligible to participate in the Plan. Thirdly, any
person who is employed by Electric City Merchandise Company, Inc.
on or after May 1, 1988, or who is employed by Savannah Electric
and Power Company on or after March 3, 1988, shall not be
entitled to accrue Retirement Income under the Plan while
employed at such companies. Lastly, any person who is a member of
the United Mine Workers at the date of his employment, or on
October 1, 1948, or thereafter becomes a member of said union or
any other mine workers union having a retirement or similar fund,
shall on the date of his employment or on October 1, 1948 or the
date of his becoming a member, whichever is later, be deemed for
purposes of the Plan to have terminated his employment with the
Employer on such date and shall not be eligible to participate in
the Plan; provided that any such person shall again become an
employee eligible to participate in the Plan upon termination of
his membership in such union subject to inclusion in the Plan as
a new employee.
============= ==================================================================
ss. 4.1 (b) Each Employee who is on an approved leave of absence
from the Employer to serve as Business Manager or Assistant
Business Manager for System Council U-19, and who has made a
timely written election to participate in the Plan during such
leave in accordance with the Pension Agreement dated May 29,
1981, shall be credited with service for the Plan Year covered by
such elections.
============= ==================================================================
ss. 4.2 An Employee who is on an approved leave of absence from the
Employer to serve as Business Manager or Assistant Business
Manger for System Council U-19, and who makes timely written
election to participate in the Plan during such leave of absence,
shall be credited with Accredited Service for the period (or
portion of the period) after January 1, 1989 covered by such
timely written election. For the purpose of determining the
Earnings of such Employee during the period (or portion of the
period) after January 1, 1989, of such leave of absence, he shall
be deemed to have received Earnings at the rate of Earnings he
would have been eligible to receive had he remained in the employ
of the Employer.
============= ==================================================================
<PAGE>
Schedule APC
ARTICLE XVII
Post-retirement Medical Benefits
1
17.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer (1)
who is eligible to receive Retirement Income after the attainment of his Normal
or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan,
(2) who was insured under the Employer's program of medical insurance benefits
on the last day worked prior to retirement, (3) who is not insured under any
group insurance plan providing hospitalization and medical coverage to which the
Employer contributes, (4) who resides in the United States, and (5) who has
become eligible for Medicare and, if the Pensioned Employee's retirement
occurred before attainment of Medicare eligibility, the premiums for
hospitalization and medical coverage were being deducted from his Retirement
Income continuously until his eligibility for Medicare. A "Pensioned Employee"
shall not include a Key Employee, as defined in Section 14.6(g), or effective
January 1, 1991, any Pensioned Employee of an Employer that has adopted the Plan
pursuant to Section 14.1 hereof but does not provide medical benefits to its
Pensioned Employees.
(b) "Spouse " means the Pensioned Employee's spouse (1) who is not
legally separated from the Pensioned Employee, (2) who was insured under the
Employer's program of medical insurance benefits on the last day prior to the
Pensioned Employee's retirement, (3) who resides in the United States, (4) who
is not insured under any group insurance plan providing hospitalization and
medical coverage to which the Employer contributes, (5) who meets the
eligibility requirements of the Medicare program, (6) who has become eligible
for Medicare and, if the Pensioned Employee's retirement occurred before his
Spouse became eligible for Medicare, premiums for hospitalization and medical
coverage for both the Pensioned Employee and his Spouse were being deducted from
his Retirement Income continuously until his Spouse became eligible for
Medicare, and (7) in the case of a surviving spouse of a deceased Pensioned
Employee, who was insured as a Spouse at the time of the Pensioned Employee's
death.
(c) "Covered Individual" means a Pensioned Employee or Spouse of a
Pensioned Employee who is eligible to receive medical benefits under Article
XVII.
(d) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 17.1(d)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 17.1(d)(3), (4) and (5)
below, a transfer shall be treated as a Qualified Transfer if such
transfer
(i) is made after the close of the Plan Year preceding the
Employer's first Plan Year beginning after December 31, 1990, and
before the earlier of (I) the due date (including extensions) for
the filing of the Employer's corporate tax return for such
preceding Plan Year, or (II) the date such return is filed, and
(ii) does not exceed the expenditures of the Employer for
Qualified Current Retiree Health Liabilities for such preceding
Plan Year.
(iii) The reduction described in the second paragraph of
Section 17.1(d)(6)(G) shall not apply to a transfer described in
Section 17.1(d)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
17.1(d)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 17.1(d)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 17.1(d)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Spouse under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 17.1(d)(1)(B), the requirements of this Section
17.1(d)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 17.1(d)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
17.1(d)(5), the Employer may elect at any time during the Plan Year to
have this Section 17.1(d)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 17.1(d), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to
any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 17.1(d)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Spouses.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
17.1(d)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 17.1(d)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any,
of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section 412(c)(7)(A)(i), or
(II) 125 percent of current liability (as defined in
Code Section 412(c)(7)(B)).
The determination under this paragraph shall
be made as of the most recent valuation date of the
Plan preceding the Qualified Transfer.
(F) "Health Benefits Account" means an account
established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities"
means, with respect to any Plan Year, the aggregate amounts,
including administrative expenses, which would have been
allowable as a deduction to the Employer for payment of
Applicable Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were provided
directly by the Employer and the Employer used the cash
receipts and disbursements method of accounting. For purposes
of the preceding sentence, the rule of Code Section
419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or
before December 8, 1994, the amount determined in the
paragraph above shall be reduced by any amount previously
contributed to a Health Benefits Account or welfare benefit
fund, as defined in Code Section 419(e)(1), to pay for the
Qualified Current Retiree Health Liabilities. The portion of
any reserves remaining as of the close of December 31, 1990
shall be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount determined under
the preceding paragraph shall be reduced by the amount which
bears the same ratio to such amount as the value (as of the
close of the Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits Accounts or
welfare benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health
Liability, bears to the present value of the Qualified Current
Retiree Health Liabilities for all Plan Years determined
without regard to this paragraph.
17.2 Eligibility of Pensioned Employees and their Spouses.
(a) A person who is a Pensioned Employee on January 1, 1997 shall be
eligible for coverage as a Pensioned Employee on January 1, 1997, provided he
was covered as an Employee under a group medical plan maintained by the Employer
immediately prior to the time he became a Pensioned Employee.
(b) An Employee who becomes a Pensioned Employee on or after January 1,
1997 shall be eligible for coverage on the date he becomes a Pensioned Employee,
provided he was covered as an Employee under a group medical plan maintained by
the Employer immediately prior to the time he became a Pensioned Employee.
(c) A Spouse of a Pensioned Employee shall be eligible for coverage
under this Plan on the later of (1) the date the Pensioned Employee becomes
eligible for coverage hereunder and (2) the date such person becomes a Spouse.
17.3 Medical benefits. The medical benefits provided under this Article
XVII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit A
and specifically incorporated herein by reference in its entirety, as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
17.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVII is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of a Spouse shall cease as follows:
(1) when Article XVII is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
17.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVII to the contrary notwithstanding, a
Pensioned Employee or Spouse shall be entitled to elect continued medical
coverage as provided under the terms of Article XVII upon the occurrence of a
Qualifying Event, provided such Pensioned Employee or Spouse was entitled to
benefits under Article XVII on the day prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee or Spouse, as appropriate, (A) the death of the Pensioned
Employee, (B) the divorce or legal separation of the Pensioned Employee
from his Spouse, or (C) a proceeding in a case under Title 11, United
States Code, with respect to the Employer.
(b) The Pensioned Employee or Spouse electing continued coverage under
this Section 17.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee or Spouse
shall begin on the date of the Qualifying Event and end not earlier than the
first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVII of the Plan;
(3) The failure of the Pensioned Employee or Spouse to pay any
required contribution when due;
(4) The date on which the Pensioned Employee or Spouse first
becomes, after the date of his election, (A) a covered employee under
any other group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such
individual, or (B) entitled to benefits under Title XVIII of the
Social Security Act; or
(5) The date the Spouse becomes covered under another group
health plan which does not contain any exclusion or limitation with
respect to any preexisting condition of such Spouse.
(d) Any election to continue coverage under this Section 17.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee or Spouse receives notice of a Qualifying Event from the
Employer.
(e) The Employer shall provide each Pensioned Employee and Spouse, if
any, written notice of the rights provided in this Section 17.5. The Pensioned
Employee or Spouse is required to notify the Employer within thirty (30) days of
any Qualifying Event described in Section 17.5(a)(1)(B), and the Employer shall
provide the Spouse written notice of the rights provided in this Section 17.5
within fourteen (14) days thereafter.
17.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees to the Employer's medical benefit plan in amounts determined in the
sole discretion of the Employer from time to time. All Employer contributions
shall be made to the Trustee under the Trust Agreement provided for in Article
XI and shall be allocated to a separate account maintained solely to fund the
medical benefits provided under this Article XVII. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XVII. In the event that a Pensioned Employee's
interest in an account, or his Spouse's, maintained pursuant to this Article
XVII is forfeited prior to termination of the Plan, the forfeited amount shall
be applied as soon as possible to reduce Employer contributions made under this
Article XVII. In no event at any time prior to the satisfaction of all
liabilities under this Article XVII shall any part of the corpus or income of
such separate account be used for, or diverted to, purposes other than for the
exclusive purpose of providing benefits under this Article XVII.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertainable and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XVII, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XVII after Article XVII is
terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XVII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from January
1, 1987) plus the costs of any life insurance protection shall not exceed
twenty-five percent (25%) of the sum of the aggregate of costs of retirement
benefits under the Plan (other than past service credits), the aggregate of
costs of the medical benefits and the costs of any life insurance protection
(both measured from January 1, 1987). The aggregate of costs of retirement
benefits, other than for past service credits, and the aggregate of costs of
medical benefits provided under the Plan shall be determined using the projected
unit credit funding method and the actuarial assumptions set forth in Exhibit B,
a copy of which is attached hereto and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time by the
committee responsible for providing a procedure for establishing and carrying
out a funding policy and method for the Plan pursuant to Section 10.9 of the
Plan. Effective for contributions made after January 1, 1990, the limitations
set forth in the preceding two sentences in this paragraph on amounts that may
be contributed to fund medical benefits under this Article XVII shall be based
on contributions alone and not on cost. Contributions allocated to any separate
account established for a Pensioned Employee from which medical benefits will be
payable solely to such Pensioned Employee or his Spouse shall be treated as an
Annual Addition as defined in Section 6.5(a) to any defined contribution plan
maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVII.
17.7 Pensioned Employee Contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because his Spouse has become ineligible for coverage under this
Article XVII. No person shall become covered under this Article XVII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
17.8 Amendment of Article XVII. The Employer reserves the right,
through action of its Board of Directors, to amend Article XVII (including
Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any
Pensioned Employee or his Spouse, provided, however, that no amendment of this
Article or the Trust shall cancel the payment or reimbursement of expenses for
claims already incurred by a Pensioned Employee or his Spouse prior to the date
of any amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XVII, as set
forth in the Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any Pensioned
Employee or his Spouse. The Employer makes no promise to continue these benefits
in the future and rights to future benefits will never vest. In particular,
retirement or the fulfillment of the prerequisites for a retirement benefit
pursuant to the terms of the Plan or under the terms of any other employee
benefit plan maintained by the Employer shall not confer upon any Pensioned
Employee or his Spouse any right to continued benefits under this Article XVII.
17.9 Termination of Article XVII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XVII or permanently
discontinue contributions at any time in its sole discretion. This Article XVII,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Spouse. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Spouse any right to continued benefits under this
Article XVII. Effective January 1, 1991, in the event the Employer or any
adopting Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 17.3 of the Plan to its Pensioned Employees,
this Article XVII of the Plan shall automatically terminate with respect to the
Pensioned Employees and their Spouses of such Employer without the requirement
of any action by such Employer.
17.10 Reversion of assets upon termination. Upon the termination of
this Article XVII and the satisfaction of all liabilities under this Article
XVII, all remaining assets in the separate account described in Section 17.6
shall be returned to the Employer.
<PAGE>
ARTICLE XVIII
Post-retirement Medical Benefits Prior
to Attainment of Normal Retirement Date
18.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer who is
eligible, or becomes eligible pursuant to Section 3.2 as amended, to receive
Retirement Income after his retirement at his Early Retirement Date and prior to
attainment of his Normal Retirement Date, pursuant to the terms of the Plan, and
who was insured, or is deemed to be insured by the Retirement Board, under the
Employer's program of medical insurance benefits on the last day prior to his
retirement. The term "Pensioned Employee" shall not include (1) any former
Employee who terminated his service with the Employer prior to his Early
Retirement Date and who is entitled to Retirement Income under Section 8.1 or
8.2 of the Plan or, effective January 1, 1991, (2) a Key Employee, as defined in
Section 14.6(g), or (3) any Pensioned Employee of an Employer that has adopted
the Plan pursuant to Section 14.1 hereof but does not provide medical benefits
to its Pensioned Employees.
(b) If the required contributions for coverage of a covered individual
have been paid in advance in accordance with Article XVIII, the Employer's
coverage of a Pensioned Employee and his Dependents who were continuously
covered, or deemed to be continuously covered by the Retirement Board, under a
prior medical plan maintained by the Employer on December 31, 1989 or the day
before the retirement of a Pensioned Employee, shall continue under Article
XVIII commencing with such effective date, subject to any waiting periods.
Application for such prior medical plan shall be deemed to be application for
coverage under Article XVIII.
(c) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 18.1(c)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 18.1(c)(3), (4) and (5)
below, a transfer shall be treated as a Qualified Transfer if such
transfer
(i) is made after the close of the Plan Year preceding the
Employer's first Plan Year beginning after December 31, 1990, and
before the earlier of (I) the due date (including extensions) for
the filing of the Employer's corporate tax return for such
preceding Plan Year, or (II) the date such return is filed, and
(ii) does not exceed the expenditures of the Employer for
Qualified Current Retiree Health Liabilities for such preceding
Plan Year.
(iii) The reduction described in the second paragraph of
Section 18.1(c)(6)(G) shall not apply to a transfer described in
Section 18.1(c)(1)(A) above.
(2) The amount of Excess Pension Assets which may be transferred
in a Qualified Transfer shall not exceed a reasonable estimate of the
amount the Employer will pay (directly or through reimbursement) out
of the Health Benefits Accounts for Qualified Current Retiree Health
Liabilities during the Plan Year of the transfer.
(3) (A) Any assets transferred to a Health Benefits Account in a
Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits Account in a
Qualified Transfer (and any income allocable thereto) which are
not used as provided in Section 18.1(c)(3)(A) above shall be
transferred from the Health Benefits Account back to the Plan.
(C) For purposes of this Section 18.2(c)(3), any amount
transferred from a Health Benefits Account shall be treated as
paid first out of the assets and income described in Section
18.1(c)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned Employee
or Dependent under the Plan shall become nonforfeitable in the same
manner which would be required if the Plan had terminated immediately
before the Qualified Transfer (or in the case of a Pensioned Employee
who terminated service during the 1-year period ending on the date of
the Qualified Transfer, immediately before such termination).
(B) In the case of a Qualified Transfer described in Section
18.1(c)(1)(B), the requirements of this Section 18.1(c)(4) are
met with respect to any Pensioned Employee who terminated service
during the Plan Year to which such Qualified Transfer relates by
recomputing such Pensioned Employee's benefits as if Section
18.1(c)(4)(A) above had applied immediately before such
termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher
of the Applicable Employer Cost for each of the two Plan Years
immediately preceding the Plan Year of the Qualified Transfer.
Effective for Qualified Transfers occurring after December 8, 1994,
the medical benefits plan set forth in Exhibit A shall provide that
the Applicable Health Benefits provided by the Employer during each
Plan Year during the Benefit Maintenance Period shall be substantially
the same as the Applicable Health Benefits provided by the Employer
during the Plan Year immediately preceding the Plan Year of the
Qualified Transfer. Notwithstanding any other provision to the
contrary in this Section 18.1(c)(5), the Employer may elect at any
time during the Plan Year to have this Section 18.1(c)(5) applied
separately with respect to Pensioned Employees eligible for benefits
under Title XVIII of the Social Security Act and with respect to
Pensioned Employees which are not so eligible.
(6) For purposes of this Section 18.1(c), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to any
Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health Liabilities of
the Employer for such Plan Year determined (I) without
regard to any reduction under Section 18.1(c)(6)(G), and
(II) in the case of a Plan Year in which there was no
Qualified Transfer in the same manner as if there had been
such a transfer at the end of the Plan Year, by
(ii) the number of individuals to whom coverage for
Applicable Health Benefits was provided during such Plan
Year.
(B) "Applicable Health Benefits" means health benefits or
coverage which are provided to Pensioned Employees who
immediately before the Qualified Transfer are eligible to receive
such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of five
(5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of five (5)
Plan Years beginning with the taxable year in which the Qualified
Transfer occurs. If a Plan Year is in two (2) or more overlapping
Cost Maintenance periods, this Section 18.1(c)(6)(D) shall be
applied by taking into account the highest Applicable Employer
Cost required to be provided under Section 18.1(c)(6)(A) for such
Plan Year.
(E) "Excess Pension Assets" means the excess, if any, of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount determined under
Code Section 412(c)(7)(A)(i), or (II) 125 percent of current
liability (as defined in Code Section 412(c)(7)(B)).
The determination under this paragraph shall be made as
of the most recent valuation date of the Plan preceding the
Qualified Transfer.
(F) "Health Benefits Account" means an account established
and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities" means,
with respect to any Plan Year, the aggregate amounts, including
administrative expenses, which would have been allowable as a
deduction to the Employer for payment of Applicable Health
Benefits provided during the Plan Year assuming such Applicable
Health Benefits were provided directly by the Employer and the
Employer used the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence, the rule of
Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or before
December 8, 1994, the amount determined in the paragraph above
shall be reduced by any amount previously contributed to a Health
Benefits Account or welfare benefit fund, as defined in Code
Section 419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. The portion of any reserves remaining as of
the close of December 31, 1990 shall be allocated on a pro rata
basis to Qualified Current Retiree Health Liabilities. Effective
for Qualified Transfers occurring after December 8, 1994, the
amount determined under the preceding paragraph shall be reduced
by the amount which bears the same ratio to such amount as the
value (as of the close of the Plan Year preceding the year of the
Qualified Transfer) of the assets in all Health Benefits Accounts
or welfare benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without regard
to this paragraph.
18.2 Application for and commencement of Coverage.
(a) Every Pensioned Employee, as defined in Section 18.1, shall be
entitled to apply for coverage for himself and his eligible Dependents.
(b) If the required contributions for coverage of a covered individual
have been paid in advance in accordance with Article XVIII, the Employer's
coverage of a Pensioned Employee and his Dependents who were continuously
covered under a prior medical plan maintained by the Employer on December 31,
1996 or the day before the retirement of a Pensioned Employee, shall continue
under Article XVIII commencing with such effective date, subject to any waiting
periods. Application for such prior medical plan shall be deemed to be
application for coverage under Article XVIII.
18.3 Medical benefits. The medical benefits provided under this Article
XVIII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit C
and specifically incorporated herein by reference in its entirety, and as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
18.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVIII is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit C.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XVIII is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit C.
18.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVIII to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to
elect continued medical coverage as provided under the terms of Article XVIII
upon the occurrence of a Qualifying Event, provided such Pensioned Employee,
Dependent spouse, or Dependent child was entitled to benefits under Article
XVIII on the day prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee, Dependent spouse, or Dependent child, as appropriate, (A) the
death of the Pensioned Employee, (B) the divorce or legal separation of
the Pensioned Employee from the Dependent spouse, (C) a Dependent child
ceasing to be a Dependent as defined under the requirements of Article
XVIII, or (D) a proceeding in a case under Title 11, United States
Code, with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued coverage
under this Section 18.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the Qualifying
Event and end not earlier than the first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVIII of the Plan;
(3) The failure of the Pensioned Employee or Dependent to pay any
required contribution when due;
(4) The date on which the Pensioned Employee or Dependent first
becomes, after the date of his election, (A) a covered employee under
any other group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such
individual, or (B) entitled to benefits under Title XVIII of the
Social Security Act; or
(5) The date the Dependent spouse becomes covered under another
group health plan which does not contain any exclusion or limitation
with respect to any preexisting condition of such Dependent spouse.
(d) Any election to continue coverage under this Section 18.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee, Dependent spouse, or Dependent child receives notice of a
Qualifying Event from the Employer.
(e) The Employer shall provide each Pensioned Employee and Dependent
spouse, if any, written notice of the rights provided in this Section 18.5. The
Pensioned Employee or Dependent spouse is required to notify the Employer within
thirty (30) days of any Qualifying Event described in Section 18.5(a)(1)(B) or
(C), and the Employer shall provide the Dependent spouse or Dependent child
written notice of the rights provided in this Section 18.5 within fourteen (14)
days thereafter. Notice to the Dependent spouse shall be deemed notice to each
Dependent child residing with such spouse at the time such notification is made.
18.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVIII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees in amounts determined in the sole discretion of the Employer from time
to time. All contributions shall be made to the Trustee under the Trust
Agreement provided for in Article XI and shall be allocated to a separate
account maintained solely to fund the medical benefits provided under Article
XVIII. The Employer shall designate that portion of any contribution to the Plan
allocable to the funding of medical benefits under this Article XVIII. In the
event that a Pensioned Employee's interest in an account, or his Dependents',
maintained pursuant to this Article XVIII is forfeited prior to termination of
the Plan, the forfeited amount shall be applied as soon as possible to reduce
Employer contributions made under this Article XVIII. In no event at any time
prior to the satisfaction of all liabilities under this Article XVIII shall any
part of the corpus or income of such separate account be used for, or diverted
to, purposes other than for the exclusive purpose of providing benefits under
this Article XVIII.
The minimum amount of contributions to be made by or on behalf of the
Employer for any Plan Year, if any, shall be reasonable and ascertainable and
shall be determined in accordance with any generally accepted actuarial method
which is reasonable in view of the provisions and coverage of Article XVIII, the
funding medium, and any other applicable considerations. However, the Employer
is under no obligation to make any contributions under Article XVIII after
Article XVIII is terminated, except to fund claims for medical expenses incurred
prior to the date of termination.
The medical benefits provided under this Article XVIII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from January
1, 1987) plus the costs of any life insurance protection shall not exceed
twenty-five percent (25%) of the sum of the aggregate of costs of retirement
benefits under the Plan (other than past service credits), the aggregate of
costs of the medical benefits and the costs of any life insurance protection
(both measured from January 1, 1987). The aggregate of costs of retirement
benefits, other than for past service credits, and the aggregate of costs of
medical benefits provided under the Plan shall be determined using the projected
unit credit funding method and the actuarial assumptions set forth in Exhibit B,
a copy of which is attached hereto and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time by the
committee responsible for providing a procedure for establishing and carrying
out a funding policy and method for the Plan pursuant to Section 10.9 of the
Plan. Effective for contributions made after January 1, 1990, the limitations
set forth in the preceding two sentences in this paragraph on amounts that may
be contributed to fund medical benefits under this Article XVII shall be based
on contributions alone and not cost. Contributions allocated to any separate
account established for a Pensioned Employee from which medical benefits will be
payable solely to such Pensioned Employee or his Dependents shall be treated as
an Annual Addition as defined in Section 6.5(a) to any defined contribution plan
maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVIII.
18.7 Pensioned Employee Contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because a Dependent has become ineligible for coverage under this
Article XVIII. No person shall become covered under this Article XVIII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVIII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
18.8 Amendment of Article XVIII. The Employer reserves the right,
through action of its Board of Directors pursuant to Section 13.1, to amend
Article XVIII (including Exhibit C) or the Trust without the consent of any
Pensioned Employee, or any Dependent of a Pensioned Employee, provided, however,
that no amendment of this Article or the Trust shall cancel the payment or
reimbursement of expenses for claims already incurred by a Pensioned Employee or
his Dependent prior to the date of any amendment, nor shall any such amendment
increase the duties and obligations of the Trustee except with its consent. This
Article XVIII, as set forth in the Plan document, is not a contract and
non-contributory benefits hereunder are provided gratuitously, without
consideration from any Pensioned Employee or the Dependent of any Pensioned
Employee. The Employer makes no promise to continue these benefits in the future
and rights to future benefits will never vest. In particular, retirement or the
fulfillment of the prerequisites for a retirement benefit pursuant to the terms
of the Plan or under the terms of any other employee benefit plan maintained by
the Employer shall not confer upon any Pensioned Employee or the Dependent of
any Pensioned Employee any right to continued benefits under this Article XVIII.
18.9 Termination of Article XVIII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XVIII or permanently
discontinue contributions at any time in its sole discretion. This Article
XVIII, as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or the Dependent of any Pensioned Employee. The Employer
makes no promise to continue these benefits in the future and rights to future
benefits will never vest. In particular, retirement or the fulfillment of the
prerequisites for a retirement benefit pursuant to the terms of the Plan or
under the terms of any other employee benefit plan maintained by the Employer
shall not confer upon any Pensioned Employee or the Dependent of any Pensioned
Employee any right to continued benefits under this Article XVIII. Effective
January 1, 1991, in the event the Employer or any adopting Employer shall
terminate its provision of the medical benefits described in Exhibit C to
Section 18.3 of the Plan to its Pensioned Employees, this Article XVIII of the
Plan shall automatically terminate with respect to the Pensioned Employees of
such Employer without the requirement of any action by such Employer.
18.10 Reversion of Assets upon Termination. Upon the termination of
this Article XVIII and the satisfaction of all liabilities under this Article
XVIII, any remaining assets in the separate account described in Section 18.6
shall be returned to the Employer.
<PAGE>
GEORGIA POWER COMPANY SCHEDULE
=================== ============================================================
GPC ss. NO. GPC PLAN TEXT
=================== ============================================================
ss. 1.14(a) 1.14 (a) "Earnings" with respect to any Employee
including any Employee whose service is terminated by reason
of disability (as defined in Section 4.4) means (1) the
highest annual rate of salary or wages of an Employee of the
Employer or employee of any Affiliated Employer within any
Plan Year before deductions for taxes, Social Security,
etc., (2) monthly shift and seven-day differentials and
nuclear plan premiums, (3) all amounts contributed by the
Employer or any Affiliated Employer to The Southern Company
Employee Savings Plan as Elective Employer Contributions, as
said term is described under Section 4.1 of such plan,
pursuant to the Employee's exercise of his deferral option
made thereunder in accordance with the requirements of
Section 401(k) of the Code, (4) all amounts contributed by
the Employer or any Affiliated Employer to The Southern
Electric System Flexible Benefits Plan or The Southern
Company Flexible Benefits Plan on behalf of an Employee
pursuant to his salary reduction election, and applied to
provide one or more of the optional benefits available under
such plan, but (5) shall exclude all amounts deferred under
any non-qualified deferred compensation plan maintained by
the Employer or any Affiliated Employer.
=================== ============================================================
ss. 1.14(d) (d) Notwithstanding the above, "Earnings" with respect
to an Employee who is a member of Local Union 84 of
I.B.E.W., who is eligible to be included in the Plan, and
who is granted a leave of absence by the Employer to carry
on union business, shall be determined pursuant to Section
4.2 of the Plan.
=================== ============================================================
ss. 1.17
1.17 "Employee" means any person who is currently
employed by the Employer as (a) a regular full-time
employee, (b) a regular part-time employee, (c) a
cooperative education employee, or (d) a Temporary Full-Time
or Temporary Part-Time employee, as such terms are defined
in the Corporate Guidelines of the Employer. The term also
includes "leased employees" within the meaning of Section
414(n)(2) of the Code, unless the total number of leased
employees constitutes less than twenty percent (20%) of the
Employer's non-highly compensated workforce within the
meaning of Section 414(n)(5)(C)(ii) and such leased
employees are covered by a plan described in Section
414(n)(5)(B) of the Code.
=================== ============================================================
ss. 1.20 Provided there is no duplication of Hours of Service
credited in accordance with the 4th P. foregoing provisions,
an Employee shall be credited with Hours of Service as
though he were in the active employment of the Employer
during an authorized leave of absence to carry on union
business as provided in Section 4.2, if such Employee elects
to receive credit for Accredited Service in accordance with
Section 4.2.
=================== ============================================================
ss. 2.6 2.6 Exclusion of certain categories of employees.
Notwithstanding any other provision of this Article II,
leased employees shall not be eligible to participate in the
Plan. In addition, a Temporary Full-Time or Temporary
Part-Time employee, as such terms are defined in the
Corporate Guidelines of the Employer, who was not
participating in the Plan as an Employee prior to July 1,
1990, shall not be considered to be an Employee for purposes
of this Plan and shall not be entitled to any benefits
hereunder. Lastly, any person who is employed by Electric
City Merchandise Company, Inc. on or after May 1, 1988, or
who is employed by Savannah Electric and Power Company on or
after March 3, 1988, shall not be entitled to accrue
Retirement Income under the Plan while employed at such
companies.
=================== ============================================================
ss. 4.2 An Employee who is a member of Local Union 84 of
2nd P. I.B.E.W. who is eligible to be included in the Plan will be
credited with Accredited Service for the period (or portion
of the period) after January 1, 1984, of a leave of absence
granted by the Employer to permit him to carry on union
business at the international office of I.B.E.W., but only
if such Employee elects in writing on or before the
beginning of a Plan Year to receive such credit for
Accredited Service for such Plan Year. For the purposes of
determining the Earnings of such Employee during the period
(or portion of the period) after January 1, 1978 of such
leave of absence, he shall be deemed to have received
Earnings at the rate of Earnings being paid to him at the
time of his leave of absence for union business commenced,
adjusted from time to time during the period of such leave
of absence for any general wage increase or decrease during
such period applicable to Employees in the category of
employment in which the Employee was employed at the time
his leave of absence commenced.
=================== ============================================================
<PAGE>
Schedule GPC
ARTICLE XVII
Post-retirement Medical Benefits
17.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer who is
eligible, or becomes eligible pursuant to Section 3.2 as amended, to receive
Retirement Income after his retirement at his Early, Normal, or Deferred
Retirement Date, as applicable. A "Pensioned Employee" shall not include any
former Employee who terminated his service with the Employer prior to his Early,
Normal, or Deferred Retirement Date and who is entitled to Retirement Income
under Section 8.1 or 8.2 of the Plan; a Key Employee, as defined in Section
14.6(g); or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not provide
medical benefits to its Pensioned Employees.
(b) "Dependents" means the Pensioned Employee's spouse who is not
legally separated or, effective January 1, 1991, divorced from the Pensioned
Employee and the Pensioned Employee's unmarried children (both natural and
legally adopted) within the prescribed age limit set forth below. The term
"children" includes stepchildren and foster children who reside with the
Pensioned Employee in a regular parent-child relationship and are dependent upon
the Pensioned Employee for principal support and maintenance. The term Dependent
shall not include any person who is covered, or eligible for coverage, under the
Plan as a Pensioned Employee or who is entitled to any benefits under any
provisions of this Plan because of having been covered as a Pensioned Employee.
Children shall be considered to be within the prescribed age limit if
they are less than nineteen (19) years of age, except that unmarried children
shall continue to be eligible until the December 31 coinciding with or next
following attainment of age nineteen (19). Unmarried children age nineteen (19),
but less than age twenty-five (25), shall continue to be within the prescribed
age limit if they are regularly attending school on a full-time basis. Effective
January 1, 1991, for purposes of this Article XVII, an unmarried child shall be
considered to be regularly attending school on a full-time basis if such child
is enrolled in and regularly attending a secondary school or an accredited
vocational school, College or University (as defined under Exhibit A) and meets
the minimum requirements of such school, College or University to maintain
full-time status. This shall also include an unmarried child who is enrolled as
a part-time student at one of the above institutions while such individual is
taking a course load that is equivalent to the minimum course load required for
full-time student status at such institution.
If both a husband and his wife are covered under this Plan as Pensioned
Employees of the Employer, either, but not both, may elect to cover their
eligible children as Dependents.
Any person covered or eligible for coverage under Article XVII as a
Pensioned Employee, or under any group medical plan maintained by the Employer
as an Employee, shall not be considered as a Dependent.
(c) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 17.1(c)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 17.1(c)(3),
(4) and (5) below, a transfer shall be treated as a Qualified
Transfer if such transfer
(i) is made after the close of the Plan Year
preceding the Employer's first Plan Year beginning
after December 31, 1990, and before the earlier of
(I) the due date (including extensions) for the
filing of the Employer's corporate tax return for
such preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the expenditures of the
Employer for Qualified Current Retiree Health
Liabilities for such preceding Plan Year.
(iii) The reduction described in the second
paragraph of Section 17.1(c)(6)(G) shall not apply to
a transfer described in Section 17.1(c)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
17.1(c)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 17.1(c)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 17.1(c)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 17.1(c)(1)(B), the requirements of this Section
17.1(c)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 17.1(c)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
17.1(c)(5), the Employer may elect at any time during the Plan Year to
have this Section 17.1(c)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 17.1(c), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to any
Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 17.1(c)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health benefits or
coverage which are provided to Pensioned Employees who
immediately before the Qualified Transfer are eligible to receive
such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of five
(5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of five (5)
Plan Years beginning with the taxable year in which the Qualified
Transfer occurs. If a Plan Year is in two (2) or more overlapping
Cost Maintenance periods, this Section 17.1(c)(6)(D) shall be
applied by taking into account the highest Applicable Employer
Cost required to be provided under Section 17.1(c)(6)(A) for such
Plan Year.
(E) "Excess Pension Assets" means the excess, if any, of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount determined under
Code Section 412(c)(7)(A)(i), or (II) 125 percent of current
liability (as defined in Code Section 412(c)(7)(B)).
The determination under this paragraph shall be made as
of the most recent valuation date of the Plan preceding the
Qualified Transfer.
(F) "Health Benefits Account" means an account established
and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities" means,
with respect to any Plan Year, the aggregate amounts, including
administrative expenses, which would have been allowable as a
deduction to the Employer for payment of Applicable Health
Benefits provided during the Plan Year assuming such Applicable
Health Benefits were provided directly by the Employer and the
Employer used the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence, the rule of
Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or before
December 8, 1994, the amount determined in the paragraph above
shall be reduced by any amount previously contributed to a Health
Benefits Account or welfare benefit fund, as defined in Code
Section 419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. The portion of any reserves remaining as of
the close of December 31, 1990 shall be allocated on a pro rata
basis to Qualified Current Retiree Health Liabilities. Effective
for Qualified Transfers occurring after December 8, 1994, the
amount determined under the preceding paragraph shall be reduced
by the amount which bears the same ratio to such amount as the
value (as of the close of the Plan Year preceding the year of the
Qualified Transfer) of the assets in all Health Benefits Accounts
or welfare benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without regard
to this paragraph.
17.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1997 shall be
eligible for coverage as a Pensioned Employee on January 1, 1997, provided he
was covered as an Employee under a group medical plan maintained by the Employer
immediately prior to the time he became a Pensioned Employee, or is deemed
covered as determined by the Retirement Board.
(b) An Employee who becomes a Pensioned Employee on or after January 1,
1997 shall be eligible for coverage on the date he becomes a Pensioned Employee,
provided he was covered as an Employee under a group medical plan maintained by
the Employer immediately prior to the time he became a Pensioned Employee.
(c) Effective January 1, 1989, a Dependent of a Pensioned Employee
shall be eligible for coverage under this Plan on the later of (1) the date the
Pensioned Employee becomes eligible for coverage hereunder and (2) the date such
person becomes a Dependent and (3) the date of the payment of any contribution
required of the Pensioned Employee with respect to the Dependent.
(d) Notwithstanding paragraph (c) above, effective January 1, 1991, a
Dependent of a Pensioned Employee shall be eligible for coverage under this Plan
on the later of (1) the date the Pensioned Employee becomes eligible for
coverage hereunder and (2) the date such person becomes a Dependent.
17.3 Medical benefits. The medical benefits provided under this Article
XVII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit A
and specifically incorporated herein by reference in its entirety, as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
Parts A and B and other medical plans, and procedures for submitting claims and
initiating legal proceedings provided therein.
17.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
17.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVII to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to
elect continued medical coverage as provided under the terms of Article XVII
upon the occurrence of a Qualifying Event, provided such Pensioned Employee,
Dependent spouse, or Dependent child was entitled to benefits under Article XVII
on the day prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee, Dependent spouse, or Dependent child, as appropriate, (A) the
death of the Pensioned Employee, (B) the divorce or legal separation of
the Pensioned Employee from the Dependent spouse, (C) a Dependent child
ceasing to be a Dependent as defined under the requirements of Article
XVII, or (D) a proceeding in a case under Title 11, United States Code,
with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued coverage
under this Section 17.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the Qualifying
Event and end not earlier than the first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVII of the Plan;
(3) The failure of the Pensioned Employee or Dependent to
pay any required contribution when due;
(4) The date on which the Pensioned Employee or Dependent
first becomes, after the date of his election, (A) a covered
employee under any other group health plan which does not contain
any exclusion or limitation with respect to any preexisting
condition of such individual, or (B) entitled to benefits under
Title XVIII of the Social Security Act; or
(5) The date the Dependent spouse becomes covered under
another group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such
Dependent spouse.
(d) Any election to continue coverage under this Section 17.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee, Dependent spouse, or Dependent child receives notice of a
Qualifying Event from the Employer.
(e) The Employer shall provide each Pensioned Employee and Dependent
spouse, if any, written notice of the rights provided in this Section 17.5. The
Pensioned Employee or Dependent spouse is required to notify the Employer within
thirty (30) days of any Qualifying Event described in Section 17.5(a)(1)(B) or
(C), and the Employer shall provide the Dependent spouse or Dependent child
written notice of the rights provided in this Section 17.5 within fourteen (14)
days thereafter. Notice to the Dependent spouse shall be deemed notice to each
Dependent child residing with such spouse at the time such notification is made.
17.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees to the Employer's medical benefit plan in amounts determined in the
sole discretion of the Employer from time to time. All Employer contributions
shall be made to the Trustee under the Trust Agreement provided for in Article
XI and shall be allocated to a separate account maintained solely to fund the
medical benefits provided under this Article XVII. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XVII. In the event that a Pensioned Employee's
interest in an account, or his Dependents', maintained pursuant to this Article
XVII is forfeited prior to termination of the Plan, the forfeited amount shall
be applied as soon as possible to reduce Employer contributions made under this
Article XVII. In no event at any time prior to the satisfaction of all
liabilities under this Article XVII shall any part of the corpus or income of
such separate account be used for, or diverted to, purposes other than for the
exclusive purpose of providing benefits under this Article XVII.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertainable and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XVII, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XVII after Article XVII is
terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XVII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from January
1, 1987) plus the costs of any life insurance protection shall not exceed
twenty-five percent (25%) of the sum of the aggregate of costs of retirement
benefits under the Plan (other than past service credits), the aggregate of
costs of the medical benefits and the costs of any life insurance protection
(both measured from January 1, 1987). The aggregate of costs of retirement
benefits, other than for past service credits, and the aggregate of costs of
medical benefits provided under the Plan shall be determined using the projected
unit credit funding method and the actuarial assumptions set forth in Exhibit B,
a copy of which is attached hereto and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time by the
committee responsible for providing a procedure for establishing and carrying
out a funding policy and method for the Plan pursuant to Section 10.9 of the
Plan. Effective for contributions made after January 1, 1990, the limitations
set forth in the preceding two sentences in this paragraph on amounts that may
be contributed to fund medical benefits under this Article XVII shall be based
on contributions alone and not cost. Contributions allocated to any separate
account established for a Pensioned Employee from which medical benefits will be
payable solely to such Pensioned Employee or his Dependents shall be treated as
an Annual Addition as defined in Section 6.5(a) to any defined contribution plan
maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVII.
