Operator: Good afternoon. My name is Christian and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company Second Quarter 2011 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.
I would now like to turn the call over to Mr. Glen Kundert, Vice President of Investor Relations. Please go ahead, sir.
Glen Kundert - IR: Thank you and welcome to Southern Company's second quarter earnings call. Joining me this afternoon are; Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company and Art Beattie, Chief Financial Officer.
Let me remind you that we will make forward-looking statements today in addition to providing historical information. There are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent filings.
We'll be including slides as part of today's conference call. These slides provide details on information that will be discussed in today's call. You can access the slides on our Investor Relations website at www.southerncompany.com, if you want to follow along during the presentation.
Now, at this time, I'll turn the call over to Tom Fanning, Southern Company's Chairman, President and Chief Executive Officer.
Thomas A. Fanning - Chairman, President and CEO: Good afternoon and thank you for joining us. Our second quarter earnings show that we continue to produce favorable result. Art will share more details on those results in a few minutes. Since assuming the CEO role at Southern Company, I have been very public about setting five clear priorities for our company.
I thought it might be interesting to review our progress against those priorities. First, preserve and enhance the Circle of Life. Our business model is predicated on making customers the primary focus of everything we do. We continue to excel at bringing value to our customers. Our reliability remains outstanding. Our prices are still significantly below national averages, and our customer service ratings continue to place us among the best in the industry.
Second; succeed with Vogtle Units 3 and 4 and Plant Ratcliffe at Kemper County. I am happy to report that both of these projects remain on budget and on schedule. As with any large complex undertaking, we will always face challenges, but we are managing these challenges in a diligent, intensive and workmen like manner. When completed, both projects will provide great value to our customers.
Focusing for a moment on Plant Vogtle, I know you were interested in the timing of the issuance of the amendment to the design certification and the combined construction and operating license, or COL, for Vogtle Units 3 & 4. It is our understanding that the NRC will issue a revised schedule in a few weeks, clarifying the timeframes for these critical documents. We are confident that the revised schedule will include approval to the amendment of the design certification this fall.
We are also confident that the NRC has the discretion to issues the COL shortly following the approval of the amendment to this design certification also in 2011. Certain administrative procedures related to the effective date of the COL could push the issuance date of the COL into early 2012. If the Commission decides to issue the COL around the effective date, then the NRC has the option to approve our request which was filed some two years ago for a second limited work authorization or LWAB in the fall. This would enable us to maintain our schedule with additional construction activities related to the nuclear island while we await the final COL.
Getting back to priorities; third, engage in the development of a sensible national energy policy. We have been active with all of our external publics and arguing for a sensible national energy policy, one that balances the need for the best reliability with a reasonable economic consequence and an optimal environmental impact, all critical to creating an environment that fosters job creation and strengthens the economy and all for the benefit of our customers.
First, we argued for all the arrows in the quiver; the need to develop all the available generation resources necessary to meet the needs of this nation's energy future, including nuclear, 21st century coal, natural gas, renewables and energy efficiency. We are the only company in our industry actively engaged in all of these sectors and we have committed more than $20 billion to developing this 21st century generation portfolio.
Second, we are committed to technology development and are the only company in our industry with a robust proprietary research and development organization. We have successfully developed and implemented our own environmental control equipment and our own generation technologies like our TRIG project used for Plant Ratcliffe at Kemper County, Mississippi.
Fourth is to promote smart energy. We've been active in developing all areas of smart technologies as we call them; smart power or generation, smart grid or transportation, including smart meters, and smart choices, essentially focused on those value chains that may emerge beyond the meter.
With respect to smart power and smart grid, our path is clear and our progress is significant. For smart choices, because of how uncertain that environment currently appears, we will maintain a conservative posture and explore opportunities with a number of options bets.
Fifth, value and develop our people. Southern Company is renowned for our deep bench strength and our leadership development practices. We remain committed to these practices and have added key external talent to our roster. Enhancing our (looks), that is our skills and our experience base, and further developing our culture, our house, will make this Company successful for years to come.
At this point, I'll turn the call over to Art Beattie, our Chief Financial Officer, for a discussion of our financial highlights for the second quarter and our earnings estimate for the third quarter.
Art P. Beattie - EVP and CFO: Thanks, Tom. In the second quarter of 2011 we earned $0.71 a share compared with $0.62 a share in the second quarter of 2010 or an increase of $0.09 a share. On a year-to-date basis, we earned $1.20 a share in the first six months of 2011 compared with $1.22 a share for the same period a year ago, a decrease of $0.02 a share.
Let's turn now to the major factors that drove our second quarter numbers compared with the second quarter of 2010.
First, the negative factors; increased depreciation and amortization reduced our earnings by $0.05 a share in the second quarter of 2011 compared with the second quarter of 2010. This increase is primarily due to expiration of the Georgia Power cost of removal accounting order at the conclusion of 2010 and to increased environmental transmission and distribution investments.
A decrease in wholesale revenue in our traditional business reduced our earnings by $0.01 a share in the second quarter of 2011 compared with the same period in 2010. This reduction primarily represents the expiration of a long-term wholesale contract for Plant Miller capacity, which now serves retail customers at Alabama Power.
Income taxes reduced our earnings by $0.01 a share in the second quarter of 2011 compared with the second quarter of 2010. Other income and deductions, primarily lower AFUDC equity, reduced our earnings by $0.02 a share in the second quarter of 2011 compared with the second quarter of 2010.
Taxes, other than income taxes, reduced our earnings by $0.01 a share in the second quarter of 2011 compared with the second quarter of 2010.
Finally, an increase in the number of shares outstanding reduced our earnings by $0.02 a share in the second quarter of 2011 compared with the second quarter of 2010.
Let's now turn to the positive factors that drove earnings in the second quarter of 2011. Retail revenue effects in our traditional business added a total of $0.14 a share to our earnings in the second quarter of 2011 compared with the second quarter of 2010. Most of this increase was the result of regulatory actions at Georgia Power that became effective in January 2011 as a result of increased environmental transmission and distribution investments.
Included in this is $0.03 a share reflecting an increase in revenues associated with Georgia Power's cash recovery financing costs for Vogtle 3 and 4. This rate also known as Georgia Power's NCCR tariff is expected to say customers approximately $300 million.
Increased usage among existing customers added $0.02 a share in the second quarter of 2011 compared with the second quarter of 2010. Weather in the second quarter of 2011 added $0.01 a share into earnings when compared to the second quarter of 2010.
Other operating revenues, primarily increased transmission revenues, added $0.01 a share in the second quarter of 2011 compared with the second quarter of 2010. Decreased interest expense in our traditional business increased our earnings by $0.01 a share in the second quarter of 2011 compared with second quarter of 2010.
Finally, improved results at Southern Power added $0.02 a share to our earnings in the second quarter of 2011 compared with the second quarter of 2010. This increase was due to a combination of new long-term contracts and higher energy margins.
In conclusion, we had $0.12 of negative items compared with $0.21 of positive items or a positive change of $0.09 a share over the second quarter of 2010. So, overall, our quarter came in at $0.71 per share.
