Southern Company (The) (SO) Business Profile

What it does

Southern Company is a holding company whose subsidiaries generate and deliver electricity, distribute natural gas and provide related energy services. Its electric utilities serve households and businesses in the Southeast, while its gas utilities distribute natural gas in four states. The company was founded in 1945 and is headquartered in Atlanta. Chris Womack is chairman, president and chief executive officer.

Alabama Power, Georgia Power and Mississippi Power own power plants, transmission lines and local distribution networks. They sell electricity to retail customers and also supply wholesale customers, including other utilities and electricity distributors. Southern Power is a separate wholesale business that develops and operates generating assets and battery storage, selling electricity under contracts rather than through the traditional electric utilities’ retail rate structure.

Southern Company Gas operates natural gas distribution networks and also invests in pipelines and markets gas. Other subsidiaries support the system: Southern Nuclear operates its nuclear plants, while PowerSecure develops distributed energy and resilience systems, including microgrids for commercial, industrial, government and utility customers. Southern Linc provides wireless communications to the company and the public.

The businesses combine regulated utility operations with wholesale power sales and other energy services. Southern Company had 29,800 employees in FY2025.

How it makes money

Southern Company earns money primarily by providing electric and natural gas service. The traditional electric utilities and gas distribution utilities seek to recover their costs and earn a return on invested capital through retail rates approved by state regulators. Those rates cover the infrastructure and operations needed to serve customers. Regulators can change the timing or amount of cost recovery and the authorized return.

Southern Power sells wholesale electricity at market-based rates, primarily under long-term power purchase agreements. Its natural gas plants generally receive capacity payments designed to recover operating and maintenance costs and provide a return on investment. In contrast, customers of its solar and wind facilities generally pay for energy produced or provide a fixed price for electricity sold to the grid. Recovery of those facilities’ costs therefore depends on how much energy they generate.

Southern Company Gas also has pipeline investments and a gas marketing business. Its gas marketing operation sells the commodity to customers in competitive markets or markets that allow customer choice. PowerSecure sells distributed energy and resilience solutions, while Southern Linc markets communications services.

The company’s adjusted earnings were $1.13 per share for the second quarter of 2026. Southern Power’s average remaining contract duration was approximately 12 years at December 31, 2025; its investment coverage ratio was 97% through 2030 and 89% through 2035. The business seeks replacement contracts as existing agreements expire.

Customers and how it sells

Southern Company’s electric utilities serve retail customers across most of Alabama and Georgia and in southeastern Mississippi. Customers include residential, commercial and industrial users. The utilities also sell electricity wholesale to municipalities, cooperatives and other electricity providers.

Southern Company Gas serves approximately 4.4 million customers across Illinois, Georgia, Virginia, and Tennessee. Its distribution network delivers gas to residential, commercial and industrial users. Its gas marketing operation serves approximately 677,000 natural gas commodity customers.

Southern Power sells wholesale electricity across various U.S. utility markets. Its buyers include investor-owned utilities, independent power producers, municipalities and other entities that supply electricity, as well as commercial and industrial customers. PowerSecure serves commercial, industrial, governmental and utility customers with distributed energy systems and microgrids.

Data centers and other large-load customers are a growing part of demand. Georgia Power signed a 3.2 gigawatt 25-year contract for electric service with OpenAI for a site near Savannah, Georgia. The site is expected to take service in phases beginning in 2028 and includes flexible demand response, allowing some demand to be reduced when the system needs it.

Suppliers and costs

Southern Company’s electric utilities use natural gas and coal for generation, while Alabama Power and Georgia Power also use nuclear fuel. Southern Power’s electricity supply is primarily fueled by natural gas. The system purchases fuel from multiple suppliers and contracts for transportation and storage; Southern Company Gas purchases gas in the open market from producers and marketers.

For 2026, the system service company contracted for 644 Bcf of natural gas supply for the generating system. Alabama Power and Georgia Power have multiple contracts for uranium, conversion, enrichment and fuel fabrication. The traditional electric utilities expect existing agreements to supply substantially all of their 2026 coal requirements.

