SOUTHERN CO, DEFR14A, 1997-04-22

SOUTHERN CO
DEFR14A, 1997-04-22
ELECTRIC SERVICES

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SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [ ]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

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[SOUTHERN COMPANY LOGO]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS -- MAY 28, 1997

Dear Stockholder:

The Annual Meeting of Stockholders of The Southern Company will be held at
the Hyatt Regency Atlanta, 265 Peachtree Street, Atlanta, Georgia on Wednesday,
May 28, 1997, at 10:00 a.m. (EDT), for the following purposes:

(1) Electing 14 members of the board of directors;

(2) Approving amendments to the Southern Company Executive
Productivity Improvement Plan;

(3) Approving the Southern Company Performance Stock Plan;

(4) Approving the Southern Company Performance Dividend Plan;

(5) Approving the Southern Energy, Inc. Value Creation Plan; and

(6) Transacting such other business as may properly come before the
meeting or any adjournments thereof.

Your vote is important. Please use the toll-free telephone number on the
enclosed proxy card or mark, date, sign, and promptly return the enclosed form
of proxy in the enclosed postage-paid envelope. If you attend the annual
meeting, you may revoke this proxy by voting in person.

Only stockholders of record at the close of business on March 31, 1997, are
entitled to vote at the meeting.

By Order of the Board of Directors,

Tommy Chisholm
Secretary

Atlanta, Georgia
April 18, 1997

<PAGE>

SOUTHERN COMPANY
270 PEACHTREE STREET
ATLANTA, GEORGIA 30303

PROXY STATEMENT

GENERAL INFORMATION

This proxy statement and the accompanying form of proxy are being furnished
to stockholders in connection with the solicitation of proxies by the board of
directors of The Southern Company (the "Company") for use at its 1997 Annual
Meeting of Stockholders to be held on Wednesday, May 28, 1997, at 10:00 a.m.
(EDT) in Atlanta, Georgia. It is proposed that this proxy statement and
accompanying form of proxy first will be sent to the Company's stockholders on
or about April 18, 1997.

Stockholders of record can give instructions on the voting of their proxy
by calling the toll-free telephone number listed on the proxy card or by
returning their signed proxy card. The telephone procedure authenticates
stockholders by use of a Control Number and permits confirmation that your vote
has been properly recorded. Specific instructions to be followed are set forth
on the enclosed proxy card.

The shares represented by your proxy will be voted in accordance with your
directions if the proxy is properly recorded telephonically or signed and
returned to the Company before the meeting. Each share is entitled to one vote,
except that voting for directors may be cumulative (i.e., in voting for
directors each stockholder may multiply the number of shares stated on the form
of proxy by the number of directors to be elected and then cast the resulting
number of votes among the nominees as desired). Your proxy may be revoked by
written request that is received by the secretary of the Company before the
annual meeting. If you wish, you may revoke your proxy at the meeting by voting
in person.

At the annual meeting, abstentions will be treated as present for purposes
of determining a quorum and shares held by a broker that the broker fails to
vote will not be treated as present for purposes of a quorum. Abstentions and
broker "nonvotes" will not be counted either for or against any item submitted
for vote.

The board of directors set March 31, 1997, as the record date for the
determination of stockholders entitled to notice of and to vote at the 1997
Annual Meeting of Stockholders. On the record date, 681,118,747 shares of common
stock were outstanding, and, to the knowledge of management, no person had
beneficial ownership of more than five percent of the outstanding shares.

1. ELECTION OF DIRECTORS

The proxies, named on the enclosed form of proxy, intend to vote each
properly executed proxy for the election of the listed nominees as directors for
the ensuing year or until their successors are elected and qualified, unless you
specify otherwise. If any nominee becomes unable to stand for election, the
proxies will be voted for substitute nominees named by the board and for the
remaining nominees unless the board reduces the number of directors to be
elected. The board of directors has no reason to expect that this will occur.

The affirmative vote of a plurality of shares present and entitled to vote
is required for the election of directors.

JOHN C. ADAMS

Mr. Adams, 57, is chairman of the board, president, and chief executive officer
of Russell Corporation, designers, manufacturers, and marketers of apparel and
fabrics. He served as president and chief operations officer for Russell
Corporation from 1991 to 1992; and president and chief executive officer from
1992 to 1993, when he was appointed to his current position. He is a director of
Aliant Bank of Alexander City, Alabama, Aliant National Corporation, and Russell
Corporation. He was elected director of the Company in 1995.

<PAGE>

A. D. CORRELL

Mr. Correll, 55, is chairman of the board and chief executive officer of
Georgia-Pacific Corporation, manufacturers and distributors of building
products, pulp, and paper. He served as president and chief operating officer of
Georgia-Pacific Corporation from 1991 to May, 1993, and president and chief
executive officer of Georgia-Pacific Corporation from May, 1993 to December,
1993, when he was appointed to his current position. He is a director of
Georgia-Pacific Corporation and Sears, Roebuck and Co. He was elected director
of the Company in 1994.

A. W. DAHLBERG

Mr. Dahlberg, 56, is chairman of the board, president and chief executive
officer of the Company and chairman of the executive committee of Southern
Company Services, Inc. He served as president of the Company from 1994 until
March, 1995. Prior to 1994, he was president and chief executive officer of
Georgia Power Company. He is a director of Equifax, Inc., Protective Life
Corporation, SunTrust Banks, Inc., and Southern system companies -- Alabama
Power Company, Consolidated Electric Power Asia Limited, Georgia Power Company,
SEI Holdings, Inc., Southern Company Services, Inc., Southern Energy, Inc., and
Southern Nuclear Operating Company, Inc. He was elected director of the Company
in 1985.

PAUL J. DENICOLA

Mr. DeNicola, 48, is president and chief executive officer of Southern Company
Services, Inc. and executive vice president and group executive of the Company.
He served as executive vice president of Southern Company Services, Inc. from
April, 1991 to January, 1994, when he was appointed to his current position. He
is a director of Southern system companies -- Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, SEI Holdings, Inc., Southern
Communications Services, Inc., Southern Company Services, Inc., Southern Energy,
Inc., Southern Energy North America, Inc., Southern Nuclear Operating Company,
Inc., and The Southern Development and Investment Group, Inc. He was elected
director of the Company in 1989.

JACK EDWARDS

Mr. Edwards, 68, is a member of Hand Arendall, L.L.C., attorneys. He served in
the U.S. House of Representatives for 20 years, retiring in 1985. He is a
director of Northrop Grumman Corporation, QMS, Inc., and Holnam, Inc. Mr.
Edwards is also President Pro Tempore of the Board of Trustees of the University
of Alabama System. He was elected director of the Company in 1987.

H. ALLEN FRANKLIN

Mr. Franklin, 52, is president and chief executive officer of Georgia Power
Company, president of Piedmont-Forrest Corporation, and executive vice president
of the Company. Prior to 1994, he was president and chief executive officer of
Southern Company Services, Inc. He is a director of SouthTrust Corporation and
Southern system companies -- Georgia Power Company, Piedmont-Forrest
Corporation, SEI Holdings, Inc., Southern Company Services, Inc., Southern
Electric Generating Company, Southern Energy, Inc., Southern Energy North
America, Inc., and Southern Nuclear Operating Company, Inc. He was elected
director of the Company in 1988.

BRUCE S. GORDON

Mr. Gordon, 50, is group president of Bell Atlantic Network Services, Inc.,
telecommunications and computer equipment services. Prior to 1993, he served as
senior vice president of marketing and sales of Bell Atlantic Network Services,
Inc. He is a director of Barfield Companies and was elected director of the
Company in 1994.

L. G. HARDMAN III

Mr. Hardman, 57, is chairman of the board and chief executive officer of First
Commerce Bancorp, Inc.; chairman of the board of The First National Bank of
Commerce, Georgia; and chairman of the board,

<PAGE>

president, and treasurer of Harmony Grove Mills, Inc. He is a director of
Georgia Power Company and was elected director of the Company in 1986.

ELMER B. HARRIS

Mr. Harris, 57, is president and chief executive officer of Alabama Power
Company, president of Alabama Property Company and Southern Electric Generating
Company, and executive vice president of the Company. He is a director of
AmSouth Bancorporation and Southern system companies -- Alabama Power Company,
Alabama Property Company, Southern Company Services, Inc., Southern Electric
Generating Company, Southern Energy, Inc., and Southern Nuclear Operating
Company, Inc. He was elected director of the Company in 1989.

WILLIAM A. PARKER, JR.

Mr. Parker, 69, is chairman of the board of Seminole Investment Company, L.L.C.,
private investments in land, securities, and warehouses. He is a director of
Georgia Power Company, Atlantic Investment Company, Genuine Parts Company,
Haverty Furniture Companies, Inc., and Post Properties, Inc. He was elected
director of the Company in 1973.

WILLIAM J. RUSHTON, III

Mr. Rushton, 67, is chairman emeritus of Protective Life Corporation, an
insurance concern. Prior to 1994, he was chairman of the board of Protective
Life Corporation. He is a director of Alabama Power Company and was elected
director of the Company in 1971.

GLORIA M. SHATTO

Dr. Shatto, 65, is president of Berry College, Mount Berry, Georgia. She is a
director of Georgia Power Company, Becton Dickinson & Company, and Texas
Instruments Incorporated. She was elected director of the Company in 1984.

GERALD J. ST. PE

Mr. St. Pe, 57, is president of Ingalls Shipbuilding, Inc. division of Litton
Industries, Inc., and senior vice president of Litton Industries, Inc. He was
elected director of the Company in 1995.

HERBERT STOCKHAM

Mr. Stockham, 68, is chairman of the board and a director of Stockham Valves &
Fittings, Inc., manufacturers of pipe fittings and valves. He was elected
director of the Company in 1978.

Each nominee has served in his or her present position for at least the
past five years, unless otherwise noted.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN
PROPOSAL NO. 1.

<PAGE>

ADDITIONAL INFORMATION

STOCK OWNERSHIP

The following table shows the number of shares of the Company's common
stock and preferred stock of subsidiary companies owned by the directors,
nominees, and executive officers as of December 31, 1996. It is based on
information furnished to the Company by the directors, nominees, and executive
officers. The shares owned by all directors, nominees, and executive officers as
a group constitute less than two percent of the total number of shares of the
respective classes outstanding as of December 31, 1996.

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
TITLE OF SECURITY OWNED(1)(2)
----------------- ----------------
<S> <C> <C>
John C. Adams Southern Company common stock.................. 3,892
Thomas G. Boren Southern Company common stock.................. 28,279
A. D. Correll Southern Company common stock.................. 3,787
A. W. Dahlberg Southern Company common stock.................. 182,190
Paul J. DeNicola Southern Company common stock.................. 85,643
Jack Edwards Southern Company common stock.................. 3,929
H. Allen Franklin Southern Company common stock.................. 114,757
Bruce S. Gordon Southern Company common stock.................. 453
L. G. Hardman III Southern Company common stock.................. 8,250
Elmer B. Harris Southern Company common stock.................. 170,780
William A. Parker, Jr. Southern Company common stock.................. 27,000
Georgia Power Company preferred stock.......... 2
William J. Rushton, III Southern Company common stock.................. 6,927
Alabama Power Company preferred stock.......... 20
Gloria M. Shatto Southern Company common stock.................. 15,832
Georgia Power Company preferred stock.......... 1,200
Gerald J. St. Pe Southern Company common stock.................. 21,949
Herbert Stockham Southern Company common stock.................. 7,252
Directors, Nominees, and
Executive Officers of the
Company as a Group Southern Company common stock.................. 964,330
(19 persons) Subsidiary companies preferred stock........... 1,422
</TABLE>

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(1) "Beneficial ownership" means the sole or shared power to vote, or to
direct the voting of, a security, or investment power with respect to a
security, or any combination thereof.
(2) The shares shown include shares of common stock of which certain
directors and executive officers have the right to acquire beneficial ownership
within 60 days pursuant to the Southern Company Executive Stock Plan, as
follows: Mr. Boren, 16,987 shares; Mr. Dahlberg, 123,218 shares; Mr. DeNicola,
52,086 shares; Mr. Franklin, 90,733 shares; Mr. Harris, 120,265 shares; and all
directors, nominees, and executive officers of the Company as a group, 548,079
shares. Also included are shares of the Company's common stock held by the
spouses of the following directors: Mr. Edwards, 280 shares; Mr. Hardman, 100
shares; Mr. Harris, 310 shares; Mr. Parker, 53 shares; and Dr. Shatto, 12,667
shares. Also included are 1,200 shares of Georgia Power Company preferred stock
owned by Dr. Shatto's spouse. Each director disclaims any interest in these
shares owned by their spouses.

CERTAIN TRANSACTIONS

During 1996, Alabama Power Company paid Hand Arendall, L.L.C. $94,554 for
legal services. Mr. Edwards is a member of Hand Arendall, L.L.C.

CORPORATE GOVERNANCE

The Southern Company is organized as a holding company managed by a core
group of officers and governed by a board of directors that has been set at 14
members. The nominees for election as directors consist of 10 nonemployees and
four officers.

<PAGE>

The board of directors met nine times in 1996. Its four standing committees
met a total of 18 times. The average attendance of all directors for the board
and committee meetings was 88 percent, with Mr. Parker and Mr. St. Pe attending
less than 75 percent of the board and applicable committee meetings.

All standing committee members and chairmen are nonemployee directors.

CERTAIN COMMITTEES

AUDIT COMMITTEE -- The members of the Audit Committee are Mr. Hardman, chairman,
Mr. Gordon, Mr. Parker, Mr. St. Pe, and Mr. Stockham. The Audit Committee met
six times in 1996. The Audit Committee annually reviews and recommends the
selection of the Company's independent auditor and reviews the auditing firm's
fees and the scope and timing of audits. The committee reviews the independent
auditor's report or opinion on the Company's financial statements, significant
changes in accounting principles and practices, significant proposed
adjustments, and any unresolved disagreements with management concerning
accounting or disclosure matters. The committee also oversees the Company's
financial reporting and accounting practices, internal accounting, legal
compliance, and control systems. The Audit Committee regularly reports its
recommendations and findings to the full board of directors.

COMPENSATION & MANAGEMENT SUCCESSION COMMITTEE -- The members of the
Compensation & Management Succession Committee are Mr. Correll, chairman, Mr.
Hardman, Mr. St. Pe, and Mr. Stockham. The Compensation & Management Succession
Committee met four times in 1996. The Compensation & Management Succession
Committee reviews the performance of the president of the Company and recommends
to the board his compensation under the base salary program, the Performance Pay
Plan, and the Executive Productivity Improvement Plan. It also reviews and makes
recommendations to the board on certain compensation and benefit programs
applicable to the Company's subsidiaries and administers the Company's executive
compensation plans. The committee also reviews the Company's management
succession plans.

GOVERNANCE COMMITTEE -- The members of the Governance Committee are Mr. Rushton,
chairman, Mr. Adams, Mr. Gordon, Mr. Parker, and Dr. Shatto. The Governance
Committee met two times in 1996. This committee identifies and recommends to the
board of directors the nominees for election to the board. The Governance
Committee expects normally to identify from its own resources the names of
qualified nominees but will accept from stockholders recommendations of
individuals to be considered as nominees. Stockholder recommendations, together
with a description of the proposed nominee's qualifications, relevant
biographical information, and the proposed nominee's signed consent to serve,
should be submitted in writing to the secretary of the Company and received by
that office by December 19, 1997. The determination of nominees recommended to
the board by the Governance Committee is within the sole discretion of the
committee, and the final selection of the board's nominees is within the sole
discretion of the board of directors. The committee also reviews and makes
recommendations to the board on directors' compensation and reviews corporate
governance issues.