Before I discuss our earnings estimate for the third quarter, I'd like to update you on the economy and several important regulatory matters. First, total weather normalized retail sales for the second quarter of 2011 increased by 1.5% over the second quarter of 2010, driven primarily by stronger sales to our industrial customers.
Our industrial sales increased by 3.3% in the second quarter of 2011 compared with the second quarter of 2010. The most significant increases were in petroleum refining up 18.7%, primary metals up 13%, pipelines up 10.9% and transportation up 4.5% compared with the second quarter of 2010.
This industrial recovery is very broad-based with all major segments except for the housing-related segments of stone, clay and glass and textiles experiencing year-over-year growth. The continued growth in industrial sales represents the continuation of a trend that started in mid-2009 and is driven primarily by strong export sales.
The Port of Savannah, Georgia, for example, achieved an all-time high in second quarter activity. Container volumes in Savannah increased almost 9% during the second quarter of 2011 compared with the same period in 2010 and the combined value of exports from Georgia and Alabama increased nearly 21%.
Adjusting for weather, residential sales increased by 1.2% in the second quarter. Total personal income is still strengthening, up 4% in the second quarter of 2011 compared with the same period a year ago, but consumer confidence continues to be affected by rising prices and slower than expected net job growth.
Some of the job gains in our territory resulting from new business development were offset by losses in non-manufacturing jobs, primarily state and local government, contributing to an overall unemployment rate that is slightly above the national average.
Manufacturing employers meanwhile continue to achieve productivity improvements, which offsets the need to hire new workers. However, as the recovery continues, improvements in productivity should yield to the additional hiring of workers, which should help stimulate growth in the consumer sector.
Residential new connects are essentially flat and residential customer counts have increased by approximately 2,100 since the second quarter of 2010. While low, these numbers reflect the loss of approximately 7,000 customers due to the devastating tornados in April. However, most of these customers remain in the area and are living in temporary accommodations.
Homeowner vacancy rates are rising, but remained below peak recession levels, while construction activity remained sluggish, but it is consistent with our forecast.
Commercial sales remained flat on a weather normal basis in the second quarter of 2011 compared with the second quarter of 2010. Some data indicate that markets maybe stabilizing, such as the ISM Non-Manufacturing Index, which has been positive for the past 16 months and sales tax collections, which have been positive for the last 12 months.
This quarter we reassembled our Economic Roundtable Group, which consists of several key customers and economists from the region. Overall, the Group was more cautious than six months ago with lower GDP expectations for 2011 of 2.4% to 2.8% versus earlier estimates of 3% to 3.5%.
Most of the participants in our roundtable said that they expect stronger GDP growth in the second half of 2011 of between 2.8% and 3.5%. Driving this trend will be continued growth in exports and the auto industry, which is driving strong growth across many sectors, especially chemicals and primary metals.
Construction related industries such as stone, clay and glass and textiles, are expected to remain flat. Finally, most participants see the manufacturing industry continuing to focus on productivity gains which boost long-term competitiveness, but restrain short-term employment growth.
Meanwhile, we continue to see announcements of new business expansions and job additions in our service territory, similar to those we shared with you over the past several months. More recent announcements include Johnson Controls, a critical supplier to Mercedes-Benz, is opening a facility in Cottondale, Alabama that will create approximately 185 new jobs. BAE Systems Southeast Shipyards in Mobile is adding 400 new positions, and Toyo Tires in Bartow County, Georgia plans to add up to 470 new jobs.
In the aggregate, we have in our economic pipeline more than 230 active projects, with a potential to yield nearly 20,000 new jobs. Data indicate that activity in the pipeline in the first six months of 2011 is likely 18% to 20% higher than the comparable period a year ago.
So, interest in the Southeast region remain strong and our future product growth prospects are bright.
Turning now to the latest regulatory developments for our companies; on July 8th, Gulf Power asked the Florida Public Service Commission for a $93.5 million increase in base rates. This is Gulf Power's first base rate request in 10 years and would be used to offset rising costs in day-to-day operations and also strengthen northwest Florida's electric infrastructure. Gulf Power has asked for a portion of this increase, slightly more than a third, to be implemented in September of 2011 pending a final decision on the full request in early 2012.
Also on July 12th, the Alabama Public Service Commission voted to eliminate a tax-related adjustment under Alabama Power's rate structure, effective with billings in October of this year. The purpose of this revision is to eliminate a portion of the tax related adjustments that have been rendered obsolete within Alabama Power's current forward-looking rate setting mechanisms. This change will result in additional fourth quarter 2011 revenue of approximately $30 million for Alabama Power, which will partially replenish the natural disaster reserve that were utilized following the tornados in April.
In 2012, additional revenue of $150 million is expected as a result of this order. Accordingly, Alabama Power has agreed to a moratorium on any 2012 increases through Rate RSE.
My final regulatory update concerns the agreement Georgia Power reached last week with the Public Interest Advocacy Staff of the Georgia Public Service Commission. Both parties agreed to withdraw their recommendations for a risk sharing or incentive mechanism related to the construction of Vogtle units 3 and 4. We believe the settlement and the hearings that proceeded it reinforce the significant protections already afforded our customers under current Georgia law. The hearings and negotiations also highlighted the additional $1 billion of value Georgia Power expects to capture for customers from the time of the original certification of Vogtle 3 and 4. The agreement is subject to final approval by the Georgia Public Service Commission, which is schedule to vote on August 2nd.
Turning now to an estimate of our third quarter earnings, our estimate for the third quarter of 2011 is $1.02 per share. As a reminder, as we've said in January of this year, our earnings guidance for 2011 is 2.48 to 2.56 per share. At this point, I'll turn the call back to Tom for his closing remarks.
Thomas A. Fanning - Chairman, President and CEO: Before I close, I would like to recognize the heroic efforts of our employees in responding to the tragic storms that struck our territory this past April. These storms, which caused loss of life and severe property damage, were among the most powerful natural disasters ever to affect our region. It resulted in a temporary loss of service to some 0.5 million customers in Alabama, Georgia and Mississippi and more than $220 million in damage to our system and yet within just seven days of the initial storm impact, power had been restored to 100% of those customers who were able to receive service.
This accomplishment is tribute not only to the efforts of our line crews, generating plants and customer service personnel, but also to the reliability of our SouthernLINC wireless network, which proved crucial in the restoration efforts. Our employees worked tirelessly in the wake of an unprecedented tragedy and I couldn't be more proud of the contributions they made.
Bob Dawson, a 45-year Southern Company employee and the CEO of SouthernLINC is retiring in October. His service to our customers in the Southeast has been immense and he will be missed. We wish him and his family the best.
In closing, we are encouraged by the first six months of 2011. Our businesses are performing well and the industrial side of our economy is continuing to drive a much needed regional recovery. We believe that the inherent attractiveness of our region to new business development will help fuel a gradual return to pre-recession unemployment levels. Our primary focus remains as it has been for the past 63 years to provide a reliable and affordable supply of energy to meet the needs of our customers and the energy requirements of the Southeastern United States.
