The Southern Company is a utility holding company whose principal subsidiaries provide power in Alabama, Georgia, Florida, and Mississippi. With the gradual deregulation of the utilities industry in the 1990s, Southern Company expanded its holdings into New England, New York, the Midwest, and California, making it the largest power producer in the country. In addition, Southern now owns power generating operations in Europe, Hong Kong, the Philippines, and South America.
The early 1980s saw a return to growth. In January 1982 The Southern Company formed Southern Electric International Inc. to market The Southern Company's technical expertise to utilities and industrial concerns. Large building programs also were continued. In 1984 The Southern Company announced that it would spend $7.1 billion over three years to complete seven generating plants including two nuclear units at the Vogtle site near Augusta, Georgia.
As the decade came to a close, Southern, like many utilities, found that its nuclear building program was over budget. In 1985 Southern had pledged not to pass through to ratepayers any more than $3.56 billion, which was then its share of the $8.35 billion estimated total cost of the Vogtle plant. Southern said any amount above that cap would be charged to its shareholders. When the estimated price of the project increased by $522 million in 1986, Southern posted a charge of $229 million against 1987 earnings. Problems with construction costs and regulators led to a series of disappointing earnings years and stagnant dividends.
In March 1988 The Southern Company acquired Savannah Electric & Power Company of Savannah, Georgia, for approximately 11 million common shares, exchanging 1.05 Southern shares for each Savannah Electric common share, a stock transaction valued at $239.3 million. Later that year the U.S. Attorney General's office in Atlanta began investigating Southern's tax accounting practices for spare parts. In 1989 it also began investigating whether executives at Gulf Power had made illegal political contributions. In 1989 Gulf Power pleaded guilty to conspiring to make political contributions in violation of the Public Utility Holding Company Act and impeding the Internal Revenue Service in its collection of income taxes. In accordance with the plea agreement, Gulf Power paid a fine of $500,000.
The year 1990 brought another disappointment as Georgia regulators refused to allow Southern to charge customers for a portion of its investment in the Vogtle nuclear plant. On a positive note, Southern agreed to sell a unit of Georgia Power's Scherer Plant to two Florida utilities for $810 million and formed Southern Nuclear Operating Company to provide services for nuclear power plants. Also in 1990, the Attorney General's office dropped its investigation of Southern's spare parts accounting practices.
The Energy Policy Act of 1992 inaugurated the era of deregulation
in the utilities industry. By encouraging competition in the nation's regional power markets, the new laws compelled major utilities to expand and diversify to survive. Southern Company responded aggressively to deregulation, both at home and abroad. In 1998 it merged with Houston-based Vastar to form Southern Company Energy Marketing, with the purpose of exploring possible acquisitions in Texas and the Southwest. That same year, Southern purchased generating facilities in New England, New York, and California. While Southern Company's regulated utilities in the Southeast continued to perform well throughout the 1990s, expansion into the unregulated market transformed the company into the nation's largest supplier of electricity by decade's end, when it could claim nearly 50,000 megawatts of power generation.
Southern Company also led the charge into the rapidly growing world energy market. It obtained its first overseas holding with the purchase of a 50 percent stake in Bahamian utility Freeport Power in 1992. This...
Please join StudyMode to read the full document