form u-1 - nasdaq omx corporate...

File No. 70-9701

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Amendment No. 4

to

FORM U-1

APPLICATION OR DECLARATION

under

The Public Utility Holding Company Act of 1935

THE SOUTHERN COMPANY

270 Peachtree Street, N.W.

Atlanta, Georgia 30303

ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY 600 North 18th Street 2992 West Beach Birmingham, Alabama 35291 Gulfport, Mississippi 39501

GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER 241 Ralph McGill Boulevard, N.E. COMPANY Atlanta, Georgia 30308 600 East Bay Street Savannah, Georgia 31401

GULF POWER COMPANY SOUTHERN ELECTRIC GENERATING One Energy Place COMPANY Pensacola, Florida 32520 600 North 18th Street Birmingham, Alabama 35291

(Name of company or companies filing this statement and addresses of principal executive offices)

THE SOUTHERN COMPANY

(Name of top registered holding company parent of each applicant or declarant)

Tommy Chisholm, Secretary and Assistant Treasurer The Southern Company

270 Peachtree Street, N.W. Atlanta, Georgia 30303

2002. EDGAR Online, Inc.

William E. Zales, Jr. Michael W. Southern, Vice President, Vice President and Secretary Secretary and Treasurer Alabama Power Company Mississippi Power Company 600 North 18th Street 2992 West Beach Birmingham, Alabama 35291 Gulfport, Mississippi 39501

Judy M. Anderson, Vice President Kirby R. Willis, Vice President, and Corporate Secretary Treasurer and Chief Financial Officer Georgia Power Company Savannah Electric and Power Company 241 Ralph McGill Boulevard, N.E. 600 East Bay Street Atlanta, Georgia 30308 Savannah, Georgia 31401

Warren E. Tate William E. Zales, Jr. Secretary and Treasurer Secretary and Assistant Treasurer Gulf Power Company Southern Electric Generating Company One Energy Place 600 North 18th Street Pensacola, Florida 32520 Birmingham, Alabama 35291

(Names and address of agents for service)

This Commission is requested to mail signed copies of all orders, notices and communications to:

W.L. Westbrook John D. McLanahan, Esq. Financial Vice President Troutman Sanders LLP The Southern Company 600 Peachtree Street, N.E. 270 Peachtree Street, N.W. Suite 5200 Atlanta, Georgia 30303 Atlanta, Georgia 30308-2216

Walter M. Beale, Jr., Esq. Balch & Bingham LLP

1901 Sixth Avenue North Suite 2600

Birmingham, Alabama 35203


INFORMATION REQUIRED

The statement on Form U-1 as initially filed in this proceeding is hereby amended and restated in its entirety as follows:

Item 1. Description of Proposed Transactions.

The Southern Company ("Southern") is a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"). Southern proposes to organize a new subsidiary company ("NewCo"). Upon obtaining requisite regulatory authorizations, NewCo will undertake the construction and ownership of certain electric power generation interconnected to the transmission systems of Alabama Power Company ("Alabama"), Georgia Power Company ("Georgia"), Gulf Power Company ("Gulf"), Mississippi Power Company ("Mississippi"), Savannah Electric and Power Company ("Savannah")1 and Southern Electric Generating Company ("SEGCO") 2 (collectively, the "Operating Companies"), or to transmission systems interconnected to those of the Operating Companies designed for serving the power requirements of the Operating Companies and of other power purchasers in the region. 3 In addition, NewCo proposes to invest in exempt wholesale generators ("EWGs"), the generation of which may not be interconnected to transmission systems of the Operating Companies. NewCo will not invest in foreign utility companies ("FUCOs") or foreign EWGs. Certain power generation owned by NewCo may be integrated into the power generation owned by the Operating Companies and operated on a central dispatch basis by Southern Company Services, Inc. ("Services").

1 Alabama, Georgia, Gulf, Mississippi and Savannah are public utility company subsidiaries of Southern.

2 Alabama and Georgia each own 50% of the common stock of SEGCO and are each entitled to 50% of the output of SEGCO.

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A. Purpose of NewCo.

It is proposed that NewCo will own substantial portions of the generation for wholesale sales to third parties and to some or all of the Operating Companies. NewCo will not engage in retail sales of electricity. The wholesale sales of electricity are subject to approval by the Federal Energy Regulatory Commission (the "FERC") under procedures promulgated under the Federal Power Act, as amended (the "Federal Power Act"), designed to preserve the integrity of state regulatory authority over retail electricity sales.

Over the last few years, electric supply in the United States has been dramatically transformed from a heavily regulated industry to one that is now extremely fast paced and marked by unprecedented levels of customer choice and competition. Southern is adapting to this new environment by forming NewCo. The formation of NewCo reflects an organizational change which will focus on wholesale generating assets in the Southeast. NewCo will facilitate Southern's adaptation to that new business environment by consolidating the sort of wholesale activities that are currently being conducted on a piecemeal basis by the existing Operating Companies. The organizational change is expected to produce efficiencies in at least three respects:

(1) It will provide a structure to clearly separate assets that are involved in wholesale transactions from retail ratemaking. Under the current structure, an Operating Company is free to engage in wholesale transactions, and the Operating Companies have done so for many years. Nevertheless, a significant amount of time and effort is required by the state commissions (and their staffs) and company management to ensure that the retail/wholesale operations

3 The Commission recently granted similar authority to another holding company system. See Allegheny Energy, Inc. et al., Holding Company Act Release No. 27101, dated November 12, 1999.

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are properly segregated from both an accounting and a ratemaking standpoint. Establishing a separate company to handle those transactions in the future will conclusively resolve any such concerns and will reduce (if not eliminate) the need for jurisdictional separation studies or other such time consuming and costly safeguards that are otherwise used for this purpose.

(2) It will simplify the resource planning process for the existing Operating Companies, which must now reconcile two different concepts of business development. Under current retail regulation, each Operating Company has a statutory duty to serve retail customers located in its service territory. To meet that need, it procures resources to serve that projected load (including reserves). In contrast, the customer choice available in the wholesale market requires an entirely different planning process -- one that involves the analysis of prospective arrangements, the rapid formulation of definitive bids and the development of plants that are intended either to meet a delivery deadline under a winning bid or to serve as a source of supply for future bids. In short, the retail and wholesale markets require different approaches to planning and decision making, and thus efficiencies would result from their segregation.

(3) It will expedite decision making. The above-described wholesale power market now moves very quickly. Some of the current decision making regarding wholesale power requires coordination among the dispersed management structures of the individual Operating Companies. As a separate corporate entity, NewCo will be in a position to make decisions in a time frame that is more compatible with the requirements and expectations of the market.

While the formation of NewCo offers the improvements and efficiencies described above, it will in no way diminish the reliability of electric supply in the Southeast. Regional reliability will be just as strong as it would have been in the absence of this organizational change. Southern will continue to

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develop and/or purchase supply resources to provide reliable service to its wholesale and retail customers through the Operating Companies and also NewCo.

B. Formation and Capitalization of NewCo.

Southern and the Operating Companies request the authority to complete all steps necessary for the organization of NewCo, a limited liability company or corporation, as a new subsidiary of Southern4 (see Exhibit A-1). Southern and the Operating Companies further seek authority for the issuance by NewCo and the acquisition by Southern of limited liability company interests or other equity interests in NewCo.

As described more fully in Item 1, Section E. Financing Authority, Subsection 1 Equity Funding, Guarantee and Parent Support Authority herein, the initial capitalization of NewCo may take the form of any combination of: (1) purchases of or contributions in respect of limited liability company interests or other forms of equity interests; (2) open account advances without interest; (3) loans; and (4) Guarantees (as defined below) issued in support of securities and other obligations of NewCo. Southern and NewCo will maintain the equity component of NewCo's consolidated capitalization at or above 30%. Applicants propose that NewCo be permitted to maintain a common equity component less than 30% and request that the Commission reserve jurisdiction over transactions that would cause the common equity component of NewCo's consolidated capitalization to fall below 30%.

4 An Operating Company may form a wholly-owned subsidiary which will acquire certain assets described herein from such Operating Company and which will subsequently be spun off to Southern and be merged into a limited liability company or corporation to form NewCo.

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C. Transfer of Assets by the Operating Companies and Acquisition of Assets by NewCo.

Southern and the Operating Companies propose to transfer the following asset and types of assets (collectively, the "Plant Sites and Generating Equipment") to NewCo: Plant Dahlberg in Jackson County, Georgia; plants under construction and/or undeveloped plant sites prior to their becoming utility assets; and existing contracts for wholesale sales of electricity.

Georgia Power Company, a public utility subsidiary of Southern Company, is currently developing the Plant Dahlberg facility, an 800 MW simple-cycle natural gas peaking facility located north of Athens, Georgia. The facility will initially consist of 10 combustion turbine generating units. Units 1-8 entered commercial operation during May through June 2000. Units 9 and 10 are scheduled for commercial operation in the spring of 2001. Primary fuel for the units will be natural gas, with No. 2 fuel oil backup. The facility is interconnected to the Georgia Integrated Transmission System and the Southern Company electrical control area via a 230 kV transmission line and is centrally dispatched as part of the Southern control area. Plant Dahlberg will be transferred at the book cost of Georgia Power Company, which was approximately $204 million at September 30, 2000, and is estimated to appreciate to $275 million, upon completion of Units 9 and 10 in the spring of 2001.

The Plant Sites and Generating Equipment will be transferred or sold to NewCo in an amount equal to the net book value thereof. NewCo will pay cash and/or issue promissory notes, secured by purchase money mortgages on the Plant Sites and Generating Equipment, for the Plant Sites and Generating Equipment to the respective Operating Company in complete consideration therefor. Promissory notes would only be issued to the Operating Companies for a term not to exceed five years and at interest rates equivalent to similar securities of a like

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maturity, provided that such rate of interest fully compensates the Operating Company for its cost of funds. After the transfer of the Plant Sites and Generating Equipment, NewCo will assume responsibility for the construction and ownership of the Plant Sites and Generating Equipment.

NewCo will become an "electric utility company" as defined in Section 2(a)(3) of the Act.

D. Intercompany Interchange Contract.

By order issued June 15, 2000 under the Federal Power Act, the FERC approved the participation of NewCo in the Intercompany Interchange Contract dated as of February 17, 2000 among Alabama, Georgia, Gulf, Mississippi, Savannah, NewCo and Services (the "Intercompany Interchange Contract"). The Intercompany Interchange Contract is a wholesale power sale rate schedule and coordination agreement subject to the jurisdiction of the FERC pursuant to Section 205 of the Federal Power Act. The principal purpose of the Intercompany Interchange Contract is to provide for the accounting for energy transfers among the participants that result from the operation of their power generation on a centrally dispatched basis (the "Pool").5 Under the Intercompany Interchange Contract, each participant is deemed to retain its lowest cost energy resources to serve its own load and its remaining resources are made available to the Pool at a rate that recovers variable cost. Centralized dispatch results in a lower energy cost than would be achieved through independent operation because the participants can purchase from the Pool when doing so is less expensive than using their own resources. Pooled power operations also reduce the reserve requirements needed for reliable energy supply from those that would be required on a single company stand alone basis.

5 The Intercompany Interchange Contract also provides for the sharing of reserves among the participants.

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E. Financing Authority.

The applicants request authority to engage in the transactions described below from time to time, as applicable, through June 30, 2005.

1. Equity Funding, Guarantee and Parent Support Authority.

Southern seeks finance authority to fund the development and growth of NewCo. Funding from Southern in an aggregate amount not to exceed $1.7 billion may take the form of any combination of: (1) purchases of or contributions in respect of limited liability company interests or other forms of equity interests; (2) open account advances without interest; (3) loans; and (4) Guarantees issued in support of securities and other obligations of NewCo. The proceeds of such financings will be used to finance the operations of NewCo authorized herein including the acquisition, construction and operation of power generation facilities, fuel and power generation equipment procurement and storage, and energy-related activities, including those authorized pursuant to 17 C.F.R. ss. 250.58, pertaining thereto.

Guarantees may be utilized as credit support for NewCo. The increase in guarantee authority is necessary if NewCo is expected to achieve its goal of increasing operating income from non-rate-regulated businesses in the next few years. Southern proposes to issue additional guarantees or provide other forms of credit support or enhancements (collectively, "Guarantees") to, or for the benefit of, NewCo. Guarantees may take the form of Southern agreeing to guarantee, to undertake reimbursement obligations, to assume liabilities or to assume other obligations with respect to, or to act as surety on, bonds, letters of credit, evidences of indebtedness, equity commitments, performance and other obligations undertaken by NewCo.

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The terms and conditions of the Guarantees will be established through arms-length negotiations based upon current market conditions. Any Guarantee issued will be without recourse to any of the Operating Companies.

Southern also seeks authority to issue loans with a term not to exceed two years to NewCo in order to provide liquidity to NewCo to facilitate cash management. NewCo needs the flexibility to be able to obtain parent company loans if the need arises in its business operations. Such loans will be at interest rates and maturities designed to provide a return to Southern at its effective cost of capital.

2. NewCo Independent Financing.

In connection with its daily operations, financing the acquisition, construction and operation of assets owned by it and its subsidiaries, and to achieve its business goals, it will also be necessary for NewCo to obtain independent financing. This financing is currently expected to take, without limitation, the form of bank loans and/or bank credit support, project financing, lease or sale/leaseback transactions,6 commercial paper programs, preferred equity, preferred securities,7 debt secured by NewCo's assets or unsecured debt, notes, debentures and other issuances of equity. In connection with project financing of generating assets, NewCo may acquire securities or other interests in project subsidiaries. In addition, NewCo proposes to incur obligations in connection with the issuance and sale by public instrumentalities of one or more series of revenue bonds. NewCo requests that the Commission

6 In connection with any lease or sale/leaseback transaction, NewCo may transfer or sell its utility assets to a third party. NewCo will lease such assets from the third party with an option to buy back the assets. Applicants request that the Commission reserve jurisdiction over such transactions.

7 In connection with the issuance of preferred securities, NewCo will organize a special purpose subsidiary (each, a "SPS") and may organize another special purpose subsidiary for the purpose of complying with applicable state law. A SPS will issue preferred securities to third parties and NewCo will acquire all of the common equity or general partnership interests of the SPS. NewCo will simultaneously issue debt securities to the SPS and may guarantee certain payments with respect to the preferred securities.

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authorize it to obtain financing in an aggregate amount not to exceed $2.5 billion, which is in addition to parent support, guarantees and other commitments described in under Item 1, Section E. Financing Authority, Subsection 1. Equity Funding, Guarantee and Parent Support Authority herein.

The interest rate or other distribution rate for independent financings will reflect rates obtained by companies with comparable credit quality. It is expected that the rate will not exceed the highest of the following rates: (i) 400 basis points over U.S. Treasury securities, (ii) a gross spread over U.S. Treasury securities that is consistent with similar securities having comparable maturities, (iii) 200 basis points over the prime rate or (iv) 350 basis points over LIBOR.

3. Dividend Authority.

In order to manage its financial assets most efficiently, pursuant to Rule 46, NewCo requests that the Commission reserve jurisdiction with respect to authority for it and its subsidiaries to pay dividends to Southern out of capital or unearned surplus to the extent permitted by the applicable law and without impairing the rights of the holder of outstanding securities. This will permit NewCo and its subsidiaries to avoid having excess unrestricted cash trapped in subsidiaries.

F. Proposed Service Agreements with Services and Operating Companies.

Initially, Southern anticipates that NewCo will not have a significant number of its own employees. It is likely that (1) personnel employed by Services, a service company approved by the Commission under Section 13 of the Act and Rule 88 thereunder (see The Southern Company et al., Holding Company Act Release No. 14776, dated December 21, 1962), will provide a wide range of services on an as-needed basis pursuant to a Service Agreement ("Service Agreement") to be entered into between NewCo and Services and (2) personnel employed by the Operating Companies will also provide services to NewCo pursuant

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to Operating Agreements (the "Operating Agreements") between NewCo and each Operating Company or other arrangements.