One last comment before I go to Q&A, it's been announced that our Vice President of Investor Relations, Glen Kundert will be retiring at the end of this year, and we will honor him appropriately little bit later in the months ahead. Replacing him will be Dan Tucker, I'm sure you all will have fun getting to know Dan. As well today is a notable day and that Jimmy Stewart, a long time Investor Relations professional is experiencing his 50th earnings call, well done Jimmy.
Operator, at this point, Art and I are ready to take your questions. So let's now take the first question.
Operator: Jim von Riesemann, UBS.
Jim von Riesemann - UBS: A question for you, thanks for the call. It's very insightful, but in light of AEP's announcement on their scrubbing of their carbon capture plans, can you talk a little bit about your own commitment to your own CCS facilities and what your expectations are?
Thomas A. Fanning - Chairman, President and CEO: You know in light of this notion about proposing a sensible national energy policy, we've long felt that preserving coal as a vital resource to meet the nation's energy future, is critically important. So, in light of that need plus this notion of being a leader in research and development, we have continued in a robust way to push forward on carbon capture research. We are doing it in very visible ways on both a pre-combustion and post-combustion basis. The pre-combustion method is essentially our TRIG technology. Once we gasify the lignite in Mississippi, we will then strip out 65% of the CO2 and our carbon capture process there will use the CO2 in enhanced oil recovery. So in fact we generate symbiosis between increasing oil production in that region on the United States and increasing a supply of electricity, which while using coal, will have an environmental signature roughly equivalent to natural gas. As well we are going forward with our projected at Plant Barry. This is a post-combustion carbon capture effort, where we tap into the affluent streams of that plant, we will take the CO2 out of there and we will ship it via pipeline to the Citronelle Oil Field, north of Mobile. Likewise, that has symbiosis in driving more domestic energy supplies for the Southeast United States, but we're also doing a lot more. Many of you know that at Wilsonville, Alabama, we host the National Carbon Capture research facility. We also, at Plant Daniel in Mississippi, have demonstrated that we can sequester some 3,000 tons of CO2 in an underground geologic formation and that has proved to be exceedingly stable, and we are also looking elsewhere around the United States or at least the Southeast United States to evaluate different types of geologic formations to assess their suitability for these activities into the future. We think this is an important part of R&D and that's why we argue for this as part of our sensible national energy policy.
Operator: Daniel Eggers, Credit Suisse.
Daniel Eggers - Credit Suisse: Just first off focused on the Vogtle and potential for any delays there, can you just walk us through when you would expect a decision out of the NRC on expanded site work license and then how CapEx would get phased down or adjusted which you guys gave at the Analyst Day, I think that was not provided?
Thomas A. Fanning - Chairman, President and CEO: Yeah, so we try to be very careful with the words we have. We are still confident of achieving schedule and all that. We haven't changed our confidence a bit. We really see two avenues for this to occur. One avenue is once we get the DCD affirmed this fall that the NRC has the ability to issue the COL right then or within 10 days. Assuming, there is a chance that there are administrative issues in which the NRC may want to issue the COL coincident with the effective date of the COL, the administrative issues, and it's purely administrative, are that once the proposed COL is put forth, then it goes to OMB for a scoring process and that is a process that is designed to assure that the recipients of the regulation are not over burdened with regulation. The second is that the COL will be published in the Federal Register. That takes about 30 days. So, if in the event the COL – the issuance of the COL is delayed to the effective date, then the NRC has the ability to issue a second limited work authorization. We filed that LWA – we call it LWAB here. We filled it some two years ago and we've always contemplated that there may be a need to allow the NRC for us to continue work on the site in a manner that will preserve scheduling cost. In fact, that is something that we think is sensible and we believe that is an alternative course of action that is just as good as receiving the COL – practically just as good as receiving the COL this fall. The whole issue is to preserve scheduling cost. We think we can do that either way.
Daniel Eggers - Credit Suisse: Then I guess the other question if you could give some updated thoughts on any implications of impact of the CSAPR rules and if that's going to help make any – firm up any new decision on environmental CapEx on the plants where you guys were still evaluating your options?
Thomas A. Fanning - Chairman, President and CEO: Well, I'll let Art hit the CapEx, when we look at the cross-state rules, there are the issues related to the timeframes that are espoused, particularly the 2012 timeframe. I guess what that drives us to, with that kind of timeframe is to use allowances and perhaps revising our dispatch ranking in order to accommodate the requirements of the rule. In terms of the generation and transmission expansion plan implications, which are really the farther reaching applications, really we think that at least for Southern Company the kind of dominant document, if you will, looks more like HAPs MACT that our decisions under the cross-state rule are consistent with the HAPs MACT proposal that's put in place. Art, would you want to say anything about CapEx?
Art P. Beattie - EVP and CFO: Yeah, Dan, the CapEx really, based on what Tom says, is the HAPs MACT will dictate what we do equipment-wise, since it is a large rule and the rules are a little more meaningful there. We do not expect any change from the CapEx numbers that we've given you already and we'll reeve up those in the fall once we get the final rules. Hopefully, we'll have a better view as to what we'll actually be doing, but at this point we don't have any change contemplated as a result of a cross-state rule.
Operator: Jonathan Arnold, Deutsche Bank.
Jonathan Arnold - Deutsche Bank Securities: A quick question; this maybe a kind of arcane one, but we were just puzzled by the weather adjusted sales disclosure where it looked like weather helped the residential segment, but it hurt the commercial segment, you had sales down absolute, but then flat weather adjusted?
Art P. Beattie - EVP and CFO: Jonathan, those are weather normal numbers. So if weather is removed, so residential for the quarter was up 1.2% and commercial was basically flat once you took weather out.
Jonathan Arnold - Deutsche Bank Securities: That's what we were trying to understand as why weather would have been a negative impact on the commercial segment?
Art P. Beattie - EVP and CFO: Well, you're still losing customers on the commercial side, not a lot but some reduction in customer numbers on the commercial end of the business.
Jonathan Arnold - Deutsche Bank Securities: But my question involved why was the number worse including weather than it was excluding weather?
Art P. Beattie - EVP and CFO: I think a little bit of what you're seeing here is some variance in the use of air conditioning, for example, for commercial it maybe a little more intermittent than it might be for the residential. There are – Jonathan we would have to get back to you on that with any other..
Thomas A. Fanning - Chairman, President and CEO: A simple explanation is that commercial just responds differently to the different weather patterns than we've seen in residential.
Jonathan Arnold - Deutsche Bank Securities: Second thing there was no real sort of mention in the quarterly drivers of O&M generally. Could you comment to sort of how, it seems like you certainly controlled O&M better than we thought you would this quarter. Anything you could say there?
Art P. Beattie - EVP and CFO: Yeah, O&M is basically under our plan, but year-to-year I think they are actually up a little bit on a year-to-date basis. For the quarter, I think they're pretty flat. The storms in Alabama has a tendency to push some of their, what would normally be O&M expense, into their storm reserve because of so many resources being applied to that restoration effort and you saw a little bit of that in Georgia as well. So some of it may be timing as well done.
Jonathan Arnold - Deutsche Bank Securities: Could you hazard a guess as to much of what would have been O&M, was it effectively capital storm adjustment?