17.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because a Dependent has become ineligible for coverage under this
Article XVII. No person shall become covered under this Article XVII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
17.8 Amendment of Article XVII. The Employer reserves the right,
through action of its Board of Directors, to amend Article XVII (including
Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any
Pensioned Employee, or his Dependents, provided, however, that no amendment of
this Article or the Trust shall cancel the payment or reimbursement of expenses
for claims already incurred by a Pensioned Employee or his Dependent prior to
the date of any amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XVII, as set
forth in the Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any Pensioned
Employee or his Dependents. The Employer makes no promise to continue these
benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or Dependents any right to continued benefits under this
Article XVII.
17.9 Termination of Article XVII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XVII or permanently
discontinue contributions at any time in its sole discretion. This Article XVII,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Dependents any right to continued benefits under this
Article XVII. Effective January 1, 1991, in the event the Employer or any
adopting Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 17.3 of the Plan to its Pensioned Employees,
this Article XVII of the Plan shall automatically terminate with respect to the
Pensioned Employees and their Dependents of such Employer without the
requirement of any action by such Employer.
17.10 Reversion of assets upon termination. Upon the termination of
this Article XVII and the satisfaction of all liabilities under this Article
XVII, all remaining assets in the separate account described in Section 17.6
shall be returned to the Employer.
<PAGE>
GULF POWER COMPANY SCHEDULE
============= ==================================================================
GULF ss. NO. GULF PLAN TEXT
============= ==================================================================
ss. 3.3 3.3 Retirement at Deferred Retirement Date. An Employee
included in the Plan may remain in active service after his
Normal Retirement Date. The involuntary retirement of an
Employee on or after his Normal Retirement Date shall not be
permitted solely on the basis of the Employee's age, except
in accordance with the provisions of the Age Discrimination
in Employment Act and Section 760.10 of the Florida Statutes
Annotated, as amended from time to time. Termination of
service of such an Employee for any reason after Normal
Retirement Date shall be deemed retirement as provided in
the Plan.
============= ==================================================================
<PAGE>
Schedule GULF
ARTICLE XVII
Post-retirement Medical Benefits
17.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer who is
eligible, or becomes eligible pursuant to Section 3.2 as amended, to receive
Retirement Income after his retirement at his Early, Normal, or Deferred
Retirement Date, as applicable. A "Pensioned Employee" shall not include any
former Employee who terminated his service with the Employer prior to his Early,
Normal, or Deferred Retirement Date and who is entitled to Retirement Income
under Section 8.1 or 8.2 of the Plan; a Key Employee, as defined in Section
14.6(g); or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not provide
medical benefits to its Pensioned Employees.
(b) "Dependents" means (1) a Pensioned Employee's spouse, or (2) a
Pensioned Employee's unmarried child from birth until his or her nineteenth
(19th) birthday. A "Dependent" shall not include anyone who (1) lives outside
the United States or Canada, (2) is in the armed forces of any country, or (3)
has coverage under another medical plan maintained by the Employer as an
employee or as a dependent of another person. The term "child" includes (1) an
adopted child, or (2) a step-child or foster-child under a Pensioned Employee's
legal guardianship, but only if such step-child or foster-child is dependent on
the Pensioned Employee for support and maintenance and if the step-child or
foster-child lives with the Pensioned Employee in a parent-child relationship.
An unmarried child who is nineteen (19) years old will be considered a Dependent
until his or her twenty-third (23rd) birthday, if the child (1) is enrolled as a
full-time student at an accredited school or college, and (2) is not employed on
a full-time basis, and (3) has the same permanent home address as the Pensioned
Employee.
The age limit that applies to Dependent children will not apply to any
covered child who becomes incapable of working and remains a Dependent of a
Pensioned Employee for support and maintenance (1) before reaching the age
limit, (2) due to physical handicap or mental retardation, and (3) while
covered. If a claim is denied with respect to a handicapped child because he or
she has reached the age limit, written proof of his or her incapacity and
dependency must be furnished to the Employer. Upon receipt of this proof,
further consideration will be given to the denied claim.
The Dependent coverage being kept in force under the terms of this
Article XVII will automatically terminate (1) on the date the child is no longer
incapacitated and dependent on the Pensioned Employee, or (2) on the date the
child's coverage would terminate in the absence of this provision. This
provision applies only to Dependent coverage under Article XVII that provides
benefits based on expenses incurred for (1) medical services, (2) surgical
services, or (3) dental services. It will not apply to any other type of
coverage that provides benefits based on death, dismemberment, or loss of sight.
If a Pensioned Employee's Dependents are covered by Dependent coverage
when he dies, that coverage will be continued without payment of premiums for a
maximum period of one year after the date of the Pensioned Employee's death.
This continued coverage may be terminated before the end of the maximum period.
The coverage for any Dependent will terminate on the date Article XVII
terminates or the earliest of:
(1) the date he or she reaches the age limit;
(2) the date he or she marries or remarries;
(3) the date he or she becomes covered as an employee under a
medical plan maintained by the Employer; or
(4) the date he or she is no longer a Dependent.
If a Pensioned Employee's wife is pregnant when he dies, the Dependent
coverage continued under these provisions will automatically extend to the
newborn child or children born from that pregnancy. This coverage will take
effect on the date of birth. No other Dependents acquired by a Pensioned
Employee's spouse after his death will be covered by this continued coverage.
If both a husband and his wife are covered under this Plan as Pensioned
Employees of the Employer, or if the husband or wife of a Pensioned Employee is
covered as an Employee under any medical plan maintained by the Employer,
either, but not both, may elect to cover their eligible children as Dependents.
Any person covered or eligible for coverage under Article XVII as a
Pensioned Employee, or under any group medical plan maintained by the Employer
as an Employee, shall not be considered as a Dependent.
(c) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 17.1(c)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 17.1(c)(3), (4) and (5)
below, a transfer shall be treated as a Qualified Transfer if such
transfer
(i) is made after the close of the Plan Year preceding the
Employer's first Plan Year beginning after December 31, 1990, and
before the earlier of (I) the due date (including extensions) for
the filing of the Employer's corporate tax return for such
preceding Plan Year, or (II) the date such return is filed, and
(ii) does not exceed the expenditures of the Employer for
Qualified Current Retiree Health Liabilities for such preceding
Plan Year.
(iii) The reduction described in the second paragraph of
Section 17.1(c)(6)(G) shall not apply to a transfer described in
Section 17.1(c)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits Account in a
Qualified Transfer (and any income allocable thereto) which are
not used as provided in Section 17.1(c)(3)(A) above shall be
transferred from the Health Benefits Account back to the Plan.
(C) For purposes of this Section 17.1(c)(3), any amount
transferred from a Health Benefits Account shall be treated as
paid first out of the assets and income described in Section
17.1(c)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 17.1(c)(1)(B), the requirements of this Section
17.1(c)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 17.1(c)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
17.1(c)(5), the Employer may elect at any time during the Plan Year to
have this Section 17.1(c)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 17.1(c), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to
any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 17.1(c)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
17.1(c)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 17.1(c)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any,
of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount determined under
Code Section 412(c)(7)(A)(i), or (II) 125 percent of current
liability (as defined in Code Section 412(c)(7)(B)).
The determination under this paragraph shall be made as
of the most recent valuation date of the Plan preceding the
Qualified Transfer.
(F) "Health Benefits Account" means an account
established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities"
means, with respect to any Plan Year, the aggregate amounts,
including administrative expenses, which would have been
allowable as a deduction to the Employer for payment of
Applicable Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were provided
directly by the Employer and the Employer used the cash
receipts and disbursements method of accounting. For purposes
of the preceding sentence, the rule of Code Section
419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or
before December 8, 1994, the amount determined in the
paragraph above shall be reduced by any amount previously
contributed to a Health Benefits Account or welfare benefit
fund, as defined in Code Section 419(e)(1), to pay for the
Qualified Current Retiree Health Liabilities. The portion of
any reserves remaining as of the close of December 31, 1990
shall be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount determined under
the preceding paragraph shall be reduced by the amount which
bears the same ratio to such amount as the value (as of the
close of the Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits Accounts or
welfare benefit funds, as defined in section 419(e)(1), set
aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without
regard to this paragraph.
17.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1997 shall be
eligible for coverage as a Pensioned Employee on January 1, 1997, provided he
was covered as an Employee under a group medical plan maintained by the Employer
immediately prior to the time he became a Pensioned Employee, or is deemed
covered as determined by the Retirement Board.
(b) An Employee who becomes a Pensioned Employee on or after January 1,
1997 shall be eligible for coverage on the date he becomes a Pensioned Employee,
provided he was covered as an Employee under a group medical plan maintained by
the Employer immediately prior to the time he became a Pensioned Employee.
(c) A Dependent of a Pensioned Employee shall be eligible for coverage
under Article XVII on the later of (1) the date the Pensioned Employee becomes
eligible for coverage hereunder, (2) the date such person becomes a Dependent,
and (3) the first of the month following the date that the Pensioned Employee
properly elects to have Dependents covered and pays any contribution required of
the Pensioned Employee with respect to the Dependent.
(d) Notwithstanding the foregoing provisions of this Section 17.2, each
person subject to the conditions described below will become eligible on the
date indicated:
(1) The following applies if a person was at one time covered
under Article XVII and is again applying for coverage:
(A) Any person who was in an eligible class when his
or her coverage was terminated due to nonpayment of premiums
must prove to the Employer that he or she is in good health.
(B) If a person obtained an individual conversion
policy after his or her coverage terminated, that person must
prove to the Employer that he or she is in good health.
For a person to prove that he or she is in good health, a physician's
statement of health and/or physical exam may be required. Any cost for this must
be paid by the person. If a person becomes ineligible for coverage before
approval is given, but becomes eligible again at a later date and reapplies for
coverage, this person will have to prove he or she is in good health at that
time.
(e) For a newborn child, Dependent coverage will take effect as
follows:
(1) If a Pensioned Employee has Dependents covered on the
child's date of birth, coverage for the newborn will take effect on
that date. If an increase in premium is required, the Pensioned
Employee must:
(A) apply in writing for the coverage; and
(B) pay the required premium that applies.
(2) If the Pensioned Employee does not have any Dependents
covered, coverage for the newborn will not take effect until he applies
for Dependent coverage. The coverage will then take effect as set forth
in 17.2(c) above.
Newborn coverage will be for injury or sickness, including care or
treatment of (1) congenital defects, (2) birth abnormalities, or (3) premature
birth. It will not include any benefits for normal newborn child care.
Newborn coverage also includes coverage for the transportation of a
newborn child to and from the nearest available facility. This facility must be
staffed and equipped to treat his or her condition. A physician must certify
that the transportation is necessary to protect the health and safety of the
child. The Employer shall not pay more than $1000 at such facility.
(f) There are cases in which coverage will not begin on the usual
effective date. These cases are as follows:
(1) Coverage of a Pensioned Employee confined in a hospital or
other facility due to sickness or injury on the date coverage would
normally take effect shall not take effect until the Pensioned Employee
has been discharged.
(2) Coverage of a Dependent, other than a newborn child,
confined in a hospital or other facility due to sickness or injury on
the date his or her coverage would normally take effect will not take
effect until he or she has been discharged.
Coverage for a Dependent will not take effect before coverage for a
Pensioned Employee takes effect.
17.3 Medical benefits. The medical benefits provided under this Article
XVII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit A
and specifically incorporated herein by reference in its entirety, as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
17.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVII is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XVII is amended, terminated, or discontinued in
accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
17.5 Continuation of coverage to certain individuals.
(a) Continuation Coverage. Each Pensioned Employee, Dependent spouse or
Dependent child who is a "qualified beneficiary" and who would lose coverage
under Article XVII as a result of a "qualifying event" shall be entitled to
elect, within the "election period", "continuation coverage" under the Plan. For
purposes of this Section 17.5, the terms "qualified beneficiary", "qualifying
event", "election period" and "continuation coverage" shall have the same
meanings as those provided under Section 4980B of the Code and Title I, Subtitle
B, Part 6 of ERISA.
(b) Premium Requirements. The qualified beneficiary shall be required
to make payment of a premium during the period of continuation coverage up to
the maximum premium amount permitted under Section 4980B(f) of the Code and
Title I, Subtitle B, Part 6 of ERISA for such continuation coverage. Such
premium shall be periodically determined by the Plan Administrator and
communicated to the qualified beneficiary.
(c) Conversion Option. Each qualified beneficiary who elects to receive
continuation coverage under Article XVII shall have the right during the 180-day
period ending on the date such continuation coverage expires to enroll under a
conversion health plan if such a plan is then offered by the Employer.
(d) Notice Requirements. The Plan, the Plan Administrator and the
Employer shall each provide such notice regarding continuation coverage as they
may be required to provide under Section 4980B of the Code and Title I, Subtitle
B, Part 6 of ERISA.
(e) Election. Except as otherwise specified in an election, an election
to receive continuation coverage that is made by a Pensioned Employee or his
spouse shall be deemed to include an election for continuation coverage on
behalf of any other qualified beneficiary who would lose coverage under Article
XVII by reason of the qualifying event giving rise to the election.
17.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees to the Employer's medical benefit plan in amounts determined in the
sole discretion of the Employer from time to time. All Employer contributions
shall be made to the Trustee under the Trust Agreement provided for in Article
XI and shall be allocated to a separate account maintained solely to fund the
medical benefits provided under this Article XVII. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XVII. In the event that a Pensioned Employee's
interest in an account, or his Dependents', maintained pursuant to this Article
XVII is forfeited prior to termination of the Plan, the forfeited amount shall
be applied as soon as possible to reduce Employer contributions made under this
Article XVII. In no event at any time prior to the satisfaction of all
liabilities under this Article XVII shall any part of the corpus or income of
such separate account be used for, or diverted to, purposes other than for the
exclusive purpose of providing benefits under this Article XVII.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertainable and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XVII, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XVII after Article XVII is
terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XVII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from January
1, 1987) plus the costs of any life insurance protection shall not exceed
twenty-five percent (25%) of the sum of the aggregate of costs of retirement
benefits under the Plan (other than past service credits), the aggregate of
costs of the medical benefits and the costs of any life insurance protection
(both measured from January 1, 1987). The aggregate of costs of retirement
benefits, other than for past service credits, and the aggregate of costs of
medical benefits provided under the Plan shall be determined using the projected
unit credit funding method and the actuarial assumptions set forth in Exhibit B,
a copy of which is attached hereto and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time by the
committee responsible for providing a procedure for establishing and carrying
out a funding policy and method for the Plan pursuant to Section 10.9 of the
Plan. Effective for contributions made after January 1, 1990, the limitations
set forth in the preceding two sentences in this paragraph on amounts that may
be contributed to fund medical benefits under this Article XVII shall be based
on contributions alone and not cost. Contributions allocated to any separate
account established for a Pensioned Employee from which medical benefits will be
payable solely to such Pensioned Employee or his Dependents shall be treated as
an Annual Addition as defined in Section 6.5(a) to any defined contribution plan
maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVII.
17.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because a Dependent has become ineligible for coverage under this
Article XVII. No person shall become covered under this Article XVII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
17.8 Amendment of Article XVII. The Employer reserves the right,
through action of its Board of Directors, to amend Article XVII (including
Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any
Pensioned Employee, or his Dependents, provided, however, that no amendment of
this Article or the Trust shall cancel the payment or reimbursement of expenses
for claims already incurred by a Pensioned Employee or his Dependent prior to
the date of any amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XVII, as set
forth in the Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any Pensioned
Employee or his Dependents. The Employer makes no promise to continue these
benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or Dependents any right to continued benefits under this
Article XVII.
17.9 Termination of Article XVII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13,1, may terminate this Article XVII or permanently
discontinue contributions at any time in its sole discretion. This Article XVII,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Dependents any right to continued benefits under this
Article XVII. Effective January 1, 1991, in the event the Employer or any
adopting Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 17.3 of the Plan to its Pensioned Employees,
this Article XVII of the Plan shall automatically terminate with respect to the
Pensioned Employees and their Dependents of such Employer without the
requirement of any action by such Employer.
17.10 Reversion of assets upon termination. Upon the termination of
this Article XVII and the satisfaction of all liabilities under this Article
XVII, all remaining assets in the separate account described in Section 17.6
shall be returned to the Employer.
<PAGE>
MISSISSIPPI POWER COMPANY SCHEDULE
=============== ================================================================
MPC ss. NO. MPC PLAN TEXT
=============== ================================================================
ss. 1.18 1.18 "Employer" means Mississippi Power Company, any
successor or successors thereof and any wholly owned
subsidiary thereof which the Board of Directors may from
time to time, and upon such terms and conditions as may be
fixed by the Board of Directors, determine to bring under
the Plan, and any other corporation which shall adopt this
Plan and Trust Agreement pursuant to Section 14.1 by
appropriate resolution authorized by the board of directors
of said adopting corporation. The term "Employer" shall not
include Electric City Merchandise Company, Inc.
=============== ================================================================
<PAGE>
Schedule MPC
ARTICLE XVII
Post-retirement Medical Benefits
17.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer who is
eligible, or becomes eligible pursuant to Section 3.2 as amended, to receive
Retirement Income after his retirement at his Early, Normal, or Deferred
Retirement Date, as applicable. A "Pensioned Employee" shall not include any
former Employee who terminated his service with the Employer prior to his Early,
Normal, or Deferred Retirement Date and who is entitled to Retirement Income
under Section 8.1 or 8.2 of the Plan; a Key Employee, as defined in Section
14.6(g); or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not provide
medical benefits to its Pensioned Employees.
(b) "Dependents" means the Pensioned Employee's spouse who is not
legally separated from the Pensioned Employee and the Pensioned Employee's
unmarried children (both natural and legally adopted) within the prescribed age
limit set forth below. The term "children" includes stepchildren and foster
children who reside with the Pensioned Employee in a regular parent-child
relationship and are dependent upon the Pensioned Employee for principal support
and maintenance. The term Dependent shall not include any person who is covered,
or eligible for coverage, under the Plan as a Pensioned Employee or who is
entitled to any benefits under any provisions of this Plan because of having
been covered as a Pensioned Employee.
Children shall be considered to be within the prescribed age limit if
they are less than nineteen (19) years of age. Unmarried children age nineteen
(19) but less than age twenty-five (25) continue to be within the prescribed age
limit if they are (1) dependent upon the Pensioned Employee for their support
and maintenance, or (2) qualify as a dependent on the Pensioned Employee's tax
return. Effective March 1, 1993, unmarried children age nineteen (19) but less
than age twenty-five (25) continue to be within the prescribed age limit only if
they are (1) dependent upon the Pensioned Employee for support and maintenance,
and (2) regularly attending school on a full-time basis. For purposes of this
Article XVII, an unmarried child shall be considered to be regularly attending
school on a full-time basis if such child is enrolled in and regularly attending
a secondary school or an accredited vocational school, College or University (as
defined in Exhibit A) and meets the minimum requirements of such school, College
or University to maintain full-time status. This shall also include an unmarried
child who is enrolled as a part-time student at one of the above institutions
while such individual is taking a course load that is equivalent to the minimum
course load required for full-time student status at such institution.
If both a husband and his wife are covered under this Plan as Pensioned
Employees of the Employer, either, but not both, may elect to cover their
eligible children as Dependents.
Any person covered or eligible for coverage under Article XVII as a
Pensioned Employee, or under any group medical plan maintained by the Employer
as an Employee, shall not be considered as a Dependent.
(c) "Covered Individual" means a Pensioned Employee or Dependent of a
Pensioned Employee who is eligible to receive medical benefits under Article
XVII.
(d) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 17.1(d)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 17.1(d)(3),
(4) and (5) below, a transfer shall be treated as a Qualified
Transfer if such transfer
(i) is made after the close of the Plan Year
preceding the Employer's first Plan Year beginning
after December 31, 1990, and before the earlier of
(I) the due date (including extensions) for the
filing of the Employer's corporate tax return for
such preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the expenditures of the
Employer for Qualified Current Retiree Health
Liabilities for such preceding Plan Year.
(iii) The reduction described in the second
paragraph of Section 17.1(d)(6)(G) shall not apply to
a transfer described in Section 17.1(d)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
17.1(d)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 17.1(d)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 17.1(d)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 17.1(d)(1)(B), the requirements of this Section
17.1(d)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 17.1(d)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
17.1(d)(5), the Employer may elect at any time during the Plan Year to
have this Section 17.1(d)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 17.1(d), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to
any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 17.1(d)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
17.1(d)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 17.1(d)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any,
of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section 412(c)(7)(A)(i), or
(II) 125 percent of current liability (as defined in
Code Section 412(c)(7)(B)).
The determination under this paragraph shall
be made as of the most recent valuation date of the
Plan preceding the Qualified Transfer.
(F) "Health Benefits Account" means an account
established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities"
means, with respect to any Plan Year, the aggregate amounts,
including administrative expenses, which would have been
allowable as a deduction to the Employer for payment of
Applicable Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were provided
directly by the Employer and the Employer used the cash
receipts and disbursements method of accounting. For purposes
of the preceding sentence, the rule of Code Section
419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or
before December 8, 1994, the amount determined in the
paragraph above shall be reduced by any amount previously
contributed to a Health Benefits Account or welfare benefit
fund, as defined in Code Section 419(e)(1), to pay for the
Qualified Current Retiree Health Liabilities. The portion of
any reserves remaining as of the close of December 31, 1990
shall be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount determined under
the preceding paragraph shall be reduced by the amount which
bears the same ratio to such amount as the value (as of the
close of the Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits Accounts or
welfare benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health
Liability, bears to the present value of the Qualified Current
Retiree Health Liabilities for all Plan Years determined
without regard to this paragraph.
17.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1997 shall be
eligible for coverage as a Pensioned Employee on January 1, 1997, provided he
was covered as an Employee under a group medical plan maintained by the Employer
immediately prior to the time he became a Pensioned Employee, or is deemed
covered as determined by the Retirement Board.
(b) An Employee who becomes a Pensioned Employee on or after January 1,
1997 shall be eligible for coverage on the date he becomes a Pensioned Employee,
provided he was covered as an Employee under a group medical plan maintained by
the Employer immediately prior to the time he became a Pensioned Employee.
(c) A Dependent of a Pensioned Employee shall be eligible for coverage
under this Plan on the later of (1) the date the Pensioned Employee becomes
eligible for coverage hereunder and (2) the date such person becomes a
Dependent, and (3) the date of payment by the Pensioned Employee of any required
contributions with respect to a Dependent.
17.3 Medical benefits. The medical benefits provided under this Article
XVII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit A
and specifically incorporated herein by reference in its entirety, as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
17.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
17.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVII to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to
elect continued medical coverage as provided under the terms of Article XVII
upon the occurrence of a Qualifying Event, provided such Pensioned Employee,
Dependent spouse, or Dependent child was entitled to benefits under Article XVII
on the day prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee, Dependent spouse, or Dependent child, as appropriate, (A) the
death of the Pensioned Employee, (B) the divorce or legal separation of
the Pensioned Employee from the Dependent spouse, (C) a Dependent child
ceasing to be a Dependent as defined under the requirements of Article
XVII, or (D) a proceeding in a case under Title 11, United States Code,
with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued coverage
under this Section 17.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the Qualifying
Event and end not earlier than the first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVII of the Plan;
(3) The failure of the Pensioned Employee or Dependent to
pay any required contribution when due;
(4) The date on which the Pensioned Employee or Dependent
first becomes, after the date of his election, (A) a covered employee
under any other group health plan which does not contain any exclusion
or limitation with respect to any preexisting condition of such
individual, or (B) entitled to benefits under Title XVIII of the Social
Security Act; or
(5) The date the Dependent spouse becomes covered under
another group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such Dependent
spouse.
(d) Any election to continue coverage under this Section 17.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee, Dependent spouse, or Dependent child receives notice of a
Qualifying Event from the Employer.
(e) The Employer shall provide each Pensioned Employee and Dependent
spouse, if any, written notice of the rights provided in this Section 17.5. The
Pensioned Employee or Dependent spouse is required to notify the Employer within
thirty (30) days of any Qualifying Event described in Section 17.5(a)(1)(B) or
(C), and the Employer shall provide the Dependent spouse or Dependent child
written notice of the rights provided in this Section 17.5 within fourteen (14)
days thereafter. Notice to the Dependent spouse shall be deemed notice to each
Dependent child residing with such spouse at the time such notification is made.
17.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees to the Employer's medical benefit plan in amounts determined in the
sole discretion of the Employer from time to time. All Employer contributions
shall be made to the Trustee under the Trust Agreement provided for in Article
XI and shall be allocated to a separate account maintained solely to fund the
medical benefits provided under this Article XVII. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XVII. In the event that a Pensioned Employee's
interest in an account, or his Dependents', maintained pursuant to this Article
XVII is forfeited prior to termination of the Plan, the forfeited amount shall
be applied as soon as possible to reduce Employer contributions made under this
Article XVII. In no event at any time prior to the satisfaction of all
liabilities under this Article XVII shall any part of the corpus or income of
such separate account be used for, or diverted to, purposes other than for the
exclusive purpose of providing benefits under this Article XVII.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertainable and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XVII, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XVII after Article XVII is
terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XVII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from January
1, 1987) plus the costs of any life insurance protection shall not exceed
twenty-five percent (25%) of the sum of the aggregate of costs of retirement
benefits under the Plan (other than past service credits), the aggregate of
costs of the medical benefits and the costs of any life insurance protection
(both measured from January 1, 1987). The aggregate of costs of retirement
benefits, other than for past service credits, and the aggregate of costs of
medical benefits provided under the Plan shall be determined using the projected
unit credit funding method and the actuarial assumptions set forth in Exhibit B,
a copy of which is attached hereto and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time by the
committee responsible for providing a procedure for establishing and carrying
out a funding policy and method for the Plan pursuant to Section 10.9 of the
Plan. Effective for contributions made after January 1, 1990, the limitations
set forth in the preceding two sentences in this paragraph on amounts that may
be contributed to fund medical benefits under this Article XVII shall be based
on contributions alone and not cost. Contributions allocated to any separate
account established for a Pensioned Employee from which medical benefits will be
payable solely to such Pensioned Employee or his Dependents shall be treated as
an Annual Addition as defined in Section 6.5(a) to any defined contribution plan
maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVII.
17.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because a Dependent has become ineligible for coverage under this
Article XVII. No person shall become covered under this Article XVII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
17.8 Amendment of Article XVII. The Employer reserves the right,
through action of its Board of Directors, to amend Article XVII (including
Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any
Pensioned Employee, or his Dependents, provided, however, that no amendment of
this Article or the Trust shall cancel the payment or reimbursement of expenses
for claims already incurred by a Pensioned Employee or his Dependent prior to
the date of any amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XVII, as set
forth in the Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any Pensioned
Employee or his Dependents. The Employer makes no promise to continue these
benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or Dependents any right to continued benefits under this
Article XVII.
17.9 Termination of Article XVII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XVII or permanently
discontinue contributions at any time in its sole discretion. This Article XVII,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Dependents any right to continued benefits under this
Article XVII. Effective January 1, 1991, in the event the Employer or any
adopting Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 17.3 of the Plan to its Pensioned Employees,
this Article XVII of the Plan shall automatically terminate with respect to the
Pensioned Employees and their Dependents of such Employer without the
requirement of any action by such Employer.
17.10 Reversion of assets upon termination. Upon the termination of
this Article XVII and the satisfaction of all liabilities under this Article
XVII, all remaining assets in the separate account described in Section 17.6
shall be returned to the Employer.
<PAGE>
Schedule SCS
ARTICLE XVII
Post-retirement Medical Benefits
17.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer who is
eligible, or becomes eligible pursuant to Section 3.2 as amended, to receive
Retirement Income after his retirement at his Early, Normal, or Deferred
Retirement Date, as applicable. A "Pensioned Employee" shall not include any
former Employee who terminated his service with the Employer prior to his Early,
Normal, or Deferred Retirement Date and who is entitled to Retirement Income
under Section 8.1 or 8.2 of the Plan; a Key Employee, as defined in Section
14.6(g); or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not provide
medical benefits to its Pensioned Employees.
(b) "Dependents" means the Pensioned Employee's spouse who is not
legally separated from the Pensioned Employee and the Pensioned Employee's
unmarried children (both natural and legally adopted) within the prescribed age
limit set forth below. The term "children" includes stepchildren and foster
children who reside with the Pensioned Employee in a regular parent-child
relationship and are dependent upon the Pensioned Employee for principal support
and maintenance. The term Dependent shall not include any person who is covered,
or eligible for coverage, under the Plan as a Pensioned Employee or who is
entitled to any benefits under any provisions of this Plan because of having
been covered as a Pensioned Employee.
Children shall be considered to be within the prescribed age limit if
they are less than nineteen (19) years of age. Unmarried children age nineteen
(19) but less than age twenty-four (24) continue to be within the prescribed age
limit if they are (1) attending school on a full-time basis as defined by the
school and are dependent upon the Pensioned Employee for more than half of their
support, or (2) attending school on a part-time basis, receiving medical
treatment prescribed by an attending physician, and are dependent upon the
Pensioned Employee for more than half of their support. The attending physician
must also certify that the Dependent is mentally or physically unable to attend
school on a full-time basis.
If both a husband and his wife are covered under this Plan as Pensioned
Employees of the Employer, either, but not both, may elect to cover their
eligible children as Dependents.
Any person covered or eligible for coverage under Article XVII as a
Pensioned Employee, or under any group medical plan maintained by the Employer
as an Employee, shall not be considered as a Dependent.
(c) "Covered Individual" means a Pensioned Employee or Dependent of a
Pensioned Employee who is eligible to receive medical benefits under Article
XVII.
(d) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 17.1(d)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 17.1(d)(3), (4)
and (5) below, a transfer shall be treated as a Qualified
Transfer if such transfer
(i) is made after the close of the Plan Year
preceding the Employer's first Plan Year beginning
after December 31, 1990, and before the earlier of
(I) the due date (including extensions) for the
filing of the Employer's corporate tax return for
such preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the expenditures of the
Employer for Qualified Current Retiree Health
Liabilities for such preceding Plan Year.
(iii) The reduction described in the second
paragraph of Section 17.1(d)(6)(G) shall not apply to
a transfer described in Section 17.1(d)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
17.1(d)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 17.1(d)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 17.1(d)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 17.1(d)(1)(B), the requirements of this Section
17.1(d)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 17.1(d)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
17.1(d)(5), the Employer may elect at any time during the Plan Year to
have this Section 17.1(d)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 17.1(d), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to any
Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 17.1(d)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
17.1(d)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 17.1(d)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any, of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount determined under
Code Section 412(c)(7)(A)(i), or (II) 125 percent of current
liability (as defined in Code Section 412(c)(7)(B)).
The determination under this paragraph shall be made as
of the most recent valuation date of the Plan preceding the
Qualified Transfer.
(F) "Health Benefits Account" means an account established
and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities" means,
with respect to any Plan Year, the aggregate amounts, including
administrative expenses, which would have been allowable as a
deduction to the Employer for payment of Applicable Health
Benefits provided during the Plan Year assuming such Applicable
Health Benefits were provided directly by the Employer and the
Employer used the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence, the rule of
Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or before
December 8, 1994, the amount determined in the paragraph above
shall be reduced by any amount previously contributed to a Health
Benefits Account or welfare benefit fund, as defined in Code
Section 419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. The portion of any reserves remaining as of
the close of December 31, 1990 shall be allocated on a pro rata
basis to Qualified Current Retiree Health Liabilities. Effective
for Qualified Transfers occurring after December 8, 1994, the
amount determined under the preceding paragraph shall be reduced
by the amount which bears the same ratio to such amount as the
value (as of the close of the Plan Year preceding the year of the
Qualified Transfer) of the assets in all Health Benefits Accounts
or welfare benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without regard
to this paragraph.
17.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1997 shall be
eligible for coverage as a Pensioned Employee on January 1, 1997, provided he
was covered as an Employee under a group medical plan maintained by the Employer
immediately prior to the time he became a Pensioned Employee, or is deemed
covered as determined by the Retirement Board.
(b) An Employee who becomes a Pensioned Employee on or after January 1,
1997 shall be eligible for coverage on the date he becomes a Pensioned Employee,
provided he was covered as an Employee under a group medical plan maintained by
the Employer immediately prior to the time he became a Pensioned Employee.
(c) A Dependent of a Pensioned Employee shall be eligible for coverage
under this Plan on the later of (1) the date the Pensioned Employee becomes
eligible for coverage hereunder and (2) the date such person becomes a
Dependent.
17.3 Medical benefits. The medical benefits provided under this Article
XVII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit A
and specifically incorporated herein by reference in its entirety, as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
17.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
17.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVII to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to
elect continued medical coverage as provided under the terms of Article XVII
upon the occurrence of a Qualifying Event, provided such Pensioned Employee,
Dependent spouse, or Dependent child was entitled to benefits under Article XVII
on the day prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee, Dependent spouse, or Dependent child, as appropriate, (A) the
death of the Pensioned Employee, (B) the divorce or legal separation of
the Pensioned Employee from the Dependent spouse, (C) a Dependent child
ceasing to be a Dependent as defined under the requirements of Article
XVII, or (D) a proceeding in a case under Title 11, United States Code,
with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued coverage
under this Section 17.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the Qualifying
Event and end not earlier than the first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVII of the Plan;
(3) The failure of the Pensioned Employee or Dependent to
pay any required contribution when due;
(4) The date on which the Pensioned Employee or Dependent
first becomes, after the date of his election, (A) a covered employee
under any other group health plan which does not contain any exclusion
or limitation with respect to any preexisting condition of such
individual, or (B) entitled to benefits under Title XVIII of the Social
Security Act; or
(5) The date the Dependent spouse becomes covered under
another group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such Dependent
spouse.
(d) Any election to continue coverage under this Section 17.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee, Dependent spouse, or Dependent child receives notice of a
Qualifying Event from the Employer.
(e) The Employer shall provide each Pensioned Employee and Dependent
spouse, if any, written notice of the rights provided in this Section 17.5. The
Pensioned Employee or Dependent spouse is required to notify the Employer within
thirty (30) days of any Qualifying Event described in Section 17.5(a)(1)(B) or
(C), and the Employer shall provide the Dependent spouse or Dependent child
written notice of the rights provided in this Section 17.5 within fourteen (14)
days thereafter. Notice to the Dependent spouse shall be deemed notice to each
Dependent child residing with such spouse at the time such notification is made.
17.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees to the Employer's medical benefit plan in amounts determined in the
sole discretion of the Employer from time to time. All Employer contributions
shall be made to the Trustee under the Trust Agreement provided for in Article
XI and shall be allocated to a separate account maintained solely to fund the
medical benefits provided under this Article XVII. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XVII. In the event that a Pensioned Employee's
interest in an account, or his Dependents', maintained pursuant to this Article
XVII is forfeited prior to termination of the Plan, the forfeited amount shall
be applied as soon as possible to reduce Employer contributions made under this
Article XVII. In no event at any time prior to the satisfaction of all
liabilities under this Article XVII shall any part of the corpus or income of
such separate account be used for, or diverted to, purposes other than for the
exclusive purpose of providing benefits under this Article XVII.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertainable and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XVII, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XVII after Article XVII is
terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XVII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from January
1, 1987) plus the costs of any life insurance protection shall not exceed
twenty-five percent (25%) of the sum of the aggregate of costs of retirement
benefits under the Plan (other than past service credits), the aggregate of
costs of the medical benefits and the costs of any life insurance protection
(both measured from January 1, 1987). The aggregate of costs of retirement
benefits, other than for past service credits, and the aggregate of costs of
medical benefits provided under the Plan shall be determined using the projected
unit credit funding method and the actuarial assumptions set forth in Exhibit B,
a copy of which is attached hereto and specifically incorporated herein by
reference in its entirety, and as may be amended from time to time by the
committee responsible for providing a procedure for establishing and carrying
out a funding policy and method for the Plan pursuant to Section 10.9 of the
Plan. Effective for contributions made after January 1, 1990, the limitations
set forth in the preceding two sentences in this paragraph on amounts that may
be contributed to fund medical benefits under this Article XVII shall be based
on contributions alone and not cost. Contributions allocated to any separate
account established for a Pensioned Employee from which medical benefits will be
payable solely to such Pensioned Employee or his Dependents shall be treated as
an Annual Addition as defined in Section 6.5(a) to any defined contribution plan
maintained by the Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVII.
17.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because a Dependent has become ineligible for coverage under this
Article XVII. No person shall become covered under this Article XVII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
17.8 Amendment of Article XVII. The Employer reserves the right,
through action of its Board of Directors, to amend Article XVII (including
Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any
Pensioned Employee, or his Dependents, provided, however, that no amendment of
this Article or the Trust shall cancel the payment or reimbursement of expenses
for claims already incurred by a Pensioned Employee or his Dependent prior to
the date of any amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XVII, as set
forth in the Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any Pensioned
Employee or his Dependents. The Employer makes no promise to continue these
benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or Dependents any right to continued benefits under this
Article XVII.
17.9 Termination of Article XVII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XVII or permanently
discontinue contributions at any time in its sole discretion. This Article XVII,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Dependents any right to continued benefits under this
Article XVII. Effective January 1, 1991, in the event the Employer or any
adopting Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 17.3 of the Plan to its Pensioned Employees,
this Article XVII of the Plan shall automatically terminate with respect to the
Pensioned Employees and their Dependents of such Employer without the
requirement of any action by such Employer.
17.10 Reversion of assets upon termination. Upon the termination of
this Article XVII and the satisfaction of all liabilities under this Article
XVII, all remaining assets in the separate account described in Section 17.6
shall be returned to the Employer.
<PAGE>
SOUTHERN NUCLEAR OPERATING COMPANY, INC. SCHEDULE
================== =============================================================
SONOPCO
ss. NO. SONOPCO PLAN TEXT
================== =============================================================
ss. 1.13(a) & (b) 1.13 (a) "Earnings" with respect to any Employee
including any Employee whose service is terminated by reason
of disability (as defined in Section 4.3) means (1) the
highest annual rate of salary or wages of an Employee of the
Employer or employee of any Affiliated Employer within any
Plan Year before deductions for taxes, Social Security,
etc., (2) with respect to Plan Years beginning after January
1, 1991, monthly shift and seven-day differentials and
nuclear plan premiums, (3) all amounts contributed by the
Employer or any Affiliated Employer to The Southern Company
Employee Savings Plan as Elective Employer Contributions, as
said term is described under Section 4.1 of such plan,
pursuant to the Employee's exercise of his deferral option
made thereunder in accordance with the requirements of
Section 401(k) of the Code, (4) all amounts contributed by
the Employer or any Affiliated Employer to The Southern
Electric System Flexible Benefits Plan or The Southern
Company Flexible Benefits Plan on behalf of an Employee
pursuant to his salary reduction election, and applied to
provide one or more of the optional benefits available under
such plan, but (5) shall exclude all amounts deferred under
any non-qualified deferred compensation plan maintained by
the Employer or any Affiliated Employer.
================== =============================================================
ss. 1.14 1.14 "Effective Date" means the original effective date
of the Plan, January 1, 1991. The effective date of this
amendment and restatement is also January 1, 1991.