The Service Agreement will take effect upon Commission approval thereof and will be similar in all material respects to those service agreements which Services has signed with each of the Operating Companies. Under the proposed Service Agreement, Services will render to NewCo, at cost computed in accordance with Rules 90 and 91 under the Act and other applicable rules and regulations, various services including general executive and advisory services, power pool operations, general engineering, design engineering, purchasing, accounting, finance and treasury, taxes, insurance and pensions, corporate, rates, budgeting, public relations, employee relations, systems and procedures and other services with respect to business and operations. Services will account for, allocate and charge its costs of the services provided on a full cost reimbursement basis under a work order system consistent with the Uniform System of Accounts for Mutual and Subsidiary Service Companies. The time that Services employees spend working for NewCo will be billed to and paid by NewCo on a monthly basis, based upon time records. Each company will maintain separate financial records and detailed supporting records. The proposed form of Service Agreement to be entered into is filed as Exhibit B-1.

The Operating Agreements will provide that each Operating Company will provide certain services relating to accounting matters and to the construction, operation, maintenance and rehabilitation of assets owned by NewCo at cost to NewCo. The proposed form of Operating Agreement is attached hereto as Exhibit B-2.

NewCo may also determine from time to time that it is efficient and advantageous to have certain development activities performed by its own employees and/or by unaffiliated third parties. Such arrangements with

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unaffiliated third parties will be on a fee-for-service negotiated basis at market rates.

G. Formation of EWG Subsidiaries of NewCo.

NewCo proposes to acquire securities or interests in the business of one or more EWGs, as such term is defined in the Act (the "Exempt Subsidiaries"), either directly or indirectly through project companies ("Intermediate Companies").

1. Use of Intermediate Companies.

Intermediate Companies would be special purpose subsidiaries formed to exclusively engage in activities to facilitate the consummation of investments in EWGs. They may also engage in development activities.8 Intermediate Companies may acquire interests in, finance the acquisition of and hold the securities of EWGs. Intermediate Companies would enhance the ability of NewCo to respond quickly to investment opportunities. An Intermediate Company may be organized at the time of the making of bids or proposals to acquire an interest in any EWG or at any time thereafter in order to facilitate the bidding and subsequent consummation of an acquisition of an interest in an EWG.

Southern also proposes that an Intermediate Company may issue equity securities and debt securities to persons other than NewCo or Southern (and with respect to which there will be no recourse to Southern), including banks, insurance companies and other financial institutions, exclusively for the purpose of financing (including any refinancing) investments in EWGs.

8 Development activities will include project due diligence and design review; market studies; site inspection; preparation of bid proposals, including, in connection therewith, posting of bid bonds, cash deposits or the like; application for required permits and/or regulatory approvals; acquisition of site options and options on other necessary rights; negotiation and execution of contractual commitments with owners of existing facilities, equipment vendors, construction firms, power purchasers, thermal "host" users, fuel suppliers and other project contractors; negotiation of financing commitments with lenders and equity co-investors; and such other preliminary development activities as may be required in preparation for the acquisition or financing of a project.

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2. Investment in Intermediate Companies and Exempt Subsidiaries.

The Intermediate Companies may issue securities to Southern and/or NewCo, and Southern and/or NewCo may acquire the securities. The investment by Southern or NewCo in the Exempt Subsidiaries may take the form of capital stock or shares, debt securities, trust certificates, capital contributions, open account advances without interest and partnership interests or other equity or participation interests, bid bonds or other credit support to secure obligations incurred by NewCo and/or Intermediate Companies in connection with Exempt Subsidiary investments or of NewCo's undertaking to contribute equity to an Intermediate Company. Southern and NewCo propose, from time to time through June 30, 2005, to (1) guarantee the indebtedness or other obligations of one or more Exempt Subsidiaries; (2) assume the liabilities of one or more Exempt Subsidiaries; and/or (3) enter into guarantees and letters of credit reimbursement agreements in support of equity contribution obligations or otherwise in connection with project development activities for one or more Exempt Subsidiaries. Guarantees and credit support are also described under Item 1, Section E. Financing Authority, Subsection 1. Equity Funding, Guarantee and Parent Support Authority herein.

Investments may be made from Southern to NewCo and/or Intermediate Companies directly or indirectly. Any open account advance made by Southern will have a maturity of not more than one year.

Southern requests approval to enter into reimbursement agreements with banks to support letters of credit delivered as security for Southern's or NewCo's equity contribution obligation to an Intermediate Company or otherwise in connection with an Intermediate Company's or Exempt Subsidiary's project development activities.

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The investment in Intermediate Companies and Exempt Subsidiaries is included in the $4.2 billion authority requested in Item 1, Section E. Financing Authority herein.

3. Rule 53 and Rule 58 Compliance.

Southern will report all "aggregate investment" as defined under Rule 53 of the Act on a consolidated basis. In addition, to the extent that Southern provides funds to NewCo that are used to invest in an energy-related company (within the meaning of Rule 58 under the Act), the amount of the investment will be included in the calculation of "aggregate investment" required under Rule 58.

H. NewCo to Sign Income Tax Allocation Agreement.

In accordance with Rule 45 of the Act, NewCo will participate in the Income Tax Allocation Agreements, as amended, by signing an amendment to such agreements.

I. Reporting Requirements.

Southern proposes that a single consolidated quarterly report be filed by Southern pursuant to Rule 24, with respect to all activities of Southern and its subsidiaries authorized in this file. The format of the report shall continue to include the following:

Item (1) A copy of the balance sheet and income statements as of and for the period ending on the last day of such quarter for direct subsidiaries of Southern that hold the securities of EWGs, including, without limitation, NewCo.

Item (2) A narrative description of NewCo's activities during the quarter just ended organized by business category (project development, project related services and other) and, within each category, a description of new developments by project type (e.g., EWGs, energy related activities, etc.).

Item (3) Amounts and forms of: (i) guarantees of, and similar provisions and arrangements concerning, performance and undertaking of other obligations by NewCo or any subsidiary of NewCo; and (ii) indemnifications of and with respect to persons acting as sureties on bonds or other obligations on

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behalf of NewCo or any subsidiary of NewCo which Southern has agreed to grant in the event a bid by any of the foregoing is accepted.

Item (4) Amounts and forms of: (i) guarantees of, and similar provisions and arrangements concerning, performance and undertaking of other obligations by NewCo or any subsidiary of NewCo which Southern has granted and are currently effective; and (ii) indemnification's of and with respect to persons acting as sureties on bonds or other obligations on behalf of NewCo or any subsidiary of NewCo which Southern has granted and are currently effective.

Item (5) A description of services and goods obtained from associate companies, including services to NewCo, specifying the type of service, the number of personnel from each associate company providing services during the quarter and the total dollar value of such services.

Item (6) A description of services and goods provided to associate companies and NewCo which identifies the recipient company, the charge to the associate and whether the charge was computed at cost, market or pursuant to another method, which method shall be specified.

Item (7) A chart showing, as of the end of such quarterly period, all associate companies of Southern that are EWGs, Intermediate Subsidiaries, Special Purpose Subsidiaries and Energy-Related Companies; Southern's direct or indirect investment in each such entity; the aggregate direct and indirect investment by Southern in all such entities; and Southern's percentage equity ownership in each such entity, together with a statement indicating by category the type of entity or person (i.e., domestic corporation, foreign corporation, foreign government or natural persons) owning the equity interests in each such entity that are not held directly or indirectly by Southern.

Item 2. Fees, Commissions and Expenses.

The fees, commissions and expenses paid or incurred or to be paid or incurred in connection with the proposed transactions are estimated not to exceed $100,000.

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Item 3. Applicable Statutory Provisions.

The applicants consider that Sections 6, 7, 9, 10, 11, 12 and 13 of the Act and Rules 43, 44, 45, 46, 53, 54, 58, 88, 90 and 91 under the Act are applicable to the proposed transactions.

To the extent that other sections of the Act or the Commission rules thereunder are deemed to be applicable to the transactions described herein, such sections and rules should be considered to be set forth in this Item 3.

Section 9(a)(1) provides that unless the acquisition has been approved by the Commission under Section 10, it shall be unlawful for any registered holding company or any subsidiary company thereof "to acquire, directly or indirectly, any securities or utility assets or any other interest in any business."

Applicants believe that the proposed transactions described herein which are subject to Section 9(a) of the Act satisfy the standards of Section 10 of the Act.

Applicants also believe that the consideration to be paid in connection with the transactions described herein is fair and reasonable.

Applicants believe that the transactions described in Item 1 do not unduly complicate the capital structure of the Southern system and are in the public interest and in the interest of investors and consumers. Applicants also believe that the transactions described in Item 1 will tend toward the proper functioning of the Southern system in a deregulated wholesale market and, as a consequence, toward the economical and efficient development of an integrated public utility system. The request that NewCo and its subsidiaries be permitted to pay dividends from unearned surplus is consistent with Commission precedent. See Conectiv, Inc., Holding Company Act Release No. 27079 (September 27, 1999.)

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The transactions described in Item 1 are, in the context of deregulation in the wholesale electrical generation market, "reasonably incidental, or economically necessary and appropriate to" the operations of a registered electric utility holding company system such as Southern. See The Southern Company, Holding Company Act Release No. 26211, dated December 30, 1994. These transactions will enable the Southern system to offer competitive generation in the wholesale market, thus they tend toward the economical and efficient development of an integrated public utility system.

The various transfers of assets and equity securities and the formation of NewCo described in Item 1 would not result in the existence of any company in the holding company system that would unduly or unnecessarily complicate the structure, or unfairly or inequitably distribute voting power among security holders, of the Southern system. The creation of the new subsidiary is necessary to adapt to competition in the wholesale generation industry and will contribute to the efficient operation of Southern's integrated power supply system. Plant Dahlberg operates as part of that system. As noted in Item 1, the transfers and the formation of new subsidiary will allow the Operating Companies to continue to serve the needs of their requirements customers while gearing Southern for competition in a deregulated wholesale generation market, will allow NewCo to manage and operate its generating assets with due regard to market considerations and will increase the flexibility for financing activities on cost-effective terms that reflect the costs of capital for each area of business activity. After all transfers and actions described in Item 1 are completed, redundant organizational structures will not remain. As described in Item 1 hereof, Southern will achieve a number of operating, financial and managerial benefits from forming NewCo that are consistent with and will contribute to the efficient operation of an integrated utility system. See WPL Holdings Inc.,

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Holding Company Act Release No. 25377, dated September 18, 1991. Accordingly, approval is warranted under Section 10 of the Act.

Rule 54 Analysis: The proposed transactions are also subject to Rule 54, which provides that, in determining whether to approve an application which does not relate to any EWG or FUCO, the Commission shall not consider the effect of the capitalization or earnings of any such EWG or FUCO which is a subsidiary of a registered holding company if the requirements of Rule 53(a), (b) and (c) are satisfied.

Southern currently meets all of the conditions of Rule 53(a), except for clause (1). At September 30, 2000, Southern's "aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.565 billion, or about 58.14% of Southern's "consolidated retained earnings," also as defined in Rule 53(a)(1), for the four quarters ended September 30, 2000 ($4.412 billion). With respect to Rule 53(a)(1), however, the Commission has determined that Southern's financing of investments in EWGs and FUCOs in an amount greater than the amount that would otherwise be allowed by Rule 53(a)(1) would not have either of the adverse effects set forth in Rule 53(c). See The Southern Company, Holding Company Act Release No. 26501, dated April 1, 1996 (the "Rule 53(c) Order"); and Holding Company Act Release No. 26646, dated January 15, 1997 (order denying request for reconsideration and motion to stay).

In addition, Southern has complied and will continue to comply with the record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3) on the use of Operating Company personnel to render services to EWGs and FUCOs, and the requirements of Rule 53(a)(4) concerning the submission of copies of certain filings under the Act to retail rate regulatory commissions. Further, none of the circumstances described in Rule 53(b) has occurred.

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Moreover, even if the effect of the capitalization and earnings of EWGs and FUCOs in which Southern has an ownership interest upon the Southern holding company system were considered, there would be no basis for the Commission to withhold or deny approval for the proposal made in this Application-Declaration. The action requested in the instant filing would not, by itself, or even considered in conjunction with the effect of the capitalization and earnings of Southern's EWGs and FUCOs, have a material adverse effect on the financial integrity of the Southern system, or an adverse impact on Southern's public-utility subsidiaries, their customers, or the ability of State commissions to protect such public-utility customers.

The Rule 53(c) Order was predicated, in part, upon an assessment of Southern's overall financial condition which took into account, among other factors, Southern's consolidated capitalization ratio and the recent growth trend in Southern's retained earnings. As of December 31, 1995, the most recent fiscal year preceding the Rule 53(c) Order, Southern's consolidated capitalization consisted of 49.3% equity (including mandatorily redeemable preferred securities) and 50.7% debt (including $1.68 billion of long-term, non-recourse debt and short-term debt related to EWGs and FUCOs). Southern's consolidated capitalization as of September 30, 2000 was 40.4% equity,9 59.6% debt including all non-recourse debt, and 55.7% equity and 44.3% debt excluding all non-recourse debt. On a pro forma basis, taking into consideration the transactions contemplated hereby, such ratios are 40.4% and 59.6%, respectively, for equity and debt. The common equity component of Southern's pro forma consolidated capitalization includes $11.080 billion of common stock equity, representing 32.5% of capitalization and $2.688 billion principal amount of

9 Excluding preferred stock and preferred securities from the equity component of Southern's consolidated capitalization, the equity component was 31.4% of total capitalization.

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preferred stock and preferred securities representing 7.9% of capitalization.

Since the date of the Rule 53(c) Order, there has been a reduction in Southern's consolidated equity capitalization ratio; however, it remains within acceptable ranges and limits of rating agencies for strong investment grade corporate credit ratings. In addition, the affiliated operating companies, which have a significant influence on the Southern corporate rating, continue to show strong financial statistics as measured by the rating agencies. The following table presents the senior secured ratings history for each as rated by S&P, Moody's and Fitch:

------------- ---------- --------- --------- --------- --------- --------- Company Agency 1995 1996 1997 1998 199910 ------------- ---------- --------- --------- --------- --------- --------- ------------- ---------- --------- --------- --------- --------- --------- Alabama S&P A+ A+ A+ A+ A+ Moody's A1 A1 A1 A1 A1 Fitch A+ AA- AA- AA- AA- ------------- ---------- --------- --------- --------- --------- --------- ------------- ---------- --------- --------- --------- --------- --------- Georgia S&P A+ A+ A+ A+ A+ Moody's A1 A1 A1 A1 A1 Fitch AA- AA- AA- AA- AA- ------------- ---------- --------- --------- --------- --------- --------- ------------- ---------- --------- --------- --------- --------- --------- Gulf S&P A+ A+ AA- AA- AA- Moody's A1 A1 A1 A1 A1 Fitch A+ AA- AA- AA- AA- ------------- ---------- --------- --------- --------- --------- --------- ------------- ---------- --------- --------- --------- --------- --------- Mississippi S&P A+ A+ AA- AA- AA- Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Fitch AA- AA- AA- AA- AA- ------------- ---------- --------- --------- --------- --------- --------- ------------- ---------- --------- --------- --------- --------- --------- Savannah S&P A+ A+ AA- AA- AA- Moody's A1 A1 A1 A1 A1

Fitch Not rated Not rated Not rated Not rated Not rated

Southern's consolidated retained earnings grew on average approximately 5.9% per year over the last five years. Excluding the $111 million one-time windfall profits tax imposed on SWEB in 1997, the $221 million write down of

10 In April 2000, Moody's and Duff & Phelps (now known as Fitch) reaffirmed their ratings; however, S&P placed the ratings of Southern and its affiliates on credit watch with negative implications.

