Planning for a Low-Carbon Future a Letter from the CEO

Planning for a low-carbon future A letter from the CEO

The energy sector is rapidly evolving, driven by customer preferences, technology advancements, commodity prices, energy security and resiliency efforts, and environmental, social and governance initiatives. With evolution comes opportunity and Southern Company, with its customer- centric business model, is poised to provide continued value to our customers and communities in this evolving energy landscape.

We have a long history of proactive, goals are a continuation of our our carbon emission reduction constructive engagement and trajectory of lower carbon emissions goals are no exception. Combined dialogue with shareholders, over the past 10 years, which have with our objective of delivering customers and other stakeholders resulted in a 36 percent reduction regular, predictable and sustainable around the path forward in a low- since 2007. Similarly, our use of coal earnings and dividend growth, carbon future, and we understand for power generation has declined our collective goal is to provide the need for a broader focus on by almost 60 percent; in 2017, coal premier risk-adjusted returns to the financial, operational and represented only 28 percent of our shareholders. regulatory risks that come with our energy mix as compared to 69 reducing carbon emissions over the percent in 2007. I am confident that we are prepared long term. We are committed to and well-positioned to meet the keeping everyone informed as we Over the long term, meeting our needs of our customers well into move forward. goals will require energy policies the future and to succeed in this that support low natural gas transition to a low-carbon future. Throughout this report you will see prices and the development and We remain steadfastly committed how we are taking steps to increase deployment of more low- to no- to providing clean, safe, reliable and disclosure of our preparations carbon emitting energy resources. affordable energy to the customers for a low-carbon future, as well We will continue our commitments we are privileged to serve. as the risks and opportunities to research and development and for our company with this to help shape responsible energy Thomas A. Fanning important transition. policies that promote optionality Chairman, President and Chief across the entire energy value Executive Officer With this backdrop, we are chain and retain each state’s ability April 2018 establishing an intermediate goal to adequately plan and deploy of a 50 percent reduction in carbon resources that meet the needs of emissions from 2007 levels by 2030 their citizens and communities. and a long-term goal of low- to no- carbon operations by 2050. These Managing risks in our business is an integral component of the value proposition for our investors and

2 Contents

Greenhouse gas emissions and references 02 to carbon and carbon dioxide A letter from the CEO Southern Company’s greenhouse gas (GHG) emissions 4 come primarily from fossil fuels used to generate Executive summary electricity, which result in emissions of three GHGs: carbon dioxide (CO ), methane (CH ) and nitrous 6 2 4 Goals and actions for a low-carbon future oxide (N2O). Southern Company subsidiaries Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power, Southern Company Gas, Southern 7 Our approach to reducing CO emissions Electric Generating Company and PowerSecure all have 2 operations that emit CO₂, CH₄ and N₂O. More than 13 99 percent of the system’s electric generation GHG Risks and opportunities in a low-carbon future emissions are CO₂. Throughout this report, references to carbon or CO₂ emissions should be interpreted as 17 all GHGs. Conclusion Southern Company is a holding company that conducts its business through its subsidiaries; accordingly, Further discussion throughout this report references to Southern Company’s GHG emissions and related operations refer 18 to the operations conducted through its subsidiaries. Achieving climate goals through resource diversity and clean energy investment Southern Company is transitioning to a 2007 baseline year that represents Southern Company’s 22 maximum emissions year, while continuing to rely on Details about emissions reporting a baseline calculation methodology consistent with the Environmental Protection Agency’s (EPA’s) GHG 23 Reporting Program (GHGRP) methodology. See “Details Governance about emissions reporting” (page 22) for further information about this methodology. 25 Engagement, transparency Task force on climate-related financial and further information disclosures

The Financial Stability Board’s Task Force on Climate- related Financial Disclosures (TCFD) has developed voluntary, consistent, climate-related financial risk disclosures for use by companies in providing information to investors and other stakeholders. In 2017, the TCFD issued its final disclosure recommendations. This report includes disclosure responsive to the four core elements identified in the TCFD recommendations: metrics and targets; strategy; risk management; and governance.

Planning for a low-carbon future 3 Executive summary

Southern Company is committed to providing clean, safe, reliable and affordable energy, while 36% transitioning to low- to no-carbon operations by Reduction 2050. We have already made significant progress with an “all of the above” approach to electric in greenhouse generation resource diversity. Since 2007, without gas emissions any regulatory mandates, we have reduced CO2 since 2007 emissions by 36 percent.

2007: GHG Emissions Baseline 2017: GHG Emissions Reduced 36%

Setting emission modernizing the grid to optimize see potential to invest appropriately reduction goals technology advancements, increasing in new technologies that may the use of natural gas, building new emerge, mature and come to market We are, for the first time, setting nuclear generating units, continuing through our PowerSecure subsidiary. emission reduction goals that are our industry-leading, robust research aligned with our long-term business and development (R&D) efforts, and We are also engaging with strategy and our commitment to investing in energy efficiency for policymakers, customers and a leadership role in developing savings on both sides of the meter. other stakeholders to help shape solutions that make technological and Transitioning to a low-carbon future an energy policy that enhances economic sense. These are enterprise- will require continued advancement optionality across the entire energy wide goals that encompass our in technology. value chain and supports the electric and natural gas operations. development and deployment of Existing opportunities to reduce more carbon-free energy sources, Strategy to achieve our carbon emissions include while ensuring that each state the goals completing construction on the that we serve retains the ability new Vogtle 3 and 4 nuclear units, to adequately plan and deploy Our strategy to achieve these goals seeking useful life extensions for resources that meet the needs of its includes the continued development our existing 3,700 megawatt (MW) citizens and communities. and deployment of a diverse nuclear fleet, continuing to grow portfolio of energy resources to our sizable renewable energy Risks and opportunities reliably and affordably serve our resources, partnering with battery along the way customers and communities with a manufacturers and vendors on focus on reducing CO₂ emissions. To energy storage development and We aim to minimize our exposure do this, we are aggressively growing continuing to modernize the power to carbon risk across the energy our investment in renewable energy, grid for greater efficiencies. We also value chain as we make, move and

4 2030 Goal: 50% Reduction in GHG Emissions 2050 Goal: LOW to NO GHG Emissions sell energy to a wide customer Robust processes to utilities to actively work within its base. Our business model relies get us there regulatory framework to ensure heavily on state-regulated electric that carbon reduction efforts are in and natural gas investments as As we plan for a cleaner energy customers’ best interests over time. well as long-term contracted future, we recognize that our current energy infrastructure, which electric generation portfolio consists Governance to guide differentiates Southern Company of high-capital, long-life assets. us through from other businesses. We believe Efforts to further diversify our that operating a customer-centric portfolio should be achieved through Our Board of Directors recognizes business model provides the an orderly transition that accounts the potential impacts on our opportunity to effectively respond for the economic value of our business and the transitional to future carbon regulations and existing assets. Our robust scenario- risks and opportunities the utility the potential to succeed in an based integrated resource planning industry faces in a low-carbon accelerated transition to a low process occurs annually, and is a key future. Our governance process carbon business environment. component that we use to ensure combines regular assessments of that the right resources are deployed our short- and long-term business By continuing to make major at the right time to maintain safety, strategy and a robust enterprise energy decisions that are in the best reliability and affordability for risk management program, both interest of customers, appropriately customers. The planning process of which facilitate identification, consider fuel and carbon risks, allows for updates to a number communication and management of and are approved by our state of assumptions, inputs, and significant risks ultimately reporting regulators, we expect to continue to alternatives, including potential CO₂ to the Chief Executive Officer and receive fair regulatory treatment of prices, fuel and other commodity the Board. The existing governance our state-regulated investments. We prices, as well as economic or other and enterprise risk management believe that investment risk to these policy indicators. The annual process process ensures focus on the long- rate-regulated assets is limited. allows each of our state-regulated term sustainability of our business.