Art P. Beattie - EVP and CFO: No, I really don't have a number on that. I believe Alabama was under their budget by or plan by about $20 million. So, if you were to add that back in, I think you would see a more normal growth on non-fuel O&M.
Thomas A. Fanning - Chairman, President and CEO: The break-out of O&M to capital and the storm –
Art P. Beattie - EVP and CFO: The breakdown is basically a total cost of – and these numbers are revised downward from our original estimates of $175 million to $220 million. About $40 million of that would be O&M and the rest would be capital. So by far it's a capital event than it is an O&M event.
Operator: Brian Chin, Citi.
Brian Chin - Citi: Can I just go back to Dan's question on the COL timeline. If I can just reiterate my understanding to you and then just tell where I might be understanding things wrong? The chain of events here is sometimes soon there will be a revised NRC schedule that outlines the timeline.
Thomas A. Fanning - Chairman, President and CEO: Yes.
Brian Chin - Citi: After that, the NRC will approve the amendment to the design certification sometime this fall.
Thomas A. Fanning - Chairman, President and CEO: That's right.
Brian Chin - Citi: The NRC has the ability to shortly after the amendment of the design certification has approved – the NRC has the ability to at that time issue the COL and if they do that it will likely happen before year end.
Thomas A. Fanning - Chairman, President and CEO: That's right.
Brian Chin - Citi: Then shortly thereafter, sometime in early 2012 the COL effective date will likely occur?
Thomas A. Fanning - Chairman, President and CEO: Following the timeframe of these administrative procedures.
Brian Chin - Citi: Right. Now based on – there is a possibility that the COL issuance and effective date would take place at the same time in 2012 due to the OMB scoring issues in the Federal Register timelines. So if that is done where the COL issuance take place in early 2012, then the NRC has the ability to issue a limited work authorization that would allow you guys to keep on schedule?
Thomas A. Fanning - Chairman, President and CEO: That's right and we filed for that two years ago.
Brian Chin - Citi: Great, that's all I want.
Thomas A. Fanning - Chairman, President and CEO: You have that exactly right by the way.
Brian Chin - Citi: Then the last thing is do you know when the NRC schedule is going to be issued?
Thomas A. Fanning - Chairman, President and CEO: We think in the next few weeks.
Operator: Steve Fleishman, Bank of America.
Steven Fleishman - Bank of America: Couple of questions, first just to beat this horse one more time, in that scenario where the NRC doesn't issue the COL until the OMB and the effective date, we would have essentially already seen some kind of document sent to OMB that they support it?
Thomas A. Fanning - Chairman, President and CEO: Well, upon the design control – the design certification rule, so you will know essentially all of the amendments after the design certification rule. Okay. That will occur this year, so once the rule goes for scoring to OMB, you know what it is.
Steven Fleishman - Bank of America: Right. So you know you're getting the COL when you just don't have it.
Thomas A. Fanning - Chairman, President and CEO: Exactly. That's why we're calling it administrative and we think there is a legal means for them to issue the COL because of that within 10 days and then if they want to delay – not delay, but if they want to just wait until the administrative process unfolds and as the COL becomes what they call, effective, then they have this LWAB that they can issue that's been essentially asked for two years ago.
Steven Fleishman - Bank of America: What is this scoring?
Thomas A. Fanning - Chairman, President and CEO: It's a process that was put in place under the Obama administration to relieve the administrative burden of new regulations, and so OMB for any major new regulation does an assessment as to its effect upon the issuee essentially. We're the sole issuee here.
Steven Fleishman - Bank of America: Okay, so that shouldn't be an issue then?
Thomas A. Fanning - Chairman, President and CEO: No.
Steven Fleishman - Bank of America: Then you didn't talk much in your remarks today about your views and at least it sounds like your views on the opposition to the timeline of HAPs MACT and changes that you'd like. Could you – I know your comments will probably be filed soon to EPA, and I know you're pursuing other initiatives, could you just give us an update on both what your comments might be on the rule as well as the other initiatives you might be looking at?
Thomas A. Fanning - Chairman, President and CEO: Sure. You know, Steve, I think we've been reasonably public on our position there and this goes all the way back to my speech before the United States Chamber of Commerce and then I testified before Congress, and then in a variety of other forums, we've been very consistent with this. We think for a variety of reasons the EPA is overreaching on the HAPs MACT rule. We think that the comment schedule was way too short. Now, they do give us 30 days more than the original 60 day, but for any other MACT rule, it had been somewhere between 120 and 180 days, so giving us 90 days still is far short, and this is the most far reaching of the MACT rules they've ever done. Remember, this thing has – almost 1,000 pages long, a 1,000 pages of supporting documentation. So, then they've given us 30 days more, but they haven't changed the effective date, and so therefore I just wonder how EPA is going to process all of that information to create an effective rule that will be in place I guess this November. So, we think the effective date of the rule, so this November date this year, we think is too short for EPA to accumulate the comments. Then finally I know that I've talked to a number of members of the administration and a variety of other people and I know people say, well, this is a DOJ issue. The DOJ was very clear in their order back to the EPA that if EPA felt they needed more time to assess this issue that DOJ was positively disposed to do that. Secondly, the EPA on their own has developed the thresholds for the measurement and the whole regime as to how this rule would be implemented and we think the thresholds and some of the new test, and I think I pointed out for example the condensable PM standards, this is all brand new stuff, and I know from time to time people say, oh, well you knew this was coming. No one knew that this condensable PM standard was going to be put forth, and I am just guessing, not many people or very few know how to measure it in the first place. So, look, for a variety of reasons we think this whole process has been flawed. We will file our comments on August 4th.
Operator: Andrew Levi, Caris & Company.
Andrew Levi - Caris & Company: Just on the LWAC, so I guess the NRC would have to issue that or how would that work?
Thomas A. Fanning - Chairman, President and CEO: Yes, that's right. It's LWAB, like boy.
Andrew Levi - Caris & Company: Okay, I'm sorry.
Thomas A. Fanning - Chairman, President and CEO: Yes, no problem. The NRC would issue that?
Andrew Levi - Caris & Company: That would happen around when in your opinion?
Thomas A. Fanning - Chairman, President and CEO: Sometimes following the affirmation of the DCD.
Andrew Levi - Caris & Company: When do you expect that to happen?
Thomas A. Fanning - Chairman, President and CEO: This fall, okay.
Andrew Levi - Caris & Company: Then just for, Art, just on the quarterly guidance and also maybe on the yearly guidance. I guess at the first quarter you were down $0.10 versus last year, right, $0.50 versus $0.60, and then second quarter you are up $0.09.
Art P. Beattie - EVP and CFO: Right.
Andrew Levi - Caris & Company: Third quarter, you are projecting up $0.04. That puts you up $0.03 for the year, gets you to about $2.40. So, you would actually have to have a pretty very sizable bump in the fourth quarter, is that kind of what the expectation is or are you guys being conservative on the third quarter, just trying to figure out the numbers?
Art P. Beattie - EVP and CFO: Yes, you will see some – the bigger pick up because of the COR from last year. The COR effects that you won't see much of that in the third and the fourth quarter, and those will be reflected in rates this year as cash rates. So, those will be reflected as additional pieces of gain. You had a lot of weather in the numbers last year as well in the third quarter. So, that's a big driver.