COMPENSATION OF DIRECTORS

Each nonemployee director of the Company is paid an annual retainer fee of
$40,000 of which at least $10,000 is deferred in shares of Company common stock
under the Deferred Compensation Plan for Directors of The Southern Company (the
"Deferred Compensation Plan") until membership on the board is terminated. A
meeting fee of $1,250 is paid for each meeting of the board of directors
attended and a fee of $1,000 is paid for each committee meeting attended. Also,
each committee chairman is paid an annual retainer fee of $5,000. All or a
portion of the fees payable in cash can be deferred under the Deferred
Compensation Plan until membership on the board is terminated. Dr. Shatto also
was paid $1,000 for service on the Southern Company College board of advisors.

Effective January 1, 1997, the board of directors terminated the Outside
Directors Pension Plan (the "Pension Plan") and froze the benefits payable under
the Pension Plan. Nonemployee directors were given a one-time opportunity to
elect to receive a Pension Plan benefit buy-out equal to the actuarial present
value of future Pension Plan benefits, based on the annual retainer in effect on
December 31, 1996 ($30,000), or receive benefits under the terms of the Pension
Plan frozen at the level of the annual retainer rate in effect on December 31,
1996. Directors who elected to receive the benefit buy-out were

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required to defer receipt of that amount under the Deferred Compensation Plan
until termination from board membership. Two directors elected to continue to
participate under the terms of the Pension Plan. They are entitled to benefits
upon retirement from the board. The annual benefit payable is based upon length
of service and varies from 75 percent (if one has at least 60 months of service)
to 100 percent (if one has 120 months of service) of the annual retainer fee in
effect on December 31, 1996. Payments will continue for the greater of the
lifetime of the participant or 10 years. The termination of the Pension Plan did
not affect retired directors already receiving payments under it.

EXECUTIVE COMPENSATION

COMPENSATION & MANAGEMENT SUCCESSION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION

The following report of the Compensation & Management Succession Committee
(the "committee") discusses generally the committee's executive compensation
objectives and policies and their relationship to corporate performance in 1996.
Also, the report specifically discusses the committee's bases for compensation
in 1996 of the Company's chairman of the board, president and chief executive
officer (the "chairman") as reported in the Summary Compensation Table following
this report.

EXECUTIVE COMPENSATION OBJECTIVES AND POLICIES

The committee's objective is to provide a competitive compensation program
with appropriate incentives for superior corporate performance, thereby
providing a strong and direct link between corporate performance and pay.
Performance is defined in several ways, as more fully discussed below, each of
which has relevance to the Company's success in the short term, long term, or
both. Additionally, executive compensation is variable so that higher
performance leads to higher pay and lower performance results in lower pay.

Total executive compensation (base salary plus incentive compensation) is
compared with that of a group of electric and gas utility companies with similar
market and operating characteristics and within a comparable size range.
Currently, each company in that group has revenues of $3 billion and higher. All
but one of these companies are included in the 24 companies that make up the
Standard & Poor's Electric Utility Index, the peer group in the five-year
performance graph. Total executive compensation of the president of Southern
Energy, Inc. ("Southern Energy president") is compared with that of a group of
109 heavy industrial and durable goods manufacturing companies with similar
market and operating characteristics and within a comparable size range.
Currently, each company in that group has revenues of $1 billion and higher. The
committee targets total executive pay levels at the median of the applicable
selected group of companies. This is accomplished through a mix of base
compensation and short- and long-term incentive compensation. Higher corporate
performance, based on various performance measures described below, can result
in increased incentive compensation that in turn results in total compensation
that is higher than the target. Lower performance results in lower incentive
compensation and, therefore, compensation that is lower than the median level of
the selected group of companies. If certain performance goals are not reached,
no incentive compensation is paid.

EXECUTIVE COMPENSATION COMPONENTS

Total executive compensation, as reported in the Summary Compensation
Table, consists of three primary components: base salary, short-term incentive
compensation (annual performance bonus), and long-term incentive compensation.
The compensation components of the Southern Energy president are described
separately where they differ from those of the other named executive officers.

BASE SALARY. Base salary levels, including the chairman's, are largely
determined by comparison with salaries of other gas and electric utility
companies of comparable size, as reported in market surveys prepared by
independent, outside consultants. All but one of these companies are included in
the 24 companies that comprise the Standard & Poor's Electric Utility Index.
Base salary of the Southern Energy president is determined by comparison with
salaries of a group of heavy industrial and durable goods manufacturing
companies of comparable size, as reported in market surveys prepared by
independent, outside consultants. A salary range above and below the median
salary reported in such surveys is established. Base salary increases are based
on individual job performance and set within the estab-

<PAGE>

lished competitive salary range. Base salary also can be increased based on a
significant increase in job responsibilities. The base salary levels of the
named executive officers were below the median in 1996.

ANNUAL PERFORMANCE BONUS. All regular employees of the Company's
subsidiaries, except those employed by Southern Communications Services, Inc.,
The Southern Development and Investment Group, Inc., and Southern Energy, Inc.
and its affiliates, and except those employed by Georgia Power Company who are
part of a collective bargaining unit, are eligible to receive an annual
performance bonus under the Company's Performance Pay Plan.

Amounts paid to executive officers for 1996 performance were based on the
achievement of corporate performance goals and individual objectives. Corporate
performance goals are designed to improve operating results in the areas of
earnings (return on common equity), kilowatt-hour cost, overhead costs, cash
flow, and customer satisfaction. Individual objectives are goals and initiatives
that link the corporate performance goals and the Company's strategic direction.
The committee believes that achievement of these goals is essential for the
Company's continued success and sustained financial performance. The plan
provides that, in the discretion of the chairman, extraordinary expenses or
income may be excluded for the purpose of calculating the amount available for
the payment of awards.

A target performance level is set for each goal. Awards paid are based on
performance relative to the established target. Performance above the target
level results in proportionately higher payout. Likewise, performance below the
target results in proportionately lower payout. No awards are made if
performance is below a threshold level or if a minimum earnings level is not
achieved. Also, no awards are made if the Company's current earnings are
insufficient to fund its common stock dividend at the same level as the prior
year.

The earnings target requires the Company's return on common equity to be
sufficient to maintain the common stock dividend at or below a specific payout
ratio. Additional funds are made available for awards if the Company's return on
common equity ranks in the highest quartile of a large group (approximately 100)
of investor-owned electric utility companies -- the companies with which the
Company competes for investors. All of the companies in the Standard & Poor's
Electric Utility Index are included in this group. The Company's position was in
the top of the second highest quartile for 1996. The kilowatt-hour cost target
required the Company to keep capital expenditures and operation and maintenance
costs below specific targets designed to achieve a kilowatt-hour cost that is at
or below the competitive market price offered by electric providers, including
the companies comprising the Standard & Poor's Electric Utility Index. The
Company continued to cut costs aggressively and achieved costs below the
targets. The overhead costs target requires the Company to reduce overhead costs
by 20 percent by 1998 and called for identifying specific strategies, targets,
and an implementation schedule in 1996. During 1996, the Company approved the
schedule for implementing strategies to achieve the target. The cash flow target
required the Company to generate a positive cash flow above capital reinvestment
and dividend requirements. The Company generated a positive cash flow in 1996.
The customer satisfaction target required the Company to rank in the best
quartile of 16 electric utilities in the southeastern United States -- the
primary companies with which the Company competes for customers. More than
one-half of these companies are included in the Standard & Poor's Electric
Utility Index. During 1996, the company achieved a rating of 67.6 percent of
"very satisfied" customers -- retaining the Company's position in the best
quartile. Corporate performance met or exceeded the target levels in all five
areas in 1996, resulting in proportionately higher awards. The achievement of
the return on common equity corporate performance goal determined the initial
funding for the annual performance bonuses paid to the executive officers for
1996 performance. The remainder of the corporate performance goals provided the
opportunity of adjusting the funding for performance bonuses to a maximum of 110
percent or a minimum of 90 percent of that initial funding.

The chairman's target annual performance award opportunity for full
achievement of goals was 10 percent of his base salary. Of the annual
performance bonus paid to the chairman for 1996 performance, 70 percent was
based on the corporate performance goals of return on common equity,
kilowatt-hour cost, overhead costs, cash flow, and customer satisfaction with
the remainder based on individual objectives regarding leadership and strategic
initiatives designed to strengthen the Company's performance on a short-term and
long-term basis. The committee found that, under all measurement criteria,
performance met or exceeded the targets established for 1996. This resulted in
an award under the plan that exceeded the target award opportunity.

<PAGE>

LONG-TERM INCENTIVE COMPENSATION. Long-term incentives for executive
officers, including the chairman, are provided through annual grants of
performance awards under the Executive Productivity Improvement Plan and annual
grants of stock options under the Executive Stock Plan. (The Southern Energy
president does not participate in the Executive Productivity Improvement Plan.)
The committee believes that, together, these plans reflect two primary means of
motivating and rewarding improvement in the long-term performance of the
Company. Performance awards result in additional compensation based on the
Company's average return on common equity performance over a four-year period
ranked against a group of utility companies located in the southeastern United
States. Stock options provide gains to executives only if, in the long term, the
Company's common stock price improves over the fair market value of the stock on
the date options are granted.

Executive Productivity Improvement Plan. The named executive officers
participating in the plan are granted a number of units, valued at $1.00 each,
equal to 65 percent of their respective salary range midpoint at the beginning
of the four-year performance period. The target award set under the plan of
$1.00 per unit requires the Company's return on equity over the four-year
performance period to rank in the top quartile of the selected group of
companies. The value of the units at the end of the performance period may range
from $0.50 if the Company's return on equity is in the second highest quartile
to $2.00 if the Company's return on equity is the best of the selected group. No
awards are paid if the Company's return on equity is below the median or if the
Company's current earnings are insufficient to fund its common stock dividend at
the same level as the prior year. (See Proposal No. 2 on page 13 of this proxy
statement for information regarding proposed changes to the Executive
Productivity Improvement Plan.)

For the performance period January 1, 1993, through December 31, 1996, the
Company's return on equity was the third highest of the selected group,
resulting in each unit granted to the executive officers, including the
chairman, being valued at $1.60.

Based on the degree of achievement of pre-determined goals, the Southern
Energy president is awarded a bonus, one-half of which is paid in cash at the
end of the year and one-half is deferred under the Southern Energy, Inc.
Deferred Incentive Compensation Plan. The deferred portion is awarded in units
that are adjusted -- up or down -- based upon the total return on the Company's
common stock and the performance of Southern Energy's investment projects. The
value of the units is payable in cash at the end of a four-year performance
period, unless an election to extend the deferral period is made by the
participant at least 12 months before the scheduled distribution date. The
Southern Energy president's goals for 1996 were related to achieving a
prescribed net income, managing Southern Energy's impact on the Company's
earnings per share and return on equity, continuing to position Southern Energy
for future growth, and managing assets to achieve certain returns. Southern
Energy exceeded its targets in 1996. If approved by the stockholders, the
proposed Southern Energy, Inc. Value Creation Plan would replace the Southern
Energy, Inc. Deferred Incentive Compensation Plan. (See Proposal No. 5 on page
18 of this proxy statement for information regarding the proposed Southern
Energy, Inc. Value Creation Plan.)

Stock Option Grants. Under the Company's Executive Stock Plan, executive
officers, including the chairman, are granted stock options that give them the
right to purchase shares of the Company's common stock at a specified price.
(The Southern Energy president participates in the Executive Stock Plan.) Stock
option grants are one of the components of total executive compensation. As
discussed above, total executive compensation is targeted at the median total
compensation paid by the selected group of companies. The estimated annualized
value of the stock options granted, if targeted performance is achieved,
represented approximately 20 percent of the targeted compensation level for the
chairman and from 10 to 15 percent of the targeted compensation levels for the
named executive officers for the last fiscal year. Neither the size of prior
option grants nor the number of outstanding grants was considered in determining
the size of the latest grants. Historically, the total number of stock options
granted annually by the committee to all participants has not exceeded 10
percent of the total number of shares authorized under the plan. (See Proposals
No. 3 and No. 4 beginning on page 14 of this proxy statement for information
regarding the proposed Southern Company Performance Stock Plan to replace the
Executive Stock Plan and the proposed Southern Company Performance Dividend
Plan, respectively.)

The committee believes that granting stock options aligns the interests of
executives with those of common stockholders in two ways. First, because the
exercise price of all stock options granted under the Plan is equal to the fair
market value on the grant date, there must be an appreciation in the price of

<PAGE>

the common stock for participants to benefit. Second, long-term performance is
encouraged because options vest annually at a rate of 25 percent on the
anniversary date of the grant.

SUMMARY

The committee's policy in setting executive compensation and in
establishing the appropriate balance among fixed, short-term, and long-term
compensation is designed to clearly link pay and performance. The committee
believes that its executive compensation program rewards executives more as
stockholders are rewarded. Total executive compensation is increasingly weighted
toward long-term incentives and, therefore, toward long-term Company performance
and total shareholder return. To achieve these goals, the committee frequently
reviews the various pay plans and policies and modifies them as it deems
necessary to continue to attract, retain, and motivate talented executives and
to pay them competitively. The committee seeks stockholder approval of
performance-based compensation plans in order to qualify the compensation to be
paid under the plans for full income tax deductibility under Section 162(m) of
the Internal Revenue Code (the "Code"). Section 162(m) of the Code generally
limits tax deductibility of certain compensation paid to each of the Company's
five most highly compensated executive officers to $1,000,000, per officer,
unless the compensation is paid under a performance plan, meeting certain
criteria under the Code, that has been approved by its stockholders.

MEMBERS OF THE COMPENSATION & MANAGEMENT SUCCESSION COMMITTEE:

<TABLE>
<S> <C>
A. D. Correll, Chairman G. J. St. Pe
L. G. Hardman III H. Stockham
</TABLE>

<PAGE>

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the Company's current
chairman of the board, president, and chief executive officer, and each of the
other four most highly compensated executive officers of the Company serving as
of December 31, 1996.

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ------------------------
NUMBER OF
SECURITIES LONG-TERM
OTHER UNDERLYING INCENTIVE
ANNUAL STOCK PLAN ALL OTHER
SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)(1) ($)(2)
- --------------------------- ---- ------- ------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. W. Dahlberg 1996 782,409 118,534 6,833 154,610 770,216 43,850
Chairman, President & CEO, 1995 722,489 120,415 6,577 52,203 866,493 40,755
Southern Company 1994 600,026 120,415 6,579 43,062 306,459 32,630
T. G. Boren 1996 291,086 275,000 13,757 14,250 0 16,293
President, Southern Energy 1995(3) 248,333 298,497 12,579 13,295 0 10,263
P. J. DeNicola 1996 400,491 56,520 3,325 26,330 426,442 22,894
President, 1995 384,845 50,464 3,037 26,297 479,747 21,603
Southern Company Services 1994 361,618 74,294 3,540 26,569 188,858 21,381
H. A. Franklin 1996 482,658 73,260 10,992 31,853 498,688 27,334
President, 1995 456,366 82,935 3,936 31,960 561,024 25,577
Georgia Power Company 1994 415,954 87,763 30,078 31,386 203,201 100,201
E. B. Harris 1996 480,310 72,697 7,112 31,608 439,508 25,068
President, 1995 458,940 74,204 5,956 32,170 494,447 26,192
Alabama Power Company 1994 436,280 96,711 13,882 31,441 236,642 24,467
</TABLE>

- ---------------

(1) Payouts made in 1995, 1996, and 1997 for the four-year performance
periods ending December 31, 1994, 1995, and 1996, respectively.
(2) Company contributions in 1996 to the Employee Savings Plan, Employee
Stock Ownership Plan, and non-pension related accruals under the Supplemental
Benefit Plan (ERISA excess plan under which accruals are made to offset Internal
Revenue Code imposed limitations under the Employee Savings and Stock Ownership
Plans) for the following: Mr. Dahlberg -- $6,750, $1,127, and $35,973; Mr.
Boren -- $6,750, $1,127, and $8,416; Mr. DeNicola -- $6,750, $1,127, and
$15,017; Mr. Franklin $6,750, $1,127, and $19,457; and Mr. Harris -- $6,750,
$1,127, and $17,191.
(3) Mr. Boren did not serve as an executive officer of the Company prior to
1995.