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assets in 1998, the $69 million write down of the Mobile Energy investment in 1999 and the $78 million gain on the sale of the SWEB supply business in 1999, the average growth would be 7.4%. In 1999, consolidated retained earnings increased $354 million, or 9.1%. Southern's interests in EWGs and FUCOs have made a positive contribution to earnings over the four calendar years ending after the Rule 53(c) Order.

Accordingly, since the date of the Rule 53(c) Order, the capitalization and earnings attributable to Southern's investments in EWGs and FUCOs has not had an adverse impact on Southern's financial integrity.

Item 4. Regulatory Approval.

No state commission has jurisdiction with respect to the subject transactions and, assuming that the Commission authorizes and approves all aspects of the subject transactions (including the accounting therefor), no other Federal commission has jurisdiction with respect thereto except that NewCo's participation in the Intercompany Interchange Contract and any wholesale sales of electric power will be subject to FERC jurisdiction under the Federal Power Act.

Item 5. Procedure.

The applicants hereby request that the Commission's order be issued as soon as the rules allow. The applicants hereby waive a recommended decision by a hearing officer or other responsible officer of the Commission, consent that the Division of Investment Management may assist in the preparation of the Commission's decision and/or order in this matter, unless such Division opposes the transactions proposed herein, and request that there be no 30-day waiting

20


period between the issuance of the Commission's order and the date on which it is to become effective.

Item 6. Exhibits and Financial Statements.

The following exhibits and financial statements are filed as a part of this Application/Declaration:

(a) Exhibits

A-1- Proposed Certificate of Incorporation of NewCo.

A-2- Proposed By-Laws of NewCo.

B-1- Form of Service Agreement.

B-2- Form of Operating Agreement.

C - Not applicable.

D-1- Approval of the FERC regarding NewCo's participation in the Intercompany Interchange Agreement.

E - Not applicable.

F-1- Opinion of Troutman Sanders LLP, counsel to Southern.

F-2- Opinion of Balch & Bingham LLP, counsel to Alabama.

F-3- Opinion of Troutman Sanders LLP, counsel to Georgia.

F-4- Opinion of Beggs & Lane, counsel to Gulf.

F-5- Opinion of Eaton and Cottrell, P.A., counsel to Mississippi.

F-6- Opinion of Troutman Sanders LLP, counsel to Savannah.

G - Form of Notice. (Previously filed).

21


(b) Financial Statements

Consolidated balance sheet of The Southern Company and its subsidiaries at September 30, 2000. (Designated in the Southern Company's Form 10-Q for the quarter ended September 30, 2000, File No. 1-3536.)

Consolidated statements of income and cash flows for The Southern Company and its subsidiaries for the six months ended September 30, 2000. (Designated in The Southern Company's Form 10-Q for the quarter ended September 30, 2000, File No. 1-3536.)

Item 7. Information as to Environmental Effects.

(a) The issuance of an order by the Commission with respect to the proposed transactions will not constitute a major federal action significantly affecting the quality of the human environment.

(b) No other federal agency has prepared or is preparing an environmental impact statement with regard to the proposed transactions.

22


SIGNATURES

Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this amendment to be signed on their behalf by the undersigned thereunto duly authorized.

Date: December 21, 2000 THE SOUTHERN COMPANY

By: /s/Tommy Chisholm Tommy Chisholm Corporate Secretary and Assistant Treasurer

ALABAMA POWER COMPANY

By: /s/Wayne Boston Wayne Boston Assistant Secretary

GEORGIA POWER COMPANY


GULF POWER COMPANY


23


MISSISSIPPI POWER COMPANY


SAVANNAH ELECTRIC AND POWER COMPANY


SOUTHERN ELECTRIC GENERATING COMPANY


24


Exhibit A-1

CERTIFICATE OF INCORPORATION

OF

[NEWCO, INC.]

I.

The name of the corporation is [Newco, Inc.] (the "Corporation").

II.

The initial registered office of the Corporation in the State of Delaware shall be located at [1013 Centre Road, Wilmington, New Castle County, Delaware 19805]. The initial registered agent of the Corporation at such address shall be [Corporation Service Company].

III.

The purpose or purposes for which the Corporation is organized shall be to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

IV.

The Corporation shall be authorized to issue [One Thousand (1,000)] shares of [$.01] par value capital stock, all of which shall be designated "Common Stock." The shares of Common Stock shall have unlimited voting rights and shall be entitled to receive all of the net assets of the Corporation upon dissolution or liquidation.

V.

The affairs of the Corporation shall be managed by a Board of Directors and as otherwise provided in the Bylaws of the Corporation. The initial Board of Directors of the corporation shall consist of ____________ members, whose names are as follows:

The mailing address of the directors is ________________________________.

VI.

The Corporation shall have perpetual duration.

VII.

The Board of Directors of the Corporation shall have the power to adopt, amend and repeal the Bylaws of the Corporation.

VIII.

To the fullest extent that the General Corporation Law of Delaware, as it exists on the date hereof or as it may hereafter be amended, permits the limitation or elimination of the liability of directors, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of duty of care or other duty as a director. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

IX.

The name and address of the Incorporator of the Corporation is _______________.

Incorporator


Exhibit A-2

B Y L A W S

OF

[NEWCO, INC.]

ARTICLE I

OFFICES

Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. All meetings of the stockholders for the election of directors shall be held at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2. Annual meetings of stockholders shall be held at such date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.

Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.

Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting.

Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.


Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question.

Section 10. Unless otherwise provided in the certificate of incorporation or in an agreement among stockholders as permitted under the General Corporation Law of the State of Delaware (the "Delaware Corporation Law"), each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.

Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE III

DIRECTORS

Section 1. The number of directors which shall constitute the whole board shall be not less than one (1) nor more than [twenty (20)]. The initial board shall consist of _____ (_) directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.

Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.

Section 3. The business of the corporation shall be managed by or under the direction of its board of directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.

Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.

Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.

Section 7. Special meetings of the board may be called by the president on two days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director.

Section 8. At all meetings of the board, a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise


specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 9. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.

Section 10. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

COMMITTEES OF DIRECTORS

Section 11. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in the Delaware Corporation Law, Section 151(a), fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of stock of the corporation), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors.

Section 12. Unless otherwise specifically permitted by the board of directors, the provisions of these bylaws that govern meetings, actions without meetings, notice and waiver of notice and quorum and voting requirements of the board of directors, shall apply to meetings of committees and their members as well.

COMPENSATION OF DIRECTORS

Section 13. Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

REMOVAL OF DIRECTORS

Section 14. Unless otherwise restricted by the certificate of incorporation or by law, any director of the entire board of directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.

ARTICLE IV

NOTICES

Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, facsimile or email.

Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall


be deemed equivalent thereto.

ARTICLE V

OFFICERS

Section 1. The officers of the corporation shall be chosen by the board of directors and shall be at a minimum a president, secretary and treasurer. The board of directors may also choose one or more vice-presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provides.

Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, one or more vice-presidents, a secretary and a treasurer.

Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.

Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.

Section 5. The officers of the corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.

Section 6. Each officer of the corporation shall have the authority to execute and deliver any and all applications and filings as are necessary to be filed with federal, state and local regulatory agencies on behalf of the corporation.

THE PRESIDENT

Section 7. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect.

Section 8. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.

THE VICE-PRESIDENTS

Section 9. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of, and be subject to, all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE SECRETARY AND ASSISTANT SECRETARY

Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.

Section 11. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE TREASURER AND ASSISTANT TREASURERS

Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and


disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.

Section 13. The treasurer shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.

Section 14. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

Section 15. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

ARTICLE VI

CERTIFICATES FOR SHARES

Section 1. The shares of the corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation.

Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to the Delaware Corporate Law, Sections 151, 156, 202(a) or 218(a) or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

Section 2. Any of or all the signatures on a certificate may be by facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

LOST CERTIFICATES

Section 3. The board of directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

TRANSFER OF STOCK

Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation.

FIXING RECORD DATE

Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less


than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

REGISTERED STOCKHOLDERS

Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII

INDEMNIFICATION

Section 1. Each person who is or was a director of the corporation or officer or employee of the corporation holding one or more positions of management through and inclusive of managers (but not positions below the level of such managers) (such positions being hereinafter referred to as "Management Positions") and who was or is a party or was or is threatened to be made a party to any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director of the corporation or officer or employee of the corporation holding one or more Management Positions, or is or was serving at the request of the corporation as a director (or the equivalent), alternate director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall be indemnified by the corporation as a matter of right against any and all expenses (including attorneys' fees) actually and reasonably incurred by him and against any and all claims, judgments, fines, penalties, liabilities and amounts paid in settlement actually incurred by him in defense of such claim, action, suit or proceeding, including appeals, to the full extent permitted by applicable law. The indemnification provided by this section shall inure to the benefit of the heirs, executors and administrators of such person.

Section 2. Expenses (including attorneys' fees) incurred by a director of the corporation or officer or employee of the corporation holding one or more Management Positions with respect to the defense of any such claim, action, suit or proceeding may be advanced by the corporation prior to the final disposition of such claim, action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the corporation under these bylaws or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and until it shall ultimately be determined that such person is entitled to be indemnified by the corporation.

Section 3. The corporation may purchase and maintain insurance at the expense of the corporation on behalf of any person who is or was a director, officer, employee or agent of the corporation, or any person who is or was serving at the request of the corporation as a director (or the equivalent), alternate director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability or expense (including attorneys' fees) asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability or expense under these bylaws or otherwise.

Section 4. Without limiting the generality of the foregoing provisions, no present or future director or officer of the corporation, or his heirs, executors or administrators, shall be liable for any act, omission, step or conduct taken or had in good faith, which is required, authorized or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, as amended, or any federal or state statute or municipal ordinance regulating the corporation or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies or subsidiaries of public utility holding companies. In any action, suit or proceeding based on any act, omission, step or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer, and his heirs, executors and administrators, shall be reimbursed for, or indemnified against, all expenses and liabilities incurred by him or imposed on him, in connection with, or arising out of, any such action, suit or proceeding based on any act, omission, step, or conduct taken or had in good faith as in this paragraph described. Such expenses and liabilities shall include judgments, court costs and attorneys' fees.

Section 5. The foregoing rights shall not be exclusive of any other rights to which any such director or officer or employee may otherwise be entitled and shall be available whether or not the director or officer or employee continues to be a director or officer or employee at the time of incurring any such expenses and liabilities.

Section 6. If any word, clause or provision of the bylaws or any indemnification made under this Article VII hereof shall for any reason be determined to be invalid, the provisions of the bylaws shall not otherwise be affected thereby but shall remain in full force and effect. The masculine pronoun, as used in the bylaws, means the masculine and feminine wherever applicable.


ARTICLE VIII

GENERAL PROVISIONS

DIVIDENDS

Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the certificate of incorporation.

Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

ANNUAL STATEMENT

Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.

CHECKS

Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.

FISCAL YEAR

Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors.

SEAL

Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE IX

AMENDMENTS

Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the board of directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.

I hereby certify that the foregoing Bylaws were duly adopted by the Board of Directors of the Corporation on , 2000.

Secretary

[SEAL]


Exhibit B-1

SERVICE AGREEMENT

THIS AGREEMENT, made and entered into as of __________ 1, 2001, between SOUTHERN COMPANY SERVICES, INC., a corporation organized under the laws of the State of Alabama (hereinafter sometimes referred to as the "Service Company") and [NEWCO], a ________________ organized under the laws of the State of Delaware (hereinafter sometimes referred to as "Client Company");

WITNESSETH:

THAT, WHEREAS, Service Company is willing to provide Client Company certain services upon request by Client Company; and

WHEREAS, Client Company wishes to obtain such services from Service Company;

NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein, the parties hereto agree as follows:

1. Agreement to Furnish Services

Service Company agrees to furnish to Client Company, upon the terms and conditions hereinafter set forth, such of the services described in Article 2 hereof, at such times, for such periods and in such manner as Client Company may from time to time require.

2. Description of Services

Service Company will, as and to the extent required for Client Company, keep itself and its personnel available and competent to render to Client Company, the following services:

A. Power Pool Operations

The maintenance of a central dispatching office to coordinate the bulk power supply, if any, of Client Company and other client companies working with their Operating Committee, with the objective of reducing power costs and improving service reliability; and in connection with the foregoing to act as Client Company's agent pursuant to the intercompany interchange contract; to prepare the intercompany billing under such contract; to assist in negotiating and administering power purchase contracts on behalf of Client Company and other client companies; to make studies of power costs for use in hearings before


regulatory Commissions; to make studies of present and future load characteristics and of future requirements for additional generating and transmission facilities; and, where appropriate, to prepare reports related to these activities.

B. General Executive and Advisory Services

To advise and assist the officers and employees of Client Company in connection with various phases of its business and operations, including particularly but not exclusively, those phases which involve coordination of planning or operation between Client Company and other client companies or otherwise have a direct effect not only on Client Company but also on the Southern System or other members thereof.

C. General Engineering

The maintenance of an organization staffed and equipped to perform for Client Company general engineering work, including system production and transmission studies, preparation and analysis of electrical apparatus specifications, distribution studies and standards, civil engineering and hydraulic studies and problems, fuel supply studies, advice and assistance in connection with analyses of operations and operating and construction budgets. The members of this group will keep informed as to improvements and developments in the art of generation, transmission and distribution of electricity through frequent contacts with the manufacturers of electrical equipment, through membership in the various national and regional engineering societies and through participation in the committee work of such societies and trade associations of the utility industry. Service Company will make available to Client Company the information thus gained with respect to such developments.

D. Design Engineering

To perform detailed design work for Client Company for fossil-fueled generating plants, hydroelectric generating plants,

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transmission lines and substations and otherwise as required by Client Company; to make available to Client Company and other client companies as required, the services of a specialist or specialists on various phases of plant operation; and also to make available as required, inspection and supervision personnel for generating plant, transmission line and substation and other construction and operation.

E. Purchasing

To render services to Client Company in connection with purchasing, including the coordination of group purchasing, and to supply expediting services. All requests for bids shall be made by and purchases confirmed in the name of Client Company or of Service Company as agent therefor, and all contracts of purchase shall be likewise made.

F. Accounting

To advise and assist Client Company in connection with the installation of new accounting systems and similar problems, appearances before regulatory commissions, requirements of Federal and State regulatory bodies with respect to accounting, studies of accounting procedures and practices to improve efficiency, book entries resulting from unusual financial transactions, internal audits, employment of independent auditors, preparation and analyses of financial and operating reports and other statistical matters relating to Client Company and other client companies, analyses of securities of other utility companies, preparation of annual reports to stockholders, regulatory commissions, insurance companies and others, standardization of accounting and statistical forms in the interest of economy, and other accounting and statistical matters.

G. Finance and Treasury

To advise and assist Client Company on (a) financing matters, including determination of types and times of sale of long and short-term securities, refunding studies, sinking fund problems, and (b) all treasury matters, including banking problems and investment of

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surplus funds, and (c) maintenance of books of accounts and other related corporate records.

H. Taxes

To advise and assist Client Company in connection with tax matters, including preparation of Federal and State income and other tax returns and of protests, claims and briefs where necessary, tax accruals, and other matters in connection with Client Company's taxes.

I. Insurance and Pensions

To advise and assist Client Company in connection with insurance and pension matters, including contracts with insurers, trustees and actuaries and the placing of blanket and group policies covering Client Company and other client companies, and other insurance problems as required.