Andrew Levi - Caris & Company: Okay. Then on Southern Power I guess – at least I was – I was expecting kind of flat earnings for the year. Is that – I guess here you are looking like you might be up for the year, is that possible.
Art P. Beattie - EVP and CFO: Yeah, Southern Power is doing better than we expected. Most of that is energy margins and their ability to, with those low cost gas units, are able to sell into the markets. Their capacity levels are increased much over last year and their energy margins have reflected that result. As to whether or not there were also some new contracts on a year-to-date or a year-over-year basis that reflected a lot of increase, but a lot of those contracts started midyear last year, so you won't see the contract piece be additive for the rest of the year but you could see some additions on the margins side.
Thomas A. Fanning - Chairman, President and CEO: Let me jump in on a couple of these too. Fourth quarter of '10, I guess it was about $0.18 was abnormally low for us. If you go back in prior years, I just went and looked it up real quick, I mean it's easy – not easy but I think it's normal for us to expect $0.30 or more, so with a normal progression, a normal fourth quarter is very much on the strike zone there. This other thing with Southern Power is really pretty interesting. I know we've chatted with many of you in the past about our strategy about Southern Power and I think what we mentioned to you was that just – I know it's a topic of conversation early last year 2010 and perhaps even in '09, keeping our powder dry a little bit while we assess what was going on with environmental regulations. As you all know, and it's happened with us, that we've gone from 70% of our energy generation from coal to now about 52% from coal with gas picking up the difference and so what we're seeing is this notion of keeping our power dry at Southern Power has turned out to be really good. In fact, in this period before HAPs MACT take effect, we're seeing that they've been able to generate through energy margins more net income. Their capacity factor for their combined cycling unit has gone up this year to 50% from say similar period last year of 38%. So we have reason to believe that they are going to do better this year certainly than what we thought they would at the beginning of the year and we think frankly there's pretty good reason why that should continue.
Andrew Levi - Caris & Company: Then just one last quick question back on the…
Thomas A. Fanning - Chairman, President and CEO: Andy, one more thing I just want to say. No, I was just kind of thinking of it myself, but remember we have a pretty sustainable idea of covering their capacity with long-term contracts. We actually have, if you start thinking about what might happen 2015 and beyond assuming we don't get any relief from schedule or consequence of HAPs MACT plus 316(b) plus everything else coming down the road, we actually think Southern Power is very well positioned from a long-term standpoint to do well in the years ahead.
Andrew Levi - Caris & Company: Then back on the LWAB; that allows you to begin the nuclear construction phase?
Thomas A. Fanning - Chairman, President and CEO: So the LWAB, we've already done some work under LWAA, right and that's how we made so much progress today. LWAB as it was filed two years ago is very kind of defined. Essentially what we will do is put rebar on the plant and then pour concrete on the base of the plant. So that will be very sufficient for us to maintain schedule and cost estimates.
Operator: Paul Ridzon, KeyBanc.
Paul Ridzon - Keybanc Capital Markets: Couple of questions, what's a typical Alabama RSE adjustment relative to 150 that you've been authorized?
Art P. Beattie - EVP and CFO: Well, there's not a typical adjustment, some year – they didn't have an adjustment this year under their RSE mechanism. They are authorized to increase rates under the rate no more than 8% over any two-year timeframe. So if they have a 3% increase in one year, then they can increase rates the following year by more than 5% and that's the way the rate works. So there is no normal increase. As you know they have got other rate mechanisms as well such as rates for their environmental investments and expenses, but the $150 million or so that it will raise in 2012 is just under a 3% increase in base rates.
Paul Ridzon - Keybanc Capital Markets: One of the other questions relative to your $0.62 guidance, can you kind of parse out the pieces, I guess, you got about $0.06 or $0.07 of weather?
Thomas A. Fanning - Chairman, President and CEO: I am going to (indiscernible) along with that. We only give guidance once a year and that's the range and then we update our guidance in October once a year. These are just estimates that we tend – we yell to each about that here, so Art is ready to go.
Art P. Beattie - EVP and CFO: For the quarter or the year-to-date period?
Paul Ridzon - Keybanc Capital Markets: Quarter.
Art P. Beattie - EVP and CFO: Against the guidance weather was up about $0.07 and Southern Power is up about $0.02. So there is a lots of other cats and dogs, but that will get you there.
Paul Ridzon - Keybanc Capital Markets: Lastly, there have been some articles in the press about you talking about potential for cost over on Vogtle, but your language sounds like you're pretty confident of getting this done on budget. Can you kind of just address the dichotomy there?
Thomas A. Fanning - Chairman, President and CEO: I'm not aware of anybody talking about cost overruns at Vogtle. I am looking around the room. I'm not aware of it. Look, there was an independent evaluator report that is part of the regular process in reviewing, remember, every six month the costs associated with constructing Plant Vogtle, and I think (he) highlighted in a report that got some media play, some concerns he had. The only thing – I would just caution everybody on this call, I completely understand that interest in Vogtle 3 and 4 and its schedule and its cost has white-hot interest. Well, it certainly does for us as well. Our view is, we will always have challenges on a construction project of this magnitude and of this complexity, so really our test is how we manage these various ebbs and flows in the progress of the project. Our sense is and has been that we are on budget, on schedule. The other thing that I would just want to highlight here; we've said it before but I love to say it again, since certification, we believe we brought over $1 billion of value for the benefit of Georgia's customer associated with Vogtle 3 and 4, and that now is part of the permanent record at Georgia Power Company, and now when they evaluate the progress on the project that's part of the context in which they evaluate our progress.
Operator: Marc De Croisset, FBR Capital Markets.
Marc De Croisset - FBR Capital Markets: If I may I'd love to ask a quick question on your thoughts on the Cross-State Air Pollution Rule. One of the arguments that I think the EPA has made is that SO2 compliance could be achieved by having utilities use existing scrubbers more effectively, and as a result that would be one of the means to achieve SO2 compliance, and I'd be very interested in your reaction to this argument and have you seen any indication in the industry that – or in your region that scrubbers over the last several years may not have been utilized as often or as effectively as they could be?
Thomas A. Fanning - Chairman, President and CEO: Yeah, so there is all layers to that question. Let me hit just kind of a couple of them, and I just can't contain myself but start with a commercial; about half the scrubbers that we put in place or I think maybe two-third of them are the Chiyoda scrubbers that we developed at our R&D facility along with the Chiyoda Company out of Japan, and those companies use a fiberglass wall, if you will, for the bubbling structure where we take out the harmful effluents. We've been able to put those in place on time, under budget, and their performance has exceeded our expectations and normal industry performance. Just another example of how R&D and also this Engineering and Construction Services group we have about 1,500 to 1,600 people in Birmingham, really work to the benefit of our customers. Now, when I evaluate the effectiveness of the scrubber technologies that we have put in place, I would say that there is not a whole lot more that we're going to do to improve their performance. They already perform in an excellent manner. I would argue, and I just know this, I am not going to throw names out, but certain people around the industry have come to us for some help in trying to support their scrubber programs, and either it's a flaw in the technology because they rely on third-party constructors, they don't perform as they might have, and also sometimes scrubbers were deployed in order to meet certain, shall we say, merchant market credit thresholds, it really don't operate in an efficient manner as possible in order to generate thresholds as required by the EPA. Then finally some of the technologies that have been deployed were deployed years ago and just are not the latest and greatest technologies. So, when EPA considers you know, oh, well if you just operate more efficiently, I think you've got a very tough question here. In other words, are you going to be able to run your scrubbers more efficiently? Are you going to be able to throw in DSI or TRONA or any of that other stuff? Remember too, it's not just a simple matter of, well, if you just run your scrubbers more efficiently you're going to comply. Well, if you add up the aggregate effect of all the other issues they're raising, including PM standards, where this DSI may cause a problem on the PM side of the equation, it's just not that easy.