Planning for a low-carbon future 5 Goals and actions for a low-carbon future

We are setting a long-term goal of low- to no-carbon operations by 2050 on an enterprise-wide basis. On our path to 2050, we have set a goal of 50 percent reduction from 2007 levels in CO2 emissions by 2030. Achievement of these goals will be dependent on many factors, including natural gas prices and the pace and extent of improvements in energy technology.

Metrics and goals – GHG emissions reductions

36% 50% LOW Reducton 2017 Reducton 2030 to NO 2050 n GHG n GHG GHG em ss ons em ss ons em ss ons

In addition, we aim to reduce ff We do not intend to invest ff We will work within the fugitive methane emissions for our further in our existing thermal regulatory framework in each natural gas distribution operations coal fleet, unless the investment of our states to ensure that to align with Our Nation’s ensures safety, affordability or our carbon reduction efforts Energy (ONE) Future’s 2025 goal. reliability to serve customers support customers’ needs Southern Company Gas was a or to comply with federal or and preferences. founding member in ONE Future. state laws. ff We will continue our Today, our natural gas operations ff In each of our state-regulated industry-leading research and intensity is already 0.26 percent, electric jurisdictions, we will development efforts seeking to which is below ONE Future's 2025 continue to propose and seek drive technology advancements goal of 0.44 percent for local approval of low-carbon and that lead to GHG reductions distribution companies. carbon-free resources that across the energy value chain. are in the best interest of our We believe these goals are ff As a consumer and distributor of customers – such as natural reasonable and achievable, while natural gas, we will continue our gas, nuclear, renewables, and still supporting our commitment to participation in the ONE Future energy efficiency – as energy serve customers with clean, safe, program with a goal to achieve deployment options in the reliable, and affordable energy. an average rate of methane resource planning process. It’s Our path to 2050 will include the emissions across the entire important to note that advanced following actions: natural gas value chain that efficient natural gas combined is one percent or less of total cycle facilities will be needed natural gas production. as a bridge to a low- to no- carbon future.

6 Our approach to reducing CO2 emissions

We operate a complex business in a complicated environment. Our approach to reducing CO2 emissions is based on three key focus areas.

Diverse energy Research & Constructive resource portfolio development engagement

Pursue a diverse portfolio to Continue our industry-leading R&D, Constructively engage with include low-carbon and carbon- as well as active participation in the policymakers, regulators, investors free resources and energy Electric Power Research Institute and customers to support outcomes efficiency resources (EPRI), with particular focus on leading to a low-carbon future technologies that lower GHG emissions

Diversifying the portfolio Our environmental compliance long-term viability of our electric of energy resources strategy involves the continuous generating units. Over the past monitoring of policy developments, eight years, more than 50 percent Today, we are one of the few compliance options and other of our coal units have been retired energy companies pursuing an “all factors which may impact the or converted to natural gas. of the above” energy strategy. We Electricity generation mix believe developing and maintaining a diversified energy portfolio is essential to successfully reducing carbon emissions while maintaining 69% 16% 14% 1% Col Nturl Gs Nucler Renewbles/Other reliability and affordability. 2007 Southern Company’s portfolio was initially founded on hydroelectric generation and has grown to include coal, natural gas, nuclear, biomass, landfill gas, solar, wind, 47% 28% 15% 10% energy efficiency programs, Nturl Gs Col Nucler Renewbles/Other demand response, and distributed 2017 resources. Over the last decade, we have significantly transformed our electricity generation mix.

Planning for a low-carbon future 7 Recent generation decisions and ff Our competitive generation We expect to own or otherwise environmental compliance subsidiary, Southern Power, control 16,000 MW of carbon-free strategies have led to the following: owns approximately 1,800 MW and carbon neutral generating ff Approximately 4,200 MW of of solar, 1,600 MW of wind and capacity by 2022. coal- and oil-related retirements 100 MW of biomass. since 2010. Our future energy mix is expected Investing in technologies that support our goals ff Approximately 3,300 MW to include more low- and no-carbon resources, particularly if natural gas of natural gas fuel switches Southern Company has actively prices remain low and technology since 2015. engaged in robust, proprietary R&D costs associated with renewables We invest in a diverse portfolio that grows the value of energy and storage continue to decrease. of low-carbon and carbon-free services to customers since the The trends of coal unit retirements energy assets to serve customers 1960s. Nearly all of our current and additions of natural gas-fired and communities with a focus R&D spend is focused on lower and renewable generation are on maintaining reliability and carbon-emitting technologies. projected to continue. We expect affordability while reducing carbon to add an additional 3,000 MW We are also an active participant emissions. Through our subsidiaries of renewable generating capacity and a significant funder of EPRI. we have invested $20 billion in by 2022. EPRI is an independent, nonprofit developing low-carbon and carbon- organization for public interest Nuclear energy is one of the free resources and more than energy and environmental research. cleanest, most reliable and cost- 5,000 MW of renewable generating The members of EPRI include effective fuel sources available capacity has been added across utilities throughout the world. EPRI today. It currently accounts for the system since 2010. Our current seeks to pool resources and ideas about 15 percent of our electricity portfolio of over 12,000 MW of from all members to advance the generation mix, and its importance carbon-free and carbon neutral development and deployment in our portfolio continues to grow. resource capacity has established a of technologies impacting the As we transition to a low-carbon foundation enabling us to continue electricity sector. Southern 1 energy future, we are preparing our carbon reduction efforts. Company was instrumental in to bring Georgia Power's Vogtle ff Along with our partners, we are forming EPRI as the primary Units 3 and 4 into operation in 2021 building the first new nuclear and 2022. units in the U.S. in more than 30 years. These units will add Growing portfolio of carbon-free and carbon neutral energy sources 1,000 MW to our existing 3,700 MW portfolio of carbon-free nuclear generation. ff We are among the largest solar owner-operators in the U.S. Solar 30% 25% 22% 21% 2% represents a key component of 2017 our state-regulated utilities’ and Southern Power’s 8,500 MW 12,000 MW renewable resource portfolio. ff Our state-regulated electric operating companies’ renewable 30% 29% 19% 19% 3% resource portfolio includes more 2022 than 900 MW of wind, 1,000 MW of solar, 3,000 MW of hydroelectric 16,000 MW and nearly 200 MW of biomass.