STOCK OPTION GRANTS

The following table sets forth all stock option grants to the named
executive officers during the year ending December 31, 1996.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
------------------------------------------------------- ----------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED EXERCISE OR GRANT DATE
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR(2) ($/SH)(1) DATE(1) ($)(3)
---- ---------- --------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
A. W. Dahlberg.................. 154,610 11 23.00 04/15/2006 564,327
T. G. Boren..................... 14,250 1 23.00 04/15/2006 52,013
P. J. DeNicola.................. 26,330 2 23.00 04/15/2006 96,105
H. A. Franklin.................. 31,853 2 23.00 04/15/2006 116,263
E. B. Harris.................... 31,608 2 23.00 04/15/2006 115,369
</TABLE>

- ---------------

(1) Grants were made on April 15, 1996, and vest annually at a rate of 25
percent on the anniversary date of the grant. Grants fully vest upon termination
incident to death, total disability, or retirement. The exercise price is the
average of the high and low fair market value of the Company's common stock on
the date granted.
(2) A total of 1,460,731 stock options were granted in 1996 to employees
participating in the Company'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
the Company's common stock at a future date. This valuation is provided pursuant
to Securities and Exchange Commission disclosure rules. There

<PAGE>

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 percent; risk-free rate of return -- 6.51 percent; dividend
yield -- 5.48 percent; and time to exercise -- 10 years.

AGGREGATED STOCK OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES

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.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NUMBER OF YEAR-END(#) YEAR-END($)(2)
SHARES ACQUIRED VALUE REALIZED ------------------------- -------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
A. W. Dahlberg....... Not exercised 0 123,218/222,955 571,573/130,667
T. G. Boren.......... Not exercised 0 16,987/32,360 43,590/36,318
P. J. DeNicola....... Not exercised 0 52,086/63,560 203,635/75,287
H. A. Franklin....... Not exercised 0 90,733/77,368 458,476/91,048
E. B. Harris......... Not exercised 0 120,265/78,180 657,199/92,536
</TABLE>

- ---------------

(1) The "Value Realized" would be ordinary income, before taxes, and would
represent the amount equal to the excess of the fair market value of the shares
at the time of exercise above the exercise price.
(2) This column represents the excess of the fair market value of the
Company'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.

LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996

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.

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE OR NON-STOCK PRICE BASED PLANS
OTHER PERIOD UNTIL --------------------------------
NUMBER OF MATURATION OR THRESHOLD TARGET MAXIMUM
NAME UNITS(1) PAYOUT ($)(2) ($)(2) ($)(2)
---- --------- ------------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
A. W. Dahlberg........................ 491,010 4 years 245,505 491,010 982,020
T. G. Boren........................... 2,750 4 years -- -- --
P. J. DeNicola........................ 271,854 4 years 135,927 271,854 543,706
H. A. Franklin........................ 317,913 4 years 158,957 317,913 635,826
E. B. Harris.......................... 280,184 4 years 140,092 280,184 560,368
</TABLE>

- ---------------

(1) A performance unit is a method of assigning a dollar value to a
performance award opportunity. Under the Executive Productivity Improvement Plan
of the Company (the "plan"), the number of units granted to named executive
officers (except Mr. Boren who does not participate in the plan) is 65 percent
of their base salary range midpoint, with each unit valued at $1.00. No awards
are paid unless the participant remains employed by the Company through the end
of the performance period.
Mr. Boren is awarded a number of units, valued at $100 each, by the board
of directors of Southern Energy, Inc. under its Deferred Incentive Compensation
Plan. No awards are paid unless the participant remains employed by the Company
through the end of the performance period.
(2) The threshold, target, and maximum value of a unit under the plan is
$0.50, $1.00, and $2.00, respectively, and can vary based on the Company'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 the Company are not sufficient to fund
the dividend rate paid in the last calendar year. The plan provides that in the
discretion of the committee extraordinary income may be excluded for purposes of
calculating the amount available for the payment of awards. All awards are
payable in cash at the end of the performance period. (See Proposal No. 2 on
page 13 of this proxy statement for information regarding the proposed
amendments to the plan.)

<PAGE>

Under the Southern Energy, Inc. Deferred Incentive Compensation Plan, the
number of units payable at the end of the four-year performance period is
adjusted by a performance index based on the return on common equity of Southern
Company common stock and the performance of Southern Energy's investment
projects. At the end of the four-year period, the units, as adjusted, are
payable in cash unless the participants elects, 12 months in advance of the end
of the period, to defer receipt of the award. If approved by the stockholders,
the proposed Southern Energy, Inc. Value Creation Plan would replace the
Southern Energy, Inc. Deferred Incentive Compensation Plan. (See Proposal No. 5
on page 18 of this proxy statement for information regarding the proposed
Southern Energy, Inc. Value Creation Plan.)

PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF ACCREDITED SERVICE
---------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- -------- --------
<S> <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
900,000................ 229,500 306,000 382,500 459,000 535,500 612,000
</TABLE>

The above table sets forth the estimated combined annual pension benefits
under the pension and supplemental defined benefit plans in effect during 1996.
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 Table on page 10). As of December 31, 1996, the applicable
compensation levels for Messrs. Boren, Dahlberg, DeNicola, Franklin, and Harris
would have been $258,336; $714,960; $387,792; $462,660; and $462,672,
respectively. As of December 31, 1996, Messrs. Boren, Dahlberg, DeNicola,
Franklin, and Harris had 26, 35, 26, 25, and 37 years, respectively, of
accredited service.

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 that 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.

<PAGE>

FIVE-YEAR PERFORMANCE GRAPH

The following performance graph compares the cumulative total shareholder
return on the Company's common stock with the Standard & Poor's Electric Utility
Index and the Standard & Poor's 500 Index for the past five years. The graph
assumes that the value of the investment in the Company's common stock and each
index was $100 on December 31, 1991, and that all dividends are reinvested. The
shareholder return shown below for the five-year historical period may not be
indicative of future performance.

<TABLE>
<CAPTION>
Southern
Measurement Period Company S&P Electric Utility
(Fiscal Year Covered) Common Stock Index S&P 500 Index
<S> <C> <C> <C>
1991 100 100 100
1992 119 106 108
1993 144 119 118
1994 139 104 120
1995 181 136 165
1996 175 136 203
</TABLE>

APPOINTMENT OF INDEPENDENT AUDITORS

The board of directors, upon recommendation of the Audit Committee, has
selected Arthur Andersen LLP as independent auditors for 1997. Representatives
of Arthur Andersen LLP are expected to be present at the annual meeting and will
have an opportunity to make a statement if they desire and to respond to
appropriate questions from stockholders.

2. PROPOSAL TO AMEND THE COMPANY'S EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

The Southern Company Executive Productivity Improvement Plan (the "Plan")
was adopted by the board of directors effective as of January 1, 1994, and
approved by the stockholders on May 25, 1994. The Plan was amended by the board
of directors effective as of January 1, 1995, and approved by the stockholders
on May 24, 1995. The Plan was further amended by the board of directors
effective as of January 1, 1997.

The board is seeking stockholder approval of the amended Plan in order to
continue to qualify all compensation to be paid under the Plan, after an initial
phase-in period, for full income tax deductibility under Section 162(m) of the
Internal Revenue Code (the "Code"). Section 162(m) of the Code generally limits
tax deductibility of certain compensation paid to each of the Company's five
most highly compensated executive officers to $1,000,000, per officer, unless
the compensation is paid under a performance plan, meeting certain criteria
under the Code, that has been approved by its stockholders.

Only executive officers of the Company are eligible to participate in the
Plan. Presently, there are five executive officers participating in the Plan.

The Plan is administered by the Compensation & Management Succession
Committee of the board of directors of the Company (the "committee"). The
committee consists of three or more directors of the Company who are not
employees of the Company or its subsidiaries and who are not participants in the
Plan. The committee has exclusive authority to interpret the Plan.

<PAGE>

The Plan has been amended to change the basis of the performance
measurement from return on equity ("ROE") to total shareholder return ("TSR")
for the years beginning on or after January 1, 1997. TSR is calculated as the
value of an investment of $100 per quarter for each quarter over a specific
period (the "TSR Computation Period"). Payments under the Plan are paid in cash
and, for the applicable Computation Periods, are based upon the annual ranking
of the Company's ROE within a group of 16 utility companies located in the
southeastern United States, more than one-half of which are included in the
Standard & Poor's Electric Utility Index, or upon the annual ranking of the
Company's TSR to the TSR of a group of approximately 80 investor-owned electric
utilities in the United States as reported by Goldman, Sachs & Co., which
includes all of the companies in the Standard & Poor's Electric Utility Index.

During an initial phase-in period, the award opportunity for the four-year
period beginning January 1, 1994, is based 75% on ROE performance and 25% on TSR
performance, the award opportunity for the four-year period beginning January 1,
1995, is based 50% on ROE performance and 50% on TSR performance, and the award
opportunity for the four-year period beginning January 1, 1996, is based 25% on
ROE performance and 75% on TSR performance. Consequently, portions of awards
paid during the phase-in period are included in determining the deductibility of
certain compensation paid to the Company's five most highly compensated
executive officers. The award opportunity for Computation Periods beginning on
or after January 1, 1997, is based entirely on TSR performance. The maximum
award that may be paid to any individual under the Plan is $2,000,000. The
executive officers currently participating in the amended Plan have an award
opportunity ranging from 45 to 65 percent of their salary range midpoint or, in
the discretion of the committee, their annual base salary.

Under the amended Plan, awards based on ROE performance will range from 50
percent of the target award if the Company's ROE is in the second highest
quartile to 200 percent of the target award if the Company's ROE is the highest
among the selected group of companies, and awards based upon TSR performance
will range from 50 percent of the target award if the Company's TSR is at the
thirtieth percentile to 200 percent of the target award if the Company's TSR is
at or above the ninetieth percentile among the selected group of companies. No
awards may be paid for any ROE Computation Period in which the Company's ROE is
below the median, nor for any TSR Computation Period in which the Company's TSR
is below the thirtieth percentile, nor for any four-year period ending in a
calendar year in which the Company's current earnings are not sufficient to fund
its common stock dividend at the same level as the prior year.

The following table sets forth estimated amounts to be paid under the Plan
at target-level performance for the four-year performance period ending December
31, 1997:

EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE($)
- ----------------- ----------------
<S> <C>
A. W. Dahlberg, Chairman, President & CEO, Southern
Company................................................... 481,385
T. G. Boren, President, Southern Energy..................... 0
P. J. DeNicola, President, Southern Company Services........ 266,526
H. A. Franklin, President, Georgia Power Company............ 311,680
E. B. Harris, President, Alabama Power Company.............. 274,693
Executive officers as a group............................... 1,440,594
Non-executive directors as a group.......................... 0
Non-executive officer employees............................. 0
</TABLE>

The vote needed to approve the Plan is a majority of the shares of the
Company's stock represented at the meeting and entitled to vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2.

3. PROPOSAL TO APPROVE THE COMPANY'S PERFORMANCE STOCK PLAN

The Southern Company Executive Stock Plan, adopted by the board of
directors on December 7, 1987, and approved by the stockholders on May 25, 1988,
expires in 1997. The Southern Company Performance Stock Plan (the "Plan") was
adopted by the board of directors on February 17, 1997, subject to stockholder
approval.

<PAGE>

The purpose of the Plan is to maximize the long-term success of the
Company, to ensure a balanced emphasis on both current and long-term
performance, to enhance Plan participants' identification with stockholders'
interests, and to facilitate the attraction and retention of key individuals
with outstanding ability.

The Plan is administered by the Compensation & Management Succession
Committee of the board of directors of the Company (the "committee"). The
committee consists of three or more directors of the Company who are not
employees of the Company or its subsidiaries. The committee has exclusive
authority to interpret the Plan.

The Plan permits the committee to grant not more frequently than once each
calendar year, in its discretion, Incentive Stock Options and Nonqualified Stock
Options (collectively, "Stock Options"), Stock Appreciation Rights, and
Restricted Stock to directors of the Company and certain of its subsidiaries,
and those employees who have a significant impact on the long-term performance
and success of the Company. The committee has determined that the approximate
number of participants under the Plan initially will be 250, but may be changed
at the committee's discretion.

Nonqualified Stock Options entitle the participant to purchase up to the
number of shares of the Company's common stock ("Common Stock") specified in the
grant at a specified price (the "Option Price"). The Option Price, which cannot
be lower than the fair market value of the Common Stock on the grant date, is
set by the committee at the time a grant is made.

Stock Options designated by the committee as Incentive Stock Options are
intended to comply with Section 422 of the Internal Revenue Code. They will be
granted only to employees and entitle the participant to purchase the specified
number of shares of Common Stock at the Option Price. The aggregate fair market
value of Common Stock determined at the time of each grant for which any
participant may vest in Incentive Stock Options under the Plan for any calendar
year shall not exceed $100,000.

Stock Appreciation Rights are rights that, when exercised, entitle the
participant to the appreciation in value of the number of shares of Common Stock
specified in the grant, from the date granted to the date exercised. The
exercised Stock Appreciation Right may be paid in cash or Common Stock, as
determined by the committee. Stock Appreciation Rights may be granted in the
sole discretion of the committee in conjunction with an Incentive Stock Option
or Nonqualified Stock Option. Stock Options and Stock Appreciation Rights may
not be exercised more than 10 years after the date granted.

Restricted Stock awards are grants of shares of Common Stock that are held
by the Company for the benefit of the participant without payment of
consideration by the participant. There are restrictions or conditions on the
participant's right to transfer or sell such shares. The committee will
establish a "Restriction Period" of from one through 10 years for each
Restricted Stock award made. The participant will be entitled to dividends paid
on the Restricted Stock and will have the right to vote such shares.

Stock Options must be paid in full when exercised by the participant. The
committee, in its discretion, may permit the Option Price to be paid in whole or
in part through the transfer to the Company of shares of Common Stock previously
acquired by the participant.

A total of 40 million shares of Common Stock is available for grants under
the Plan. The committee anticipates only granting Nonqualified Stock Options
under the Plan at this time, however, the other types of awards provided for in
the Plan may be granted in the future. Under the Plan, the maximum number of
shares of Common Stock which may be the subject of any award to a participant
during any calendar year is 1,000,000 shares. On March 31, 1997, the closing
price per share of Common Stock reported on the New York Stock Exchange
Composite Tape was $21.125.

The board of directors may terminate or amend the Plan at any time;
provided, however, without stockholder approval, the board may not increase the
total number of shares of Common Stock available for grants under the Plan.

The Plan will terminate February 17, 2007, unless terminated sooner by the
board of directors.

<PAGE>

FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS GRANTED UNDER THE PLAN

The following is a summary of some of the more significant Federal income
tax consequences under present law of the granting and exercise of Stock Options
under the Plan.

No taxable income is realized by a participant upon the grant of a Stock
Option, and no deduction is then available to the Company. Upon exercise of a
Stock Option, the excess of the fair market value of the shares of Common Stock
on the date of exercise over the Option Price will be taxable to the participant
as ordinary income and, subject to any limitation imposed by Section 162(m) of
the Internal Revenue Code (the "Code"), deductible by the Company. The board is
seeking stockholder approval of the Plan partly in order to qualify all
compensation to be paid under the Plan for full income tax deductibility under
Section 162(m) of the Code. Section 162(m) of the Code generally limits tax
deductibility of certain compensation paid to each of the Company's five most
highly compensated executive officers to $1,000,000, per officer, unless the
compensation is paid under a performance plan, meeting certain criteria under
the Code, that has been approved by its stockholders.

If a participant disposes of any shares of Common Stock received upon the
exercise of any Stock Option granted under the Plan, such participant will
realize a capital gain or loss equal to the difference between the amount
realized on disposition and the value of such shares at the time the Stock
Option was exercised. The gain or loss will be either long-term or short-term,
depending on the holding period measured from the date of exercise. The Company
will not be entitled to any further deduction at that time.

The Company is required to withhold and remit to the Internal Revenue
Service income taxes on all compensation which is taxable as ordinary income.
Upon exercise of Stock Options, as a condition of such exercise, a participant
must pay or arrange for payment to the Company of cash representing the
appropriate withholding taxes generated by the exercise.