Marc De Croisset - FBR Capital Markets: Tom, just one clarification. Can a scrubber be effective but utilized infrequently; is that a possibility, so even – I'll just repeat that, even if a scrubber is effective at removing SO2, can you use it less often at your discretion?
Thomas A. Fanning - Chairman, President and CEO: You can. Wait, so the answer to the question is, yes. Now, I kind of want to understand that. In other words, it would be – that where you are getting to is a coal unit being used more as an intermediate or peaking kind of facility where you might run it. I can't imagine in this future environment you're going to run unscrubbed coal.
Operator: Michael Lapides, Goldman Sachs.
Michael Lapides - Goldman Sachs: Tom, you went to a lot of detail on HAPs MACT about some of the concerns, timeline et cetera. Would love kind of similar feedback on the cross-state's rule, whether its timing that concerns you? Whether it's how the allocations were given out on a state by state or a plant by plant basis, whether it's something else?
Thomas A. Fanning - Chairman, President and CEO: Michael, at the risk of being glib it's all the above and honestly when we think about this, sometimes what you is a significant overlap between rules and certainly that's the case we think with this cross-state thing and HAPs MACT. Timeframes and all the other issues you raise are absolutely legitimate here and kind of what the value of the allowances are and what they might be in the future regime. Is all of this warranted? Is the net effect? I have to keep going back to – remember our business model fits customers who know everything we do and the question that I think should be on the table for everybody especially in the context of these national debt negotiations and a variety of other issues that are facing our national economy is why now. When we consider the potential impact to the price of electricity in the United States and how important that is to the national economy, what impact is that going to have. Our own estimate by our own economist would say that if the price of electricity goes up 20%, that could represent a reduction in national GDP of about 0.5% and that could represent a loss of between 1 million and 1.5 million jobs.
Michael Lapides - Goldman Sachs: What is the likelihood – it maybe early to make this call on whether the court and whether it's the same court that put it back on remand or another court, I am not sure of the legal path, I would assume that's the DC circuit, would consider a stay or an injunction if they EPA proves inflexible on timeframes?
Thomas A. Fanning - Chairman, President and CEO: Oh, it's the DC circuit and we believe something needs to happen to create a more sensible approach. See when we think about this, we go to the kind of three prongs of reliability, economic consequence and environmental impact. Right now we're at a balance I think with the proposal of these rules. We've got to come back and I don't know how it will happen but we think to the DC circuit there maybe some chance here.
Michael Lapides - Goldman Sachs: One more of a modeling-oriented question. How should we think about outside of the core subsidiaries, meaning the regulated subs in Southern Power? What costs exists at the holding company level or at the parent level? If I remember correctly, you had $1 billion and $1.5 of combined short and long-term debt. Just curious about other costs there if any?
Art P. Beattie - EVP and CFO: Well, a lot of those are corporate costs at the Southern level that are allocated. Some are charged directly through the OpCos and other are handled through the dividend allocation that we allocate to each of the operating companies.
Thomas A. Fanning - Chairman, President and CEO: Help us out with your question a little more. What are you interested in?
Michael Lapides - Goldman Sachs: No, I am just trying to true something and trying to just kind of back into what else potentially besides holding company debt could be a drag if I were to look at the difference between some of the FERC Form 1 filing data and some of the SEC data, but I will follow with your guys offline.
Thomas A. Fanning - Chairman, President and CEO: Yeah, 2010 is a reasonable start. Take our year end performance 2010 and then that's – I don't know of anything unusual then nor now that would cause that to be out of lag.
Operator: Ali Agha, SunTrust.
Ali Agha - SunTrust: Tom, just listening to you commentary with regards to the proposed HAPs MACT rule, the nuclear rules and reconciling the points that you've made many times in prior presentations about the kind of political backlash you expect from the Midwest and coal states and other areas and the lobbying efforts by you and others, where we stand today looking at the reality on the ground, is your thinking now that the rules are likely to just go in as planned? I mean are the chances of delays much lower today than they were say four or five months ago? What your latest on that?
Thomas A. Fanning - Chairman, President and CEO: You know it's hard to assess because the context is changing, right. So here we are with this national debate right now about what to do about the federal deficit and the national level of debt and everything else and it's fascinating to hear the two sides talk about, on one hand we've got costs and on the other hand we got to raise revenues through increased taxes, and it's our sense that cutting costs is certainly a dominant solution. We got lots of room to do that and we've got to rationalize essentially the size of government by the same token when you consider raising taxes. You're not going to be able to cut your way out of this problem and you're not going to be able to tax your way out of this problem. We're going to have to grow the economy and that's the way out of the problem eventually. Raising taxes just dampens your ability to grow and the point we continue to make and I think it has some traction is that when you consider some of the overreaching regulation that we're seeing now this is clearly has the effect of an indirect tax on the economy and that is not good for anybody right now. So, we ask the question again, why now? There will be time that we'll play out as these events unfold, where we'll have more clarity.
Ali Agha - SunTrust: Tom, I recall also one of the avenues for pushing things back is the Whitehouse or the administrating adding another two years beyond the one year that EPA has flexibility on. Is that still an option? Is that still on the table as far as you can tell?
Thomas A. Fanning - Chairman, President and CEO: For sure. So, the question there is, the devil in the details, how does that get issued, is that something that's just unilaterally done by the President, can he essentially delegate that authority to the states, a variety of other issues?
Ali Agha - SunTrust: Last question. The folks from MEI have been talking about the COL approval process and one of the points they raised was that this time around there will be mandatory hearings as part of the process, which I believe has not been done before and they put that in the category of unknowns or uncertainties. Do you guys look at it that way and what's your view on that?
Thomas A. Fanning - Chairman, President and CEO: We think that there are no kind of contentions to those schedule that's going to be laid out. We think actually – I know people are really focused on this, but we think actually the process that's been laid out is thoughtful, it is thorough, and it is predictable, and I think as the NRC comes out with its revised schedule, I think it will provide some clarity, transparency to the process, and we think frankly it will be supportive to issuing the COL in a timely manner.
Operator: Mark Barnett, Morningstar.