================== =============================================================
================== =============================================================
ss. 1.32 1.32 "Social Security Offset" shall mean an amount
equal to one-half (1/2) of the amount, if any, of the
Federal primary Social Security benefit (primary old age
insurance benefit) to which it is estimated that an Employee
will become entitled in accordance with the Social Security
Act in force as provided in subparagraphs (a) through (e)
below which shall exceed $250 per month on and after January
1, 1991, and for Employees who (a) are not covered by the
terms of a collective bargaining agreement or (b) are
covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and the
Employer have mutually agreed to participation in the Plan
as amended, $325 per month on and after January 1, 1996,
multiplied by a fraction not greater than one, the numerator
of which shall be the Employee's total Accredited Service,
and the denominator of which shall be such total Accredited
Service plus the Accredited Service the Employee could have
accumulated if he had continued his employment from the date
he terminates service with his Employer or any Affiliated
Employer until his Normal Retirement Date. For purposes of
determining the estimated Federal primary Social Security
benefit used in the Social Security Offset, an Employee
shall be deemed to be entitled to receive Federal primary
Social Security benefits after retirement or death, if
earlier, regardless of the fact that he may have
disqualified himself to receive payment thereof. In addition
to the foregoing, the calculation of the Social Security
benefit shall be based on the salary history of the Employee
as provided in Section 5.4 and shall be determined pursuant
to the following, as applicable:
================== =============================================================
ss. 2.2 2.2 Employees represented by a collective bargaining
agent. An The Employer recognizes Local 84 and System
Council U-19 of the International Brotherhood of Electrical
Workers as the exclusive representative of all employees
covered by the Memorandum of Agreement between Local Union
No. 84 and System Council U-19 and the Employer, and it is
further agreed that these employees are eligible to
participate in accordance with the provisions of the Plan.
Any other Employee who is represented by a collective
bargaining agent may participate in the Plan, subject to its
terms, if the representative(s) of his bargaining unit and
the Employer mutually agree to participation in the Plan by
members of his bargaining unit.
================== =============================================================
ss. 2.3 An Employee not already included in the Plan who is
granted a leave of absence on or after 3rd P. January 1,
1991 to serve as Business Manager or Assistant Business
Manager of System Council U-19, or to carry on union
business at the local or international offices of the
I.B.E.W. Local No. 84, and who makes timely written election
to participate in the Plan during such leave of absence,
shall be credited with Hours of Service as though the period
of absence was a period of active employment with the
Employer for the period (or portion of the period). Such
Employee shall be included in the Plan when he meets the
requirements of this Article II if he is, on the date of
such inclusion, on such leave of absence or has returned to
the active employment of the Employer. The crediting of
Hours of Service with respect to such Employee shall
continue only so long as such Employee remains on leave in
such capacity as stated above.
================== =============================================================
ss. 4.1(a) 4.1 Accredited Service.
(a) Each Employee meeting the requirements of Article
II shall be credited with Accredited Service as set forth in
(b) below. Any such Employee who is on authorized leave of
absence with regular pay shall be credited with Accredited
Service during the period of such absence. Any such Employee
who is a "participant in the Plan" within the meaning of
that term as defined in paragraph (a) of Section 5.11 shall
be credited with Accredited Service during all or such
portion of the period of his absence to serve in the Armed
Forces of the United States as may be recognized under
paragraph (b) of Section 5.11. Employees on authorized leave
of absence without regular pay, other than Employees deemed
to accrue Hours of Service under Section 4.3 , and persons
in the Armed Forces who are not "participants in the Plan"
within the meaning of that term as defined in paragraph (a)
of Section 5.11 shall not be credited with Accredited
Service for the period of such absence.
================== =============================================================
ss. 4.1(a) An Employee who is on an approved leave of absence from
the Employer to serve as Business Manager or Assistant
Business Manager for System Council U-19, or to carry on
union business at the local or international office of
I.B.E.W. Local No. 84 and who makes timely written election
to participate in the Plan during such leave of absence,
shall be credited with Accredited Service for the period (or
portion of the period) after January 1, 1991 covered by such
timely written election. For the purpose of determining the
Earnings of such Employee during the period (or portion of
the period) after January 1, 1991, of such leave of absence,
he shall be deemed to have received Earnings at the rate of
Earnings being paid to him at the time of his leave of
absence for union business commenced, adjusted during such
leave of absence for any general wage increase or decrease
during such period applicable to Employees in the category
of employment in which the Employee was employed at the time
his leave of absence commenced.
================== =============================================================
================== =============================================================
ss. 5.1 5.1 Normal Retirement Income. The monthly Retirement
Income payable as a single life annuity to an Employee
included in the Plan who retires from the service of the
Employer at his Normal Retirement Date, subject to the
limitations of Article VI, shall be the greater of (a) and
(b):
(a) $25.00 times an Employee's years of Accredited
Service; and
(b) the Minimum Retirement Income as determined in
accordance with Section 5.2.
================== =============================================================
<PAGE>
Schedule SONOPCO
ARTICLE XVII
Post-retirement Medical Benefits
After Attainment of Normal Retirement Date
1
17.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer (1)
who is eligible to receive Retirement Income after the attainment of his Normal
or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan,
(2) who was insured under the group health plan of the Employer on the last day
worked prior to retirement, (3) who is not insured under any group insurance
plan providing hospitalization and medical coverage to which the Employer
contributes, (4) who resides in the United States, (5) who has become eligible
for Medicare and, if the Pensioned Employee's retirement occurred before
attainment of Medicare eligibility, the premiums for hospitalization and medical
coverage were being deducted from his Retirement Income continuously until his
eligibility for Medicare, and (6) who was insured under the group health plan of
the Employer on the last day worked prior to qualifying for benefits under the
long-term disability plan of the Employer. A "Pensioned Employee" shall not
include (1) any former Employee who terminated his service with the Employer
prior to his Early, Normal, or Deferred Retirement Date and who is entitled to
Retirement Income under the Plan, (2) a Key Employee, as defined in Section
14.6(g), (3) any Pensioned Employee of an Employer that has adopted the Plan
pursuant to Section 14.1 hereof but does not provide medical benefits to its
Pensioned Employees, or (4) any individual classified by the Employer as a
temporary employee, a leased employee or an independent contractor.
(b) "Spouse" means the Pensioned Employee's spouse (1) who is not
legally separated from the Pensioned Employee, (2) who was insured under the
group health plan of the Employer on the last day prior to the Pensioned
Employee's retirement, (3) who is not insured under any group insurance plan
providing hospitalization and medical coverage to which the Employer
contributes, (4) who resides in the United States, (5) who has become eligible
for Medicare and, if the Pensioned Employee's retirement occurred before his
Spouse became eligible for Medicare, premiums for hospitalization and medical
coverage for both the Pensioned Employee and his Spouse were being deducted from
his Retirement Income continuously until his Spouse became eligible for
Medicare, and (6) in the case of a surviving spouse of a deceased Pensioned
Employee, who was insured as a Spouse at the time of the Pensioned Employee's
death.
(c) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 17.1(c)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 17.1(c)(3),
(4) and (5) below, a transfer shall be treated as a Qualified
Transfer if such transfer
(i) is made after the close of the Plan Year
preceding the Employer's first Plan Year beginning
after December 31, 1990, and before the earlier of
(I) the due date (including extensions) for the
filing of the Employer's corporate tax return for
such preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the expenditures of the
Employer for Qualified Current Retiree Health
Liabilities for such preceding Plan Year.
(iii) The reduction described in the second
paragraph of Section 17.1(c)(6)(G) shall not apply to
a transfer described in Section 17.1(c)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
17.1(c)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 17.1(c)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 17.1(c)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Spouse under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 17.1(c)(1)(B), the requirements of this Section
17.1(c)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 17.1(c)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
17.1(c)(5), the Employer may elect at any time during the Plan Year to
have this Section 17.1(c)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 17.1(c), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to
any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 17.1(c)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health
benefits or coverage which are provided to Pensioned Employees
who immediately before the Qualified Transfer are eligible to
receive such benefits and their Spouses.
(C) "Benefit Maintenance Period" means the period of
five (5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of
five (5) Plan Years beginning with the taxable year in which
the Qualified Transfer occurs. If a Plan Year is in two (2) or
more overlapping Cost Maintenance periods, this Section
17.1(c)(6)(D) shall be applied by taking into account the
highest Applicable Employer Cost required to be provided under
Section 17.1(c)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any,
of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section 412(c)(7)(A)(i), or
(II) 125 percent of current liability (as defined in
Code Section 412(c)(7)(B)).
The determination under this paragraph shall
be made as of the most recent valuation date of the
Plan preceding the Qualified Transfer.
(F) "Health Benefits Account" means an account
established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities"
means, with respect to any Plan Year, the aggregate amounts,
including administrative expenses, which would have been
allowable as a deduction to the Employer for payment of
Applicable Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were provided
directly by the Employer and the Employer used the cash
receipts and disbursements method of accounting. For purposes
of the preceding sentence, the rule of Code Section
419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or
before December 8, 1994, the amount determined in the
paragraph above shall be reduced by any amount previously
contributed to a Health Benefits Account or welfare benefit
fund, as defined in Code Section 419(e)(1), to pay for the
Qualified Current Retiree Health Liabilities. The portion of
any reserves remaining as of the close of December 31, 1990
shall be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount determined under
the preceding paragraph shall be reduced by the amount which
bears the same ratio to such amount as the value (as of the
close of the Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits Accounts or
welfare benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health
Liability, bears to the present value of the Qualified Current
Retiree Health Liabilities for all Plan Years determined
without regard to this paragraph.
17.2 Eligibility of Pensioned Employees and their Spouses.
(a) An Employee who becomes a Pensioned Employee shall be eligible for
coverage on the date he becomes a Pensioned Employee, provided he was insured as
an Employee under a group medical plan maintained by the Employer immediately
prior to the time he became a Pensioned Employee and has authorized the
deduction from his Retirement Income of any applicable contributions required of
Pensioned Employees under this Article XVII.
(b) A Spouse of a Pensioned Employee shall be eligible for coverage
under this Plan on the later of (1) the date the Pensioned Employee becomes
eligible for coverage hereunder and (2) the date such person becomes a Spouse,
provided the Pensioned Employee has authorized the deduction from his Retirement
Income of any applicable contributions required of Pensioned Employees under
this Article XVII.
17.3 Medical benefits. The medical benefits provided under this Article
XVII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit A
and specifically incorporated herein by reference in its entirety, as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
17.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of a Spouse shall cease as follows:
(1) when Article XVII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
17.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVII to the contrary notwithstanding, a
Pensioned Employee or Spouse shall be entitled to elect continued medical
coverage as provided under the terms of Article XVII upon the occurrence of a
Qualifying Event, provided such Pensioned Employee or Spouse was entitled to
benefits under Article XVII on the day prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee or Spouse, as appropriate, (A) the death of the Pensioned
Employee, (B) the divorce or legal separation of the Pensioned Employee
from his Spouse, or (C) a proceeding in a case under Title 11, United
States Code, with respect to the Employer.
(b) The Pensioned Employee or Spouse electing continued coverage under
this Section 17.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee or Spouse
shall begin on the date of the Qualifying Event and end not earlier than the
first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVII of the Plan;
(3) The failure of the Pensioned Employee or Spouse to pay
any required contribution when due;
(4) The date on which the Pensioned Employee or Spouse first
becomes, after the date of his election, (A) a covered employee under
any other group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such
individual, or (B) entitled to benefits under Title XVIII of the Social
Security Act; or
(5) The date the Spouse becomes covered under another group
health plan which does not contain any exclusion or limitation with
respect to any preexisting condition of such Spouse.
(d) Any election to continue coverage under this Section 17.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee or Spouse receives notice of a Qualifying Event from the
Employer.
(e) The Employer shall provide each Pensioned Employee and Spouse, if
any, written notice of the rights provided in this Section 17.5. The Pensioned
Employee or Spouse is required to notify the Employer within thirty (30) days of
any Qualifying Event described in Section 17.5(a)(1)(B), and the Employer shall
provide the Spouse written notice of the rights provided in this Section 17.5
within fourteen (14) days thereafter.
17.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees to the Employer's medical benefit plan in amounts determined in the
sole discretion of the Employer from time to time. All Employer contributions
shall be made to the Trustee under the Trust Agreement provided for in Article
XI and shall be allocated to a separate account maintained solely to fund the
medical benefits provided under this Article XVII. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XVII. In the event that a Pensioned Employee's
interest in an account, or his Spouses', maintained pursuant to this Article
XVII is forfeited prior to termination of the Plan, the forfeited amount shall
be applied as soon as possible to reduce Employer contributions made under this
Article XVII. In no event at any time prior to the satisfaction of all
liabilities under this Article XVII shall any part of the corpus or income of
such separate account be used for, or diverted to, purposes other than for the
exclusive purpose of providing benefits under this Article XVII.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertaining and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XVII, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XVII after Article XVII is
terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XVII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of contributions of the medical benefits (measured from
January 1, 1991) plus the contributions of any life insurance protection shall
not exceed twenty-five percent (25%) of the sum of the aggregate of
contributions of retirement benefits under the Plan (other than past service
credits), the aggregate of contributions of the medical benefits and the
contributions of any life insurance protection (both measured from January 1,
1991). Contributions allocated to any separate account established for a
Pensioned Employee from which medical benefits will be payable solely to such
Pensioned Employee or his Spouse shall be treated as an Annual Addition as
defined in Section 6.5(a) to any defined contribution plan maintained by the
Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVII.
17.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because his Spouse has become ineligible for coverage under this
Article XVII. No person shall become covered under this Article XVII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
17.8 Amendment of Article XVII. The Employer reserves the right,
through action of its Board of Directors, to amend Article XVII (including
Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any
Pensioned Employee or his Spouse, provided, however, that no amendment of this
Article or the Trust shall cancel the payment or reimbursement of expenses for
claims already incurred by a Pensioned Employee or his Spouse prior to the date
of any amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XV, as set
forth in the Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any Pensioned
Employee or his Spouse. The Employer makes no promise to continue these benefits
in the future and rights to future benefits will never vest. In particular,
retirement or the fulfillment of the prerequisites for a retirement benefit
pursuant to the terms of the Plan or under the terms of any other employee
benefit plan maintained by the Employer shall not confer upon any Pensioned
Employee or Spouse any right to continued benefits under this Article XVII.
17.9 Termination of Article XVII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XVII or permanently
discontinue contributions at any time in its sole discretion. This Article XVII,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Spouse. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Spouse any right to continued benefits under this
Article XVII. In the event the Employer or any adopting Employer shall terminate
its provision of the medical benefits described in Exhibit A to Section 17.3 of
the Plan to its Pensioned Employees, this Article XVII of the Plan shall
automatically terminate with respect to the Pensioned Employees and their
Dependents of such Employer without the requirement of any action by such
Employer.
17.10 Reversion of assets upon termination. Upon the termination of
this Article XVII and the satisfaction of all liabilities under this Article
XVII, all remaining assets in the separate account described in Section 17.6
shall be returned to the Employer.
<PAGE>
ARTICLE XVIII
Post-retirement Medical Benefits prior
to attainment of Normal Retirement Date
1
18.1 Definitions. The following words and phraseology as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
(a) "Pensioned Employee" means a former Employee of the Employer who is
eligible, or becomes eligible pursuant to Section 3.2 as amended, to receive
Retirement Income after his retirement at his Early Retirement Date, and prior
to attainment of his Normal Retirement Date, pursuant to the terms of the Plan,
and who was insured, or is deemed to be insured by the Retirement Board, under
the group health plan of the Employer on the last day worked prior to his
retirement and who is not yet eligible for Medicare. A "Pensioned Employee"
shall not include (1) a Key Employee, as defined in Section 14.6(g), (2) any
Pensioned Employee of an Employer that has adopted the Plan pursuant to Section
14.1 hereof but does not provide medical benefits to its Pensioned Employees,
(3) any individual who is classified by the Employer as a temporary employee, a
leased employee, or an independent contractor, or (4) any former Employee who
terminated his service with the Employer prior to his Early, Normal, or Deferred
Retirement Date and who is entitled to Retirement Income under Section 8.1 or
8.2 of the Plan.
(b) "Dependents" means a person who was insured by the Pensioned
Employee under the Employer's program of medical insurance on the last day prior
to retirement and who is:
(1) the spouse of the Pensioned Employee, or
(2) an unmarried child of either or both under nineteen (19)
years of age, or
(3) an unmarried child of either or both between nineteen
(19) and twenty-five (25) years of age who is a full-time student
in a course of study or training (approved by the Employer), not
employed on a regular full-time basis and chiefly dependent upon
the Pensioned Employee for support, or
(4) an unmarried child of either or both who is mentally or
physically incapacitated (as evidenced by a statement of
incapacitation from the child's physician) and incapable of
self-support and chiefly dependent upon the Employee for support.
The incapacity must occur prior to age nineteen (19) and the
child or stepchild must have continuous coverage from the date of
the occurrence of the incapacity.
The term "child" as used in this definition is limited to the
following:
(1) Any natural child of the Pensioned Employee;
(2) Any child of the Pensioned Employee's spouse who regularly
and permanently resides with the Pensioned Employee and such spouse in
a parent-child relationship during the marriage; and
(3) A child placed for adoption with the Pensioned Employee
(as such term is defined in Exhibit B).
(c) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs (1)
through (6) below.
(1) (A) Except as provided in Section 18.1(c)(1)(B) below, no
more than 1 transfer per Plan Year may be treated as a Qualified
Transfer.
(B) Subject to the provisions of Sections 18.1(c)(3),
(4) and (5) below, a transfer shall be treated as a Qualified
Transfer if such transfer
(i) is made after the close of the Plan Year
preceding the Employer's first Plan Year beginning
after December 31, 1990, and before the earlier of
(I) the due date (including extensions) for the
filing of the Employer's corporate tax return for
such preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the expenditures of the
Employer for Qualified Current Retiree Health
Liabilities for such preceding Plan Year.
(iii) The reduction described in the second
paragraph of Section 18.1(c)(6)(G) shall not apply to
a transfer described in Section 18.1(c)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a reasonable
estimate of the amount the Employer will pay (directly or through
reimbursement) out of the Health Benefits Accounts for Qualified
Current Retiree Health Liabilities during the Plan Year of the
transfer.
(3) (A) Any assets transferred to a Health Benefits Account in
a Qualified Transfer (and any income allocated thereto) shall only be
used to pay Qualified Current Retiree Health Liabilities (whether
directly or through reimbursement).
(B) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocable
thereto) which are not used as provided in Section
18.1(c)(3)(A) above shall be transferred from the Health
Benefits Account back to the Plan.
(C) For purposes of this Section 18.1(c)(3), any
amount transferred from a Health Benefits Account shall be
treated as paid first out of the assets and income described
in Section 18.1(c)(3)(A) above.
(4) (A) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become nonforfeitable in the
same manner which would be required if the Plan had terminated
immediately before the Qualified Transfer (or in the case of a
Pensioned Employee who terminated service during the 1-year period
ending on the date of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer described in
Section 18.1(c)(1)(B), the requirements of this Section
18.1(c)(4) are met with respect to any Pensioned Employee who
terminated service during the Plan Year to which such
Qualified Transfer relates by recomputing such Pensioned
Employee's benefits as if Section 18.1(c)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or before
December 8, 1994, the Applicable Employer Cost for each Plan Year
during the Cost Maintenance Period shall not be less than the higher of
the Applicable Employer Cost for each of the two Plan Years immediately
preceding the Plan Year of the Qualified Transfer. Effective for
Qualified Transfers occurring after December 8, 1994, the medical
benefits plan set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year during
the Benefit Maintenance Period shall be substantially the same as the
Applicable Health Benefits provided by the Employer during the Plan
Year immediately preceding the Plan Year of the Qualified Transfer.
Notwithstanding any other provision to the contrary in this Section
18.1(c)(5), the Employer may elect at any time during the Plan Year to
have this Section 18.1(c)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of the
Social Security Act and with respect to Pensioned Employees which are
not so eligible.
(6) For purposes of this Section 18.1(c), the following words
and phraseology shall have the following meanings unless a different
meaning is plainly required by the context:
(A) "Applicable Employer Cost" means, with respect to any
Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health
Liabilities of the Employer for such Plan Year
determined (I) without regard to any reduction under
Section 18.1(c)(6)(G), and (II) in the case of a Plan
Year in which there was no Qualified Transfer in the
same manner as if there had been such a transfer at
the end of the Plan Year, by
(ii) the number of individuals to whom
coverage for Applicable Health Benefits was provided
during such Plan Year.
(B) "Applicable Health Benefits" means health benefits or
coverage which are provided to Pensioned Employees who
immediately before the Qualified Transfer are eligible to receive
such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of five
(5) Plan Years beginning with the Plan Year in which the
Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of five (5)
Plan Years beginning with the taxable year in which the Qualified
Transfer occurs. If a Plan Year is in two (2) or more overlapping
Cost Maintenance periods, this Section 18.1(c)(6)(D) shall be
applied by taking into account the highest Applicable Employer
Cost required to be provided under Section 18.1(c)(6)(A) for such
Plan Year.
(E) "Excess Pension Assets" means the excess, if any, of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount determined under
Code Section 412(c)(7)(A)(i), or (II) 125 percent of current
liability (as defined in Code Section 412(c)(7)(B)).
The determination under this paragraph shall be made as
of the most recent valuation date of the Plan preceding the
Qualified Transfer.
(F) "Health Benefits Account" means an account established
and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities" means,
with respect to any Plan Year, the aggregate amounts, including
administrative expenses, which would have been allowable as a
deduction to the Employer for payment of Applicable Health
Benefits provided during the Plan Year assuming such Applicable
Health Benefits were provided directly by the Employer and the
Employer used the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence, the rule of
Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or before
December 8, 1994, the amount determined in the paragraph above
shall be reduced by any amount previously contributed to a Health
Benefits Account or welfare benefit fund, as defined in Code
Section 419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. The portion of any reserves remaining as of
the close of December 31, 1990 shall be allocated on a pro rata
basis to Qualified Current Retiree Health Liabilities. Effective
for Qualified Transfers occurring after December 8, 1994, the
amount determined under the preceding paragraph shall be reduced
by the amount which bears the same ratio to such amount as the
value (as of the close of the Plan Year preceding the year of the
Qualified Transfer) of the assets in all Health Benefits Accounts
or welfare benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health Liability,
bears to the present value of the Qualified Current Retiree
Health Liabilities for all Plan Years determined without regard
to this paragraph.
18.2 Application for and commencement of coverage.
(a) Every Pensioned Employee, as defined in Section 18.1, shall be
entitled to apply for coverage for himself and his eligible Dependents, provided
such Pensioned Employee shall authorize the deduction from his Retirement Income
of any applicable contributions required of Pensioned Employees under this
Article XVIII.
(b) If the required contributions for coverage of a Pensioned Employee
and his Dependents have been paid in advance in accordance with Article XVIII,
the Employer's coverage of a Pensioned Employee and his Dependents who were
continuously covered, or deemed to be continuously covered by the Retirement
Board, under a prior medical plan maintained by the Employer on the day before
the retirement of a Pensioned Employee shall continue under Article XVIII
commencing with such effective date, subject to any waiting periods. Application
for such prior medical plan shall be deemed to be application for coverage under
Article XVIII.
18.3 Medical benefits. The medical benefits provided under this Article
XVIII by the Employer and each adopting Employer are set forth in the copy of
each such Employer's medical benefits plan which is attached hereto as Exhibit B
and specifically incorporated herein by reference in its entirety, and as may be
amended from time to time. Such medical benefits shall be subject without
limitation to all deductibles, maximums, exclusions, coordination with Medicare
and other medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
18.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XVIII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit B.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XVIII is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit B.
Unless the coverage of a Dependent shall otherwise cease as provided in
this Section 18.4(b), such coverage shall not terminate when the Pensioned
Employee ceases to be covered under this Article XVIII, provided such Pensioned
Employee elects coverage under Article XVII above.
18.5 Continuation of coverage to certain individuals.
(a) Anything in Article XVIII to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to
elect continued medical coverage as provided under the terms of Article XVIII
upon the occurrence of a Qualifying Event, provided such Pensioned Employee,
Dependent spouse, or Dependent child was entitled to benefits under Article
XVIII on the day prior to the Qualifying Event.
(1) "Qualifying Event" means with respect to any Pensioned
Employee, Dependent spouse, or Dependent child, as appropriate, (A) the
death of the Pensioned Employee, (B) the divorce or legal separation of
the Pensioned Employee from the Dependent spouse, (C) a Dependent child
ceasing to be a Dependent as defined under the requirements of Article
XVIII, or (D) a proceeding in a case under Title 11, United States
Code, with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued coverage
under this Section 18.5 shall be required to pay such monthly contributions as
determined by the Employer to be equal to a reasonable estimate of 102% of the
cost of providing coverage for such period for similarly situated beneficiaries
which (1) is determined on an actuarial basis and (2) takes into account such
factors as the Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the Qualifying
Event and end not earlier than the first to occur of the following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XVIII of the Plan;
(3) The failure of the Pensioned Employee or Dependent to
pay any required contribution when due;
(4) The date on which the Pensioned Employee or Dependent
first becomes, after the date of his election, (A) a covered
employee under any other group health plan which does not contain
any exclusion or limitation with respect to any preexisting
condition of such individual, or (B) entitled to benefits under
Title XVIII of the Social Security Act; or
(5) The date the Dependent spouse becomes covered under
another group health plan which does not contain any exclusion or
limitation with respect to any preexisting condition of such
Dependent spouse.
(d) Any election to continue coverage under this Section 18.5 shall be
made during the election period (1) beginning not later than the termination
date of coverage by reason of the Qualifying Event and (2) ending sixty (60)
days following the later of the date described in (1) above or the date any
Pensioned Employee, Dependent spouse, or Dependent child receives notice of a
Qualifying Event from the Employer.
(e) The Employer shall provide each Pensioned Employee and Dependent
spouse, if any, written notice of the rights provided in this Section 18.5. The
Pensioned Employee or Dependent spouse is required to notify the Employer within
thirty (30) days of any Qualifying Event described in Section 18.5(a)(1)(B) or
(C), and the Employer shall provide the Dependent spouse or Dependent child
written notice of the rights provided in this Section 18.5 within fourteen (14)
days thereafter. Notice to the Dependent spouse shall be deemed notice to each
Dependent child residing with such spouse at the time such notification is made.
18.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to provide the
medical benefits under Article XVIII will be made from time to time by or on
behalf of the Employer, and contributions shall be required of the Pensioned
Employees to the Employer's medical benefit plan in amounts determined in the
sole discretion of the Employer from time to time. All Employer contributions
shall be made to the Trustee under the Trust Agreement provided for in Article
XI and shall be allocated to a separate account maintained solely to fund the
medical benefits provided under this Article XVIII. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding of medical
benefits under this Article XVIII. In the event that a Pensioned Employee's
interest in an account, or his Dependents', maintained pursuant to this Article
XVIII is forfeited prior to termination of the Plan, the forfeited amount shall
be applied as soon as possible to reduce Employer contributions made under this
Article XVIII. In no event at any time prior to the satisfaction of all
liabilities under this Article XVIII shall any part of the corpus or income of
such separate account be used for, or diverted to, purposes other than for the
exclusive purpose of providing benefits under this Article XVIII.
The amount of contributions to be made by or on behalf of the Employer
for any Plan Year, if any, shall be reasonable and ascertainable and shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions and coverage of Article XVIII, the funding
medium, and any other applicable considerations. However, the Employer is under
no obligation to make any contributions under Article XVIII after Article XVIII
is terminated, except to fund claims for medical expenses incurred prior to the
date of termination.
The medical benefits provided under this Article XVIII, when added to
any life insurance protection provided under the Plan, shall be subordinate to
the retirement benefits provided under the Plan.
The aggregate of contributions of the medical benefits (measured from
January 1, 1991) plus the contributions of any life insurance protection shall
not exceed twenty-five percent (25%) of the sum of the aggregate of
contributions of retirement benefits under the Plan (other than past service
credits), the aggregate of contributions of the medical benefits and the
contributions of any life insurance protection (both measured from January 1,
1991). Contributions allocated to any separate account established for a
Pensioned Employee from which medical benefits will be payable solely to such
Pensioned Employee or his Dependents shall be treated as an Annual Addition as
defined in Section 6.5(a) to any defined contribution plan maintained by the
Employer.
(b) Effective January 1, 1991, the Employer shall have the right, in
its sole discretion, to make a Qualified Transfer of all or a portion of any
Excess Pension Assets contributed to fund Retirement Income under the Plan to
the Health Benefits Accounts to fund medical benefits under this Article XVIII.
18.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer promptly in
writing when a change in the amount of the Pensioned Employee's contribution is
in order because a Dependent has become ineligible for coverage under this
Article XVIII. No person shall become covered under this Article XVIII for whom
the Pensioned Employee has not made the required contribution. Any contribution
paid by a Pensioned Employee for any person after such person shall have become
ineligible for coverage under this Article XVIII shall be returned upon written
request but only provided such written request by or on behalf of the Pensioned
Employee is received by the Employer within ninety (90) days from the date
coverage terminates with respect to such ineligible person.
18.8 Amendment of Article XVIII. The Employer reserves the right,
through action of its Board of Directors, to amend Article XVIII (including
Exhibit B) or the Trust without the consent of any Pensioned Employee or his
Dependents, provided, however, that no amendment of this Article or the Trust
shall cancel the payment or reimbursement of expenses for claims already
incurred by a Pensioned Employee or his Dependent prior to the date of any
amendment, nor shall any such amendment increase the duties and obligations of
the Trustee except with its consent. This Article XVIII, as set forth in the
Plan document, is not a contract and non-contributory benefits hereunder are
provided gratuitously, without consideration from any Pensioned Employee or his
Dependents. The Employer makes no promise to continue these benefits in the
future and rights to future benefits will never vest. In particular, retirement
or the fulfillment of the prerequisites for a retirement benefit pursuant to the
terms of the Plan or under the terms of any other employee benefit plan
maintained by the Employer shall not confer upon any Pensioned Employee or the
Dependent of any Pensioned Employee any right to continued benefits under this
Article XVIII.
18.9 Termination of Article XVIII. Although it is the intention of the
Employer that this Article shall be continued and the contribution shall be made
regularly thereto each year, the Employer, by action of its Board of Directors
pursuant to Section 13.1, may terminate this Article XVIII or permanently
discontinue contributions at any time in its sole discretion. This Article XVI,
as set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to continue
these benefits in the future and rights to future benefits will never vest. In
particular, retirement or the fulfillment of the prerequisites for a retirement
benefit pursuant to the terms of the Plan or under the terms of any other
employee benefit plan maintained by the Employer shall not confer upon any
Pensioned Employee or his Dependents any right to continued benefits under this
Article XVIII. In the event the Employer or any adopting Employer shall
terminate its provision of the medical benefits described in Exhibit B to
Section 18.3 of the Plan to its Pensioned Employees, this Article XVIII of the
Plan shall automatically terminate with respect to the Pensioned Employees of
such Employer without the requirement of any action by such Employer.
18.10 Reversion of assets upon termination. Upon the termination of
this Article XVIII and the satisfaction of all liabilities under this Article
XVIII, any remaining assets in the separate account described in Section 18.6
shall be returned to the Employer.
<PAGE>
Exhibit 10(d)22
FIRST AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
GULF POWER COMPANY
WHEREAS, the Board of Directors of Gulf Power Company (the "Company")
heretofore adopted the amendment and restatement of the Pension Plan for
Employees of Gulf Power Company (the "Plan") effective January 1, 1989 in order
to comply with the Internal Revenue Code of 1986, as amended, (the "Code") and
to make other technical and clarifying changes; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
additional requirements imposed by the Internal Revenue Service and to make
certain other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1989, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.14(b) should be deleted in its entirety and replaced by the
following:
(b) Notwithstanding the above, "Earnings" with
respect to any commissioned salesperson means the salary or
wages of an Employee of the Employer or employee of any
Affiliated Employer within any Plan Year, without including
overtime, and before deductions for taxes, Social Security,
etc. but applying those adjustments identified in paragraphs
(a)(2), (3) and (4) above. In addition, "Earnings" for any
Employee who is a regular part-time employee means with regard
to paragraph (a)(1) above the highest annual rate of salary or
wages based on a forty (40) hour work week.
II.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary
Social Security benefit (primary old age insurance benefit) to
which it is estimated that an Employee will become entitled in
accordance with the Social Security Act in force as provided
in subparagraphs (a) through (e) below which shall exceed $168
per month on and after January 1, 1989, and $250 per month, on
and after January 1, 1991, multiplied by a fraction not
greater than one, the numerator of which shall be the
Employee's total Accredited Service, and the denominator of
which shall be such total Accredited Service plus the
Accredited Service the Employee could have accumulated if he
had continued his employment from the date he terminates
service with his Employer or any Affiliated Employer until his
Normal Retirement Date. For purposes of determining the
estimated Federal primary Social Security benefit used in the
Social Security Offset, an Employee shall be deemed to be
entitled to receive Federal primary Social Security benefits
after retirement or death, if earlier, regardless of the fact
that he may have disqualified himself to receive payment
thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history
of the Employee as provided in Section 5.4(b) and shall be
determined pursuant to the following, as applicable:
III.
Section 2.6 should be deleted in its entirety and replaced by the
following:
2.6 Exclusion of certain categories of employees.
Notwithstanding any other provision of this Article II, leased
employees shall not be eligible to participate in the Plan. In
addition, temporary employees, except Employees as defined in
Section 1.17 participating in the Plan prior to July 1, 1991,
shall not be eligible to participate in the Plan. Any person
who is employed by Electric City Merchandise Company, Inc. on
or after May 1, 1988, or who is employed by Savannah Electric
and Power Company on or after March 3, 1988, shall not be
entitled to accrue Retirement Income under the Plan while
employed at such companies.
IV.
Effective September 1, 1996, Section 5.4(a) should be deleted in its
entirety.
V.
Effective September 1, 1996, Section 5.4(b) should be deleted in its
entirety and a new Section 5.4 should be inserted as follows:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an
Employee's Retirement Income under the Plan, the Social
Security Offset shall be determined by using the actual salary
history of the Employee during his employment with the
Employer or any Affiliated Employer, provided that in the
event that the Retirement Board is unable to secure such
actual salary history within 90 days (or such longer period as
may be prescribed by the Retirement Board) following the later
of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is
notified of the Retirement Income to which he is entitled, the
salary history shall be determined in the following manner:
(1) The salary history shall be estimated by
applying a salary scale, projected backwards, to the
Employee's compensation from the Employer for W-2
purposes for the first Plan Year following the most
recent Plan Year for which the salary history is
estimated. The salary scale shall be a level
percentage per year equal to six percent (6%) per
annum.
(2) The Plan shall give clear written notice
to each Employee of the Employee's right to supply
the actual salary history and of the financial
consequences of failing to supply such history. Such
notice shall state that the actual salary history is
available from the Social Security Administration.
For purposes of determining the Social Security
Offset in calculating the Retirement Income of an Employee
entitled to receive a public pension based on his employment
with a Federal, state, or local government agency, no
reduction in such Employee's Social Security benefit resulting
from the receipt of a public pension shall be recognized.
VI.
Effective September 1, 1996, Section 5.4(c) should be deleted in its
entirety.
VII.
Section 5.9(a) should be deleted in its entirety and replaced by the
following:
5.9 Required distributions.
(a) Once a written claim for benefits is filed with
the Retirement Board, payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day
of the Plan Year in which the latest of the following events
occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the Employee
commenced participation in the Plan; or
(3) the Employee's separation from service from the Employer
or any Affiliated Employer.
VIII.
Section 5.9(d) should be deleted in its entirety and replaced by the
following:
(d) Distribution upon death of Employee
(1) Death after commencement of benefits
If the Employee dies before his entire nonforfeitable
interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Employee as
set forth in the provisions of Article VII.
(2) Death prior to commencement of benefits
If the Employee dies before the distribution of his
nonforfeitable interest has begun, the entire interest,
subject to the provisions of Article VII, shall be distributed
monthly to his Provisional Payee, if any, over such
Provisional Payee's remaining lifetime.
IX.
Section 8.4(a) should be deleted in its entirety and replaced by the
following:
8.4 Cash-out and buy-back. (a) Effective January 1, 1995,
notwithstanding any other provision of this Plan, if the
present value of Accrued Retirement Income of an Employee
whose service terminates for any reason other than transfer to
an Affiliated Employer under Section 4.6, or retirement under
Article III, is not more than $3,500 (or such greater amount
as permitted by the regulations prescribed by the Secretary of
the Treasury) the Employer shall direct that such present
value of the Employee's Accrued Retirement Income be paid in a
lump sum, in cash, to such terminated Employee. The present
value of the Accrued Retirement Income shall be calculated as
of the last day of the date of distribution of the lump sum
applying the Applicable Interest Rate as defined in Section
8.5(e) in effect on the first day of the Plan Year of
distribution. For purposes of this Section 8.4, if the present
value of the Employee's vested Accrued Retirement Income is
zero, the Employee shall be deemed to have received a
distribution of such vested Retirement Income.
X.
Effective January 1, 1996, Section 10.7 should be deleted in its
entirety and replaced by the following:
10.7 Accounts and tables. The Retirement Board shall maintain
accounts showing the fiscal transactions of the Plan, and
shall keep in convenient form such data as may be necessary
for actuarial valuations with respect to the operation and
administration of the Plan. The Retirement Board shall
annually report to the Board of Directors and provide a
reasonable summary of the financial condition of the Trust and
the operation of the Plan for the past year, and any further
information which the Board of Directors may require.
The Retirement Board may, with the advice of an
enrolled actuary, adopt from time to time mortality and other
tables as it may deem necessary or appropriate for use in
calculating benefits under the Plan.
XI.
Section 10.9 should be deleted in its entirety and replaced by the
following:
10.9 Areas in which the Retirement Board does not have
responsibility. The Retirement Board shall not have
responsibility which respect to control or management of the
assets of the Plan. The Trustee or an insurance company, if
funds of the Plan shall be held by an insurance company, shall
have the sole responsibility for the administration of the
assets of the Plan as provided in the Trust Agreement or
contract with an insurance company, except to the extent that
an "Investment Manager," as that term is defined in ERISA,
appointed by the Board of Directors shall have responsibility
for the management of the assets of the Plan, or some part
thereof, including the power to acquire and dispose of the
assets of the Plan, or some part thereof.
The responsibility for providing a procedure for
establishing and carrying out a funding policy and method for
the Plan consistent with the objectives of the Plan and the
requirements of Title I of ERISA shall be that of the Board of
Directors or such committee, whether or not comprised of
members of the Board of Directors, as the Board of Directors
may from time to time designate and shall not be the
responsibility of the Retirement Board.
Effective October 23, 1993, the Pension Fund
Investment Review Committee of The Southern Company System
shall recommend for approval by the Board of Directors of
Southern Company Services, Inc. any Investment Manager that
shall have responsibility with respect to management of any
Plan assets. In addition, the Pension Fund Investment Review
Committee shall assume all responsibility for providing a
procedure for establishing and carrying out a funding policy
and method for the Plan consistent with the objectives of the
Plan and the requirements of Title I of ERISA.
XII.
Article XV should be deleted in its entirety and replaced by the
following:
ARTICLE XV
Post-retirement Medical Benefits
15.1 Definitions. The following words and phraseology as used
herein shall have the following meanings unless a different meaning is
plainly required by the context:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible to receive Retirement Income after his
retirement at his Early, Normal, or Deferred Retirement Date, as
applicable, pursuant to the terms of the Plan, but shall not include
any former Employee who terminated his service with the Employer prior
to his Early, Normal, or Deferred Retirement Date and who is entitled
to Retirement Income under the Plan. A "Pensioned Employee" shall not
include a Key Employee, as defined in Section 14.6 (g), or effective
January 1, 1991, any Pensioned Employee of an Employer that has adopted
the Plan pursuant to Section 14.1 hereof, but does not provide medical
benefits to its Pensioned Employees.
(b) "Dependents" means (1) a Pensioned Employee's spouse, or
(2) a Pensioned Employee's unmarried child from birth until his or her
nineteenth (19th) birthday. A "Dependent" shall not include anyone who
(1) lives outside the United States or Canada, (2) is in the armed
forces of any country, or (3) has coverage under another medical plan
maintained by the Employer as an employee or as a dependent of another
person. The term "child" includes (1) an adopted child, or (2) a
step-child or foster-child under a Pensioned Employee's legal
guardianship, but only if such step-child or foster-child is dependent
on the Pensioned Employee for support and maintenance and if the
step-child or foster-child lives with the Pensioned Employee in a
parent-child relationship. An unmarried child who is nineteen (19)
years old will be considered a Dependent until his or her twenty-third
(23rd) birthday, if the child (1) is enrolled as a full-time student at
an accredited school or college, and (2) is not employed on a full-time
basis, and (3) has the same permanent home address as the Pensioned
Employee.