1 Generally, with respect to renewable energy generated or purchased by the state-regulated electric operating companies, the state-regulated electric operating companies retain the right to use the renewable energy to serve customers or to sell the energy and associated renewable energy credits, together or separately, to third parties for the benefit of customers. 8 research organization for more competitive with natural In June 2017, PowerSecure and than 90 percent of the electricity gas-fired generation. Advanced Microgrid Solutions generated and delivered in the U.S. announced a strategic alliance with National Carbon Capture the goal of accelerating the cost- A low-carbon future will Center effective deployment of distributed require developing new and energy resources. We believe this more cost-effective energy The National Carbon Capture alliance positions us to serve a conversion, delivery and use Center (NCCC) is a focal point of nationwide base of customers technologies. Our R&D strategy the U.S. Department of Energy's on both sides of the meter more seeks at least six revolutionary (DOE) efforts to develop advanced reliably and efficiently. technological successes: technologies to reduce emissions from natural gas- and coal-based ff Beneficial electrification with Leading the way for power generation. Since 2009, we newly developed and broadly advanced nuclear have managed and operated this deployed technologies including world-class test facility and worked As a leader in pursuing innovative those for transportation, with scientists and technology solutions for a clean energy buildings, industrial processes developers to help overcome the future, we are investing in several and food production; challenges of developing carbon advanced nuclear research and ff Solar, wind, energy storage capture technologies. The NCCC has development projects while working closely with federal regulators — and other carbon-free energy already surpassed 100,000 hours of technology testing. The Center also playing a vital role in moving the resources – supported by nuclear energy industry forward. advancements in cost and cofounded the International Test Center Network, a global coalition In recognition of the difficulties efficiency through R&D - of facilities working to accelerate associated with deploying new developed and operated in the research and development of nuclear, we are forming strategic centralized and microgrid CCUS technologies. partnerships with companies configurations, as well as behind worldwide. We continue to leverage the meter as the lowest-cost PowerSecure and Bloom the experience and expertise at energy sources; Southern Nuclear and Southern Energy Company's R&D division to fully ff Resilient, fully integrated explore all potential opportunities Beyond providing clean, safe, energy delivery grids allowing within the current fleet and with reliable and affordable energy to advanced technologies including increased use of low- to no-GHG our customers, we are ensuring Generation III+, AP1000, small emissions energy; that our customers can efficiently modular reactors and advanced ff Cost-effective carbon capture, use our product. In May 2016, we acquired PowerSecure, a proprietary Generation IV reactors. use and storage (CCUS) distributed infrastructure, technologies developed and energy efficiency and utility Energy Impact Partners operating on an efficient, reliable infrastructure solutions company. Southern Company is a primary natural gas-fired generation fleet; With over 1.5 gigawatts (GW) of partner in Energy Impact Partners distributed energy resources under f (EIP). EIP is a private equity f New utility business models management, PowerSecure has a firm that strategically invests in created from hydrogen national footprint and continues innovative technologies, services and production, delivery and end-use to grow. products throughout the electricity technologies; and In October 2016, PowerSecure supply chain from generation ff Advanced nuclear power and Bloom Energy formed a to consumption. Through close generation developed with strategic venture where Bloom collaboration with its investor base, EIP seeks to bring the best companies, superior safety benefits and servers (fuel cells) are paired with PowerSecure’s energy storage buying power and vision in the polygeneration (simultaneous solution for a portfolio of customers industry to bear on the emerging production of electricity and including Home Depot and energy landscape. Information about useful chemicals) business Kaiser Permanente. investments by EIP can be found at opportunities that is cost- https://www.energyimpactpartners. com/investments/.

Planning for a low-carbon future 9 Renewable resources Nuclear Grid modernization We have more than 20 research and We are committed to nuclear energy Over the past ten years, we have development projects underway as an integral component of the full made major investments in smart across our system to determine the portfolio strategy for low- to no- grid technologies including deploying potential of different renewable carbon operations. Georgia Power, approximately 4.6 million smart resources and technologies. Research with its co-owners, is constructing meters, or advanced metering areas include solar photovoltaic two new nuclear units at the Plant infrastructure, helping customers (PV) deployment, operation and Vogtle site in Burke County, Georgia. better manage their energy use maintenance, solar resource Upon completion, Plant Vogtle Units 3 and save money. We are also forecasting, wind generation, biomass- and 4 will provide a total of 2,200 MW conducting collaborative, industry- fueled power generation and bulk- (approximately 1,000 MW for Georgia wide research with EPRI, for the power system integration of variable Power). Once completed, Plant Vogtle ongoing development of transmission generation sources. units 3 and 4 will be part of a 4,700 system monitoring, diagnostics and MW carbon-free nuclear generation visualization tools that will facilitate fleet. We have also been awarded decisions and mitigation measures up to $40 million from the DOE to to enhance system performance, explore, develop and demonstrate efficiency and reliability. advanced nuclear reactor technologies.

Energy efficiency Distributed resources We are a leader in offering innovative electric and natural Our long and successful history of incorporating distributed gas energy efficiency programs that help our customers generation into our energy mix began in the late 1970s use energy more wisely. Across our state-regulated electric and continues today. In April 2017, PowerSecure extended utilities, since 2000, energy efficiency and demand response its distributed infrastructure offering by acquiring Power programs have helped reduce peak demand for electricity Pro-Tech Services, a distributed power system service by more than 5,300 MW (which equates to 17 percent of our provider that specializes in distributed power systems 2017 peak load) and avoid more than 3 billion kWh of energy including fuel cells, solar inverters and controls that can be use. Additionally, over the past 16 years, Southern Company used to create microgrids for use by customers. In addition, Gas’ energy efficiency programs have helped reduce demand Gulf Power is operating a 1 MWh Tesla lithium-ion battery by more than 90 million therms and reducing customers’ energy storage system in a research demonstration with emissions. Looking forward, we are on a path to finding more Southern Company R&D and EPRI. The integration of cost ways for our customers to save money while also reducing effective energy storage with intermittent renewable GHG emissions by investing more than $1 billion in energy generation is one of the key options that can help lower efficiency for electric customers by 2020 and more than carbon emissions. $160 million in energy efficiency for natural gas customers by 2021. Energy efficiency programs and associated customer savings will remain a focus of the Company.

10 Engaged in shaping energy policy at local, state and federal levels Stte-reulted Electrc Servce Engagement at all levels of energy Terrtor policy development is essential to executing our customer-centric business model. We engage with policymakers to help shape an energy policy that supports developing and deploying more low- and carbon-free energy resources while ensuring that each state that we serve retains the ability to adequately plan and deploy resources that meet the needs of its citizens and communities.