The following table sets forth the estimated number and dollar value of
Nonqualified Stock Options that could be granted under the Plan in 1997 to the
individuals and groups indicated:

PERFORMANCE STOCK PLAN

<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS DOLLAR VALUE ($)
- ----------------- ----------------- ----------------
<S> <C> <C>
A. W. Dahlberg, Chairman, President & CEO, Southern
Company.......................................... 133,142 (1)
T. G. Boren, President, Southern Energy............ 18,560 (1)
P. J. DeNicola, President, Southern Company
Services......................................... 29,040 (1)
H. A. Franklin, President, Georgia Power Company... 35,807 (1)
E. B. Harris, President, Alabama Power Company..... 34,929 (1)
Executive officers as a group...................... 324,763 (1)
Non-executive directors as a group................. 0 0
Non-executive officer employees.................... 39,969 (1)
</TABLE>

- ---------------

(1) The actual value a participant may realize, if any, will depend on the
excess of the fair market value of the Common Stock over the Option Price on the
date exercised. The average of the high and low prices of the Common Stock on
March 31, 1997, was $21.1875.

The vote needed to approve the Plan is a majority of the shares of the
Company's stock represented at the meeting and entitled to vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3.

4. PROPOSAL TO APPROVE THE COMPANY'S PERFORMANCE DIVIDEND PLAN

The Southern Company Performance Dividend Plan (the "Plan") was adopted by
the board of directors on February 17, 1997, subject to stockholder approval.

The purpose of the Plan is to provide a financial incentive which will
focus the efforts of certain key employees on areas which will have a direct and
significant influence on corporate performance and to

<PAGE>

provide the potential for levels of compensation which will enhance the
Company's ability to attract, retain and motivate such key employees.

The board is seeking stockholder approval of the Plan in order to qualify
all compensation to be paid under the Plan for full income tax deductibility
under Section 162(m) of the Internal Revenue Code (the "Code"). Section 162(m)
of the Code generally limits tax deductibility of certain compensation paid to
each of the Company's five most highly compensated executive officers to
$1,000,000, per officer, unless the compensation is paid under a performance
plan, meeting certain criteria under the Code, that has been approved by its
stockholders.

Under the Plan, participants in the Southern Company Performance Stock Plan
are awarded cash payments based upon the number of Stock Options held by the
participant on the last day of the year multiplied by the aggregate annual
dividend declared by the Company on its common stock during the year multiplied
by a payout percentage determined by comparing the Company's performance against
a selected group of peer companies. (See Proposal No. 3 on page 14 of this proxy
statement for information regarding the proposed Southern Company Performance
Stock Plan.) The committee has determined that the approximate number of
participants under the Plan initially will be 250, but may be changed at the
committee's discretion.

The basis for measuring the Company's performance is total shareholder
return ("TSR") calculated as the value of an investment of $100 per quarter for
each quarter over a specific period (the "TSR Computation Period"). The TSR
Computation Period is a four-calendar-year period except that, during the first
three years of the Plan, the TSR Computation Period is one, two, and three
years, respectively, beginning January 1, 1997. Payments under the Plan are paid
in cash and, for the applicable Computation Periods, are based upon the annual
ranking of the TSR of the Company within a group of approximately 80
investor-owned electric utilities in the United States as reported by Goldman,
Sachs & Co., which includes all of the companies in the Standard & Poor's
Electric Utility Index.

Generally, the payout percentage will range from 25 percent of the dividend
if the Company's TSR is at the thirtieth percentile to 100 percent of the
dividend if the Company's TSR is at or above the ninetieth percentile among the
selected group of companies. However, in the discretion of the committee, the
payout percentage may be increased to a maximum of 200 percent of the dividend.
No awards may be paid for any TSR Computation Period in which the Company's TSR
is below the thirtieth percentile, nor for any Computation Period ending in a
calendar year in which the Company's current earnings are not sufficient to fund
its common stock dividend at the same level as the prior year.

The maximum award that may be paid during any calendar year to any
participant under the Plan with respect to any option granted during the
calendar year is $6,000,000.

The following table sets forth estimated amounts to be paid under the Plan
at target-level performance for the performance period ending December 31, 1997:

PERFORMANCE DIVIDEND PLAN

<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($)
- ----------------- ----------------
<S> <C>
A. W. Dahlberg, Chairman, President & CEO, Southern
Company................................................... 346,170
T. G. Boren, President, Southern Energy..................... 24,128
P. J. DeNicola, President, Southern Company Services........ 37,752
H. A. Franklin, President, Georgia Power Company............ 46,549
E. B. Harris, President, Alabama Power Company.............. 45,408
Executive officers as a group............................... 595,277
Non-executive directors as a group.......................... 0
Non-executive officer employees............................. 51,960
</TABLE>

<PAGE>

The vote needed to approve the Plan is a majority of the shares of the
Company's stock represented at the meeting and entitled to vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4.

5. PROPOSAL TO APPROVE THE SOUTHERN ENERGY, INC. VALUE CREATION PLAN

The Southern Energy, Inc. Value Creation Plan (the "Plan") was adopted by
the board of directors of Southern Energy, Inc. ("Southern Energy ") effective
as of January 1, 1997.

The purpose of the Plan is to enhance the ability of Southern Energy to
attract, retain, and motivate high performance employees, to focus the attention
and efforts of those employees on goals which directly and significantly
influence earnings before interest and income taxes, to provide financial
rewards for long-term value creation, to reward consistency, and to improve the
link between pay and performance for the achievement of corporate goals.

The Plan will be administered by the Compensation & Management Succession
Committee of the board of directors of the Company (the "committee"). The
committee consists of three or more directors of the Company who are not
employees of the Company or its subsidiaries and who are not participants in the
Plan. The committee has exclusive authority to interpret the Plan.

The Plan permits the committee to grant, in its discretion, Appreciation
Rights and Indexed Rights (collectively, "Rights") to a select group of
employees of Southern Energy. The committee has determined that the approximate
number of participants under the Plan initially will be 35, but may be changed
at the committee's discretion. Presently, the Southern Energy president is the
only executive officer participating in the Plan.

Rights granted under the Plan entitle participants to the appreciation in
the value of Southern Energy over a term of 10 years from the date of grant, as
verified by a nationally recognized independent appraisal firm chosen by the
committee. The initial valuation of the units of phantom interests in Southern
Energy created by the Plan, as verified by such appraisal firm, is $10.00 each.
The number of such units outstanding shall be adjusted to reflect changes in
capitalization of Southern Energy. Appreciation Rights shall vest at the rate of
25 percent per year on each of the first four anniversary dates of the date of
the grant. The maximum number of Appreciation Rights which a participant may
receive in any Plan year shall be 150,000.

Indexed Rights entitle the participant to the appreciation in value as
adjusted by an interest rate over a ten year term. Indexed Rights shall vest 100
percent on the fourth anniversary of the date of the grant. The maximum number
of Indexed Rights which a participant may receive in any Plan year shall be
5,000,000. Vested Rights may be exercised by the participant at the value
established as of December 31 of the immediately preceding Plan year, and are
paid in cash.

<PAGE>

The following table sets forth estimated amounts to be granted under the
Plan for the performance period ending December 31, 1997:

SOUTHERN ENERGY, INC. VALUE CREATION PLAN

<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF UNITS DOLLAR VALUE ($)
- ----------------- --------------- ----------------
<S> <C> <C>
A. W. Dahlberg, Chairman, President & CEO, Southern
Company............................................ 0 0
T. G. Boren, President, Southern Energy.............. 838,983 (1)
P. J. DeNicola, President, Southern Company
Services........................................... 0 0
H. A. Franklin, President, Georgia Power Company..... 0 0
E. B. Harris, President, Alabama Power Company....... 0 0
Executive officers as a group........................ 0 0
Non-executive directors as a group................... 0 0
Non-executive officer employees...................... 0 0
</TABLE>

- ---------------

(1) The actual value a participant may realize, if any, will depend on the
excess of the value of Southern Energy on the date Rights are exercised over the
value on the dates Rights are granted.

The vote needed to approve the Plan is a majority of the shares of the
Company's stock represented at the meeting and entitled to vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 5.

6. OTHER BUSINESS

The board of directors is not aware of any other matters to be presented at
the annual meeting for stockholder action. However, the holders of the proxies
intend to vote in their discretion on any properly presented matters.

SOLICITATION OF PROXIES

The cost of soliciting proxies will be paid by the Company and includes
reimbursement to brokers, banks, nominees, and other fiduciaries for forwarding
proxy material to beneficial owners in accordance with regulations of the
Securities and Exchange Commission and the New York Stock Exchange. Officers and
other employees of the Company or its subsidiaries may solicit proxies
personally or by telephone in certain instances in an effort to have larger
representation at the meeting.

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF STOCKHOLDERS

The deadline for the receipt of stockholder proposals for consideration for
inclusion in the Company's proxy statement and form of proxy for the 1998 Annual
Meeting of Stockholders is December 19, 1997.

YOUR VOTE IS IMPORTANT

To save the Company the expense of a second proxy mailing, please use the
toll-free telephone number on the enclosed proxy card or mark, date, sign, and
promptly return the enclosed form of proxy.

The Company's 1996 Annual Report to the Securities and Exchange Commission
on Form 10-K will be provided without charge to each stockholder upon written
request to Tommy Chisholm, Secretary, Southern Company, 270 Peachtree Street,
Suite 2200, Atlanta, Georgia 30303.

<PAGE>

(PRINTED ON RECYCLED PAPER LOGO)
EXPLANATION OF DIFFERENCES BETWEEN

CIRCULATED DOCUMENT AND ELECTRONIC DOCUMENT

Notice of Annual Meeting and Proxy Statement

1. The back cover contains the phrase "Printed on Recycled Paper" with
the appropriate logo.

Appendix A

AMENDMENT AND RESTATEMENT OF
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

EFFECTIVE JANUARY 1, 1997

TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000

<PAGE>

SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

Purposes

The purposes of the Southern Company Executive Productivity Improvement
Plan (the "Plan") are to provide a financial incentive which will focus the
efforts of certain executives on areas that will have a direct and significant
influence on corporate performance and to provide the potential for levels of
compensation that will enhance the Employing Companies' abilities to attract,
retain and motivate such executives. In order to achieve these objectives, the
Plan will be based upon corporate performance.

This Amendment and Restatement shall be effective as of January 1,
1997.

ARTICLE I

Definitions

For purposes of the 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 base salary or wages paid to a
Participant before deductions for taxes, social security, etc., including all
amounts contributed by an Employing 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 Employing 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 Executive Productivity Improvement Plan, overtime
pay, shift differential and substitution pay.

1.2 "Average ROE" shall mean the mathematical result obtained by (a)
calculating the return on equity for each year in the Computation Period, (b)
adding the return on equity calculations for all years in the Computation
Period; and (c) dividing the total by the number of years in the Computation
Period.

1.3 "Award" shall mean the Award Opportunity or Award Units multiplied
by the Performance Unit Value determined under Sections 3.2 and 3.4 of the Plan.

1.4 "Award Opportunity" shall mean the award opportunity determined under
Section 3.1 of the Plan.

1.5 "Award Unit" shall mean the unit opportunity determined under Section
3.3 of the Plan.

1.6 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.

1.7 "Chief Executive Officer" shall mean the individual designated as
such by the Board of Directors of an Employing Company and of Southern Company.

1.8 "Committee" or "Compensation Committee" shall mean the Compensation
Committee of the Board of Directors of Southern Company or the Employing
Company.

1.9 "Common Stock" shall mean the common stock of Southern Company.

1.10 "Computation Period" shall mean a four-year period commencing on
the first day of the initial year of participation and thereafter it shall mean
a four-year period commencing the first day of January each year made up of the
ROE Computation Period and the TSR Computation Period, if any, respectively.

1.11 "Employing Company" shall mean Southern Company Services, Inc., or
any affiliate or subsidiary (direct or indirect) of 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.

1.12 "Executive Employee" shall mean any person who is currently
employed by an Employing Company who is a "covered employee" as that term is
defined in Section 162(m) of the Internal Revenue Code (the "Code") who is
designated as an Executive Employee by the Compensation Committee and such other
persons employed by an Employing Company as the Compensation Committee in its
discretion shall designate.

1.13 "Grade Level" shall mean the evaluation assigned under the job
evaluation system.

1.14 "Grade Level Value" shall mean the assigned dollar value within
the Annual Salary range for a Grade Level in a Computation Period, upon which
awards are based.

1.15 "Non-Adopting Employer" shall mean any subsidiary or affiliate of
Southern Company which is not an Employing Company.

1.16 "Participant" shall mean an Executive Employee who satisfies the
criteria referred to in Article II at the beginning of a Computation Period but
shall not include any individual who ceased to be an Executive Employee by
reason of the amendment of Section 1.11 hereof by this Amendment and
Restatement.

1.17 "Payment Date" shall mean the date the check evidencing the Award
is endorsed by an authorized person of an Employing Company.

1.18 "Percentage of Total Award" shall have the meaning ascribed in
Exhibits B and E hereof.

1.19 "Plan" shall mean the Southern Company Executive Productivity
Improvement Plan, as described herein or as from time to time amended.

1.20 "Prior Plan" shall mean the Plan as amended and restated effective
January 1, 1995.

1.21 "Southern Company" shall mean The Southern Company.

1.22 "ROE Computation Period" shall have the meaning ascribed in Section
3.1 hereof.

1.23 "ROE Peer Group Companies" shall mean the companies set forth on
Exhibit C attached hereto and as may be revised from time to time by the
Committee to reflect mergers, acquisitions, reorganizations, etc. of such
companies.

1.24 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:

a. The Participant willfully neglects or refuses to discharge his
or her duties to the Employing Company as an employee or refuses to
comply with any lawful or reasonable instructions given to him or her
by the Employing Company without reasonable excuse;

b. The Participant is guilty of gross misconduct. For purposes of
this Plan, the following acts shall constitute gross misconduct:

i) any act involving fraud or dishonesty or breach of
appropriate regulations of competent authorities;

ii) the carrying out of any activity or the making of any
statement which would prejudice and/or reduce the good name and
standing of the Company or an Employing Company or would bring
the Company or an Employing Company any into contempt, ridicule
or would reasonably shock or offend any community in which the
Company or an Employing Company is located;

iii) attendance at work in a state of intoxication or
otherwise being found in possession at his or her workplace of
any prohibited drug or substance, possession of which would
amount to a criminal offense;

iv) assault or other act of violence against any employee or
other person during the course of the Participant's employment;
and

v) conviction of any felony or misdemeanor involving moral
turpitude.

1.25 "Total Shareholder Return" or "TSR" shall mean the total amount an
investor would receive by investing $100 per quarter in Common Stock or in TSR
Peer Group Common Stock, as the case may be, as determined by measuring the
total dividends which would have been paid on such Common Stock or TSR Peer
Group Common Stock by reinvesting such dividends on a quarterly basis in
additional shares of Common Stock or TSR Peer Group Common Stock as the case may
be and the total gain or loss on such Common Stock or Peer Group Common Stock as
if such stock had been sold at the closing price on the last day of the
respective Computation Period.

1.26 "TSR Computation Period" shall have the meaning ascribed in Section
3.3 hereof.

1.27 "TSR Peer Group Common Stock" shall mean the common stock of the Peer
Group Companies

1.28 "TSR Peer Group Companies" shall mean those Companies designated by
Goldman Sachs as the 80 Utility Peer Group Companies as published quarterly and
as composed from time to time. In the event that Goldman Sachs no longer
publishes the 80 Utility Peer Group Companies, the Committee shall choose such
other and similar list of national peer group companies as published by a
similarly nationally recognized firm.

1.29 "Value of Performance Unit" shall have the meaning ascribed in
Exhibits B and E attached hereto.

Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.