J. Corporate

To advise and assist Client Company in connection with its corporate affairs, including assistance and suggestions in connection with the preparation of petitions and applications for the issuance of securities, contracts for the sale or underwriting of securities, preparation of schedules of steps required in connection with major financial and other corporate matters and the consummation thereof, and the preparation of various documents required in connection therewith, contacts with trustees, transfer agents and registrars; maintenance of minutes of directors' and stockholders' meetings and other proceedings and of other related corporate records; and also arrangements for stockholders' meetings, including notices, proxies and records thereof and for other types of meetings relating to its securities.

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K. Rates

To study comparative rate levels for various classes of service, in different areas and for different operating conditions, and keep in touch with trends in rate design, and to make such information available to Client Company; to advise Client Company on matters relating to rates and valuation, the design of new and improved rate schedules, and their effect upon Client Company's revenues, the cost of competitive services, earning trends, the desirability of rate changes, rate audits, service rules and regulations, commodity and tax clauses, minimum charges, metering problems, special industrial contracts, resale rates and rural extension plans; and to assist Client Company in the preparation of petitions and applications required in connection with rate changes.

L. Budgeting

To advise and assist Client Company in matters involving the preparation and development of construction and operating budgets, cash and cost forecasts, and budgetary controls.

M. Business Promotion and Public Relations

To advise and assist Client Company in area development activities, in the development of residential, commercial and industrial sales programs, in the preparation and use of advertising, and in the determination and carrying out of public information programs, including those arising out of regulatory and legislative matters.

N. Employee Relations

To furnish Client Company with advisory services in connection with employee relations matters, including recruitment, employee placement, training, compensation, safety, labor relations and health, welfare and employee benefits.

O. Systems and Procedures

To advise and assist Client Company in the formation of good operating practices and methods of procedure, the standardization of forms, the purchase, rental and use of mechanical and electronic data

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processing, computing and communications equipment, in conducting economic research and planning and in the development of special economic studies.

P. Wholesale Power Purchase and Sale

To render services to Client Company in connection with the purchase and sale of electric power on the wholesale market, including the purchase and sale of transportation and transmission capacity in connection with power generation and delivery and the negotiation and administration of derivative transactions, including without limitation those entered into pursuant to master swap agreements; to make studies and, where appropriate, prepare reports on present and future requirements and abilities concerning the purchase and sale of electric power for resale; and to perform other services in connection with such sales and purchase as are required.

Q. Other Services

To render advice and assistance in connection with such other matters as Client Company may request and Service Company may be able to perform with respect to Client Company's business and operations

3. Compensation of Service Company

As compensation for such services rendered to it by Service Company, Client Company hereby agrees to pay to Service Company the cost of such services. Bills will be rendered for the amount of such cost on or before the 10th day of the succeeding month and will be payable on or before the 20th day of such month. Cost of services to be paid by Client Company shall include direct charges and Client Company's pro rata share of certain of Service Company's costs, determined as set forth below:

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A. Direct Charges

To the extent that the costs incurred by Service Company in connection with services rendered by it to Client Company can be identified and related to a particular transaction, direct charges will be made by Service Company against Client Company.

B. Prorated Charges

Such costs incurred by Service Company each month as cannot be charged by Service Company directly to the companies for which it performs services will be distributed among such companies in a fair and equitable manner as set forth in the Southern Company Services, Inc. Cost Allocation Manual which is incorporated herein by reference. The Service Company may revise the Cost Allocation Manual from time to time, subject to the approval of the Client Company and to any necessary regulatory approval, and the revised Cost Allocation Manual shall be incorporated herein by reference upon the effective date of the revision.

4. Companies to be Served

Service Company agrees that during the term hereof it will render services as required by companies in the Southern System and that all such companies will compensate Service Company as provided in Section 3 hereof.

5. Appointment of Service Company as Agent

Client Company hereby appoints Service Company to act as its agent in the performance of the services furnished pursuant to Sections 2 and 4. Such authorization shall include, without limitation, the rights and authority to perform, negotiate, execute and administer agreements pursuant to which Client Company will (i) purchase and sell electric power for resale, (ii) purchase and sell fuels and related services in connection with power generation, (iii) purchase and sell utility equipment and facilities and related services, (iv) purchase and sell transportation and transmission capacity in connection with power generation and delivery, (v) engage in derivative transactions, including

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(without limitation) those entered into pursuant to master swap agreements (the "Contracts"), and (vi) purchase and sell other goods and services. Service Company's agency with respect to the Contracts shall include without limitation the right to collect payments required under such Contracts, to advance payments on Client Company's behalf, and to accept and give notices and other communications on behalf of Client Company. .

6. Effective Date - Term - Cancellation

After execution by the parties hereto this agreement shall become effective as of 1, 2001, subject to receipt of any required regulatory approval, and shall remain in effect until terminated by mutual agreement of said parties.

It is also understood and agreed that nothing herein shall be construed to release the officers and directors of Client Company from the obligation to perform their respective duties, or to limit the exercise of their powers in accordance with the provisions of law or otherwise, and this agreement shall be cancelled to the extent and from the time that performance hereunder may conflict with any rule, regulation or order of the Securities and Exchange Commission adopted before or after the execution hereof.

7. Limitation of Liability.

As between Client Company and Service Company, Client Company will be solely responsible for all liabilities, obligations, and performance under any Contract executed pursuant to this Agreement, whether or not Service Company's role as agent for Client Company is disclosed to the other party to such contract. Service Company will not warrant or guaranty or otherwise be secondarily liable for performance by Client Company under any Contract or under any other agreement the Client Company may enter in relation to such Contract, including (without limitation) subcontracts, purchase orders and other similar agreements. Client Company shall defend, hold harmless, and indemnify Service Company against any claim made by any third party in connection with the subject matter of such Contract.

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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized officers and their respective seals to be affixed as of the day and year first above written.

SOUTHERN COMPANY SERVICES, INC.

By:

Its:

Attest:

Secretary

[NEWCO]

By:

Its:

Attest:

Secretary


Exhibit B-2

OPERATING AGREEMENT

between

[OPCO]

and

[NEWCO]


TABLE OF CONTENTS

ARTICLE 1 Definitions.....................................................................................2 ----------- 1.1 Entitlement to Output...........................................................................2 1.2 Generation Facility.............................................................................3 1.3 Governmental Authority..........................................................................3 1.4 Legal Requirements..............................................................................3 1.5 New Investment Services.........................................................................3 1.6 Operating Services..............................................................................4 1.7 Operation and Maintenance Services..............................................................4 1.8 Prudent Utility Practice........................................................................4

ARTICLE 2 [OPCO]'s Authority and Responsibility with Respect to Operationof the Generation Facilities.....5 ------------------------------------------------------------------------------------------- 2.1 Responsibility of [OPCO]........................................................................5 2.2 Authorization of [OPCO].........................................................................5 2.2.1 Plant Operation and Maintenance........................................................6 (a) Staff and Personnel...........................................................6 (b) Licenses and Permits for Generation Facilities................................7 (c) Reductions in Capacity and Outages at Each Plant..............................7 (d) Events About Which Owner is to be Notified....................................8 (e) No Changes to Transmission or Distribution Facilities.........................8 (f) Operation in Accordance with Operating Plan...................................8 (g) Points of Interconnection.....................................................9 2.2.2 New Investment Services................................................................9 2.2.3 Fuel Services..........................................................................9 2.3 Retirement of Generating Facility...............................................................9 2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on Agency.............................................................................10 2.5 Assignment of Contracts; Liability and Allocation of Risks.....................................10 2.5.1 Contracts with Third Parties..........................................................10 2.5.2 Acceptance of Contract Provisions.....................................................10 2.5.3 Enforcement of Rights Under Contracts.................................................11 2.6 Cooperation of Owner...........................................................................12 2.7 [OPCO] Interface Procedure.....................................................................12 2.8 Plans and Budgets..............................................................................12 2.8.1 Strategic Plan........................................................................13 (a) Five-year Operating and Planned Outage Schedule..............................13 (b) Availability and Performance Goals...........................................14 (c) Planned Mandatory Projects...................................................14 (d) Planned Improvement Projects.................................................14 (e) Authorized Level of Staffing.................................................14 2.8.2 Fuel Plan.............................................................................15 2.8.3 Operating Budget......................................................................15 2


2.8.4 Capital Budget........................................................................15 2.8.5 Fuel Budget...........................................................................15 2.9 Information and Reports........................................................................16 2.9.1 Generation Facility Data..............................................................16 2.9.2 Generation Facility Budget Reports....................................................16 2.9.3 Generation Facility Strategic Plan Reports............................................16 2.9.4 Audit Reports.........................................................................16 2.9.5 Correspondence to and from Regulatory Agencies........................................16 2.9.6 Responses to Owner Inquiries..........................................................17 2.10 Plant tours....................................................................................17 2.11 Management Audit...............................................................................17

ARTICLE 3 Entitlement to Output..........................................................................17 --------------------- 3.1 Entitlement to Output..........................................................................17 3.2 Determination of Output-Responsibility for Station Service and Losses..........................18

ARTICLE 4 Charges, Billing and Audit.....................................................................18 -------------------------- 4.1 Cost of Operation and Maintenance..............................................................18 4.2 New Investment Costs...........................................................................19 4.3 Fuel Costs.....................................................................................19 4.4 Other Costs Required by Legal Requirements.....................................................19 4.5 Revision.......................................................................................19 4.6 Billing........................................................................................20 4.7 Payment........................................................................................20 4.8 General Accounting Matters.....................................................................20 4.9 Right to Inspect Records.......................................................................20 4.10 Disputed Invoice...............................................................................21

ARTICLE 5 Advancement of Funds...........................................................................21 -------------------- 5.1 Advancement of Funds...........................................................................21

ARTICLE 6 Taxes..........................................................................................22 ----- 6.1 Taxes..........................................................................................22

ARTICLE 7 Compliance with Provisions of Permits and Requirements of Governmental ---------------------------------------------------------------------- Agencies.......................................................................................22 -------- 7.1 Compliance with Provisions of Permits and Requirements of Governmental Agencies.......................................................................................22

ARTICLE 8 Confidentiality of Information.................................................................22 ------------------------------ 8.1 Confidentiality of Information.................................................................22

ARTICLE 9 Damage to Persons or Property; Penalties; Fines................................................23 ----------------------------------------------- 9.1 Applicability of Article.......................................................................23

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9.2 Absence of Warranty............................................................................23 9.3 Liabilities to Third Parties and Owner.........................................................23 9.4 Willful Misconduct.............................................................................25 9.5 Limitation of Liability........................................................................25 9.6 Severability...................................................................................26

ARTICLE 10 Insurance......................................................................................26 --------- 10.1 Parties' Obligations Generally.................................................................26 10.2 Commercial Liability Insurance.................................................................27 10.3 Workmen's Compensation Insurance...............................................................27 10.4 Additional Insurance...........................................................................28 10.5 Waiver of Subrogation - Allocation and Payment of Premium......................................28

ARTICLE 11 Term...........................................................................................28 ---- 11.1 Term...........................................................................................28

ARTICLE 12 Remedies.......................................................................................29 -------- 12.1 Termination....................................................................................29 12.1.1 ......................................................................................29 12.1.2.........................................................................................30 12.1.3.........................................................................................30

ARTICLE 13 Miscellaneous..................................................................................30 ------------- 13.1 No Partnership or Joint Venture................................................................30 13.2 Owner's Designated Representatives.............................................................31 13.3 [OPCO]'s Designated Representative.............................................................31 13.4 Depreciation...................................................................................31 13.5 Holidays, Business Days........................................................................31 13.6 Owner's Services to be Furnished at Cost.......................................................31 13.7 Entire Agreement...............................................................................31 13.8 Amendments.....................................................................................32 13.9 Notices........................................................................................32 13.10 Captions.......................................................................................32 13.11 Counterparts...................................................................................33 13.12 No Waiver......................................................................................33 13.13 Singular and Plural............................................................................33 13.14 Third Party Beneficiaries......................................................................33 13.15 Severability...................................................................................33

ARTICLE 14 Successors and Assigns.........................................................................33 ---------------------- 14.1 ...............................................................................................34 ARTICLE 15 Governing Law..................................................................................34 ------------- 15.1 ...............................................................................................34

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OPERATING AGREEMENT between [OPCO] and [NEWCO]

THIS AGREEMENT is made and entered into this _____ day of ___________ 200__ (the "Effective Date") by and between [OPCO] ("___") and [NEWCO]["Owner"].

W I T N E S S E T H:

WHEREAS, [OPCO] and Owner are each a wholly-owned subsidiary of The Southern Company ("Southern"), a registered holding company under the Public Utility Holding Company Act of 1935 (the "1935 Act"); and

WHEREAS, Owner owns certain generation stations, plants and other generation facilities (collectively, "Generation Facilities" or individually, the "Generation Facility") within the service territory of [OPCO], and may construct or acquire additional Generation Facilities in the future, which Generating Facilities are set forth and generally described on Schedule I hereto, as it may from time to time be hereafter amended or supplemented without the necessity of an amendment to this Agreement; and

WHEREAS, Owner intends to sell on the wholesale market the electric power generated by such facilities; and

WHEREAS, [OPCO] owns and operates generation stations, plants and other related generation facilities and has developed the expertise and experience to efficiently and economically operate such facilities; and


WHEREAS, Owner believes that in order to more efficiently and economically provide for the operation, maintenance, repair, and rehabilitation of its Generation Facilities, such activities should be conducted and coordinated by [OPCO]; and WHEREAS, Owner desires that [OPCO] undertake the operation, maintenance, repair and rehabilitation of its Generation Facilities identified on Schedule I, subject to the receipt of any necessary regulatory approvals, and [OPCO] has agreed to do so under the terms and conditions set forth below. NOW THEREFORE, in consideration of these premises, the parties, intending to be legally bound, do hereby agree as follows:

ARTICLE 1

Definitions

As used herein, the following terms and phrases shall have, respectively, the following meanings: 1.1 "Fuel Services" shall mean work related to supplying and managing all necessary fuels for the Generating Facilities including, without limitation, planning, procurement, contract administration, fuel quality assurance, and all activities relating to procurement, transportation, installation, monitoring, repairing, storage, reprocessing and disposal of fuel for the Generating Facilities, related materials and waste products.


1.2 "Generation Facility" shall mean, and refer to, respectively, each of the fossil fuel, hydro-electric and pumped storage generation stations, plants and other related generation facilities owned by Owner and located within the service territory of [OPCO]; provided, however, that should activities concerning a Generation Facility be undertaken with respect to one unit of such station, plant or facility, the phrase "Generation Facility" shall mean and refer to that unit and related common facilities. 1.3 "Governmental Authority" shall mean any local, state, regional or federal legislative, regulatory, administrative, legal, judicial or executive agency, commission, department or other entity and any person acting on behalf of any such entity. 1.4 "Legal Requirements" shall mean all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, written agreements, regulations and requirements of or issued by every Governmental Authority having jurisdiction over the matter in question, whether federal, regional, state or local, which may be applicable to [OPCO], or to Owner, or to any Generation Facility or any of the real or personal property comprising the Generation Facilities, or to services to be provided to Owner hereunder, or the use, occupancy, possession, operation, maintenance, construction, retirement, acquisition, installation, alteration, replacement reconstruction or disposal of any one or more of the Generation Facilities or any part thereof. 1.5 "New Investment Services" shall mean work for the Generation Facilities relating to the planning, design, licensing, acquisition, construction, completion, renewal, improvement, addition, repair, replacement or enlargement of any Unit of Property (as described in the Federal Energy Regulatory Commission's "Units of Property for Use in Accounting for Additions and Retirements of Electric Plants"), under circumstances where expenditures for such work are to be capitalized in accordance with the Electric Plant Instructions of the Uniform System of Accounts prescribed for Class A and B utilities by the Federal Energy Regulatory Commission.


1.6 "Operating Services" shall mean Fuel Services, New Investment Services, and Operation and Maintenance Services.