We believe the following principles are fundamental to shaping energy policy. ff Constructive regulation: Regulations should provide must properly weigh the relevant and regulation. To date, Southern constructive solutions to problems costs and benefits imposed by Company’s percent reduction in affecting people, the environment those regulations. GHG emissions is equivalent to EPA’s stated nationwide electric and the economy. Requirements ff Realistic technology-based sector reductions associated with should be supported by sound standards: Standards should the CPP of approximately 32 percent data and analysis, while be based on supported by 2030 from 2005 levels. considering other statutes and conclusions or on proven regulations, both federal and state. and reliable commercially State and local: Our electric available technologies. ff Regulatory certainty: For many operating companies and our regulated industries, including Federal: As of the publication of this natural gas local distribution the utility industry, regulatory report, there is no comprehensive companies are subject to the certainty is essential to federal regulatory framework for jurisdiction of their respective state inform the long-term business limiting CO₂ emissions from existing Public Service Commissions (PSCs) planning and substantial power plants in the U.S., absent and state environmental agencies. capital investments required major modifications at those plants. PSCs have broad regulatory to effectively operate and plan We recognize that domestic policies authority over the companies, for the future. We value clear, may emerge in the future that including approval of new supply- predictable requirements and assist in transitioning the U.S. to a side and demand-side resources and consistent application of the law. lower GHG-emitting economy. As related cost recovery rates, while ff Cooperative federalism: the EPA considers repealing and environmental agencies are charged Regulation is most effective replacing the Clean Power Plan (CPP) with the enforcement of each when the federal government and as the courts consider its legal state’s environmental policies. works in partnership with the standing, we support regulating At varying frequencies and under a states rather than imposing one- GHG emissions and, in the case variety of circumstances, the electric size-fits-all federal regulations. of repeal, instating a durable and constructive GHG regulation policy operating companies file with their f f Realistic assessments of costs solution that works within the respective PSCs economic analyses and benefits: Analyses of cooperative federalism goals of the of recommendations or decisions proposed or existing regulation Clean Air Act and other federal laws using the scenario planning process.

Planning for a low-carbon future 11 Accordingly, decisions made by an electric operating company regarding its assets, including those requiring specific PSC approval, must be made in the best interest of its customers, taking into consideration a wide variety of factors, and based on the best information available at the time the decisions are made.

Our state-regulated electric Partnering with the US military Meeting customer demand operating companies are committed on renewable energy. We are for renewable energy. Our to proposing and seeking approval the only energy company in the state-regulated electric utilities of energy deployment options in nation to partner with the Army, utilize over 5,000 MW of existing each state jurisdiction's resource Navy, Marine Corps and Air Force renewable resources. We expect planning process that coincide to develop innovative renewable that number to grow through with a transition to a low- to no- energy generation projects programs like Georgia Power's carbon future. These resources, for on 19 military bases. Through Renewable Energy Development example, may include: advanced March 2018, Southern Company Initiative (REDI). REDI was approved natural gas generating units, and its subsidiaries Alabama Power, by the Georgia PSC as part of its nuclear, renewables, energy Georgia Power, Gulf Power and 2016 Integrated Resource Plan efficiency, and demand response. Mississippi Power have military and includes approval for Georgia Each state-regulated electric solar projects online or under Power to add an additional 1,200 operating company will work within contract totaling 365 MW. This MW of renewable resources. its state’s regulatory framework to partnership with the Department of REDI included the beginning of a ensure that carbon reduction efforts Defense helps meet the military’s Commercial and Industrial (C&I) are supportive of customers’ needs goals to support the development customer renewable program that and preferences. of new renewable generation allows Georgia Power to procure resources nationwide. up to 200 MW of additional To date, none of the four states renewable generation that C&I where we operate electric customers can use to support their utilities has enacted legislation or sustainability initiatives. Through regulations to specifically regulate our planning process and customer CO₂ emissions or mandates partnerships, Southern Company for certain levels of renewable and its subsidiaries will continue resources. But we understand our to evaluate and develop similar customers’ needs and preferences Bringing wind to the Southeast. program designs to meet customers’ for clean, safe, reliable and Alabama Power, Georgia Power and renewable energy needs. affordable energy, as well as a Gulf Power have purchased more continuing desire of many of our than 900 MW of wind generation stakeholders to reduce our carbon from Oklahoma and Kansas. The emissions. We will work within each companies receive all the renewable state’s regulatory framework – with energy credits from these projects, support from customers, PSCs, and which they may use to serve environmental agencies – to ensure customers with wind energy or that our carbon reduction efforts sell to third parties for the benefit are supportive of customers’ needs of customers. and preferences.

12 Risks and opportunities in a low-carbon future

For the energy industry, high-capital, long-life assets require long-term planning. The current transition in the energy industry along with the potential for a low-carbon future is placing new and different pressures on the traditional energy production and delivery model, creating uncertainty and presenting challenges. The investor community recognizes this as potential risk.

Revenue mix 13% 5% 82% Wholesle Ener Stte-reulted Electrc Electrc Interton 2007

Opertn Revenues = $153B 16% 11% 6% 67% Nturl Gs Wholesle Ener Stte-reulted Electrc Dstrbuton** Electrc Interton* 2017 Opertn Revenues = $23B

* Certain non-regulated sales of products and services by Alabama Power and Georgia Power were reclassified as other revenues for consistency of presentation on a consolidated basis following the PowerSecure acquisition. ** Natural Gas Distribution includes Southern Company Gas’ state-regulated local distribution companies, midstream pipeline operations and gas marketing services.

We are engaged across the energy state-regulated assets and other State-regulated asset value chain as we make, move and energy assets that were developed sell energy to a wide customer pursuant to long-term contracts Owned and operated by base. We are seeking to minimize with creditworthy counterparties. regulated utilities, with state potential risk by diversifying our This mix of asset types is designed utility commissions setting rates business through electric generation to produce stable, predictable to cover the cost of the asset optionality, as well as through the revenue streams with lower Long-term contracted asset addition of regulated natural gas carbon risks. Owned and operated pursuant infrastructure with our acquisition to long-term contracts with of Southern Company Gas in 2016. Over the past 10 years, we have creditworthy counterparties that Also in 2016, recognizing that diversified our revenue streams are designed to cover the cost of more energy solutions will reside while continuing to grow revenue. the asset on the customer’s side of the To further compare and contrast meter, we acquired PowerSecure, Merchant asset our business model with other which specializes in customer business models that experience Owned and operated based on energy solutions. greater carbon risk, it is helpful to market speculation with plans to sell power into the competitive As we seek out opportunities to consider the three primary energy spot or term markets with expand our business, we continue asset business models in use across little or no certainty of fixed to focus on our customer-centric the U.S. energy industry. revenue streams business model, combining