The age limit that applies to Dependent children will not
apply to any covered child who becomes incapable of working and remains
a Dependent of a Pensioned Employee for support and maintenance (1)
before reaching the age limit, (2) due to physical handicap or mental
retardation, and (3) while covered. If a claim is denied with respect
to a handicapped child because he or she has reached the age limit,
written proof of his or her incapacity and dependency must be furnished
to the Employer. Upon receipt of this proof, further consideration will
be given to the denied claim.
The Dependent coverage being kept in force under the terms of
this Article XV will automatically terminate (1) on the date the child
is no longer incapacitated and dependent on the Pensioned Employee, or
(2) on the date the child's coverage would terminate in the absence of
this provision. This provision applies only to Dependent coverage under
Article XV that provides benefits based on expenses incurred for (1)
medical services, (2) surgical services, or (3) dental services. It
will not apply to any other type of coverage that provides benefits
based on death, dismemberment, or loss of sight.
If a Pensioned Employee's Dependents are covered by Dependent
coverage when he dies, that coverage will be continued without payment
of premiums for a maximum period of one year after the date of the
Pensioned Employee's death. This continued coverage may be terminated
before the end of the maximum period. The coverage for any Dependent
will terminate on the date Article XV terminates or the earliest of:
(1) the date he or she reaches the age limit;
(2) the date he or she marries or remarries;
(3) the date he or she becomes covered as an employee under
a medical plan maintained by the Employer; or
(4) the date he or she is no longer a Dependent.
If a Pensioned Employee's wife is pregnant when he dies, the
Dependent coverage continued under these provisions will automatically
extend to the newborn child or children born from that pregnancy. This
coverage will take effect on the date of birth. No other Dependents
acquired by a Pensioned Employee's spouse after his death will be
covered by this continued coverage.
If both a husband and his wife are covered under this Plan as
Pensioned Employees of the Employer, or if the husband or wife of a
Pensioned Employee is covered as an Employee under any medical plan
maintained by the Employer, either, but not both, may elect to cover
their eligible children as Dependents.
Any person covered or eligible for coverage under Article XV
as a Pensioned Employee, or under any group medical plan maintained by
the Employer as an Employee, shall not be considered as a Dependent.
(c) "Qualified Transfer" means a transfer of Excess Pension
Assets of the Plan to a Health Benefits Account after December 31,
1990, but before December 31, 2000, which satisfies the requirements
set forth in paragraphs (1) through (6) below.
(1) (A) Except as provided in Section 15.1(c)(1)(B)
below, no more than 1 transfer per Plan Year may be treated as
a Qualified Transfer.
(B) Subject to the provisions of Sections
15.1(c)(3), (4) and (5) below, a transfer shall be
treated as a Qualified Transfer if such transfer
(i) is made after the close of the
Plan Year preceding the Employer's first
Plan Year beginning after December 31, 1990,
and before the earlier of (I) the due date
(including extensions) for the filing of the
Employer's corporate tax return for such
preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the
expenditures of the Employer for Qualified
Current Retiree Health Liabilities for such
preceding Plan Year.
(iii) The reduction described in the
second paragraph of Section 15.1(c)(6)(G)
shall not apply to a transfer described in
Section 15.1(c)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a
reasonable estimate of the amount the Employer will pay
(directly or through reimbursement) out of the Health Benefits
Accounts for Qualified Current Retiree Health Liabilities
during the Plan Year of the transfer.
(3) (A) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocated
thereto) shall only be used to pay Qualified Current Retiree
Health Liabilities (whether directly or through
reimbursement).
(B) Any assets transferred to a Health
Benefits Account in a Qualified Transfer (and any
income allocable thereto) which are not used as
provided in Section 15.1(c)(3)(A) above shall be
transferred from the Health Benefits Account back to
the Plan.
(C) For purposes of this Section 15.1(c)(3),
any amount transferred from a Health Benefits Account
shall be treated as paid first out of the assets and
income described in Section 15.1(c)(3)(A) above.
(4) (A) The Accrued Retirement Income of any
Pensioned Employee or Dependent under the Plan shall become
nonforfeitable in the same manner which would be required if
the Plan had terminated immediately before the Qualified
Transfer (or in the case of a Pensioned Employee who
terminated service during the 1-year period ending on the date
of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer
described in Section 15.1(c)(1)(B), the requirements
of this Section 15.1(c)(4) are met with respect to
any Pensioned Employee who terminated service during
the Plan Year to which such Qualified Transfer
relates by recomputing such Pensioned Employee's
benefits as if Section 15.1(c)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or
before December 8, 1994, the Applicable Employer Cost for each
Plan Year during the Cost Maintenance Period shall not be less
than the higher of the Applicable Employer Cost for each of
the two Plan Years immediately preceding the Plan Year of the
Qualified Transfer. Effective for Qualified Transfers
occurring after December 8, 1994, the medical benefits plan
set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year
during the Benefit Maintenance Period shall be substantially
the same as the Applicable Health Benefits provided by the
Employer during the Plan Year immediately preceding the Plan
Year of the Qualified Transfer. Notwithstanding any other
provision to the contrary in this Section 15.1(c)(5), the
Employer may elect at any time during the Plan Year to have
this Section 15.1(c)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of
the Social Security Act and with respect to Pensioned
Employees which are not so eligible.
(6) For purposes of this Section 15.1(c), the
following words and phraseology shall have the following
meanings unless a different meaning is plainly required by the
context:
(A) "Applicable Employer Cost" means, with
respect to any Plan Year, the amount determined by
dividing
(i) the Qualified Current Retiree
Health Liabilities of the Employer for such
Plan Year determined (I) without regard to
any reduction under Section 15.1(c)(6)(G),
and (II) in the case of a Plan Year in which
there was no Qualified Transfer in the same
manner as if there had been such a transfer
at the end of the Plan Year, by
(ii) the number of individuals to
whom coverage for Applicable Health Benefits
was provided during such Plan Year.
(B) "Applicable Health Benefits" means
health benefits or coverage which are provided to
Pensioned Employees who immediately before the
Qualified Transfer are eligible to receive such
benefits and their Dependents.
(C) "Benefit Maintenance Period" means the
period of five (5) Plan Years beginning with the Plan
Year in which the Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the
period of five (5) Plan Years beginning with the
taxable year in which the Qualified Transfer occurs.
If a Plan Year is in two (2) or more overlapping Cost
Maintenance periods, this Section 15.1(c)(6)(D) shall
be applied by taking into account the highest
Applicable Employer Cost required to be provided
under Section 15.1(c)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the
excess, if any, of
(i) the amount determined under Code
Section 412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section
412(c)(7)(A)(i), or (II) 125 percent of
current liability (as defined in Code
Section 412(c)(7)(B)).
The determination under this
paragraph shall be made as of the most
recent valuation date of the Plan preceding
the Qualified Transfer.
(F) "Health Benefits Account" means an
account established and maintained under Code Section
401(h).
(G) "Qualified Current Retiree Health
Liabilities" means, with respect to any Plan Year,
the aggregate amounts, including administrative
expenses, which would have been allowable as a
deduction to the Employer for payment of Applicable
Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were
provided directly by the Employer and the Employer
used the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence,
the rule of Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring
on or before December 8, 1994, the amount determined
in the paragraph above shall be reduced by any amount
previously contributed to a Health Benefits Account
or welfare benefit fund, as defined in Code Section
419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. The portion of any reserves
remaining as of the close of December 31, 1990 shall
be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified
Transfers occurring after December 8, 1994, the
amount determined under the preceding paragraph shall
be reduced by the amount which bears the same ratio
to such amount as the value (as of the close of the
Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits
Accounts or welfare benefit funds, as defined in
section 419(e)(1), set aside to pay the Qualified
Current Retiree Health Liability, bears to the
present value of the Qualified Current Retiree Health
Liabilities for all Plan Years determined without
regard to this paragraph.
15.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1989
shall be eligible for coverage as a Pensioned Employee on January 1,
1989, provided he was covered as an Employee under a group medical plan
maintained by the Employer immediately prior to the time he became a
Pensioned Employee.
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered as an Employee under a
group medical plan maintained by the Employer immediately prior to the
time he became a Pensioned Employee.
(c) A Dependent of a Pensioned Employee shall be eligible for
coverage under Article XV on the later of (1) the date the Pensioned
Employee becomes eligible for coverage hereunder, (2) the date such
person becomes a Dependent, and (3) the first of the month following
the date that the Pensioned Employee properly elects to have Dependents
covered and pays any contribution required of the Pensioned Employee
with respect to the Dependent.
(d) Notwithstanding the foregoing provisions of this Section
15.2, each person subject to the conditions described below will become
eligible on the date indicated:
(1) The following applies if a person was at one time
covered under Article XV and is again applying for coverage:
(A) Any person who was in an eligible class
when his or her coverage was terminated due to
nonpayment of premiums must prove to the Employer
that he or she is in good health.
(B) If a person obtained an individual
conversion policy after his or her coverage
terminated, that person must prove to the Employer
that he or she is in good health.
For a person to prove that he or she is in good health, a
physician's statement of health and/or physical exam may be required.
Any cost for this must be paid by the person. If a person becomes
ineligible for coverage before approval is given, but becomes eligible
again at a later date and reapplies for coverage, this person will have
to prove he or she is in good health at that time.
(e) For a newborn child, Dependent coverage will take effect as
follows:
(1) If a Pensioned Employee has Dependents covered on
the child's date of birth, coverage for the newborn will take
effect on that date. If an increase in premium is required,
the Pensioned Employee must:
(A) apply in writing for the coverage; and
(B) pay the required premium that applies.
(2) If the Pensioned Employee does not have any
Dependents covered, coverage for the newborn will not take
effect until he applies for Dependent coverage. The coverage
will then take effect as set forth in 15.2(c) above.
Newborn coverage will be for injury or sickness, including
care or treatment of (1) congenital defects, (2) birth abnormalities,
or (3) premature birth. It will not include any benefits for normal
newborn child care.
Newborn coverage also includes coverage for the transportation
of a newborn child to and from the nearest available facility. This
facility must be staffed and equipped to treat his or her condition. A
physician must certify that the transportation is necessary to protect
the health and safety of the child. The Employer shall not pay more
than $1000 at such facility.
(f) There are cases in which coverage will not begin on the usual
effective date. These cases are as follows:
(1) Coverage of a Pensioned Employee confined in a
hospital or other facility due to sickness or injury on the
date coverage would normally take effect shall not take effect
until the Pensioned Employee has been discharged.
(2) Coverage of a Dependent, other than a newborn
child, confined in a hospital or other facility due to
sickness or injury on the date his or her coverage would
normally take effect will not take effect until he or she has
been discharged.
Coverage for a Dependent will not take effect before coverage
for a Pensioned Employee takes effect.
15.3 Medical benefits. The medical benefits provided under
this Article XV by the Employer and each adopting Employer are set
forth in the copy of each such Employer's medical benefits plan which
is attached hereto as Exhibit A and specifically incorporated herein by
reference in its entirety, as may be amended from time to time. Such
medical benefits shall be subject without limitation to all
deductibles, maximums, exclusions, coordination with Medicare and other
medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
15.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when Article XV is amended, terminated, or discontinued
in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XV is amended, terminated, or discontinued
in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any
required contribution; or
(3) as otherwise provided in Exhibit A.
15.5 Continuation of coverage to certain individuals.
(a) Continuation Coverage. Each Pensioned Employee, Dependent
spouse or Dependent child who is a "qualified beneficiary" and who
would lose coverage under Article XV as a result of a "qualifying
event" shall be entitled to elect, within the "election period",
"continuation coverage" under the Plan. For purposes of this Section
15.5, the terms "qualified beneficiary", "qualifying event", "election
period" and "continuation coverage" shall have the same meanings as
those provided under Section 4980B of the Code and Title I, Subtitle B,
Part 6 of ERISA.
(b) Premium Requirements. The qualified beneficiary shall be
required to make payment of a premium during the period of continuation
coverage up to the maximum premium amount permitted under Section
4980B(f) of the Code and Title I, Subtitle B, Part 6 of ERISA for such
continuation coverage. Such premium shall be periodically determined by
the Plan Administrator and communicated to the qualified beneficiary.
(c) Conversion Option. Each qualified beneficiary who elects
to receive continuation coverage under Article XV shall have the right
during the 180-day period ending on the date such continuation coverage
expires to enroll under a conversion health plan if such a plan is then
offered by the Employer.
(d) Notice Requirements. The Plan, the Plan Administrator and
the Employer shall each provide such notice regarding continuation
coverage as they may be required to provide under Section 4980B of the
Code and Title I, Subtitle B, Part 6 of ERISA.
(e) Election. Except as otherwise specified in an election, an
election to receive continuation coverage that is made by a Pensioned
Employee or his spouse shall be deemed to include an election for
continuation coverage on behalf of any other qualified beneficiary who
would lose coverage under Article XV by reason of the qualifying event
giving rise to the election.
15.6 Contributions or Qualified Transfers to fund medical benefits.
(a) Any contributions which the Employer deems necessary to
provide the medical benefits under Article XV will be made from time to
time by or on behalf of the Employer, and contributions shall be
required of the Pensioned Employees to the Employer's medical benefit
plan in amounts determined in the sole discretion of the Employer from
time to time. All Employer contributions shall be made to the Trustee
under the Trust Agreement provided for in Article XI and shall be
allocated to a separate account maintained solely to fund the medical
benefits provided under this Article XV. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding
of medical benefits under this Article XV. In the event that a
Pensioned Employee's interest in an account, or his Dependents',
maintained pursuant to this Article XV is forfeited prior to
termination of the Plan, the forfeited amount shall be applied as soon
as possible to reduce Employer contributions made under this Article
XV. In no event at any time prior to the satisfaction of all
liabilities under this Article XV shall any part of the corpus or
income of such separate account be used for, or diverted to, purposes
other than for the exclusive purpose of providing benefits under this
Article XV.
The amount of contributions to be made by or on behalf of the
Employer for any Plan Year, if any, shall be reasonable and
ascertainable and shall be determined in accordance with any generally
accepted actuarial method which is reasonable in view of the provisions
and coverage of Article XV, the funding medium, and any other
applicable considerations. However, the Employer is under no obligation
to make any contributions under Article XV after Article XV is
terminated, except to fund claims for medical expenses incurred prior
to the date of termination.
The medical benefits provided under this Article XV, when
added to any life insurance protection provided under the Plan, shall
be subordinate to the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from
January 1, 1987) plus the costs of any life insurance protection shall
not exceed twenty-five percent (25%) of the sum of the aggregate of
costs of retirement benefits under the Plan (other than past service
credits), the aggregate of costs of the medical benefits and the costs
of any life insurance protection (both measured from January 1, 1987).
The aggregate of costs of retirement benefits, other than for past
service credits, and the aggregate of costs of medical benefits
provided under the Plan shall be determined using the projected unit
credit funding method and the actuarial assumptions set forth in
Exhibit B, a copy of which is attached hereto and specifically
incorporated herein by reference in its entirety, and as may be amended
from time to time by the committee responsible for providing a
procedure for establishing and carrying out a funding policy and method
for the Plan pursuant to Section 10.9 of the Plan. Effective for
contributions made after January 1, 1990, the limitations set forth in
the preceding two sentences in this paragraph on amounts that may be
contributed to fund medical benefits under this Article XV shall be
based on contributions alone and not cost. Contributions allocated to
any separate account established for a Pensioned Employee from which
medical benefits will be payable solely to such Pensioned Employee or
his Dependents shall be treated as an Annual Addition as defined in
Section 6.6(a) to any defined contribution plan maintained by the
Employer.
(b) Effective January 1, 1991, the Employer shall have the
right, in its sole discretion, to make a Qualified Transfer of all or a
portion of any Excess Pension Assets contributed to fund Retirement
Income under the Plan to the Health Benefits Accounts to fund medical
benefits under this Article XV.
15.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer
promptly in writing when a change in the amount of the Pensioned
Employee's contribution is in order because a Dependent has become
ineligible for coverage under this Article XV. No person shall become
covered under this Article XV for whom the Pensioned Employee has not
made the required contribution. Any contribution paid by a Pensioned
Employee for any person after such person shall have become ineligible
for coverage under this Article XV shall be returned upon written
request but only provided such written request by or on behalf of the
Pensioned Employee is received by the Employer within ninety (90) days
from the date coverage terminates with respect to such ineligible
person.
15.8 Amendment of Article XV. The Employer reserves the right,
through action of its Board of Directors, to amend Article XV
(including Exhibit A) pursuant to Section 13.1 or the Trust without the
consent of any Pensioned Employee, or his Dependents, provided,
however, that no amendment of this Article or the Trust shall cancel
the payment or reimbursement of expenses for claims already incurred by
a Pensioned Employee or his Dependent prior to the date of any
amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XV, as
set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration
from any Pensioned Employee or his Dependents. The Employer makes no
promise to continue these benefits in the future and rights to future
benefits will never vest. In particular, retirement or the fulfillment
of the prerequisites for a retirement benefit pursuant to the terms of
the Plan or under the terms of any other employee benefit plan
maintained by the Employer shall not confer upon any Pensioned Employee
or Dependents any right to continued benefits under this Article XV.
15.9 Termination of Article XV. Although it is the intention
of the Employer that this Article shall be continued and the
contribution shall be made regularly thereto each year, the Employer,
by action of its Board of Directors pursuant to Section 13.1, may
terminate this Article XV or permanently discontinue contributions at
any time in its sole discretion. This Article XV, as set forth in the
Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to
continue these benefits in the future and rights to future benefits
will never vest. In particular, retirement or the fulfillment of the
prerequisites for a retirement benefit pursuant to the terms of the
Plan or under the terms of any other employee benefit plan maintained
by the Employer shall not confer upon any Pensioned Employee or his
Dependents any right to continued benefits under this Article XV.
Effective January 1, 1991, in the event the Employer or any adopting
Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 0 of the Plan to its Pensioned
Employees, this Article XV of the Plan shall automatically terminate
with respect to the Pensioned Employees and their Dependents of such
Employer without the requirement of any action by such Employer.
15.10 Reversion of assets upon termination. Upon the
termination of this Article XV and the satisfaction of all liabilities
under this Article XV, all remaining assets in the separate account
described in Section 0 shall be returned to the Employer.
IN WITNESS WHEREOF, Gulf Power Company through its duly authorized
officers, has adopted this First Amendment to the Pension Plan for Employees of
Gulf Power Company this ____ day of _________________, 1996, to be effective as
stated herein.
GULF POWER COMPANY
By: _________________
Title:_______________
ATTEST:
By: ________________________
Title:_______________________
[CORPORATE SEAL]
<PAGE>
SECOND AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
GULF POWER COMPANY
WHEREAS, the Board of Directors of Gulf Power Company (the "Company")
heretofore adopted the amendment and restatement of the Pension Plan for
Employees of Gulf Power Company (the "Plan") effective January 1, 1989; and
WHEREAS, the Company wishes to amend the Plan to provide ad hoc cost of
living increases to retirees; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan to
amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated, the
Company hereby amends the Plan as follows:
I.
Section 5.11 should be deleted in its entirety and replaced with the
following:
5.11 Increase in Retirement Income of retired Employees
(a) Retirement Income payable on and after January 1, 1991 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1991 pursuant to the Plan as in
effect prior to January 1, 1991 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of two percent (2%)
to a maximum of forty percent (40%) in accordance with the following
schedule:
Year in which Percentage
retirement occurred increase
1990 2%
1989 4%
1988 6%
1987 8%
1976 - 1986 10%
1971 - 1975 20%
1966 - 1970 30%
1965 and prior years 40%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1991 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1991
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1991 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1991 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(b) Retirement Income payable on and after January 1, 1996 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1996 pursuant to the Plan as in
effect prior to January 1, 1996 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of one and one-half
percent (1.5%) to a maximum of seven and one-half percent (7.5%) in
accordance with the following schedule:
Year in which Percentage
retirement occurred increase
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1996 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1996
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1996 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1996 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(c) This Section 5.11 shall not apply with respect to an
Employee who has not retired, but for whom the distribution of
Retirement Income has commenced pursuant to Section 5.9 of the Plan.
IN WITNESS WHEREOF, Gulf Power Company through its duly authorized
officer, has adopted this Second Amendment to the Pension Plan for Employees of
Gulf Power Company this ____ day of _________________, 1996, to be effective as
stated herein.
GULF POWER COMPANY
By: _________________
Title:_______________
ATTEST:
By: _________________________
Title:________________________
[CORPORATE SEAL]
<PAGE>
THIRD AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
GULF POWER COMPANY
WHEREAS, the Board of Directors of Gulf Power Company (the "Company")
heretofore adopted the amendment and restatement of the Pension Plan for
Employees of Gulf Power Company (the "Plan") effective January 1, 1989; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
requirements imposed by the Retirement Protection Act of 1994, to reduce the
early retirement age from 55 to 50, to reduce the Social Security offset amount,
to provide for outsourcing of Plan administration to a third party
administrator, and to make certain other technical and miscellaneous changes;
and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.13 should be amended by adding the following paragraph to the
end of such section:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service and elects to retire in 1996 and who has not attained his
fifty-fifth (55th) birthday, such Employee's Early Retirement Date
shall be January 1, 1997.
II.
Section 1.31 should be deleted in its entirety and replaced with the
following:
1.31 "Qualified Election" means an election by an Employee or
former Employee on a prescribed form that concerns the form of
distribution of Retirement Income that must be in writing and must be
consented to by the Employee's spouse. The spouse's consent to such an
election must acknowledge the effect of such election, must be in
writing, and must be witnessed by a notary public. Notwithstanding this
consent requirement, if the Employee establishes to the satisfaction of
the Retirement Board (or its delegee) that such written consent may not
be obtained because the spouse cannot be located or because of such
other circumstances as the Secretary of the Treasury may by regulations
prescribe, an election by the Employee will be deemed a Qualified
Election. Any consent necessary under this provision shall be valid and
effective only with respect to the spouse who signs the consent, or in
the event of a deemed Qualified Election, with respect to such spouse.
A revocation of a prior Qualified Election may be made by the
Employee without consent at any time commencing within 90 days before
such Employee's fifty-fifth (55th) birthday but not later than before
the commencement of Retirement Income. Effective for Employees who have
an Hour of Service on or after January 1, 1996 and who (a) are not
covered by the terms of a collective bargaining agreement or (b) are
covered by the terms of a collective bargaining agreement but where the
bargaining unit representative and the Employer have mutually agreed to
participation in the Plan as amended, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding sentence.
III.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary Social
Security benefit (primary old age insurance benefit) to which it is
estimated that an Employee will become entitled in accordance with the
Social Security Act in force as provided in subparagraphs (a) through
(e) below which shall exceed $168 per month on and after January 1,
1989, $250 per month on and after January 1, 1991, and for Employees
who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and the Employer
have mutually agreed to participation in the Plan as amended, $325 per
month on and after January 1, 1996, multiplied by a fraction not
greater than one, the numerator of which shall be the Employee's total
Accredited Service, and the denominator of which shall be such total
Accredited Service plus the Accredited Service the Employee could have
accumulated if he had continued his employment from the date he
terminates service with his Employer or any Affiliated Employer until
his Normal Retirement Date. For purposes of determining the estimated
Federal primary Social Security benefit used in the Social Security
Offset, an Employee shall be deemed to be entitled to receive Federal
primary Social Security benefits after retirement or death, if earlier,
regardless of the fact that he may have disqualified himself to receive
payment thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history of the
Employee as provided in Section 5.4 and shall be determined pursuant to
the following, as applicable:
IV.
Section 3.2 should be amended by adding the following paragraph to the
end thereof:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service in 1996, who has not attained his fifty-fifth (55th) birthday
and who elects to retire pursuant to uniform rules established for
Employees retiring pursuant to this paragraph, such Employee's Early
Retirement Date shall be January 1, 1997.
V.
Section 4.4(a) should be deleted in its entirety and replaced with the
following:
(a) If an Employee included in the Plan who has completed at
least five (5) Vesting Years of Service becomes totally disabled and is
granted either Social Security disability benefits or long-term
disability benefits under a long-term disability benefit plan of the
Employer, he shall be considered to be on a leave of absence, herein
referred to as a "Disability Leave." An Employee's Disability Leave
shall be deemed to begin on the initial date of the disability and
shall continue until the earlier of: (1) the end of the month in which
he shall cease to be entitled to receive Social Security Disability
benefits and long-term disability benefits under a long-term disability
benefit plan of the Employer; (2) his death; and (3) his Retirement
Date if he elects to have his Retirement Income commence on such date.
During the period of the Employee's Disability Leave, he shall, for
purposes of the Plan, be deemed to have received Earnings at the
regular rate in effect for him.
VI.
Section 5.3(a) should be deleted in its entirety and replaced with the
following:
(a) Upon retirement at Early Retirement Date, his Minimum
Retirement Income (before adjustment for Provisional Payee designation,
if any) shall be an amount equal to 1.70% of his Average Monthly
Earnings multiplied by his years (and fraction of a year) of Accredited
Service earned as of his Early Retirement Date including a Social
Security Offset.
VII.
Section 5.4 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an Employee's
Retirement Income under the Plan, the Social Security Offset shall be
determined by using the actual salary history of the Employee during
his employment with the Employer or any Affiliated Employer, provided
that in the event that the Retirement Board (or its delegee) is unable
to secure such actual salary history within 180 days following the
later of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is notified of
the Retirement Income to which he is entitled, the salary history shall
be determined in the following manner:
VIII.
Section 5.5 should be deleted in its entirety and replaced with the
following:
5.5 Early Retirement Income. The monthly amount of Retirement
Income payable to an Employee who retires from the service of the
Employer at his Early Retirement Date subject to the limitations of
Section 6.2, will be equal to his Retirement Income determined in
accordance with Sections 5.1 and 5.3 based on his Accredited Service to
his Early Retirement Date, reduced by three-tenths of one percent
(0.3%) for each calendar month by which the commencement date of his
Retirement Income precedes his Normal Retirement Date but follows the
first day of the month following his attainment of his fifty-fifth
(55th) birthday.
Effective for Employees who have an Hour of Service on or
after January 1, 1996, and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) elect to retire in accordance with this
Section 5.5 on or after attainment of age fifty (50) but before
attainment of age fifty-five (55), Retirement Income shall be
determined as in the preceding paragraph including an additional
reduction of one-third of one percent (0.33%) for each calendar month
by which the commencement date precedes the first day of the month
following any such Employee's attainment of his fifty-fifth (55th)
birthday.
At the option of the Employee exercised at or prior to
commencement of his Retirement Income on or after his Early Retirement
Date (provided he shall not have in effect at such Early Retirement
Date a Provisional Payee designation pursuant to Article VII), he may
have his Retirement Income adjusted upwards in an amount which will
make his Retirement Income payable up to age sixty-five (65) equal, as
nearly as may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to become payable
after age sixty-five (65), as computed at the time of his retirement in
accordance with Section 5.3(a), plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after age
sixty-five (65). The Federal primary Social Security benefit used in
calculating an Employee's Retirement Income payable under the Plan
shall be determined by using the salary history of the Employee during
his employment with the Employer or any Affiliated Employer, as
calculated in accordance with Section 5.4.
IX.
Section 5.7 should be deleted in its entirety and replaced with the
following:
5.7 Payment of Retirement Income. The first payment of an
Employee's Retirement Income will be made on his Early Retirement Date,
Normal Retirement Date, Deferred Retirement Date, or date of
commencement of payment of Retirement Income in accordance with Section
8.2 or 8.6, as the case may be; provided that commencement of the
distribution of an Employee's Retirement Income shall not be made prior
to his Normal Retirement Date without the consent of such Employee,
except as provided in Section 8.4 of the Plan.
Notwithstanding anything to the contrary above, if in
accordance with this Section 5.7, an Employee is entitled to receive
Retirement Income commencing at his Early Retirement Date, he may, in
lieu of commencing payment of his Retirement Income upon his Early
Retirement Date, elect to receive such Retirement Income commencing as
of the first day of any month after his Early Retirement Date and
preceding his Normal Retirement Date in an amount equal to his Accrued
Retirement Income determined as of the commencement of his Retirement
Income on or after his Early Retirement Date determined in accordance
with Section 5.5. An election pursuant to this Section 5.7 to have
Retirement Income commence prior to Normal Retirement Date shall be
made on a prescribed form and shall be filed with the Retirement Board
(or its delegee) at least thirty (30) days before Retirement Income is
to commence.
In the event of the death of an Employee who has designated a
Provisional Payee or is deemed to have done so in accordance with
Article VII, if the designation has become effective, the first payment
to be made to the Provisional Payee pursuant to Article VII shall be
made to the Provisional Payee on the first day of the month after the
later of (a) the Employee's death and (b) the date on which the
Employee would have attained his fifty-fifth (55th) birthday if he had
survived to such date, if the Provisional Payee shall then be alive and
proof of the Employee's death satisfactory to the Retirement Board (or
its delegee) shall have been received by it. Subsequent payments will
be made monthly thereafter until the death of such Provisional Payee.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who dies in 1996
while in service with the Employer and who has attained his fiftieth
(50th) birthday but has not attained his fifty-fifth (55th) birthday at
the time of his death, such Employee's Provisional Payee shall commence
receipt of Retirement Income on the earlier of the first day of the
month following the date on which the Employee would have attained his
fifty-fifth (55th) birthday if he were still alive or on January 1,
1997, provided the Employee's Provisional Payee is alive and proof of
the Employee's death satisfactory to the Retirement Board (or its
delegee) is received.
In any event, payment of Retirement Income, including any
adjustments thereto caused by an amendment to the Plan providing for or
which has the effect of providing retroactively increased Retirement
Income, to the Employee shall begin not later than the sixtieth (60th)
day after the later of the close of the Plan Year in which falls (a)
the Employee's Normal Retirement Date or (b) the date the Employee
terminates his service with the Employer or any Affiliated Employer.
Notwithstanding the provisions of the Plan for the monthly payment of
Retirement Income, such income may be adjusted and payable annually in
arrears if the amount of the Retirement Income is less than $10.00 per
month.
X.
Section 5.9(a) should be deleted in its entirety and replaced with the
following:
(a) Once a written claim for benefits is filed with the
Retirement Board (or its delegee), payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day of the
Plan Year in which the latest of the following events occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the
Employee commenced participation in the Plan; or
(3) the Employee's separation from service from the
Employer or any Affiliated Employer.
XI.
Section 5.12(b) should be amended by deleting such paragraph in its
entirety and renaming paragraphs "(c)," "(d)," "(e)," and "(f)" to be "(b),"
"(c)," "(d)," and "(e)."
XII.
Section 6.1(a) should be deleted in its entirety and replaced with the
following:
(a) The maximum annual amount of Retirement Income payable
with respect to an Employee in the form of a straight life annuity
without any ancillary benefits after any adjustment for a Provisional
Payee designation shall be the lesser of the dollar limitation
determined under Code Section 415(b)(1)(A) as adjusted under Code
Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury
Regulation Section 1.415-5, subject to the following provisions of
Article VI. With respect to any former Employee who has Accrued
Retirement Income under the Plan or his Provisional Payee, the maximum
annual amount shall also be subject to the adjustment under Code
Section 415(d), but only those adjustments occurring before September
1, 1996.
XIII.
Article VII should be deleted in its entirety and replaced with the
following:
ARTICLE VII
Provisional Payee
7.1 Adjustment of Retirement Income to provide for payment to
Provisional Payee. An Employee who desires to have his Accrued
Retirement Income adjusted in accordance with the provisions of this
Article VII to provide a reduced amount of Retirement Income payable to
him for his lifetime commencing on his Early Retirement Date, his
Normal Retirement Date, or his Deferred Retirement Date, as the case
may be, may elect subject to Section 7.11, in accordance with the
provisions of this Article VII, at his option, either:
(a) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty percent (80%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that the same amount will be
continued after his death to his Provisional Payee until the death of
such Provisional Payee, or
(b) that an amount of Retirement Income be payable to him for
his lifetime which is equal to ninety percent (90%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount
payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or
(c) that an amount of Retirement Income be payable to him for
his lifetime which is equal to seventy-five percent (75%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that the same amount will
be continued after his death to his Provisional Payee until the death
of such Provisional Payee, or, if such Provisional Payee predeceases
the Employee, the Employee's Retirement Income automatically increases
to a monthly amount equal to the Retirement Income which would be
payable to him had he not elected the form of benefit described in this
Section 7.1(c) and instead had elected the single life annuity form of
benefit, or
(d) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty-eight percent (88%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the
amount payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or, if
such Provisional Payee predeceases the Employee, the Employee's
Retirement Income automatically increases to a monthly amount equal to
the Retirement Income which would be payable to him had he not elected
the form of benefit described in this Section 7.1(d) and instead had
elected the single life annuity form of benefit.
7.2 Form and time of election and notice requirements.
(a) An election of payment and designation of a Provisional
Payee in accordance with Section 7.1 shall be made in writing at the
same time on a prescribed form delivered to the Retirement Board (or
its delegee). Subject to Section 7.10(d), the election and designation
shall specify its effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII.
Notwithstanding the preceding paragraph, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan.
(b) Subject to Section 7.10(d), an election of payment to be
made in accordance with paragraph (a), (b), (c), or (d) of Section 7.1
may be changed by an Employee, provided the written election of the
change specifies an effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII. Notwithstanding the preceding sentence, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan. To the
extent that the new method of payment shall afford the Employee changed
protection in the event of his death after the effective date of the
new election and prior to retirement, his Accrued Retirement Income
shall be adjusted pursuant to Section 7.4(a) to reflect such changed
protection.
(c) With respect to Sections 7.5 and 7.6, within the period
not less than 30 days and not more than 90 days prior to the
anticipated commencement of benefits, the Employee shall be furnished,
by mail or personal delivery, a written explanation of: (1) the terms
and conditions of the reduced Retirement Income payable as provided in
paragraph (b) of Section 7.1; (2) the Employee's right to make, and the
effect of, an election to waive the payment of reduced Retirement
Income pursuant to a Provisional Payee designation; (3) the rights of
the Employee's Provisional Payee; and (4) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
reduced Retirement Income pursuant to a Provisional Payee designation.
Within thirty (30) days following an Employee's written
request received by the Retirement Board (or its delegee) during the
election period, but within sixty (60) days from the date the Employee
is furnished all of the information prescribed in the immediately
preceding sentence, the Employee shall be furnished an additional
written explanation, in terms of dollar amounts, of the financial
effect of an election by him not to receive such reduced Retirement
Income. If an Employee makes such request, the election period herein
prescribed shall end not earlier than sixty (60) calendar days
following the day of the mailing or personal delivery of the additional
explanation to the Employee. Except that if an election made as
provided in Section 7.5 or 7.6 is revoked, another election under that
Section may be made during the specified election period.
7.3 Circumstances in which election and designation are
inoperative. An election and designation made pursuant to this Article
shall be inoperative and the regular provisions of the Plan shall again
become applicable as if a Provisional Payee had not been designated if,
prior to the commencement of any payment in accordance with this
Article VII: (a) an Employee's Provisional Payee shall die, (b) the
Employee and the Provisional Payee shall be divorced under a final
decree of divorce, or (c) the Retirement Board (or its delegee) shall
have received the written Qualified Election of the Employee to rescind
his election of payment and designation of a Provisional Payee in order
to receive a single life annuity from of benefit. If such a Qualified
Election to rescind is made by the Employee, his Accrued Retirement
Income shall be reduced to reflect the protection afforded the Employee
by any Provisional Payee designation during the period from its
effective date to the date of the Retirement Board's (or its delegee's)
receipt of the Employee's Qualified Election to rescind if the option
as to payments of reduced Retirement Income was in accordance with
either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries
subsequent to the death or divorce of his Provisional Payee and prior
to the commencement of payments in accordance with this Article VII,
then he shall be entitled to designate a new Provisional Payee in the
manner set forth in Section 7.2.
7.4 Pre-retirement death benefit. If prior to his Normal
Retirement Date (or his Deferred Retirement Date, if applicable), an
Employee shall die while in the service of the Employer and is survived
by his spouse to whom he shall be married at the time of his death,
there shall be payable to his surviving spouse (whom he shall be deemed
to have designated as his Provisional Payee) Retirement Income
determined in accordance with paragraph (a) or paragraph (c) of this
Section 7.4, as applicable. Subject to Section 7.10(b), such Retirement
Income shall commence on the first day of the month following the death
of the Employee or the first day of the month following the date on
which he would have attained his fifty-fifth (55th) birthday if he were
still alive, whichever is later, and shall cease with the last payment
preceding the death of his Provisional Payee.
(a) The amount of Retirement Income payable to the Provisional
Payee of a deceased Employee who prior to his death had attained his
fifty-fifth (55th) birthday shall be equal to the amount payable to the
Provisional Payee as calculated in Section 7.1(b) determined on the
basis of his Accredited Service to the date of his death, or if the
Employee shall have attained his fifty-fifth (55th) birthday and so
elected prior to his death, such Retirement Income shall be equal to
the amount set forth in Section 7.1(a) determined on the basis of his
Accredited Service to the date of his death reduced as provided in the
next sentence. If such election shall be made by the Employee, the
Retirement Income which shall be payable to the Employee if he lives to
his Early Retirement Date or the first day of the month following his
attainment of age sixty-five (65), if later, shall be reduced by
three-fourths of one percent (0.75%) for each year (prorated for a
fraction of a year from the first day of the month following the
effective date of the election) which has elapsed from the effective
date of his election to the earlier of (1) the commencement of
Retirement Income on or after his Early Retirement Date or the first
day of the month following his attainment of age sixty-five (65), if
later, or (2) the revocation of such election. If he shall die before
the commencement of Retirement Income on or after his Early Retirement
Date or the first day of the month following his attainment of age
sixty-five (65), if later, his Accrued Retirement Income to the date of
his death shall be reduced by three-quarters of one percent (0.75%) for
each year (prorated for a fraction of a year from the first day of the
month following the effective date of the election) between the
effective date of his election and the first day of the month following
his attainment of age sixty-five (65). No reduction in the Employee's
Retirement Income shall be made for the period during which the
election is in effect after the first day of the month following his
attainment of age sixty-five (65).
(b) Retirement Income shall not be payable under paragraph (a)
of this Section 7.4 to the Provisional Payee of a deceased Employee if
at the time of his death there was in effect a Qualified Election made
after August 22, 1984 under this paragraph (b) that no Retirement
Income shall be paid to his Provisional Payee in the event of his death
while in the service of the Employer (or while in the service of an
Affiliated Employer to which his employment had been transferred in
accordance with Section 4.6) as provided in paragraph (a), provided the
Employee had received at least 180 days prior to his fifty-fifth (55th)
birthday a written explanation of: (1) the terms and conditions of the
Retirement Income payable to his Provisional Payee as provided in
paragraph (a); (2) the Employee's right to make, and the effect of, an
election to waive the payment of Retirement Income to his Provisional
Payee; (3) the rights of the Employee's Provisional Payee; and (4) the
right to make, and the effect of, a revocation of a previous election
to waive the payment of Retirement Income to the Employee's Provisional
Payee.
A revocation of a prior Qualified Election may be made by the
Employee without the consent of the Employee's Provisional Payee at any
time before the commencement of benefits. An election under this
paragraph (b) may be made and such election may be revoked by an
Employee during the period commencing ninety (90) days prior to the
Employee's fifty-fifth (55th) birthday and ending on the date of the
Employee's death.