ARTICLE II

Participants

2.1 Participation in the Plan shall be limited to Executive Employees of
the Employing Companies.

2.2 Any Participant who vacates an eligible Grade Level prior to the
close of a Computation Period and who is not immediately re-employed with an
affiliate of an Employing Company shall forfeit any Award for any Computation
Periods that have not closed as of the date the Participant vacates such
eligible Grade Level.

2.3 If a Participant's employment is terminated by reason of death,
disability or retirement, such Participant or his or her estate shall be
eligible to receive an Award for the Computation Period ending in the year of
such death, disability or retirement unless such death, disability or retirement
shall have occurred on January 1 in which case the Participant or his or her
estate shall only be entitled to an Award for the Computation Period ending
December 31 of the previous year. Any Participant who terminates employment for
any other reason shall receive only any unpaid Award for a completed Computation
Period and shall not be eligible to receive an Award for the Computation Period
ending in the year of such termination of employment, provided, however, that
any Participant who's employment is Terminated for Cause shall forfeit any and
all unpaid Awards as of the date of termination.

2.4 Notwithstanding the provisions of Section 2.3 above, in the case of
an individual transferring from an Employing Company to a Non-Adopting Employer
any Award paid for any Computation Period not yet closed as of the date of a
Participant's transfer shall be paid to the Participant by the Employing Company
from which the Participant is transferring on the following basis:

(i) 100% of the Award for the Computation Period ending in the
year of transfer;

(ii) 75% of the Award for the Computation Period ending in the
first year following the year of transfer;

(iii) 50% of the Award for the Computation Period ending in the
second year following the year of transfer; and

(iv) 25% of the Award for the Computation Period ending in the
third year following the year of transfer.

Such transferring Participant shall receive no award for any Computation Period
which has not begun on the date of the Participant's transfer or if Participant
shall no longer be in an eligible Grade Level after such transfer.

Any Awards payable under this Section 2.4 shall be based on the Grade
Level at the time of transfer.

2.5 In the case of an individual transferring from a Non-Adopting
Employer to an Employing Company whose Grade Level and length of service at the
Non-Adopting Employer would have caused the Employee to have been a Participant
in the Plan if the Non-Adopting Employer were an Employing Company and whose
Grade Level after the transfer would enable the Employee to participate in the
Plan, such individual shall be deemed to have been employed by an Employing
Company while employed with the Non-Adopting Employer and shall, for any
Computation Period ending after such transfer, be deemed a Participant in the
plan as if the Non-Adopting Employer was an Employing Company.

Any Awards payable under this Section 2.5 shall be based on the Grade
Levels at the Employing Company.

2.6 Notwithstanding any other provision of this Plan, no employee whose
employment is Terminated for Cause shall be eligible to receive an Award under
this Plan.

2.7 The administration of Awards for Participants who are promoted or
transferred from one Grade Level included in the Plan to another Grade Level
included in the Plan shall be based on the Participant's Grade Level Value on
the first day of the Computation Period for which an Award is being granted. For
the Computation Periods ending December 31, 1995, December 31, 1996, December
31, 1997 and December 31, 1998 a Participant's Grade Level Value for determining
Awards shall be the Participant's Grade Level Value on January 1, 1995.

2.8 Notwithstanding any other provision of this Plan, the maximum Award
for any Computation Period payable to any Participant shall be two million
dollars ($2,000,000).

2.9 Any individual who initially becomes a Participant in the Plan as
of January 1, 1995 shall be considered to have been participating in the Plan as
of January 1, 1993 for purposes of determining benefits payable for any
Computation Period that began or begins on or after January 1, 1993 and such
Participant will therefore be eligible for an Award equal to seventy-five
percent (75%) of the Award Opportunity for the Computation Period ending
December 31, 1995.

2.10 In the case of an individual who becomes a Participant subsequent
to January 1, 1995, said Participant will participate in each Computation Period
which ends not less than two (2) years after becoming a Participant.

ARTICLE III

Corporate Financial Performance Award

3.1 For Computation Period years beginning before January 1, 1997 (the
"ROE Computation Period"), the Award Opportunity for each Participant shall be
based upon either his Grade Level Value (as determined based on his Grade Level
at the beginning of such period) or, in the Committee's discretion, upon his
Annual Salary at the beginning of such period and in either case shall range
from fifty percent (50%) to sixty-five percent (65%) of such Grade Level Value
or Annual Salary, as applicable. The Award Opportunity for each Grade Level or
Annual Salary shall be determined in accordance with the chart set forth in
Exhibit A hereof.

3.2 Each Award Opportunity granted in the ROE Computation Period shall
be multiplied by the Value of Performance Unit factor and the Percentage of
Total Award factor set forth in Exhibit B hereof, which is based on Southern
Company's Average ROE ranking during the ROE Computation Period as compared to
the Average ROE ranking of the ROE Peer Group Companies to determine a
Participant's Award. The return on common equity of the ROE Peer Group Companies
shall be determined annually by an independent certified public accountant based
on generally accepted accounting principles and shall be properly adjusted and
annualized by such accountant so that each ROE Peer Group Company return on
common equity may be accurately compared to that of Southern Company.

3.3 For Computation Period years beginning on or after January 1, 1997
(the "TSR Computation Period"), the Award Units for each Participant shall be
based upon either his Grade Level Value (as determined based upon his Grade
Level at the beginning of such period) or, in the Committee's discretion, upon
his Annual Salary at the beginning of such period and, in either case shall
range from fifty percent (50%) to sixty-five percent (65%) of such Grade Level
Value or Annual Salary, as applicable. The Award Units for each Grade Level or
Annual Salary shall be determined in accordance with the charts set forth in
Exhibit D hereof.

3.4 Each Award Unit granted in the TSR Computation Period shall be
multiplied by the Value of Performance Unit factor and the Percentage of Total
Award factor set forth in Exhibit E hereof which is based on Total Shareholder
Return of Southern Company as compared to the Total Shareholder Return for the
TSR Peer Group Companies. The Total Shareholder Return of Southern Company and
the TSR Peer Group Companies shall be determined annually by an independent
certified public accountant based on generally accepted accounting principles
and shall be property adjusted and amortized by such accountant so that each TSR
Peer Group Company's total shareholder return may be accurately compared to that
of Southern Company.

3.5 Notwithstanding the above provisions, an Award will not be granted
for any Computation Period ending with the calendar year in which the current
earnings of Southern Company are less than the amount necessary to fund the
dividends on its Common Stock at the rate such dividends were paid for the
immediately preceding calendar year.

3.6 In the discretion of the Compensation Committee the Award for one
or more Computation Period(s) may be calculated without regard to any
extraordinary item of income incurred by Southern Company or any Employing
Company, provided such determination is made prior to the close of the
Computation Period.

3.7 The Awards to the Participants will be paid in cash as soon as is
practicable after all evaluations are completed. An Award payment may not be
deferred under this Plan. In the event an Award was deferred under the Prior
Plan, such deferral shall be governed by the terms of the Prior Plan.

ARTICLE IV

Miscellaneous Provisions

4.1 Neither the Participant, his beneficiary, 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.

4.2 The Employing Company shall not reserve or otherwise set aside
funds for the payments of Awards deferred in accordance with the Prior Plan.

4.3 The Plan may be amended, modified, or terminated by the Board of
Directors in its sole discretion at any time and from time to time; provided,
however, that no such amendment, modification, or termination shall impair any
rights to payments which have been deferred under the Prior Plan prior to such
amendment, modification, or termination.

4.4 It is expressly understood and agreed that the 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 Employing Company.

4.5 There shall be deducted from the payment of each Award under the
Plan the amount of any tax required by any governmental authority to be withheld
and paid over by the Employing Company to such governmental authority for the
account of the person entitled to such distribution.

4.6 Any Awards paid to a Participant while employed by an Employing
Company shall not be considered in the calculation of the Participant's benefits
under any other employee welfare or pension benefit plan maintained by an
Employing Company, unless otherwise specifically provided therein.

4.7 This Plan, and all its rights under it, 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 duly
authorized officers, hereby amends and restates the Southern Company Executive
Productivity Improvement Plan this ____ day of March, 1997, to be effective
January 1, 1997.

SOUTHERN COMPANY SERVICES, INC.

By: ______________________________

Its: ______________________________

Attest: ________________________

By: ________________________

Its: ________________________

[CORPORATE SEAL]

<PAGE>

SOUTHERN COMPANY

EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

EXHIBIT A

Award Opportunity

Grade Award Opportunity
1/1/95 6/1/95 Percentage of Grade Level Value
or Annual Salary

President/CEO 50/65%
29/30 (15) 50%

<PAGE>

SOUTHERN COMPANY

EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

EXHIBIT B

Performance Unit Factor
Position Ranking
----------------------------------------------------------
Value of
Performance Unit 12-14 15-17 18-20
$ Companies Companies Companies
- --------- --------- ---------
Above Above Above
$2.00 Position 1 Position 1 Position 1
1.80 1.0 1.0 1.0
1.60 2.0 2.0 2.0
1.40 2.5 3.0 3.0
1.20 3.0 4.0 4.0
1.00 4.0 4.5 5.0
0.90 4.5 5.0 6.0
0.80 5.0 6.0 7.0
0.70 6.0 7.0 8.0
0.60 6.5 8.0 9.0
0.50 7.0 8.5 10.0
0 Below 7.0 Below 8.5 Below 10

Percentage Of Total Award Factor

Computation Period Ending Factor
December 31, 1997 75%
December 31, 1998 50%
December 31, 1999 25%
Thereafter 0%

SOUTHERN COMPANY

EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

EXHIBIT C

ROE Peer Group Companies

Allegheny Power System
American Electric Power
Carolina Power & Light
Central & South West (4 utility subs will be combined*)
Central Louisiana Electric
Constellation Energy (previously BG&E & Potomac Electric)
Delmarva Power & Light
Duke Power
Entergy
Florida Power & Light (previously used FPL Group, Inc.)
Florida Power Corp. (previously used Florida Progress)
Kentucky Utilities Company (previously used KU Energy)
South Carolina Electric & Gas (previously used SCANA)
Southern Company (Core only)
Tampa Electric (previously used TECO Energy)
Virginia Electric & Power (previously used Dominion Resources)

*Central Power & Light Co., Public Service Co. of Oklahoma, Southwestern
Electric Power Co. and West Texas Utilities Co.

<PAGE>

- ------------------------------------------------------------------------------
SOUTHERN COMPANY
- ------------------------------------------------------------------------------

EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

EXHIBIT D

Award Units

Grade
1/1/95 6/1/95 Award Units
Percentage of Grade Level Value
or Annual Salary

President/CEO 50/65%
29/30 (15) 50%

<PAGE>

SOUTHERN COMPANY

EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN

EXHIBIT E

Performance Unit Factor

Value of Unit Percentage of Southern TSR
vs.
Investor Utility
$ 2.00 90th and above
$ 1.50 70th and above
$1.00 50th and above
$ .50 30th and above
$ .00 Below 30th

Percentage Of Total Award Factor

Computation Period Ending Factor
December 31, 1997 25%
December 31, 1998 50%
December 31, 1999 75%
Thereafter 100%

Appendix B

SOUTHERN COMPANY PERFORMANCE STOCK PLAN

EFFECTIVE FEBRUARY 17, 1997

TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000

<PAGE>

SOUTHERN COMPANY STOCK PLAN
Purposes
This Southern Company Performance Stock Plan is intended to maximize
the long-term success of Southern Company, ensure a balanced emphasis on both
current and long-term performance, enhance Participants' identification with
shareholders' interests, and facilitate the attraction and retention of key
individuals with outstanding ability.

ARTICLE I

1.1 Definitions. Whenever used in the Plan, the following terms shall have
the meaning set forth below:

(a) "Award" shall mean, individually and collectively, any
Option, Stock Appreciation Right, or Restricted Stock granted under
the Plan.

(b) "Award Document" shall mean the written document evidencing
the grant of an Award and setting forth the terms and conditions
thereof.

(d) "Board" or "Board of Directors" shall mean the Board of
Directors of the Company.

(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

(f) "Committee" shall mean the Compensation Committee of the
Board of Directors of the Company composed solely of not less than
three (3) Nonemployee Directors and, to the extent necessary for any
Award intended to qualify as performance based compensation under
Section 162(m) of the Code to so qualify, each member of the Committee
shall be an Outside Director.

(g) "Common Stock" shall mean the Common Stock of the Company.

(h) "Company" shall mean The Southern Company or any successor
thereto.

(i) "Covered Employee" shall mean a Participant who is as of the
last day of the Company's fiscal year in which the Participant shall
be required to recognize taxable income with respect to an Award, a
"covered employee" within the meaning of Code section 162(m)(3) and
the regulations thereunder.

(j) "Director" shall mean any person who is currently a member of
the Board of Directors of the Company or an Employing Company.

(k) "Disability" shall mean total and permanent disability as
determined by the Social Security Administration.

(l) "Effective Date" shall mean the date the Plan is adopted by
the Board of Directors of the Company, subject to approval by the
shareholders of the Company at a meeting held within twelve (12)
months following the date of adoption by the Board of Directors.

(m) "Employee" shall mean any person who is currently employed by
an Employing Company.

(n) "Employing Company" shall mean any affiliate or subsidiary
(direct or indirect) of the Company, which the Board of Directors may
from time to time determine to bring under the Plan and which may
adopt the Plan, and any successor of any of them.

The Employing Companies as of January 1, 1997 are:

Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications, Inc.
Southern Company Services, Inc.
Southern Energy, Inc.
Southern Nuclear Operating Company
Southern Development and Investment Group, Inc.

(o) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

(p) "Fair Market Value" shall mean the average of the high and
low prices at which a share of Common Stock shall have been traded on
the date of grant or the exercise of an Award, or on the next
preceding trading day if such date was not a trading date, as reported
on the New York Stock Exchange-Composite Transactions Listing, or as
otherwise determined by the Committee. In no event shall the Fair
Market Value equal less than the par value of the Common Stock.

(q) "Incentive Stock Option" shall mean a stock option satisfying
the requirements of Section 422 of the Code granted pursuant to
Section 4.1(b) and designated by the Committee as an Incentive Stock
Option.

(r) "Nonemployee Director" shall mean a Director of the Company
who is a "nonemployee director" within the meaning of Rule 16b-3
promulgated under the Exchange Act.

(s) "Nonqualified Stock Option" shall mean an Option, other than
an Incentive Stock Option, granted pursuant to Section 4.1(c).

(t) "Option" shall mean, individually and collectively, an
Incentive Stock Option or a Nonqualified Stock Option to purchase
Common Stock.

(u) "Optionee" shall mean a person to whom an Option has been
granted under the Plan.

(v) "Option Price" shall mean the price per share of Common Stock
set by the grant of an Option, but in no event less than the Fair
Market Value of the Common Stock on the date of grant.

(w) "Outside Director" shall mean a Director of the Company who
is an "outside director" within the meaning of Section 162(m) of the
Code and the regulations promulgated thereunder.

(x) "Participant" shall mean any Director or Employee who
satisfies the criteria set forth in Article III.

(y) "Performance-Based" shall mean compensation which qualifies
as "performance-based" within the meaning of Code section 162(m)(4)(c)
and the regulations thereunder.

(z) "Restricted Stock" shall mean an Award granted pursuant to
Section 4.1(e).

(aa) "Retirement" shall mean the termination of service or
employment by a Participant on or after age 65 or as otherwise
determined by the Committee in its sole discretion.

(bb) "Separation Date" shall mean, as determined by the
Committee, the date on which a Participant's service or employment
with the Company or Employing Company terminates for reasons other
than his transfer of service or employment to the Company or another
Employing Company. Whether any leave of absence shall constitute
termination of service or employment for the purposes of the Plan
shall be determined in each case by the Committee in its sole
discretion.

(cc) "Stock Appreciation Right" or "SAR" shall mean a right to
any appreciation in value of shares of Common Stock granted pursuant
to Section 4.1(d).

1.2 Construction. Where the context requires, words in the masculine
gender shall include the feminine and neuter genders, words in the singular
shall include the plural, and words in the plural shall include the singular.