Planning for a low-carbon future 13 Our key asset categories are state-regulated assets and long-term contracted assets. Our carbon risk is lower than many other businesses due to reliance on these two business models, a customer-centric focus and state regulatory approval processes that are informed by a scenario planning process described later in this report. The following table provides greater details on our asset categories and denotes the business model associated with each. Asset outlook of Southern Company's portfolio in GHG-constrained futures GHG-Constrained Futures Rate Long-Term Facilitates GHG Demand Potential Opportunities to Address Emission Portfolio Pros Cons Regulated Contract Merchant2 Reductions Outlook Reductions Pressure and Demand Outlook3 Natural Gas yy Abundant supply yy No onsite gas storage yy Increase existing natural gas unit efficiency yy Flexible operations yy Requires pipeline infrastructure yy Deploy new high efficiency natural gas units yy Balances renewables yy GHG emissions yy Retrofit existing and deploy new natural yy Lower GHG emissions gas assets with CCUS where economic Coal yy Stable price yy Environmental footprint yy Increase coal unit efficiency yy Abundant supply yy Higher GHG emissions yy Retrofit existing coal assets with CCUS yy Onsite fuel storage where economic yy Replace with lower emission resources Nuclear yy Low and stable fuel costs yy High capital cost yy Maximize life of existing nuclear units yy GHG emissions free yy Waste disposal yy Invest in nuclear uprates at existing yy Abundant supply of fuel yy Long construction period nuclear units yy Develop new generation nuclear technology Renewables yy Abundant supply yy Intermittent generation for solar and wind yy Invest in renewable energy capacity and yy GHG free or neutral yy Siting and permitting constraints for transmission infrastructure yy Declining capital cost for solar new infrastructure yy Improve efficiency of renewable technologies

Energy Storage yy Enables effective utilization of yy High capital cost yy Invest in energy storage projects and R&D intermittent generation yy Limited storage capacity yy Develop strategic partnerships with yy Declining capital costs battery companies

Electric Transmission yy Increases power yy Siting and permitting constraints for new yy Invest in grid modernization, such as smart & Distribution transmission capabilities infrastructure grid, advanced metering infrastructure

Local Natural Gas yy Abundant supply yy Needs additional infrastructure yy Replace aging pipeline infrastructure Distribution yy Existing infrastructure yy Minimize methane emissions yy Invest in renewable natural gas

Midstream Natural yy Abundant supply yy Siting and permitting constraints for new yy Replace aging pipeline infrastructure Gas Transmission yy Opportunity to provide pipeline infrastructure yy Minimize methane emissions expansion yy Expand to support generation growth, replacements and conversions Distributed Energy yy Facilitates electricity peak shaving and yy Requires rate adjustments for regulated yy Increase market penetration Infrastructure demand management electric subsidiaries yy Utilize energy and product monitoring to yy Potential transmission and mitigate future distribution system impacts distribution benefits

2 Southern Company's business model does not rely on merchant assets that could create unpredictable fuel price or GHG risk. 3 Potential opportunities are hypothetical in nature, do not necessarily represent a component of the Southern Company system's future plans and may or may not actually be pursued in the future.

14 Asset outlook of Southern Company's portfolio in GHG-constrained futures GHG-Constrained Futures Rate Long-Term Facilitates GHG Demand Potential Opportunities to Address Emission Portfolio Pros Cons Regulated Contract Merchant2 Reductions Outlook Reductions Pressure and Demand Outlook3 Natural Gas yy Abundant supply yy No onsite gas storage yy Increase existing natural gas unit efficiency yy Flexible operations yy Requires pipeline infrastructure yy Deploy new high efficiency natural gas units yy Balances renewables yy GHG emissions yy Retrofit existing and deploy new natural yy Lower GHG emissions gas assets with CCUS where economic Coal yy Stable price yy Environmental footprint yy Increase coal unit efficiency yy Abundant supply yy Higher GHG emissions yy Retrofit existing coal assets with CCUS yy Onsite fuel storage where economic yy Replace with lower emission resources Nuclear yy Low and stable fuel costs yy High capital cost yy Maximize life of existing nuclear units yy GHG emissions free yy Waste disposal yy Invest in nuclear uprates at existing yy Abundant supply of fuel yy Long construction period nuclear units yy Develop new generation nuclear technology Renewables yy Abundant supply yy Intermittent generation for solar and wind yy Invest in renewable energy capacity and yy GHG free or neutral yy Siting and permitting constraints for transmission infrastructure yy Declining capital cost for solar new infrastructure yy Improve efficiency of renewable technologies

Planning for a low-carbon future 15 Potential stranded assets, We expect that if our companies business model does not rely on investments and costs continue to make major energy merchant assets that could create decisions that are in the best unpredictable investment risk. For rate-regulated assets, we interest of customers, that have an obligation to continually appropriately consider fuel Our energy infrastructure portfolio make decisions that are in the and carbon risks, and that are of primarily rate-regulated assets best interest of customers. Our approved by the state regulators, and assets under long-term state-regulated electric operating each company will receive fair contracts is designed to produce companies seek approval of major regulatory treatment regarding its regular, predictable and sustainable decisions regarding rate-regulated rate-regulated assets. We believe earnings. Our significant investment assets from their respective state that carbon investment risk to these over the past decade in low- and PSCs. Information provided to the rate-regulated assets is low. no-carbon resources is expected to state PSCs by the electric operating further reduce future risk related to companies includes economic For our portfolio of non-rate carbon emissions. results from the Company’s scenario regulated assets, we rely on planning process, thereby allowing long-term contracts with the PSCs to render a decision is in creditworthy counterparties the best interest of customers under that help mitigate carbon risk associated with these assets. Our a variety of fuel and CO2 scenarios.

16 Conclusion

Our strategy is to maximize long-term value to shareholders through a customer, community and stakeholder-focused business model that produces sustainable levels of return on energy infrastructure.

We believe we can successfully We continue to manage our Our carbon reduction goals of sustain and evolve our business carbon risk using effective 50 percent by 2030 and low- to as we transition to a low- to scenario planning for major electric no-carbon operations by 2050 no-carbon future. We anticipate generation decisions through the are a critical step forward for us that we are well-positioned for execution of a customer-centric and our business units. As we the transition and the risks and business model that focuses on work to achieve those goals, we opportunities that are part of state-regulated or long-term remain committed to our core that transition. contracted assets while adhering to principles of providing clean, safe, a robust governance process. reliable and affordable energy for our customers.