Mark Barnett - Morningstar: I know you've been answering a lot of policy questions today. I don't want to push you too hard, but actually switching gears a little bit towards kind of the renewable policy framework and how that's affected your plans at Southern Power maybe in pursuing solar. If you look at, as kind of the cash grants will be expiring this year and obviously with the debt debate, some of these things have come up on the chopping block. Just wondering what you have heard I guess, what might be targeted and how that might shape your kind of strategic planning around renewables at Southern Power.
Thomas A. Fanning - Chairman, President and CEO: Well, you have raised a great point and in our discussions on Capitol Hill, both within the administration and in Congress, it is clear that renewables exist today primarily because of federal subsidies in the form of tax benefits either with production tax credits, investment tax credits, a variety of other things. To some extent, from a policy level, federal support makes sense, particularly when you want to get something started, okay? So you give it some support, you get its legs underneath it and then it goes forward. The question that I think remains for the renewable sector is how viable are those projects in thinking about the national energy portfolio, ex federal subsidies. That's why we said before that we are kind of bullish on the development of solar, just as apart from wind for example. When we think about – we did our project in New Mexico with First Solar, a terrific company, great group of guys; their idea is to get thin-film photovoltaics to an economic competitive basis by the middle of this next decade, say 2016, to where maybe it will be $0.15 per kilowatt hour. When you consider the normal trajectory of energy prices in the United States, if they are able to reach that, and it's really two ways to reach it, it's either through efficiency gains in the conversion of sunlight to electricity, so from a technological improvement standpoint, and then the second would be kind of a production cost efficiency standpoint, if they can now generate thin-film solar panels at a cost per panel rate that continues to decline, well maybe they can hit that, and as you consider the price of energy in the United States – now, you know, we in the Southeast are pretty cheap. We're about $0.085 on a retail basis. Nationally, $0.15 per kilowatt hour might make sense even without federal subsidies. That's where the renewable sector has to go. They have to be able to demonstrate their reliability and economic consequence without federal subsidies eventually.
Mark Barnett - Morningstar: Okay, thanks for those comments. I guess also regarding sort of Southern Power looking to the future; obviously, sitting on that dry powder and kind of waiting things out, are you looking at any of the deals and the transactions going on this year or the offered portfolios, I should say, and do you see any kind of bargains out there, is there anything that you are looking at, maybe acquisition wise anywhere around the U.S.?
Thomas A. Fanning - Chairman, President and CEO: So, we always look at acquisitions, and in fact you know recently we have done some things. The West George deal, we did a trade for – what was the project in Florida. We did a trade for one of our projects in Florida for West Georgia. DeSoto, yeah, we traded DeSoto for West Georgia plus cash I guess. We are always in the market to evaluate opportunities and do that, so we're always on there. The other thing, I guess, I didn't really hit this, I kind of hit it but, so Southern Power through our Southern Renewables Company, its all managed in the same spot. We've done a solar deal, we're doing a biomass deal and there are tax credits associated with that. Obviously, we're very modest in our approach there compared to perhaps some other people. From a financial policy standpoint, we view tax advantage investing as riskier than normal investing and for Southern Company given our conservative profiles and having the best level of financial integrity and the most conservative business model around, we put a higher hurdle rate on those kinds of investments than just get all brick and mortar investing. So, you'll look to see us continue in that vein in the future. We will probably be pretty modest there.
Operator: (Paul Patterson, Glenrock Associates).
Paul Patterson - Glenrock Associates: Just two quick questions. One on Fukushima, the report that came out, did you guys see anything in there that would cause you any concern about increasing expenses?
Thomas A. Fanning - Chairman, President and CEO: So do you mean, let me break. I'll answer my own question hear. Heck with it. With Vogtle 3 and 4 we got reaffirmed that in fact Vogtle 3 and 4 had the design characteristics et cetera, et cetera. So it was very supportive of moving forward with all reasonable haste to get that done.
Paul Patterson - Glenrock Associates: Right, I meant the existing plants.
Thomas A. Fanning - Chairman, President and CEO: Basically, so I got my own plug in there Paul.
Paul Patterson - Glenrock Associates: Okay.
Thomas A. Fanning - Chairman, President and CEO: The existing fleet. I think – it's hard to tell right now. When you consider this 90-day report was a very solid work product of six people from the NRC. That work product has to go through a thoughtful review at the NRC and I think in its review of NRC's normal processes, it will take a very thoughtful look and assess its applicability to the current fleet. So it's really just hard to say right now. I think there are some attractive areas to consider improving the current fleet, but it will take some time.
Paul Patterson - Glenrock Associates: Second question is the – sounds like the economy is doing pretty well, before you guys were sort of may be thinking that, I guess, economic growth (in a year) could be about 4%, but you guys were being conservative at 3%, 3.5%, that's last thing I recall, may be it's changed. I was wondering if it has changed actually do you guys – what's your outlook now as for Southeast economy?
Art P. Beattie - EVP and CFO: Well, our forecast is what it is and as we look at where we are now I would expect us to do a bit better than what we forecast on industrial and kind of like what happened last year. The mix was different, although we hit our total forecast or did little better than our total forecast. The mix may be off a bit. We may under run our estimate on residential and commercial growth, but in total we don't think we'll be too far from our numbers.
Thomas A. Fanning - Chairman, President and CEO: Hey, let me give you just a little more flavor there, which is kind of fascinating to me. You did see this little bump in residential compared to say prior quarters. There is almost two classes kind of people right now in the United States, those with jobs and those without and let me say right at the outset the unemployment is at unacceptably high levels in the United States, and we got to get about fixing that problem. What we are seeing however, for those that have jobs in the Southeast, they are doing reasonably well. We've seen a 4% increase in personal income growth. We've seen – we think with this bump an increase in usage, we see an increase in tax receipts, I mean people are spending more money. So there is this interesting set of data points that suggest that if you have a job that we may see some momentum to grow not only with the creation of jobs as we suggested on the economic development front, but also in the future in terms of personal consumption. So it's a pretty interesting thing that we're keeping our eye on. Its highly uncertain with the visibility we see in the economic development, but we think it will turn. The question is when will it turn and just a last comment I'll make, when we make estimate as to economic growth and a variety of other things, we do this with this economic roundtable that Art runs and that Paul Bowers beforehand started. This is really not our own estimate, it's really kind of the aggregation of everyone's estimates that we talk to in the Southeast.
Operator: Dan Jenkins, State of Wisconsin Investment Board).
Dan Jenkins - State of Wisconsin Investment Board: I'll just follow-up a little bit on what you were just talking about in particular with the industrial group. You were pretty positive when you talked about job growth in the industrial sector in your region, but we did see a slow down in the weather-adjusted change from quarter-to-quarter and also you mentioned that your roundtable group was a little more cautious than they were six months ago. I guess, could you give us a little color on kind of a trend you are seeing within – have you seen any pull back as the quarter progressed as we have seen in the national economic numbers that you've really not seen that in your region?
Art P. Beattie - EVP and CFO: Yeah we've seen some spotty things, but when you look year-to-year '11 to '10, you will notice last year's pattern of industrial sales grew throughout the year. So, our ability to grow over last year's numbers is going to be a little more limited this year than, say, was last year because we are working off from very low base. You had some additions to capacity such as ThyssenKrupp in Alabama that have ramped up production a little quicker than we thought. You had the addition of a new refinery in Alabama, which has helped those industrial sales, as well offset by, say, Honda, which was impacted by – some of their production by the earthquake in Japan, interrupting the supply chain a bit. So you got hot and cold spots, but on the whole, our chemicals, our primary metals, our fabricated metals, and out of production continue to be very strong and we expect to remain that way.