Notwithstanding the above provisions of this paragraph (b),
such Employee shall not be entitled on or after September 1, 1996 to
waive payment of Retirement Income to his Provisional Payee as provided
in this Section 7.4. Any such election to waive payment of Retirement
Income in effect on August 31, 1996 shall remain in effect unless
subsequently revoked by the Employee.
(c) The amount of such Retirement Income payable to the
Provisional Payee of a deceased Employee who prior to his death, had
completed at least five (5) Vesting Years of Service and had not
attained his fifty-fifth (55th) birthday shall be equal to one-half of
the reduced amount, as actuarially adjusted to provide for the payment
of such Retirement Income beginning as of the first day of the month
following the date on which such deceased Employee would have attained
his fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the Employee's Accrued Retirement Income, determined on the
basis of his Accredited Service to the date of his death.
This Section 7.4(c) shall also apply to adjust, as provided in
the next following paragraph, the future payment of Retirement Income
after December 31, 1990 to a Provisional Payee with respect to an
Employee who died (while in the service of the Employer prior to his
fifty-fifth (55th) birthday after completing the requisite number of
Years of Service in order to have a nonforfeitable right to Retirement
Income under the Plan as in effect on the Employee's date of death),
provided Retirement Income is payable to such Provisional Payee on or
after January 1, 1991. The adjustment under this Section 7.4(c) shall
be determined by adjusting the Retirement Income that had commenced to
the Provisional Payee on or before January 1, 1986, and then adding the
applicable percentage increase under Section 5.13 of the Prior Plan.
Subject to Section 7.10(c), for an Employee on or after
January 1, 1991, who dies while in the service of the Employer prior to
his fifty-fifth (55th) birthday after completing five (5) Vesting Years
of Service, the amount of such Retirement Income payable to the
Provisional Payee shall be calculated as provided in Section 7.1(b)
determined on the basis of his Accredited Service to the date of his
death. The payment of such Retirement Income to the Provisional Payee
shall begin on the first day of the month following the date on which
such deceased Employee would have attained his fifty-fifth (55th)
birthday.
7.5 Post-retirement death benefit - qualified joint and
survivor annuity. If at his Early Retirement Date, Normal Retirement
Date, or Deferred Retirement Date, as the case may be, an Employee is
married and he has not: (a) designated a Provisional Payee in
accordance with Section 7.1 in respect of payments to be made
commencing on his Early, Normal, or Deferred Retirement Date or (b)
made, subject to Section 7.4(b), a Qualified Election that payment be
made to him in the mode of a single life annuity, he shall nevertheless
be deemed to have made an effective designation of a Provisional Payee
under this Section 7.5 and to have specified the payment of a benefit
as provided in Section 7.1(b).
7.6 Election and designation by former Employee entitled to
Retirement Income in accordance with Article VIII. If a former Employee
is entitled to receive in accordance with Section 8.1 Retirement Income
commencing at Normal Retirement Date, or sooner in accordance with
Section 8.2, he may, on or after his fifty-fifth (55th) birthday,
designate his spouse as his Provisional Payee and elect, subject to
Section 7.11, to have his Accrued Retirement Income at the date of
termination of his service actuarially adjusted to provide, at his
option, in the event of the commencement of payment prior to his Normal
Retirement Date either:
(a) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee; or
(b) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee; or
(c) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee, or, if such Provisional Payee predeceases the former Employee,
the former Employee's Retirement Income automatically increases to a
monthly amount equal to the Retirement Income which would be payable to
him had he not elected the form of benefit described in this Section
7.6(c) and instead had elected the single life annuity form of benefit;
or
(d) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee, or, if such Provisional Payee predeceases the
former Employee, the former Employee's Retirement Income automatically
increases to a monthly amount equal to the Retirement Income which
would be payable to him had he not elected the form of benefit
described in this Section 7.6(d) and instead had elected the single
life annuity form of benefit.
The former Employee's election and designation of his
Provisional Payee made in accordance with this Section 7.6 shall be in
writing on a prescribed form delivered to the Retirement Board (or its
delegee) and shall become effective not sooner than the date received
or the former Employee's fifty-fifth (55th) birthday, whichever is
later, nor later than the date of commencement of payment in accordance
with this Section 7.6. Notwithstanding the preceding sentence, an
election under Section 7.6(c) or (d) is subject to Section 7.11, must
be in the form of a written Qualified Election, and shall not become
effective until commencement of Retirement Income payments under the
Plan.
If the former Employee dies prior to his Normal Retirement
Date but after the effective date of his Provisional Payee designation,
there will be payable to his Provisional Payee for life commencing on
the first day of the calendar month after the former Employee's death
Retirement Income in a reduced amount in accordance with the former
Employee's election of payments to be made to his Provisional Payee
after the death of the former Employee under paragraph (a), (b), (c),
or (d), as the case may be, of this Section 7.6. Notwithstanding the
preceding sentence, an election under Section 7.6(c) or (d) is subject
to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until commencement of Retirement Income
payments under the Plan. However, if prior to the former Employee's
death, the Retirement Board (or its delegee) has not received such
election, payment of a reduced amount of Retirement Income will be made
in accordance with paragraph (b) of this Section 7.6 to his surviving
spouse to whom he is married at the time of his death, unless (1) at
the time of his death there is in effect a Qualified Election by the
former Employee that reduced Retirement Income shall not be paid to his
surviving spouse in accordance with this Section 7.6 should he die
between his fifty-fifth (55th) birthday and his Normal Retirement Date
without having elected that payment be made to a Provisional Payee and
(2) at least 180 days prior to his fifty-fifth (55th) birthday a
written explanation is provided to the former Employee of: (A) the
terms and conditions of the Retirement Income payable to his
Provisional Payee as provided in this Section 7.6; (B) the former
Employee's right to make, and the effect of, an election to waive the
payment of Retirement Income to his Provisional Payee; (C) the rights
of a former Employee's spouse; and (D) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
Retirement Income to his Provisional Payee.
If the former Employee is entitled to receive payment of
Retirement Income in accordance with Section 8.2 after his fifty-fifth
(55th) birthday and prior to his Normal Retirement Date and elects to
do so, a reduced amount of Retirement Income determined in accordance
with this Section 7.6, subject to Section 7.11, based upon his Accrued
Retirement Income at the date of termination of his service
(actuarially reduced in accordance with Section 8.2) will be payable to
him commencing on the date on which payments commence prior to Normal
Retirement Date in accordance with Section 8.2 with payments in the
same or reduced amount to be continued to his Provisional Payee for
life after the former Employee's death in accordance with his election
under paragraph (a), (b), (c), or (d), as the case may be, of this
Section 7.6. However, if the former Employee is married and he has not
designated a Provisional Payee in respect of payments to commence to
him prior to his Normal Retirement Date or elected that payment be made
to him in the mode of a single life annuity pursuant to a Qualified
Election, he shall be deemed to have designated a Provisional Payee
pursuant to this Section 7.6 and thereby specified that a reduced
Retirement Income shall be paid to him during his lifetime as provided
in paragraph (b) of this Section 7.6 and continued after his death to
his Provisional Payee as provided in paragraph (b) of this Section 7.6.
If the former Employee is alive on his Normal Retirement Date
and is married and payment of Retirement Income has not sooner
commenced, the provisions of Section 7.5 shall be applicable to the
payment of his Retirement Income, unless he shall elect, subject to
Section 7.11, at his Normal Retirement Date to receive payment of his
Retirement Income pursuant to Section 7.1(a), (b), (c), or (d).
However, if an election and designation in accordance with this Section
7.6 was in effect prior to his Normal Retirement Date, the former
Employee's Accrued Retirement Income at his Normal Retirement Date
shall be actuarially adjusted for the period the election and
designation was in effect.
7.7 Death benefit for Provisional Payee of former Employee. If
an Employee, whose service with the Employer terminates on or after
January 1, 1989, shall die after such termination of employment, and
prior to his death (a) shall have not attained his fifty-fifth (55th)
birthday, (b) shall have completed at least five (5) Vesting Years of
Service, and (c) shall be survived by his spouse to whom he shall be
married at his death, then there shall be payable to his surviving
spouse (whom he shall be deemed to have designated as his Provisional
Payee) Retirement Income determined in accordance with this Section
7.7. Such Retirement Income shall be equal to one-half of the reduced
amount, as actuarially adjusted to provide for the payment of such
Retirement Income beginning as of the first day of the month following
the date on which such deceased former Employee would have attained his
fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the former Employee's Accrued Retirement Income, determined on
the basis of his Accredited Service to the date of his death. Subject
to Section 7.10(b), the Provisional Payee shall be eligible to commence
receipt of such Retirement Income on the first day of the month
following the date on which the former Employee would have attained his
fifty-fifth (55th) birthday if he were still alive, or the first day of
any subsequent month preceding what would have been the former
Employee's Normal Retirement Date, and shall cease with the last
payment preceding the death of his Provisional Payee. In any event, the
Provisional Payee shall commence receipt of such Retirement Income no
later than what would have been the former Employee's Normal Retirement
Date.
7.8 Limitations on Employee's and Provisional Payee's benefits.
(a) With respect to an Employee who does not elect a single
life annuity, the limitation on benefits imposed under Article VI shall
be applied as if such Employee had elected a benefit in the form of a
single life annuity.
(b) With respect to a Provisional Payee, the limitations on
benefits imposed under Article VI shall be applied consistent with
paragraph (a) above prorated to provide a limitation equal to or
one-half of the Employee's limitation as appropriate in accordance with
annuity form of benefit elected by the Employee.
7.9 Effect of election under Article VII. An election of
payment or a deemed election of payment in accordance with this Article
VII shall be in lieu of any other form or method of payment of
Retirement Income.
7.10 Effects of change in retirement at Early Retirement Date.
(a) Notwithstanding any other provision of this Article VII
with the exception of paragraphs one and two of Section 7.4(c), with
respect to Employees who have an Hour of Service on or after January 1,
1996 and who (1) are not covered by the terms of a collective
bargaining agreement or (2) are covered by the terms of a collective
bargaining agreement but where the bargaining unit representative and
the Employer have mutually agreed to participation in the Plan as
amended, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)."
(b) Notwithstanding Sections 7.4 and 7.7 and subject to
paragraph (a) above, if an Employee who has an Hour of Service on or
after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (3) dies after attaining his fiftieth (50th)
birthday but before attaining his fifty-fifth (55th) birthday, his
Provisional Payee shall commence receipt of Retirement Income on or
after January 1, 1997, provided the Employee's Provisional Payee is
alive and proof of the Employee's death satisfactory to the Retirement
Board (or its delegee) is received. Notwithstanding the preceding
sentence, with respect to Section 7.7, the Provisional Payee may elect
to defer receipt of Retirement Income to the first day of any month
following the date the Employee would have attained his fiftieth (50th)
birthday but not beyond what would have been such Employee's Normal
Retirement Date.
(c) Subject to paragraph (a) above, the Provisional Payee of
any Employee described in the third paragraph of Section 7.4(c) who (1)
is not covered by the terms of a collective bargaining agreement or (2)
is covered by the terms of a collective bargaining agreement but where
the bargaining unit representative and the Employer have mutually
agreed to participation in the Plan as amended shall commence receipt
of Retirement Income upon the later of the first day of the month after
the Employee would have attained his fiftieth (50th) birthday or
January 1, 1997.
(d) For Employees who have an Hour of Service on or after
January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) have not attained their fifty-fifth
(55th) birthday by December 31, 1996, notwithstanding Section 7.2, with
respect to an election to receive a form of benefit described in
Sections 7.1(a) and 7.6(a), such election will be effective not sooner
than the date received by the Retirement Board (or its delegee) or
January 1, 1997, whichever is later, nor later than the date of
commencement of payments in accordance with this Article VII.
7.11 Commencement of new optional forms of payment. The
options for payment described in Sections 7.1(c) and (d) and Sections
7.6(c) and (d) may be elected only for payments that commence on or
after October 1, 1996 and only for Employees who have an Hour of
Service on or after January 1, 1996 and who (a) are not covered by the
terms of a collective bargaining agreement or (b) are covered by the
terms of a collective bargaining agreement but where the bargaining
unit representative and the Employer have mutually agreed to
participation in the Plan as amended.
7.12 Special form of benefit for former Employees.
(a) With respect to any Employee who has an Hour of Service on
or after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended (3) terminates employment with the Employer in
1996 and (4) has attained his fiftieth (50th) birthday but not his
fifty-fifth (55th) birthday as of his termination of employment, such
Employee shall be eligible to elect the special form of benefit
described in the next following paragraph which election must be made
in the form of a written Qualified Election.
(b) This special form of benefit shall only commence on
January 1, 1997 and shall be comprised of two components consisting of
a lump sum and a single life annuity as described in paragraphs (1) and
(2) below.
(1) Annuity Component: A reduced amount of Retirement Income
payable to the former Employee for his lifetime determined
as if he had elected to retire as of the first of the month
following the date such former Employee terminated from
employment.
(2) Lump Sum Component: A lump sum payment equal to the
difference between paragraphs (A) and (B) below:
(A) the lump sum amount which is the Actuarial Equivalent
of a single life annuity payable to the former Employee
determined as if the former Employee had elected such
single life annuity to commence as of January 1, 1997,
and
(B) the lump sum amount which is the Actuarial Equivalent
of the payment described in paragraph (1) above.
(3) With respect to paragraph (1) above, if the annuity
component is payable to the former Employee for his
lifetime, he may elect to have his Retirement Income
adjusted upwards in an amount which will make his Retirement
Income payable up to age sixty-five (65) equal, as nearly as
may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to
become payable after age sixty-five (65), computed as of the
first of the month following the date the former Employee
terminated employment, plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after
age sixty-five (65). The Federal primary Social Security
benefit used in calculating the former Employee's Retirement
Income payable under the Plan shall be determined by using
the salary history of the former Employee during his
employment with the Employer, or any Affiliated Employer, as
calculated in accordance with Section 5.4.
(c) Notwithstanding paragraph (b) above, with respect to this
form of benefit, a former Employee may elect, in lieu of receiving the
annuity component as a single life annuity, to receive his benefit in a
manner similar to the forms of payment described in Section 7.1(a),
(b), (c), or (d). If one of these alternatives is elected, the annuity
and lump sum component will be adjusted as follows:
(1) Alternative 1
(A) Annuity Component: The form of payment described in
Section 7.1(a) but which is calculated based on eighty
percent (80%) of the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty percent
(80%) of the amount provided in paragraph (b)(2) above.
(2) Alternative 2
(A) Annuity Component: The form of payment described in
Section 7.1(b) but which is calculated based on ninety
percent (90%) of the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to ninety percent
(90%) of the amount provided in paragraph (b)(2) above.
(3) Alternative 3
(A) Annuity Component: The form of payment described in
Section 7.1(c) but which is calculated based on
seventy-five percent (75%) of the single life annuity
provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to seventy-five
percent (75%) of the amount provided in paragraph
(b)(2) above.
(4) Alternative 4
(A) Annuity Component: The form of payment described in
Section 7.1(d) but which is calculated based on
eighty-eight percent (88%) of the single life annuity
provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty-eight
percent (88%) of the amount provided in paragraph
(b)(2) above.
XIV.
Section 8.2 should be deleted in its entirety and replaced with the
following:
8.2 Early distribution of vested benefit. If an Employee
terminates from service before his fifty-fifth (55th) birthday and is
entitled to receive in accordance with Section 8.1 Retirement Income
commencing at his Normal Retirement Date and at the time his service
terminated he had at least ten (10) Years of Accredited Service, he
may, in lieu of receiving payment of such Retirement Income commencing
at Normal Retirement Date, elect to receive such Retirement Income
commencing as of the first day of any month after his fifty-fifth
(55th) birthday but preceding his Normal Retirement Date in an amount
equal to his Accrued Retirement Income at the date of termination of
his service actuarially reduced in accordance with reasonable actuarial
assumptions adopted by the Retirement Board. An election pursuant to
this Section 8.2 to have Retirement Income commence prior to Normal
Retirement Date shall be made on a prescribed form and shall be filed
with the Retirement Board (or its delegee) at least thirty (30) days
before Retirement Income is to commence.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. If any such Employee
commences receipt of his Retirement Income after attaining age fifty
(50) but before attaining age fifty-five (55), the Employee's
Retirement Income shall be determined as in the preceding paragraph
including an additional reduction of one-third of one percent (0.33%)
for each calendar month by which the commencement date precedes the
first day of the month following such Employee's attainment of his
fifty-fifth (55th) birthday.
XV.
Section 8.4 should be deleted in its entirety and replaced with the
following:
8.4 Cash-out and buy-back. (a) Effective January 1, 1995,
notwithstanding any other provision of this Plan, if the present value
of Accrued Retirement Income of an Employee whose service terminates
for any reason other than transfer to an Affiliated Employer under
Section 4.6, or retirement under Article III, is not more than $3,500
(or such greater amount as permitted by the regulations prescribed by
the Secretary of the Treasury), the Employer shall direct that such
present value of the Employee's Accrued Retirement Income be paid in a
lump sum, in cash, to such terminated Employee. The present value of
the Accrued Retirement Income shall be calculated as of the date of
distribution of the lump sum applying the Applicable Interest Rate as
defined in Section 8.5(e) in effect on the first day of the Plan Year
of distribution or in accordance with Section 8.5(g), as applicable.
For purposes of this Section 8.4, if the present value of the
Employee's vested Accrued Retirement Income is zero, the Employee shall
be deemed to have received a distribution of such vested Retirement
Income.
(b) If such terminated Employee is subsequently reemployed and
becomes covered under this Plan, the calculation of his Accrued
Retirement Income shall be without regard to his years of Accredited
Service prior to any One-Year Breaks in Service, unless the amount of
such payment is repaid to the Trust, plus interest at the rate
determined under Section 411(c)(2)(C) of the Code. If such amount (plus
interest) is repaid, the Employee's Retirement Income shall be
calculated based on his years of Accredited Service before and after
any One-Year Breaks in Service. Any repayment of a cash-out made
pursuant to this Section 8.4 shall be made before the earlier of (a)
five (5) years after the date on which the Employee is reemployed by
the Employer or an Affiliated Employer, or (b) the close of the first
period of five (5) consecutive One-Year Breaks in Service commencing
after the distribution. If an Employee has been deemed to receive a
distribution in accordance with paragraph (a) and is then reemployed,
upon such reemployment, the amount of the deemed distribution shall be
restored to the Employee.
(c) Notwithstanding paragraph (b) above, effective on or after
July 15, 1996, a terminated Employee who has been paid a lump sum of
the present value of his Accrued Retirement Income in accordance with
paragraph (a) above shall not be entitled to repay this amount to the
Trust. If such terminated Employee is subsequently reemployed and
attains his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date, or terminates service for any reason subject to the
requirements of Section 8.1 or 8.2, the Employee shall receive
Retirement Income based on all Accredited Service, including Accredited
Service earned prior to reemployment, but reduced by the Actuarial
Equivalent of the lump sum payment made in accordance with paragraph
(a).
XVI.
Section 8.5 should be amended by adding the following new paragraph (g)
to the end thereof:
(g) Notwithstanding paragraph (c) and (e) above, effective for
Employees who will commence receipt of their Retirement Income on or
after October 1, 1996, the present value of such Employee's vested
Accrued Retirement Income under Section 8.4 shall be calculated by
using the annual rate of interest on 30-year Treasury securities for
the month of November in the Plan Year which precedes the Plan Year in
which such present value is determined and by using the prevailing
commissioners' standard table used to determine reserves for group
annuity contracts in effect on the date as of which the present value
is being determined.
XVII.
Section 8.7 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
8.7 Requirement for Direct Rollovers. This Section 8.7 applies
to distributions made from the Plan on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Article VIII, a
Distributee may elect on a prescribed form to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
XVIII.
Section 10.2 should be amended by deleting the second paragraph in its
entirety and replacing it with the following:
The members of the Retirement Board shall elect a Chairman
from their number, and a Secretary who may be but need not be one of
the members of the Retirement Board, and shall designate an actuary to
act in actuarial matters relating to the Plan. They may appoint from
their number such committees with such powers as they shall determine,
may authorize one or more of their number or any agent to make any
payment in their behalf, or to execute or deliver any instrument except
that a requisition for funds from the Trustee shall be signed by two
(2) members of the Retirement Board unless the Retirement Board
determines in writing to delegate such requisition authority.
XIX.
Section 10.3 should be amended by deleting the last paragraph in its
entirety and replacing it with the following:
Any action by the Retirement Board under this Section 10.3
shall be binding and conclusive. To the extent that the Retirement
Board delegates any of the foregoing duties or functions to another
party, the Retirement Board retains the ultimate authority to act in
accordance with this Section 10.3.
XX.
Section 15.1(a) should be deleted in its entirety and replaced with the
following:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible, or becomes eligible pursuant to Section 3.2
as amended, to receive Retirement Income after his retirement at his
Early, Normal, or Deferred Retirement Date, as applicable. A "Pensioned
Employee" shall not include any former Employee who terminated his
service with the Employer prior to his Early, Normal, or Deferred
Retirement Date and who is entitled to Retirement Income under Section
8.1 or 8.2 of the Plan; a Key Employee, as defined in Section 14.6(g);
or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not
provide medical benefits to its Pensioned Employees.
XXI.
Section 15.2(b) should be deleted in its entirety and replaced with the
following:
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered, or is deemed covered as
determined by the Retirement Board, as an Employee under a group
medical plan maintained by the Employer immediately prior to the time
he became a Pensioned Employee.
IN WITNESS WHEREOF, Gulf Power Company through its duly authorized
officer, has adopted this Third Amendment to the Pension Plan for Employees of
Gulf Power Company this ____ day of _________________, 1996, to be effective as
stated herein.
GULF POWER COMPANY
By:
Its:
ATTEST:
By:
Its:
[CORPORATE SEAL]
Exhibit 10(e)21
FIRST AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
MISSISSIPPI POWER COMPANY
WHEREAS, the Board of Directors of Mississippi Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Mississippi Power Company (the "Plan") effective January 1,
1989 in order to comply with the Internal Revenue Code of 1986, as amended, (the
"Code") and to make other technical and clarifying changes; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
additional requirements imposed by the Internal Revenue Service and to make
certain other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1989, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.14(b) should be deleted in its entirety and replaced by the
following:
(b) Notwithstanding the above, "Earnings" with
respect to any commissioned salesperson means the salary or
wages of an Employee of the Employer or employee of any
Affiliated Employer within any Plan Year, without including
overtime, and before deductions for taxes, Social Security,
etc. but applying those adjustments identified in paragraphs
(a)(2), (3) and (4) above. In addition, "Earnings" for any
Employee who is a regular part-time employee means with regard
to paragraph (a)(1) above the highest annual rate of salary or
wages based on a forty (40) hour work week.
II.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary
Social Security benefit (primary old age insurance benefit) to
which it is estimated that an Employee will become entitled in
accordance with the Social Security Act in force as provided
in subparagraphs (a) through (e) below which shall exceed $168
per month on and after January 1, 1989, and $250 per month, on
and after January 1, 1991, multiplied by a fraction not
greater than one, the numerator of which shall be the
Employee's total Accredited Service, and the denominator of
which shall be such total Accredited Service plus the
Accredited Service the Employee could have accumulated if he
had continued his employment from the date he terminates
service with his Employer or any Affiliated Employer until his
Normal Retirement Date. For purposes of determining the
estimated Federal primary Social Security benefit used in the
Social Security Offset, an Employee shall be deemed to be
entitled to receive Federal primary Social Security benefits
after retirement or death, if earlier, regardless of the fact
that he may have disqualified himself to receive payment
thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history
of the Employee as provided in Section 5.4(b) and shall be
determined pursuant to the following, as applicable:
III.
Section 2.6 should be deleted in its entirety and replaced by the
following:
2.6 Exclusion of certain categories of employees.
Notwithstanding any other provision of this Article II, leased
employees shall not be eligible to participate in the Plan. In
addition temporary employees, except Employees as defined in
Section 1.17 participating in the Plan prior to July 1, 1991,
shall not be eligible to participate in the Plan. Any person
who is employed by Electric City Merchandise Company, Inc. on
or after May 1, 1988, or who is employed by Savannah Electric
and Power Company on or after March 3, 1988, shall not be
entitled to accrue Retirement Income under the Plan while
employed at such companies.
IV.
Effective September 1, 1996, Section 5.4(a) should be deleted in its
entirety.
V.
Effective September 1, 1996, Section 5.4(b) should be deleted in its
entirety and a new Section 5.4 should be inserted as follows:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an
Employee's Retirement Income under the Plan, the Social
Security Offset shall be determined by using the actual salary
history of the Employee during his employment with the
Employer or any Affiliated Employer, provided that in the
event that the Retirement Board is unable to secure such
actual salary history within 90 days (or such longer period as
may be prescribed by the Retirement Board) following the later
of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is
notified of the Retirement Income to which he is entitled, the
salary history shall be determined in the following manner:
(1) The salary history shall be estimated by
applying a salary scale, projected backwards, to the
Employee's compensation from the Employer for W-2
purposes for the first Plan Year following the most
recent Plan Year for which the salary history is
estimated. The salary scale shall be a level
percentage per year equal to six percent (6%) per
annum.
(2) The Plan shall give clear written notice
to each Employee of the Employee's right to supply
the actual salary history and of the financial
consequences of failing to supply such history. Such
notice shall state that the actual salary history is
available from the Social Security Administration.
For purposes of determining the Social Security
Offset in calculating the Retirement Income of an Employee
entitled to receive a public pension based on his employment
with a Federal, state, or local government agency, no
reduction in such Employee's Social Security benefit resulting
from the receipt of a public pension shall be recognized.
VI.
Effective September 1, 1996, Section 5.4(c) should be deleted in its
entirety.
VII.
Section 5.9(a) should be deleted in its entirety and replaced by the
following:
5.9 Required distributions.
(a) Once a written claim for benefits is filed with
the Retirement Board, payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day
of the Plan Year in which the latest of the following events
occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the
Employee commenced participation in the Plan; or
(3) the Employee's separation from service from the
Employer or any Affiliated Employer.
VIII.
Section 5.9(d) should be deleted in its entirety and replaced by the
following:
(d) Distribution upon death of Employee
(1) Death after commencement of benefits
If the Employee dies before his entire nonforfeitable
interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Employee as
set forth in the provisions of Article VII.
(2) Death prior to commencement of benefits
If the Employee dies before the distribution of his
nonforfeitable interest has begun, the entire interest,
subject to the provisions of Article VII, shall be distributed
monthly to his Provisional Payee, if any, over such
Provisional Payee's remaining lifetime.
IX.
Effective January 1, 1996, Section 10.7 should be deleted in its
entirety and replaced by the following:
10.7 Accounts and tables. The Retirement Board shall maintain
accounts showing the fiscal transactions of the Plan, and
shall keep in convenient form such data as may be necessary
for actuarial valuations with respect to the operation and
administration of the Plan. The Retirement Board shall
annually report to the Board of Directors and provide a
reasonable summary of the financial condition of the Trust and
the operation of the Plan for the past year, and any further
information which the Board of Directors may require.
The Retirement Board may, with the advice of an
enrolled actuary, adopt from time to time mortality and other
tables as it may deem necessary or appropriate for use in
calculating benefits under the Plan.
X.
Section 10.9 should be deleted in its entirety and replaced by the
following:
10.9 Areas in which the Retirement Board does not have
responsibility. The Retirement Board shall not have
responsibility which respect to control or management of the
assets of the Plan. The Trustee or an insurance company, if
funds of the Plan shall be held by an insurance company, shall
have the sole responsibility for the administration of the
assets of the Plan as provided in the Trust Agreement or
contract with an insurance company, except to the extent that
an "Investment Manager," as that term is defined in ERISA,
appointed by the Board of Directors shall have responsibility
for the management of the assets of the Plan, or some part
thereof, including the power to acquire and dispose of the
assets of the Plan, or some part thereof.
The responsibility for providing a procedure for
establishing and carrying out a funding policy and method for
the Plan consistent with the objectives of the Plan and the
requirements of Title I of ERISA shall be that of the Board of
Directors or such committee, whether or not comprised of
members of the Board of Directors, as the Board of Directors
may from time to time designate and shall not be the
responsibility of the Retirement Board.
Effective July 28, 1993, the Pension Fund Investment
Review Committee of The Southern Company System shall
recommend for approval by the Board of Directors of Southern
Company Services, Inc. any Investment Manager that shall have
responsibility with respect to management of any Plan assets.
In addition, the Pension Fund Investment Review Committee
shall assume all responsibility for providing a procedure for
establishing and carrying out a funding policy and method for
the Plan consistent with the objectives of the Plan and the
requirements of Title I of ERISA.
XI.
Article XV should be deleted in its entirety and replaced by the
following:
ARTICLE XV
Post-retirement Medical Benefits
15.1 Definitions. The following words and phraseology as used
herein shall have the following meanings unless a different meaning is
plainly required by the context:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible to receive Retirement Income after his
retirement at his Early, Normal, or Deferred Retirement Date, as
applicable, pursuant to the terms of the Plan, but shall not include
any former Employee who terminated his service with the Employer prior
to his Early, Normal, or Deferred Retirement Date and who is entitled
to Retirement Income under the Plan. A "Pensioned Employee" shall not
include a Key Employee, as defined in Section 14.6(g), or effective
January 1, 1991, any Pensioned Employee of an employer that has adopted
the Plan pursuant to Section 14.1 hereof but does not provide medical
benefits to its Pensioned Employees.
(b) "Dependents" means the Pensioned Employee's spouse who is
not legally separated from the Pensioned Employee and the Pensioned
Employee's unmarried children (both natural and legally adopted) within
the prescribed age limit set forth below. The term "children" includes
stepchildren and foster children who reside with the Pensioned Employee
in a regular parent-child relationship and are dependent upon the
Pensioned Employee for principal support and maintenance. The term
Dependent shall not include any person who is covered, or eligible for
coverage, under the Plan as a Pensioned Employee or who is entitled to
any benefits under any provisions of this Plan because of having been
covered as a Pensioned Employee.
Children shall be considered to be within the prescribed age
limit if they are less than nineteen (19) years of age. Unmarried
children age nineteen (19) but less than age twenty-five (25) continue
to be within the prescribed age limit if they are (1) dependent upon
the Pensioned Employee for their support and maintenance, or (2)
qualify as a dependent on the Pensioned Employee's tax return.
Effective March 1, 1993, unmarried children age nineteen (19) but less
than age twenty-five (25) continue to be within the prescribed age
limit only if they are (1) dependent upon the Pensioned Employee for
support and maintenance, and (2) regularly attending school on a
full-time basis. For purposes of this Article XV, an unmarried child
shall be considered to be regularly attending school on a full-time
basis if such child is enrolled in and regularly attending a secondary
school or an accredited vocational school, College or University (as
defined in Exhibit A) and meets the minimum requirements of such
school, College or University to maintain full-time status. This shall
also include an unmarried child who is enrolled as a part-time student
at one of the above institutions while such individual is taking a
course load that is equivalent to the minimum course load required for
full-time student status at such institution.
If both a husband and his wife are covered under this Plan as
Pensioned Employees of the Employer, either, but not both, may elect to
cover their eligible children as Dependents.
Any person covered or eligible for coverage under Article XV
as a Pensioned Employee, or under any group medical plan maintained by
the Employer as an Employee, shall not be considered as a Dependent.
(c) "Covered Individual" means a Pensioned Employee or
Dependent of a Pensioned Employee who is eligible to receive medical
benefits under Article XV.
(d) "Qualified Transfer" means a transfer of Excess Pension
Assets of the Plan to a Health Benefits Account after December 31,
1990, but before December 31, 2000, which satisfies the requirements
set forth in paragraphs (1) through (6) below.
(1) (A) Except as provided in Section 15.1(d)(1)(B)
below, no more than 1 transfer per Plan Year may be treated as
a Qualified Transfer.
(B) Subject to the provisions of Sections
15.1(d)(3), (4) and (5) below, a transfer shall be
treated as a Qualified Transfer if such transfer
(i) is made after the close of the
Plan Year preceding the Employer's first
Plan Year beginning after December 31, 1990,
and before the earlier of (I) the due date
(including extensions) for the filing of the
Employer's corporate tax return for such
preceding Plan Year, or (II) the date such
return is filed, and
(ii) does not exceed the
expenditures of the Employer for Qualified
Current Retiree Health Liabilities for such
preceding Plan Year.
(iii) The reduction described in the
second paragraph of Section 15.1(d)(6)(G)
shall not apply to a transfer described in
Section 15.1(d)(1)(A) above.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a
reasonable estimate of the amount the Employer will pay
(directly or through reimbursement) out of the Health Benefits
Accounts for Qualified Current Retiree Health Liabilities
during the Plan Year of the transfer.
(3) (A) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocated
thereto) shall only be used to pay Qualified Current Retiree
Health Liabilities (whether directly or through
reimbursement).
(B) Any assets transferred to a Health
Benefits Account in a Qualified Transfer (and any
income allocable thereto) which are not used as
provided in Section 15.1(d)(3)(A) above shall be
transferred from the Health Benefits Account back to
the Plan.
(C) For purposes of this Section 15.1(d)(3),
any amount transferred from a Health Benefits Account
shall be treated as paid first out of the assets and
income described in Section 15.1(d)(3)(A) above.
(4) (A) The Accrued Retirement Income of any
Pensioned Employee or Dependent under the Plan shall become
nonforfeitable in the same manner which would be required if
the Plan had terminated immediately before the Qualified
Transfer (or in the case of a Pensioned Employee who
terminated service during the 1-year period ending on the date
of the Qualified Transfer, immediately before such
termination).
(B) In the case of a Qualified Transfer
described in Section 15.1(d)(1)(B), the requirements
of this Section 15.1(d)(4) are met with respect to
any Pensioned Employee who terminated service during
the Plan Year to which such Qualified Transfer
relates by recomputing such Pensioned Employee's
benefits as if Section 15.1(d)(4)(A) above had
applied immediately before such termination.
(5) Effective for Qualified Transfers occurring on or
before December 8, 1994, the Applicable Employer Cost for each
Plan Year during the Cost Maintenance Period shall not be less
than the higher of the Applicable Employer Cost for each of
the two Plan Years immediately preceding the Plan Year of the
Qualified Transfer. Effective for Qualified Transfers
occurring after December 8, 1994, the medical benefits plan
set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Employer during each Plan Year
during the Benefit Maintenance Period shall be substantially
the same as the Applicable Health Benefits provided by the
Employer during the Plan Year immediately preceding the Plan
Year of the Qualified Transfer. Notwithstanding any other
provision to the contrary in this Section 15.1(d)(5), the
Employer may elect at any time during the Plan Year to have
this Section 15.1(d)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of
the Social Security Act and with respect to Pensioned
Employees which are not so eligible.
(6) For purposes of this Section 15.1(d), the
following words and phraseology shall have the following
meanings unless a different meaning is plainly required by the
context:
(A) "Applicable Employer Cost" means, with
respect to any Plan Year, the amount determined by
dividing
(i) the Qualified Current Retiree
Health Liabilities of the Employer for such
Plan Year determined (I) without regard to
any reduction under Section 15.1(d)(6)(G),
and (II) in the case of a Plan Year in which
there was no Qualified Transfer in the same
manner as if there had been such a transfer
at the end of the Plan Year, by
(ii) the number of individuals to
whom coverage for Applicable Health Benefits
was provided during such Plan Year.
(B) "Applicable Health Benefits" means
health benefits or coverage which are provided to
Pensioned Employees who immediately before the
Qualified Transfer are eligible to receive such
benefits and their Dependents.
(C) "Benefit Maintenance Period" means the
period of five (5) Plan Years beginning with the Plan
Year in which the Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the
period of five (5) Plan Years beginning with the
taxable year in which the Qualified Transfer occurs.
If a Plan Year is in two (2) or more overlapping Cost
Maintenance periods, this Section 15.1(d)(6)(D) shall
be applied by taking into account the highest
Applicable Employer Cost required to be provided
under Section 15.1(d)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the
excess, if any, of
(i) the amount determined under Code
Section 412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section
412(c)(7)(A)(i), or (II) 125 percent of
current liability (as defined in Code
Section 412(c)(7)(B)).
The determination under this
paragraph shall be made as of the most
recent valuation date of the Plan preceding
the Qualified Transfer.
(F) "Health Benefits Account" means an
account established and maintained under Code Section
401(h).
(G) "Qualified Current Retiree Health
Liabilities" means, with respect to any Plan Year,
the aggregate amounts, including administrative
expenses, which would have been allowable as a
deduction to the Employer for payment of Applicable
Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were
provided directly by the Employer and the Employer
used the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence,
the rule of Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring
on or before December 8, 1994, the amount determined
in the paragraph above shall be reduced by any amount
previously contributed to a Health Benefits Account
or welfare benefit fund, as defined in Code Section
419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. The portion of any reserves
remaining as of the close of December 31, 1990 shall
be allocated on a pro rata basis to Qualified Current
Retiree Health Liabilities. Effective for Qualified
Transfers occurring after December 8, 1994, the
amount determined under the preceding paragraph shall
be reduced by the amount which bears the same ratio
to such amount as the value (as of the close of the
Plan Year preceding the year of the Qualified
Transfer) of the assets in all Health Benefits
Accounts or welfare benefit funds, as defined in
section 419(e)(1), set aside to pay the Qualified
Current Retiree Health Liability, bears to the
present value of the Qualified Current Retiree Health
Liabilities for all Plan Years determined without
regard to this paragraph.
15.2 Eligibility of Pensioned Employees and their Dependents.
(a) A person who is a Pensioned Employee on January 1, 1989
shall be eligible for coverage as a Pensioned Employee on January 1,
1989, provided he was covered as an Employee under a group medical plan
maintained by the Employer immediately prior to the time he became a
Pensioned Employee.
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered as an Employee under a
group medical plan maintained by the Employer immediately prior to the
time he became a Pensioned Employee.
(c) A Dependent of a Pensioned Employee shall be eligible for
coverage under this Plan on the later of (1) the date the Pensioned
Employee becomes eligible for coverage hereunder and (2) the date such
person becomes a Dependent, and (3) the date of payment by the
Pensioned Employee of any required contributions with respect to a
Dependent.
15.3 Medical benefits. The medical benefits provided under
this Article XV by the Employer and each adopting Employer are set
forth in the copy of each such Employer's medical benefits plan which
is attached hereto as Exhibit A and specifically incorporated herein by
reference in its entirety, as may be amended from time to time. Such
medical benefits shall be subject without limitation to all
deductibles, maximums, exclusions, coordination with Medicare and other
medical plans, and procedures for submitting claims and initiating
legal proceedings provided therein.
15.4 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as
follows:
(1) when Article XV is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article XV is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
15.5 Continuation of coverage to certain individuals.
(a) Anything in Article XV to the contrary notwithstanding, a
Pensioned Employee, Dependent spouse, or Dependent child shall be
entitled to elect continued medical coverage as provided under the
terms of Article XV upon the occurrence of a Qualifying Event, provided
such Pensioned Employee, Dependent spouse, or Dependent child was
entitled to benefits under Article XV on the day prior to the
Qualifying Event.
(1) "Qualifying Event" means with respect to any
Pensioned Employee, Dependent spouse, or Dependent child, as
appropriate, (A) the death of the Pensioned Employee, (B) the
divorce or legal separation of the Pensioned Employee from the
Dependent spouse, (C) a Dependent child ceasing to be a
Dependent as defined under the requirements of Article XV, or
(D) a proceeding in a case under Title 11, United States Code,
with respect to the Employer.
(b) The Pensioned Employee or Dependent electing continued
coverage under this Section 15.5 shall be required to pay such monthly
contributions as determined by the Employer to be equal to a reasonable
estimate of 102% of the cost of providing coverage for such period for
similarly situated beneficiaries which (1) is determined on an
actuarial basis and (2) takes into account such factors as the
Secretary of the Treasury may prescribe.