1.3 Term. The Plan shall remain in effect for ten (10) years from the
Effective Date or until terminated by the Board of Directors, whichever occurs
first.
ARTICLE II

2.1 Plan Administration. The Plan shall be administered by the
Committee. The Committee is authorized to establish such rules, to appoint such
agents and to delegate such authority as it deems appropriate for the proper
administration of the Plan, including, but not limited to, the delegation of
authority to such person or persons to exercise the discretion provided in
Section 5.1 hereof to determine whether a Participant may exercise an Award
subsequent to termination of employment, and to make such determinations and to
take such steps in connection with the Plan or the benefits provided hereunder
as it deems necessary or advisable.

2.2 Plan Interpretation. The Committee shall have the exclusive
authority to interpret the Plan. The decision of the Committee with respect to
any question arising as to the grant of an Award to a Participant in the Plan,
the amount, term, form, and time of payment of Awards under the Plan, or any
other matter concerning the Plan shall be final, conclusive, and binding on both
the Company and the Participants.

ARTICLE III

3.1 Eligibility. The Participants in the Plan shall be limited to
Directors and to those Employees, as determined by the Committee, who have a
significant impact on the long-term performance and success of the Company.
Subject to the terms of the Plan, the Committee shall identify individuals
eligible to become Participants in the Plan, select from time to time the
Participants to whom Awards shall be granted and shall determine the number of
Awards to be granted.

ARTICLE IV

4.1 Awards.

(a) General. Beginning February 17, 1997 and thereafter not
more frequently than once each calendar year, the Committee shall
determine the forms and amounts of Awards for Participants, provided
that in no event shall any Award be granted until the shareholders of
the Company have approved the Plan. All Awards shall be subject to the
terms and conditions of the Plan and to such other terms and conditions
consistent with the Plan as the Committee deems appropriate. Awards
under the Plan need not be uniform and Awards under two (2) or more
paragraphs may be combined in one Award Document. Any combination of
Awards may be granted at one time and on more than one occasion to the
same Participant. Such Awards may take the following forms, in the
Committee's sole discretion:

(b) Incentive Stock Options. These shall be stock options
within the meaning of Section 422 of the Code to purchase Common Stock.
In addition to other restrictions contained in the Plan, an Incentive
Stock Option (1) shall not be exercised more than ten (10) years after
the date it is granted, (2) shall not have an Option Price less than
the Fair Market Value of Common Stock on the date the Incentive Stock
Option is granted, (3) shall otherwise comply with Section 422 of the
Code, (4) shall be granted only to Employees and (5) shall be
designated as an "Incentive Stock Option" by the Committee. The
aggregate Fair Market Value of Common Stock determined at the time of
each grant for which any Optionee may vest in Incentive Stock Options
under this Plan for any calendar year shall not exceed $100,000.

(c) Nonqualified Stock Options. These shall be stock options
to purchase Common Stock which are not designated by the Committee as
"Incentive Stock Options." At the time of the grant, the Committee
shall determine the Option exercise period, the Option Price, and such
other conditions or restrictions on the exercise of the Nonqualified
Stock Option as the Committee deems appropriate. In addition to other
restrictions contained in the Plan, a Nonqualified Stock Option (1)
shall not be exercised more than ten (10) years after the date it is
granted, and (2) shall not have an Option Price less than 100% of the
Fair Market Value of Common Stock on the date the Nonqualified Stock
Option is granted.

(d) Stock Appreciation Rights. These shall be rights that on
exercise entitle the holder to receive the excess of (1) the Fair
Market Value of Common Stock on the date of exercise over (2) its Base
Value multiplied by (3) the number of SAR's exercised. Such rights
shall be satisfied in cash, stock, or a combination thereof, as
determined by the Committee. Stock Appreciation rights granted under
the Plan may be granted in the sole discretion of the Committee in
conjunction with an Incentive Stock Option or Nonqualified Stock Option
under the Plan. The Committee may impose such conditions or
restrictions on the exercise of SAR's as it deems appropriate and may
terminate, amend, or suspend such SAR's at any time. SAR's granted
under this Plan shall not be exercised more than ten (10) years after
the date of grant.

(e) Restricted Stock. Restricted Stock shall be shares of
Common Stock held by the Company for the benefit of a Participant
without payment of consideration, except as otherwise may be determined
by the Committee in its discretion, with restrictions or conditions
upon the Participant's right to retain, transfer or sell such shares.
The following provisions shall be applicable to Restricted Stock
Awards:

(1) Stock Power. Each certificate for Restricted Stock shall
be registered in the name of the Participant and shall be
deposited by him with the Company, together with a stock power
endorsed in blank.

(2) Restriction Period. At the time of making a Restricted
Stock Award, the Committee shall establish the "Restriction
Period" applicable thereto. Such Restriction Period may be up to
ten (10) years as determined by the Committee. The Committee may
provide for the annual lapse of restrictions with respect to a
specified percentage of the Restricted Stock, provided the
Participant satisfies all eligibility requirements at such time.

(3) Dividends. The Participant shall be entitled to receive
dividends during the Restriction Period and shall have the right
to vote such Common Stock and all other shareholder's rights
except the following:

(i) the Participant shall not be entitled to delivery
of the stock certificate during the Restriction Period,

(ii) the Company shall retain custody of the Common
Stock during the Restriction Period, and

(iii) a breach of a restriction or a breach of the
terms and conditions established by the Committee with
respect to the Restricted Stock shall cause a forfeiture of
the Restricted Stock.

4.2 Award Document. After the Committee determines the form and amount
of a Participant's Award, it shall cause the Company to prepare an Award
Document to be delivered to the Participant setting forth the form and amount of
the Award and any conditions and restrictions on the Award imposed by the Plan
and the Committee.

4.3 Exercise and Payment. The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
shares of Common Stock to be purchased and accompanied by payment therefore and
otherwise in accordance with the Award Document pursuant to which the Option was
granted. The purchase price for any shares of Common Stock purchased pursuant to
the exercise of an Option shall be paid, as determined by the Committee in its
discretion and set forth in the Award Document at the time of grant, in either
of the following forms (or any combination thereof): (i) cash or (ii) the
transfer of shares of Common Stock with a Fair Market Value equal to the
aggregate exercise price of the Option to the Company upon such terms and
conditions as determined by the Committee. In addition, Options may be exercised
through a registered broker-dealer pursuant to such cashless exercise procedures
(other than the withholding of shares of Common Stock that would otherwise be
acquired upon the exercise of such Option) which are, from time to time, deemed
acceptable by the Committee, and the Committee may authorize that the purchase
price payable upon exercise of an Option may be paid by having shares of Common
Stock withheld that otherwise would be acquired upon such exercise. Any shares
of Common Stock transferred to the Company (or withheld upon exercise) as
payment of the purchase price under an Option shall be valued at their Fair
Market Value on the day preceding the date of exercise of such Option. The
Optionee shall deliver the Award Document evidencing the Option to the Secretary
of the Company who shall endorse thereon a notation of such exercise and return
such Award Document to the Optionee. No fractional shares of Common Stock (or
cash in lieu thereof) shall be issued upon exercise of an Option and the number
of shares of Common Stock that may be purchased upon exercise shall be rounded
to the nearest number of whole shares of Common Stock.

<PAGE>

ARTICLE V

5.1 Termination of Service or Employment. A Participant whose service
as a Director or employment terminates for reasons other than Retirement,
Disability, or death shall, in the discretion of the Committee, have no right to
receive any benefit or payment for existing Awards under the Plan. Any
outstanding Award shall terminate on the Participant's Separation Date;
provided, however, that the Committee or its designee, in its or his sole
discretion, may permit the exercise of any outstanding Award after the
Participant's Separation Date, at such time and in such manner as the Committee
or such designee may determine, but in no event in the case of Incentive Stock
Options shall such exercise be beyond the earlier of (a) three (3) months from
the Participant's Separation Date or (b) the expiration date of the Award, to
the extent exercisable on such Participant's Separation Date.

5.2 Death of a Participant. Unless otherwise provided in the Award
Document, in the event of the death of a Participant prior to the exercise of
all Incentive Stock Options, Nonqualified Stock Options, and Stock Appreciation
Rights granted to such Participant, the administrator of the deceased
Participant's estate, the executor under his will, or the person or persons to
whom the Options or SAR's shall have been validly transferred by such executor
or administrator pursuant to the will or laws of intestate succession shall have
the right, within thirty-six (36) months from the date of such Participant's
death, but not beyond the expiration date of the Options or SAR's, to exercise
such Options or SAR's to the extent exercisable on such Participant's Separation
Date.

5.3 Retirement.

(a) Incentive Stock Options. In the event of the termination
of a Participant's employment as result of his Retirement prior to the
exercise of all Incentive Stock Options granted to the Participant,
such Participant shall have the right, within three (3) months of his
Separation Date, but not beyond the expiration date of such Options, to
exercise such Incentive Stock Options to the extent exercisable on his
Separation Date.

(b) Nonqualified Stock Options and SARs. Unless otherwise
provided in the Award Document, in the event of the termination of a
Participant's employment as a result of his Retirement prior to the
exercise of all Nonqualified Stock Options or Stock Appreciation Rights
granted to the Participant, such Participant shall have the right,
within thirty-six (36) months of his Separation Date, but not beyond
the expiration date of such Nonqualified Stock Options or SAR's, to
exercise such Nonqualified Stock Options or SAR's to the extent
exercisable on his Separation Date.

5.4 Disability.

(a) Incentive Stock Options. In the event of the termination
of a Participant's employment due to Disability prior to the exercise
of all Incentive Stock Options granted to the Participant, such
Participant or his legal representative shall have the right, within
twelve (12) months of his Separation Date, but not beyond the
expiration date of such Incentive Stock Options, to exercise such
Incentive Stock Options to the extent exercisable on his Separation
Date.
(b) Nonqualified Stock Options and SARs. Unless otherwise
provided in the Award Document, in the event of the termination of a
Participant's employment due to Disability prior to the exercise of all
Nonqualified Stock Options and Stock Appreciation Rights granted to the
Participant, such Participant or his legal representative shall have
the right, within thirty-six (36) months of his Separation Date, but
not beyond the expiration date of such Nonqualified Stock Options or
SAR's, to exercise such Nonqualified Stock Options or SAR's to the
extent exercisable on his Separation Date.

ARTICLE VI

6.1 Limitation of Shares of Common Stock Available under the Plan.

(a) Share Limit. The total number of shares of Common Stock
available to be granted by the Committee as Awards to the Participants
under the Plan shall not exceed 40,000,000 shares. Upon a change in
capitalization, the maximum number of shares of Common Stock referred
to in the preceding sentence shall be adjusted in number and kind
pursuant to Section 7.1 hereof.

(b) Share Reduction. The total number of shares available under
Section 6.1(a) shall be reduced from time to time in the manner
specified:

(1) Incentive Stock Options and Nonqualified Stock Options.
The grant of an Incentive Stock Option and Nonqualified Stock
Option shall reduce the available shares by the number of shares
subject to such Option.

(2) Stock Appreciation Rights. The grant of Stock
Appreciation Rights shall reduce the available shares by the
number of SAR's granted; provided, however, if SAR's are granted
in conjunction with an Option and the exercise of such Option
would cancel the SAR's and vice versa, then the grant of the
SAR's will only reduce the amount available by the excess, if
any, of the number of SAR's granted over the number of shares
subject to the related Option.

(3) Restricted Stock. The grant of Restricted Stock shall
reduce the available shares by the number of shares of Restricted
Stock granted.

(c) Share Increase. The total number of shares available under
Section 6.1(a) shall be increased from time to time in the manner
specified:

(1) Incentive Stock Options and Nonqualified Stock
Options. The lapse or cancellation of an Incentive Stock
Option or Nonqualified Stock Option shall increase the
available shares by the number of shares released from such
Option; provided, however, in the event the cancellation of an
Option is due to the exercise of SAR's related to such Option,
the cancellation of such Option shall only increase the amount
available by the excess, if any, of the number of shares
released from such Option over the number of SAR's exercised.
(2) Stock Appreciation Rights. The lapse or
cancellation of Stock Appreciation Rights shall increase the
available shares by the number of SAR's which lapse or are
canceled; provided, however, in the event the cancellation of
such SAR's is due to the exercise of an Option related to such
SAR's, the cancellation of such SAR's shall only increase the
available shares by the excess, if any, of the number of SAR's
canceled over the number of shares delivered on the exercise
of such Option.

(3) Restricted Shares. The reversion of Restricted
Stock to the Company due to the breach or occurrence of a
restriction or failure to satisfy a condition on such shares
shall increase the available shares by the number of shares of
Restricted Stock reverted.

6.2 Maximum Shares to Participant. The maximum number of shares of Common
Stock which may be the subject of Awards to a Participant during any calendar
year during the term of the Plan shall be 1,000,000.

ARTICLE VII

7.1 Adjustment Upon Changes in Capitalization. The total number of
shares of Common Stock available for Awards under the Plan or allocable to any
individual Participant, the number of shares of Common Stock subject to
outstanding Options, the exercise price for such Options, the number of
outstanding SAR's, the Base Value of such SAR's and the Award limit set forth in
subsection 6.2 shall be appropriately adjusted by the Committee in the event of
any increase or decrease in the number of outstanding shares of Common Stock
resulting from any change in the Company's capital structure, including but not
limited to any stock dividend, subdivision or combination of shares, or
reclassification.

7.2 Merger, Consolidation or Tender Offer. In the event of a merger or
consolidation of the Company or a tender offer for shares of Common Stock, the
Committee may make such adjustments with respect to Awards under the Plan and
take such other action as it deems necessary or appropriate to reflect, or in
anticipation of, such merger, consolidation, or tender offer, including without
limitation the substitution of new Awards, the termination or adjustment of
outstanding Awards, the acceleration of Awards, or the removal of limitations or
restrictions on outstanding Awards.

ARTICLE VIII

8.1 Withholding Taxes. The Company or the Employing Company, as the
case may be, of the Participant shall deduct from all payments and distributions
in cash under the Plan any taxes required to be withheld for federal, state, or
local governments. In the event distributions are made in shares of Common
Stock, the Company shall retain the value of sufficient shares to equal the
amount of the tax required to be withheld in respect of such distributions.

8.2 Service or Employment. The establishment of the Plan and Awards
hereunder shall not be construed as conferring on any Participant any right to
continued service or employment, and the service or employment of any
Participant may be terminated without regard to the effect which such action
might have upon him or her as a Participant.

8.3 Non-Alienation of Benefits. Unless otherwise provided in the
Participant's Award Document with respect to Awards other than Incentive Stock
Options, and other than as specifically provided with regard to the death of a
Participant, no benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, excluding the use of Options under this Plan as collateral in exercising
such Options. Any attempt to do so shall be null and void. No such benefits
shall, prior to receipt thereof by the Participant, be in any manner liable for
or subject to the debts, contracts, liabilities, engagement, or torts of the
Participant.

8.4 Non-Alienation of Election or Exercise Rights. Unless otherwise
provided in the Participant's Award Document with respect to Awards other than
Incentive Stock Options, no election as to benefits or exercise of Options,
Stock Appreciation Rights, or other rights may be made during a Participant's
lifetime by anyone other than the Participant.

8.5 Amendment, Modification, and Termination of the Plan. The Board of
Directors, at any time, may terminate and in any respect amend or modify the
Plan; provided, however, that no such action by the Board of Directors, without
approval of the Company's shareholders, may increase the total number of shares
of Common Stock available under the Plan; and further provided that, except as
provided in Section 7.2, no amendment, modification, or termination of the Plan
shall in any manner adversely affect the rights of any Participant under the
Plan without the consent of such Participant.

8.6 Indemnification. Each person who is or shall have been a member of
the Committee or of the Board of Directors shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may be a party
or in which he may be involved by reason of any action or failure to act under
the Plan and against and from any and all amounts paid by him in satisfaction of
judgment in any such action, suit, or proceeding against him. Such person shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.