Thomas A. Fanning - Chairman, President and CEO: One more local story of interest, just real quick. One of my buddies runs (Southtowne Automotive) here in Atlanta, several dealerships of automobiles. He is selling out of low-price fuel efficient cars, he is selling out of used vehicles, he is getting plenty of supply, but there are coming of the lot, and he is having trouble replacing them with other product or so. So it's a fascinating time right now. It feels like we're on the cusp of some recovery. My sense is that it's still a prolonged recovery, but we see interesting signals all over the place.
Dan Jenkins - State of Wisconsin Investment Board: Okay moving on, you talked a little bit about – you filed for at Georgia Power for, I think, it was $93.5 million of increase – of Gulf Power, I mean. What's the requested ROE and what are the other drivers of that and then what was your earned ROE in the last 12 months in Gulf?
Art P. Beattie - EVP and CFO: The requested ROE in the case is 11.7%. The drivers for the increase are basically as I said in the text of my remarks was that they haven't filed a base rate increase in over 10 years and just the increase in costs and the infrastructure hardening that the Commission has asked for within the state of Florida, our cost increases that the Company has to-date been able to cover, but at this point it's necessary to go ahead and try to get recovery of those increased costs. The actual last year earned ROE total company was 11.7%.
Dan Jenkins - State of Wisconsin Investment Board: Then the last question I have is just what was the quarter-end debt balance and then what are the – any change in debt plans for the second half?
Art P. Beattie - EVP and CFO: Basically we're right at $20 billion in debt. The plans you see so far year-to-date we've issued $1.7 billion, not all of that is new money. We have done little more refinancing as the markets have allowed and for the rest of this year, we probably have another $1 billion to issue.
Operator: Brian Chin, Citigroup.
Brian Chin - Citi: Hi. Thanks for taking my question in what's turning out to be an epic Southern call.
Thomas A. Fanning - Chairman, President and CEO: Well, but we always enjoy talking with you folks.
Brian Chin - Citi: A question on Southern Power, if I remember right, that's roughly 80% contract is what you've told us in the past?
Thomas A. Fanning - Chairman, President and CEO: Certainly in the near-term, that's right.
Brian Chin - Citi: Is that 80% volumetrically contracted as well or is that contracted in terms of expected overall margins?
Thomas A. Fanning - Chairman, President and CEO: Remember what we do is, we try to structure our competitive gen business with a similar risk posture to our integrated regulated business, so virtually all of our contracts had two segments. One segment is associated with the investment in brick and mortar capacity and for the term of the contract we earn a fixed return on those investments – on that capacity even whether the assets run or not. The second element, the second segment of contracts deals with energy, and as you see with our integrated regulated businesses, those essentially are cost pass-throughs, essentially fuel cost with some variable O&M, and there is the ability with some small level to earn upsides that would be for starts, energy, margin, availability, and a variety of other small potential benefits that we can do. So, when we think about kind of keeping our power dry and 80% and all that, we were wondering earlier last year and even the year before how aggressively do we want to cover the uncovered portion of that generation portfolio, and remember that generation portfolio is almost exclusively gas fired in the Southeast. As you think about the weight of the implications of these proposed regulations by EPA, we have felt that Southern Power was exceedingly attractively positioned to take advantage of this kind of rapidly changing environment, not only in just kind of how the world may change as a result of regulations, but also the economic effects of cheap plentiful so called tight gas, shale gas relative to coal. So that's what we're seeing with Southern Power right now. Did that hit your question?
Brian Chin - Citi: Well, I guess what I am – because your earlier comment about volumes or utilizations at CCGT is going from 38% up to 50% has sparked my interest in Southern Power and what we're trying to think about here is if Southern Power is staying at similar level of interest and demand, then do your contracts preclude you from seeing that upside or do your contracts allow you to capture a little bit more upside than what you had projected you were contracted at?
Thomas A. Fanning - Chairman, President and CEO: Yeah, but it's not much.
Art P. Beattie - EVP and CFO: It depends. It depends on if the customer you have a contract with has scheduled that capacity, if they have not, then we might have the opportunity to sell it somewhere else, but normally in this kind of environment they're going to schedule it all on their own.
Thomas A. Fanning - Chairman, President and CEO: Just to review kind of what Art said the broader context because this applies to operating companies as well, we operate in a pool of energy here in the Southeast. Each of the companies – well you meet your own needs first for your retail load; secondly, you meet the need for sister companies first; thirdly, only after you meet the needs of all of your retail customers all across our service territory, then do you get to make opportunity sales and offset a land of somewhere else in the U.S. Interestingly we've had a real pick-up in the second quarter of sales to our west. So that's kind of where we've made the excess margin in the second quarter.
Brian Chin - Citi: Last question on this, with the allowance shortfall in Georgia Power, would it be possible for you to meet that shortfall by running your coal plants less and then ramping utilization at some of the Southern Power plants or am I just not really thinking about this correctly?
Thomas A. Fanning - Chairman, President and CEO: No, absolutely. Look, I mean…
Art P. Beattie - EVP and CFO: Yeah, that's an option.
Thomas A. Fanning - Chairman, President and CEO: That is – when we say change the (dispatch), that's we are talking about.
Brian Chin - Citi: Then – because your answer back to Marc De Croisset earlier seem to imply that your scrubbers on your coal plants are already running at high utilization rates as you think they can go. So you can't increase the utilization on the scrubbers. The only thing you can do is – or one of the options you have is to swap out of the dispatched curve?
Thomas A. Fanning - Chairman, President and CEO: See, I now I went it in detail there with Marc, but the point is ours are already performing at an excellent level, I mean, an industry leading level for heaven sake. So I don't know how much – so we've got all these engineers that tinker around with the stuff and love to make it work better. So there is always some potential, but I think relative to what you're seeing elsewhere in the United States, I thought his question went more to other people that had other technologies, other expense, older technologies, deregulated market with a different reality. It really applied to somebody other than Southern.
Brian Chin - Citi: To summarize your early response back to me in terms of your hedging at Southern Power, you are essentially physically hedged and not financially hedged. That may be a better or more accurate way to phrase that?
Thomas A. Fanning - Chairman, President and CEO: Very accurate
Operator: At this time there are no further questions. Sir, are there any closing remarks?
Thomas A. Fanning - Chairman, President and CEO: Well, I just want to say thanks to everybody. We always enjoy getting together for these quarterly chats. Our Investor Relations team is undergoing some transition as Glenn enters into his final days here, but – and we bring Dan Tucker on but we'll always strive to meet your needs as best we can and we're going to be intensive as ever on the roads telling the story of Southern Company. We appreciate your interest and look forward to seeing you soon.
Operator: Thank you, sir. Ladies and gentlemen, this does conclude the Southern Company second quarter 2011 earnings call. You may now disconnect.