1.7 "Operation and Maintenance Services" shall mean work for Owner relating to the possession, management, control, start-up, operation, availability, production of energy, maintenance, improvement, renewal, replacement, and shutdown including, but not limited to, any planning, design, engineering, labor, procurement of materials and supplies, materials management, quality assurance, training, security, and environmental protection, together with maintaining or obtaining licenses and regulatory approvals related thereto, governmental affairs or regulatory relationships, and all other activity required for the safe and reliable operation of the Generation Facilities or that may be required to comply with Legal Requirements.

1.8 "Prudent Utility Practice" shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Utility Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of governmental agencies of competent jurisdiction.

ARTICLE 2

[OPCO]'s Authority and Responsibility with Respect to Operation of the Generation Facilities


2.1 Responsibility of [OPCO]. [OPCO], consistent with such written guidelines as may be jointly developed with Owner, shall provide and be responsible for (i) the operation and maintenance of the Generation Facilities within its service territory in a safe and reliable manner in accordance with all Legal Requirements and with Prudent Utility Practice, (ii) the generation of power and energy at the Generation Facilities to the credit of and for the benefit of the Owner as economically as is reasonably practicable, (iii) the repair and rehabilitation of the Generation Facilities as may, from time to time, be necessary, appropriate or reasonably practicable and advisable and (iv) as and to the extent deemed by Owner to be necessary or appropriate, the construction of new or additional non-nuclear generation facilities for Owner. [OPCO] also shall make such further changes and additions to and retirements from the Generation Facilities in its service territory as shall be consistent with such operation, maintenance, repair and rehabilitation. Such services and construction may be provided by [OPCO] through its own personnel or, in part, by others, including without limitation affiliate personnel, under contractual or other arrangements, including the use of Owner's personnel under the direction and supervision of [OPCO].


2.2 Authorization of [OPCO]. In furtherance of the foregoing, Owner authorizes [OPCO], and [OPCO] agrees to provide, Operation and Maintenance Services, New Investment Services, and Fuel Services for the Generation Facilities. Owner hereby authorizes [OPCO] to take all actions that, in the discretion and judgment of [OPCO] consistent with Prudent Utility Practice, are deemed necessary or advisable in providing these Operating Services. Owner hereby authorizes [OPCO], as operator, to take any and all action necessary to comply with all Legal Requirements and to take all action necessary to fulfill any requirements for the safe and reliable operation of the Generation Facilities. The authority vested in [OPCO] shall include, but not be limited to, the authority to incur costs, liabilities, and obligations, to purchase equipment, materials and supplies, to perform and arrange for performance of work, to select and retain contractors, engineers, consultants, architect-engineers, attorneys, accountants and other firms or persons, and to take all actions in connection with the Generation Facilities that are within the scope set forth above. Without limiting the foregoing, the authority vested in [OPCO] shall include the following: 2.2.1. Plant Operation and Maintenance. [OPCO] shall have the authority to possess, operate and maintain the Generation Facilities in accordance with policies and decisions established and made by Owner. Subject to the provisions of this Agreement, [OPCO] shall in accordance with Prudent Utility Practice endeavor to achieve reliable performance of each Generation Facility, to maximize the capacity and availability factors and minimize forced outage rates and durations at each Generation Facility and to produce busbar costs as low as reasonably possible.


(a) Staff and Personnel. Subject to the provisions of Section 2.8.1 respecting Strategic Plans, [OPCO] shall have the authority to select, hire, compensate, control and discharge (when deemed appropriate by [OPCO]) those persons, firms or corporations which are required to satisfy its obligations under this Agreement. [OPCO] shall keep Owner informed of any plans to change either the [OPCO] officer responsible for any of Owner's Generation Facilities or the [OPCO] manager of such Generation Facility. Any input from Owner on such plans will be considered by [OPCO], but [OPCO]'s decisions on personnel matters shall be final. [OPCO] shall also consider any positive or negative comments from Owner regarding the performance of any of [OPCO]'s officers or managers, but management decisions on whether to take personnel or salary administration actions shall be made solely by [OPCO]. (b) Licenses and Permits for Generation Facilities. [OPCO] is authorized to obtain and maintain compliance with all licenses, approvals and permits for each Generation Facility from Governmental Authorities required for operation and maintenance of the Generation Facility. (c) Reductions in Capacity and Outages at Each Plant. Owner recognizes that, in the course of operating the Generation Facilities, it may be necessary to decide whether to operate the Generation Facilities at less than full power or to terminate or suspend such operations altogether in light of technical, legal, regulatory, safety, economic, power system, testing, or other considerations. [OPCO] recognizes the need to minimize periods of reduced capacity or outages at the Generation Facilities that could have an adverse effect on Owner's power supply system or its cost of providing reliable electric service. [OPCO] will endeavor to consult with Owner concerning any operating conditions which are expected to result in capacity reductions of fifty percent (50%) or more at a Generation Facility or outages at a unit of any Generation Facility, and [OPCO] will only take those actions when they determine they are prudent and necessary from an operating standpoint.


(d) Events About Which Owner is to be Notified. In the event of an occurrence at a Generation Facility of any unplanned outage, any significant extension of a planned outage, any unplanned reduction in the capacity of a unit for an extended period, or any event at a Generation Facility or any regulatory action which is likely to attract substantial media attention or to affect substantially the operation of the Generation Facility, [OPCO] shall inform Owner as soon as practical, or in accordance with guidelines acceptable to Owner, after the occurrence of such event. (e) No Changes to Transmission or Distribution Facilities. In order that the safe operation of the Generation Facilities is assured, Owner shall not effect any operating or physical changes to its transmission and distribution facilities which may adversely affect the safe operation of the Generation Facilities without prior consultation with and the concurrence of [OPCO]. (f) Operation in Accordance with Operating Plan. Each Generation Facility shall be operated in accordance with Prudent Utility Practice and pursuant to an operating plan developed and updated regularly by [OPCO] and Owner and in accordance with Owner's obligations, if any, under any interconnection agreements, power pooling arrangements or other applicable arrangements, as such obligations may presently exist or may hereafter be modified from time to time, including the obligations, if any, of Owner to maintain the design integrity of each Generation Facility under the requirements of the Southeast Electric Reliability Council and the National Electric Reliability Council.


(g) Point of Interconnection. The point of interconnection between any Generation Facility and [OPCO]'s or a third party's transmission system and the extent of [OPCO]'s operational responsibility therefor shall be determined from time to time by Owner and [OPCO].

2.2.2. New Investment Services. [OPCO] shall have responsibility for all New Investment Services. [OPCO] is authorized to enter into such arrangements as it deems appropriate for the Generation Facilities and to make all decisions regarding the completion of New Investment projects. All equipment, materials and supplies included in the New Investment projects for each Generation Facility shall be acquired in the name of Owner and shall be the property of Owner. 2.2.3. Fuel Services. [OPCO] shall have responsibility for Fuel Services. [OPCO] is authorized to enter into such arrangements as it deems appropriate and to make all decisions regarding fuel and fuel services. All fuel shall be procured in the name of Owner. 2.3 Retirement of Generating Facility. Owner shall retain the exclusive authority to determine when the economic life of the Generation Facility has ended and thereupon to retire the Generation Facility from commercial operation. Owner retains the authority to determine whether such Generation Facility should be placed in standby status or operated at reduced output for economic reasons or Owner's need for the capacity or energy of the Generation Facility. Upon Owner informing [OPCO], [OPCO] shall take such action as may be necessary to reduce operation of the Generation Facility or to terminate operation and place the Generation Facility or unit in a safe shutdown condition. [OPCO] shall also take such steps as may be necessary to decommission and dispose of and thereafter maintain, to the extent necessary, the Generation Facility or any unit thereof designated for retirement.


2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on Agency. In the conduct of the authority vested in [OPCO] in Sections 2.1 and 2.2 above, Owner hereby designates and authorizes [OPCO] to act as its attorney-in-fact and agent for such purposes, including without limitation authority to enter into and administer contracts on behalf of Owner for procurement of material, equipment or services and authority to administer contracts entered into by Owner with respect to the Generation Facilities. As relates to all third parties, the designation of [OPCO] as agent shall be binding on Owner. [OPCO] accepts such appointment as agent of Owner. Upon request from [OPCO], Owner shall provide written confirmation of this agency relationship to third parties.

2.5 Assignment of Contracts; Liability and Allocation of Risks.

2.5.1 Contracts with Third Parties. Upon request from [OPCO] to Owner, Owner shall assign and transfer to [OPCO] those contracts with third parties relating to the operation of each Generation Facility. Prior to assignment and transfer of such contracts, [OPCO] may request Owner to appoint [OPCO] as agent for administration of any such contracts. After receipt of any such assignment, transfer or authorization to administer, [OPCO] shall have the exclusive responsibility for the administration and enforcement thereof in accordance with the terms thereof.


2.5.2 Acceptance of Contract Provisions. [OPCO] in such contracts with third parties may agree to certain matters including, but not limited to, limitations on the liability of such contractors for work performed or materials furnished, restrictions on warranties, agreements to indemnify the contractors from liability and other provisions. Owner waives any claims against [OPCO] for entering into such contracts or agreeing to the provisions thereof. Owner also recognizes that a number of [OPCO]'s contracts relating to the Generation Facilities may contain provisions that require [OPCO] to obtain from Owner agreements by Owner that it will be bound by all of the requirements for financial protection, waivers, releases, indemnifications, limitations of liability and further transfers or assignments that bind [OPCO] under such contracts. Owner agrees to be bound by the requirements for financial protection, waivers, releases, indemnification, limitation of liability and further transfers or assignments that bind [OPCO] as they now exist or may exist in the future with respect to all contracts relating to the Generation Facilities. 2.5.3 Enforcement of Rights Under Contracts. Owner covenants that, without the written consent of [OPCO], Owner will not threaten suit or bring suit against third parties or otherwise make any claim under any contract or arrangement relating to any of the Generation Facilities or Operating Services, and Owner recognizes that [OPCO] has complete and exclusive authority with respect to such matters. If Owner desires for suit to be threatened or brought or otherwise for any claim to be made, or desires that such action contemplated by [OPCO] shall not be taken, Owner shall, by written notice to [OPCO], request it so to act or refrain from acting. Upon [OPCO]'s receipt of such notice Owner and [OPCO] shall arrange for consultation within ten (10) working days thereafter on the questions raised, or such lesser period of time as [OPCO], in its sole discretion, shall specify in the light of circumstances requiring a more expeditious determination. [OPCO] shall not make its determination until after such consultation, but such determination by [OPCO] shall be final and binding.


2.6 Cooperation of Owner. Owner agrees that it will take all necessary action in a prompt manner to execute any agreements with respect to the provision of Operation and Maintenance Services, New Investment Services, and Fuel Services for the Generation Facilities as and when requested by [OPCO] to permit [OPCO] to carry out its authority and responsibilities pursuant to this Article 2. [OPCO] may request Owner to furnish services or assistance, materials, supplies, licenses, offices and real property rights including, without limitation, power supply services, transmission and distribution system repair, replacement, construction and maintenance, accounting services, maintenance personnel, security services, and other personnel, services or assistance as [OPCO] may require with respect to any one or more Generation Facilities. Any such items which Owner agrees to furnish to [OPCO] shall be provided at cost. 2.7 [OPCO] Interface Procedure. [OPCO] and Owner will jointly establish and maintain an [OPCO] Interface Procedure to govern the working relationships between the two companies. The [OPCO] Interface Procedure shall contain procedures by which Owner can maintain an overview of Generation Facility operations, procedures for administering this Operating Agreement through designated executive points of contact, and procedures to define interfaces for support services and assistance provided by Owner pursuant to Section 2.6 hereof.


2.8 Plans and Budgets. Strategic Plans, Fuel Plans, Operating Budgets, Capital Budgets and Fuel Budgets shall be submitted to Owner by [OPCO] as provided in Paragraphs 2.8.1 through 2.8.5 below. The contents of these plans and budgets shall conform to the requirements and guidelines established pursuant to the [OPCO] Interface Procedure. Owner shall approve or disapprove each such plan or budget within thirty (30) days after its submittal. In the event Owner disapproves a plan or budget, Owner shall inform [OPCO] of the basis for such disapproval. [OPCO] shall then modify such plan or budget as required to make it acceptable to Owner and shall resubmit it for approval; provided, however, that in no event shall [OPCO] be required to submit plans or budgets which would cause [OPCO] to operate a Generation Facility in violation of any Legal Requirements or in a manner that fails to provide reasonable assurance of health and safety to employees. [OPCO] shall attempt to provide Operating Services in accordance with such approved plans and within the aggregate annual amount of such budgets. Notwithstanding the foregoing, [OPCO] makes no representation, warranty or promise of any kind as to accuracy of any such plan or budget, or that any attempt referred to in the preceding sentence will be successful, and in no event shall Owner be relieved of its responsibility to pay costs incurred by [OPCO] as required in Article 4 hereof. 2.8.1 Strategic Plan. A Strategic Plan for each Generating Facility shall be submitted to Owner by [OPCO] no later than July 1 of each year. Owner may separately approve or disapprove individual projects which are classified as planned improvement projects pursuant to Paragraph (d) below, but shall otherwise approve or disapprove each Strategic Plan in its entirety. Strategic Plans may cover one or more Generation Facilities. Each Strategic Plan shall identify key assumptions to be used in the preparation of budgets and forecasts, including: (a) Five-year Operating and Planned Outage Schedule. This section shall identify the scheduled operating cycles and planned outages for maintenance and other work during the succeeding five years. The schedule shall describe in reasonable detail the time and duration of each planned outage and the maintenance and other work planned to be performed during such outage.


(b) Availability and Performance Goals. This section shall contain overall performance goals which have been established by [OPCO] for the Generation Facility for the current year. (c) Planned Mandatory Projects. A mandatory project is any project with a total estimated cost in excess of one million dollars ($1,000,000) or such other amount as Owner may establish, including but not limited to any upgrade, replacement, addition or program, which is needed in order to support normal operations in accordance with Prudent Utility Practice or in order to comply with regulatory or safety requirements. The associated schedule and estimated annual funding requirements shall be included. (d) Planned Improvement Projects. An improvement project is any project with a total estimated cost in excess of one million dollars ($1,000,000) or such other amount as Owner may establish, including but not limited to any upgrade, replacement, addition, or program, which is not mandatory as defined in (c) above. Examples of such projects include efforts to improve performance of a Generation Facility or conditions, such as improved Generation Facility capacity or efficiency, enhanced working conditions, and appearance. The associated schedule and estimated annual funding requirements shall be included.


(e) Authorized Level of Staffing. This section shall provide the current authorized number of permanent staff positions which are assigned to the Generation Facility and its offsite support. Such number of positions shall be broken down by functional areas (e.g., operations, maintenance, administrative, technical, corporate support), shall include positions which are located either on-site or off-site, and shall include all positions regardless of the actual employer. This section shall also show any estimates of planned changes in such authorized number of positions over the succeeding five years. 2.8.2 Fuel Plan. A five-year Fuel Plan for each Generation Facility shall be submitted to Owner by September 15 of each year. Owner shall approve or disapprove each Fuel Plan within thirty days after submittal. Each Fuel Plan shall describe in reasonable detail plans for procurement and utilization of fuel for the Generation Facility and information on disposal of waste products. A Fuel Plan may cover one or more Generation Facilities. 2.8.3 Operating Budget. By September 1 of each year, [OPCO] shall submit to Owner a written Operating Budget showing the estimated costs of operating and maintaining Owner's Generation Facilities during the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner. 2.8.4 Capital Budget. By September 1, of each year, [OPCO] shall submit to Owner a written Capital Budget estimate of capital expenditures for each of Owner's Generation Facilities for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.


2.8.5 Fuel Budget. By September 15 of each year, [OPCO] shall submit to Owner a written Fuel Budget estimate of fuel expenditures for each of Owner's Generation Facilities for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.