8.7 Reliance on Reports. Each member of the Committee and each member
of the Board of Directors shall be fully justified in relying or acting in good
faith upon any report made by the independent public accountants of the Company
and any Employing Company and upon any other information furnished in connection
with the Plan by any person or persons other than himself. In no event shall any
person who is or shall have been a member of the Committee or the Board of
Directors be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.

8.8 Governing Law. To the extent that federal law shall not be held to
have preempted local law, this Plan shall be governed by the laws of the State
of Delaware. If any provision of the Plan shall be held invalid or
unenforceable, the remaining provisions hereof shall continue in full force and
effect.

IN WITNESS WHEREOF, the Company has caused the Southern Company
Performance Stock Plan to be executed by its duly authorized officers pursuant
to resolutions of the Board of Directors as of the 17th day of February 1997, to
be effective February 17, 1997.

SOUTHERN COMPANY

By:___________________________________
A. William Dahlberg
President
Attest:

By:____________________________
Tommy Chisholm
Secretary

[CORPORATE SEAL]

Appendix C

SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN

EFFECTIVE JANUARY 1, 1997

TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000

<PAGE>

SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN

Purposes

The purposes of the Southern Company Performance Dividend Plan are to
provide a financial incentive which will focus the efforts of certain key
employees on areas which will have a direct and significant influence on
corporate performance and to provide the potential for levels of compensation
which will enhance the Employing Companies' abilities to attract, retain and
motivate such key employees. In order to achieve these objectives, the Plan will
be based upon corporate performance as measured by total shareholder return or
such other performance measure which the Committee may determine under the terms
of the Plan.

ARTICLE I

Definitions

For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:

1.1 "Annual Dividend" shall mean the aggregate, annual dividend declared by
the Company on Common Stock for the Plan Year in which an Award is made.

1.2 "Award" shall mean the awards granted pursuant to Article IV hereof.

1.3 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.

1.4 "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company or the Employing Company.

1.5 "Common Stock" shall mean the common stock of the Company.

1.6 "Company" shall mean The Southern Company.

1.7 "Computation Period" shall mean a four-year period commencing the first
day of January of each year, provided, however, that the Computation Period for
the first three years beginning in the year of the effective date of the Plan
shall be one year, two years and three years, respectively, beginning January 1,
1997.

1.8 "Employing Company" shall mean Southern Company Services, Inc., or any
affiliate or subsidiary (direct or indirect) of the 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.

1.9 "Key Employee" shall mean any person who is or was employed by an
Employing Company who has been granted Stock Options.

1.10 "Participant" shall mean an Employee who satisfies the criteria set
forth in Article III.

1.11 "Payment Date" shall mean the date the check evidencing an Award is
endorsed by an authorized person of an Employing Company.

1.12 "Peer Group Common Stock" shall mean the common stock of the Peer
Group Companies.

1.13 "Peer Group Companies" shall mean those Companies designated by
Goldman Sachs as the 80 Utility Peer Group Companies as published quarterly and
as composed from time to time. In the event that Goldman Sachs no longer
publishes the 80 Utility Peer Group Companies, the Committee shall choose such
other and similar list of national peer group companies as published by a
similarly nationally recognized firm.

1.14 "Performance Based" shall mean compensation which qualifies as
"performance based" within the meaning of Code Section 162(m)(4)(c) and the
regulations thereunder.

1.15 "Permanent Disability" shall mean such permanent disability as defined
in The Southern Company Pension Plan.

1.16 "Phantom Stock" shall mean phantom shares of Common Stock as defined
by The Southern Company Deferred Compensation Plan.

1.17 "Plan" shall mean the Southern Company Performance Dividend Plan.

1.18 "Plan Year" shall mean the calendar year.

1.19 "Retirement" shall mean the termination of employment with an
Employing Company under the terms of The Southern Company Pension Plan or such
other retirement or early retirement plan or arrangement which the Committee
shall adopt and make available to a Participant.

1.20 "Stock Option" shall mean those options to acquire Common Stock
awarded to Participants pursuant to the Southern Company Performance Stock Plan.

1.21 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:

b. The Participant is guilty of gross misconduct. For purposes of
this Plan, the following acts shall constitute gross misconduct:

i) any act involving fraud or dishonesty or breach of
appropriate regulations of competent authorities;

iv) assault or other act of violence against any employee or
other person during the course of the Participant's employment;
and

v) conviction of any felony or misdemeanor involving moral
turpitude.

1.22 "Total Shareholder Return" or "TSR" shall mean the total amount an
investor would receive by investing $100 per quarter in Common Stock or in Peer
Group Common Stock, as the case may be, as determined by measuring the total
dividends which would have been paid on such Common Stock or Peer Group Common
Stock by reinvesting such dividends on a quarterly basis in additional shares of
Common Stock or Peer Group Common Stock as the case may be and the total gain or
loss on such Common Stock or Peer Group Common Stock as if such stock had been
sold at the closing price on the last day of the respective Computation Period.

<PAGE>

ARTICLE II

2.1 Plan Administration. The Plan shall be administered by the
Committee. The Committee is authorized to establish such rules and to appoint
such agents as it deems appropriate for the proper administration of the Plan,
and to make such determinations and to take such steps in connection with the
Plan or the benefits provided hereunder as it deems necessary or advisable.

ARTICLE III

Participants

3.1 Participation in the Plan shall be limited to Key Employees of the
Employing Companies, or in the case of death, their estates or beneficiaries,
holding Stock Options as of the last day of any Computation Period.

3.2 Any Participant who terminates his or her employment with an
Employing Company and who is not immediately re-employed with an affiliate of an
Employing Company prior to the Payment Date of any Award due under this Plan for
reasons other than death, Permanent Disability, or Retirement shall forfeit any
Award due under this Plan. If a Participant terminates his or her employment by
reason of death, Permanent Disability or Retirement, such Participant or his or
her estate or representative shall continue to be eligible to receive Awards
with respect to any Stock Options which remain outstanding in accordance with
their terms.

3.3 Notwithstanding any other provision of this Plan, no Participant
whose employment is terminated by an Employing Company for Cause shall be
eligible to receive an Award under this Plan.

3.4 Notwithstanding any other provision of this Plan, the maximum Award
for any Plan Year payable to any Participant with respect to Stock Options
awarded during such Plan Year shall be six million dollars ($6,000,000).

3.5 In the case of an individual who becomes a Participant subsequent
to January 1, 1997, such Participant shall participate in each Computation
Period which ends not less than two (2) years after becoming a Participant. A
new four-year measuring period shall begin each year in order to recognize the
need to link objectives over longer periods of time, to recognize changes in the
operating environment, and to encourage Participants to make long-term
decisions.

ARTICLE IV

Performance Dividend Award

4.1 Each Participant shall receive an Award on the last day of each
Computation Period which shall be based upon the number of vested and unvested,
outstanding Stock Options held by the Participant on the last day of such
Computation Period multiplied by the Annual Dividend multiplied by the Payout
Percentage determined in accordance with the following schedule:

Percentage of Southern TSR Payout Percentage
Versus Peer Group TSR
90th 100%
70th 75%
50th 50%
30th 25%
Below 30th 0%

The Payout Percentage for performance levels falling between the percentiles
listed above shall be extrapolated for any given Plan Year. The Committee may
increase the Payout Percentage by up to a factor of two (2) with respect to such
Participants and under such circumstances as the Committee in its discretion
shall deem appropriate.

4.2 The Payout Percentage set forth herein shall be based on the
Company's Total Shareholder Return ranking during a Computation Period as
compared to the Total Shareholder Return ranking of the Peer Group Companies for
such Computation Period. The Total Shareholder Return of the Peer Group
Companies shall be determined annually by an independent certified public
accountant based on generally accepted accounting principles and shall be
properly adjusted and annualized by such accountant so that the Peer Group
Companies' Total Shareholder Return may be accurately compared to that of the
Company.

4.3 Notwithstanding the above provisions, an Award shall not be granted
for any Computation Period ending with the Plan Year in which the current
earnings of The Southern Company are less than the amount necessary to fund
dividends on its Common Stock at the rate such dividends were paid for the
immediately preceding Plan Year.

4.4 Awards shall be paid in cash on or before the 15th day of the third
month following the last day of the Computation Period or, with respect to those
Participants who are otherwise eligible to participate in The Southern Company
Deferred Compensation Plan, may be deferred by exercising an option to do so no
later than 12 months before any amount would otherwise be distributed pursuant
to this Section 4.4. If an election is made to defer the receipt of the amount
of any Award, such amount shall be deemed to be invested in Phantom Stock.
Dividend equivalents earned on such Phantom Stock shall be automatically
invested in additional shares of Phantom Stock.

ARTICLE V

Miscellaneous Provisions

5.1 Neither the Participant, his or her beneficiary, nor his or her
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 under
this Plan shall be void and have no effect.

5.2 An Employing Company shall neither reserve nor otherwise set aside
funds for the payments of any Awards under this Plan.

5.3 The Plan may be amended, modified, or terminated by the Board of
Directors in its sole discretion at any time and from time to time; provided,
however, that no such amendment, modification, or termination shall impair any
rights to payments which have accrued under the Plan prior to such amendment,
modification, or termination.

5.4 It is expressly understood and agreed that 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 or she may be eligible,
whether funded or unfunded, by reason of his or her employment with an Employing
Company.

5.5 There shall be deducted from the payment of each Award 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 person entitled to such distribution.

5.6 Any Awards paid to a Participant while employed by an Employing
Company shall not be considered in the calculation of the Participant's benefits
under any other employee welfare or pension benefit plan maintained by an
Employing Company, unless otherwise specifically provided therein.

5.7 This Plan, and all rights under it, 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 duly
authorized officers, hereby adopts the Southern Company Performance Dividend
Plan this ____ day of March, 1997, to be effective January 1, 1997.

SOUTHERN COMPANY SERVICES, INC.

By:

Its:
Attest:

By:

Its:

[CORPORATE SEAL]

Appendix D

SOUTHERN ENERGY, INC.
VALUE CREATION PLAN

EFFECTIVE JANUARY 1, 1997

TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30309
(404)885-3000

<PAGE>

SOUTHERN ENERGY, INC.
VALUE CREATION PLAN

ARTICLE I Definitions............................................3
ARTICLE II Plan Administration...................................6
ARTICLE III Awards...............................................6
ARTICLE IV Distribution of Awards................................8
ARTICLE V Miscellaneous Provisions...............................9

<PAGE>

SOUTHERN ENERGY, INC.
VALUE CREATION PLAN

Purposes

This Southern Energy, Inc. Value Creation Plan is intended to provide
the potential for levels of compensation which will enhance the ability of
Southern Energy, Inc. to attract, retain and motivate high performance
Employees, to focus the attention and efforts of those Employees on goals which
directly and significantly influence earnings before interest and income taxes,
to provide financial rewards for long-term value creation, to reward consistency
and to improve the link between pay and performance for the achievement of
corporate goals. This Plan is not intended to be regulated by the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), as either a
welfare benefit plan or as a pension plan. It is intended to be a bonus program
as such term is defined in the regulations under ERISA at 29 C.F.R. Section
2510.3-2(c) and a qualified performance based plan under Section 162(m) of the
Internal Revenue Code of 1986, as amended.

ARTICLE I

Definitions

For purposes of the Plan, the following terms when capitalized shall
have the following meanings unless a different meaning is plainly required by
the context:

1.1 "Administrative Committee" shall be the committee designated by
the Compensation Committee pursuant to Section 2.2 hereof.

1.2 "Appreciation Right" shall mean the awards granted under Section
3.1 of the Plan.

1.3 "Award" shall mean either an Appreciation Right or an Indexed
Right under the terms of the Plan.

1.4 "Award Agreement" shall mean the written agreement granting a
Participant an Award under this Plan.

1.5 "Base Value" shall mean the Share Value as of the immediately
preceding Valuation Date prior to the grant of an Award.

1.6 "Beneficiary" shall mean the person or entity designated by the
Participant in writing on the form prepared by the Administrative
Committee and deposited with the Administrative Committee prior to the
Participant's death. In the event the Participant fails to designate a
Beneficiary or his or her designated Beneficiary does not survive the
Participant, such Participant's Beneficiary shall be his or her
estate.

1.7 "Board of Directors" or "Board" shall mean the Board of Directors
of Southern Energy, Inc.

1.8 "Cash Flow" shall mean the net after tax cash return to the
Company from operations as shown on the annual project business plans
as submitted to and approved by the Management Council for each Plan
Year.

1.9 "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors of The Southern Company.

1.10 "Company" shall mean Southern Energy, Inc. and its successors and
assigns.

1.11 "Discount Rate" shall mean the rate established by the Committee
for the Plan at its meeting on March 31, 1997 as reflected in the
minutes of the meeting.

1.12 "Employee" shall mean a common law employee of the Company
including an officer of the Company.

1.13 "Indexed Base Value" shall mean the Share Value as the Valuation
Date immediately preceding the grant of an Indexed Right increased
through the date of exercise by the amount of the Discount Rate.

1.14 "Indexed Rights" shall mean those awards granted pursuant to
Section 3.2 hereof.

1.15 "Management Council" shall mean the Management Council of
Southern Energy, Inc., as determined by the President of Southern
Energy, Inc.

1.16 "Normal Retirement Age" shall mean age sixty-five (65) or such
other age as the Committee in its discretion shall determine.

1.17 "Participant" shall mean those Employees of the Company selected
by the Committee to receive awards under this Plan.

1.18 "Permanent Disability" shall mean such permanent disability as
defined by the Social Security Administration.

1.19 "Plan" shall mean this Southern Energy, Inc. Value Creation Plan.

1.20 "Plan Year" shall mean the calendar year.

1.21 "Share" shall mean a unit of the phantom interests in the Company
created by this Plan. As of the effective date of this Plan, Southern
shall be deemed to hold that number of Shares established by the
Committee at its meeting on March 31, 1997 as reflected in the minutes
of the meeting.

1.22 "Share Value" shall mean the Value of the Company divided by the
number of Shares outstanding as of the Valuation Date.

1.23 "Southern" shall mean The Southern Company.

1.24 "Termination for Cause" or "Cause" shall mean the termination of
a Participant's employment by the Company under any of the following
circumstances:

a. The Participant willfully neglects or refuses to discharge his
or her duties to the Company as an employee or refuses to comply with
any lawful or reasonable instructions given to him or her by the
Company without reasonable excuse;

b. The Participant is guilty of gross misconduct. For purposes of
this Plan, the following acts shall constitute gross misconduct:

i) any act involving fraud or dishonesty or breach of
appropriate regulations of competent authorities;

ii) the carrying out of any activity or the making of any
statement which would prejudice and/or reduce the good name and
standing of the Company or would bring the Company into contempt,
ridicule or would reasonably shock or offend any community in
which the Company is located;

iv) assault or other act of violence against any employee or
other person during the course of the Participant's employment;
and

v) conviction of any felony or misdemeanor involving moral
turpitude.

1.25 "Value" shall mean the value of the Company determined by
discounting future Cash Flow using the Discount Rate. Value shall be
determined no less than annually, as of the Valuation Date, by the
Company's Chief Financial Officer, approved by the Company's Board of
Directors and verified by a nationally recognized independent
appraisal firm chosen by the Compensation Committee.

1.26 "Valuation Date" shall mean December 31st of the immediately
preceding Plan Year or such other more recent date at which the Value
of the Company has been determined in accordance with Subsection 1.25
hereof.

ARTICLE II

Plan Administration

2.1 Compensation Committee. The Compensation Committee shall be the
executive administrator of the Plan and in such capacity shall, in its sole
discretion subject to the terms of the Plan, select the Participants to receive
Awards under the Plan, determine the amount of such Awards, determine the time
or times when such Awards shall be granted and certify with respect to each
Award that the performance objectives of the Plan have been met. The
Compensation Committee shall have the power to take such equitable and other
action as it acting in its discretion deems proper or appropriate under the
circumstances (including the power to delegate administrative functions to
others) to the extent that such action is not inconsistent with the express
provisions of this Plan.

