Settlement Reached In GPU/SO Rate Case

Deutsche Bank has published a research report on Southern Company

after a settlement was reached in the Georgia Power

rate case. In the report, Deutsche Bank writes "Georgia Power filed a multi-year settlement agreement when it filed rebuttal testimony in its electric rate case on Friday. It was posted to the Georgia Public Service Commission's website after the market closed. We believe the settlement, if ultimately approved by the Georgia Public Service Commission in December, will comfortably support SO management's targeted EPS growth rate of 5-7% per year. The settlement calls for a rate increase of $562.3M effective 1/1/11, including a traditional base rate increase of $347.2M, $167.8M for environmental costs under the Environmental Compliance Cost Recovery (ECCR) tariff, $31.6M for Demand Side Management programs, and $15.7M for municipal franchise fees. The settlement also calls for additional rate increases of $189.7M in YR 2 (2012) and $92.6M in YR 3 (2013). On an apples to apples basis, this represents approximately 70% of the company's ask in YR 1, which looks constructive. We note that the settlement doesn't compare on an apples to apples basis to the proposed rate increases of $615M in YR 1, $313M in YR 2, and $106M in YR 3, which were disclosed in SO's 8-K filing in July 2010." Deutsche Bank maintains its Hold rating and $37 price target. Southern Company closed Friday at $38.07.