Planning for a low-carbon future 17 Further discussion

Achieving climate goals through resource diversity and clean energy investment A global perspective from 2014 levels by 2060 (Figure 1), capture and storage, nuclear and with carbon neutrality in the global sustainably sourced bioenergy are In 2015, negotiations at the energy system being achieved specifically identified by IEA as key United Nations Framework in 2100. drivers within the 2DS. Convention on Climate Change resulted in a new international While this global energy sector A national perspective climate deal, the Paris Agreement. analysis shows a large reduction A central goal of the Paris in the use of fossil fuels over Southern Company’s recent scenario Agreement is to hold the increase the next several decades, it planning analysis of the overall in global average temperature also demonstrates that global U.S. economy shows a potential to well below 2° Celsius above energy demand will require a 39 percent reduction in CO2 pre-industrial levels. full portfolio of energy solutions emissions from 2007 levels by 2050 in a carbon-constrained future (Figure 3). Most of these reductions The International Energy Agency (Figure 2). IEA states: “sustainable are achieved by the electric sector, (IEA) developed a global 2° Celsius transformation of the energy with a reduction of approximately scenario (2DS) that provides an sector can be achieved only 70 percent in one of the scenarios example of a global energy system with accelerated investment (Figure 4). It should be noted that pathway and a CO2 emissions in a portfolio of clean energy this reduction of approximately 70 trajectory consistent with at least technologies and energy percent in carbon emissions is close a 50 percent chance of limiting efficiency.”4 Energy efficiency, to the U.S. electric sector reductions the average global temperature electrification of end-use sectors, modeled in IEA’s 2DS. However, our increase to 2°C by 2100. The 2DS low emitting electricity generation recent analysis does not achieve emission trajectory represents such as renewable energy, these reductions until 2050. a 70 percent reduction in global fossil-fueled generation with carbon annual energy sector CO2 emissions

4,5 4,5 Figure 1: Global Direct CO2 Emissions in IEA’s 2DS Figure 2: Global Primary Energy Demand in IEA’s 2DS 18 Million Metric Tons CO2 EJ (EJ - exajoule - 10 joules)

40,000 700 Col Other trnsformton 600 30,000 500 Nucler Power 20,000 400 O l

Trnsport 300 10,000 Nturl s 200 Buldns, rculture, 0 Hdro fshn, other 100 Renewbles -10,000 Industr 0 2014 2060 2014 2060

4 © OECD/IEA 2017, Energy Technology Perspectives 2017, IEA Publishing. License: www.iea.org/t&c 5 Based on IEA data from the Energy Technology Perspectives 2017, ETP 2017 scenarios summary © OECD/IEA 2017, www.iea.org. License: www.iea.org/t&c; as modified by Bridget Brown.

18 Our goal of low- to no-carbon Electric transportation emissions by 2050 aligns with the modeled trajectories associated We are actively engaged in with the 2DS emissions trajectories. advancing the electrification of transportation, which will reduce The transportation sector accounted transportation costs for customers for 36 percent of the total U.S. while reducing carbon emissions. energy-related CO₂ emissions in This includes: 2016. Transitioning this sector from the heavy use of fossil fuels ff Promoting customer education presents the largest opportunity in and awareness. realizing a carbon-free future. With ff Working with vehicle overall carbon reductions as the manufacturers and EPRI to bring objective, emissions reductions in viable on-road EV technologies the electricity sector can provide to market. important motivation for further electrification of the remaining ff Helping develop charging end-use sectors. infrastructure and improve vehicle/grid integration plans for ff Accelerating the growth of We are exploring opportunities efficient distribution. the U.S. EV infrastructure as a member of the Alliance for for carbon reductions from the ff Offering lower electricity rates Transportation Electrification. transportation sector through our and programs for off-peak electric vehicle (EV) and hydrogen usage, which helps commercial Moreover, we monitor technology research efforts. and industrial customers reduce advancements that will be vital their operating costs and in a low-carbon future. New environmental impact.

Figure 3: U.S. Sector-Related Figure 4: U.S. Energy-Related 6 7 CO2 Emissions CO2 Emissions (Range Across Scenarios) (Range Across Scenarios)

Projected CO2 Reductions (2007 - 2050) Change in CO2 Emissions from 2007

10% 0%

0% -5% -10% -10% -10% -16% -20% -15% Are represents -30% -20% resultn rne of CO2 emsson -40% -25% pthw s -50% -30%

-60% -35%

-70% -40% -39% -80% -45% 2010 2020 2030 2040 2050 Industrl Resdentl Commercl Electrc Sector Trnsportton

6 U.S. sector-related CO2 emissions determined by Charles River Associates through the Company’s annual resource planning process. End-use sector-related emissions reductions include those associated with electricity. 7 U.S. energy-related CO2 emissions determined by Charles River Associates through the Company’s annual resource planning

process. Based on U.S. Energy Information Administration 2007 U.S. energy-related CO2 emissions of 6,021 MMTCO2. Planning for a low-carbon future 19 technologies are incorporated ff Energy economy modeling, integrated resource planning into the annual scenario planning in collaboration with external at the state-regulated electric process when appropriate, industry experts, analyzes the operating companies – and thereby influencing major implications of diverse futures ultimately informs major generation decisions. on multiple sectors of the generation retirement and capital nation’s economy. The two investment decisions. Scenario planning central uncertainties analyzed at a macro, national-level are ff Integrated resource planning Our integrated resource planning fuel (e.g., natural gas prices) and provides an orderly and reasoned process occurs annually – allowing CO₂ (e.g., represented as a cost framework where generation updates to the scenarios and to emit CO₂). Understanding supply and demand-side associated CO prices, as well 2 the impacts to individual options are analyzed across the as incorporation of the most sectors of the economy and state-regulated electric operating recent commodity, economic or the interaction between sectors companies with the objective of policy indicators. at the macro-economy level providing reliable and affordable energy that meets customers’ We use a robust scenario provides significant insight to needs over the planning horizon. planning process that has two informing and identifying broad primary components: energy industry risks and potential economy modeling and integrated business strategies. This scenario resource planning. format also serves as a basis for

Scenario planning process Energy Economy Modeling Integrated Resource Planning

Economc Scenro 1 Ares of Assumptons Fuel Mr et uncertnt Assumptons Addtonl enerton Scenro 2 technolo optons

Envronmentl Unt-specfc Polc Scenro chrcterstcs Assumptons Structure Compn -specfc Technolo lod proectons Scenro 3 Assumptons Scenro

Fuel nd Emsson Allownce Prce Forecst Ntonl ener Interreltonshps Economc Impcts econom model between vrous (e GDP, Income) wth multple fctors n sectors, ncludn the econom Interted resource plns the electrct sector Retrement nl ses New enerton development Scenro 1 Scenro

Scenro 2 Scenro 3

20 Energy economy modeling

Our most recent national-level scenario planning process Stte-reulted Electrc Servce encompasses a range of scenarios Terrtor with varying views for natural gas prices and CO2 prices. The CO2 price is represented as a range of economy-wide dollar per-metric ton prices of emissions. For this recent analysis, the starting price of

CO2 emissions spans $0 to $20 per metric ton and increases annually above inflation.

Multiple scenarios are generated using a range of fuel price and CO2 price inputs.