2.2 Administrative Committee. The general administrative functions of the
Plan shall be managed by the Administrative Committee appointed by the
Compensation Committee. The initial members of the Administrative Committee
shall be W. Lawrence Westbrook, Raymond D. Hill, Vance N. Booker and such other
officers of the Company as the Compensation Committee shall appoint.
Administrative Committee members shall serve at the pleasure of the Compensation
Committee and may be removed and appointed as the Compensation Committee in its
sole discretion shall determine.

ARTICLE III

Awards

3.1 Appreciation Rights. At the discretion of the Compensation Committee, a
Participant may be granted an Appreciation Right which shall entitle such
Participant to a payment equal to the appreciation in the value of a Share based
upon the difference between the Base Value and the Share Value as of the most
recent Valuation Date prior to the date of exercise multiplied by the number of
Shares subject to the Appreciation Right which are exercised.

3.2 Indexed Rights. At the discretion of the Compensation Committee, a
Participant may be granted an Indexed Right which shall entitle such Participant
to a payment equal to the appreciation in Value of a Share based upon the
difference between the Indexed Base Value on the date of exercise and the Share
Value as of the most recent Valuation Date prior to the date of exercise
multiplied by the number of Shares subject to the Indexed Right which are
exercised. . 3.3 Vesting. Except as may otherwise be provided in the respective
Participants' Award Agreements, the number of Shares subject to an Appreciation
Right shall vest 25% per year on each of the first four anniversary dates of the
date of grant and the number of Shares subject to an Indexed Right shall vest
100% on the fourth anniversary of the date of grant.

3.4 Term. The term of each Award hereunder shall be ten years from the date
of grant.

3.5 Exercise. Exercise under Sections 3.1 and 3.2 shall be made by delivery
to the Administrative Committee or its designee of notice of such election to
exercise his or her Award by the Participant (or his or her executor, estate,
guardian or personal representative) in such form as the Administrative
Committee in its discretion shall determine.

3.6 Award Agreement. Each Participant receiving an Appreciation Right or
Indexed Right under this Plan shall enter into an Agreement with the Company in
a form specified by the Administrative Committee setting out the Base Value, or
the Indexed Base Value, as the case may be, the number of Shares subject to
Awards granted and such other terms and conditions as the Compensation Committee
shall determine.

3.7 Maximum Annual Appreciation Rights. The maximum number of Shares
subject to Appreciation Rights which a Participant may receive in any Plan Year
during the term of this Plan shall be 150,000.

3.8 Maximum Indexed Rights. The maximum number of Shares subject to Indexed
Rights which a Participant may receive under the Plan shall be 5,000,000.

3.9 Changes in Capitalization. In the event that Southern shall contribute
additional capital to the Company during the term of the Plan or during the term
of any Awards issued hereunder, the number of outstanding Shares deemed to be
held by Southern shall be appropriately adjusted by the Compensation Committee
to reflect such increase based upon the amount of such capital contribution
divided by the then current Share Value. Subsequent distributions by the Company
to Southern shall cause such number of outstanding Shares deemed to be held by
Southern to be reduced in a similar manner. Company acquisitions shall result in
an increase in the number of Shares deemed to be held by Southern in the amount
of the present value of the projected net after tax cash flow of the acquisition
divided by the then current Share Value. Southern shall thereafter be deemed to
have contributed to the capital of the Company twenty (20%) percent of such
Shares in the Plan Year of financial closing of the project and an additional
twenty (20%) percent per year for the immediately succeeding four Plan Years on
the anniversary date of such financial closing.

3.10 Plan Conversion. The Committee reserves the right to convert the Plan
into a stock option and/or stock appreciation right plan and the Awards granted
hereunder into stock options and/or stock appreciation rights ("SARs") with
respect to the Company's common stock in the event that such stock becomes
publicly traded. In such event, except as otherwise provided herein, the
Committee shall establish the option price and/or SAR base price, as the case
may be, for each Award converted so as to maintain the difference between the
Base Value and/or Indexed Base Value, as the case may be, and the Share Value
determined as of the most recent Valuation Date or, if the Committee in its
discretion determines that it is appropriate under the circumstances, an amount
up to the value of the Company's common stock as determined by the average
closing price of the Company's common stock on a nationally recognized exchange
for the ten consecutive trading days immediately preceding such conversion (the
"Stock Price"); provided, however, that if the fair market value of the Company
as determined by the Stock Price is lower than eighty percent of the Value as of
the most recent Valuation Date, then the Committee shall take into consideration
such Stock Price and the reasons for any such difference, including but not
limited to, whether or not the initial Base Value and/or the Indexed Base Value
as established by the Committee upon creation of the Plan was lower than the
actual fair market value of the Company. Upon such consideration and a
determination that an adjustment is necessary in order to properly reflect the
growth in value of the Company, the Committee may establish the option price
and/or SAR base value, as the case may be, relative to the Stock Price so as to
appropriately take into account such difference between fair market value and
Value. The Committee in its discretion shall determine for each Participant the
relative number of replacement options or SARs, as the case may be, provided
that the aggregate Stock Price of the number of shares of the Company's common
stock subject to options and/or SARs, as the case may be, granted to each
Participant shall be no less than the aggregate Share Value of the Shares
subject to each Participant's Awards immediately prior to such conversion. All
other terms, rights and obligations with respect to Awards granted hereunder
shall be appropriately maintained and carried over to any replacement stock
options and/or SARs granted in accordance with any such conversion, including
but not limited to, individual vesting schedules and the Discount Rate with
respect to converted Indexed Rights.

ARTICLE IV

Distribution of Awards

4.1 Annual Report. On or before March 15th of each Plan Year, the
Administrative Committee shall provide a report to each Participant, (the
"Annual Report") setting forth the Share Value as of the most recent Valuation
Date, the number of vested and unvested Shares subject Appreciation Rights and
Indexed Rights and the Base Value or Indexed Base Value of the Awards held by
the Participants.

4.2 Transfer of Employment. In the event that a Participant transfers his
or her employment to an affiliate of Southern, any outstanding Appreciation
Rights shall continue to vest and shall be exercisable for the remainder of
their term(s). In the event of such a transfer, any outstanding Indexed Rights
shall be treated in accordance with the provisions of Section 4.5 hereof.

4.3 Retirement or Disability. When a Participant holding an Award
terminates his or her employment with the Company on or after his or her Normal
Retirement Age for reasons other than Cause or terminates employment by reason
of Permanent Disability, any outstanding Awards held by such Participant shall
continue to vest and shall be exercisable for the original term of the Award or
for five years from the date of such termination, whichever occurs earlier.

4.4 Death. When a Participant holding an Award terminates his or her
employment with the Company by reason of death, any and all such Awards held by
such Participant shall immediately become 100% vested and the Participant's
estate, heirs or beneficiaries shall have two years from the date of the
Participant's death to exercise such Awards.

4.5 Termination. Except as provided in 4.2, 4.3 and 4.4 herein or as
otherwise may be determined by the Committee in its sole discretion, in the
event of the termination of the employment of a Participant holding outstanding
Awards for reasons other than Cause, Participant shall have 30 days from the
date of such termination to exercise the vested portions of any such Awards and
any and all unvested Awards shall be forfeited.

4.6 Termination for Cause. In the event that a Participant's employment by
the Company is Terminated for Cause, any and all Awards shall immediately
terminate and shall be forfeited and the Company shall have no further
obligations with respect to any Awards granted to such Participant under this
Plan.

4.7 Beneficiary Designation. Upon commencement of participation in the
Plan, each Participant shall designate on the form provided by the
Administrative Committee the individual or entity to receive an Award held by
such Participant in the event of his death. Upon application to the
Administrative Committee, a Participant's Beneficiary designation may be amended
at any time without the consent of any prior Beneficiary.

ARTICLE V

Miscellaneous Provisions

5.1 No Assignment. Neither the Participant, a Beneficiary, nor a
Participant's personal representative shall have any rights to commute, sell,
assign, transfer or otherwise convey the right to receive any payments under
this Plan, which payments and the rights thereto are expressly declared to be
nonassignable and nontransferable. Any attempt to assign or transfer the right
to any payment under this Plan shall be void and have no effect.

5.2 Source of Distributions. The Company shall neither reserve nor
otherwise set aside funds for the payment of amounts pursuant to any Awards
under this Plan and the Participants and their Beneficiaries shall be general
and unsecured creditors of the Company with respect to any such payments under
this Plan.

5.3 Amendment and Termination. The Plan may be amended, modified, or
terminated by the Board in its sole discretion at any time and from time to
time; provided, however, that no such amendment, modification, or termination
shall impair any rights which have been granted under the Plan prior to such
amendment, modification, or termination. If the Plan is converted into a stock
option and/SAR plan in accordance with the provisions of Section 3.10 hereof,
the Plan shall be appropriately amended and restated in order to reflect such
conversion.

5.4 Other Compensation. The Grants made in accordance with this Plan are in
addition to any other benefits or compensation to which a Participant may be
entitled or for which he or she may be eligible, whether funded or unfunded, by
reason of his or her employment with the Company.

5.5 Payment of Taxes. There shall be deducted from each payment under this
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 person entitled to such distribution.

5.6 Participants Bound by Terms of Plan. The calculation of Awards and
payments under this Plan shall be made by the Compensation Committee, and each
Participant and Beneficiary shall be bound by such calculation and the terms and
conditions of this Plan.

5.7 Governing Law. This Plan, and all its rights under it, shall be
governed by and construed in accordance with the laws of the State of Georgia.

IN WITNESS WHEREOF, Southern Energy, Inc., through its officers duly
authorized, hereby adopts the Southern Energy, Inc. Value Creation Plan this ___
day of April, 1997 effective as of January 1, 1997.

SOUTHERN ENERGY, INC.

By: ________________________________________
Thomas G. Boren
President and Chief Executive Officer
Attest:

By:

Its:

[CORPORATE SEAL]

INDEX OF EXHIBITS

Exhibit
Number -

21A - Form of Proxy

21B - Form of Proxy - Employee Savings Plan and Employee Stock Ownership Plan
Participants

21C - Form of Proxy - Brokers

Exhibit 21A

Now you can vote your proxy right over the telephone. It's fast, convenient, and
your proxy is immediately confirmed and posted. Just dial 1-888-457-2963 and
follow the 4 easy steps below. If you prefer, you can send in your proxy vote by
filling in the attached proxy form below. If you wish to withhold authority for
an individual nominee, please mark your card accordingly and vote by mail.

TO VOTE BY MAIL, DETACH, MARK, SIGN AND FORWARD BOTTOM PORTION

UNLESS OTHERWISE SPECIFIED BELOW, THIS PROXY WILL BE VOTED "FOR" ALL ITEMS.

The Board of Directors recommend a vote "FOR" items 1-5.

1. ELECTION OF DIRECTORS: J.C. Adams, A.D. Corell, A.W. Dahlberg, P.J.
DeNicola, J. Edwards, H.A. Franklin, B.S. Gordon, L.G. Hardman, III,
E.B. Harris, W.A. Parker, Jr., W.J. Rushton, III, G.M. Shatto,
G.J. St. Pe, H. Stockham
<TABLE>
<CAPTION>

<S> <C> <C>
FOR WITHHOLD (INSTRUCTIONS: To withhold authority to vote for any individual
all nominees listed above authority to vote for all nominee, write that nominee's name in the space provided below.)
(except as marked to the nominees listed above
contrary to the right) ______________________________________________________________

4. APPROVAL OF THE COMPANY'S PERFORMANCE DIVIDEND PLAN
FOR AGAINST ABSTAIN

2. APPROVAL OF AMENDMENTS TO THE COMPANY'S
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN 5.APPROVAL OF THE SOUTHERN ENERGY, INC. VALUE CREATION PLAN
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN

3. APPROVAL OF THE COMPANY'S PERFORMANCE STOCK PLAN Mark here if attending annual meeting.
FOR AGAINST ABSTAIN

</TABLE>

CORRECT MARK INCORRECT MARKS

Use a No. 2 pencil or blue or black ink pen only.
Do not use pens with ink that soaks through the paper.
Make solid marks that fill the oval completely.
Make no stray marks on this form.
Do not fold, tear, or mutilate this form.

Signature(s)____________________________

----------------------------

Date _______________________,1997

<PAGE>

EXPLANATION OF DIFFERENCES BETWEEN
CIRCULATED DOCUMENT AND ELECTRONIC DOCUMENT

Form of Proxy

1. The circulated document includes a map with directions to the annual
meeting site.

Exhibit 21B

This Proxy Is For Your Combined E.S.O.P. and E.S.P. (if any) Shares.

TO VOTE BY MAIL, DETACH, MARK, SIGN AND FORWARD BOTTOM PORTION

UNLESS OTHERWISE SPECIFIED BELOW, THIS PROXY WILL BE VOTED "FOR" ALL ITEMS.

The Board of Directors recommend a vote "FOR" items 1-5.

4. APPROVAL OF THE COMPANY'S PERFORMANCE DIVIDEND PLAN
FOR AGAINST ABSTAIN

2. APPROVAL OF AMENDMENTS TO THE COMPANY'S
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN 5.APPROVAL OF THE SOUTHERN ENERGY, INC. VALUE CREATION PLAN
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN

3. APPROVAL OF THE COMPANY'S PERFORMANCE STOCK PLAN Mark here if attending annual meeting.
FOR AGAINST ABSTAIN

</TABLE>

CORRECT MARK INCORRECT MARKS

Signature(s)____________________________

----------------------------

Date _______________________,1997

<PAGE>

EXPLANATION OF DIFFERENCES BETWEEN
CIRCULATED DOCUMENT AND ELECTRONIC DOCUMENT

Form of Proxy

1. The circulated document includes a map with directions to the annual
meeting site.

Exhibit 21C
<TABLE>
<S> <C>
SOUTHERN COMPANY
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
For Annual Meeting of Stockholders May 28, 1997
The undersigned hereby appoints A. W. DAHLBERG and W. L.
WESTBROOK, or either of them, proxies with full power of
substitution in each, to vote all shares the undersigned is
entitled to vote at the Annual Meeting of Stockholders of
THE SOUTHERN COMPANY, to be held at the Hyatt Regency, 265
Peachtree Street, Atlanta, Georgia, at 10:00 a.m. (EDT), and
any adjournments thereof, on all matters legally coming
before the meeting including, without limitation, the
proposals listed on the reverse side hereof.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED. IF
NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED ON THE REVERSE
SIDE, AND FOR ITEMS 2, 3, 4, AND 5. Please date, sign
P exactly as your
R name appears on
O the form, and mail
X the proxy
Y promptly. When
signing as an
attorney,
executor,
administrator,
trustee, or
guardian, please
give your full
title as such. If
shares are held
jointly, both
owners must sign.
Date , 1997
Signature(s)
</TABLE>

UNLESS OTHERWISE SPECIFIED BELOW, THIS PROXY WILL BE VOTED "FOR" ALL ITEMS.

The Board of Directors recommend a vote "FOR" items 1-5.

(1) ELECTION OF DIRECTORS: J. C. Adams, A. D. Correll, A. W. Dahlberg, P. J.
DeNicola, J. Edwards, H. A. Franklin, B. S. Gordon, L. G. Hardman III, E. B.
Harris, W. A. Parker, Jr., W. J. Rushton, III, G. M. Shatto, G. J. St. Pe,
H. Stockham.

<TABLE>
<S> <C>
[ ] FOR all nominees, listed above [ ] WITHHOLD authority to vote for all nominees listed
(except as marked to the contrary below). above.
</TABLE>

(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)

- --------------------------------------------------------------------------------

(2) APPROVAL OF AMENDMENTS TO THE COMPANY'S EXECUTIVE PRODUCTIVITY IMPROVEMENT
PLAN.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(3) APPROVAL OF THE COMPANY'S PERFORMANCE STOCK PLAN.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(4) APPROVAL OF THE COMPANY'S PERFORMANCE DIVIDEND PLAN.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(5) APPROVAL OF THE SOUTHERN ENERGY, INC. VALUE CREATION PLAN.

[ ] FOR [ ] AGAINST [ ] ABSTAIN