Major costs include fuel, purchased power, operating and maintaining plants and networks, construction, and environmental compliance. Changes in fuel prices are generally reflected in the traditional electric utilities’ fuel adjustment clauses. Southern Power’s natural gas agreements generally make counterparties responsible for substantially all fuel costs. Except for Atlanta Gas Light, the gas distribution utilities have mechanisms that adjust rates for changes in wholesale gas costs and recover prudently incurred purchasing costs.

Southern Company estimated 2026 spending of $653 million for closure and monitoring of certain surface impoundments and landfills.

Competitive position

Southern Company operates in both regulated utility service and markets where customers or power buyers can choose among suppliers. Its traditional electric companies serve defined retail territories, while Southern Power sells electricity at market-based rates across U.S. wholesale markets. Southern Company Gas also markets gas in competitive markets or markets that provide for customer choice.

No direct competitor is named in the available business description. AEP appears in a published comparison of commercial electricity sales growth, but that comparison does not establish that it competes directly with Southern Company in a particular market.

Our reading: The established electric and gas networks and the cost of building comparable infrastructure support Southern Company’s position in its service territories, although regulation also controls the returns it can earn. Our reading: Southern Power’s long-term contracts provide some protection against the need to sell all its output at prevailing market prices, but contracts expire and must be replaced. Our reading: The breadth of generation, transmission and distribution operations can help the electric utilities coordinate service for large customers, though additional demand also requires new investment and regulatory approvals.

Southern Power’s renewable contracts depend on actual generation, and its future earnings depend in part on wholesale market conditions and its ability to renew or replace contracts.

Growth opportunities

Southern Company is building infrastructure to meet projected electricity demand, particularly from data centers and other large customers. The company has secured approvals for 10 gigawatts of new company-owned generation resources, including thermal, battery and solar resources, as well as new transmission lines. Alabama Power and Georgia Power also have requests for proposals underway for potential additional generation needed in the early 2030s.

The company has contracts for over 17 gigawatts of large-load demand across its electric subsidiaries by the mid 2030s. It identifies an additional eight gigawatts of projects in late stages, including three gigawatts it expects to finalize in the near term. These prospective projects are separate from those already contracted. The company’s broader prospective pipeline of large industrial and data center projects remains well above 75 gigawatts.

Data center usage was 55% higher compared to the second quarter of 2025, and system-wide data center load exceeded 1.2 gigawatts. The company expects the load to rise as contracted demand comes online. Its large-load pricing includes minimum bills intended to cover at least 100% of incremental service costs, alongside termination payments and collateral requirements.

Southern Power is pursuing opportunities to replace or reprice expiring contracts and upgrade existing plants. Southern Company also sees possible expansion opportunities in its existing regulated pipeline investments.

Structural risks

• Regulatory recovery: Utility profitability depends on rates that permit recovery of costs and a return on investment. Regulators can change the amount or timing of recovery, and rising infrastructure costs may increase resistance to rate increases.
• Construction and large-load demand: Serving projected demand requires new generation, transmission and distribution investment. Construction costs can vary from estimates, and large customers’ actual usage ramps can differ from projections, although contracts include minimum bills and other protections.
• Environmental obligations: Compliance with environmental laws and the closure and monitoring of coal ash facilities require spending. Southern Company cannot be certain that all environmental costs will be recovered through rates.
• Operating and nuclear hazards: Equipment failures, fuel interruptions, storms and other events can disrupt service. Nuclear operations carry safety, environmental and financial risks, and losses or decommissioning costs could exceed insurance or trust coverage.
• Cyber and physical security: Attacks on dispersed infrastructure, technology systems or third-party providers could disrupt energy delivery or compromise information. Insurance may not cover all associated losses.
• Wholesale contracts: Southern Power’s earnings depend on market conditions, customer creditworthiness and its ability to replace expiring power purchase agreements. Renewable facilities’ ability to recover costs also depends on energy generation.

Bottom line

Our reading

Southern Company combines regulated electric and gas utilities with a contracted wholesale power business and related energy services. Its existing networks and long-term contracts provide the foundation for serving customers, while data centers are creating demand for additional infrastructure. [item1] [call_prepared]

The central trade-off is between growth in electricity demand and the cost of building and operating assets to serve it. Contract protections address some large-load exposure, but regulatory cost recovery, construction execution and operating risks remain important. [item1a] [call_prepared]