Applying the scenario f planning process at the We consider the potential for f Along with a quantitative retirement of generating units economic review, we also state-regulated electric as a part of our overall resource consider other qualitative companies strategy. For example: factors such as fuel diversity, impacts to local communities, ff If an electric generating unit is Our electric operating companies and operational flexibility not able to achieve required are subject to the jurisdiction of when making major emissions reductions in a their respective state PSCs. These generation decisions. regulatory agencies have broad cost-effective manner, we authority over the companies, evaluate other options, such as Our state-regulated electric switching fuels, finding alternate including approval of new operating companies are committed methods to comply or retiring supply-side and demand-side to proposing and seeking approval the unit and replacing it with resources and related cost of energy deployment options in another resource if needed. recovery rates. each state jurisdiction's resource If environmental controls are planning process that coincide At varying frequencies and under a required for a unit to remain in with a transition to a low- to no- variety of circumstances, the electric compliance, then the economic operating companies file with their value of the unit, including carbon future. These resources, for respective PSCs economic analyses future operating costs, must example, may include: advanced of recommendations or decisions be considered to determine natural gas generating units, using the scenario planning process. whether it is in the best interest nuclear, renewables, energy Accordingly, decisions made by of customers to install the efficiency, and demand response. an electric operating company required control technology or to Each state-regulated electric regarding its assets, including those retire the unit and, if necessary, operating company will work within requiring specific PSC approval, are replace it with another resource. its state’s regulatory framework in the best interest of its customers, Typically, an environmental to ensure that carbon reduction taking into account a wide variety strategy is also compiled on efforts are supportive of customers’ of factors, and based on the best a unit level and reviewed desires for clean, safe, reliable and information available at the time annually based on the most affordable energy. the decisions are made. current information.

Planning for a low-carbon future 21 Details about emissions reporting

Our estimated 2017 GHG emissions (CO2 equivalent) were approximately 97 million metric tons. This represents a carbon emissions reduction of 36 percent as compared to 2007 levels.

To better represent GHG emission reductions, we are transitioning to a 2007 baseline year that represents Southern Company's maximum emissions year, and we are continuing to use a calculation methodology consistent with EPA’s GHGRP methodology. Our actions and diverse generation portfolio have resulted in a GHG emission reduction of 36 percent from 2007 through 2017. Based on ownership, or financial control of facilities, the GHG emissions are calculated using methods required by GHGRP, including the GHGRP’s global warming potentials and emission factors.8

The majority of our GHG emissions result from the use of fossil fuels to We have reported natural gas CH4 Southern Company Gas continues to generate electricity, which results emissions through EPA’s Natural Gas work diligently with state PSCs to in emissions of three GHGs: CO2, STAR voluntary reporting program remove aging pipe from its system,

CH4 and N2O. More than 99 percent for nearly two decades, and which helps reduce leakage-related of the system’s electric generation through GHGRP since 2011. In 2016, GHG emissions. All seven local

GHG emissions are CO2. Alabama Southern Company Gas’ fugitive distribution companies continue Power, Georgia Power, Gulf Power, methane emissions intensity to achieve methane emissions Mississippi Power, Southern Power, rate was 0.25 percent, where the reductions through system Southern Company Gas, Southern total methane emissions were modernization. An overview of the Electric Generating Company and 1,900 million standard cubic feet Southern Company Gas pipeline PowerSecure all emit CO₂, CH₄ (MMscf) and methane throughput replacement program can be viewed and N₂O. was approximately 767,000 MMscf. on our website.

8 The emissions reported under the GHGRP are verified by EPA and based on units for which the system has operational control. The majority of the system’s electricity generation GHG emissions are measured with continuous emissions monitoring systems (CEMS) according to EPA’s Title 40 of the U.S. Code of Federal Regulations Part 75 specifications. Emissions not monitored by CEMS are calculated based on GHGRP methodology.

22 Governance

Board oversight of risk oversight for the risks designated to manage enterprise-level risk, to it, reports to the Board on their monitor the performance of risk The Board of Directors is responsible oversight activities and elevates mitigation strategies and identify for oversight of strategy and risk, review of risk issues to the Board as emerging risks. They meet routinely including risks related to carbon appropriate. Independent Directors and engage regularly with the Board emissions and related matters. The chair each Board committee, and and its committees throughout Board recognizes the potential each committee has a designated the year. impacts on our business and the member of executive management transitional risks and opportunities as the primary responsible officer Board committees the utility industry faces in a for providing information and low carbon future. The Board updates to the Board committee The Operations, Environmental regularly assesses the Company’s related to significant risks. There and Safety (OE&S) Committee of short- and long-term business is regular, open communication the Board oversees and reports strategy, including the long-term between management and the to the full Board on significant sustainability of its business, in Board on these topics throughout environmental and safety policy light of carbon-related risks and the year. and planning issues, including: opportunities. Issues that are ff Policies and operating matters the subject of active discussions We have a robust enterprise before environmental regulatory at Board and Board committee risk management program agencies; compliance with meetings include carbon-related that facilitates identification, environmental, health, and risk, regulatory compliance, energy communication and management safety laws and regulations; efficiency, renewable energy and of the most significant risks in transmission reliability and emerging technology. a formal process. Within this framework, risk governance and pipeline safety standards. Board and management oversight are largely embedded ff Programs, policies and in existing organizational and engagement in enterprise procedures to protect the control structures. As a part of the risk management program environment and provide a governance structure, the Chief healthy and safe environment Risk Officer is accountable to the All Board members are actively for employees, customers, Chief Executive Officer and the involved in our risk oversight contractors and the public. function. The Board reviews Board for ensuring that enterprise our risk profile and ensures that risk oversight and management ff Significant technology initiatives. oversight of each risk is properly processes are established and designated to an appropriate Board operating effectively. Officers and ff Risks and associated risk committee or the full Board. Each senior managers are responsible management activities related to Board committee provides ongoing for working across the business significant system operation.

Planning for a low-carbon future 23 The OE&S Committee receives regular reports on operating units’ safety and environmental activities. The Committee also engages in robust discussions about carbon emissions and carbon risks, strategic planning and scenario planning and analysis.

The Nominating, Governance and Corporate Responsibility (NG&CR) Committee of the Board oversees and reports to the full Board on the composition and competencies of the Board and its committees and corporate governance policies, including: ff Evaluating the composition and size of the Board to assess the skills and expertise that are represented on the Board and in individual directors, as well as the skills and experience that the Board may find valuable in the future. ff Reviewing and making recommendations to the Board ff Reviewing and making The NG&CR Committee receives regarding the Company’s recommendations to the Board updates about our ongoing practices and positions to regarding proposed responses to shareholder engagement program advance its corporate citizenship, shareholder proposals. and feedback received from including environmental, shareholders on environmental, ff Overseeing the Company’s sustainability and corporate social and governance (ESG) topics, shareholder engagement social responsibility initiatives. including climate-related risks program, and making and disclosures. recommendations to the Board regarding its involvement in shareholder engagement.