(c) The continuation coverage elected by a Pensioned Employee,
Dependent spouse, or Dependent child shall begin on the date of the
Qualifying Event and end not earlier than the first to occur of the
following:
(1) The third anniversary of the Qualifying Event;
(2) The termination of Article XV of the Plan;
(3) The failure of the Pensioned Employee or Dependent
to pay any required contribution when due;
(4) The date on which the Pensioned Employee or
Dependent first becomes, after the date of his election, (A) a
covered employee under any other group health plan which does
not contain any exclusion or limitation with respect to any
preexisting condition of such individual, or (B) entitled to
benefits under Title XVIII of the Social Security Act; or
(5) The date the Dependent spouse becomes covered
under another group health plan which does not contain any
exclusion or limitation with respect to any preexisting
condition of such Dependent spouse.
(d) Any election to continue coverage under this Section 15.5
shall be made during the election period (1) beginning not later than
the termination date of coverage by reason of the Qualifying Event and
(2) ending sixty (60) days following the later of the date described in
(1) above or the date any Pensioned Employee, Dependent spouse, or
Dependent child receives notice of a Qualifying Event from the
Employer.
(e) The Employer shall provide each Pensioned Employee and
Dependent spouse, if any, written notice of the rights provided in this
Section 15.5. The Pensioned Employee or Dependent spouse is required to
notify the Employer within thirty (30) days of any Qualifying Event
described in Section 15.5(a)(1)(B) or (C), and the Employer shall
provide the Dependent spouse or Dependent child written notice of the
rights provided in this Section 15.5 within fourteen (14) days
thereafter. Notice to the Dependent spouse shall be deemed notice to
each Dependent child residing with such spouse at the time such
notification is made.
15.6 Contributions or Qualified Transfers to fund medical
benefits.
(a) Any contributions which the Employer deems necessary to
provide the medical benefits under Article XV will be made from time to
time by or on behalf of the Employer, and contributions shall be
required of the Pensioned Employees to the Employer's medical benefit
plan in amounts determined in the sole discretion of the Employer from
time to time. All Employer contributions shall be made to the Trustee
under the Trust Agreement provided for in Article XI and shall be
allocated to a separate account maintained solely to fund the medical
benefits provided under this Article XV. The Employer shall designate
that portion of any contribution to the Plan allocable to the funding
of medical benefits under this Article XV. In the event that a
Pensioned Employee's interest in an account, or his Dependents',
maintained pursuant to this Article XV is forfeited prior to
termination of the Plan, the forfeited amount shall be applied as soon
as possible to reduce Employer contributions made under this Article
XV. In no event at any time prior to the satisfaction of all
liabilities under this Article XV shall any part of the corpus or
income of such separate account be used for, or diverted to, purposes
other than for the exclusive purpose of providing benefits under this
Article XV.
The amount of contributions to be made by or on behalf of the
Employer for any Plan Year, if any, shall be reasonable and
ascertainable and shall be determined in accordance with any generally
accepted actuarial method which is reasonable in view of the provisions
and coverage of Article XV, the funding medium, and any other
applicable considerations. However, the Employer is under no obligation
to make any contributions under Article XV after Article XV is
terminated, except to fund claims for medical expenses incurred prior
to the date of termination.
The medical benefits provided under this Article XV, when
added to any life insurance protection provided under the Plan, shall
be subordinate to the retirement benefits provided under the Plan.
The aggregate of costs of the medical benefits (measured from
January 1, 1987) plus the costs of any life insurance protection shall
not exceed twenty-five percent (25%) of the sum of the aggregate of
costs of retirement benefits under the Plan (other than past service
credits), the aggregate of costs of the medical benefits and the costs
of any life insurance protection (both measured from January 1, 1987).
The aggregate of costs of retirement benefits, other than for past
service credits, and the aggregate of costs of medical benefits
provided under the Plan shall be determined using the projected unit
credit funding method and the actuarial assumptions set forth in
Exhibit B, a copy of which is attached hereto and specifically
incorporated herein by reference in its entirety, and as may be amended
from time to time by the committee responsible for providing a
procedure for establishing and carrying out a funding policy and method
for the Plan pursuant to Section 10.9 of the Plan. Effective for
contributions made after January 1, 1990, the limitations set forth in
the preceding two sentences in this paragraph on amounts that may be
contributed to fund medical benefits under this Article XV shall be
based on contributions alone and not cost. Contributions allocated to
any separate account established for a Pensioned Employee from which
medical benefits will be payable solely to such Pensioned Employee or
his Dependents shall be treated as an Annual Addition as defined in
Section 6.6(a) to any defined contribution plan maintained by the
Employer.
(b) Effective January 1, 1991, the Employer shall have the
right, in its sole discretion, to make a Qualified Transfer of all or a
portion of any Excess Pension Assets contributed to fund Retirement
Income under the Plan to the Health Benefits Accounts to fund medical
benefits under this Article XV.
15.7 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Employer
promptly in writing when a change in the amount of the Pensioned
Employee's contribution is in order because a Dependent has become
ineligible for coverage under this Article XV. No person shall become
covered under this Article XV for whom the Pensioned Employee has not
made the required contribution. Any contribution paid by a Pensioned
Employee for any person after such person shall have become ineligible
for coverage under this Article XV shall be returned upon written
request but only provided such written request by or on behalf of the
Pensioned Employee is received by the Employer within ninety (90) days
from the date coverage terminates with respect to such ineligible
person.
15.8 Amendment of Article XV. The Employer reserves the right,
through action of its Board of Directors, to amend Article XV
(including Exhibit A) pursuant to Section 13.1 or the Trust without the
consent of any Pensioned Employee, or his Dependents, provided,
however, that no amendment of this Article or the Trust shall cancel
the payment or reimbursement of expenses for claims already incurred by
a Pensioned Employee or his Dependent prior to the date of any
amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article XV, as
set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration
from any Pensioned Employee or his Dependents. The Employer makes no
promise to continue these benefits in the future and rights to future
benefits will never vest. In particular, retirement or the fulfillment
of the prerequisites for a retirement benefit pursuant to the terms of
the Plan or under the terms of any other employee benefit plan
maintained by the Employer shall not confer upon any Pensioned Employee
or Dependents any right to continued benefits under this Article XV.
15.9 Termination of Article XV. Although it is the intention
of the Employer that this Article shall be continued and the
contribution shall be made regularly thereto each year, the Employer,
by action of its Board of Directors pursuant to Section 13.1, may
terminate this Article XV or permanently discontinue contributions at
any time in its sole discretion. This Article XV, as set forth in the
Plan document, is not a contract and non-contributory benefits
hereunder are provided gratuitously, without consideration from any
Pensioned Employee or his Dependents. The Employer makes no promise to
continue these benefits in the future and rights to future benefits
will never vest. In particular, retirement or the fulfillment of the
prerequisites for a retirement benefit pursuant to the terms of the
Plan or under the terms of any other employee benefit plan maintained
by the Employer shall not confer upon any Pensioned Employee or his
Dependents any right to continued benefits under this Article XV.
Effective January 1, 1991, in the event the Employer or any adopting
Employer shall terminate its provision of the medical benefits
described in Exhibit A to Section 15.3 of the Plan to its Pensioned
Employees, this Article XV of the Plan shall automatically terminate
with respect to the Pensioned Employees and their Dependents of such
Employer without the requirement of any action by such Employer.
15.10 Reversion of assets upon termination. Upon the
termination of this Article XV and the satisfaction of all liabilities
under this Article XV, all remaining assets in the separate account
described in Section 15.6 shall be returned to the Employer.
IN WITNESS WHEREOF, Mississippi Power Company through its duly
authorized officers, has adopted this First Amendment to the Pension Plan for
Employees of Mississippi Power Company this ____ day of _________________, 1996,
to be effective as stated herein.
MISSISSIPPI POWER COMPANY
By: _______________________________
Title:_____________________________
ATTEST:
By: _________________________
Title:________________________
(CORPORATE SEAL)
<PAGE>
SECOND AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
MISSISSIPPI POWER COMPANY
WHEREAS, the Board of Directors of Mississippi Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Mississippi Power Company (the "Plan") effective January 1,
1989; and
WHEREAS, the Company wishes to amend the Plan to provide ad hoc cost of
living increases to retirees; and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan to
amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated, the
Company hereby amends the Plan as follows:
I.
Section 5.11 should be deleted in its entirety and replaced with the
following:
5.11 Increase in Retirement Income of retired Employees
(a) Retirement Income payable on and after January 1, 1991 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1991 pursuant to the Plan as in
effect prior to January 1, 1991 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of two percent (2%)
to a maximum of forty percent (40%) in accordance with the following
schedule:
Year in which Percentage
retirement occurred increase
1990 2%
1989 4%
1988 6%
1987 8%
1976 - 1986 10%
1971 - 1975 20%
1966 - 1970 30%
1965 and prior years 40%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1991 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1991
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1991 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1991 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(b) Retirement Income payable on and after January 1, 1996 to
an Employee (or to the Provisional Payee of an Employee) who retired at
his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date on or before January 1, 1996 pursuant to the Plan as in
effect prior to January 1, 1996 will be recalculated to increase the
amount thereof by an amount ranging from a minimum of one and one-half
percent (1.5%) to a maximum of seven and one-half percent (7.5%) in
accordance with the following schedule:
Year in which Percentage
retirement occurred increase
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
A similar adjustment, based on the date of the commencement of
Retirement Income payments to the Employee's Provisional Payee, rather
than the Employee's Retirement Date, will be made in respect of
Retirement Income which is payable on or after January 1, 1996 where a
Provisional Payee election was in effect, or was deemed to be in
effect, when an Employee died while in service prior to January 1, 1996
and prior to his retirement.
A similar adjustment will be made in respect of Retirement
Income which is payable on or after January 1, 1996 for an Employee (or
the Provisional Payee of an Employee) entitled to Retirement Income for
which payments have commenced on or before January 1, 1996 in
accordance with Article VIII of the Plan or of the Prior Plan, except
for Employees whose Retirement Income has been cashed-out pursuant to
Section 8.4 of the Plan.
For purposes of determining the applicable percentage increase
under this Section 5.11, the year of retirement includes retirement
where the last day of employment was December 31 of such year. An
Employee whose Deferred Retirement Date is on or before January 1, 1988
and who did not retire at his Normal Retirement Date shall be deemed to
have retired at his Normal Retirement Date for purposes of determining
the increase in his Retirement Income payable at his Deferred
Retirement Date.
(c) This Section 5.11 shall not apply with respect to an
Employee who has not retired, but for whom the distribution of
Retirement Income has commenced pursuant to Section 5.9 of the Plan.
IN WITNESS WHEREOF, Mississippi Power Company through its duly
authorized officer, has adopted this Second Amendment to the Pension Plan for
Employees of Mississippi Power Company this ____ day of _________________, 1996,
to be effective as stated herein.
MISSISSIPPI POWER COMPANY
By: ____________________________
Title:__________________________
ATTEST:
By: _____________________________
Title:____________________________
[CORPORATE SEAL]
<PAGE>
THIRD AMENDMENT TO THE
PENSION PLAN
FOR EMPLOYEES OF
MISSISSIPPI POWER COMPANY
WHEREAS, the Board of Directors of Mississippi Power Company (the
"Company") heretofore adopted the amendment and restatement of the Pension Plan
for Employees of Mississippi Power Company (the "Plan") effective January 1,
1989; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
requirements imposed by the Retirement Protection Act of 1994, to reduce the
early retirement age from 55 to 50, to reduce the Social Security offset amount,
to provide for outsourcing of Plan administration to a third party
administrator, and to make certain other technical and miscellaneous changes;
and
WHEREAS, the Company is authorized pursuant to section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 1.13 should be amended by adding the following paragraph to the
end of such section:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service and elects to retire in 1996 and who has not attained his
fifty-fifth (55th) birthday, such Employee's Early Retirement Date
shall be January 1, 1997.
II.
Section 1.31 should be deleted in its entirety and replaced with the
following:
1.31 "Qualified Election" means an election by an Employee or
former Employee on a prescribed form that concerns the form of
distribution of Retirement Income that must be in writing and must be
consented to by the Employee's spouse. The spouse's consent to such an
election must acknowledge the effect of such election, must be in
writing, and must be witnessed by a notary public. Notwithstanding this
consent requirement, if the Employee establishes to the satisfaction of
the Retirement Board (or its delegee) that such written consent may not
be obtained because the spouse cannot be located or because of such
other circumstances as the Secretary of the Treasury may by regulations
prescribe, an election by the Employee will be deemed a Qualified
Election. Any consent necessary under this provision shall be valid and
effective only with respect to the spouse who signs the consent, or in
the event of a deemed Qualified Election, with respect to such spouse.
A revocation of a prior Qualified Election may be made by the
Employee without consent at any time commencing within 90 days before
such Employee's fifty-fifth (55th) birthday but not later than before
the commencement of Retirement Income. Effective for Employees who have
an Hour of Service on or after January 1, 1996 and who (a) are not
covered by the terms of a collective bargaining agreement or (b) are
covered by the terms of a collective bargaining agreement but where the
bargaining unit representative and the Employer have mutually agreed to
participation in the Plan as amended, the term "fiftieth (50th)" shall
replace "fifty-fifth (55th)" in the preceding sentence.
III.
Section 1.35 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
1.35 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary Social
Security benefit (primary old age insurance benefit) to which it is
estimated that an Employee will become entitled in accordance with the
Social Security Act in force as provided in subparagraphs (a) through
(e) below which shall exceed $168 per month on and after January 1,
1989, $250 per month on and after January 1, 1991, and for Employees
who (a) are not covered by the terms of a collective bargaining
agreement or (b) are covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and the Employer
have mutually agreed to participation in the Plan as amended, $325 per
month on and after January 1, 1996, multiplied by a fraction not
greater than one, the numerator of which shall be the Employee's total
Accredited Service, and the denominator of which shall be such total
Accredited Service plus the Accredited Service the Employee could have
accumulated if he had continued his employment from the date he
terminates service with his Employer or any Affiliated Employer until
his Normal Retirement Date. For purposes of determining the estimated
Federal primary Social Security benefit used in the Social Security
Offset, an Employee shall be deemed to be entitled to receive Federal
primary Social Security benefits after retirement or death, if earlier,
regardless of the fact that he may have disqualified himself to receive
payment thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history of the
Employee as provided in Section 5.4 and shall be determined pursuant to
the following, as applicable:
IV.
Section 3.2 should be amended by adding the following paragraph to the
end thereof:
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who separates from
service in 1996, who has not attained his fifty-fifth (55th) birthday
and who elects to retire pursuant to uniform rules established for
Employees retiring pursuant to this paragraph, such Employee's Early
Retirement Date shall be January 1, 1997.
V.
Section 4.4(a) should be deleted in its entirety and replaced with the
following:
(a) If an Employee included in the Plan who has completed at
least five (5) Vesting Years of Service becomes totally disabled and is
granted either Social Security disability benefits or long-term
disability benefits under a long-term disability benefit plan of the
Employer, he shall be considered to be on a leave of absence, herein
referred to as a "Disability Leave." An Employee's Disability Leave
shall be deemed to begin on the initial date of the disability and
shall continue until the earlier of: (1) the end of the month in which
he shall cease to be entitled to receive Social Security Disability
benefits and long-term disability benefits under a long-term disability
benefit plan of the Employer; (2) his death; and (3) his Retirement
Date if he elects to have his Retirement Income commence on such date.
During the period of the Employee's Disability Leave, he shall, for
purposes of the Plan, be deemed to have received Earnings at the
regular rate in effect for him.
VI.
Section 5.3(a) should be deleted in its entirety and replaced with the
following:
(a) Upon retirement at Early Retirement Date, his Minimum
Retirement Income (before adjustment for Provisional Payee designation,
if any) shall be an amount equal to 1.70% of his Average Monthly
Earnings multiplied by his years (and fraction of a year) of Accredited
Service earned as of his Early Retirement Date including a Social
Security Offset.
VII.
Section 5.4 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
5.4 Calculation of Social Security Offset. For purposes of
determining the Social Security Offset in calculating an Employee's
Retirement Income under the Plan, the Social Security Offset shall be
determined by using the actual salary history of the Employee during
his employment with the Employer or any Affiliated Employer, provided
that in the event that the Retirement Board (or its delegee) is unable
to secure such actual salary history within 180 days following the
later of the date of the Employee's separation from service (by
retirement or otherwise) and the time when the Employee is notified of
the Retirement Income to which he is entitled, the salary history shall
be determined in the following manner:
VIII.
Section 5.5 should be deleted in its entirety and replaced with the
following:
5.5 Early Retirement Income. The monthly amount of Retirement
Income payable to an Employee who retires from the service of the
Employer at his Early Retirement Date subject to the limitations of
Section 6.2, will be equal to his Retirement Income determined in
accordance with Sections 5.1 and 5.3 based on his Accredited Service to
his Early Retirement Date, reduced by three-tenths of one percent
(0.3%) for each calendar month by which the commencement date of his
Retirement Income precedes his Normal Retirement Date but follows the
first day of the month following his attainment of his fifty-fifth
(55th) birthday.
Effective for Employees who have an Hour of Service on or
after January 1, 1996, and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) elect to retire in accordance with this
Section 5.5 on or after attainment of age fifty (50) but before
attainment of age fifty-five (55), Retirement Income shall be
determined as in the preceding paragraph including an additional
reduction of one-third of one percent (0.33%) for each calendar month
by which the commencement date precedes the first day of the month
following any such Employee's attainment of his fifty-fifth (55th)
birthday.
At the option of the Employee exercised at or prior to
commencement of his Retirement Income on or after his Early Retirement
Date (provided he shall not have in effect at such Early Retirement
Date a Provisional Payee designation pursuant to Article VII), he may
have his Retirement Income adjusted upwards in an amount which will
make his Retirement Income payable up to age sixty-five (65) equal, as
nearly as may be, to the amount of his Federal primary Social Security
benefit (primary old age insurance benefit) estimated to become payable
after age sixty-five (65), as computed at the time of his retirement in
accordance with Section 5.3(a), plus a reduced amount, if any, of
Retirement Income actuarially determined to be payable after age
sixty-five (65). The Federal primary Social Security benefit used in
calculating an Employee's Retirement Income payable under the Plan
shall be determined by using the salary history of the Employee during
his employment with the Employer or any Affiliated Employer, as
calculated in accordance with Section 5.4.
IX.
Section 5.7 should be deleted in its entirety and replaced with the
following:
5.7 Payment of Retirement Income. The first payment of an
Employee's Retirement Income will be made on his Early Retirement Date,
Normal Retirement Date, Deferred Retirement Date, or date of
commencement of payment of Retirement Income in accordance with Section
8.2 or 8.6, as the case may be; provided that commencement of the
distribution of an Employee's Retirement Income shall not be made prior
to his Normal Retirement Date without the consent of such Employee,
except as provided in Section 8.4 of the Plan.
Notwithstanding anything to the contrary above, if in
accordance with this Section 5.7, an Employee is entitled to receive
Retirement Income commencing at his Early Retirement Date, he may, in
lieu of commencing payment of his Retirement Income upon his Early
Retirement Date, elect to receive such Retirement Income commencing as
of the first day of any month after his Early Retirement Date and
preceding his Normal Retirement Date in an amount equal to his Accrued
Retirement Income determined as of the commencement of his Retirement
Income on or after his Early Retirement Date determined in accordance
with Section 5.5. An election pursuant to this Section 5.7 to have
Retirement Income commence prior to Normal Retirement Date shall be
made on a prescribed form and shall be filed with the Retirement Board
(or its delegee) at least thirty (30) days before Retirement Income is
to commence.
In the event of the death of an Employee who has designated a
Provisional Payee or is deemed to have done so in accordance with
Article VII, if the designation has become effective, the first payment
to be made to the Provisional Payee pursuant to Article VII shall be
made to the Provisional Payee on the first day of the month after the
later of (a) the Employee's death and (b) the date on which the
Employee would have attained his fifty-fifth (55th) birthday if he had
survived to such date, if the Provisional Payee shall then be alive and
proof of the Employee's death satisfactory to the Retirement Board (or
its delegee) shall have been received by it. Subsequent payments will
be made monthly thereafter until the death of such Provisional Payee.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. In addition, with
respect to any Employee described in this paragraph who dies in 1996
while in service with the Employer and who has attained his fiftieth
(50th) birthday but has not attained his fifty-fifth (55th) birthday at
the time of his death, such Employee's Provisional Payee shall commence
receipt of Retirement Income on the earlier of the first day of the
month following the date on which the Employee would have attained his
fifty-fifth (55th) birthday if he were still alive or on January 1,
1997, provided the Employee's Provisional Payee is alive and proof of
the Employee's death satisfactory to the Retirement Board (or its
delegee) is received.
In any event, payment of Retirement Income, including any
adjustments thereto caused by an amendment to the Plan providing for or
which has the effect of providing retroactively increased Retirement
Income, to the Employee shall begin not later than the sixtieth (60th)
day after the later of the close of the Plan Year in which falls (a)
the Employee's Normal Retirement Date or (b) the date the Employee
terminates his service with the Employer or any Affiliated Employer.
Notwithstanding the provisions of the Plan for the monthly payment of
Retirement Income, such income may be adjusted and payable annually in
arrears if the amount of the Retirement Income is less than $10.00 per
month.
X.
Section 5.9(a) should be deleted in its entirety and replaced with the
following:
(a) Once a written claim for benefits is filed with the
Retirement Board (or its delegee), payment of benefits to the Employee
shall begin not later than sixty (60) days after the last day of the
Plan Year in which the latest of the following events occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the Employee
commenced participation in the Plan; or
(3) the Employee's separation from service from the Employer
or any Affiliated Employer.
XI.
Section 5.12(b) should be amended by deleting such paragraph in its
entirety and renaming paragraphs "(c)," "(d)," "(e)," and "(f)" to be "(b),"
"(c)," "(d)," and "(e)."
XII.
Section 6.1(a) should be deleted in its entirety and replaced with the
following:
(a) The maximum annual amount of Retirement Income payable
with respect to an Employee in the form of a straight life annuity
without any ancillary benefits after any adjustment for a Provisional
Payee designation shall be the lesser of the dollar limitation
determined under Code Section 415(b)(1)(A) as adjusted under Code
Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury
Regulation Section 1.415-5, subject to the following provisions of
Article VI. With respect to any former Employee who has Accrued
Retirement Income under the Plan or his Provisional Payee, the maximum
annual amount shall also be subject to the adjustment under Code
Section 415(d), but only those adjustments occurring before September
1, 1996.
XIII.
Article VII should be deleted in its entirety and replaced with the
following:
ARTICLE VII
Provisional Payee
7.1 Adjustment of Retirement Income to provide for payment to
Provisional Payee. An Employee who desires to have his Accrued
Retirement Income adjusted in accordance with the provisions of this
Article VII to provide a reduced amount of Retirement Income payable to
him for his lifetime commencing on his Early Retirement Date, his
Normal Retirement Date, or his Deferred Retirement Date, as the case
may be, may elect subject to Section 7.11, in accordance with the
provisions of this Article VII, at his option, either:
(a) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty percent (80%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that the same amount will be
continued after his death to his Provisional Payee until the death of
such Provisional Payee, or
(b) that an amount of Retirement Income be payable to him for
his lifetime which is equal to ninety percent (90%) of the Retirement
Income which would otherwise be payable to him, but for such election
(taking into account any reduction required in accordance with Sections
7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount
payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or
(c) that an amount of Retirement Income be payable to him for
his lifetime which is equal to seventy-five percent (75%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that the same amount will
be continued after his death to his Provisional Payee until the death
of such Provisional Payee, or, if such Provisional Payee predeceases
the Employee, the Employee's Retirement Income automatically increases
to a monthly amount equal to the Retirement Income which would be
payable to him had he not elected the form of benefit described in this
Section 7.1(c) and instead had elected the single life annuity form of
benefit, or
(d) that an amount of Retirement Income be payable to him for
his lifetime which is equal to eighty-eight percent (88%) of the
Retirement Income which would otherwise be payable to him, but for such
election (taking into account any reduction required in accordance with
Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the
amount payable to the Employee will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or, if
such Provisional Payee predeceases the Employee, the Employee's
Retirement Income automatically increases to a monthly amount equal to
the Retirement Income which would be payable to him had he not elected
the form of benefit described in this Section 7.1(d) and instead had
elected the single life annuity form of benefit.
7.2 Form and time of election and notice requirements.
(a) An election of payment and designation of a Provisional
Payee in accordance with Section 7.1 shall be made in writing at the
same time on a prescribed form delivered to the Retirement Board (or
its delegee). Subject to Section 7.10(d), the election and designation
shall specify its effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII.
Notwithstanding the preceding paragraph, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan.
(b) Subject to Section 7.10(d), an election of payment to be
made in accordance with paragraph (a), (b), (c), or (d) of Section 7.1
may be changed by an Employee, provided the written election of the
change specifies an effective date which shall not be sooner than the
date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later
than the date of commencement of payments in accordance with this
Article VII. Notwithstanding the preceding sentence, an election under
Section 7.1(c) or (d) is subject to Section 7.11, must be in the form
of a written Qualified Election, and shall not become effective until
the commencement of Retirement Income payments under the Plan. To the
extent that the new method of payment shall afford the Employee changed
protection in the event of his death after the effective date of the
new election and prior to retirement, his Accrued Retirement Income
shall be adjusted pursuant to Section 7.4(a) to reflect such changed
protection.
(c) With respect to Sections 7.5 and 7.6, within the period
not less than 30 days and not more than 90 days prior to the
anticipated commencement of benefits, the Employee shall be furnished,
by mail or personal delivery, a written explanation of: (1) the terms
and conditions of the reduced Retirement Income payable as provided in
paragraph (b) of Section 7.1; (2) the Employee's right to make, and the
effect of, an election to waive the payment of reduced Retirement
Income pursuant to a Provisional Payee designation; (3) the rights of
the Employee's Provisional Payee; and (4) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
reduced Retirement Income pursuant to a Provisional Payee designation.
Within thirty (30) days following an Employee's written
request received by the Retirement Board (or its delegee) during the
election period, but within sixty (60) days from the date the Employee
is furnished all of the information prescribed in the immediately
preceding sentence, the Employee shall be furnished an additional
written explanation, in terms of dollar amounts, of the financial
effect of an election by him not to receive such reduced Retirement
Income. If an Employee makes such request, the election period herein
prescribed shall end not earlier than sixty (60) calendar days
following the day of the mailing or personal delivery of the additional
explanation to the Employee. Except that if an election made as
provided in Section 7.5 or 7.6 is revoked, another election under that
Section may be made during the specified election period.
7.3 Circumstances in which election and designation are
inoperative. An election and designation made pursuant to this Article
shall be inoperative and the regular provisions of the Plan shall again
become applicable as if a Provisional Payee had not been designated if,
prior to the commencement of any payment in accordance with this
Article VII: (a) an Employee's Provisional Payee shall die, (b) the
Employee and the Provisional Payee shall be divorced under a final
decree of divorce, or (c) the Retirement Board (or its delegee) shall
have received the written Qualified Election of the Employee to rescind
his election of payment and designation of a Provisional Payee in order
to receive a single life annuity form of benefit. If such a Qualified
Election to rescind is made by the Employee, his Accrued Retirement
Income shall be reduced to reflect the protection afforded the Employee
by any Provisional Payee designation during the period from its
effective date to the date of the Retirement Board's (or its delegee's)
receipt of the Employee's Qualified Election to rescind if the option
as to payments of reduced Retirement Income was in accordance with
either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries
subsequent to the death or divorce of his Provisional Payee and prior
to the commencement of payments in accordance with this Article VII,
then he shall be entitled to designate a new Provisional Payee in the
manner set forth in Section 7.2.
7.4 Pre-retirement death benefit. If prior to his Normal
Retirement Date (or his Deferred Retirement Date, if applicable), an
Employee shall die while in the service of the Employer and is survived
by his spouse to whom he shall be married at the time of his death,
there shall be payable to his surviving spouse (whom he shall be deemed
to have designated as his Provisional Payee) Retirement Income
determined in accordance with paragraph (a) or paragraph (c) of this
Section 7.4, as applicable. Subject to Section 7.10(b), such Retirement
Income shall commence on the first day of the month following the death
of the Employee or the first day of the month following the date on
which he would have attained his fifty-fifth (55th) birthday if he were
still alive, whichever is later, and shall cease with the last payment
preceding the death of his Provisional Payee.
(a) The amount of Retirement Income payable to the Provisional
Payee of a deceased Employee who prior to his death had attained his
fifty-fifth (55th) birthday shall be equal to the amount payable to the
Provisional Payee as calculated in Section 7.1(b) determined on the
basis of his Accredited Service to the date of his death, or if the
Employee shall have attained his fifty-fifth (55th) birthday and so
elected prior to his death, such Retirement Income shall be equal to
the amount set forth in Section 7.1(a) determined on the basis of his
Accredited Service to the date of his death reduced as provided in the
next sentence. If such election shall be made by the Employee, the
Retirement Income which shall be payable to the Employee if he lives to
his Early Retirement Date or the first day of the month following his
attainment of age sixty-five (65), if later, shall be reduced by
three-fourths of one percent (0.75%) for each year (prorated for a
fraction of a year from the first day of the month following the
effective date of the election) which has elapsed from the effective
date of his election to the earlier of (1) the commencement of
Retirement Income on or after his Early Retirement Date or the first
day of the month following his attainment of age sixty-five (65), if
later, or (2) the revocation of such election. If he shall die before
the commencement of Retirement Income on or after his Early Retirement
Date or the first day of the month following his attainment of age
sixty-five (65), if later, his Accrued Retirement Income to the date of
his death shall be reduced by three-quarters of one percent (0.75%) for
each year (prorated for a fraction of a year from the first day of the
month following the effective date of the election) between the
effective date of his election and the first day of the month following
his attainment of age sixty-five (65). No reduction in the Employee's
Retirement Income shall be made for the period during which the
election is in effect after the first day of the month following his
attainment of age sixty-five (65).
(b) Retirement Income shall not be payable under paragraph (a)
of this Section 7.4 to the Provisional Payee of a deceased Employee if
at the time of his death there was in effect a Qualified Election made
after August 22, 1984 under this paragraph (b) that no Retirement
Income shall be paid to his Provisional Payee in the event of his death
while in the service of the Employer (or while in the service of an
Affiliated Employer to which his employment had been transferred in
accordance with Section 4.6) as provided in paragraph (a), provided the
Employee had received at least 180 days prior to his fifty-fifth (55th)
birthday a written explanation of: (1) the terms and conditions of the
Retirement Income payable to his Provisional Payee as provided in
paragraph (a); (2) the Employee's right to make, and the effect of, an
election to waive the payment of Retirement Income to his Provisional
Payee; (3) the rights of the Employee's Provisional Payee; and (4) the
right to make, and the effect of, a revocation of a previous election
to waive the payment of Retirement Income to the Employee's Provisional
Payee.
A revocation of a prior Qualified Election may be made by the
Employee without the consent of the Employee's Provisional Payee at any
time before the commencement of benefits. An election under this
paragraph (b) may be made and such election may be revoked by an
Employee during the period commencing ninety (90) days prior to the
Employee's fifty-fifth (55th) birthday and ending on the date of the
Employee's death.
Notwithstanding the above provisions of this paragraph (b),
such Employee shall not be entitled on or after September 1, 1996 to
waive payment of Retirement Income to his Provisional Payee as provided
in this Section 7.4. Any such election to waive payment of Retirement
Income in effect on August 31, 1996 shall remain in effect unless
subsequently revoked by the Employee.
(c) The amount of such Retirement Income payable to the
Provisional Payee of a deceased Employee who prior to his death, had
completed at least five (5) Vesting Years of Service and had not
attained his fifty-fifth (55th) birthday shall be equal to one-half of
the reduced amount, as actuarially adjusted to provide for the payment
of such Retirement Income beginning as of the first day of the month
following the date on which such deceased Employee would have attained
his fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the Employee's Accrued Retirement Income, determined on the
basis of his Accredited Service to the date of his death.
This Section 7.4(c) shall also apply to adjust, as provided in
the next following paragraph, the future payment of Retirement Income
after December 31, 1990 to a Provisional Payee with respect to an
Employee who died (while in the service of the Employer prior to his
fifty-fifth (55th) birthday after completing the requisite number of
Years of Service in order to have a nonforfeitable right to Retirement
Income under the Plan as in effect on the Employee's date of death),
provided Retirement Income is payable to such Provisional Payee on or
after January 1, 1991. The adjustment under this Section 7.4(c) shall
be determined by adjusting the Retirement Income that had commenced to
the Provisional Payee on or before January 1, 1986, and then adding the
applicable percentage increase under Section 5.13 of the Prior Plan.
Subject to Section 7.10(c), for an Employee on or after
January 1, 1991, who dies while in the service of the Employer prior to
his fifty-fifth (55th) birthday after completing five (5) Vesting Years
of Service, the amount of such Retirement Income payable to the
Provisional Payee shall be calculated as provided in Section 7.1(b)
determined on the basis of his Accredited Service to the date of his
death. The payment of such Retirement Income to the Provisional Payee
shall begin on the first day of the month following the date on which
such deceased Employee would have attained his fifty-fifth (55th)
birthday.
7.5 Post-retirement death benefit - qualified joint and
survivor annuity. If at his Early Retirement Date, Normal Retirement
Date, or Deferred Retirement Date, as the case may be, an Employee is
married and he has not: (a) designated a Provisional Payee in
accordance with Section 7.1 in respect of payments to be made
commencing on his Early, Normal, or Deferred Retirement Date or (b)
made, subject to Section 7.4(b), a Qualified Election that payment be
made to him in the mode of a single life annuity, he shall nevertheless
be deemed to have made an effective designation of a Provisional Payee
under this Section 7.5 and to have specified the payment of a benefit
as provided in Section 7.1(b).
7.6 Election and designation by former Employee entitled to
Retirement Income in accordance with Article VIII. If a former Employee
is entitled to receive in accordance with Section 8.1 Retirement Income
commencing at Normal Retirement Date, or sooner in accordance with
Section 8.2, he may, on or after his fifty-fifth (55th) birthday,
designate his spouse as his Provisional Payee and elect, subject to
Section 7.11, to have his Accrued Retirement Income at the date of
termination of his service actuarially adjusted to provide, at his
option, in the event of the commencement of payment prior to his Normal
Retirement Date either:
(a) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee; or
(b) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee; or
(c) a reduced amount payable to him for his lifetime with the
provision that such reduced amount will be continued after his death to
his spouse as Provisional Payee until the death of such Provisional
Payee, or, if such Provisional Payee predeceases the former Employee,
the former Employee's Retirement Income automatically increases to a
monthly amount equal to the Retirement Income which would be payable to
him had he not elected the form of benefit described in this Section
7.6(c) and instead had elected the single life annuity form of benefit;
or
(d) a reduced amount payable to him for his lifetime with the
provision that one-half (1/2) of such reduced amount will be continued
after his death to his spouse as Provisional Payee until the death of
such Provisional Payee, or, if such Provisional Payee predeceases the
former Employee, the former Employee's Retirement Income automatically
increases to a monthly amount equal to the Retirement Income which
would be payable to him had he not elected the form of benefit
described in this Section 7.6(d) and instead had elected the single
life annuity form of benefit.
The former Employee's election and designation of his
Provisional Payee made in accordance with this Section 7.6 shall be in
writing on a prescribed form delivered to the Retirement Board (or its
delegee) and shall become effective not sooner than the date received
or the former Employee's fifty-fifth (55th) birthday, whichever is
later, nor later than the date of commencement of payment in accordance
with this Section 7.6. Notwithstanding the preceding sentence, an
election under Section 7.6(c) or (d) is subject to Section 7.11, must
be in the form of a written Qualified Election, and shall not become
effective until commencement of Retirement Income payments under the
Plan.
If the former Employee dies prior to his Normal Retirement
Date but after the effective date of his Provisional Payee designation,
there will be payable to his Provisional Payee for life commencing on
the first day of the calendar month after the former Employee's death
Retirement Income in a reduced amount in accordance with the former
Employee's election of payments to be made to his Provisional Payee
after the death of the former Employee under paragraph (a), (b), (c),
or (d), as the case may be, of this Section 7.6. Notwithstanding the
preceding sentence, an election under Section 7.6(c) or (d) is subject
to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until commencement of Retirement Income
payments under the Plan. However, if prior to the former Employee's
death, the Retirement Board (or its delegee) has not received such
election, payment of a reduced amount of Retirement Income will be made
in accordance with paragraph (b) of this Section 7.6 to his surviving
spouse to whom he is married at the time of his death, unless (1) at
the time of his death there is in effect a Qualified Election by the
former Employee that reduced Retirement Income shall not be paid to his
surviving spouse in accordance with this Section 7.6 should he die
between his fifty-fifth (55th) birthday and his Normal Retirement Date
without having elected that payment be made to a Provisional Payee and
(2) at least 180 days prior to his fifty-fifth (55th) birthday a
written explanation is provided to the former Employee of: (A) the
terms and conditions of the Retirement Income payable to his
Provisional Payee as provided in this Section 7.6; (B) the former
Employee's right to make, and the effect of, an election to waive the
payment of Retirement Income to his Provisional Payee; (C) the rights
of a former Employee's spouse; and (D) the right to make, and the
effect of, a revocation of a previous election to waive the payment of
Retirement Income to his Provisional Payee.
If the former Employee is entitled to receive payment of
Retirement Income in accordance with Section 8.2 after his fifty-fifth
(55th) birthday and prior to his Normal Retirement Date and elects to
do so, a reduced amount of Retirement Income determined in accordance
with this Section 7.6, subject to Section 7.11, based upon his Accrued
Retirement Income at the date of termination of his service
(actuarially reduced in accordance with Section 8.2) will be payable to
him commencing on the date on which payments commence prior to Normal
Retirement Date in accordance with Section 8.2 with payments in the
same or reduced amount to be continued to his Provisional Payee for
life after the former Employee's death in accordance with his election
under paragraph (a), (b), (c), or (d), as the case may be, of this
Section 7.6. However, if the former Employee is married and he has not
designated a Provisional Payee in respect of payments to commence to
him prior to his Normal Retirement Date or elected that payment be made
to him in the mode of a single life annuity pursuant to a Qualified
Election, he shall be deemed to have designated a Provisional Payee
pursuant to this Section 7.6 and thereby specified that a reduced
Retirement Income shall be paid to him during his lifetime as provided
in paragraph (b) of this Section 7.6 and continued after his death to
his Provisional Payee as provided in paragraph (b) of this Section 7.6.
If the former Employee is alive on his Normal Retirement Date
and is married and payment of Retirement Income has not sooner
commenced, the provisions of Section 7.5 shall be applicable to the
payment of his Retirement Income, unless he shall elect, subject to
Section 7.11, at his Normal Retirement Date to receive payment of his
Retirement Income pursuant to Section 7.1(a), (b), (c), or (d).
However, if an election and designation in accordance with this Section
7.6 was in effect prior to his Normal Retirement Date, the former
Employee's Accrued Retirement Income at his Normal Retirement Date
shall be actuarially adjusted for the period the election and
designation was in effect.
