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Feb. 18, 2021, 6:08 a.m. EST

10-K: MISSISSIPPI POWER CO

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(EDGAR Online via COMTEX) -- Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page Combined Management's Discussion and Analysis of Financial Condition and Results of Operations Overview II- 3 Results of Operations II- 7 Southern Company II- 7 Alabama Power II- 17 Georgia Power II- 21 Mississippi Power II- 25 Southern Power II- 29 Southern Company Gas II- 32 Future Earnings Potential II- 40 Accounting Policies II- 48 Financial Condition and Liquidity II- 56

This section generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Annual Report on Form 10-K can be found in Item 7 of each Registrant's Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 19, 2020. The following Management's Discussion and Analysis of Financial Condition and Results of Operations is a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants.







        Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        See MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND LIQUIDITY -
        "Market Price Risk" in Item 7 herein and Note 1 to the financial statements
        under "Financial Instruments" in Item 8 herein. Also see Notes 13 and 14 to the
        financial statements in Item 8 herein.
        II-2
        


COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS







        Southern Company and Subsidiary Companies 2020 Annual Report
        OVERVIEW
        Business Activities
        Southern Company is a holding company that owns all of the common stock of three
        traditional electric operating companies, as well as Southern Power and Southern
        Company Gas, and owns other direct and indirect subsidiaries. The primary
        businesses of the Southern Company system are electricity sales by the
        traditional electric operating companies and Southern Power and the distribution
        of natural gas by Southern Company Gas. Southern Company's reportable segments
        are the sale of electricity by the traditional electric operating companies, the
        sale of electricity in the competitive wholesale market by Southern Power, and
        the sale of natural gas and other complementary products and services by
        Southern Company Gas. See Note 16 to the financial statements for additional
        information.
         The traditional electric operating companies - Alabama Power, Georgia Power,
        and Mississippi Power - are vertically integrated utilities providing electric
        service to retail customers in three Southeastern states in addition to
        wholesale customers in the Southeast.
         Southern Power develops, constructs, acquires, owns, and manages power
        generation assets, including renewable energy and battery energy storage
        projects, and sells electricity at market-based rates in the wholesale market.
        Southern Power continually seeks opportunities to execute its strategy to create
        value through various transactions including acquisitions, dispositions, and
        sales of partnership interests, development and construction of new generating
        facilities, and entry into PPAs primarily with investor-owned utilities, IPPs,
        municipalities, electric cooperatives, and other load-serving entities, as well
        as commercial and industrial customers. In general, Southern Power commits to
        the construction or acquisition of new generating capacity only after entering
        into or assuming long-term PPAs for the new facilities.
         Southern Company Gas is an energy services holding company whose primary
        business is the distribution of natural gas. Southern Company Gas owns natural
        gas distribution utilities in four states - Illinois, Georgia, Virginia, and
        Tennessee - and is also involved in several other complementary businesses.
        Southern Company Gas manages its business through four reportable segments - gas
        distribution operations, gas pipeline investments, wholesale gas services, which
        includes Sequent, a natural gas asset optimization company, and gas marketing
        services, which includes SouthStar, a Marketer and provider of energy-related
        products and services to natural gas markets - and one non-reportable segment,
        all other. See Notes 7 and 16 to the financial statements for additional
        information.
        Many factors affect the opportunities, challenges, and risks of the Southern
        Company system's electric service and natural gas businesses. These factors
        include the ability to maintain constructive regulatory environments, to
        maintain and grow sales and customers, and to effectively manage and secure
        timely recovery of prudently-incurred costs. These costs include those related
        to projected long-term demand growth; stringent environmental standards,
        including CCR rules; safety; system reliability and resilience; fuel; natural
        gas; restoration following major storms; and capital expenditures, including
        constructing new electric generating plants and expanding and improving the
        electric transmission and electric and natural gas distribution systems.
        The traditional electric operating companies and the natural gas distribution
        utilities have various regulatory mechanisms that address cost recovery.
        Effectively operating pursuant to these regulatory mechanisms and appropriately
        balancing required costs and capital expenditures with customer prices will
        continue to challenge the Southern Company system for the foreseeable future.
        See Note 2 to the financial statements for additional information.
        Southern Power's future earnings will depend upon the parameters of the
        wholesale market and the efficient operation of its wholesale generating assets,
        as well as Southern Power's ability to execute its growth strategy and to
        develop and construct generating facilities. In addition, Southern Power's
        future earnings will depend upon the availability of federal and state ITCs and
        PTCs on its renewable energy projects, which could be impacted by future tax
        legislation. See FUTURE EARNINGS POTENTIAL - "Income Tax Matters" herein and
        Notes 10 and 15 to the financial statements for additional information.
        Southern Company's other business activities include providing energy solutions
        to electric utilities and their customers in the areas of distributed
        generation, energy storage and renewables, and energy efficiency. Other business
        activities also include investments in telecommunications, leveraged lease
        projects, and gas storage facilities. Management continues to evaluate the
        contribution of each of these activities to total shareholder return and may
        pursue acquisitions, dispositions, and other strategic ventures or investments
        accordingly.
        II-3
        


COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)