2.9 Information and Reports. [OPCO] shall furnish to Owner the following information and reports:

2.9.1 Generation Facility Data. At the time of submittal of each Strategic Plan, [OPCO] shall also furnish a comparison of the performance of each Generation Facility with other generating facilities using performance indicators in common use in the electric utility industry or as may be specified by Owner. 2.9.2 Generation Facility Budget Reports. [OPCO] shall furnish monthly data showing actual costs for operation and maintenance, capital expenditures, and direct fuel expenditures with comparisons to the respective budgets. This report will normally be provided by the end of the succeeding month. 2.9.3 Generation Facility Strategic Plan Reports. At least quarterly, [OPCO] shall furnish data showing actual performance for each unit at each Generation Facility compared to goals contained in the Strategic Plan for the Generation Facility. 2.9.4 Audit Reports. [OPCO] shall make available for review by Owner copies of financial or accounting reports concerning Owner's Generation Facilities containing the results of audits by or for Southern Company Services, Inc., or any affiliate or subsidiary of The Southern Company, or by any regulatory agency. 2.9.5 Correspondence to and from Regulatory Agencies. At the request of Owner, [OPCO] shall furnish to Owner copies of correspondence to and from regulatory agencies concerning one or more of Owner's Generation Facilities.


2.9.6 Responses to Owner Inquiries. In addition to the obligation of [OPCO] to provide the information as explicitly required herein, [OPCO] shall respond to reasonable written or verbal requests from Owner for information not otherwise specifically provided for herein. 2.10 Plant Tours. Owner shall have the right to have its representatives and guests visit its Generation Facilities, to tour the facilities, and observe activities at the Generation Facilities; provided that such visits or tours will not interfere with the operation of the Generation Facilities, or the security or safety of such facilities. Owner shall assure that its representatives and guests comply with all applicable rules and regulations in effect at a Generation Facility whether imposed by Governmental Authority or by [OPCO]. 2.11 Management Audit. Owner shall have the right to conduct a management audit, at its own cost, of [OPCO]'s performance hereunder either by Owner officers and employees or through their duly authorized agents or representatives. [OPCO] shall cooperate with Owner in the conducting of such audit and, subject to applicable Legal Requirements and the requirements of vendors, give Owner reasonable access to all contracts, records and other documents relating to the Generating Facilities. Following any such management audit, [OPCO] shall respond to the findings of such audit if requested to do so by Owner. Management audits by Owner shall be scheduled so as to minimize the number of audits required and so as to not to exceed one management audit in any consecutive twelve-month period.

ARTICLE 3 Entitlement to Output


3.1 Entitlement to Output. Owner shall be entitled to all of the output from its Generation Facilities at the time generation in such units occurs. Subject to [OPCO]'s primary responsibility for safe operation of the Generation Facilities, Owner shall have the right to schedule and dispatch the capacity and energy needed from the facilities, and [OPCO] shall use its best efforts to honor such schedule. 3.2 Determination of Output-Responsibility for Station Service and Losses. Output of each Generation Facility shall be the gross generation of the facility, less station service requirements, and less adjustments for losses experienced. Owner shall be responsible for providing all off-site electric power required at the Generation Facility whenever the station service and losses exceed the gross generation of the Generation Facility.

ARTICLE 4 Costs, Billing, Accounting and Audit


4.1 Cost of Operation and Maintenance. Owner shall pay to [OPCO] all direct costs incurred by [OPCO] relating to Operation and Maintenance Services for the Generation Facilities (including all costs identified in Section 9.3) and any costs incurred by [OPCO] as a consequence of termination hereunder). Such costs shall include all payments made to [OPCO] employees (including payment of wages, salaries, workmen's compensation and other benefits) relating to work performed by such employees while on the premises of any of the Generation Facilities. [OPCO] and Owner acknowledge that all such payments made to [OPCO] employees, relating to work performed by such employees while on Generation Facility premises, are effectively made by Owner, since Owner is responsible for such payments and they are made from funds placed on deposit by Owner for those purposes. Owner shall also pay to [OPCO] the Generation Facility allocated share of other of [OPCO]'s costs. Allocation of costs to Operation and Maintenance Services shall be performed in the manner described in the [OPCO] Cost Allocation Manual which is incorporated herein by reference. [OPCO] may revise the Cost Allocation Manual from time to time, in accordance with Legal Requirements, and the revised Cost Allocation Manual shall be incorporated herein by reference upon the effective date of the revision. 4.2 New Investment Costs. Owner shall pay to [OPCO] all costs incurred by [OPCO] relating to New Investment Services for the Generation Facilities, including obligations incurred to third parties, direct costs of [OPCO] associated with such New Investment Services and the Generation Facilities allocated share of [OPCO]'s other costs associated with such activities. Allocation of costs to New Investment Services shall be performed in the manner described in the [OPCO] Cost Allocation Manual referred to in Section 4.1 hereof. 4.3 Fuel Costs. Owner shall pay to [OPCO] all direct costs incurred by [OPCO] relating to Fuel Services for the Generation Facilities and the Generation Facilities allocated share of other of [OPCO]'s costs. Allocation of costs to Fuel Costs shall be performed in the manner described in the [OPCO] Cost Allocation Manual referred to in Section 4.1 hereof. 4.4 Other Costs Required by Legal Requirements. Owner shall pay to [OPCO] all direct costs incurred by [OPCO] and the Generation Facilities allocated share of other of [OPCO]'s costs associated with any other activities of [OPCO] relative to the Generation Facilities that are required to meet Legal Requirements.


4.5 Revision. Should [OPCO] undertake to perform services for any other affiliated company or for any non-affiliated company where the cost to [OPCO] of providing such services affects the cost of [OPCO] to provide Operating Services pursuant to this Agreement, [OPCO] shall discuss the matter and reach agreement with Owner respecting the need for or the terms of any amendment of this Section 4 as may be appropriate to assure the continued fairness of the determination of the responsibility for costs payable to [OPCO] hereunder. 4.6 Billing. [OPCO] shall render to Owner a monthly billing statement no later than the fifteenth (15th) day of each month detailing costs incurred for Operation and Maintenance Services during the preceding month pursuant to Section 4.1; costs incurred for New Investment Services during the preceding month pursuant to Section 4.2; costs incurred for Fuel Services during the preceding month pursuant to Section 4.3; and the other costs incurred during the preceding month pursuant to Section 4.4. 4.7 Payment. The obligation to make payments as specified herein shall continue notwithstanding the capability (or lack of capability) of the Generation Facilities to produce power for any reason. 4.8 General Accounting Matters. Determinations by [OPCO] on all accounting matters related to the transactions contemplated by this Agreement will be in accordance with Generally Accepted Accounting Principles and the Securities and Exchange Commission's Uniform System of Accounts for Mutual and Subsidiary Service Companies, utilizing the accrual method of accounting, unless otherwise specifically provided in this Agreement or mutually agreed by [OPCO] and Owner or as prescribed by other regulatory agencies having jurisdiction, as in effect from time to time.


4.9 Right to Inspect Records. During normal business hours and subject to conditions consistent with the conduct by [OPCO] of its regular business affairs and responsibilities, [OPCO] will provide Owner or any auditor utilized by Owner and reasonably acceptable to [OPCO], or any nationally recognized accounting firm retained by Owner, access to [OPCO]'s books, records, and other documents directly related to the performance of [OPCO]'s obligations under this Agreement and, upon request, copies thereof, which pertain to (a) costs applicable to Operation and Maintenance Services, New Investment Services, Fuel Services, and Other Costs for Owner's Generation Facilities to the extent necessary to enable Owner to verify the costs which have been billed to Owner pursuant to the provisions of this Agreement; (b) compliance with all environmental Legal Requirements; and (c) matters relating to the design, construction and operation and retirement of Owner's Generation Facilities in proceedings before any Governmental Authority. 4.10 Disputed Invoice. In the event Owner shall question any statement rendered by [OPCO] in accordance with the provisions of Section 4.1 hereof, Owner shall nevertheless promptly pay amounts called for by [OPCO] under Section 4.1 hereof but such payment shall not be deemed to prevent Owner from claiming an adjustment of any statement rendered.

ARTICLE 5 Advancement of Funds


5.1 [OPCO] shall prepare forecasts, in such frequency, form and detail as Owner shall direct, of the funds required to pay [OPCO]'s anticipated costs of the services to be provided to Owner and the dates on which payment of such costs shall become due. Owner shall advance funds to [OPCO] in such amounts and at such times determined on the basis of such forecasts, to enable [OPCO] to pay its costs of services on or before payment of such costs shall be due. Such advances shall be made by deposits or bank transfers to accounts of [OPCO] with such financial institutions as [OPCO] shall designate. Any excess funds in such accounts shall be invested by [OPCO] in accordance with prudent cash management practices and all investment income and appreciation received on such funds shall be credited against the cost of service provided to Owner.

ARTICLE 6 Taxes

6.1 Owner shall report, file returns with respect to, be responsible for and pay all real property, franchise, business or other taxes, except payroll and sales or use taxes, arising out of or relating to its ownership of the Generation Facilities.

ARTICLE 7 Compliance with Provisions of Permits and Requirements of Governmental Agencies

7.1 Owner and [OPCO] shall cooperate in taking whatever action may be necessary to comply with the terms and provisions of all permits and licenses for the Generation Facilities and with all applicable lawful requirements of any federal, state or local agency or regulatory body having jurisdiction in or over the Generation Facilities.

ARTICLE 8 Confidentiality of Information


8.1 Each party to this Agreement may, from time to time, come into possession of information of the other parties that is either confidential or proprietary. Any party having any such information which is known to be considered by any other party as either confidential or proprietary will not reproduce, copy, use or disclose (except when required by a Governmental Authority) any such information in whole or in part for any purpose without the written consent of the other party. In disclosing confidential or proprietary information to a Governmental Authority, the disclosing party shall cooperate with the other party in minimizing the amount of such information furnished. At the specific request of the other party, the disclosing party will endeavor to secure the agreement of such Governmental Authority to maintain specified portions of such information in confidence. Public dissemination of information by the furnishing party before or after it is furnished shall constitute a termination of the confidentiality requirement as to that specific information.

ARTICLE 9 Damage to Persons or Property; Penalties; Fines

9.1 Applicability of Article. Since [OPCO] is undertaking its responsibilities hereunder (i) at cost and (ii) in order to assist Owner in meeting its responsibilities with respect to its Generation Facilities, the following provisions shall be applicable to loss or damage to the property of any or all of the parties hereto (including Generation Facilities property) or of third parties, or injuries to or loss of life by any person, including employees of the parties hereto, and to penalties or fines assessed with respect to the Generation Facilities: 9.2 Absence of Warranty. [OPCO] does not warrant that its performance of Operating Services will meet the standards set forth in Sections 2.1 and 2.2 hereof, and its sole obligation if it fails to meet such standards is to reperform at the request of Owner the deficient work at cost payable by Owner in a manner that complies with such standards. Owner acknowledges that such services are not subject to any warranty of any nature, express or implied, including, without limitation, any warranty of merchantability or fitness for a particular purpose.


9.3 Liabilities to Third Parties and Owner. (a) To the fullest extent provided by law, all liability to third parties other than liability for Willful Misconduct as defined in 9.4 below, whether arising in contract (including breach of warranty), tort (including fraud, negligence, product liability, breach of fiduciary duty or any other theory of tort liability), under the laws of real property or otherwise, or as a result of fines or other penalties imposed by any Governmental Authority, that results from or is in any way connected with the provision of Operation and Maintenance Services, New Investment Services, or Fuel Services for the Generation Facilities shall be borne by Owner in their entirety. Owner shall indemnify and hold harmless [OPCO], its agents servants, directors, employees, affiliates and insurers (the "Indemnified Parties") from and against any and all claims, losses, damages, expenses and costs of any kind, including without limitation attorneys fees, costs of investigation and court costs, other than those attributable to Willful Misconduct of [OPCO], as defined in Section 9.4 hereof, whether direct or indirect, on account of or by reason of bodily injuries (including death) to any person or persons or property damage arising out of or occurring in connection with the provision of Operation and Maintenance Services, New Investment Services, or Fuel Services for the Generation Facilities, whether or not such claims, losses, damages, expenses or costs were caused by or alleged to have been caused by or contributed to by the active, passive, affirmative, sole or concurrent negligence or by breach of any statutory or other duty (whether non-delegable or otherwise) of any of the Indemnified Parties.


Except for consequences of Willful Misconduct, Owner and its affiliates, servants, employees, agents and insurers hereby release, acquit and forever discharge the Indemnified Parties, to the fullest extent permitted by applicable law, from any and all damages, claims, causes of action, damage to property of Owner or expenses of whatever kind or nature, that are in any manner connected with the provision of any Operating Services or the performance and prosecution of any project or work by any of the Indemnified Parties for or on behalf of Owner for its Generation Facilities, whether arising in tort (including fraud, negligence, strict liability, breach of fiduciary duty or any other theory of tort liability), contract (including breach of warranty), under the laws of real property or otherwise, or as a result of any fine or other penalty imposed by any Governmental Authority. This release shall be effective whether or not such claims, causes of action, damages, or expenses were caused or alleged to have been caused by or contributed to by the active, passive, affirmative, sole or concurrent negligence or by breach of any statutory or other duty (whether non-delegable or otherwise) of any of the Indemnified Parties. 9.4 Willful Misconduct. As used in this Agreement, the term "Willful Misconduct" shall mean any act or omission by any of the Indemnified Parties that is performed or omitted consciously with actual knowledge that such conduct is likely to result in damage or injury to persons or property; provided, however, that any such act or omission, if performed or omitted by an Indemnified Party, shall not be deemed Willful Misconduct unless an officer of [OPCO] at or above the level of Vice President shall have expressly authorized such act or omission. [OPCO] shall exercise reasonable and customary supervision or control over the activities of its agents, servants, or employees, and its affiliates, so as to minimize the potential for adverse willful actions by such agents, servants or employees or affiliates; provided, however, that failure of [OPCO] to prevent such adverse willful actions shall not itself be considered Willful Misconduct. Liability attributable solely to Willful Misconduct shall be borne by [OPCO], subject to the limitation of liability in Section 9.5 below.


9.5 Limitation of Liability. Notwithstanding Sections 9.3 and 9.4 hereof, Owner agrees that in no event shall any of the Indemnified Parties be liable to Owner for any indirect, special, punitive, incidental or consequential damages including, without limitation, (1) loss of profits or revenues, (2) damages suffered as a result of the loss of the use of Owner's power system, Generation Facilities or equipment, (3) cost of purchase of replacement power (including any differential in fuel or power costs), or (4) cost of capital with respect to any claim based on or in any way connected with this Agreement whether arising in contract (including breach of warranty), tort (including fraud, negligence, strict liability, breach of fiduciary duty or any other theory of tort liability), under the laws of real property or any other legal or equitable theory of law, or as a result of any fine or other penalty imposed by any Governmental Authority. Owner shall release, acquit, forever discharge, indemnify, and hold harmless the Indemnified Parties from and against any claim by any customer of Owner, or any other third party, for any direct, indirect, special, punitive, incidental or consequential damages arising out of any performance or failure to perform under this Agreement. The provisions of this Section 9.5 shall apply to the fullest extent permitted by law. 9.6 Severability. In the event that any particular application of any of the limitations of liability contained in this Article 9 should be finally adjudicated to be void as a violation of the public policy of the State of ________________, then such limitation of liability shall not apply with respect to such application to the extent (but only to the extent) required in order for such limitation of liability not to be void as a violation of such public policy, and such limitations of liability shall remain in full force and effect with respect to all other applications to the fullest extent permitted by law.