7.7 Death benefit for Provisional Payee of former Employee. If
an Employee, whose service with the Employer terminates on or after
January 1, 1989, shall die after such termination of employment, and
prior to his death (a) shall have not attained his fifty-fifth (55th)
birthday, (b) shall have completed at least five (5) Vesting Years of
Service, and (c) shall be survived by his spouse to whom he shall be
married at his death, then there shall be payable to his surviving
spouse (whom he shall be deemed to have designated as his Provisional
Payee) Retirement Income determined in accordance with this Section
7.7. Such Retirement Income shall be equal to one-half of the reduced
amount, as actuarially adjusted to provide for the payment of such
Retirement Income beginning as of the first day of the month following
the date on which such deceased former Employee would have attained his
fifty-fifth (55th) birthday and to provide for the determination of
such Retirement Income on a joint and fifty percent (50%) survivor
basis of the former Employee's Accrued Retirement Income, determined on
the basis of his Accredited Service to the date of his death. Subject
to Section 7.10(b), the Provisional Payee shall be eligible to commence
receipt of such Retirement Income on the first day of the month
following the date on which the former Employee would have attained his
fifty-fifth (55th) birthday if he were still alive, or the first day of
any subsequent month preceding what would have been the former
Employee's Normal Retirement Date, and shall cease with the last
payment preceding the death of his Provisional Payee. In any event, the
Provisional Payee shall commence receipt of such Retirement Income no
later than what would have been the former Employee's Normal Retirement
Date.
7.8 Limitations on Employee's and Provisional Payee's benefits.
(a) With respect to an Employee who does not elect a single
life annuity, the limitation on benefits imposed under Article VI shall
be applied as if such Employee had elected a benefit in the form of a
single life annuity.
(b) With respect to a Provisional Payee, the limitations on
benefits imposed under Article VI shall be applied consistent with
paragraph (a) above prorated to provide a limitation equal to or
one-half of the Employee's limitation as appropriate in accordance with
annuity form of benefit elected by the Employee.
7.9 Effect of election under Article VII. An election of
payment or a deemed election of payment in accordance with this Article
VII shall be in lieu of any other form or method of payment of
Retirement Income.
7.10 Effects of change in retirement at Early Retirement Date.
(a) Notwithstanding any other provision of this Article VII
with the exception of paragraphs one and two of Section 7.4(c), with
respect to Employees who have an Hour of Service on or after January 1,
1996 and who (1) are not covered by the terms of a collective
bargaining agreement or (2) are covered by the terms of a collective
bargaining agreement but where the bargaining unit representative and
the Employer have mutually agreed to participation in the Plan as
amended, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)."
(b) Notwithstanding Sections 7.4 and 7.7 and subject to
paragraph (a) above, if an Employee who has an Hour of Service on or
after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (3) dies after attaining his fiftieth (50th)
birthday but before attaining his fifty-fifth (55th) birthday, his
Provisional Payee shall commence receipt of Retirement Income on or
after January 1, 1997, provided the Employee's Provisional Payee is
alive and proof of the Employee's death satisfactory to the Retirement
Board (or its delegee) is received. Notwithstanding the preceding
sentence, with respect to Section 7.7, the Provisional Payee may elect
to defer receipt of Retirement Income to the first day of any month
following the date the Employee would have attained his fiftieth (50th)
birthday but not beyond what would have been such Employee's Normal
Retirement Date.
(c) Subject to paragraph (a) above, the Provisional Payee of
any Employee described in the third paragraph of Section 7.4(c) who (1)
is not covered by the terms of a collective bargaining agreement or (2)
is covered by the terms of a collective bargaining agreement but where
the bargaining unit representative and the Employer have mutually
agreed to participation in the Plan as amended shall commence receipt
of Retirement Income upon the later of the first day of the month after
the Employee would have attained his fiftieth (50th) birthday or
January 1, 1997.
(d) For Employees who have an Hour of Service on or after
January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended and (c) have not attained their fifty-fifth
(55th) birthday by December 31, 1996, notwithstanding Section 7.2, with
respect to an election to receive a form of benefit described in
Sections 7.1(a) and 7.6(a), such election will be effective not sooner
than the date received by the Retirement Board (or its delegee) or
January 1, 1997, whichever is later, nor later than the date of
commencement of payments in accordance with this Article VII.
7.11 Commencement of new optional forms of payment. The
options for payment described in Sections 7.1(c) and (d) and Sections
7.6(c) and (d) may be elected only for payments that commence on or
after October 1, 1996 and only for Employees who have an Hour of
Service on or after January 1, 1996 and who (a) are not covered by the
terms of a collective bargaining agreement or (b) are covered by the
terms of a collective bargaining agreement but where the bargaining
unit representative and the Employer have mutually agreed to
participation in the Plan as amended.
7.12 Special form of benefit for former Employees.
(a) With respect to any Employee who has an Hour of Service on
or after January 1, 1996 and who (1) is not covered by the terms of a
collective bargaining agreement or (2) is covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended (3) terminates employment with the Employer in
1996 and (4) has attained his fiftieth (50th) birthday but not his
fifty-fifth (55th) birthday as of his termination of employment, such
Employee shall be eligible to elect the special form of benefit
described in the next following paragraph which election must be made
in the form of a written Qualified Election.
(b) This special form of benefit shall only commence on
January 1, 1997 and shall be comprised of two components consisting of
a lump sum and a single life annuity as described in paragraphs (1) and
(2) below.
(1) Annuity Component: A reduced amount of Retirement
Income payable to the former Employee for his lifetime
determined as if he had elected to retire as of the
first of the month following the date such former
Employee terminated from employment.
(2) Lump Sum Component: A lump sum payment equal to the
difference between paragraphs (A) and (B) below:
(A) the lump sum amount which is the
Actuarial Equivalent of a single
life annuity payable to the former
Employee determined as if the former
Employee had elected such single
life annuity to commence as of
January 1, 1997, and
(B) the lump sum amount which is the
Actuarial Equivalent of the payment
described in paragraph (1) above.
(3) With respect to paragraph (1) above, if the annuity
component is payable to the former Employee for his
lifetime, he may elect to have his Retirement Income
adjusted upwards in an amount which will make his
Retirement Income payable up to age sixty-five (65)
equal, as nearly as may be, to the amount of his
Federal primary Social Security benefit (primary old
age insurance benefit) estimated to become payable
after age sixty-five (65), computed as of the first of
the month following the date the former Employee
terminated employment, plus a reduced amount, if any,
of Retirement Income actuarially determined to be
payable after age sixty-five (65). The Federal primary
Social Security benefit used in calculating the former
Employee's Retirement Income payable under the Plan
shall be determined by using the salary history of the
former Employee during his employment with the
Employer, or any Affiliated Employer, as calculated in
accordance with Section 5.4.
(c) Notwithstanding paragraph (b) above, with respect to this
form of benefit, a former Employee may elect, in lieu of receiving the
annuity component as a single life annuity, to receive his benefit in a
manner similar to the forms of payment described in Section 7.1(a),
(b), (c), or (d). If one of these alternatives is elected, the annuity
and lump sum component will be adjusted as follows:
(1) Alternative 1
(A) Annuity Component: The form of payment described in Section
7.1(a) but which is calculated based on eighty percent (80%)
of the single life annuity provided in paragraph (b)(1)
above.
(B) Lump Sum Component: A lump sum equal to eighty percent (80%)
of the amount provided in paragraph (b)(2) above.
(2) Alternative 2
(A) Annuity Component: The form of payment described in Section
7.1(b) but which is calculated based on ninety percent (90%)
of the single life annuity provided in paragraph (b)(1)
above.
(B) Lump Sum Component: A lump sum equal to ninety percent (90%)
of the amount provided in paragraph (b)(2) above.
(3) Alternative 3
(A) Annuity Component: The form of payment described in Section
7.1(c) but which is calculated based on seventy-five percent
(75%) of the single life annuity provided in paragraph
(b)(1) above.
(B) Lump Sum Component: A lump sum equal to seventy-five percent
(75%) of the amount provided in paragraph (b)(2) above.
(4) Alternative 4
(A) Annuity Component: The form of payment described in Section
7.1(d) but which is calculated based on eighty-eight percent
(88%) of the single life annuity provided in paragraph
(b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty-eight percent
(88%) of the amount provided in paragraph (b)(2) above.
XIV.
Section 8.2 should be deleted in its entirety and replaced with the
following:
8.2 Early distribution of vested benefit. If an Employee
terminates from service before his fifty-fifth (55th) birthday and is
entitled to receive in accordance with Section 8.1 Retirement Income
commencing at his Normal Retirement Date and at the time his service
terminated he had at least ten (10) Years of Accredited Service, he
may, in lieu of receiving payment of such Retirement Income commencing
at Normal Retirement Date, elect to receive such Retirement Income
commencing as of the first day of any month after his fifty-fifth
(55th) birthday but preceding his Normal Retirement Date in an amount
equal to his Accrued Retirement Income at the date of termination of
his service actuarially reduced in accordance with reasonable actuarial
assumptions adopted by the Retirement Board. An election pursuant to
this Section 8.2 to have Retirement Income commence prior to Normal
Retirement Date shall be made on a prescribed form and shall be filed
with the Retirement Board (or its delegee) at least thirty (30) days
before Retirement Income is to commence.
Effective for Employees who have an Hour of Service on or
after January 1, 1996 and who (a) are not covered by the terms of a
collective bargaining agreement or (b) are covered by the terms of a
collective bargaining agreement but where the bargaining unit
representative and the Employer have mutually agreed to participation
in the Plan as amended, the term "fiftieth (50th)" shall replace
"fifty-fifth (55th)" in the preceding paragraph. If any such Employee
commences receipt of his Retirement Income after attaining age fifty
(50) but before attaining age fifty-five (55), the Employee's
Retirement Income shall be determined as in the preceding paragraph
including an additional reduction of one-third of one percent (0.33%)
for each calendar month by which the commencement date precedes the
first day of the month following such Employee's attainment of his
fifty-fifth (55th) birthday.
XV.
Section 8.4 should be deleted in its entirety and replaced with the
following:
8.4 Cash-out and buy-back. (a) Notwithstanding any other
provision of this Plan, if the present value of Accrued Retirement
Income of an Employee whose service terminates for any reason other
than transfer to an Affiliated Employer under Section 4.6, or
retirement under Article III, is not more than $3,500 (or such greater
amount as permitted by the regulations prescribed by the Secretary of
the Treasury), the Employer shall direct that such present value of the
Employee's Accrued Retirement Income be paid in a lump sum, in cash, to
such terminated Employee. The present value of the Accrued Retirement
Income shall be calculated as of the date of distribution of the lump
sum applying the Applicable Interest Rate as defined in Section 8.5(e)
in effect on the first day of the Plan Year of distribution or in
accordance with Section 8.5(g), as applicable. For purposes of this
Section 8.4, if the present value of the Employee's vested Accrued
Retirement Income is zero, the Employee shall be deemed to have
received a distribution of such vested Retirement Income.
(b) If such terminated Employee is subsequently reemployed and
becomes covered under this Plan, the calculation of his Accrued
Retirement Income shall be without regard to his years of Accredited
Service prior to any One-Year Breaks in Service, unless the amount of
such payment is repaid to the Trust, plus interest at the rate
determined under Section 411(c)(2)(C) of the Code. If such amount (plus
interest) is repaid, the Employee's Retirement Income shall be
calculated based on his years of Accredited Service before and after
any One-Year Breaks in Service. Any repayment of a cash-out made
pursuant to this Section 8.4 shall be made before the earlier of (a)
five (5) years after the date on which the Employee is reemployed by
the Employer or an Affiliated Employer, or (b) the close of the first
period of five (5) consecutive One-Year Breaks in Service commencing
after the distribution. If an Employee has been deemed to receive a
distribution in accordance with paragraph (a) and is then reemployed,
upon such reemployment, the amount of the deemed distribution shall be
restored to the Employee.
(c) Notwithstanding paragraph (b) above, effective on or after
July 15, 1996, a terminated Employee who has been paid a lump sum of
the present value of his Accrued Retirement Income in accordance with
paragraph (a) above shall not be entitled to repay this amount to the
Trust. If such terminated Employee is subsequently reemployed and
attains his Early Retirement Date, Normal Retirement Date, or Deferred
Retirement Date, or terminates service for any reason subject to the
requirements of Section 8.1 or 8.2, the Employee shall receive
Retirement Income based on all Accredited Service, including Accredited
Service earned prior to reemployment, but reduced by the Actuarial
Equivalent of the lump sum payment made in accordance with paragraph
(a).
XVI.
Section 8.5 should be amended by adding the following new paragraph (g)
to the end thereof:
(g) Notwithstanding paragraph (c) and (e) above, effective for
Employees who will commence receipt of their Retirement Income on or
after October 1, 1996, the present value of such Employee's vested
Accrued Retirement Income under Section 8.4 shall be calculated by
using the annual rate of interest on 30-year Treasury securities for
the month of November in the Plan Year which precedes the Plan Year in
which such present value is determined and by using the prevailing
commissioners' standard table used to determine reserves for group
annuity contracts in effect on the date as of which the present value
is being determined.
XVII.
Section 8.7 should be amended by deleting the first paragraph in its
entirety and replacing it with the following:
8.7 Requirement for Direct Rollovers. This Section 8.7 applies
to distributions made from the Plan on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Article VIII, a
Distributee may elect on a prescribed form to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
XVIII.
Section 10.2 should be amended by deleting the second paragraph in its
entirety and replacing it with the following:
The members of the Retirement Board shall elect a Chairman
from their number, and a Secretary who may be but need not be one of
the members of the Retirement Board, and shall designate an actuary to
act in actuarial matters relating to the Plan. They may appoint from
their number such committees with such powers as they shall determine,
may authorize one or more of their number or any agent to make any
payment in their behalf, or to execute or deliver any instrument except
that a requisition for funds from the Trustee shall be signed by two
(2) members of the Retirement Board unless the Retirement Board
determines in writing to delegate such requisition authority.
XIX.
Section 10.3 should be amended by deleting the last paragraph in its
entirety and replacing it with the following:
Any action by the Retirement Board under this Section 10.3
shall be binding and conclusive. To the extent that the Retirement
Board delegates any of the foregoing duties or functions to another
party, the Retirement Board retains the ultimate authority to act in
accordance with this Section 10.3.
XX.
Section 15.1(a) should be deleted in its entirety and replaced with the
following:
(a) "Pensioned Employee" means a former Employee of the
Employer who is eligible, or becomes eligible pursuant to Section 3.2
as amended, to receive Retirement Income after his retirement at his
Early, Normal, or Deferred Retirement Date, as applicable. A "Pensioned
Employee" shall not include any former Employee who terminated his
service with the Employer prior to his Early, Normal, or Deferred
Retirement Date and who is entitled to Retirement Income under Section
8.1 or 8.2 of the Plan; a Key Employee, as defined in Section 14.6(g);
or effective January 1, 1991, any Pensioned Employee of an Employer
that has adopted the Plan pursuant to Section 14.1 hereof but does not
provide medical benefits to its Pensioned Employees.
XXI.
Section 15.2(b) should be deleted in its entirety and replaced with the
following:
(b) An Employee who becomes a Pensioned Employee on or after
January 1, 1989 shall be eligible for coverage on the date he becomes a
Pensioned Employee, provided he was covered, or is deemed covered as
determined by the Retirement Board, as an Employee under a group
medical plan maintained by the Employer immediately prior to the time
he became a Pensioned Employee.
IN WITNESS WHEREOF, Mississippi Power Company through its duly
authorized officer, has adopted this Third Amendment to the Pension Plan for
Employees of Mississippi Power Company this ____ day of _________________, 1996,
to be effective as stated herein.
MISSISSIPPI POWER COMPANY
By: _______________________________
Title:_____________________________
ATTEST:
By: ____________________________
Title:___________________________
(CORPORATE SEAL)
Exhibit 10(e)23
SUPPLEMENTAL BENEFIT PLAN
FOR
MISSISSIPPI POWER COMPANY
January 1, 1996
<PAGE>
SUPPLEMENTAL BENEFIT PLAN
FOR
MISSISSIPPI POWER COMPANY
Page
ARTICLE I - PURPOSE AND ADOPTION OF PLAN----------------------------1
1.1 Adoption-----------------------------------------------1
1.2 Purpose------------------------------------------------1
ARTICLE II
DEFINITIONS-----------------------------------------------1
2.1 Account-----------------------------------------------1
2.2 Affiliated Employer-----------------------------------2
2.3 Beneficiary-------------------------------------------2
2.4 Board of Directors------------------------------------2
2.5 Code--------------------------------------------------2
2.6 Common Stock------------------------------------------2
2.7 Company-----------------------------------------------2
2.8 Deferred Compensation Plan----------------------------2
2.9 Effective Date----------------------------------------2
2.10 Employee---------------------------------------------3
2.11 ESOP-------------------------------------------------3
2.12 Non-Pension Benefit----------------------------------3
2.13 Participant------------------------------------------3
2.14 Pension Benefit--------------------------------------3
2.15 Pension Plan-----------------------------------------3
2.16 Plan-------------------------------------------------3
2.17 Plan Year--------------------------------------------3
2.18 Savings Plan-----------------------------------------3
ARTICLE III ADMINISTRATION OF PLAN---------------------------------4
3.1 Administrator-----------------------------------------4
3.2 Powers------------------------------------------------4
3.3 Duties of the Board of Directors----------------------4
3.4 Indemnification---------------------------------------5
ARTICLE IV ELIGIBILITY---------------------------------------------6
4.1 Eligibility Requirements------------------------------6
4.2 Determination of Eligibility--------------------------6
ARTICLE V BENEFITS------------------------------------------------6
5.1 Pension Benefit---------------------------------------7
5.2 Non-Pension Benefit-----------------------------------8
5.3 Distribution of Benefits-----------------------------10
5.5 Withholding------------------------------------------12
ARTICLE VI MISCELLANEOUS------------------------------------------12
6.1 Assignment-------------------------------------------13
6.2 Amendment and Termination----------------------------13
6.3 No Guarantee of Employment---------------------------13
6.4 Construction-----------------------------------------13
<PAGE>
SUPPLEMENTAL BENEFIT PLAN
FOR
MISSISSIPPI POWER COMPANY
ARTICLE I - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption: Mississippi Power Company hereby adopts and establishes
the Supplemental Benefit Plan for Mississippi Power Company. The Plan shall be
an unfunded deferred compensation arrangement whose benefits shall be paid
solely from the general assets of the Company.
1.2 Purpose: The Plan is designed to provide certain retirement and
other deferred compensation benefits primarily for a select group of management
or highly compensated employees which are not otherwise payable or cannot
otherwise be provided by the Company (1) under the Pension Plan for Employees of
Mississippi Power Company, The Southern Company Employee Savings Plan, and The
Southern Company Employee Stock Ownership Plan, as a result of the limitations
set forth under Sections 401(a)(17), 402(g), 401(k), 401(m) or 415 of the
Internal Revenue Code of 1986, as amended from time to time and (2) to
compensate for lost benefits resulting from participation in The Southern
Company Deferred Compensation Plan, as amended from time to time.
ARTICLE II DEFINITIONS
2.1 "Account" shall mean the account or accounts established and
maintained by the Company to reflect the interest of a Participant in the Plan
resulting from a Participant's Non-Pension Benefit calculated in accordance with
Section 5.2.
2.2 "Affiliated Employer" shall mean any corporation which is a member
of the controlled group of corporations of which The Southern Company is the
common parent corporation.
2.3 "Beneficiary" shall mean any person, estate, trust, or organization
entitled to receive any payment under the Plan upon the death of a Participant.
2.4 "Board of Directors" shall mean the Board of Directors of the Company.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.6 "Common Stock" shall mean common stock of The Southern Company.
2.7 "Company" shall mean Mississippi Power Company.
2.8 "Deferred Compensation Plan" shall mean The Southern Company
Deferred Compensation Plan, as amended from time to time, following its adoption
by the Board of Directors.
2.9 "Effective Date" shall mean January 1, 1983. The Effective Date of
this amendment and restatement shall mean January 1, 1996.
2.10 "Employee" shall mean any person who is currently employed by the
Company.
2.11 "ESOP" shall mean The Southern Company Employee Stock Ownership Plan,
as amended from time to time. 2.12 "Non-Pension Benefit" shall mean the benefit
described in Section 5.2.
2.13 "Participant" shall mean an Employee or former Employee of the
Company who is eligible pursuant to Sections 4.1 and 4.2.
2.14 "Pension Benefit" shall mean the benefit described in Section 5.1.
2.15 "Pension Plan" shall mean the defined benefit pension plan
maintained by the Company or an Affiliated Employer, as amended from time to
time.
2.16 "Plan" shall mean the Supplemental Benefit Plan for Mississippi
Power Company, as amended from time to time.
2.17 "Plan Year" shall mean the calendar year.
2.18 "Savings Plan" shall mean The Southern Company Employee Savings Plan,
as amended from time to time.
Where the context requires, the definitions of all terms set forth in
the Pension Plan, the ESOP, the Savings Plan and the Deferred Compensation Plan
shall apply with equal force and effect for purposes of interpretation and
administration of the Plan, unless said terms are otherwise specifically defined
in the Plan. The masculine pronoun shall be construed to include the feminine
pronoun and the singular shall include the plural, where the context so
requires.
ARTICLE III ADMINISTRATION OF PLAN
3.1 Administrator. The general administration of the Plan shall be placed
in the Board of Directors.
3.2 Powers. The Board of Directors shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan more particularly set forth herein. It shall interpret
the Plan and shall determine all questions arising in the administration,
interpretation and application of the Plan. Any such determination by it shall
be conclusive and binding on all persons. It may adopt such regulations as it
deems desirable for the conduct of its affairs. It may appoint such accountants,
counsel, actuaries, specialists and other persons as it deems necessary or
desirable in connection with the administration of this Plan, and shall be the
agent for the service of process.
3.3 Duties of the Board of Directors.
(a) The Board of Directors is responsible for the daily
administration of the Plan. It may appoint other persons or entities to perform
any of its fiduciary functions. The Board of Directors and any such appointee
may employ advisors and other persons necessary or convenient to help it carry
out its duties, including its fiduciary duties. The Board of Directors shall
have the right to remove any such appointee from his position. Any person, group
of persons or entity may serve in more than one fiduciary capacity.
(b) The Board of Directors shall maintain accurate and
detailed records and accounts of Participants and of their rights under the Plan
and of all receipts, disbursements, transfers and other transactions concerning
the Plan. Such accounts, books and records relating thereto shall be open at all
reasonable times to inspection and audit by persons designated by the Board of
Directors.
(c) The Board of Directors shall take all steps necessary to
ensure that the Plan complies with the law at all times. These steps shall
include such items as the preparation and filing of all documents and forms
required by any governmental agency; maintaining of adequate Participants'
records; recording and transmission of all notices required to be given to
Participants and their Beneficiaries; the receipt and dissemination, if
required, of all reports and information received from an Affiliated Employer;
securing of such fidelity bonds as may be required by law; and doing such other
acts necessary for the proper administration of the Plan. The Board of Directors
shall keep a record of all of its proceedings and acts, and shall keep all such
books of account, records and other data as may be necessary for proper
administration of the Plan.
3.4 Indemnification. The Company shall indemnify the Board of Directors
against any and all claims, losses, damages, expenses and liability arising from
an action or failure to act, except when the same is finally judicially
determined to be due to gross negligence or willful misconduct. The Company may
purchase at its own expense sufficient liability insurance for the Board of
Directors to cover any and all claims, losses, damages and expenses arising from
any action or failure to act in connection with the execution of the duties as
Board of Directors. No member of the Board of Directors who is also an Employee
of the Company shall receive any compensation from the Plan for his services in
administering the Plan.
ARTICLE IV ELIGIBILITY
4.1 Eligibility Requirements. All Employees (a) who are determined
eligible to participate in accordance with Section 4.2, (b) whose benefits under
the Pension Plan of the Company are limited by the limitations set forth in
Sections 401(a)(17) or 415 of the Code, (c) for whom contributions by the
Company to the Savings Plan are limited by the limitations set forth in Sections
401(a)(17), 401(k), 401(m), 402(g) or 415 of the Code, (d) for whom
contributions by the Company to the ESOP are limited by the limitations set
forth in Sections 401(a)(17) or 415 of the Code or (e) who after December 31,
1995, make deferrals under the Deferred Compensation Plan, shall be eligible to
receive benefits under the Plan.
4.2 Determination of Eligibility. The Board of Directors shall
determine which Employees are eligible to participate. Upon becoming a
Participant, an Employee shall be deemed to have assented to the Plan and to any
amendments hereafter adopted. The Board of Directors shall be authorized to
rescind the eligibility of any Participant if necessary to insure that the Plan
is maintained primarily for the purpose of providing deferred compensation to a
select group of management or highly compensated employees under the Employee
Retirement Income Security Act of 1974, as amended.
ARTICLE V BENEFITS
5.1 Pension Benefit.
(a) If a Participant has Accredited Service with respect to
the Pension Plan of the Company, but not with respect to the Pension Plan of any
Affiliated Employer, he shall be entitled to a Pension Benefit equal to that
portion of his Retirement Income under the Pension Plan of the Company which is
not payable under such Pension Plan as a result of the limitations imposed by
Sections 401(a)(17), 415(b), or 415(e) of the Code.
(b) If a Participant has Accredited Service with respect to
the Pension Plan of the Company and with respect to the Pension Plan of one or
more Affiliated Employers, his Pension Benefit payable by the Company, and any
Affiliated Employer(s) shall be equal to that portion of his combined Retirement
Income under each Pension Plan which is not payable under any of such Pension
Plans as a result of the limitations described by Sections 401(a)(17), 415(b),
or 415(e) of the Code, multiplied by a fraction, the sum of the individual
fractions not to exceed one (1), the numerator of which is his years of
Accredited Service under the Pension Plan of the Company or any Affiliated
Employer(s) and the denominator which is his total years of Accredited Service
under the Pension Plans of the Company and any Affiliated Employer(s).
(c) For purposes of this Section 5.1, the Pension Benefit of
a Participant shall be calculated based on the Participant's Earnings that are
considered under the Pension Plan of the Company in calculating his Retirement
Income, without regard to the limitation of Section 401(a)(17) of the Code,
including any portion of his compensation he may have elected to defer under the
Deferred Compensation Plan but excluding Incentive Pay he deferred under such
Deferred Compensation Plan.
(d) To the extent that a Participant's Retirement Income
under a Pension Plan is recalculated as a result of an amendment to such Pension
Plan in order to increase the amount of his Retirement Income, the Participant's
Pension Benefit shall also be recalculated in order to properly reflect such
increase in determining payments of the Participant's Pension Benefit made on or
after the effective date of such increase.
5.2 Non-Pension Benefit.
(a) A Participant shall be entitled to a Non-Pension Benefit
which is determined under this Section 5.2. An Account shall be established for
the Participant by the Company, as of his initial Plan Year of participation in
the Plan. Each Plan Year such Account shall be credited with an amount equal to
the amount that the Company is prohibited from contributing (1) to the Savings
Plan on behalf of the Participant as a result of the limitations imposed by
Sections 401(a)(17), 401(k), 401(m), 402(g), 415(c), or 415(e) of the Code and
(2) to the ESOP on behalf of the Participant as a result of the limitations
imposed by Sections 401(a)(17), 415(c), or 415(e) of the Code.
(b) For purposes of this Section 5.2, the Non-Pension
Benefit of a Participant shall be calculated based on the Participant's
compensation that would have been considered in calculating allocations to his
accounts under the Savings Plan and ESOP, without regard to the limitations of
Section 401(a)(17) or Section 402(g) of the Code, including any portion of his
compensation he may have elected to defer under the Deferred Compensation Plan
but excluding Incentive Pay he deferred under the Deferred Compensation Plan.
(c) All amounts so credited to the Account of the
Participant shall be deemed to be invested in the Common Stock at the same time
that such amounts would have been so invested if they had been contributed by
the Company to the Savings Plan or the ESOP, as the case may be. In addition,
such Account shall be credited with respect to shares of Common Stock allocated
to the Participant's Account as follows:
(1) In the case of cash dividends, such additional
shares as could be purchased with the dividends which would have been
payable if the credited shares had been outstanding;
(2) In the case of dividends payable in property
other than cash or Common Stock, such additional shares as could be
purchased with the fair market value of the property which would have
been payable if the credited shares had been outstanding; or
(3) In the case of dividends payable in Common
Stock, such additional shares as would have been payable on the
credited shares if they had been outstanding.
(d) As soon as practicable following the first day of his
eligibility to have benefits credited to his Account, a Participant shall
designate in writing on a form to be prescribed by the Company the method of
payment of his Account, which shall be the payment of a single lump sum or a
series of annual installments not to exceed twenty (20). The method of
distribution initially designated by a Participant shall not be revoked and
shall govern the distribution of each Account established for the benefit of the
Participant by the Company. Notwithstanding, in the sole discretion of the Board
of Directors upon application by the Participant, the method of distribution
designated by such Participant may be modified not prior to 395 days nor later
than 365 days prior to a Participant's date of separation from service in order
to change the form of distribution of his Account in accordance with the terms
of the Plan. Each Participant, his Beneficiary, and legal representative shall
be bound as to any action taken pursuant to the method of distribution elected
by a Participant and the terms of the Plan.
5.3 Distribution of Benefits.
(a) The Pension Benefit, as determined in accordance with
Section 5.1, shall be payable in monthly increments on the first day of the
month concurrently with and in the same manner as the Participant's Retirement
Income under the Pension Plan. The Beneficiary of a Participant's Pension
Benefit shall be the same as the beneficiary of the Participant's Retirement
Income under the Pension Plan.
(b) When a Participant terminates his employment with the
Company, said Participant shall be entitled to receive the market value of any
shares of Common Stock (and fractions thereof) reflected in any Account
maintained by the Company for his benefit under the Plan in a single lump sum
distribution or annual installments not to exceed twenty (20). Such distribution
shall be made not later than sixty (60) days following the close of the calendar
quarter in which his termination of employment occurs, or as soon as reasonably
practicable thereafter. The transfer by a Participant between companies within
The Southern Company shall not be deemed to be a termination of employment with
the Company. No portion of a Participant's Account shall be distributed in
Common Stock.
(c) In the event a Participant elects to receive the
distribution of his Account in annual installments, the first payment shall be
made not later than sixty (60) days following the close of the calendar quarter
in which his termination of employment occurs, or as soon as reasonably
practicable thereafter, and shall be an amount equal to the balance in the
Participant's Account divided by the number of annual installment payments. Each
subsequent annual payment shall be an amount equal to the balance in the
Participant's Account divided by the number of the remaining annual payments and
shall be due on the anniversary of the preceding payment date. No portion of a
Participant's Account shall be distributed in Common Stock.
(d) Upon the death of a Participant, or a former Participant
prior to the payment of all amounts credited to said Participant's Account, the
unpaid balance shall be paid in the sole discretion of the Board of Directors
(1) in a lump sum to the designated Beneficiary of a Participant or former
Participant within sixty (60) days following the close of the calendar quarter
in which the Board of Directors is provided evidence of the Participant's death
(or as soon as reasonably practicable thereafter) or (2) in accordance with the
distribution method chosen by such Participant or former Participant. The
Beneficiary designation may be changed by the Participant or former Participant
at any time without the consent of the prior Beneficiary. In the event a
Beneficiary designation is not on file or the designated Beneficiary is deceased
or cannot be located, payment will be made to the estate of the Participant or
former Participant. No portion of a Participant's Account shall be distributed
in Common Stock.
(e) Upon the total disability of a Participant or former
Participant, as determined by the Social Security Administration, the unpaid
balance of his Account shall be paid in the sole discretion of the Board of
Directors (1) in a lump sum to the Participant or former Participant, or his
legal representative within sixty (60) days following the notification of the
Board of Directors of the determination of disability by the Social Security
Administration (or as soon as reasonably practicable thereafter) or (2) in
accordance with the distribution method elected by such Participant or former
Participant. No portion of a Participant's Account shall be distributed in
Common Stock.
(f) The Board of Directors in its sole discretion upon
application made by the Participant, a designated Beneficiary, or their legal
representative, may determine to accelerate payments or, in the event of death
or total disability (as determined by Social Security Administration), to extend
or otherwise make payments in a manner different from the manner in which such
payment would be made under the method of distribution elected by the
Participant in the absence of such determination.
5.4 Funding of Benefits. The Company maintaining an Account for the
benefit of a Participant shall not reserve or otherwise set aside funds for the
payment of its obligations under the Plan, and such obligations shall be paid
solely from the general assets of the Company. Notwithstanding that a
Participant shall be entitled to receive the balance of his Account under the
Plan, the assets from which such amount shall be paid at all times remain
subject to the claims of the creditors of the Company.
5.5 Withholding. There shall be deducted from the payment of any
Pension Benefit or Non-Pension Benefit due under the Plan the amount of any tax
required by any governmental authority to be withheld and paid over by the
Company to such governmental authority for the account of the Participant or
Beneficiary entitled to such payment.
ARTICLE VI MISCELLANEOUS
6.1 Assignment. Neither the Participant, his Beneficiary, nor his legal
representative shall have any rights to sell, assign, transfer or otherwise
convey the right to receive the payment of any Pension Benefit or Non-Pension
Benefit due hereunder, which payment and the right thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to assign or
transfer the right to payment under the Plan shall be null and void and of no
effect.
6.2 Amendment and Termination. The Plan may be amended or terminated at
any time by the Board of Directors, provided that no amendment or termination
shall cause a forfeiture or reduction in any benefits accrued as of the date of
such amendment or termination.
6.3 No Guarantee of Employment. Participation hereunder shall not be
construed as creating any contract of employment between the Company and a
Participant, nor shall it limit the right of the Company to suspend, terminate,
alter, or modify, whether or not for cause, the employment relationship between
the Company and a Participant.
6.4 Construction. This Plan shall be construed in accordance with and
governed by the laws of the State of Mississippi, to the extent such laws are
not otherwise superseded by the laws of the United States.
IN WITNESS WHEREOF, the Plan has been executed by duly authorized
officers of Mississippi Power Company, pursuant to resolutions of the Board of
Directors of Mississippi Power Company, this day of
, 1996.
MISSISSIPPI POWER COMPANY
(CORPORATE SEAL)
By:
Attest:
Exhibit 10(f)18
SECOND AMENDMENT TO THE
EMPLOYEES' RETIREMENT PLAN OF
SAVANNAH ELECTRIC AND POWER COMPANY
WHEREAS, the Board of Directors of Savannah Electric and Power Company
(the "Company") heretofore adopted the amendment and restatement of the
Employees Retirement Plan of Savannah Electric and Power Company (the "Plan")
effective January 1, 1989 in order to comply with the Internal Revenue Code of
1986, as amended, (the "Code") and to make other technical and clarifying
changes; and
WHEREAS, the Company wishes to amend the Plan to comply with certain
additional requirements imposed by the Internal Revenue Service and to make
certain other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to Article 13 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1989, unless otherwise indicated,
the Company hereby amends the Plan as follows:
I.
Section 7.07(b)(iii) should be deleted in its entirety and replaced
with the following:
If the Member continues in service as an Employee after his
Normal Retirement Date and the notice of his election is
received by the Retirement Committee prior to his Normal
Retirement Date, the election shall become effective on his
Normal Retirement Date, or if the notice of the election is
received by the Retirement Committee after the Member's Normal
Retirement Date, the election shall become effective on the
date it is received by the Retirement Committee. In the event
of the death of a Member in service as an Employee on or after
his Normal Retirement Date and after his election has become
effective, payments of the benefit under the option shall
commence on the first day of the month next following the
month of death if the contingent annuitant designated under
the option is then living; or, upon the retirement of such a
Member, the amount under the option shall be payable to the
Member, but no payments shall commence or accrue to him until
the date of retirement.
II.
Article 7.08 should be deleted in its entirety and replaced by the
following:
7.08 Cash-Out of Annuity Benefits
Although Allowances shall normally be payable in monthly
installments, a lump sum payment of Equivalent Actuarial Value
shall be made in lieu thereof if the present value of a
Member's Allowance upon termination of employment is less than
$3,500, or effective September 1, 1996 less than or equal to
$3,500. The Equivalent Actuarial Value shall be determined by
using an interest rate assumption equal to the interest rate
used by the Pension Benefit Guaranty Corporation for valuing a
lump sum distribution for single employer plans that terminate
on the first day of the Computation Year in which the Annuity
Starting Date occurs. In determining the amount of a lump sum
payable prior to a Member's Normal Retirement Date, Equivalent
Actuarial Value shall be calculated as a benefit which would
otherwise have been provided commencing at the Member's Normal
Retirement Date, or, if larger, the benefit payable at the
earliest possible commencement date, but in no event earlier
than the date as of which the lump sum is paid. The lump sum
payment shall be made as soon as practicable on or after the
date the Member terminates employment. Notwithstanding the
foregoing, if the present value of the Member's vested
Allowance is zero, the Member shall be deemed to have received
a distribution of such Member's Accrued Benefit.
III.
Article 17 should be deleted in its entirety and replaced by the
following:
ARTICLE 17
Retiree Medical Benefits
17.01 Definitions. The following words and phraseology as used
herein shall have the following meanings unless a different meaning is
plainly required by the context:
(a) "Pensioned Employee" means effective September 15, 1993, a
Member who retires and is receiving a distribution from the Plan
pursuant to Sections 5.01 and 5.02 or a retired Member who is entitled
to receive a distribution from the Plan pursuant to Sections 5.01 or
5.02 after retirement will be eligible for reimbursement or payment of
covered medical expenses, as hereinafter described, provided the Member
(1) was covered by the Georgia Power Company Medical Benefits Plan
immediately before retirement; (2) is not eligible as a spouse or
dependent or otherwise for coverage under the Georgia Power Company
Medical Benefits Plan; and (3) continues to satisfy the eligibility
requirements applicable to retired employees as set forth in the
provisions of the Georgia Power Company Medical Benefits Plan, which is
attached hereto as Exhibit A and incorporated herein by reference and
may be changed in accordance with the terms of the Georgia Power
Company Medical Benefits Plan. Notwithstanding the foregoing, a former
employee who was a key employee pursuant to Section 15.02(g) on the
date of his retirement shall not be eligible to receive any benefits
under this Article 17.
(b) "Dependents" means the spouses and dependents of retired
Members who are eligible for reimbursement or payment of covered
medical expenses pursuant to paragraph (a) and who were covered under
the Georgia Power Company Medical Benefits Plan immediately prior to
the Member's retirement are also eligible for reimbursement or payment
of covered medical expenses to the extent, if any, provided in the
Georgia Power Company Medical Benefits Plan, a copy of which is
attached as Exhibit A. Notwithstanding the foregoing, a spouse or
dependent who is eligible for coverage under the "active employee"
portion of the Georgia Power Company Medical Benefits Plan shall not be
eligible for reimbursement of medical expenses or payment of premiums
hereunder.
(c) "Qualified Transfer" means a transfer of Excess Pension
Assets of the Plan to a Health Benefits Account after December 31,
1990, but before December 31, 2000, which satisfies the requirements
set forth in paragraphs (1) through (6) below.
(1) No more than 1 transfer per Plan Year may be
treated as a Qualified Transfer.
(2) The amount of Excess Pension Assets which may be
transferred in a Qualified Transfer shall not exceed a
reasonable estimate of the amount the Company will pay
(directly or through reimbursement) out of the Health Benefits
Accounts for Qualified Current Retiree Health Liabilities
during the Plan Year of the transfer.
(3) (A) Any assets transferred to a Health Benefits
Account in a Qualified Transfer (and any income allocated
thereto) shall only be used to pay Qualified Current Retiree
Health Liabilities (whether directly or through
reimbursement).
(B) Any assets transferred to a Health
Benefits Account in a Qualified Transfer (and any
income allocable thereto) which are not used as
provided in Section 17.01(c)(3)(A) above shall be
transferred from the Health Benefits Account back to
the Plan.
(C) For purposes of this Section
17.01(c)(3), any amount transferred from a Health
Benefits Account shall be treated as paid first out
of the assets and income described in Section
17.01(c)(3)(A) above.