24 Engagement, transparency and further information

Engagement with to include independent Directors. the IEA 2DS received 46 percent stakeholders The NG&CR Committee currently support. Although the proposal oversees the shareholder did not pass, we began working We place great importance on engagement program on behalf with the proponents on disclosures consistent dialogue with all our of the Board. responsive to the proposal. Over the stakeholders, including customers, past year, we have had a number employees, and investors. We Shareholder outreach over of collaborative and constructive regularly engage in discussions the last year in-person meetings and telephone with, and provide comprehensive conferences with the proponents to information for, constituents In 2017 and early 2018, we reached discuss the proposal and this report. interested in our citizenship, out to our 100 largest shareholders stewardship and environmental representing more than 35 percent Transparency on ESG data compliance. We are receptive to of our outstanding shares and stakeholder concerns, and we to our shareholders that are We are focused on increasing are committed to transparency not among our 100 largest but transparency and accessibility and proactive interactions with expressed an interest in engaging to information about our carbon our investors. We regularly with us. We requested meetings emissions. We have worked with communicate with our shareholders to discuss ESG topics, as well as the Edison Electric Institute (EEI) to better understand their any other topics of interest to and its member companies, our viewpoints, gather input on our shareholders. We received positive investors and other stakeholders business strategy and execution and responses from, and had meetings to develop an ESG/Sustainability obtain feedback regarding other by telephone or in person with, template that is consistent across matters of investor interest. shareholders representing more the electric sector. The goals of this than 31 percent of our outstanding initiative include: ff Our management team shares, including index funds, union f participates in numerous investor and public pension funds, actively- f Provide consistent information meetings each year to discuss our managed funds and socially- to investors; business, our strategy and our responsible investment funds. ff Allow integration of financial results. These meetings ESG/Sustainability data include in-person, telephone, and Participants in calls and meetings and performance; webcast conferences. with our largest shareholders included one or more independent ff Provide clarity of risks (e.g., ff Since 2011, we have held regular Directors, the Chief Executive stranded assets, regulatory environmental stakeholder Officer, the Chief Financial Officer, issues, etc.) and opportunities forums, webinars, calls and the General Counsel, the Chief (e.g., investments in renewables, meetings covering a range of Human Resources Officer and the etc.) and how they are topics, including regulatory and Vice President for Environmental being managed; policy issues, system risk and and System Planning. Shareholder planning related to renewables, feedback is reported to our Board ff Provide insight into growth energy efficiency and greenhouse committees throughout the year. strategy, assumptions and gas matters. Members of senior future trajectory; management participate in Response to 2017 these events. shareholder proposal ff Provide both qualitative and quantitative information; and ff We began a more systematic At the 2017 annual meeting of approach to shareholder shareholders, a proposal from the ff Serve as a primary reporting outreach with respect to ESG Sisters of St. Dominic of Caldwell, channel for consolidated ESG/ topics in 2014 that involved New Jersey and certain colleagues Sustainability information members of our senior at the Interfaith Center on relevant to investors and management. The shareholder Corporate Responsibility requesting other stakeholders. outreach team expanded in 2016 a report on our strategy related to

Planning for a low-carbon future 25 Where you can find more information

2018 Notice of Annual Meeting of Stockholders and Proxy Statement 2017 Corporate Responsibility Report The energy to lead

Annual Report 2018 Proxy Statement Corporate Responsibility Reports

Our EEI/ESG Sustainability Report can be viewed on the Corporate Responsibility section of our website.

Cautionary note regarding forward-looking statements

Certain information contained in this of other natural resources, as well as activities (including major equipment report is forward-looking information changes in application of existing laws failure and system integration), and/or based on current expectations and plans and regulations; current and future operational performance; the ability that involve risks and uncertainties. litigation or regulatory investigations, to construct facilities in accordance Forward-looking information includes, proceedings, or inquiries; the effects, with the requirements of permits and among other things, statements extent, and timing of the entry of licenses (including satisfaction of Nuclear concerning GHG reduction strategies, additional competition in the markets in Regulatory Commission requirements), to demand outlooks, expected future cost which Southern Company’s subsidiaries satisfy any environmental performance and benefit analyses, other items related operate; variations in demand for standards and the requirements of tax to Southern Company’s future business electricity and natural gas, including those credits and other incentives, and to plans, and expected in-service dates relating to weather, the general economy, integrate facilities into the Southern for Plant Vogtle Units 3 and 4. Southern population and business growth Company system upon completion of Company cautions that there are certain (and declines), the effects of energy construction; advances in technology; factors that can cause actual results conservation and efficiency measures, ongoing renewable energy partnerships to differ materially from the forward- including from the development and and development agreements; state looking information that has been deployment of alternative energy and federal rate regulations and the provided. The reader is cautioned not sources such as self-generation and impact of pending and future rate to put undue reliance on this forward- distributed generation technologies; cases and negotiations, including rate looking information, which is not a available sources and costs of natural actions relating to fuel and other cost guarantee of future performance and is gas and other fuels; limits on pipeline recovery mechanisms; the ability of subject to a number of uncertainties and capacity; transmission constraints; the Southern Company’s electric utilities to other factors, many of which are outside ability to control costs and avoid cost obtain additional generating capacity the control of Southern Company and overruns during the development, (or sell excess generating capacity) at its subsidiaries; accordingly, there can construction, and operation of facilities, competitive prices; catastrophic events be no assurance that such suggested which include the development and such as fires, earthquakes, explosions, results will be realized. The following construction of generating facilities with floods, tornadoes hurricanes and other factors, in addition to those discussed in designs that have not been previously storms, droughts, pandemic health Southern Company’s and its subsidiaries’ constructed, including changes in events such as influenzas, or other similar Annual Reports on Form 10-K for the labor costs and productivity, adverse occurrences; and the direct or indirect year ended December 31, 2017, and weather conditions, shortages and effects on the Southern Company subsequent securities filings, could cause inconsistent quality of equipment, system’s business resulting from incidents actual results to differ materially from materials, and labor, contractor or affecting the U.S. electric grid, natural gas management expectations as suggested supplier delay, non-performance pipeline infrastructure, or operation of by such forward-looking information: under construction, operating, or other generating or storage resources. Southern the impact of recent and future federal agreements, operational readiness, Company and its subsidiaries expressly and state regulatory changes, including including specialized operator training and disclaim any obligation to update any environmental laws and regulations required site safety programs, unforeseen forward-looking information. governing air, water, land, and protection engineering or design problems, start-up

26 Southern Company system footprint

61 PH

2 CC PH 11 3 PH SS SS 5 1 PH LNG SS PH PH 4 20 SS SS PH PH 53 SS 7 3 11 1 PH PH PH 3 21 2 PH 5 3 69 3 PH

CC CT 242 PH 11 LNG CT 23 LNG 19 52 LNG 17 CT LNG 1 LNG

CC CT SS

CC CC PH PH 8 PH 39 PH SE B 4 LNG 805

SE CC SS

CT PH

Service territories Southern Power Southern Company Gas Facilities in operation or under LNG LNG facilities Electric development as of March 20, 2018 PH Pivotal Home Solutions Gas CC Combined cycle facility NOTE: On April 11, 2018, Southern NOTE: On October 16, 2017, CT Company Gas announced the pending Southern Company Gas announced Peaking facility disposition of Pivotal Home Solutions. the pending disposition of its Elizabethtown Gas and Elkton B Biomass facility Gas businesses. SE Sequent Energy Management S Solar facility SS SouthStar W Wind facility Natural gas storage Gas pipelines PowerSecure

Southern Natural Gas # Owned and managed sites per state Southern Company Gas

Pipeline projects southerncompany.com Printed on recycled paper April 2018_4535