        COVID-19
        During March 2020, COVID-19 was declared a pandemic by the World Health
        Organization and the Centers for Disease Control and Prevention and has spread
        globally, including throughout the United States. The Southern Company system
        provides an essential service to its customers; therefore, it is critical that
        Southern Company system employees are able to continue to perform their
        essential duties safely and effectively. The Southern Company system has
        implemented applicable business continuity plans, including teleworking,
        canceling non-essential business travel, increasing cleaning frequency at
        business locations, implementing applicable safety and health guidelines issued
        by federal and state officials, and establishing protocols for required work on
        customer premises. To date, these procedures have been effective in maintaining
        the Southern Company system's critical operations. As a result of the COVID-19
        pandemic, there have been economic disruptions in the Registrants' operating
        territories. The traditional electric operating companies and the natural gas
        distribution utilities temporarily suspended disconnections for non-payment by
        customers and waived late fees for certain periods. See Note 2 to the financial
        statements for information regarding deferral of certain incremental
        COVID-19-related costs, including bad debt, to a regulatory asset by certain of
        the traditional electric operating companies and the natural gas distribution
        utilities. In addition, the COVID-19 pandemic has impacted productivity and the
        pace of activity completion at Plant Vogtle Units 3 and 4, as discussed further
        herein. Additional information regarding the COVID-19 pandemic and its past and
        potential future impacts on the Registrants is provided throughout Management's
        Discussion and Analysis of Financial Condition and Results of Operations and in
        Item 1A herein.
        Alabama Power
        On August 14, 2020, the Alabama PSC issued an order granting Alabama Power a CCN
        to procure additional capacity, and, on August 31, 2020, Alabama Power completed
        its acquisition of the Central Alabama Generating Station.
        In October 2020, Alabama Power reduced its over-collected fuel balance by
        $94.3 million in accordance with an August 7, 2020 Alabama PSC order authorizing
        Alabama Power to reduce its over-collected fuel balance by $100 million and
        return that amount to customers in the form of bill credits, with any
        undistributed amount remaining in the regulatory liability for the benefit of
        customers.
        For the year ended December 31, 2020, Alabama Power's weighted common equity
        return exceeded 6.15%, resulting in Alabama Power establishing a current
        regulatory liability of $50 million for Rate RSE refunds, which will be refunded
        to customers through bill credits in April 2021.
        During 2020, Alabama Power recorded $51 million and $67 million against the NDR
        for damages incurred to its transmission and distribution facilities from
        Hurricane Sally and Hurricane Zeta, respectively. Alabama Power made an
        additional accrual of $100 million to the NDR in December 2020.
        Effective for the billing month of January 2021, Alabama Power's Rate RSE
        increased 4.09%, or approximately $228 million annually, and Alabama Power's
        Rate ECR decreased 1.84%, or approximately $103 million annually, as approved by
        the Alabama PSC.
        See Notes 2 and 15 to the financial statements under "Alabama Power" for
        additional information.
        Georgia Power
        Rate Plans
        On December 15, 2020, in accordance with the terms of the 2019 ARP, the Georgia
        PSC approved tariff adjustments effective January 1, 2021 as follows: (i)
        increased traditional base tariffs by approximately $120 million; (ii) increased
        the Environmental Compliance Cost Recovery (ECCR) tariff by approximately $2
        million; (iii) decreased Demand-Side Management tariffs by approximately $15
        million; and (iv) increased Municipal Franchise Fee tariffs by approximately $4
        million, for a total net increase in annual base revenues of approximately $111
        million. Georgia Power expects to submit a compliance filing in the third
        quarter 2021 to request tariff adjustments approved pursuant to the 2019 ARP
        effective January 1, 2022. The amounts requested in the 2019 ARP were as
        follows: (i) increase traditional base tariffs by approximately $192 million;
        (ii) increase the ECCR tariff by approximately $184 million; (iii) increase
        Demand-Side Management tariffs by approximately $1 million; and (iv) increase
        Municipal Franchise Fee tariffs by approximately $9 million, for a total
        increase in annual base revenues of approximately $386 million. The ultimate
        outcome of this matter cannot be determined at this time. See Note 2 to the
        financial statements under "Georgia Power - Rate Plans - 2019 ARP" for
        additional information.
        II-4
        


COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)







        Table of Contents                    Index to Financial Statements
        


COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2020 Annual Report site restoration activities. These activities are expected to be completed by 2026. See Note 3 to the financial statements under "Other Matters - Mississippi Power - Kemper County Energy Facility" for additional information. On February 12, 2021, Mississippi Power submitted its 2021 ECO Plan filing to the Mississippi PSC, which requested an annual decrease in revenues of approximately $9 million, as well as its ad valorem tax adjustment filing for 2021, which requested an annual increase in revenues of approximately $28 million. Mississippi Power plans to submit its 2021 PEP filing in March 2021.







        Table of Contents                    Index to Financial Statements
        


COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)







                                                          2020         2019
                                                            (in millions)
                            Electricity business        $ 3,115      $ 3,268
        . . .
        


Feb 18, 2021

COMTEX_381290816/2041/2021-02-18T06:08:12

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