The Southern Company SO, via one of its affiliates, Georgia Power Company, recently announced a proposed settlement with the Georgia Public Service Commission (PSC) Public Interest Advocacy Staff. The agreement recommends extending the current alternate rate plan through Dec. 31, 2028, maintaining rate stability for Georgia Power customers for three additional years.

This settlement is still pending approval from the Georgia PSC, with a final decision expected by July 1, 2025. If rejected, Georgia Power must proceed with a full base rate case filing by that date.

Retail Rates to Remain Unchanged, Storm Costs to Be Handled Separately

Under the proposed agreement, retail base rates would remain unchanged from those set for 2023-2025 throughout the extension period. The only exception is for reasonable and prudent storm damage costs incurred by the end of 2025. These costs, along with key modifications under the Settlement Agreement, will be addressed separately in a filing expected between Feb. 1 and July 1, 2026. The Georgia PSC will determine how and over what period those costs will be recovered.

The company expects its retail return on equity (ROE) to be at 10.50%, with an equity ratio of 56% within the previously approved range of 9.50% to 11.90%.

Adjustments to Depreciation, Tax Credits and Earnings Sharing

As part of the settlement, the amortization of regulatory assets and liabilities will continue, including those projected to be completed by 2025. Additionally, investment and production tax credits will follow specific deferral and amortization strategies. The depreciation period for certain generating plants will shift to 13 years starting Jan. 1, 2026.

The agreement also includes an earnings-sharing mechanism: if Georgia Power’s earnings exceed the approved ROE range, the excess will be split — 40% to regulatory assets, 40% refunded to customers and 20% retained by the company.

Flexibility for Interim Adjustments and Next Steps

To safeguard financial stability, Georgia Power may seek an Interim Cost Recovery (ICR) tariff if its earnings dip below the approved ROE range. The ICR, if filed, would be temporary, expiring by Jan. 1, 2029, or earlier, depending on its effective date. Alternatively, Georgia Power may file a full base rate case by July 1, 2028.

SO’s Zacks Rank & Key Picks

The Southern Company deals with the generation, transmission and distribution of electricity and serves approximately 9 million customers through its seven electric and natural gas distribution units. Currently, SO has a Zacks Rank #3 (Hold).

Story Continues

Investors interested in the utility sector might look at some better-ranked stocks like EDP, S.A. EDPFY, Engie SA ENGIY and Avista Corporation AVA. While EDP and Engie currently sport a Zacks Rank #1 (Strong Buy) each, Avista carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EDP ranks among Europe's major electricity operators, as well as being one of Portugal's largest business groups.

ENGIE SA engages in the power, natural gas, and energy services businesses. It operates through Renewables, Networks, Energy Solutions, FlexGen, Retail, Nuclear and Others segments. The Zacks Consensus Estimate for ENGIY's 2025 earnings indicates 19.55% year-over-year growth.

Avista Corp is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. The Zacks Consensus Estimate for AVA's 2025 earnings indicates 13.97% year-over-year growth.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Southern Company (The) (SO):Free Stock Analysis Report

Energias de Portugal (EDPFY):Free Stock Analysis Report

Avista Corporation (AVA):Free Stock Analysis Report

ENGIE - Sponsored ADR (ENGIY):Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

View Comments