ARTICLE 10 Insurance


10.1 Parties' Obligations Generally. During the term of this Agreement Owner and [OPCO] shall make reasonable efforts to procure and maintain in force such physical damage and loss, public liability, workers' compensation, officers' liability and other insurance as Owner may deem appropriate with respect to all losses, damages, liability and claims arising out of Owner's ownership of its Generation Facilities and [OPCO]'s operation thereof and the provision of Operating Services hereunder. All such insurance policies shall identify [OPCO] and Owner as additional insureds thereunder as their interests may appear, and shall contain a waiver of subrogation clause in favor of [OPCO] and Owner to the extent of the applicable limits of such policies. The aggregate cost of all insurance, applicable to each Generation Facility and procured by [OPCO] pursuant to this Agreement, and any payment by [OPCO] of any deductible, self-insured retention, or co-payment in connection with any policy claim arising out of [OPCO's] performance of this Agreement shall be included in the costs of Operating Services. [OPCO] will take steps to meet the requirements of such insurance policies and cooperate with Owner to furnish information, establish procedures, erect or change physical facilities and otherwise meet the requirements of the insurers to maintain coverage in effect and to collect claims that may be made under such insurance. In the event that any of the insurance described in this Article 10 is canceled by a party, that party shall give written notice of such cancellation to the other party at least sixty (60) days prior to the effective date of such cancellation. 10.2 Commercial Liability Insurance. [OPCO] will carry insurance to cover the legal obligations to pay damages because of bodily injury or property damage. The limit and the deductible of such coverage shall be the appropriate amounts as determined by [OPCO].


10.3 Workmen's Compensation Insurance. [OPCO] shall qualify as a self-insurer in ________________ and with the U.S. Department of Labor for purposes of the U.S. Longshoreman's and Harbor Worker's Act, but will provide an umbrella policy to cover benefits in excess of its assumed liability for workmen's compensation, the Longshoreman's and Harbor Worker's Act, and employers liability. The Owner and [OPCO] acknowledge that, pursuant to the terms of this Agreement, all premiums for [OPCO]'s workmen's compensation insurance and all payments to [OPCO] employees, including workmen's compensation benefits, relating to work performed by such employees while on the premises of a Generation Facility, are effectively made by the Owner, since such premiums and payments constitute direct charges incurred by [OPCO] in relation to the performance of Operating Services for such Generation Facility. It is the intent of Owner and [OPCO] that for purposes of workmen's compensation Owner not be exposed to greater liability by virtue of this Agreement than Owner would have if it had utilized Owner employees to perform Operating Services. 10.4 Additional Insurance. In the event Owner at any time or from time to time shall have elected to participate in supplemental insurance programs to cover other risks arising from the ownership and operation of a Generation Facility, including the extra costs of replacement power, the costs of such protection shall be borne by Owner. 10.5 Waiver of Subrogation - Allocation and Payment of Premium. Each insurance policy obtained by a party hereto shall contain waivers of subrogation against the other party, if obtainable from the insurer. The aggregate cost of all insurance, applicable to the Generation Facilities and procured by [OPCO] pursuant to this Agreement, shall be considered an Operating Cost. In the event that any of the foregoing insurance policies is canceled by a party, that party shall give written notice of such cancellation to the other party sixty (60) days prior to the effective date of such cancellation.


ARTICLE 11 Term

11.1 Term. The term of this Agreement shall commence on the Effective Date, subject nevertheless to any applicable rules, regulations or approvals of any regulatory authority whose approval is required. This Agreement shall expire (i) when all Generation Facilities have been retired and each site has been returned to a condition acceptable to Owner, all in compliance with Legal Requirements; (ii) upon termination pursuant to Section 12.1; or (c) upon mutual agreement of the parties. In no event, however, shall this Agreement terminate as to Owner unless all necessary regulatory approvas for transfer of responsibility for all Generation Facilities of Owner have been obtained. Owner's obligation to make payments to [OPCO] under this Agreement that have not been satisfied prior to the expiration of the term of this Agreement shall survive such expiration of the term.

ARTICLE 12 Remedies

12.1 Termination. In the event Owner determines that it is in its interest to do so, or [OPCO] determines that it is in [OPCO]'s interest to do so, either [OPCO] or Owner may at will terminate this Agreement as provided below. Except as may be otherwise provided in Section 12.2 and Article 9 hereof, this right of termination shall be Owner's sole and exclusive remedy, legal or equitable, for any failure by [OPCO] at any time to perform its duties, responsibilities, obligations, or functions under this Agreement, or for any other breach by [OPCO] of this Agreement. The procedure for exercise of this right of termination shall be as follows:


12.1.1 Owner shall give written notice to [OPCO] of Owner's determination to terminate this Agreement or [OPCO] shall give written notice to Owner of its determination to terminate this Agreement. It is recognized that no termination can be accomplished until all necessary regulatory approval has been obtained to transfer the operating responsibility for the Generation Facilities to Owner. Following the giving of such notice, the parties agree to cooperate, in good faith, to accomplish the transfer of operating responsibility in a prompt manner. 12.1.2 During the period between the giving of the notice of determination to terminate, and the date on which such transfer of operating responsibility is accomplished, [OPCO] agrees to continue the provision of Operating Services for the Generation Facilities.


12.1.3 Upon receipt of all necessary governmental authorization for transfer of operating responsibility for each Generation Facility from [OPCO] to Owner, this Agreement shall terminate. Except as may otherwise be provided in Section 12.2 and Article 9 hereof, Owner hereby agrees that from and after such termination Owner shall indemnify and forever hold [OPCO] , its servants, directors, employees, affiliates and its agents harmless from and against any and all liability, costs, expenses (including reasonable attorneys' fees) and judgments, which may thereafter be experienced by [OPCO], which are in any way related to, arise out of or are in connection with the activities of [OPCO], its agents, servants, directors, employees and affiliates under this Agreement (whether the cause occurred before or after termination), and Owner further waives any claim Owner may have against [OPCO], its officers, directors, employees, affiliates and agents for damage to property of Owner, that arose out of or in connection with the activities of [OPCO], its officers, directors, employees, affiliates and agents under this Agreement. The indemnification and waiver contained herein shall survive termination and shall be specifically enforceable by [OPCO] against Owner.

ARTICLE 13 Miscellaneous

13.1 No Partnership or Joint Venture. Nothing in this Agreement shall be deemed to create or constitute a partnership, joint venture or association among the parties hereto or any of them, the sole purpose of this Agreement being limited to providing for the orderly and efficient operation, maintenance, repair, upgrade, rehabilitation, renewal, replacement, additions and construction of the Generation Facilities. 13.2 Owner's Designated Representatives. Owner hereby designates its President as Owner's Representative, who shall receive notices and communications from [OPCO] under the provisions of this Agreement and who shall send to the designated Representative of [OPCO] all notices and communications under the provisions of this Agreement. 13.3 [OPCO]'s Designated Representative, [OPCO] hereby designates its President as the [OPCO] Representative, who shall receive notices and communications from Owner's Representative under the provisions of this Agreement and who shall send to Owner's Representative all notices and communications concerning the provisions of this Agreement. 13.4 Depreciation. Owner shall determine the basis and method it will use for purposes of depreciation and other matters where investment in Generation Facilities property is relevant.


13.5 Holidays, Business Days. Any obligations to perform under this Agreement, including payment obligations, which shall become due on a non-business day shall become due upon the next business day. The term "business day" shall mean any day other than a day on which banking institutions in the City of __________, ________________ are authorized by law to close.

13.6 Owner's Services to be Furnished at Cost. To the extent that Owner may, from time to time, provide goods or services to [OPCO], [OPCO] shall pay for such goods and services at Owner's cost determined as herein provided, which payments shall thereupon be treated as Generation Facilities costs under Article 4. 13.7 Entire Agreement. This Agreement constitutes the entire understanding among the parties hereto, superseding any and all previous understandings, oral or written, pertaining to the subject matter contained herein. No party hereto has relied or will rely upon any verbal or written representation or verbal or written information made or given to such party by any representative of the other party or anyone on its behalf. 13.8 Amendments. This Agreement may not be amended, modified, or terminated, nor may any obligation hereunder be waived verbally, and no such amendment, modification, termination or waiver shall be effective for any purpose unless it is in writing, and signed by both parties hereto, and all necessary regulatory approvals have been obtained. 13.9 Notices. Any notice, request, consent or other communication permitted or required by this Agreement shall be in writing and shall be deemed given when deposited in the United States Mail, first class postage prepaid, and addressed as follows:

If to [OPCO]: [OPCO] ===================== Attention: President

If to Owner: [NEWCO] ======================== Attention: President


Unless a different officer or address shall have been designated by the respective party by notice in writing. 13.10 Captions. The descriptive captions of the various Articles, Sections and Paragraphs of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof. 13.11 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.12 No Waiver. Failure of any party to enforce any rights or to require performance of any other party of any of the provisions of this Agreement shall not release any party of any of its obligations under this Agreement and shall not be deemed a waiver of any rights of the parties to insist on performance thereof, or of any of the parties' rights or remedies hereunder, and in no way shall affect the validity of these terms and conditions or any part thereof, or the right of any party thereafter to enforce every provision hereof. 13.13 Singular and Plural. Throughout this Agreement, whenever any word in the singular number is used, it shall include the plural unless the context otherwise requires; and whenever the plural number is used, it shall include the singular unless the context otherwise requires.......... 13.14 Third Party Beneficiaries. This Agreement is for the benefit of Owner and [OPCO], and no person or entity other than Owner and [OPCO] is or shall be entitled to bring any action to enforce any provision of this Agreement against anyone.


13.15 Severability. Should any provision of this Agreement be held to be invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect, provided that deletion of the invalid or unenforceable provision does not materially affect the agreement of the parties contained herein.

ARTICLE 14 Successors and Assigns

14.1 This Agreement and all of the terms and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of [OPCO]'s obligations hereunder shall be assignable by [OPCO], in whole or in part, without the express written consent of Owner. Any mortgage indenture trustee which shall foreclose on substantially all of the electric generation properties of Owner may, at such trustee's own election, be deemed to be a successor and assign of Owner under this Agreement.

ARTICLE 15 Governing Law

15.1 This Agreement shall be construed in accordance with, and to be governed by, the laws of the State of _______________.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and by their duly authorized representatives as of the day and year first above written. [OPCO]


By________________________________________ President

[NEWCO]

By ----------------------------------------------- President


SCHEDULE 1

NEWCO GENERATING FACILITIES

GENERATING STATION .................LOCATION ------------------ --------


Exhibit D-1

*1 Commission Opinions, Orders and Notices

Southern Company Services, Inc.

Docket Nos. ER00-1655-000 and ER00-1655-001

Order Accepting for Filing Proposed Market-Based Rates and Amended Intercompany Interchange Contract as Modified

(Issued June 15, 2000)

Before Commissioners: James J. Hoecker, Chairman; William L. Massey, Linda Breathitt, and Curt H (acute)ebert, Jr.

In this order, we accept for filing, without hearing or suspension, the revised Market- Based Rate Power Sales Tariff (Market Rate Tariff) and the amended and restated Intercompany Interchange Contract (IIC) filed by Southern Company Services, Inc. (SCSI).

Background

On February 18, 2000, as amended on May 8, 2000, SCSI, as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company (Operating Companies), filed an amended and restated IIC. In its filing, SCSI requests authority to include under the amended and restated IIC a new operating company that SCSI is forming, New Operating Company (NewCo). [FN1] SCSI states that NewCo is being created to consolidate wholesale activities that are currently being conducted on a piecemeal basis by the existing Operating Companies. SCSI also proposes to revise the IIC to incorporate all previous Commission- approved amendments into a single "restated" contract and to simplify and modernize the contract. SCSI's proposed substantive changes to the IIC include: (1) creating a new definition for Assignable Energy to differentiate purchases made for the benefit of all the Operating Companies from those made to meet a specific need involving less than all of the Operating Companies; (2) incorporating a method to adjust the costs to individual Operating Companies in instances where a purchase benefits the system as a whole but adversely impacts an individual Operating Company; (3) allowing all Operating Companies to satisfy their opportunity sale obligations for system sales at the same average system rate; and (4) eliminating a provision specifying that operating and maintenance expenses otherwise classified as variable would be treated as fixed whenever a generating unit was projected to run at less than a 10 percent annual capacity factor (Ten Percent Rule). In addition, SCSI proposes to revise its Market Rate Tariff to include NewCo among the companies authorized to sell under its terms. [FN2] Furthermore, SCSI has submitted amendments to its Code of Conduct to reflect the addition of NewCo. SCSI requests an effective date of April 18, 2000 for the amended IIC and the Market Rate Tariff with the exception of the elimination of the Ten Percent Rule, for which the effective date requested is the date that a Commission order is issued accepting the filing without any refund obligation.

Notice and Interventions

Notice of SCSI's initial filing was published in the Federal Register, 65 Fed. Reg. 11,296 (2000), with comments, protests and motions to intervene due on or before March 10, 2000. *2 On March 10, 2000, Oglethorpe Power Corporation (Oglethorpe) and the Board of Water, Light and Sinking Fund Commissioners of the City of Dalton, Georgia (Dalton Utilities) filed timely motions to intervene. Dalton Utilities states that it is not clear what role NewCo will play in the future supply of electric power under existing wholesale agreements between SCSI and customers. Dalton Utilities argues that no action on this filing by the Commission should pre-determine the rights of customers under existing wholesale agreements without the consent of such customers. On March 13, 2000, the Municipal Electric Authority of Georgia (MEAG) filed an untimely motion to intervene, raising nosubstantive issues. On March 27, 2000, SCSI filed a letter stating that the rights of the parties are defined under the existing wholesale agreements and that these rights would not be affected (one way or the other) by this filing. On April 14, 2000, a deficiency letter was issued by the Director, Division of Tariffs and Rates-East, concerning SCSI's filing. On May 8, 2000, SCSI filed a supplement to its original filing. Notice of SCSI's supplemental filing was published in the Federal Register, 65 Fed. Reg. 31,306, with comments, protests and motions to intervene due on or before May 22, 2000. No additional comments or interventions were filed.