(4) The Accrued Retirement Income of any Pensioned
Employee or Dependent under the Plan shall become
nonforfeitable in the same manner which would be required if
the Plan had terminated immediately before the Qualified
Transfer (or in the case of a Pensioned Employee who
terminated service during the 1-year period ending on the date
of the Qualified Transfer, immediately before such
termination).
(5) Effective for Qualified Transfers occurring on or
before December 8, 1994, the Applicable Company Cost for each
Plan Year during the Cost Maintenance Period shall not be less
than the higher of the Applicable Company Cost for each of the
two Plan Years immediately preceding the Plan Year of the
Qualified Transfer. Effective for Qualified Transfers
occurring after December 8, 1994, the medical benefits plan
set forth in Exhibit A shall provide that the Applicable
Health Benefits provided by the Company during each Plan Year
during the Benefit Maintenance Period shall be substantially
the same as the Applicable Health Benefits provided by the
Company during the Plan Year immediately preceding the Plan
Year of the Qualified Transfer. Notwithstanding any other
provision to the contrary in this Section 17.01(c)(5), the
Company may elect at any time during the Plan Year to have
this Section 17.01(c)(5) applied separately with respect to
Pensioned Employees eligible for benefits under Title XVIII of
the Social Security Act and with respect to Pensioned
Employees which are not so eligible.
(6) For purposes of this Section 17.01(c), the
following words and phraseology shall have the following
meanings unless a different meaning is plainly required by the
context:
(A) "Applicable Company Cost" means, with
respect to any Plan Year, the amount determined by
dividing
(i) the Qualified Current Retiree
Health Liabilities of the Company for such
Plan Year determined (I) without regard to
any reduction under Section 17.01(c)(6)(G),
and (II) in the case of a Plan Year in which
there was no Qualified Transfer in the same
manner as if there had been such a transfer
at the end of the Plan Year, by
(ii) the number of individuals to
whom coverage for Applicable Health Benefits
was provided during such Plan Year.
(B) "Applicable Health Benefits" means
health benefits or coverage which are provided to
Pensioned Employees who immediately before the
Qualified Transfer are eligible to receive such
benefits and their Dependents.
(C) "Benefit Maintenance Period" means the
period of five (5) Plan Years beginning with the Plan
Year in which the Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the
period of five (5) Plan Years beginning with the
taxable year in which the Qualified Transfer occurs.
If a Plan Year is in two (2) or more overlapping Cost
Maintenance periods, this Section 17.01(c)(6)(D)
shall be applied by taking into account the highest
Applicable Company Cost required to be provided under
Section 17.01(c)(6)(A) for such Plan Year.
(E) "Excess Pension Assets" means the
excess, if any, of
(i) the amount determined under Code
Section 412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount
determined under Code Section
412(c)(7)(A)(i), or (II) 125 percent of
current liability (as defined in Code
Section 412(c)(7)(B)).
The determination under this
paragraph shall be made as of the most
recent valuation date of the Plan preceding
the Qualified Transfer.
(F) "Health Benefits Account" means an
account established and maintained under Code Section
401(h).
(G) "Qualified Current Retiree Health
Liabilities" means, with respect to any Plan Year,
the aggregate amounts, including administrative
expenses, which would have been allowable as a
deduction to the Company for payment of Applicable
Health Benefits provided during the Plan Year
assuming such Applicable Health Benefits were
provided directly by the Company and the Company used
the cash receipts and disbursements method of
accounting. For purposes of the preceding sentence,
the rule of Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring
on or before December 8, 1994, the amount determined
in the paragraph above shall be reduced by any amount
previously contributed to a Health Benefits Account
or welfare benefit fund, as defined in Code Section
419(e)(1), to pay for the Qualified Current Retiree
Health Liabilities. Effective for Qualified Transfers
occurring after December 8, 1994, the amount
determined under the preceding paragraph shall be
reduced by the amount which bears the same ratio to
such amount as the value (as of the close of the Plan
Year preceding the year of the Qualified Transfer) of
the assets in all Health Benefits Accounts or welfare
benefit funds, as defined in Code Section 419(e)(1),
set aside to pay the Qualified Current Retiree Health
Liability, bears to the present value of the
Qualified Current Retiree Health Liabilities for all
Plan Years determined without regard to this
paragraph.
17.03 Medical benefits. Medical benefits under the Plan shall
be provided through the Georgia Power Company Medical Benefits Plan by
the payment of premiums thereunder, or through reimbursement to the
Company for its payment to Pensioned Employees or their Dependents of
medical expenses in accordance with the terms and conditions of the
Georgia Power Company Medical Benefits Plan attached hereto as Exhibit
A. Medical benefits shall be provided under the Plan only to the extent
there are sufficient funds to provide such benefits. In no event shall
any benefits be paid under the Plan to the extent the same benefits are
payable under any other plan, program or arrangement of the Company.
The Retirement Committee may establish claims procedures and
administrative rules relating to the provision of medical benefits
hereunder to the extent that the claims procedures and administrative
rules under the applicable group medical plan do not apply.
17.04 Termination of coverage.
(a) Coverage of any Pensioned Employee shall cease as
follows:
(1) when Article 17 is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when Article 17 is amended, terminated, or
discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due
any required contribution; or
(3) as otherwise provided in Exhibit A.
17.06 Contributions or Qualified Transfers to fund medical
benefits.
(a) Any contributions which the Company deems necessary to
provide the medical benefits under Article 17 will be made from time to
time by or on behalf of the Company, and contributions shall be
required of the Pensioned Employees to the Company's medical benefit
plan in amounts determined in the sole discretion of the Company from
time to time. All Company contributions shall be made to the Trustee
under the Trust Agreement provided for in Article 10 and shall be
allocated to a separate account maintained solely to fund the medical
benefits provided under this Article 17. The Company shall designate
that portion of any contribution to the Plan allocable to the funding
of medical benefits under this Article 17. In the event that a
Pensioned Employee's interest in an account, or his Dependents',
maintained pursuant to this Article 17 is forfeited prior to
termination of the Plan, the forfeited amount shall be applied as soon
as possible to reduce Company contributions made under this Article 17.
In no event at any time prior to the satisfaction of all liabilities
under this Article 17 shall any part of the corpus or income of such
separate account be used for, or diverted to, purposes other than for
the exclusive purpose of providing benefits under this Article 17.
The amount of contributions to be made by or on behalf of the
Company for any Plan Year, if any, shall be reasonable and
ascertainable and shall be determined in accordance with any generally
accepted actuarial method which is reasonable in view of the provisions
and coverage of Article 17, the funding medium, and any other
applicable considerations. However, the Company is under no obligation
to make any contributions under Article 17 after Article 17 is
terminated, except to fund claims for medical expenses incurred prior
to the date of termination.
The medical benefits provided under this Article 17, when
added to any life insurance protection provided under the Plan, shall
be subordinate to the retirement benefits provided under the Plan.
Anything in this Plan to the contrary notwithstanding, the
aggregate amount of the actual contributions made pursuant to this
Article 17 may not exceed 25% of the total actual contributions to the
Plan for all benefits under the Plan (exclusive of contributions that
may be made to fund past service credits) on and after September 15,
1993.
(b) Effective September 15, 1993, the Company shall have the
right, in its sole discretion, to make a Qualified Transfer of all or a
portion of any Excess Pension Assets contributed to fund Retirement
Income under the Plan to the Health Benefits Accounts to fund medical
benefits under this Article 17.
17.07 Pensioned Employee contributions. It shall be the sole
responsibility of the Pensioned Employee to notify the Company promptly
in writing when a change in the amount of the Pensioned Employee's
contribution is in order because a Dependent has become ineligible for
coverage under this Article 17. No person shall become covered under
this Article 17 for whom the Pensioned Employee has not made the
required contribution. Any contribution paid by a Pensioned Employee
for any person after such person shall have become ineligible for
coverage under this Article 17 shall be returned upon written request
but only provided such written request by or on behalf of the Pensioned
Employee is received by the Company within ninety (90) days from the
date coverage terminates with respect to such ineligible person.
17.08 Amendment of Article 17. The Company reserves the right,
through action of its Board of Directors, to amend Article 17
(including Exhibit A) pursuant to Article 13 or the Trust without the
consent of any Pensioned Employee, or his Dependents, provided,
however, that no amendment of this Article or the Trust shall cancel
the payment or reimbursement of expenses for claims already incurred by
a Pensioned Employee or his Dependent prior to the date of any
amendment, nor shall any such amendment increase the duties and
obligations of the Trustee except with its consent. This Article 17, as
set forth in the Plan document, is not a contract and non-contributory
benefits hereunder are provided gratuitously, without consideration
from any Pensioned Employee or his Dependents. The Company makes no
promise to continue these benefits in the future and rights to future
benefits will never vest. In particular, retirement or the fulfillment
of the prerequisites for a retirement benefit pursuant to the terms of
the Plan or under the terms of any other employee benefit plan
maintained by the Company shall not confer upon any Pensioned Employee
or Dependents any right to continued benefits under this Article 17.
17.09 Termination of Article 17. Although it is the intention
of the Company that this Article shall be continued and the
contribution shall be made regularly thereto each year, the Company, by
action of its Board of Directors pursuant to Article 13, may terminate
this Article 17 or permanently discontinue contributions at any time in
its sole discretion. This Article 17, as set forth in the Plan
document, is not a contract and non-contributory benefits hereunder are
provided gratuitously, without consideration from any Pensioned
Employee or his Dependents. The Company makes no promise to continue
these benefits in the future and rights to future benefits will never
vest. In particular, retirement or the fulfillment of the prerequisites
for a retirement benefit pursuant to the terms of the Plan or under the
terms of any other employee benefit plan maintained by the Company
shall not confer upon any Pensioned Employee or his Dependents any
right to continued benefits under this Article 17.
17.10 Reversion of assets upon termination. Upon the
termination of this Article 17 and the satisfaction of all liabilities
under this Article 17, all remaining assets in the separate account
described in this Article 17 shall be returned to the Company.
IN WITNESS WHEREOF, Savannah Electric and Power Company through its
duly authorized officers, has adopted this Second Amendment to the Employees'
Retirement Plan of Savannah Electric and Power Company this ____ day of
_________________, 1996, to be effective as stated herein.
SAVANNAH ELECTRIC AND POWER
COMPANY
By: ____________________________
Title:__________________________
ATTEST:
By: ___________________________
Title:__________________________
[CORPORATE SEAL]
<PAGE>
THIRD AMENDMENT TO THE
EMPLOYEES RETIREMENT PLAN OF
SAVANNAH ELECTRIC AND POWER COMPANY
WHEREAS, the Board of Directors of Savannah Electric and Power Company
(the "Company") heretofore adopted the amendment and restatement of the
Employees' Retirement Plan of Savannah Electric and Power Company, effective
January 1, 1989 (the "Plan"); and
WHEREAS, the Company wishes to amend the Plan to make a technical
change in how average annual compensation is determined for a member who does
not receive compensation for any given month; and
WHEREAS, the Company desires to amend the Plan to add an additional
monthly amount to the allowance of members who retired prior to January 1, 1994;
and
WHEREAS, the Company is authorized pursuant to Article 13 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows:
I.
Section 5.01(d) should be amended by inserting at the end thereof the
following new paragraph:
Effective January 1, 1994, for purposes of determining a
Member's average annual Compensation under this paragraph (d), the
determination of the 36 highest consecutive months within the 120
months preceding retirement shall only include those months in which
the Member receives Compensation.
II.
Section 5.06 should be deleted in its entirety and replaced with the
following:
5.06 Additional Monthly Benefit
(a) In addition to other benefits provided in this Article 5, the
following monthly benefits are payable as a life annuity to
eligible Members as defined in Paragraph (b) or (c) below, as
applicable.
The "additional monthly amount" is calculated as (i) a percentage of
the Member's first $300 of monthly Allowance set forth below,
multiplied by (ii) the number of years the Member was retired (A) prior
to January 1, 1990, and (B) prior to January 1, 1995 but after January
1, 1990, as applicable. In any event, for both the additional monthly
amount effective June 1, 1991 and June 1, 1996, the minimum additional
monthly amount to be added to a Member's Allowance shall equal $25.00
per month.
Effective June 1, 1991, the percentage increases and the years of
retirement for which they are applicable are as follows:
Years of Retirement Percentage Increase
as of 1/1/90 for All Prior Years
Less than 5 3.75%
5 to 10 4.0%
10 to 15 4.5%
15 or more 5.0%
Effective June 1, 1 996, the percentage increases and the years of
retirement for which they are applicable are as follows:
Percentage Increase
Years of Retirement for Each Year of
as of 1/1/95 Retirement Since 1/1/90
Less than 5 3.5%
5 to 9 4.0%
10 to 14 4.5%
15 or more 5.0%
(b) Members eligible for the additional monthly amount made
effective as of June 1, 1991 are those retired Members who
retired directly from active status on or before June 1, 1991.
(c) Members eligible for the additional monthly amount made
effective June 1, 1996 are those Members who retired directly
from active status before January 1, 1994.
(d) If an adjustment of retirement Allowance for Social Security
benefits option was elected pursuant to Section 5.04, the
additional monthly benefit shall be calculated based on the
Allowance before such adjustment.
(e) Upon the death of a Member eligible for an additional monthly
amount, such amount shall be paid to the Member's Spouse
regardless of the method of distribution elected by a Member.
With regard to the additional monthly amount made effective June
1, 1996, it shall be determined (i) based on the Allowance being
paid as of June 1, 1996, or (ii) if no allowance is being paid
but the Member's Spouse is receiving an additional monthly amount
in accordance with the preceding sentence, based on the amount
such Spouse is receiving as of June 1, 1996.
IN WITNESS WHEREOF, Savannah Electric and Power Company through its
duly authorized officer, has adopted this Third Amendment to the Employees'
Retirement Plan of Savannah Electric and Power Company this 16th day of July,
1996, to be effective as stated herein.
SAVANNAH ELECTRIC AND POWER COMPANY
By:
Title:
ATTEST:
By:
Title:
[CORPORATE SEAL]
Exhibit 10(f)20
FIRST AMENDMENT TO THE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF
SAVANNAH ELECTRIC AND POWER COMPANY
WHEREAS, the Board of Directors of Savannah Electric and Power Company
(the "Company") heretofore adopted the Supplemental Executive Retirement Plan of
Savannah Electric and Power Company, as amended and restated January 1, 1996
(the "Plan"); and
WHEREAS, the Board of Directors of the Company desires to amend the
Plan in order to clarify Article VI of the Plan regarding the payment of
disability benefits and to make certain other necessary and miscellaneous
technical corrections; and
WHEREAS, the Board of Directors of the Company is authorized pursuant
to Section 9.1 of the Plan to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1996, the Board of Directors of
the Company hereby amends the Plan as follows:
I.
Amend Section 1.2 of the Plan by deleting said Section in its entirety
and replacing it with the following:
1.2 Purpose. This Plan is designed and implemented for the purpose of
enhancing the earnings and growth of Savannah Electric and Power Company by
providing to the limited group of management employees largely responsible for
such earnings and long-term growth deferred compensation in the form of
supplemental retirement income benefits, thereby increasing the incentive of
such key management employees to make the Company more profitable. The benefits
are normally payable to Participants upon retirement, disability or death. The
terms of the benefits operate in conjunction with the Participant's benefits
payable under the Employees' Retirement Plan of Savannah Electric and Power
Company and the Southern Company Services, Inc. Long Term Disability Plan, as
adopted by Savannah Electric and Power Company, and are designed to supplement
such benefits and provide the Participant with additional financial security
upon retirement, disability or death.
II.
Amend Section 2.7 of the Plan by deleting said Section in its entirety
and replacing it with the following:
2.7 "Disability Benefit" shall mean a Totally Disabled Participant's actual
annual disability benefit paid pursuant to the Southern Company Services, Inc.
Long Term Disability Plan, as adopted by Savannah Electric and Power Company.
III.
Amend Section 2.8 of the Plan by deleting said Section in its entirety
and replacing it with the following:
2.8 "Disability Date" shall be the day first following the expiration of
the "Waiting Period" as that term is set forth in the Southern Company Services,
Inc. Long Term Disability Plan, as adopted by Savannah Electric and Power
Company.
IV.
Amend Section 2.25 of the Plan by deleting said Section in its entirety
and replacing it with the following:
2.25 "Total Disability and Totally Disabled" shall have the same meaning as
set forth in the Southern Company Services, Inc. Long Term Disability Plan, as
adopted by Savannah Electric and Power Company.
V.
Amend Section 6.1(a) of the Plan by deleting said Section in its
entirety and replacing it with the following:
(a) Benefit. In the event of Total Disability prior to his Normal
Retirement Date, the Participant shall become entitled to receive a disability
retirement benefit commencing on his Disability Date. Such disability retirement
benefit shall be determined as of the date of the Participant's Disability Date
and shall be equal to 1/12th of the Participant's SERP Disability Benefit.
VI.
Amend Section 6.2(a) of the Plan by deleting said Section in its
entirety and replacing it with the following:
(a) Benefit. Upon reaching the earlier of his Early Retirement
Date and electing to retire or his Normal Retirement Date, a Participant
receiving the disability retirement benefit described in Section 6.1 above shall
become entitled to the disability retirement benefits as described in this
Section 6.2(a) in lieu of the retirement benefits provided in Article IV. Such
benefits shall be calculated at either the Participant's Early Retirement Date
as elected by the Participant or Normal Retirement Date, as the case may be, and
shall be equal to the Participant's Early Retirement Benefit, and associated
Eligible Spouse's benefit, or Normal Retirement Benefit, and associated Eligible
Spouse's benefit, as the case may be, as described in Sections 4.1 and 4.2, as
if such disabled Participant had actually retired upon his Early Retirement Date
or his Normal Retirement Date with the prior period of Total Disability being
treated as Credited Service; provided, however, that in determining such Early
Retirement Benefit or Normal Retirement Benefit, as the case may be, the
Participant's Final Average Salary shall be calculated as of his Disability
Date.
VII.
Amend Section 10.9 of the Plan by deleting said Section in its entirety
and replacing it with the following:
10.9 Age Differential of Spouse. If a Participant's Eligible Spouse at
the time of commencement of a i) Normal Retirement Benefit; ii) Early Retirement
Benefit; iii) Postponed Retirement Benefit; iv) Pre-Retirement Death Benefit; or
v) Severance Benefit is more than ten years younger than the Participant, the
monthly benefits payable hereunder shall be reduced actuarially using actuarial
assumptions under Section 1.15 of the Pension Plan and assuming that the
Eligible Spouse is ten years older than such spouse's attained age.
IN WITNESS WHEREOF, the Company, through its duly authorized officer,
has adopted this First Amendment to the Supplemental Executive Retirement Plan
of Savannah Electric and Power Company this ________ day of
_____________________, 1996.
SAVANNAH ELECTRIC AND POWER COMPANY
By:
Title:
(CORPORATE SEAL)
ATTEST:
By:
Title:
Exhibit 10(f)22
SECOND AMENDMENT TO THE DEFERRED
COMPENSATION PLAN FOR KEY EMPLOYEES OF
SAVANNAH ELECTRIC AND POWER COMPANY
WHEREAS, the Board of Directors of Savannah Electric and Power Company
(the "Company") heretofore adopted the Deferred Compensation Plan for Key
Employees of Savannah Electric and Power Company (the "Plan"), in order to
provide key management employees of the Company with long-term compensation
incentives; and
WHEREAS, the Plan has been amended from time to time to change the
terms of these long-term compensation incentives; and
WHEREAS, the Company desires to amend the Plan at this time to
gradually freeze future deferral opportunities such that all additional
deferrals will cease after 1999; and
WHEREAS, the Company has reserved the right to amend the Plan at any
time pursuant to Article XI of the Plan.
NOW THEREFORE, effective January 1, 1997, the Company hereby amends the
Plan as follows:
1.
Section 2(a) of Article III of the Plan shall be amended by deleting
said Section in its entirety and substituting therefor the following new
language:
(a) An eligible Employee may participate in the Plan by irrevocably
electing, in the manner specified herein, to defer future Salary for a one (1)
or three (3) year deferral opportunity in 1997, a one (1) or two (2) year
deferral opportunity in 1998 and a final one (1) year deferral opportunity in
1999 (or such fewer years remaining until the Employee's Normal Retirement
Date). An eligible Employee may defer a minimum of $1,000 per year under the
three (3) or two (2) year election and $2,500 per year under the one (1) year
election. The maximum annual amount of Salary which may be deferred shall be
equal to fifty percent (50%) of such Employee's Salary (as defined in Article
II) for the calendar year in which such election is made;
2.
All parts of the Plan not inconsistent herewith are hereby ratified and
affirmed.
IN WITNESS WHEREOF, the Board of Directors of Savannah Electric and
Power Company hereby approves this Second Amendment to the Deferred Compensation
Plan for Key Employees of Savannah Electric and Power Company, as executed by
the undersigned authorized officer, and further authorizes such other actions
necessary to implement this Second Amendment this day of , 1996, to be effective
as provided herein.
SAVANNAH ELECTRIC AND POWER COMPANY
By:
Arthur M. Gignilliat, Jr.
President and Chief Executive Officer
ATTEST:
Lavonne K. Calandra
Corporate Secretary
(CORPORATE SEAL)
Exhibit 10(f)26
FOURTH AMENDMENT TO THE DEFERRED
COMPENSATION PLAN FOR DIRECTORS OF
SAVANNAH ELECTRIC AND POWER COMPANY
WHEREAS, the Board of Directors of Savannah Electric and Power Company
(the "Company") heretofore adopted the Deferred Compensation Plan for Directors
of Savannah Electric and Power Company (the "Plan"), in order to provide
Directors of the Company with long-term compensation incentives; and
WHEREAS, the Plan has been amended from time to time to change the
terms of these long-term compensation incentives; and
WHEREAS, the Company desires to amend the Plan at this time to
gradually freeze future deferral opportunities such that all additional
deferrals will cease after 1999; and
WHEREAS, the Company has reserved the right to amend the Plan at any
time pursuant to Article IX of the Plan.
NOW THEREFORE, effective January 1, 1997, the Company hereby amends the
Plan as follows:
1.
Section 2(a) of Article III of the Plan shall be amended by deleting
said Section in its entirety and substituting therefor the following new
language:
(a) An eligible Director may participate in the Plan by irrevocably
electing, in the manner specified herein, to defer all or any part of future
Director's Fees for a one (1) to three (3) year deferral opportunity in 1997, a
one (1) to two (2) year deferral opportunity in 1998 and a final one (1) year
deferral opportunity in 1999 (or such fewer years remaining until the Director's
Normal Retirement Date). The Deferred Compensation Agreement shall stipulate,
with respect to each such Plan Year, the percentage of Director's Fees to be
deferred or the fixed dollar to be deferred; provided, however, the annual
deferral amount shall not be less than $1,000. Notwithstanding the foregoing, no
deferral election shall be effective with respect to any increase in Director's
Fees, whether denominated as retainer fees or meeting fees, which increase
occurs mid-term during a Plan Year. However, such increase shall be subject to
the deferral election procedures set forth in paragraph (b) below, beginning on
the first day of the first Plan Year following such increase.
2.
All parts of the Plan not inconsistent herewith are hereby ratified and
affirmed.
IN WITNESS WHEREOF, the Board of Directors of Savannah Electric and
Power Company hereby approves this Fourth Amendment to the Deferred Compensation
Plan for Directors of Savannah Electric and Power Company, as executed by the
undersigned authorized officer, and further authorizes such other actions
necessary to implement this Fourth Amendment this day of , 1996, to be effective
as provided herein.
SAVANNAH ELECTRIC AND POWER COMPANY
By:
Arthur M. Gignilliat, Jr.
President and Chief Executive Officer
ATTEST:
Lavonne K. Calandra
Corporate Secretary
(CORPORATE SEAL)
Exhibit 24(a)
January 20, 1997
A. W. Dahlberg, W. L. Westbrook, Tommy Chisholm, and Wayne Boston
Dear Sirs:
The Southern Company proposes to file or join in the filing of
statements under the Securities Exchange Act of 1934, as amended, with the
Securities and Exchange Commission with respect to the following: (1) the filing
of this Company's Annual Report on Form 10-K for the year ended December 31,
1996, and (2) the filing of Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K during 1997.
The Southern Company and the undersigned directors and officers of said
Company, individually as a director and/or as an officer of the Company, hereby
make, constitute and appoint each of you our true and lawful Attorney for each
of us and in each of our names, places and steads to sign and cause to be filed
with the Securities and Exchange Commission in connection with the foregoing
said Annual Report on Form 10-K and any appropriate amendment or amendments
thereto and any necessary exhibits, said Quarterly Reports on Form 10-Q and any
necessary exhibits and any Current Reports on Form 8-K and any necessary
exhibits.
Yours very truly,
THE SOUTHERN COMPANY
By /s/A. W. Dahlberg
A. W. Dahlberg
Chairman, President and
Chief Executive Officer
<PAGE>
- 2 -
/s/John C. Adams /s/William A. Parker, Jr.
John C. Adams William A. Parker, Jr.
/s/A. D. Correll /s/William J. Rushton, III
A. D. Correll William J. Rushton, III
/s/A. W. Dahlberg /s/Gloria M. Shatto
A. W. Dahlberg Gloria M. Shatto
/s/Paul J. DeNicola /s/Gerald J. St. Pe'
Paul J. DeNicola Gerald J. St. Pe'
/s/Jack Edwards /s/Herbert Stockham
Jack Edwards Herbert Stockham
/s/H. Allen Franklin /s/W. L. Westbrook
H. Allen Franklin W. L. Westbrook
/s/Bruce S. Gordon /s/Tommy Chisholm
Bruce S. Gordon Tommy Chisholm
/s/L. G. Hardman III /s/W. Dean Hudson
L. G. Hardman III W. Dean Hudson
/s/Elmer B. Harris
Elmer B. Harris
<PAGE>
Extract from minutes of meeting of the board of directors of The Southern
Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 1996, and 1997 Form 10-Q's and
Form 8-K's and of remedying any deficiencies with respect thereto by
appropriate amendment or amendments, this Company, the members of its board
of directors, and its officers, are authorized to give their several powers
of attorney to A. W. Dahlberg, W. L. Westbrook, Tommy Chisholm, and Wayne
Boston.
- - - - - - - - - -
The undersigned officer of The Southern Company does hereby
certify that the foregoing is a true and correct copy of a resolution duly and
regularly adopted at a meeting of the board of directors of The Southern
Company, duly held on January 20, 1997, at which a quorum was in attendance and
voting throughout, and that said resolution has not since been rescinded but is
still in full force and effect.
Dated March 21, 1997 THE SOUTHERN COMPANY
By /s/Tommy Chisholm
Tommy Chisholm
Secretary
Exhbit 24(b)
600 North 18th Street
Post Office Box 2641
Birmingham, Alabama 35901
205.250.1000
ALABAMA POWER
A Southern Company
January 24, 1997
W. L. Westbrook Wayne Boston
270 Peachtree Street, N.W. 64 Perimeter Center East
Atlanta, Georgia 30303 Atlanta, Georgia 30346
Dear Sirs:
Alabama Power Company proposes to file with the Securities and Exchange
Commission, under the Securities Exchange Act of 1934, (1) its Annual Report on
Form 10-K for the year ended December 31, 1996, and (2) its quarterly reports on
Form 10-Q during 1997.
Alabama Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint W. L. Westbrook and Wayne Boston our true
and lawful Attorneys for each of us and in each of our names, places and steads
to sign and cause to be filed with the Securities and Exchange Commission in
connection with the foregoing said Annual Report on Form 10-K, quarterly reports
on Form 10-Q, and any appropriate amendment or amendments thereto and any
necessary exhibits.
Yours very truly,
ALABAMA POWER COMPANY
By /s/Elmer B. Harris
Elmer B. Harris
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/Whit Armstrong /s/Robert D. Powers
Whit Armstrong Robert D. Powers
______________________________ /s/John W. Rouse
A. W. Dahlberg John W. Rouse
/s/Peter V. Gregerson, Sr. ______________________________
Peter V. Gregerson, Sr. William J. Rushton, III
/s/Bill M. Guthrie /s/James H. Sanford
Bill M. Guthrie James H. Sanford
/s/Elmer B. Harris /s/John Cox Webb, IV
Elmer B. Harris John Cox Webb, IV
------------------------------ ------------------------------
Carl E. Jones, Jr. John W. Woods
/s/Wallace D. Malone, Jr. /s/William B. Hutchins, III
Wallace D. Malone, Jr. William B. Hutchins, III
/s/William V. Muse /s/Art P. Beattie
William V. Muse Art P. Beattie
/s/John T. Porter /s/David L. Whitson
John T. Porter David L. Whitson
/s/Gerald H. Powell
Gerald H. Powell
<PAGE>
Extract from minutes of meeting of the board of directors of Alabama Power
Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing and filing with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, Alabama Power Company's annual report on Form 10-K for the year
ended December 31, 1996, and of remedying any deficiencies with respect
thereto by appropriate amendment or amendments, and also filing
quarterly reports on Form 10-Q, Alabama Power Company, the members of
its Board of Directors, and its officers are authorized to give their
several powers of attorney to W. L. Westbrook and Wayne Boston, in
substantially the form of power of attorney presented to this meeting.
- - - - - - - - - -
The undersigned officer of Alabama Power Company does hereby
certify that the foregoing is a true and correct copy of resolution duly and
regularly adopted at a meeting of the board of directors of Alabama Power
Company, duly held on January 24, 1997, at which a quorum was in attendance and
voting throughout, and that said resolution has not since been rescinded but is
still in full force and effect.
Dated March 21, 1997 ALABAMA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(c)
February 19, 1997
W. L. Westbrook and Wayne Boston
Dear Sirs:
Georgia Power Company proposes to file or join in the filing of
statements under the Securities Exchange Act of 1934 with the Securities and
Exchange Commission with respect to the following: (1) the filing of its Annual
Report on Form 10-K for the year ended December 31, 1996, and (2) the filing of
its quarterly reports on Form 10-Q during 1997.
Georgia Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint each of you our true and lawful Attorney for
each of us and in each of our names, places and steads to sign and cause to be
filed with the Securities and Exchange Commission in connection with the
foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and
any appropriate amendment or amendments thereto and any necessary exhibits.
Yours very truly,
GEORGIA POWER COMPANY
By /s/H. Allen Franklin
H. Allen Franklin
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/Bennett A. Brown /s/G. Joseph Prendergast
Bennett A. Brown G. Joseph Prendergast
______________________________ /s/Herman J. Russell
A. W. Dahlberg Herman J. Russell
/s/William A. Fickling, Jr. /s/Gloria M. Shatto
William A. Fickling, Jr. Gloria M. Shatto
/s/H. Allen Franklin /s/William Jerry Vereen
H. Allen Franklin William Jerry Vereen
/s/L. G. Hardman III /s/Carl Ware
L. G. Hardman III Carl Ware
/s/Warren Y. Jobe /s/Thomas R. Williams
Warren Y. Jobe Thomas R. Williams
/s/James R. Lientz, Jr. /s/Cliff S. Thrasher
James R. Lientz, Jr. Cliff S. Thrasher
______________________________ /s/Judy M. Anderson
William A. Parker, Jr. Judy M. Anderson
<PAGE>
Extract from minutes of meeting of the board of directors of Georgia Power
Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing reports under the Securities
Exchange Act of 1934 to be filed with the Securities and Exchange
Commission with respect to (a) the filing of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, and (b) quarterly filings
on Form 10-Q during 1997; and of remedying any deficiencies with respect
thereto by appropriate amendment or amendments, this Company and the
members of its Board of Directors authorize their several powers of
attorney to W. L. Westbrook and Wayne Boston.
- - - - - - - - - -
The undersigned officer of Georgia Power Company does hereby certify
that the foregoing is a true and correct copy of resolution duly and regularly
adopted at a meeting of the board of directors of Georgia Power Company, duly
held on February 19, 1997, at which a quorum was in attendance and voting
throughout, and that said resolution has not since been rescinded but is still
in full force and effect.
Dated March 21, 1997 GEORGIA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(d)
500 Bayfront Parkway
Pensacola, FL 32520
Tel. 904.444.6000
GULF POWER
A Southern Company
February 28, 1997
Mr. W. L. Westbrook Mr. Wayne Boston
The Southern Company Southern Company Services, Inc.
270 Peachtree Street, N.W. 64 Perimeter Center East
Atlanta GA 30303 Atlanta GA 30346
Dear Sirs:
Re: Forms 10-K and 10-Q
Gulf Power Company proposes to file or join in the filing of statements
under the Securities Exchange Act of 1934 with the Securities and Exchange
Commission with respect to the following: (1) its Annual Report on Form 10-K for
the year ended December 31, 1996, and (2) its 1997 quarterly reports on Form
10-Q.
Gulf Power Company and the undersigned Directors and Officers of said
Company, individually as a Director and/or as an Officer of the Company, hereby
make, constitute and appoint each of you our true and lawful Attorney for each
of us and in each of our names, places and steads to sign and cause to be filed
with the Securities and Exchange Commission in connection with the foregoing
said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any
appropriate amendment or amendments thereto and any necessary exhibits.
Sincerely,
By /s/Travis J. Bowden
Travis J. Bowden
President and Chief Executive Officer
<PAGE>
- 2 -
/s/Travis J. Bowden /s/Joseph K. Tannehill
Travis J. Bowden Joseph K. Tannehill
/s/Paul J. DeNicola /s/Arlan E. Scarbrough
Paul J. DeNicola Arlan E. Scarbrough
/s/Fred C. Donovan /s/Ronnie R. Labrato
Fred C. Donovan Ronnie R. Labrato
/s/W. D. Hull, Jr. /s/Warren E. Tate
W. D. Hull, Jr. Warren E. Tate
/s/Barbara H. Thames
Barbara H. Thames
<PAGE>
Extract from minutes of meeting of the board of directors of Gulf Power Company.
- - - - - - - - - -
RESOLVED, That for the purpose of signing the statements under the
Securities Exchange Act of 1934 to be filed with the Securities and
Exchange Commission with respect to the filing of this Company's Annual
Report on Form 10-K for the year ended December 31, 1996, and its 1997
quarterly reports on Form 10-Q, and of remedying any deficiencies with
respect thereto by appropriate amendment or amendments (both before and
after such statements become effective), this Company, the members of
its Board of Directors, and its Officers, are authorized to give their
several powers of attorney to W. L. Westbrook and Wayne Boston.
- - - - - - - - - -
The undersigned officer of Gulf Power Company does hereby certify that
the foregoing is a true and correct copy of resolution duly and regularly
adopted at a meeting of the board of directors of Gulf Power Company, duly held
on February 28, 1997, at which a quorum was in attendance and voting throughout,
and that said resolution has not since been rescinded but is still in full force
and effect.
Dated March 21, 1997 GULF POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(e)
2992 West Beach Boulevard
P.O. Box 4079
Gulfport, Mississippi 39502-4079
Tel 601.864.1211
MISSISSIPPI POWER
A Southern Company
February 26, 1997
W. L. Westbrook and Wayne Boston
Dear Sirs:
Mississippi Power Company proposes to file or join in the filing of
statements under the Securities Exchange Act of 1934 with the Securities and
Exchange Commission with respect to the following: (1) the filing of its Annual
Report on Form 10-K for the year ended December 31, 1996, and (2) the filing of
its quarterly reports on Form 10-Q during 1997.
Mississippi Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint each of you our true and lawful Attorney for
each of us and in each of our names, places and steads to sign and cause to be
filed with the Securities and Exchange Commission in connection with the
foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and
any appropriate amendment or amendments thereto and any necessary exhibits.
Yours very truly,
MISSISSIPPI POWER COMPANY
By /s/Dwight H. Evans
Dwight H. Evans
President and Chief Executive Officer
<PAGE>
- 2 -
/s/Paul J. DeNicola /s/George A. Schloegel
Paul J. DeNicola George A. Schloegel
/s/Edwin E. Downer /s/Philip J. Terrell
Edwin E. Downer Philip J. Terrell
/s/Dwight H. Evans /s/Gene Warr
Dwight H. Evans Gene Warr
/s/Robert S. Gaddis /s/Michael W. Southern
Robert S. Gaddis Michael W. Southern
/s/Walter H. Hurt, III /s/Frances V. Turnage
Walter H. Hurt, III Frances V. Turnage
/s/Aubrey K. Lucas
Aubrey K. Lucas
<PAGE>
Extract from minutes of meeting of the board of directors of Mississippi Power
Company.
- - - - - - - - - -
RESOLVED: That the members of this Company's Board of
Directors and its officers are authorized to give their several powers
of attorney to W. L. Westbrook and Wayne Boston for the purpose of
signing the statements under the Securities Exchange Act of 1934 to be
filed with the Securities and Exchange Commission with respect to the
filing of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and the filing of this Company's quarterly reports
to the Securities and Exchange Commission on Form 10-Q for the year
1997.
- - - - - - - - - -
The undersigned officer of Mississippi Power Company does hereby
certify that the foregoing is a true and correct copy of resolution duly and
regularly adopted at a meeting of the board of directors of Mississippi Power
Company, duly held on February 26, 1997, at which a quorum was in attendance and
voting throughout, and that said resolution has not since been rescinded but is
still in full force and effect.
Dated March 21, 1997 MISSISSIPPI POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(f)
February 18, 1997
W. L. Westbrook and Wayne Boston
Dear Sirs:
Savannah Electric and Power Company proposes to file with the
Securities and Exchange Commission, under the Securities Exchange Act of 1934,
(1) its Annual Report on Form 10-K for the year ended December 31, 1996, and (2)
its quarterly reports on Form 10-Q during 1997.
Savannah Electric and Power Company and the undersigned directors and
officers of said Company, individually as a director and/or as an officer of the
Company, hereby make, constitute and appoint W. L. Westbrook and Wayne Boston
our true and lawful Attorneys for each of us and in each of our names, places
and steads to sign and cause to be filed with the Securities and Exchange
Commission in connection with the foregoing said Annual Report on Form 10-K,
quarterly reports on Form 10-Q, and any appropriate amendment or amendments
thereto and any necessary exhibits.
Yours very truly,
SAVANNAH ELECTRIC AND POWER COMPANY
By /s/Arthur M. Gignilliat, Jr.
Arthur M. Gignilliat, Jr.
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/Helen Q. Artley /s/Arnold M. Tenenbaum
Helen Q. Artley Arnold M. Tenenbaum
/s/Archie H. Davis /s/Frederick F. Williams, Jr.
Archie H. Davis Frederick F. Williams, Jr.
/s/Paul J. DeNicola /s/K. R. Willis
Paul J. DeNicola K. R. Willis
/s/Arthur M. Gignilliat, Jr. /s/Nancy E. Frankenhauser
Arthur M. Gignilliat, Jr. Nancy E. Frankenhauser
/s/Walter D. Gnann /s/Lavonne K. Calandra
Walter D. Gnann Lavonne K. Calandra
/s/Robert B. Miller, III
Robert B. Miller, III
<PAGE>
Extract from minutes of meeting of the board of directors of Savannah Electric
and Power Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing statements required
to be filed by the Company under the Securities Exchange Act of 1934 to
be filed with the Securities and Exchange Commission including (a) the
filing of this Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and (b) quarterly reports on Form 10-Q during
calendar year 1997; and of remedying any deficiencies with respect
thereto by appropriate amendment or amendments, this Company and the
members of its Board of Directors, and its officers, be and they are
hereby authorized to give their several powers of attorney to W. L.
Westbrook and Wayne Boston for the purposes set out above.
- - - - - - - - - -
The undersigned officer of Savannah Electric and Power Company does
hereby certify that the foregoing is a true and correct copy of resolution duly
and regularly adopted at a meeting of the board of directors of Savannah
Electric and Power Company, duly held on February 18, 1997, at which a quorum
was in attendance and voting throughout, and that said resolution has not since
been rescinded but is still in full force and effect.
Dated March 21, 1997 SAVANNAH ELECTRIC AND POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