Discussion

Procedural Matters Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure, 18 C.F.R. s 385.214 (1999), the timely, unopposed motions to intervene of Ogelthorpe and Dalton Utilities serve to make them parties to this proceeding. We will grant the untimely, unopposed motion to intervene of MEAG given its interest in this proceeding and the absence of any undue prejudice or delay. Intercompany Interchange Contract SCSI states that NewCo will aggregate into one business unit the wholesale activities currently performed on a piecemeal basis by each of the


Operating Companies. SCSI emphasizes that the addition of NewCo will simplify the resource planning and decisionmaking process, while maintaining the benefits and burdens of participation in the wholesale markets, as if the existing Operating Companies had done so directly. SCSI describes the addition of NewCo as one of several ministerial changes that have no substantive effect on rates, practices or procedures under the IIC. SCSI's statements make clear that NewCo will stand in the shoes of the existing Operating Companies, i.e., it will simplify the existing wholesale activities without any change in how costs and revenues from wholesale transactions are shared by the existing Operating Companies. Accordingly, we will accept SCSI's addition of NewCo, as well as the other changes to the IIC. Because these statements are not in the IIC, we will direct SCSI to amend the IIC within 30 days of the date of this order to make clear that the existing Operating Companies will continue to share the costs and revenues from NewCo's wholesale transactions just as if the sales were made by the existing Operating Companies themselves. [FN3] Accordingly, we will accept the amended IIC for filing, to become effective as of April 18, 2000, except for the provision eliminating the Ten Percent Rule, which will become effective upon issuance of this order. *3 Market-Based Rates The Commission allows power sales at market-based rates if the seller and its affiliates do not have, or have adequately mitigated market power in generation and transmission and cannot erect other barriers to entry. In order for the affiliate of a transmission-owning public utility to demonstrate the absence or mitigation of market power, the public utility must have on file with the Commission an open access transmission tariff for the provision of comparable services. The Commission also considers whether there is evidence of affiliate abuse or reciprocal dealing. [FN4] As we explain below, we find that SCSI's proposal to include NewCo among those authorized to sell under the Market Rate Tariff meets these standards. Accordingly, we will accept the revision to the Market Rate Tariff for filing without suspension or hearing, to become effective on the date of commencement of service by NewCo. 1. Generation Market Power The Commission has recently evaluated the generation dominance of the applicant and its affiliates in Docket No. ER99-2670-000. [FN5] Our analysis indicated that the market shares of installed and uncommitted capacity of SCSI do not exceed levels the Commission has found to be acceptable, [FN6] and there are no material changes in circumstances that would warrant a different conclusion here. Accordingly, we find that NewCo meets the Commission's generation market power standard for approval of market-based rates. 2. Transmission Market Power When an affiliate of a transmission-owning public utility seeks authorization to charge market-based rates, the Commission has required the public utility to have an open access transmission tariff on file before granting such authorization. [FN7] The Southern Company's Operating Companies have filed an open access pro forma compliance transmission tariff in Docket No. OA96-27- 000. [FN8] Accordingly, we find that NewCo meets the Commission's transmission market power standard for approval of market-based rates. 3. Other Barriers to Entry/Reciprocal Dealing We are satisfied with SCSI's explanation that there are no other barriers to entry or reciprocal dealing considerations of concern here. 4. Affiliate Abuse SCSI states that NewCo will not sell power to, or purchase power from, any affiliated entity with a franchised service territory unless the Commission first approves such a transaction in a separate order under Section 205 of the Federal Power Act (FPA), 16 U.S.C. s 824d (1994). In addition, SCSI states that it has amended its Code of Conduct, which has been previously accepted by the Commission, [FN9] to reflect the addition of NewCo as a system company. The amended Code of Conduct satisfies the Commission's affiliate abuse requirements for the separation of personnel, the pricing of non- power goods and services and the requirement concerning the sharing of all market information. *4 With these safeguards, we are satisfied with SCSI's explanation that there are no affiliate abuse considerations of concern here. Waivers, Authorizations and Reporting Requirements We will grant NewCo the following waivers, consistent with those granted to other entities with market-based rate authorization: (1) waiver of the accounting and related reporting requirements of Parts 41, 101 and 141 of the Commission's regulations, with the exception of 18 C.F.R. ss 141.14, .15 (1999); (2) permission to make abbreviated filings under Part 45; (3) waiver of the requirements of Subpart B and C of Part 35, except Sections 35.12(a), 35.13(b), 35.15 and 35.16; and (4) blanket approval for issuances of securities or assumptions of liabilities pursuant to Part 34 of the Commission's regulations. Consistent with procedures we have adopted in other cases, NewCo may file umbrella service agreements for short-term power sales (one year or less) within 30 days of the date of commencement of short-term service, to be followed by quarterly transaction summaries of specific sales. [FN10] For long- term transactions (longer than one year), NewCo must submit the actual individual service agreement for each transaction within 30 days of the date of commencement of service. To ensure the clear identification of filings,and in order to facilitate the orderly maintenance of the Commission's files and public access to documents, long-term transaction service agreements should not be filed with the short- term transaction summaries. Additionally, we will direct NewCo to inform the Commission promptly of any change in status that would reflect a departure from the characteristics the Commission has relied upon in approving market-based pricing. These include, but are not limited to: (1) ownership of generation or transmission facilities or inputs to electric power production other than fuel supplies; or (2) affiliation with any entity not disclosed in the filing that owns generation or transmission facilities or inputs to electric power production, or affiliation with any entity that has a franchised service area. [FN11] Alternatively, NewCo may elect to report such changes with the updated market analysis it will be required to file every three years. [FN12]

The Commission orders: (A) SCSI's revised Market Rate Tariff is hereby accepted for filing, without suspension or hearing, to become effective on the date of commencement of service of NewCo. (B) SCSI is hereby directed to revise the IIC as discussed in the body of this order within 30 days of the date of this order. (C) SCSI's amended and restated IIC is hereby accepted for filing, without suspension or hearing, to become effective on April 18, 2000 except for the provision eliminating the Ten Percent Rule, which will become effective upon issuance of this order. (D) NewCo is hereby directed to


inform the Commission of the date of commencement of service within 10 days of that date. *5 (E) NewCo's request for waiver of Parts 41, 101, and 141 of the Commission's regulations is hereby granted, as discussed in the body of this order. (F) Within 30 days of the date of this order, any person desiring to be heard or to protest the Commission's blanket approval of issuances of securities or assumptions of liabilities by NewCo should file a motion to intervene or protest with the Federal Energy Regulatory Commission, 888 First Street, NE., Washington, D.C. 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure, 18 C.F.R. ss 385.211 and 385.214 (1999). (G) Absent a request to be heard within the period set forth in Ordering Paragraph (F) above, NewCo is hereby authorized to issue securities and assume obligations or liabilities as guarantor, indorser, surety, or otherwise in respect of any security of another person; provided that such issue or assumption is for some lawful object within the corporate purpose of NewCo, compatible with the public interest, and reasonably necessary or appropriate for such purposes. (H) Until further order of this Commission, the full requirements of Part 45 of the Commission's regulations, except as noted below, are hereby waived with respect to any person now holding or who may hold an otherwise proscribed interlocking directorate involving NewCo. Any such person instead shall file a sworn application providing the following information: (1) the full name and business address; and (2) all jurisdictional interlocks, identifyingthe affected companies and the positions held by that person. (I) The Commission reserves the right to modify this order to require a further showing that neither public nor private interests will be adversely affected by continued Commission approval of NewCo's issuances of securities or assumptions of liabilities, or by the continued holding of any affected interlocks. (J) NewCo's request for waiver of the provisions of Subparts B and C of Part 35 of the Commission's regulations, with the exception of Sections 35.12(a), 35.13(b), 35.15 and 35.16, is hereby granted. (K) NewCo is hereby directed to conform to the filing and reporting requirements specified in this order. The first quarterly report of transactions undertaken by NewCo under its market-based power sales tariff will be due within 30 days of the calender quarter in which service commences. (L) NewCo is hereby directed to file an updated market analysis within three years of the date of this order, and every three years thereafter. (M) NewCo is hereby directed to inform the Commission promptly of any change in status that would reflect a departure from the characteristics the Commission has relied upon in approving market-based pricing. Alternatively, as discussed in the body of this order, NewCo may elect to report any such changes every three years with the updated market analysis filed pursuant to Ordering Paragraph (L) above. NewCo shall notify the Commission of which option it elects in the first quarterly report filed pursuant to Ordering Paragraph (K) above. *6 (N) SCSI is hereby informed of the following rate schedule designations:

Southern Company Services, Inc.

Docket No. ER00-1655-000

Rate Schedule Designations

Effective Date: Date of Commencement of Service of NewCo

Designation-Description

(1) FERC Electric Tariff, First Revised Volume No. 4 Original Sheet Nos. 1-7 (Supersedes Original Volume No. 4)-Market- Based Rate Tariff and Code of Conduct

Effective Date: April 18, 2000

(2) Rate Schedule FERC No. 138 (Supersedes Rate Schedule FERC No. 65, as supplemented)-Amended and Restated Intercompany Interchange Contract and Allocation Methodology and Rate Manual

FN1 SCSI notes that NewCo is subject to regulatory approval from the Securities and Exchange Commission (SEC). However, this approval has not yet been obtained. Upon receipt of SEC approval, SCSI states that a submittal to this Commission will be made to reflect the formal name of NewCo.

FN2 SCSI also proposes to revise its Market Rate Tariff (Sections 6.1 and 6.2) to adopt the prime rate published in the Wall Street Journal as the applicable interest rate. Further, SCSI has filed to update Section 1.4 of its Market Rate Tariff to reflect the change from separate Point-to-Point and Network Transmission Tariffs to the single Open Access Transmission Tariff required by Order No. 888. See Promoting Wholesale Competition Through Wholesale Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, FERCStatutes and Regulations, Regulations Preambles January 1991- June 1996 P 31,036 (1996) (Order No. 888), order on reh'g, FERC Statutes and Regulations P 31,048 (1997) (Order No. 888-A), order on reh'g, 81 FERC P 61,248 (1997) (Order No. 888-B), order on reh'g, 82 FERC P 61,046 (1998) (Order No. 888-C).

FN3 See SCSI transmittal letter at 3-4; SCSI supplemental response at 6- 7.

FN4 E.g., Progress Power Marketing, Inc., 76 FERC P 61,155, at p. 61,919 (1996), letter order approvingsettlement, 79 FERC P 61,149 (1997); Northwest Power Marketing Company, L.L.C., 75 FERC P 61,281, at p.


61,889 (1996); accord Heartland Energy Services, Inc. et al., 68 FERC P 61,223, at pp. 62,060-63 (1994) (Heartland).

FN5 Southern Operating Companies, letter order issued May 28, 1999.

FN6 See, e.g., Louisiana Energy and Power Authority v. FERC, 141 F.3d 364 (D.C. Cir. 1998).

FN7 See Order No. 888, FERC Statutes and Regulations at pp. 31,656-57; accord Southern Company Services, Inc., 71 FERC P 61,392, at p. 62,536 (1995); Heartland, 68 FERC at pp. 62,059-60.

FN8 Allegheny Power Systems, Inc., et al., 77 FERC P 61,266 (1996), clarified, 80 FERC P 61,143 (1997).

FN9 SEI Wisconsin, L.L.C., Docket No ER99-669-001, letter order, issued February 26, 1999.

FN10 See Cataula Generating Company, L.P., 79 FERC P 61,261, at p. 62,134 (1997); Kincaid Generation, L.L.C., 78 FERC P 61,082, at pp. 61,300-01 (1997); see also Southern Company Services, Inc., 75 FERC P 61,130, at pp. 61,444-45, clarified, 75 FERC P 61,353 (1996).

FN11 See, e.g., Morgan Stanley Capital Group, 69 FERC P 61,175, at p. 61,695 (1994), order on reh'g, 72 FERC P 61,082 (1995); InterCoast Power Marketing Company, 68 FERC P 61,248, at p. 62,134, clarified, 68 FERC P 61,324 (1994).

FN12 We reserve the right to require such an analysis at any time. Federal Energy Regulatory Commission 91 FERC P 61,259, 2000 WL 773047 (F.E.R.C.) END OF DOCUMENT


Exhibit F-1

Troutman Sanders LLP Bank of America Plaza

600 Peachtree Street, N.E., suite 5200 Atlanta, Georgia 30308

404-885-3000

December 21, 2000

Securities and Exchange Commission 450 Fifth Street, N.W.

Washington, D.C. 20549

Re: Statement on Form U-1 of The Southern Company, et al. (File No. 70-9701)

Ladies and Gentlemen:

We are familiar with the statement on Form U-1, as amended, referred to above relating to the proposal by The Southern Company ("Southern") to, among other things, form and acquire the stock of and make capital contributions to NewCo (as defined in such statement on Form U-1), which would then undertake the construction and ownership of certain electric power generation.

We are of the opinion that Southern is validly organized and duly existing as a corporation under the laws of the State of Delaware and that, upon incorporation and organization of NewCo pursuant to the laws of its jurisdiction of incorporation and upon the issuance of your order herein and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and such order:

(a) all state laws applicable to the proposed transactions by Southern will have been complied with;

(b) any guarantees of NewCo's indebtedness by Southern will be valid and binding obligations of Southern in accordance with their terms; and

(c) the consummation of the proposed transactions will not violate the legal rights of the holders of any securities issued by Southern or any associate company thereof.

We hereby consent to the use of this opinion in connection with the above-referenced statement on Form U-1.

/s/Troutman Sanders LLP


Exhibit F-2

Balch & Bingham LLP 1901 Sixth Avenue North

Suite 2600 Birmingham, Alabama 35202

(205) 251-8100

December 21, 2000





We are familiar with the statement on Form U-1, as amended, referred to above and, as counsel to Alabama Power Company ("Alabama"), are furnishing this opinion with respect to the proposed transactions contemplated in connection with the formation of NewCo (as defined in such statement on Form U-1) as described in such statement on Form U-1.

We are of the opinion that Alabama is validly organized and duly existing as a corporation under the laws of the State of Alabama and that, upon the issuance of your order herein and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and such order:

(a) all state laws applicable to the proposed transactions by Alabama will have been complied with; and

(b) the consummation of the proposed transactions by Alabama will not violate the legal rights of the holders of any securities issued by Alabama or any associate company thereof.


Very truly yours,

/s/Balch & Bingham LLP


Exhibit F-3



404-885-3000

December 21, 2000





We are familiar with the statement on Form U-1, as amended, referred to above and, as counsel to Georgia Power Company ("Georgia"), are furnishing this opinion with respect to the proposed transactions contemplated in connection with the formation of NewCo (as defined in such statement on Form U-1) as described in such statement on Form U-1.

We are of the opinion that Georgia is validly organized and duly existing as a corporation under the laws of the State of Georgia and that, upon the issuance of your order herein and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and such order:

(a) all state laws applicable to the proposed transactions by Georgia will have been complied with; and

(b) the consummation of the proposed transactions by Georgia will not violate the legal rights of the holders of any securities issued by Georgia or any associate company thereof.


Very truly yours,



Exhibit F-4

Beggs & Lane Seventh Floor Blount Building

3 West Garden Street Pensacola, Florida 32501

(850) 432-2451

December 21, 2000





We are familiar with the statement on Form U-1, as amended, referred to above and, as counsel to Gulf Power Company ("Gulf"), are furnishing this opinion with respect to the proposed transactions contemplated in connection with the formation of NewCo (as defined in such statement on Form U-1) as described in such statement on Form U-1.

We are of the opinion that Gulf is validly organized and duly existing as a corporation under the laws of the State of Maine and that, upon the issuance of your order herein and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and such order:

(a) all state laws applicable to the proposed transactions by Gulf will have been complied with; and

(b) the consummation of the proposed transactions by Gulf will not violate the legal rights of the holders of any securities issued by Gulf or any associate company thereof.


Very truly yours,

/s/Beggs & Lane


Exhibit F-5

Eaton and Cottrell, P.A. 1310 Twenty Fifth Avenue Gulfport, Mississippi 39501

(228) 864-9900

December 21, 2000





We are familiar with the statement on Form U-1, as amended, referred to above and, as counsel to Mississippi Power Company ("Mississippi"), are furnishing this opinion with respect to the proposed transactions contemplated in connection with the formation of NewCo (as defined in such statement on Form U-1) as described in such statement on Form U-1.

We are of the opinion that Mississippi is validly organized and duly existing as a corporation under the laws of the State of Mississippi and that, upon the issuance of your order herein and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and such order:

(a) all state laws applicable to the proposed transactions by Mississippi will have been complied with; and

(b) the consummation of the proposed transactions by Mississippi will not violate the legal rights of the holders of any securities issued by Mississippi or any associate company thereof.


Very truly yours,

/s/Eaton and Cottrell, P.A.


Exhibit F-6



404-885-3000

December 21, 2000





We are familiar with the statement on Form U-1, as amended, referred to above and, as counsel to Savannah Electric and Power Company ("Savannah"), are furnishing this opinion with respect to the proposed transactions contemplated in connection with the formation of NewCo (as defined in such statement on Form U-1) as described in such statement on Form U-1.

We are of the opinion that Savannah is validly organized and duly existing as a corporation under the laws of the State of Georgia and that, upon the issuance of your order herein and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and such order:

(a) all state laws applicable to the proposed transactions by Savannah will have been complied with; and

(b) the consummation of the proposed transactions by Savannah will not violate the legal rights of the holders of any securities issued by Savannah or any associate company thereof.


Very truly yours,



End of Filing


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